jkh annual report 2007 08

At JKH, we continuously seek to improve the mannerin which we report to you, our stakeholders.We recognise that the individual reporting

expectations and needs vary among our very diversestakeholder groups, and we have sought to make our

Annual Report more functional, effective,practical and accessible for all of you.

We believe that improving reporting practicesneed not necessarily translate to bulkier reports.

The electronic age offers us many opportunities toreduce the “weight of information” on our

stakeholders and the environment.

This year, in doing what we do, better than wealready do, we make a paradigm shift in our reporting

practice - by producing our first comprehensiveAnnual Report in electronic form, with anaccompanying condensed printed report,

for ease of reference.

Should you wish to request a printed copy of the comprehensive version, or shareyour thoughts, comments and suggestions with us please contact:

Investor RelationsJohn Keells Holdings PLC

130, Glennie StreetColombo 02, Sri Lanka

Tel: +94 11 2306739, 2306809Fax: +94 11 2306160

E mail: [email protected]

2 Annual Report 2007/08 - JOHN KEELLS HOLDINGS PLC

Part IPage

Profile and discussion3 About us4 Our industry groups5 Chairman’s message10 Operating highlights and significant events11 Financial highlights11 Group financial highlights12 Industry group financial highlights13 Financial achievements and goals14 Industry group snapshots20 Board of Directors22 Group Executive Committee23 Group Operating Committee25 Corporate governance36 Board Committee reports

Management discussion and analysis42 Investor information51 Consolidated group and segmental performance61 Group financial position and liquidity64 Portfolio movements and evaluation66 Acquisitions, new business and divestments66 Risk management

Part IVPage

Supplementary information146 Times treasured in history

Decade at a glance147 Group milestones148 Selected group financial data150 Indicative US dollar financial statement151 Group real estate portfolio153 Group directory159 Macro snapshot160 Glossary of financial terms161 Corporate information162 Notice of meeting163 Form of proxy

Part IIPage

Sustainability report 2007/0872 Note from the Chairman72 Report parameters72 Stakeholder engagement75 Summary of key impacts and responses78 Economic performance79 Environmental performance82 Social performance85 Labour practices and human rights87 Awards and certifications and recognition

Part IIIPage

Financial reports90 Report of the Board of Directors98 Statement of directors’ responsibility99 Auditors’ report100 Balance sheet101 Income statement102 Cash flow statement104 Statement of changes in equity106 Notes to the financial statements145 Consolidated value added statement

Annual Report 2007/08 - JOHN KEELLS HOLDINGS PLC 3

John Keells Holdings PLC (JKH)is Sri Lanka’s largest listed

conglomerate, with businessinterests in Transportation &

Ports, Leisure, Consumer Foods& Retail, Property Development

& management, FinancialServices and Information

Technology related services. Sinceits modest beginnings as a

produce and exchange broker inthe early 1870s, JKH has beenknown to constantly re-align,

reposition and re-invent itself inpursuing growth sectors ofthe time. Our investment

philosophy is based on a positiveoutlook, bold approach,

commitment to delivery andflexibility to change. JKH is also

committed to maintainingintegrity, ethical dealings,

sustainable development andgreater social responsibility in a

multi stakeholder context.Having produced superior returns

for our shareholders andexperienced significant growth inthe past five years, the group’snext phase of growth will be

fuelled by our newvision-“Building businesses that

are leaders in the region”.

Aboutus

Our valuesWe are passionate about -

• Changing constantly, re-inventing andevolving

• Striving to get things right the first time

• Doing the right things always

• Constantly raising the bar

• Fostering a great place to work

• Building strong relationships based onopenness and trust.

JKH is -• The third largest capitalised company onthe Colombo Stock Exchange

• The first Sri Lankan company to belisted overseas

- Global depository receipts listed onthe Luxembourg Stock Exchange

• AAA (Sri) credit rated by Fitch RatingsLanka Ltd

• A full member of the World EconomicForum

• A member of the UN Global Compact

• LMD’s most respected entity inSri Lanka for the third consecutive year


Financial Services

The largest cargo and logistics service providers in the country are clusteredwithin the industry group. We developed, and presently operate what waspreviously the Queen Elizabeth quay of the Colombo port and own the onlyon-shore marine bunkering facility at the port.

JKH is the largest hotelier in the country, owning approximately 40 per centof the 5-star capacity in Colombo as well as 7 resort hotels in Sri Lanka and4 in the Maldives, under its two brands, “Chaaya” and “Cinnamon”. This iscomplemented by destination management businesses in Sri Lanka, Maldivesand India.

We are one of the leading developers of luxury residential condominiums inSri Lanka and manage a large commercial real estate portfolio in Colombo.

The group owns two of the country’s best-known consumer brands, “Keells”and “Elephant House”, which are leaders in the production and marketing ofcarbonated soft drinks, ice creams and processed meats in Sri Lanka, as wellas the “Keells Super” chain of supermarkets.

The primary business in this industry group is software development andproviding IT solutions for off-shore clientele. We have forayed into the BPOindustry and also provide office automation solutions.

Our cluster of financial services companies offer a complete range of financialsolutions including commercial banking, insurance, stock broking, debttrading, fund management and leasing.

Centrefunctions

Sectors

Industrygroups

John KeellsHoldings

Transportation Leisure InformationTechnology

ConsumerFoods & Retail

FinancialServices

Property Other

Ports &Shipping

Transportation

HotelManagement

City Hotels

Resort Hotels

DestinationManagement

PropertyDevelopment

RealEstate

ConsumerFoods

Retail

Insurance

Banking &Leasing

Stockbroking

IT EnabledServices

IT Services &Office

Automation

PlantationServices

StrategicInvestments

John Keells Social Responsibility Foundation

CorporateCommunications

CorporateFinance &Strategy

GroupFinance

HumanResources

GroupTax

GroupTreasury

Group Risk & Control

Review

Legal &Secretarial

New BusinessDevelopment &Group Initiatives

Strategic GroupInformationTechnology

Our industrygroups

Transportation

Leisure

Property

Consumer Foods &Retail (CF&R)

InformationTechnology


“A key strategicpriority at theboard level is tobuild and scale

up anorganisationwith the

capability andthe capacity todeliver ourvision and

objectives, whilepreserving thevalues of JKH”

Chairman’smessage

Dear Stakeholder,I am pleased to report that your company, and group,performed commendably in revenue and profit growth evenin the face of the challenging macro environment thatconfronted us during the financial year.

It is in response to these macro challenges, that we adopted asimple, but determined, approach of doing what we do, betterthan we already do. This has helped us in no small measure topursue our long to medium term goals whilst realising ourshort term objectives. Having experienced the power of suchan ethos, we believe it is also an appropriate theme for ourAnnual Report this year. As you will note, our report this yearis in two parts - a compact disc containing the full annualreport and a hard copy of an abridged report that focuses onareas which traditionally have been of interest to ourstakeholders. We were encouraged on this route by a veryrecent comprehensive review of our sustainable practices thatrevealed to us with alarming clarity the urgent need toconserve what nature has bestowed in a variety of forms suchas energy creating primary materials, water, air and trees, justto name a few. The two pronged approach is JKH's first stepsin a wider “greening” and environment friendly strategy.

In overall terms, the year under review could be termed asone of “ups” and “downs”.

As for the “downs”, which I will refer to first, we were unableto fully achieve the high goals we had set for ourselves insubstantially increasing our local and regional investments.Operating assumptions and hurdle rates for local investmentswere difficult to establish because of the myriad ofuncertainties surrounding the local operating environment.The prevailing interest rates, anticipated inflation andindustry risk premiums made the determination of discountrates extremely challenging. In the case of the regionalinvestments, we explored several opportunities but werereluctant to invest in what we perceived to be an overheatedenvironment and in hindsight we were proved right withsignificant corrections taking place post the sub-prime crisis.Some of the opportunities which were available to us did notmeet our requirement of scale while in many others thereward factor for operating in unfamiliar territories were notcommensurate with the associated risks.

As for the “ups”-

- We focused on building better internal structures andprocesses and refined our compensation and benefitschemes to attract and retain the talent required for ourfuture plans

- A number of our businesses and functions achievedsignificant milestones in productivity enhancement andorganic expansion under the defined strategy

- We gained domain knowledge and insights in toidentified regional countries and have created networksthat would facilitate a smooth and successful entry intosuch countries

- In the prevailing volatile global capital marketconditions, we secured long term funding from theInternational Finance Corporation (IFC) on terms thatrecognised the strength and potential of the group

- Dividends increased by 125 per cent from Rs. 1.41 toRs. 3.18 billion on the back of a one-off special dividendof Rs. 2 per share

Our performanceI am pleased to report the following key financial highlightsfor the year 2007/08.

- Group profit after tax attributable to equity holdersincreased by 45 per cent to Rs. 5.12 billion

- Group revenue increased by 27 per cent toRs. 41.81 billion

- Group profit before tax grew by 37 per cent toRs. 6.58 billion

- Earnings per share increased by 32 per cent to Rs. 8.00

- Dividend payout increased by 29 per cent from 62.8per cent to 81.0 per cent

- Net cash flows from operating activities increased by 174per cent to Rs. 6.91 billion

- Cash EPS increased by 27 per cent to Rs. 9.54

- Pre tax return on capital employed increased to 13.7 percent from 13.6 per cent in the previous year

As stated earlier, the macro environment continued to pose amultitude of challenges during the year with the escalation ofthe North-East conflict and the increased frequency ofincidents of violence across the country. Commodity and oilprices rose sharply on the back of increasing global prices.Interest rates continued to remain high against the backdropof high inflationary trends. A re-valued Sri Lankan Rupee,while helping to lower the cost of imports, resulted in exportand other forex denominated revenues being lower in localterms. Despite these adverse factors, it is pleasing to note thatthe country's reported GDP growth for the calendar year2007 at 6.8 per cent was not a significant slow down from theprevious year's 7.7 per cent.

The above factors had varying impacts on the performance ofour industry groups. While Transportation, Property,Financial Services, Plantation Services and the holdingcompany recorded improvement in profits, Leisure,Information Technology and Consumer Foods and Retailachieved profits which were lower than that recorded duringthe previous year.

Transportation remained the main profit earner for thegroup contributing 53 per cent of the group's post tax profits.This would have been higher if not for the teething costsassociated with the supply chain management companywhich was established last year and a difficult year in thefreight forwarding businesses in Sri Lanka and India. Ourports business as well as our bunkering operations recorded asignificant increase in volumes which, combined with costeffective and efficient management, translated intohigher profits.

Leisure PAT decreased by 31 percent over the previous year.The sporadic incidents and consequent negative traveladvisories in some of our major markets resulted in a fall intourist arrivals to Sri Lanka. Furthermore, two of our new


Maldivian resorts were only partially operational for a greaterpart of the year as they underwent extensive refurbishment,and a third, that was constructed and launched this year, hadsome start-up issues. All the resorts in the Maldives are nowfully operational under our Cinnamon and Chaaya brandsand have performed very well during the peak winter season.The lease over Velidhu Island, our first resort in the Maldivesexpired at the end of the financial year and was not renewedas it was not financially viable to do so at the lease rentalsexpected by the owner.

Property recorded a decrease of 3 per cent in PAT comparedto the previous year. The completion of “The Monarch” wasbehind schedule resulting in only a part of the final profitsfrom the development being recognised in the fourth quarter.The balance will be recognised in the new financial yearwhen all the apartments are handed over and the finalinstalments are received. Road closures, restrictions in themovement of materials and other impacts emanating fromthe high security demanded in the city of Colombocontributed greatly to the delay in the completion of theproject. The construction of “The Emperor” is in progress,albeit slightly behind schedule, for the same reasons.However, I am pleased to state that almost 80 per cent of its164 apartments have been sold.

Consumer Foods & Retail experienced a 21 per cent drop inPAT compared to the previous year as a result of negativeimpacts on production costs and sales volumes of carbonatedsoft drinks arising from the delay in the installation of ournew bottling line, increasing commodity prices, lowerdisposable incomes and a higher than normal rainfall. Thisdecline was partially offset by better than previous yearperformances from the Retail segment, which opened 11 newstores during the year, and the Convenience Foods segment.

Financial Services reported a PAT increase of 30 per cent dueto an impressive performance from our banking associate,Nations Trust Bank, and an improved result from ourinsurance arm, Union Assurance.

Information Technology recorded a 23 per cent decline inPAT. This was mainly attributable to the high fixed costsassociated with the start up capability building expenses ofour still nascent business process outsourcing (BPO)business. The improving revenue prospects of the jointventure between our Software business and Air Arabia is alsoworthy of mention, as is the steady performance of ourOffice Automation business.

Plantation Services, which is shown under Others in oursegment report, recorded a 103 per cent increase in PAT withimpressive performances by both Tea Smallholder Factoriesand the Broking SBU.

A more detailed review of the performance of the industrygroups is available in the management discussion and analysissection of the comprehensive annual report.

Progress on strategic initiatives/prioritiesIn my message last year, I had outlined the strategic prioritiesof the group and our long term goals. I now wish to

summarise below the progress made on each ofthese priorities.

Internationalisation and geographical diversificationin identified core segments of our businessesThe long term funding (loan) of USD 75 million from theInternational Finance Corporation (IFC) was a landmarktransaction for the group. The funding arrangement gives usthe added strength to explore and finalise new cross bordergrowth opportunities. Given the stringent criteria that haveto be fulfilled in securing an IFC loan, I believe that thefacility reflects the strength of our balance sheet and theefficacy of our operating model.

During the year, we evaluated a large number of hotelproperties for investment in northern as well as southernIndia. However, prices of real estate in India, particularly inthe key metros and the more established leisure destinations,have increased sharply in recent years and appear to beoverpriced. Such high entry costs, coupled with the heavyinvestment costs of the capital intensive hotel sector, do notequate to commercially viable propositions. Whilst werecognise that exceptional rewards cannot be reaped in theabsence of risk taking, we have had to exercise prudence andsignificant discipline in our project evaluation andinvestment decision processes, in avoiding investments thatdo not provide sustainable returns to our stakeholders. Wewill, however, continue to appraise and seek ideal entryopportunities for us in the Indian hospitality sector. BesidesIndia, we are also evaluating several opportunities in thetourism-lucrative Indo China region and this will be anincreasing focus going forward.

In contrast, our Destination Management businessestablished in Mumbai in 2006/07 is performingexceptionally well. Two new branches in Bangalore andAhmadabad were opened during the year and a fourthbranch will also be opened shortly in Delhi. The burgeoningtourism industry, both into and out of India, presents us withmuch potential for accelerated growth in this segment.

Our BPO operations, though only in its second full year ofoperations, has about 550 staff in India and Sri Lanka.During these two years, we have developed our capability,positioned a sales team, mainly in the USA and havegenerated exciting leads. Portraying Sri Lanka as a reliableBPO host is proving to be quite challenging in the face of thenegative publicity that Sri Lanka is currently receiving aboutits security situation. However, recognising the potential ofSri Lanka in the BPO area, we acquired an equity stake of 44per cent in Quatrro Finance & Accounting Solutions(Quatrro F&A) in April 2008. Quatrro F&A recentlyacquired the Chicago based Financial Process OutsourcingLLC (FPO) which is a niche player in the Finance andAccounting (F&A) outsourcing vertical, focusing on smalland medium enterprises. FPO currently has facilities in theUSA and Mumbai with approximately 500 staff. A keyconsideration of the FPO acquisition was the availability inSri Lanka of high level F&A skills. During the year,Auxicogent, our BPO company, entered into a contract toprovide medical transcription services to USA basedcustomers. A 258 seat facility has already been established inSri Lanka for this purpose.


Chairman’s message

Our Convenience Foods business under the Consumer Foodsand Retail industry group will commence the manufactureand marketing of processed meats in the key metros of India.We are confident of success in the Indian market given thecurrent wide acceptance of our products in these cities andthe increasing disposable incomes of the expanding Indianmiddle class. Meanwhile, our Retail business is pursuingopportunities for expansion in the South Asian region.

Having established ourselves as a developer of super luxurycondominium properties in Sri Lanka, we are now evaluatingopportunities for property development in the South EastAsian region in strategic partnership with establisheddevelopers. Two large opportunities that came our way werethoroughly evaluated, but were not concluded because ofregulatory issues in the case of one and a risk rewardmismatch in the case of the other.

The Transportation industry group recently reorganised itslogistics business in India with a view to better exploiting theavailable opportunities. We are currently evaluating potentialstrategic investments in ports, shipping and logistics inthe region.

The stock broking arm of the group expanded its operationsoutside Sri Lanka by entering into a memorandum ofunderstanding with Lanka Bangla Securities, the leadingstock broking firm in Bangladesh. The positioning of ourstock broking company in Bangladesh is just one of the manysteps that we have taken, and are taking, in betterunderstanding this large market for group investment.

Focus on selected large local industriesThe port of Colombo has tremendous growth potential andthe group is committed to its future development andexpansion plans. During the year, the government called forproposals for private sector participation in the proposedSouth Container Terminal Expansion at the Colombo Port.This tender was subsequently cancelled. Encouraged by theunique success of our associate SAGT, which owns andoperates the Queen Elizabeth quay at the port of Colombo,in running a world class operation, we will participate whenthe project is retendered.

The proposed “Port City” development for which the groupreceived an in-principle approval from the government ofSri Lanka is high on our list of priorities. The group is in anongoing dialogue with the government on this project andwe are working towards executing a formal Letter of Intent(LOI) during the financial year.

We have a strategy in place for developing our extensive landbank in prime areas of Colombo and will launch newdevelopments subject to market conditions. Theconstruction of “The Monarch” has provided valuablelearnings for the business, particularly for the development of“The Emperor” project. I am delighted to also report to youthat JKH recently entered into a Memorandum ofUnderstanding with Associated Motorways, Sri Lanka andFinlays Colombo, Sri Lanka to develop a contiguous 6.6 acreblock of land in the heart of Colombo under a “City withinthe City” theme.

During the year, the John Keells Hotels PLC announcedconditional voluntary offers to acquire three listed hotelcompanies controlled by a local hotel group. However, theconditions of the offer were not met by the offer closure dateand the offer was withdrawn.

Ceylon Cold Stores (CCS) invested in a new bottling plantto increase its beverage production capacity by over 50 percent. The new bottling line is now fully installed and hasattained functioning stability. Plans that focus on productrationalisation, an improved distribution model, productionefficiencies and more focused marketing and advertising,among others, have been rolled out and are being monitoredclosely.

The Retail business has been on an aggressive expansionprogramme with 11 new outlets opened during the last year.The central distribution centre, established in 2006/07 underthe logistics arm of the Transportation industry group, hasovercome most of its teething problems and is nowfunctioning in line with original expectations and generatingsignificant efficiencies in back office processes includinginventory and vendor management. The establishment of anin-house academy for training and certifying associates at theoutlets has also been a success and will add to the quality ofour customer offering.

Our Financial Services associate, Nations Trust Bank (NTB),has continued its aggressive expansion through a growingbranch network, innovative services and the development ofmultiple channels for customer reach. In the light of itsimpressive operating and financial performance, JKHinvested in the issue of rights and warrants by NTB this yearin order to maintain our stake.

Divest businesses that contribute disproportionatelyto management timeIn line with our continuous evaluation of our portfolio ofbusinesses, we divested a majority 74 per cent of our stake inthe Systems Integration business, Keells Business Systems, asthis business, although profitable, does not fit with the longterm strategic priorities of the Information Technologyindustry group.

Building organisational capabilityA key strategic priority at the board level is to build and scaleup an organisation with the capability and the capacity todeliver our vision and objectives, while preserving thevalues of JKH.

This past year was a year of insight and introspection for thegroup. Each of our businesses delved deeply into theirprocesses and embarked on an aggressive drive of generatingcost efficiencies and increasing productivity and theseinitiatives were regularly monitored by the Group ExecutiveCommittee. We believe that if our businesses are to becomeregional leaders we must relentlessly pursue internalefficiencies and make continuous process improvements andthis is an area where we left no stone unturned.

It has given me great pleasure to lead a young and energeticteam at JKH and one of my most rewarding tasks has been


my personal involvement in the many structured processesthat proactively identify, select and develop a strong secondline in every business and function. Ours is a growth focusedgroup and there is tremendous potential for acceleratedgrowth in each of our industry groups and these, in turn,create many opportunities to recruit, train, develop andspawn high performers.

The implementation of our new “pay for performance”scheme aligning employee rewards to organisationalperformance was another important step towards enhancingperformance. This proved to be a timely move, in anenvironment where, as I stated earlier, revenues are underpressure because of lower disposable incomes and anappreciated Sri Lankan Rupee in the case of forexdenominated revenues and costs are increasing because ofescalating commodity and energy prices, and significantincreases in other inputs because of inflation. The need for anuncompromised focus on productivity has never beengreater, not just for JKH, but for our nation as a whole.Though the new scheme may have initially caused sometrepidation in the minds of our employees, there is now nearfull acceptance with employees having understood the longterm sustainability and the upside of the scheme. I have nodoubt that history will prove that it was the right move.

Corporate citizenshipWe are increasingly conscious of the impact of our businesseson a wider range of stakeholder groups and in particular onthe environment. As a first step in understanding suchimpacts, we engaged the services of an internationallyrecognised consultancy group to conduct a gap assessment ofthe sustainable business practices of the group as well as oursustainability reporting process. This exercise was concludedrecently and as of date, detailed action plans are beingformulated to address the various issues that emerged out ofthe study in order of priority. It is our intention to makesustainability a key business priority in 2008/09 andthereafter until it is institutionalised as part of organisationalDNA and towards this, a steering committee headed by anexecutive director and consisting of other very seniormanagers has been formed to ensure that all objectivespertaining to sustainable practices are achieved in theplanned time frames.

The John Keells Social Responsibility Foundation continuedmaking progress on its major projects, details of which couldbe found in the Sustainability Report of the comprehensiveAnnual Report.

The futureThe year ahead of us will be a tough and challenging one forthe country, in general, as it attempts to solve the ethnicconflict, develop the eastern province and stabilise inflationand for businesses, in particular, as they try to sustain theiroperations in an environment of rising costs, restlessemployees and declining disposable incomes. In such anenvironment, both the government and the private sectorhave to take bold steps - the government in creatingopportunities that promote public-private partnerships andthe corporate sector in exploiting such opportunities to createvalue. As a reliable partner in development, JKH is ready toplay its part. As we consolidate and improve our position

locally, we will intensify our efforts in the region and I amdelighted to state that the prospects there are encouraging.

We will take whatever steps necessary to preserve ourcompetitive advantage in the many businesses that we areinvolved in. We recognise, and acknowledge, that toughsituations require bold steps and we will not hesitate to takethem provided that they are imperative, and appropriate, inthe circumstances.

We will focus on areas within our control and work in closepartnership with the government and all our stakeholders inportraying our group as a reliable provider of goods andservices, a preferred partner, a responsible corporate citizen inthe communities that we operate in and ensuring that JKH isan organisation that our shareholders can continue to investin with the assurance of attractive returns. To this end, wewill do what we do, better than we already do.

AppreciationAs you are aware Mr Rusi Captain resigned from the boardin May 2008 because of increasing personal commitments. Iwish to acknowledge on behalf of the board the valuablecontribution made by Mr Captain to board deliberations.

I wish to thank all the women and men of JKH forrecognising, and understanding, the importance of the stepswe have taken, for being willing partners in many of ourchange initiatives, for supporting us wholeheartedly inpursuit of our medium term to long term objectives and formaking 2007/08 the year it was for JKH.

I also take this opportunity to thank all my colleagues on theboard for their support, guidance and stewardship in effectiveand exemplary corporate governance.

Finally, I thank all of you, our stakeholders, for your supportand the confidence and trust that you have placed in us.

Susantha RatnayakeChairman22 May 2008


Chairman’s message


June 2007JKH subscribed to the 5:6 rights issue of its subsidiary, JohnKeells Hotels and increased its stake in the company to 92.8per cent. The Rs. 2.90 billion raised was utilised to retire debtundertaken to fund its new hotel investments inthe Maldives.

July 2007The group implemented a “pay for performance”remuneration policy linking employee rewards directly toindividual as well as organisational performance.

The group's first “Cinnamon” resort in the Maldives,“Cinnamon Island Alidhoo”, commenced operationsfrom 1st July 2007.

August 2007LMD ranked JKH as Sri Lanka's most respected entity forthe third consecutive year.

October 2007The two new bottling lines commissioned at Ceylon ColdStores became fully operational and have more than doubledthe beverage production capacity.

November 2007JKH won the award for “Best Corporate Citizen 2007”presented by the Ceylon Chamber of Commerce.

December 2007The group's associate, Union Assurance, won the Gold awardfor “Best Annual Report” by both the Institute of CharteredAccountants of Sri Lanka (ICASL) and the South AsianFederation of Accountants (SAFA).

The JKH Annual Report won the Gold Award for“Good Corporate Governance Disclosure” from both theICASL and SAFA.

January 2008The newly purchased resort hotels, in the islands of Ellaidhooand Dhonveli in the Maldives, were fully refurbished duringthe year including the construction of 24 new waterbungalows at Ellaidhoo and re-launched under the group's“Chaaya” brand as “Chaaya Reef Ellaidhoo” and “ChaayaIsland Dhonveli”.

JKH announced and paid a special dividend of Rs. 2 pershare amounting to approximately Rs. 1.3 billion, inconsideration of significantly higher profits projected for theyear ending 31st March 2008, because of higher dividendincome, interest income arising from a high interest rateenvironment and various cost saving measures.

JKH invested Rs. 313 million in the 3:1 rights issue withwarrants attached by its associate, Nations Trust Bank, andmaintained its percentage stake in the banking associate. Thiscapital was raised by the bank to fund its aggressivegrowth plans.

February 2008The International Finance Corporation, a member of theWorld Bank group, signed a long term funding arrangementamounting to USD 75 million with JKH to support thegroup's expansion plans in key business areas in Sri Lankaand other countries in the region.

March 2008The group's Retail sector expanded aggressively during theyear with the launch of 11 new retail outlets under its “KeellsSuper” brand of super markets. The total number of outletsas at 31st March 2008 is 37 including 3 franchisee outlets.

The lease held by JKH on the Velidhu Island Resort in theMaldives expired.

JKH divested a majority stake in the systems integrationbusiness, Keells Business Systems.

Operatinghighlights andsignificant events


Year ended 31 March 2008 2007 Chg. % 2006

Earnings highlights and ratiosGroup revenue Rs. million 41,805 32,855 27% 29,463Group profit before interest and tax Rs. million 8,197 6,109 34% 4,836Group profit before tax Rs. million 6,579 4,795 37% 4,310Group profit after tax Rs. million 5,524 3,943 40% 3,492Group profit attributable to shareholders Rs. million 5,118 3,535 45% 3,050Dividends Rs. million 3,176 1,412 125% 1,197Diluted earnings per share Rs. 8.00 6.04 32% 5.30Cash EPS Rs. 9.54 7.50 27% 6.69Interest cover No. of Times 5.1 4.6 11% 9.2Return on equity (ROE) % 12.3 11.4 8% 14.7Pre-tax return on capital employed (ROCE) % 13.7 13.6 1% 16.0

Balance sheet highlights and ratiosTotal assets Rs. million 71,794 65,946 9% 39,525Total debt Rs. million 12,667 15,363 (18%) 5,327Net debt / (cash) Rs. million 20 (2,403) (101%) 1,196Total shareholders' funds Rs. million 44,218 39,235 13% 22,801No. of shares in issue millions 636 553 15% 400Net assets per share Rs. 69.1 67.1 3% 39.7Debt / Equity % 25.9 35.8 (28%) 20.2Net debt / Equity * % 0.0 (4.6) 101% 4.9Debt / Total assets % 17.6 23.3 (24%) 13.5

Market/shareholder informationMarket price of share as at 31 March (actual) Rs. 119.75 155.00 (23%) 157.75Market price of share as at 31 March (diluted) Rs. 119.75 155.00 (23%) 113.43Market capitalisation Rs. million 76,160 97,945 (22%) 63,101Enterprise value * Rs. million 76,181 95,962 (21%) 64,389Total shareholder return % (19.5) 39.7 (149%) 43.9Price earnings ratio (PER) (diluted) No. of Times 15.0 25.6 (41%) 21.4Dividend payout % 81.0 62.8 29% 65.7Dividend per share Rs. 5.0 3.0 67% 3.0Dividend yield % 4.2 2.3 83% 3.0

OtherTotal value added Rs. million 16,227 12,800 27% 11,236Employees Rs. million 4,369 4,090 7% 4,191Government Rs. million 3,271 2,328 41% 1,944Others Rs. million 8,587 6,382 35% 5,100

Total employees (excluding associates) Number 9,992 9,703 3% 9,815

* Monarch and Emperor customer advances have been excluded.

FinancialhighlightsGroup financial highlights


Industry group financial highlights

Rs. billion 2008 2007 2006

Transportation 16.7 12.4 10.5

Leisure 9.8 7.6 5.4

Property 2.6 1.5 2.4

CF & R 11.4 9.8 7.8

Financial Services 4.8 3.5 2.7

IT 2.2 2.4 1.7

Others 2.7 1.8 2.5

Rs. billion 2008 2007 2006


Leisure 1.1 1.1 0.8


CF & R 0.6 0.6 0.4


IT 0.1 0.1 0.1

Others 2.0 0.2 (0.1)

Rs. billion 2008 2007 2006


Leisure 25.3 20.5 14.3


CF & R 4.3 3.1 2.4


IT 1.8 1.9 0.3

Others 12.0 16.3 2.0

Rs. billion 2008 2007 2006


Leisure 28.1 22.4 16.1


CF & R 6.6 5.0 3.7


IT 2.1 2.5 0.7

Others 13.2 17.1 4.0

Number 2008 2007 2006

Transportation 720 632 687

Leisure 4,154 4,231 3,862

Property 118 149 162

CF & R 2,896 2,567 3,020

Financial Services 24 27 24

IT 700 735 583

Others 1,380 1,362 1,477

33%

19%5%

23%

10%

5%5%

19%

41%8%

7%

3%

3%

19%

38%

14%11%

7%

5%1%

24%

19%

39%8%

9%

4%

3%

18%

7%

42%

1%

29%

7%

14%

32%

19%4%

25%

9%

6%5%

18%

35%8%

5%

3%

3%

28%

48%

18%

14%

11%

6%2% 1%

18%

34%

8%

8%

3%

4%

25%

7%

44%

1%

26%

8%

14%

32%

17%7%

24%

8%

5%7%

17%

45%

19%

8%

4%1% 6%

49%

17%

18%

8%

8% 2%(2)%

18%

41%

16%

9%

4%2%

10%

7%

39%

2%

31%

6%

15%

2008 2007 2006 Turnover

EBIT

Capital employed

Total assets

Employees


Indicator (%) Goal Achievement

FY08 FY07 FY06

EBIT growth >20 34.2 26.3 36.0

EPS growth (fully diluted) >20 32.4 13.9 33.2

Cash EPS growth (fully diluted) >20 27.1 13.0 10.3

Pre-tax return on capital employed (ROCE) 18 13.7 13.6 16.0

Return on equity (ROE) 20 12.3 11.4 14.7

Debt/equity 100 25.9 35.8 20.2

Cash EPS

Growth %

EPS

Rs. billion

Rs. billion % %

%

Rs. billion

16.0%

32.4

>20

10.3

27.1

13.913.0

>20

2006 2007 2008 Goal

Growth in earnings and cash earnings per share

0

5

10

15

20

25

30

35

CEROCE

2006 2007 2008 Goal

Movement in capital productivity

0

10

20

30

40

50

60

70

7

9

11

13

15

17

19

13.7%

>18%

26.4

Equity

ROE

Return to equity holders

2006 2007 2008 Goal

Equity

Debt

Debt/equity

Change in leverage

0

10

20

30

40

50

0

20

40

60

80

100

25.9%

100%

2006 2007 2008 Goal0

10

20

30

40

50

12.3%

>20%

0

5

10

15

20

26.4

42.9

14.7%

11.4%

49.0

20.2%

35.8%

5.3

42.9

15.4

49.0

12.7

61.7

31.8

33.2

13.6%

58.3

Financial achievements and goals

Rs. 16.7 bn33%

Turnover EBIT Capital employed Employees

Rs. 11.5 bn19%

Rs. 3.1 bn38%

7207%

2007

/08

2006

/07

2005

/06

EBITTurnoverIn

Rs.m

illio

ns

16,706

12,429

10,519

22%

78%

23%

77%

19%

81%

2007

/08

2006

/07

2005

/06

InRs

.mill

ions

3,1012,906

2,374

60%

40%

47%

53%

43%

57%

Ports & Shipping Transportation

Ports & ShippingTransportation

- Logistics- Airlines

Highlights• SAGT handled record volumes of over 1.6 million

TEUs during 2007/08

• John Keells Logistics (Pvt) Ltd commencedoperations of its distribution centre supporting thesupply chain management of the Retail sector

• LMS volumes grew year-on-year by 13 per cent onthe back of an increased off-take of 380cst fuel oil,newly introduced by LMS two years ago

* Turnover is inclusive of the group's share of associatecompany turnover

** For associate companies the capital employed isrepresentative of the group’s equity investment in thesecompanies

*** EBIT per employee is calculated excluding the employeesof associate companies

Financial capsule

(Rs. million)

Transportation 07/08 06/07 Chg% 05/06Turnover* 16,706 12,429 34.4 10,519EBIT 3,101 2,906 6.7 2,374PBT 3,054 2,887 5.8 2,370PAT 2,904 2,757 5.3 2,211Total assets 13,862 11,768 17.8 7,114Total equity 11,203 10,272 9.1 5,185Total debt 272 179 51.4 165Capital employed** 11,474 10,452 9.8 5,349Capital expenditure 241 151 59.2 194Number of employees 720 632 13.9 687EBIT per employee*** 4.3 4.6 (6.3) 3.5

Transportation

SAGT bettered its previous year's record volumes and handled over 1.6 million TEUs during2007/08. In order to further improve our performance, we have invested in equipment toenhance capacity and operational efficiencies.


Rs. 9.8 bn19%

Turnover EBIT Capital employed

Rs. 25.3 bn41%

Rs. 1.1 bn14%

Employees

4,15442%

2007

/08

2006

/07

2005

/06

EBITTurnover

InRs

.mill

ions

9,792

7,589

5,442

>0%30%

20%

51%

34%

>0%

46%

20%

40%

>0%

32%

28%

2007

/08

2006

/07

2005

/06

InRs

.mill

ions

1,124 1,089

821

48%

13%

30%

9%

42%

3%

3%

53%

73%

(3%)

30%

>0%

Hotel Management City Hotels

Resort Hotels Destination Management

Highlights• The first Cinnamon property in the Maldives,

“Cinnamon Island Alidhoo”, commencedoperations from 1st July 2007

• The resort hotels, Ellaidhoo and Dhonveli, in theMaldives, were fully refurbished during the yearand re-launched under the group's Chaayaumbrella in January 2008

• The Indian Destination Management operations,expanded and opened two more branches inAhmadabad and Bangalore

Hotel ManagementCity HotelsResort Hotels

- Sri Lankan resorts- Maldivian resorts

Destination Management

Leisure

Financial capsule

(Rs. million)

Leisure 07/08 06/07 Chg% 05/06Turnover 9,792 7,589 28.8 5,442EBIT 1,124 1,089 3.2 821PBT 364 519 (29.8) 727PAT 347 500 (30.6) 619Total assets 28,067 22,426 25.2 16,117Total equity 18,277 13,739 33.0 12,311Total debt 7,047 6,746 4.5 1,989Capital employed 25,323 20,485 23.6 14,300Capital expenditure 1,581 1,395 13.4 3,259Number of employees 4,154 4,231 (1.8) 3,862EBIT per employee 0.3 0.3 5.2 0.2

The group expanded its product offering in the Maldives by launching its first Cinnamonproperty “Cinnamon Island Alidhoo”, delivering on its brand promise of indulgence.


Rs. 2.6 bn5%


Rs. 4.8 bn8%

Rs. 0.9 bn11%

Employees

1181%

Property Development- Development and sale of residential apartments- Operations of the Crescat Boulevard

Real Estate- Management of group office sites within the city- Management of construction projects for groupcompanies

Highlights• “The Monarch” condominium project is in its

completion phase with units being handed over tothe buyers for occupation

• The construction of “The Emperor” condominiumproject is progressing on schedule with over 80 percent of the units already sold

• Successful management and completion ofconstruction and refurbishment projects for thegroup's resort hotels, Alidhoo and Ellaidhoo, inthe Maldives

Financial capsule

(Rs. million)

Property 07/08 06/07 Chg% 05/06Turnover 2,618 1,463 79.0 2,436EBIT 902 870 3.7 847PBT 841 844 (0.4) 847PAT 785 813 (3.4) 832Total assets 5,400 5,460 (1.1) 6,484Total equity 4,765 4,333 100 5,912Total debt 82 227 (64.0) 114Capital employed 4,847 4,561 6.3 6,026Capital expenditure 37 63 (41.0) 257Number of employees 118 149 (20.8) 162EBIT per employee 7.6 5.8 30.9 5.2

Property

JKH completed the construction of the super luxury condominium project,“The Monarch”, anddespite obstacles and delays in completion, we delivered a superior product to our customers.

2007

/08

2006

/07

2005

/06

EBITTurnover

InRs

.mill

ions

2,618

1,463

2,436

98%

2%

96%

4%

97%

3%

2007

/08

2006

/07

2005

/06

InRs

.mill

ions

902870 847

91%

9%

65%

35%

88%

12%

Property Development Real Estate


Rs. 11.4 bn23%


Rs. 4.3 bn7%

Rs. 0.6 bn7%

Employees

2,89629%

Consumer Foods- Beverages- Frozen Confectionary- Convenience Foods

Retail- Supermarkets

Highlights• The two new bottling lines commissioned at

Ceylon Cold Stores for the expansion of its softdrinks operations became fully operational duringthe year and have more than doubled the beverageproduction capacity

• The Retail sector expanded aggressively during theyear with the launch of 11 new retail outlets underits “Keells Super” brand of super markets. The totalnumber of outlets as at 31st March 2008 is37, including 3 franchisee outlets

Financial capsule

(Rs. million)

Consumer Foods & Retail 07/08 06/07 Chg% 05/06Turnover 11,384 9,791 16.3 7,809EBIT 580 645 (10.1) 395PBT 387 540 (28.3) 310PAT 248 313 (20.6) 191Total assets 6,563 4,973 32.0 3,713Total equity 2,694 1,780 51.4 1,610Total debt 1,572 1,326 18.5 810Capital employed 4,266 3,106 37.3 2,420Capital expenditure 673 926 (27.4) 367Number of employees 2,896 2,567 12.8 3,020EBIT per employee 0.2 0.3 (20.3) 0.1

Consumer Foods& Retail

The “Keells Super” chain of supermarkets aggressively expanded its retail roll out duringthe year, opening 11 new outlets - the highest number of outlets opened in any given

year since its inception.

2007

/08

2006

/07

2005

/06

EBITTurnover

InRs

.mill

ions

11,384

9,791

7,809

49%

51%

49%

51%

53%

47%

2007

/08

2006

/07

2005

/06

InRs

.mill

ions

580

645

395

88%

12%

94%

6%

93%

7%

Consumer Foods Retail


Rs. 4.8 bn10%


Rs. 2.0 bn3%

Rs. 0.4 bn5%

Employees

240%

FinancialServices

InsuranceBanking & LeasingStockbroking

Highlights• The group's banking arm, Nations Trust Bank

(NTB), reviewed its growth strategy during the yearand developed a new strategic plan for the period2008 - 2012 which was formulated on the theme of“unpalleled and unprecedented levels ofconvenience”

• NTB successfully completed a 1:3 rights issue withattached warrants, which in total will raiseapproximately Rs. 3 billion in capital over the next3 years towards funding its aggressive growth plans

• The group's insurance arm, Union Assurance (UA),won the overall best annual report award from boththe Institute of Chartered Accountants ofSri Lanka and the South Asian Federation ofAccountants for its 2006 Annual Report

Financial capsule

(Rs. million)

Financial Services 07/08 06/07 Chg% 05/06Turnover* 4,796 3,462 38.5 2,681EBIT 422 338 24.8 367PBT 422 337 25.0 367PAT 292 225 29.7 250Total assets 2,555 1,735 47.2 1,454Total equity 1,990 1,517 31.2 1,326Total debt 12 47 (73.6) 33Capital employed** 2,003 1,564 28.0 1,358Capital expenditure 0.3 5 (93.9) 1Number of employees 24 27 (11.1) 24EBIT per employee*** 17.6 12.5 40.4 15.3




In its quest to provide unparalleled levels of convenience to its customers, our banking associateNTB, has rolled out its unique service proposition of bringing financial solutions to thecustomer's doorstep.

2007

/08

2006

/07

2005

/06

EBITTurnover

InRs

.mill

ions

4,796

3,462

2,681

38%

3%

58%

43%

51%

6%

50%

43%

7%

2007

/08

2006

/07

2005

/06

InRs

.mill

ions

422

338367

22%

60%

18%

20%

48%

33%

28%

43%

29%

Insurance Banking & Leasing Stockbroking


Rs. 2.2 bn5%


Rs. 1.8 bn3%

Rs. 0.1 bn1%

Employees

7007%

InformationTechnology


IT Services- Software Services

Office AutomationIT Enabled Services

Highlights• JKH divested a majority stake in the Systems

Integration business, Keells Business Systems, inMarch 2008

• The Software Services business, John KeellsComputer Services, substantially increased its orderbook for solutions from award-winning airlinecustomers in the Middle East region

• The BPO business expanded its operations duringthe year with approximately 550 revenue generatingstaff servicing key new customers in the US

Financial capsule

(Rs. million)

Information Technology 07/08 06/07 Chg% 05/06Turnover* 2,243 2,446 (8.3) 1,707EBIT 98 102 (4.8) 116PBT 90 100 (10.2) 115PAT 43 56 (22.7) 83Total assets 2,099 2,494 (15.8) 660Total equity 1,775 1,840 (3.5) 315Total debt 2 16 (89.6) 3Capital employed** 1,777 1,857 (4.3) 318Capital expenditure 62 46 33.9 16Number of employees*** 700 735 (4.8) 583EBIT per employee 0.1 0.1 (0.0) 0.2




With our investment in Financial Process Outsourcing LLC, a US-based Finance &Accounting (F&A) service provider, we have expanded our existing BPO product portfolio

to include the high value F&A segment.

2007

/08

2006

/07

2005

/06

EBITTurnover

InRs

.mill

ions

2,2432,446

1,707

28%

7%

48%

17%

22%

41%

35%

1%

47%

28%

26%

0%

2007

/08

2006

/07

2005

/06

InRs

.mill

ions

98

102116

(171%)

66%

83%

121%

46%

(53%)

21%

86%

30%

(1%)

9%

63%

Software Services Systems Integration

Office Automation IT Enabled Services

Susantha RatnayakeChairman-CEOMr Ratnayake was appointed as the Chairman and CEO of JohnKeells Holdings in January 2006 and has served on the JKH boardsince 1992/93. He has overall responsibility for Group Strategy andNew Business Development. Mr Ratnayake is a council member ofthe Employers' Federation of Ceylon and is a committee member ofthe Ceylon Chamber of Commerce. He also serves on variousclusters of the National Council of Economic Development(NCED). Mr Ratnayake has over 29 years management experience,all of which is within the John Keells group.

Ajit GunewardeneDeputy ChairmanMr Gunewardene is the Deputy Chairman of JKH and has been amember of the board since 1992/93. Whilst having overallresponsibility for the Financial Services, Leisure and Propertyindustry groups, he oversees the Investor Relations function at thecentre. He is also a member of the Capital Markets Cluster of theNCED. He is a former Chairman of the Colombo Stock Exchange.Mr Gunewardene brings 26 years of management experience to theboard. He is a graduate of the University of North Carolina with amajor in economics.

Sumithra GunesekeraDirector and PresidentAppointed to the Board in 1997/98, Mr Gunesekera has overallresponsibility for the Plantation Services sector and the CorporateCommunications function at the centre. He is also the Head of theJohn Keells Social Responsibility Foundation ManagementCommittee. Mr. Gunesekera is the Chairman of the CorporateSocial Responsibility sub-committee of the Ceylon Chamber ofCommerce as well as the Chairman of the Employers' Network onDisability of the Employers' Federation of Ceylon. He also serves onthe Board of Directors of the Sri Lanka Institute of Tourism andHotel Management. Mr Gunesekera is a Director in many groupcompanies and has over 25 years of management experience.

Ronnie PeirisGroup Finance DirectorAppointed to the board during 2002/03, Mr Peiris has overallresponsibility for Group Finance including Treasury, Taxation,Corporate Finance, Group Initiatives, Shared Services and theInformation Technology functions at the centre. Previously,Managing Director of Anglo American Corporation (Central Africa)Limited and EXCO member of Konkola Copper Mines plc, both inZambia, Mr Peiris has served on many boards overseas. He has over35 years finance and general management experience in Sri Lankaand abroad. He is a Fellow of the Chartered Institute of ManagementAccountants, UK, Association of Chartered Certified Accountants,UK, and the Society of Certified Management Accountants,Sri Lanka, and holds a MBA from the University of Cape Town,South Africa. He is a member of the committee of the CeylonChamber of Commerce, Chairman of its Taxation sub committeeand also serves on its Economic, Fiscal and Policy Planningsub committee.

Sithie Tiruchelvam*DirectorAppointed to the board in January 2007, Ms Tiruchelvam, a lawyerof the Supreme Court of Ceylon, specialises in corporate law,intellectual property law and labour law and is a notable humanrights campaigner. She obtained her LLB from the University ofCeylon in 1966, and was admitted to the Supreme Court asAdvocate in 1968. She is a founding Partner of TiruchelvamAssociates. Ms Tiruchelvam currently serves on several boards,among them being Central Corporate & Consultancy Services (Pvt.)Limited, Galadari Hotels (Lanka) Limited, Nadesan Centre forHuman Rights, LIRNEasia and South Asians for Human Rights, aregional organisation with its secretariat in Colombo. She is theChairperson of the Foundations for Peace Network, a worldwidenetwork of community foundations working on peace andreconciliation in fractured societies. She has also completed aprogramme on corporate philanthropy at the RockefellerFoundation, programme for philanthropy in New York, USAin 2000/01.

Franklyn Amerasinghe*DirectorAppointed to the board during 1999/00, Mr Amerasinghe is theformer CEO and Director General of the Employers' Federation ofCeylon. He was thereafter attached to the ILO as a senior specialistin the social dialogue sector in charge of Employers Organizations inEast Asia up to October 2002. A Bachelor of Law and a lawyer byprofession, he is currently a consultant and trainer in social dialogue,human resource management and industrial relations, both inSri Lanka and abroad. He is a Founder Trustee of the EmploymentMediation Services Centre and is a judge for sustainability reportingfor the ACCA since the initiative commenced in Sri Lanka. He wasalso one of the Founder Directors of the Skills Development Fund.He has authored books on a wide range of subjects and his papers onIndustrial Relations in Sri Lanka have been published in someinternational and local journals.

Rusi Captain (resigned w.e.f. 6th May 2008)

**DirectorAppointed to the board in March 2007, Mr Captain is anentrepreneur and investor in the Sri Lankan corporate sector,bringing with him a wealth of knowledge and over 16 years ofbusiness experience in a range of manufacturing sectors. His currentbusiness interests range from paints, garments, industrial gloves,cutting and polishing diamonds to plastics and other packagingmaterial. He is the co- founder of Asia Stock Brokers, Asia Capital,Dutch Lanka Trailers, Asia Siyaka and Asian Alliance. Mr Captainwas educated at the University of Miami, Florida.

Tarun Das*DirectorAppointed to the board during 2000/01, Mr Das has served with theConfederation of Indian Industry (CII) for a long period and was itsChief Executive from 1974 to 2004. Mr Das is currently ChiefMentor, CII. He is also the Chairman of Haldia PetrochemicalsLimited of India.


Steven Enderby*DirectorAppointed to the board in 2005/06, Mr Enderby is currentlybased in Delhi where he is a Partner in the leading emergingmarkets private equity investor, Actis Capital LLP, UK. Hisother directorships include Swaraj Mazda, Nitrex Chemicals,Tema India, Phoenix Lamps, Ceylon Oxygen, MFE and ActisAdvisers. Mr Enderby holds a BSc (Hons) in Economics andAccounting from the Queens University of Belfast and is amember of the Chartered Institute of ManagementAccountants, UK.

Mohamed Muhsin*DirectorAppointed to the board in 2005/06, Mr Muhsin is a strategicmanagement consultant and director on internationalcorporate and foundation boards. Mr Muhsin retired from theWorld Bank in 2005 having served in various senior positionsfor 17 years, ten of which as Vice President and ChiefInformation Officer. Prior to this, he served for ten years as anadvisor to the President of Zambia on state enterprise reformand as the Group Financial Director of the businessconglomerate, the Zambia Industrial and Mining Corporation(ZIMCO). Mr Muhsin is a Fellow of the Institute of CharteredAccountants of Sri Lanka (FCA).

Deshamanya Deva Rodrigo*DirectorAppointed to the board in July 2006, Mr Rodrigo, a CharteredAccountant, had a career with the international accountingand consulting firm, PricewaterhouseCoopers, joining thefirm in East Africa in 1974 and serving in its Londonoffices in 1980. He was a Founder Partner whenPricewaterhouseCoopers established its Sri Lankan firm in1981, and held the position of Senior Partner from 1992 to 30June 2006, when he retired from the firm. Mr Rodrigo was theChairman of the Ceylon Chamber of Commerce from 2004 to2006. He has previously held public office as a Director ofPeople's Bank from 2000 to early 2003 and as a member of theTelecommunication Regulatory Commission from May 1997to January 2002. Mr Rodrigo was also a member of theMonetary Board of the Central Bank of Sri Lanka from 2003to 2006 and a member of the National Council forAdministration from 2004 to 2006.

* Independent non-executive** Non-independent non-executive


Boardof

Directors

Susantha Ratnayake Ajit Gunewardene Sumithra Gunesekera

Ronnie Peiris Sithie Tiruchelvam Franklyn Amerasinghe

Rusi Captain Tarun Das Steven Enderby

Mohamed Muhsin Deva Rodrigo

Dilani AlagaratnamPresidentDilani Alagaratnam has overall responsibility for the group HumanResources, Legal and Secretarial functions. A lawyer by profession,she has been with the group for 16 years and is a law graduate anda holder of a Masters Degree in Law. She is a member of theAdvisory Committee on Human Resources and Education and isthe Alternate Chairperson of the Advisory Committee onLegislation of the Ceylon Chamber of Commerce. She is also apermanent member of the Legal Forum convened by the CentralBank of Sri Lanka.

Romesh DavidPresidentRomesh David has been with the group for 28 years and has overallresponsibility for the Transportation and IT industry groups. He isa member of the National Council for Economic Development(Transport Cluster), a member of the Economic InfrastructureSub-Committee of the Ceylon Chamber of Commerce and acommittee member of the Chartered Institute of Logistics andTransport (Sri Lanka Branch). He is a past Chairman of the SriLanka Freight Forwarders' Association and the Council forBusiness with Britain.

Jitendra GunaratnePresidentJitendra Gunaratne is responsible for the Consumer Foods &Retail (CF&R) industry group. Prior to his appointment asPresident, he overlooked the Plantations and Consumer FoodsManufacturing sector. His 27 years of management experience inthe group also covers Leisure and Property. He holds a Diploma inMarketing and serves as a member of the Advisory Committee onConsumer Affairs and the Law and Order Committee of theCeylon Chamber of Commerce.


GroupExecutiveCommitteeCurrently a 7 member committee including the 4 executivedirectors and the above members.

Dilani Alagaratnam Romesh David Jitendra Gunaratne

Krishan BalendraExecutive Vice PresidentKrishan Balendra has been Head of Corporate Finance and Strategysince September 2002. He started his professional career at UBSWarburg, Hong Kong, in investment banking, focusing primarily onequity capital markets. After a four year stint in Hong Kong, hecontinued his career in corporate finance at Aitken Spence & Co. Ltd.,Sri Lanka prior to joining JKH. He holds a Law Degree (LLB) fromthe University of London and an MBA from INSEAD. He is amember of the board of the Colombo Stock Exchange.

Manilal De SilvaExecutive Vice PresidentManilal De Silva, Head of the Consumer Foods Sector, joined thegroup in July 2003. Prior to joining the group, he gained wideinternational experience in a variety of industries which included foodprocessing, construction, professional services, and international trade,whilst serving in senior management and board positions withmultinational organizations over a period of seventeen years. Duringthis period he was based in Zambia, Zimbabwe, South Africa and theUSA. He is an Associate member of the Chartered Institute ofManagement Accountants, UK. He also serves as Chairman, InterestGroup for the Food Sector of the Ceylon Chamber of Commerce andon the Food Advisory Committee of the Ministry of Health.

Sujiva DewarajaExecutive Vice PresidentSujiva Dewaraja heads the IT Sector. Since passing out as a CharteredManagement Accountant in London, he worked in Corporate Strategyat a diversified conglomerate and in MIS for a Middle EasternGovernment. Moving to USA in 1987, he read for an MBA from theUniversity of Pittsburgh, Pennsylvania, earning a place on the Dean'sList. Since then he has been in General Management, holding CEOlevel positions in the past 16 years. He is a Fellow of CIMA, UK andan Associate Member of the Chartered Institute of Bankers, London.He has served on the Committee of the Ceylon Chamber ofCommerce and currently serves on the advisory panel on ICT Exportto the Minister of Enterprise Development.

Sanjeeva FernandoExecutive Vice PresidentSanjeeva Fernando heads the BPO arm of the group. Prior to this, hewas Head of the Transportation industry group. He has over 21 yearsof management experience, 14 of which have been with the group indiverse businesses and capacities. A printer by profession, he qualifiedfrom the London School of Printing and is a member of the LondonInstitute of Printing. He joined JKH in 1993 to head the group'sprinting and packaging business and was the CEO of Lanka MarineServices from the time of its acquisition in 2002 until 2005.


GroupOperatingCommittee

Currently a 23 member committee consisting of the GECand the above members

Sanjeeva Fernando Roshanie Jayasundera-Moraes Sanjeeva Jayaweera

Krishan Balendra Manilal De Silva Sujiva Dewaraja

Jayantissa Kehelpannala Vasantha Leelananda Chandrika Perera

Mano Rajakariar Waruna Rajapaksa Suresh Rajendra

Lallith Ramanayake Ramesh Shanmuganathan Devika Weerasinghe

Roshanie Jayasundera-MoraesExecutive Vice PresidentRoshanie Jayasundera-Moraes, Head of the Retail sector, has been with thegroup since 1991. She was with the Airlines sector of the Transportationindustry group, before being appointed as Head of the group's supermarketbusiness in November 2003. A holder of a Diploma in Marketing from theChartered Institute of Marketing (CIM), UK, she also holds a MBA from thePost¬Graduate Institute of Management of the University of SriJayawardenepura, Sri Lanka.

Sanjeeva JayaweeraExecutive Vice PresidentSanjeeva Jayaweera, the Chief Financial Officer for the CF&R industrygroup, has been with the group for 15 years, during which he served in theResort Hotels sector of the Leisure industry group and was the SectorFinancial Controller for Resort Hotels from 1998 to 2005. Prior to joiningthe group, he was based in the United Kingdom and worked for several yearsas an Audit Manager.

Jayantissa KehelpannalaExecutive Vice PresidentJayantissa Kehelpannala, currently Sector Head Resort Hotels, has been withthe Group for 26 years. He has over 19 years of management experience inthe leisure industry, both in hoteliering and inbound tourism.

He is currently a committee member of the Tourist Hotels Association of SriLanka and represents the Sri Lankan Hotel Industry at the committee of theCeylon Chamber of Commerce. He is also a Director of the RainforestEcolodge which is an industry driven hotel development project to cater andpopularise Eco Tourism in Sri Lanka.

In addition, he holds office as the President of The Sri Lanka MaldivesBilateral Business Council and Vice Chairman, Hotels and TourismEmployers Group of the Employers Federation of Ceylon.

Vasantha LeelanandaExecutive Vice PresidentVasantha Leelananda is Head of the Destination Management sector andcounts over 29 years in the leisure industry with the John Keells group. Heserved as the Managing Director of Walkers Tours from 1997 to 2005 andoverlooks the travel operations in Maldives, India and Sri Lanka. Vasanthaholds a MBA from the University of Leicester. He is the immediate pastPresident of the Sri Lanka Association of Inbound Tour Operators(SLAITO), a Board Member of the Sri Lanka Institute of Tourism & HotelManagement and a co-chair of the Responsible Tourism Partnership which isaffiliated to the Travel Foundation UK.

Chandrika PereraExecutive Vice PresidentChandrika Perera was appointed as the Chief Financial Officer of the Leisureindustry group in March 2005. She has been with the group for 25 years. Sheheld the position of Group Financial Controller from 1999 to 2005. A Fellowof the Institute of Chartered Accountants of Sri Lanka and the Society ofCertified Management Accountants, Sri Lanka, she holds a MBA (Finance)from the University of Southern Queensland. She serves as a managementcommittee member of the Financial Reporting Faculty of ICASL and is amember of the Steering Committee on Income Taxes.

Mano RajakariarExecutive Vice PresidentMano Rajakariar has been the Group Financial Controller since April 2005.He has been with the group for over 12 years in many capacities includingserving as the Sector Financial Controller of the Plantations sector andheading the Shared Services implementation within the Group. He has over20 years of experience in audit, finance and general management, acquiredboth in Sri Lanka and overseas. He is a Fellow member of the Institute ofChartered Accountants of Sri Lanka (ICASL) and the Chartered Institute ofManagement Accountants, UK. He currently serves as a committee memberof the Urgent Issues Task Force (UITF) of the ICASL.

Waruna RajapaksaExecutive Vice PresidentWaruna Rajapaksa, Head of New Business Development and GroupInitiatives, has over 21 years of experience in Sri Lanka and in the UK,primarily in management consultancy and project finance. Prior to joiningthe group in 2002, he worked for the government at the Bureau ofInfrastructure Investment, Informatics International Ltd (UK) and at Ernst& Young. He is a Fellow member of the Chartered Institute of ManagementAccountants, UK and an Associate member of the Institute of CharteredAccountants of Sri Lanka. He also holds a MBA from Cass Business School,London, UK. He is a member of the Advisory Committee on EconomicInfrastructure Development of the Ceylon Chamber of Commerce.

Suresh RajendraExecutive Vice PresidentSuresh Rajendra, Head of the Property Development and Real Estate sectors,has over 16 years of experience in the fields of finance, travel & tourism andbusiness development acquired both in Sri Lanka and overseas. Prior tojoining the group, he was the Head of Commercial and BusinessDevelopment for NRMA Motoring & Services in Sydney, Australia. He is aFellow of the Chartered Institute of Management Accountants, UK.

Lallith RamanayakeExecutive Vice PresidentLallith Ramanayake is currently the Sector Head of the Transportationindustry group. He was Head of the Plantation Services sector till July 2007and counts over 36 years with the group and the tea industry. He is a Memberof the Chartered Institute of Marketing, UK with the Chartered Marketerstatus. He holds a MBA from the Postgraduate Institute of Management,University of Sri Jayawardenapura. He has been the Chairman of theColombo Brokers' Association, a Director of the Sri Lanka Tea Board,Deputy Chairman of the Tea Association of Sri Lanka, and a member of thePlantation/Tea Cluster of the NCED. He has served on the Committee of theCeylon Chamber of Commerce.

Ramesh ShanmuganathanExecutive Vice PresidentRamesh Shanmuganathan is the group's Chief Information Officer and hasover 15 years of experience in the ICT industry both in Sri Lanka and theUSA, with the last 8 years in C-level management. Prior to this he has servedin the Group's IT sector as the CEO of Keells Business Systems Limited since2001 and Head of Strategy/New Business Initiatives of John Keells ComputerServices Ltd since 2004, until he assumed duties as the group's CIO. He is aHayes-Fulbright Scholar and holds to his credit a MSc (InformationTechnology & Computer Science) with Phi Kappa Phi Honours fromRochester Institute of Technology, MBA (General) from PostgraduateInstitute of Management, University of Sri Jayewardenepura and BSc.Eng.(Electronics & Telecommunications) with First Class Honours fromUniversity of Moratuwa. He is a Chartered Engineer, Chartered ITProfessional and a Fellow of the British Computer Society. He also has activememberships in several other professional institutions and is a visiting facultymember for several post-graduate programmes.

Devika WeerasingheExecutive Vice PresidentDevika Weerasinghe, Chief Financial Officer of the Transportation industrygroup, previously held the position of Sector Financial Controller of theTransportation sector. She also served as the Sector Financial Controller ofthe Airlines SBU of the Transportation sector during the period 1998-2004.She is an Associate member of the Chartered Institute of ManagementAccountants, UK and also holds a Bachelors Degree in BusinessAdministration, from the University of Sri Jayawardenepura.


Group Operating Committee (Contd.)

Doing what we do, better than we already do aptly summarisesthe mind-set that we have applied in the past year, and willbe applying in the year ahead of us, to all our endeavours,including corporate governance.

The key reference point in most of our corporate governanceenhancements in 2007/08 has been the Companies Act of2007 which became effective in May 2007. The new Actdemands, in the main, greater disclosure, transparency,shareholder empowerment and higher levels of personalresponsibility and accountability, particularly at board andsenior management levels. Whilst acknowledging that thethrust of the Act is to improve the status quo, which resonateswell with our own thinking of doing what we do, better thanwe already do, there are areas of the Act which are not veryclear. We are confident that dialogue, and discussion, amongthe various stakeholders will result in greater definition beingachieved in the coming year.

The new rules of governance and disclosure requirements forlisted companies, as mandated by the Securities andExchange Commission of Sri Lanka, also came in to effectduring the financial year 2007/08. JKH was in fullcompliance of this last year. JKH is also in compliance withall aspects of the governance requirements of the listing rulesof the Colombo Stock Exchange.

We follow, and comply with, the recommendations of theCombined Code of 2006 to the extent that they arepracticable in the context of the nature of our diversebusinesses and their risk profiles. Our policy in this regard, isto comply, or explain.

The following report has been structured, at minimum, toaddress all provisions of the code of governance of theInstitute of Chartered Accountants of Sri Lanka.

JKH corporate governance frameworkJohn Keells Holdings PLC (JKH) is committed to thehighest standards of business integrity, ethical values andprofessionalism in all its activities towards rewarding ourstakeholders with greater creation of value, year-on-year. Ourgovernance framework is based on the following -

• The board of JKH is responsible to shareholders to fulfillits stewardship obligations, in the best interest of thecompany and its stakeholders

• Maximising shareholder wealth-creation on a sustainablebasis while safeguarding the rights of multiplestakeholders is a fundamental value shared by all levels ofour management

• The methods we employ to achieve our goals are asimportant to us as the goals themselves, and this has beenwell communicated to the individual businesses andfunctional units within the group

• Our operating models facilitate the making of businessdecisions, and resource allocations, in an efficient andtimely manner, within a framework that ensurestransparent and ethical dealings which are compliantwith the laws of the country and the standards ofgovernance our stakeholders expect of us

• We believe that building and improving stakeholderrelationships is an integral aspect of board effectivenessand a responsible approach to business

• We will take an active role in discussions with therelevant regulatory bodies regarding the implementationof governance regulations, accounting standards, andeconomic reforms in Sri Lanka, and any otherjurisdiction where the group has major business interests

• We opt for early adoption of best practice governanceregulations or accounting standards, where practicable

• We understand that our resolve to maintain stronggovernance practices presents strong commercialadvantages for us and the reduction of our cost of capitalvia the strengthening of stakeholder confidence,particularly the confidence of our investors, bothinstitutional and individual

THE BOARD OF DIRECTORS

Board responsibilities and “decision matrix”The Board of Directors is accountable to the shareholders forthe governance of the company. All directors are accountablefor the proper stewardship of the company's affairs and sharea responsibility in ensuring the highest standards of publicinformation, particularly financial information, ethics andintegrity across the group. Powers specifically reserved for theboard as highlighted in the JKH “decision matrix” include -

• Guiding the overall direction, strategies and financialobjectives of JKH and monitoring the implementation ofthe same

• Reviewing HR processes with emphasis on topmanagement succession planning

• Appointing and reviewing the performance of theChairman-CEO

• Approving major acquisitions and disposals and capitalexpenditure

• Monitoring systems of governance and compliance


Corporategovernance

• Overseeing systems of internal control andrisk management

• Approving of annual budgets and strategic plans

• Approval of any issue of JKH equity/debt securities

• Determining any changes to the discretions delegatedfrom the board to the executive levels

Delegation of authorityThe board has, subject to pre-defined limits, delegated itsexecutive authority to the Chairman-CEO who exercises thisauthority through the use of the Group ExecutiveCommittee (GEC), which he heads and to which he providesleadership and direction.

While the board sets the strategic direction and the overallpolicy framework of the group, it has delegated strategyformulation at industry-group level and the implementationof board set strategies/policies to the Chairman-CEO.Details of the group's management, operating and overlaystructures are detailed later in the report.

Board decision rights, as opposed to executive directordecision rights, covering people, strategy and planning andfinance are well defined and meticulously followed andensure the balance between the speed of decision andappropriate debate. These decision rights are subjected toregular review and were recently revised to reflect the currentneeds of the group.

The board has also delegated some of its functions to boardcommittees, while retaining final decision rights pertainingto matters under the purview of these committees. The AuditCommittee and Remuneration Committee consist solely ofindependent directors whilst 4 out of the 5 members of theNominations Committee, the exception being theChairman-CEO of the company, are independent directors.All three committees are chaired by independent directors.

Role of the Chairman-CEOThe Chairman, who is also the Chief Executive Officer(CEO), is responsible for leading the board and for itseffectiveness, as well as executing the strategies and policies ofthe board. The board has deemed that combining the tworoles is more appropriate for the group at present, in meetingstakeholder objectives in a conglomerate setting. The boardcomposition, group organisation, and in particular, thecommittee overlay structures discussed, under the heading“Group organisation & operational controls” later in thisreport, ensure that no one individual has unfettered powersof decision making. As the head of the Group ExecutiveCommittee (GEC), the Chairman-CEO provides the overalldirection and policy/execution framework for the board'sdecisions via this structure. This enables him to effectivelybalance his role as the Chairman of the board and the CEOof the company/group.

The Chairman, while leading the board in effectivelydischarging its duties towards all stakeholders, ensures withthe assistance of the Board Secretary, that board proceduresare followed and directors receive timely, accurate and clearinformation, before board meetings and updates on mattersarising between meetings. As the CEO, he guides andsupervises executive directors in striking a balance betweentheir board and executive responsibilities. The Chairman alsoensures that constructive working relations are maintainedbetween the executive and non-executive members of theboard so that every member is able to contribute effectivelywithin their respective competencies. Finally, he sets the tonefor the governance and ethical framework of the group.

Board meetings, agenda and attendanceThe board of JKH, as decided during the previous financialyear, meets once every quarter. During the year under review,the board met on 5 occasions; 4 being regular meetings and1 being a special-purpose meeting.

Attendance of board and committee meetingsBoard Nominations Remuneration Audit

meetings Committee Committee Committeemeetings meetings meetings

HEA A HEA A HEA A HEA AS Ratnayake - Chairman 5 5 1 1 - - - -A Gunewardene 5 5 - - - - - -S Gunesekera 5 5 - - - - - -R Peiris 5 5 - - - - - -F Amerasinghe - Chairman, Remunerations Committee 5 5 - - 2 2 5 5T Das - Chairman, Nominations Committee 5 2 1 1 - - - -S Enderby 5 5 1 1 - - 5 2M Muhsin 5 5 1 1 2 2 - -D Rodrigo - Chairman, Audit Committee 5 4 - - 2 2 5 5S Tiruchelvam 5 3 1 1 - - 5 5R Captain (resigned w.e.f. 6th May 2008) 5 5 - - - - - -

HEA - Meetings held and eligible to attendA - Attended


The formal schedule of matters reserved for boardconsideration, and decision, include the items of theDecision Matrix as aforementioned, and other mattershaving a material effect on the company and the group.

Your board states that every one of its members dedicatedadequate time and effort in discharging their duties and thatmember attendance during board meetings and boardcommittee meetings (as highlighted in the table on theprevious page) was healthy.

Allowing for non-executive director involvement in variousboard committees and time spent by them in consideringvarious matters that require discussion, and decision, inbetween the formal board meetings, the company estimatesthat non-executive directors devoted around 25 full timeequivalent days each to the group during the year.

Board composition and independenceAs at 31st March 2008, the board consisted of 11 directors ofwhom 4, including the Chairman, are executive and 7 arenon-executive. The board considers that 6 of the 7non-executive directors are independent in accordance withthe criteria suggested by the Combined Code and the criteriaproposed for listed companies by the Securities and ExchangeCommission of Sri Lanka, and have been identified as suchin the board profiles given earlier in this report. Mr RusiCaptain is the only non-executive director considered by theboard to be not independent, given that he and his connectedparties have a significant shareholding in the company. The 6independent non-executive members represent a majority onthe board.

The non-executive directors had direct discussions with theChairman-CEO, on 1 occasion during the year, without thepresence of the other executive directors. Although a leadnon-executive director has not been formally appointed, suchdiscussions were led by Mr Tarun Das, an independentdirector. Non-executive directors are encouraged to proposediscussion items and are provided with the agenda andsupporting material well in advance to facilitate awarenessand preparation.

The board is of the view that its present composition ensuresa right balance between executive expediency andindependent judgment. Collectively, the non-executivedirectors bring a range of value adding domestic andinternational experience, and expertise, in specialistfunctions. Biographical details of directors are set out in theBoard of Directors section of the annual report. The non-executive directors of the board collectively possess strongfinancial acumen and are in good positions to assess theintegrity of the group's financial reporting systems andcontrols, continually review and critique these systems andmake changes to them as necessary.

The company is conscious of the need to maintain anappropriate mix of skills and experience on the board and to

refresh progressively its composition over time. The companyalso notes the value that has been brought to bear by the nonexecutive directors on the governance of the group.

Conflicts of interestOver and above the issue of independence, each Director hasa continuing responsibility to determine whether he or shehas a potential or actual conflict of interest arising fromexternal associations, interests or personal relationships, inmaterial matters which are considered by the board fromtime to time. In the past, directors who have had an interestin a matter under discussion have excused themselves fromdeliberations on the subject matter and have abstained fromvoting on them. Abstentions, where applicable, from boarddecisions, are duly minuted.

Prior to appointment to the board, eligible persons arerequested to make known their various interests that couldpotentially conflict with the interest of the company. Onceappointed to the board, all directors are expected to informthe board of any new conflicting interests and obtain boardclearance prior to accepting any position, or engaging in anytransaction that could create a potential conflict of interest.All non-executive directors are required to notify theChairman of changes in their outside board appointments,and the Chairman reviews such appointments inconsultation with other directors, where necessary, in order toascertain potential conflict situations. Details of companiesin which board members hold board or board committeemembership is available with the company, for inspection byshareholders on request.

Name of director Type Involvement/interestShare Material

holding Management businessrelationship

S Ratnayake ED Yes Yes NoA Gunewardene ED Yes Yes NoS Gunesekara ED Yes Yes NoR Peiris ED Yes Yes NoF Amerasinghe NED/ID Yes No NoT Das NED/ID No No NoS Enderby NED/ID No No NoM Muhsin NED/ID Yes No NoD Rodrigo NED/ID No No NoS Tiruchelvam NED/ID No No NoR Captain* NED/NID Yes No No

* (resigned w.e.f. 6th May 2008)

ED - executive director, NED - non executive director,ID - independent director, NID - non independent.

Supply of information and board inductionAll directors are fully briefed on important developments inthe various business activities of the group and they regularlyreceive information concerning the group's operations,finances, situations which may give rise to conflicts ofinterest, risks and its people, enabling them to fulfill their


Corporate governance

duties and obligations effectively. A monthly CEO's reportinforms directors of shares that they cannot deal in duringperiods where the director may have information which isnot in the public domain.

Steps are taken in ensuring that newly appointed non-executive directors are apprised of the operations of thegroup, its values and culture, strategies, its operating model,governance framework and processes. Their attention is alsodrawn to their responsibilities as directors in terms ofprevailing legislation and to the code of conduct demandedby the company.

The directors have access to auditors, senior managers undera structured arrangement and information, as is necessary, tocarry out their duties and responsibilities effectively andefficiently. Apart from periodic performance reports,directors also receive information updates, frommanagement, on topical matters, new regulations and bestpractices as relevant to the group's businesses. Additionally,all directors have access to the services of the companysecretaries whose appointment and/or removal is theresponsibility of the board.

External professional adviceThe board seeks independent professional advice when andwhere necessary. During the year under review, professionaladvice was sought on various matters including -

• The Companies Act 2007

• Tax and regulations prevailing in certain Indian states

• Compensation and benefits applying to businesses,functions and industries that the group is involved in

• Asset impairment accounting and the practicability ofsome of the provisions of the new standard, earlyadoption of SLAS 16 covering employee benefits(gratuity) and, in particular, its actuarial valuation, anddeferred tax in tax exempt companies

• Extensions to SAP HR and SAP business integration

• Employee Share Options and its accounting

• Sustainability reporting

• Carbon trading, among others

Board and CEO's performance appraisalIn the financial year 2007/08, an appraisal of the board'sefectiveness was conducted on the basis adopted in the lastyear, thereby giving the board the opportunity of betterunderstanding areas that had room for improvement. It is aformalised process of self appraisal, whereby each memberassessed, on an anonymous basis, the performance of theboard under the headings of “role clarity and effectivedischarge of responsibilities” (in relation to theresponsibilities highlighted earlier in this report), “people mixand structures”, “systems and procedures”, “quality ofparticipation” and “board image”. The scoring, and open

comments, were collated by a nominated independentdirector and the results were analysed to give the board anindication of its effectiveness as well as areas that requiredaddressing and/or strengthening. The open and frankdiscussions that followed the evaluation reflected thekeenness of the board on doing what we do, better than wealready do. While the analysis concluded that the board wasfunctioning effectively, it did highlight some areas whichcould be improved on and action plans to address suchhighlighted issues were agreed.

The Remuneration Committee appraises the performance ofthe Chairman-CEO on the basis of pre-agreed objectives forthe group, set in consultation with the board. Suchperformance is not merely judged in terms of the group'sperformance against plan but also considers the group'sperformance against its peers in areas such as revenue growth,market share, profit growth and earnings per share. Nonquantifiable issues such as company image, customerorientation, societal trust are also considered in theoverall assessment.

Board appointments and Nominations CommitteeThe responsibility for identifying and proposing suitablecandidates for appointment as non-executive directors to theboard of JKH, in keeping with the target board compositionand skill requirements, lies with the NominationsCommittee. It also manages the process of appointing theChairman of JKH. Board appointments follow a formal andtransparent procedure. There were no new appointees to theBoard in the financial year 2007/08.

The Nominations Committee, comprises of 4 independentdirectors (including the chairman of the committee) and theChairman-CEO of JKH.

The detailed Nominations committee report is given in theBoard Committee reports section of the annual report.

Tenure, retirement and re-electionThe executive directors are appointed and re-appointed onlyuntil their prescribed company retirement age. The non-executive directors on the other hand, are appointed for aterm of three years, ideally up to a maximum of three termseach subject to the age limit as per statutory provision at thetime of re-appointment following the end of a term.

One-third of the directors, except the Chairman, retire byrotation on the basis prescribed in the articles of thecompany. A director retiring by rotation is eligible forre-election by a shareholder resolution at the annualgeneral meeting.

All directors are subject to election by shareholders at the firstannual general meeting after their appointment. The boardrecommends that shareholders vote in favour of theresolutions to elect the relevant directors whose biographicalprofiles have been provided in the annual report.


The board recommends the re-election of Messers E F GAmerasinghe, G S A Gunesekera and S Enderby who retire thisyear and become eligible for election at the Annual GeneralMeeting to be held on the 27th of June 2008.Mr R SCaptain resigned from the board on the 6th ofMay 2008.

REMUNERATIONA customised “pay for performance” scheme based on thepillars of individual performance rating and organisationalperformance rating was implemented during the subjectfinancial year for all group employees at manager level andabove, and based purely on individual performance rating forall group employees at assistant manager and executive levels.The rationale for the exclusion of organisational rating inlinking pay to performance at the lower levels was that theindividuals at those levels had little direct influence onbottom line of their organisations.

Whilst there were initial concerns regarding the acceptanceby the subject employees of the raison d'etre of the newscheme, actual experiences are proving that the scheme isachieving the objectives of employee motivation towardsbetter performance, employee recognition and reward andthe alignment of employee, management and stakeholderinterests.

The pay for performance system has, as its bedrock, theperformance management system that the group has beenperfecting over the last four years and the detailedremuneration surveys that the group conducted, using theservices of Ernst and Young, Sri Lanka and CornucopiaLanka Limited, Sri Lanka, in mid 2007, in addition toongoing reviews of remuneration based on the participationin various surveys relevant to the group. During the yearunder review, the group participated in three specific surveys,all conducted by Mercer on behalf of a leading private sectorcompany in Sri Lanka, a leading hotel based in Sri Lanka andour transportation company based in India.

Remuneration CommitteeThe Remuneration Committee, comprising threeindependent directors, is responsible for assisting the Boardof Directors in establishing remuneration policies andpractices in the group and in reviewing and recommendingto the board appropriate remuneration packages for theChairman-CEO and the other executive directors. Inaddition to being fully apprised of the “pay for performance”system introduced during the year under review, theCommittee had discussions with various experts inunderstanding the rationale, and the operations, of variousESOP schemes in Sri Lanka.

The Remuneration Committee in consultation with theChairman-CEO ensures that -

• Levels of remuneration are sufficient to attract, retain andmotivate directors of the desired quality at the right price

• Share options are not awarded below market price, and

• Statutory and legal requirements are complied with

None of the executive directors or members of the GEC areinvolved in influencing, or determining, their owncompensation packages.

For the purpose of this report, the terms “Compensation”and “Remuneration” have been used in reference to cash andnon cash benefits received in consideration of employment(excluding statutory entitlements such as employeesprovident fund and employees trust fund contributions),unless otherwise qualified.

Key principlesThe key principles underlying the group's remunerationpolicy are -

• All AVP and above roles across the group have beenbanded by an independent third party on the basis of therelative worth of jobs, thereby enabling internal equity

• Compensation is set at levels that are competitive toenable the recruitment and the retention of high calibreexecutives in the identified career levels/job bands - asguided by the median, 65th percentile and 75thpercentile of the best comparator set of companies (fromSri Lanka and the region, where relevant)

• Compensation, comprising of fixed (base) payments,short term incentives and long term incentives are tied toindividual performance at all levels and organisationalperformance at manager levels and above

• Performance is measured annually on well definedindividual and organisation objectives and metricswhich reflect, and are positively correlated to, thecompany's objectives, thereby aligning employee,management and stakeholder interests. Organisationalratings are additionally modified to reflect marketconditions via a set of pre-agreed peer comparators

• The more senior the level of management, the higher theproportion of the incentive component, and therebylower proportion of the fixed (base) component of totalcompensation

• As the decision influencing capability of the position onorganisational results, increases, the individualperformance will hold lesser weightage than theorganisational performance when determining totalcompensation and incentives

• Long term incentives currently take the form ofEmployee Share Options and are offered to employees, indefined career levels, based on pre-determined criteriawhich are uniformly applied across the same. Suchoptions are offered at market prices prevailing on the dateof the offer

• Affordability and sustainability

• Communication and transparency



Board remunerationThe remuneration of the Chairman-CEO, the executivedirectors and other members of the Group ExecutiveCommittee are determined as per the above principles. Atthese higher levels, the benchmark weightage betweenindividual and organisation performances in establishingcompensation is a 20:80.

The remuneration of executive directors have a significantelement which is variable, such variability being linked to thepeer adjusted consolidated group bottom-line and minimumreturns on shareholder funds.

The ratio between fixed and variable in 2007/2008, withvariable being based on the actual performance in 2006/2007was;

Compensation of non-executive directors (NEDs) isdetermined in reference to fees paid to other NEDs ofcomparable companies. The fees received by NEDs isdetermined by the Board and reviewed annually.

NEDs receive a fee for devoting time and expertise for thebenefit of the group in their director capacities, andadditional fees for either chairing or being a member of acommittee. NEDs do not receive any performance/incentivepayments and are not eligible to participate in any of thegroup's pension plans or share option plans. Non executivefees are not time bound or defined by a maximum/minimumnumber of hours committed to the group per annum, andhence is not subject to additional/lower fees foradditional/lesser time devoted.

Make-up of remuneration for executive directorsThe levels and make-up of remuneration, organisation-wide,are linked to the key principles highlighted before.

In order to further align the interests of executive directorsand shareholders, the executive directors, like other eligibleemployees, receive employee share options based on roleresponsibility and actual performance against the same. Thenumber so awarded are recommended to the board by theremuneration committee. Such options are awarded at theclosing market price on the date of award.

The share options made available to each of the executivedirectors for the year has been disclosed in the Directors'Report of the JKH Annual Report 2007/08.

Value of total remuneration (cash) Rs. million

Executive Directors (company) 100.0Non Executive Directors (company) 12.5

“Cash” compensation highlighted above comprises salary,pension contributions, short term incentive plans and othernon-share based benefits. In accordance with the guidelinesof the Securities & Exchange Commission of Sri Lanka, wehave disclosed the aggregate remuneration paid to executiveand non-executive directors during the financial year2007/2008. We have also disclosed the total value of shareoptions granted to executive directors during the samefinancial year.

ACCOUNTABILITY & AUDITYour board has taken necessary steps to ensure the integrityof the group's accounting and financial reporting systems andinternal control systems and also their review and monitoringon a periodic basis. Our systems of risk management,financial and operational control, ethical conduct,compliance with legal and regulatory requirements andcorporate social responsibility are detailed below.

Audit Committee, external auditors andindependenceThe Audit Committee comprises of three independentdirectors. It is governed by a charter which, in the main,covers the principles governing financial reporting, internalcontrol and the management of risks, both financial andoperational, and the workings of the committee.

The committee is responsible for the consideration andappointment of external auditors, the maintenance of aprofessional relationship with them, reviewing theaccounting principles, policies and practices adopted in thepreparation of public financial information and examining alldocuments representing the final financial statements. Aquarterly self certification programme that requires the chieffinancial officers of industry-groups, heads of finance ofsectors and finance managers of operating units to confirmcompliance with financial standards and regulations andrequires the CEOs of business units to confirm operationalcompliance with statutory and other regulations and keycontrol procedures, coupled with the identification of anydeviations from the expected norms have significantly aidedthe committee in its efforts in ensuring correct financialreporting and effective internal control and riskmanagement.

The Chairman-CEO, the Group Finance Director, theGroup Financial Controller and the Head of Risk Controland Review and the external auditors are regular invitees tothe meetings of the Audit Committee.

The detailed Audit Committee report including the areasreviewed during the financial year 2007/2008 is found in theBoard Committee report section of the annual report.

Although Ernst & Young are the external auditors of theholding company and many other group companies and alsoaudit the consolidated financial statements, the individualgroup companies employ many other audit firms, these being


Fixed VariableEmoluments ofexecutive boardmembers

49% 51%

KPMG Ford, Rhodes, Thornton & Co, PricewaterhouseCoopers, SJMS Associates, Deloitte and Touché, India andLuthra and Luthra, India. The audits have been distributed ina manner that does not give rise to one dominant externalauditor in terms of fees. In addition to the normal auditservices, Ernst and Young and the other external auditors, havealso provided certain non audit services to the group.All such services have been provided with the full knowledgeof the respective audit committees and are assessed to ensurethat there is no compromise of external auditor independence.The board has agreed that, ideally, such non audit servicesshould not exceed the value of the total audit fees charged bythe subject auditor within the relevant geographic territory.

We have separately classified the audit and non audit feespaid by the company and group to our principal auditor,Ernst & Young, and to other auditors of companies in thegroup in the notes to the financial statements of thecomprehensive Annual Report.

Care is taken to ensure that the internal audit function ingroup companies is not outsourced to the external auditor ofthat company. The group attempts, where practical, to givepreference to audit firms who are not external auditors of anygroup company, in carrying out internal audit work in afurther attempt to ensure external auditor independence.

The Auditors’ report on the financial statements of thecompany for the year under review in the Financial Reportssection of the annual report.

Combining internal audit, risk management andinsuranceDuring the latter part of the financial year, a key move wasmade in bringing the functions of internal audit, riskmanagement and insurance under a common risk umbrella.

The group has identified a synergising relationship amongthese functions and aims to have in place, in the future,subject to further study and cost-benefit/risk-reward analysis,better risk management and risk transfer mechanisms,including the establishment of a captive insurance schemethat uses the strength of the group balance sheet, inoptimising the residual cost of risks.

The proactive identification of all risks, both operational andfinancial, has helped in ensuring that internal, and external,audit programmes are tailored to the current needs of thesubject entities.

Risk Management is now a key heading in all feasibilityreports of new investments.

System of internal controlYour board has, through the involvement of the risk reviewand control department, taken steps to gain assurance thatsystems, designed to safeguard the company's assets,

maintain proper accounting records and providemanagement information are in place and are functioningaccording to expectations. The risk review programmecovering the internal audit of the whole group is outsourcedand the reports arising out of such audits are, in the firstinstance, considered and discussed at the business/functionalunit levels and after review by the sector head and thepresident of the industry group are forwarded to the relevantaudit committee on a regular basis. Further, the auditcommittees also assess the effectiveness of the risk reviewprocess and systems of internal control on a regular basis.

Risk managementThe GEC has adopted a group-wide risk managementprogramme to identify, evaluate and manage significantgroup risks and stress-test for various risk scenarios.The programme ensures that a multitude of risks, arising as aresult of the group's diverse operations, are effectivelymanaged in creating and preserving shareholder and otherstakeholder wealth. The detailed Risk Management Report ofthe comprehensive Annual Report describes the process ofrisk management as adopted by the group and the key risksto the achievement of the group's strategic businessobjectives.

During the year, JKH further reviewed and updated itsgroup-wide financial policies and procedures, taking in toconsideration new technology, the existence of a sharedservices arm, regulations and best practices. This has resultedin greater uniformity in financial and management reportingprocesses and has facilitated better discipline and easiermonitoring. The highlight of the year was the review, andstrengthening, of the VAT accounting and VATreturns/claims processes in catering to the prevailingrequirements of the Inland Revenue Department.

The group continues its phased implementation of actions inorder to align its group-wide common processes such asvendor payments, bank account reconciliations, intercompany reconciliations and invoice verification, amongothers, in line with the COSO framework, which is theframework commonly used for assessing the effectiveness ofinternal controls over financial reporting under section 404of the Sarbanes-Oxley Act 2002, with a view to assessing thedegree of internal control when recording transactional dataunder SAP. The phased implementation is aimed atstreamlining transaction authorisation access based on rolerequirement, making user administration easier, enablingusers access for roles they perform in full as well asensuring a more effective categorisation of user IDs forlicensing purposes.

Some of the issues faced by the group in the 3-phasedimplementation process include certain roles requiring agreater degree of flexibility based on the nature of thebusiness, difficulty in altering the system in existingbusinesses vs. implementation in new business units, andchanges to authorisation matrices arising out of periodic



review and restructuring. An authorisation matrix based onroles, as opposed to individuals, has been identified as apossible part solution to changes required in SAP due tochanges in personnel.

Organisational and operational controlThe operating model currently in place clearly definesauthority limits, responsibilities and accountabilityfacilitating operating expediency, healthy debate and decisionfreedom. The committee structure, as depicted below, whilstensuring that no one operating body or individual hasunfettered powers of decision making, allows consensus to asgreat an extent as practical, but it is the Chairman-CEO, thepresidents, sector/functional heads and profit centre/functionmanagers, who are accountable for the total group, industry/functions groups, the sectors/functions and the businessunits/sub-functions respectively.

* Is not a decision making body and acts as a glue

The independence of the finance function is preserved througha structure that has executive vice presidents - finance andsector financial controllers having a direct functional reportingline to the Group Finance Director in a setting that allowsthem to contribute and add value to operations via their directadministrative reporting links with presidents and sector heads.

Group Executive Committee (GEC) and successionplanningThe 7 member GEC consists of the Chairman-CEO, theDeputy Chairman, the executive director presidents andthe presidents.

The GEC is the overlay structure that implements, under theleadership and direction of the Chairman-CEO, the policiesand strategies determined by the board, manages, throughdelegation and empowerment, the business and affairs of thegroup, makes portfolio decisions and prioritises the allocationof capital, technical and human resources.

The GEC also assists the Chairman-CEO in successionplanning and the appointment of presidents, sector heads,

functional heads and other senior managers and the careermanagement of assistant vice presidents and above. Thisprocess is well tested and on a proactive basis, a pool ofpotential successors for a number of key positions isidentified and earmarked for specific training anddevelopment as is necessary. A key feature of the operatingmodel is that the GEC members, particularly the presidents,not only play a mentoring role, but are totally accountablefor the businesses and functions under them.

Group Operating Committee (GOC)The 22 member GOC consists of the Chairman-CEO, theDeputy Chairman, the executive director presidents, thepresidents and the executive vice presidents.

The GOC provides a platform to share learning on issuesthat cross industry groups, sectors, business units andfunctions. It is also the forum to discuss group strategy, groupinitiatives and group best practices. Its main purpose is to actas a “glue” in connecting the various businesses within thegroup towards identifying and extracting group synergies andimplementation of such.

Group Management Committee (GMC) and othercommittees and succession planningThe other key operating committees are the GMCs, theSector Committees and the Management Committees thatfocus on strategy, performance monitoring, careermanagement and succession planning of employees belowassistant vice president level, risk management and groupinitiatives at an industry group, sector, strategic business unitand business unit levels respectively. Functions have GMCsand functional committees. Business units are encouraged totake responsibility and accountability to the lowest possiblelevel via suitably structured committees and teams in amanagement by objectives setting.

The agendas of these committees are carefully structured toavoid duplication of effort and ensure that discussions anddebate are complementary both in terms of a bottom-up andtop-down flow of accountabilities and information. As statedearlier, the responsibility and accountability lie with theChairman-CEO, the presidents, the sector/functional headsand the profit centre/function managers as applicable.

The introduction of peer adjusted organisational ratings indetermining pay for performance has resulted in the searchby business units, sectors and industry group of productivityenhancements, process improvements and cost efficiencieswithin a framework of better teamwork.

Operations planning, monitoring and decision rightsA planning and monitoring process, which facilitates andencourages the involvement of staff through annual plansthat articulate strategy at industry group, sector, strategicbusiness unit, business unit, departmental and functionalunit levels, ensures employee involvement andempowerment. Decision rights are defined for each level and


Group levelGroup Executive Committee

GEC

Industry/function Group Management Committee group level

Industry/functionSector Committee

SBU/sector level

Business/function Management Committee

BU/departmental level

GMC

Board

Group Operating Committee

GOC *

this has resulted in an inculcation of a sense of ownership, thereduction of bureaucracy and speedier decision-making.Annual and five year plans are formulated on a bottom-upbasis using futuristic scenarios developed by the GEC andGMCs and macro economic factors developed by thecorporate centre.

Actuals are compared against the original plan and/or thereforecast on a monthly basis at GMC, Sector Committee,Management Committee and Departmental Committeelevels and are reviewed at least quarterly by the GEC. TheChairman-CEO and the GEC are able to view key financialinformation for all group companies on a real time basis viathe group ERP system while the presidents and executive vicepresidents, the CEOs of business units and managers offunctions are able to view, on an online basis, informationrelevant to their areas of responsibility.

Responsibility for monitoring and achieving plans as well asensuring compliance with group policies and guidelines restswith the chief executive officers of each group company andheads of functions at the corporate centre at the businessunit and function levels.

Individual performance objectives are established for all stafffrom executives to the Chairman-CEO and such objectivesare linked to the group objectives. A performancemanagement system that is founded on the performanceobjectives and a competency matrix developed as a part of thehuman resources management process provides the basis fortraining and development while individual performanceratings coupled with organisational rating, at levelsapplicable, form the basis of a pay for performance system.

At the GMC level and above, the focus is more on headlinefinancial and non-financial indicators, strategic priorities,risk management, use of IT as a tool of competitiveadvantage, new business development, continuous processimprovements and human resource management.

Going concern and financial reportingThe directors are satisfied that the company has sufficientresources to continue in operation for the foreseeable future.In the unlikely event that the net assets of the company fallbelow a half of shareholders funds, shareholders would benotified and an extraordinary resolution passed on theproposed way forward.

The going concern principle has been adopted in preparingthe financial statements. All statutory and materialdeclarations are highlighted in the Annual Report of theBoard of Directors in the comprehensive Annual Report.Financial statements are prepared in accordance with the SriLanka Accounting Standards (SLAS), including all the newstandards introduced during the subject year, andInternational Accounting Standards (IAS), as applicable.

Information in the financial statements of the Annual Reportare supplemented by a detailed “Management Discussion

and Analysis” which explains to shareholders the strategic,operational, investment and risk related aspects of thecompany that have translated in to the reported financialperformance and are likely to influence future results.

The Statement of Directors' Responsibilities in relation tofinancial reporting is given in the Financial Reports Sectionof the annual report. The Directors' Interests in contracts ofthe company are addressed in the Annual Report of theBoard of Directors.

The directors have taken all reasonable steps in ensuring theaccuracy and timeliness of published information and inpresenting an honest and balanced assessment of results inthe quarterly and annual financial statements. As discussed inthe shareholder relations section of this note, all pricesensitive information has been made known to the ColomboStock Exchange, shareholders and the press in a timelymanner and in keeping with the regulations.

Ethical and responsible decision making valuesThe board encourages management to promote value-baseddecision making across the organisation. The culture withinJKH draws upon a set of unifying values to guide the actionsand decisions of the board and all employees. The group'svalues are found in the “Our Values” section of the AnnualReport and are/have been constantly referred to by theChairman-CEO, Presidents and BU heads during employee,agent and other key stakeholder engagement. The groupbelieves that the main source of its competitive advantage isthe trust that the stakeholders place on the core valuesunderlying its corporate activities.

The group's core values are regularly displayed in the group'sintranet and are also disseminated in many other ways,including new employee induction sessions, feedbacksessions and performance management feedback sessions,just to name a few. The senior management of the group,generally recognised as AVP and above grades including theChairman-CEO, are expected to walk the talk and theirmanagement behaviour is monitored through an annual 360-degree feedback. All the group's recognition schemes insist,as a minimum, that all nominees have lived the JKH Values.

Code of conductA code of conduct has been formally communicated to allemployees, executives and above and are now a component ofthe employee self service - HR portals - developed by groupHR and group IT on a SAP platform and is based on fourbasic principles, namely -

• The allegiance to the company and the group

• The compliance with rules and regulations applying inthe territories that the group operates in

• The conduct of business in an ethical manner at all timesand in keeping with acceptable business practices, and

• The exercise of professionalism and integrity in allbusiness and “public” personal transactions



The subject employees are expected to adhere to the code inthe performance of their official duties and in other situationsthat could affect the group's image and are expected toentrench the expected behaviour at all levels in theorganisation through communication and role modelling.

Securities trading policyThe group's securities trading policy prohibits all employeesand agents engaged by JKH who are aware of unpublishedprice-sensitive information from trading in JKH shares or theshares of other companies in which the group has a presentbusiness interest. The board, GEC, GOC as well as certainidentified employees in senior executive roles who are privyto JKH's results prior to its availability to the public areprohibited from trading during periods leading up to therelease of quarterly and annual results, new investments,particularly mergers and acquisitions, announcements ofscrip issues and dividend payments.

Open communicationsJKH board believes in maintaining open-door policies for itsemployees and key stakeholders and this is promoted at alllevels of the group.

Given the hierarchical structures that are unavoidable in anorganisation as diverse as JKH, the entrenchment of opencommunications is yet to take the form and be in the extentdesired. The importance of communication, top-down,bottom-up and lateral in gaining employee commitment toorganisational goals through a sense of belonging as a resultof being better informed has been emphasised throughvarious communiqués issued by the Chairman-CEO andother senior managers.

Skip-level meetings, which were introduced for employees atassistant manager and above levels throughout the groupcompanies in 2006/2007 and enabled employees to get anopportunity to interact, and discuss, with superiors who areat a level higher than their own immediate supervisor, gainedin stature during 2007/2008 and proved to be more effectiveas the subject employees gained more confidence in its intent.This has furnished the management with a conduit, viafirsthand feedback, to information, which has been helpful inimproving operations and work relationships.

Whistleblower policyThe group has established a mechanism for employees toreport to the Chairman through a communication linknamed “Chairman Direct”, concerns about unethicalbehaviour and any violation of group values. Employeesreporting such incidents are guaranteed completeconfidentiality and such complaints are investigated andaddressed via a select committee under the direction ofthe Chairman.

While this is a key process within JKH to support andpromote honest and ethical behaviour, this course of action is

to be used where the systems and processes that are already inplace do not, or are not, capable of addressing the issueat hand.

ComplianceThe board is conscious of its responsibility to theshareholders, the government and the society in which itoperates and is committed to upholding the higheststandards of ethical behaviour in conducting its business. Theboard, through the group legal division, the group financedivision and its other operating structures, strives to ensurethat the company and all of its subsidiaries and associatescomply with the laws and regulations of the countries theyoperate in.

The Board of Directors have also taken all reasonable steps inensuring that all financial statements are prepared inaccordance with the Sri Lanka Accounting Standards and therequirements of the Colombo Stock Exchange and otherapplicable authorities. The Sri Lanka Accounting Standards,as set by the Institute of Chartered Accountants of Sri Lanka,are those, which govern the preparation of the financialstatements. The International Accounting Standard is used inthe rare instance where a Sri Lanka Accounting Standarddoes not exist. The board is aware of the growing importanceof the disclosure of critical accounting policies as a part ofgood governance and opine that there are no instances wherethe use of such concept would have a material impact on thecompany's and the group's financial performance.

The group has made every effort to comply with therequirement of the new Companies Act which came intoeffect from 3rd May 2007.

Corporate responsibilityThe group recognises that it exists not only to maximise longterm shareholder value but also to look after the rights andappropriate claims of many non-shareholder groups such asemployees, consumers, clients, suppliers, lenders,environmentalists, host communities and governments. Werecognise that they have a stake in the outcome of the group'sactions and, accordingly, we will accord to them an increasingstatus when making corporate decisions. More importantly,we are becoming more aware of the impact of our businessdecisions on these stakeholder groups, the environment andbroader communities.

Corporate responsibility is admittedly an area that demandsmore prominence in the group's decision matrix. While wehave been reporting on our sustainability practices in thepast, we believe that our efforts, particularly on stakeholderand environmental aspects, could be more focused, furtherrefined and better organised. This year, the group undertookan extensive audit of its operations in order to ascertain thefull impacts of its business operations on the economy,environment and society and establish the gaps andshortcomings in the way we currently integrate such impacts


in our short term, medium term and long term decisions andstrategies. An audit of our sustainability practices wasrecently conducted by Det Norske Veritas (DNV) and themain findings of the audit have been captured in theSustainability Report of the comprehensive Annual Report. Aquick scan of the findings give us the confidence that muchcan be achieved by a few immediate actions and the grouphas already taken the next steps in formulating action plansand in establishing a steering committee that will monitorthe actual progress against plans. It has also been agreed thatsustainability priorities and objectives will be developed andadopted, for each of our major businesses and will beintegrated in to the annual planning and strategy formulationprocesses. The John Keells Social Responsibility Foundation,the vehicle used by the group in developing andimplementing the group's involvement in “the community”,is gearing itself to ensure that the social programmes of thegroup are consistent with the principles of sustainabledevelopment.

The company, through its Investor Relations division (IR),maintains an active dialogue with shareholders, potentialinvestors, investment banks, stockbrokers and otherinterested parties. Any concerns raised by a shareholder areaddressed promptly at the department level and areforwarded, when necessary, to the GEC for considerationand advice. Analysts reports are circulated among the GEC,as and when available, and its contents debated.

SHAREHOLDER RELATIONS

Constructive use of AGMShareholders will have the opportunity at the forthcomingAGM, notice of which has been communicated to you to putquestions to the board and to the Chairman of JKH and thechairmen of the various committees. The contents of thisannual report will enable existing and prospectivestakeholders to make better informed decisions in theirdealings with the company.

In general, all steps are taken to facilitate the exercise ofshareholder rights at AGMs, including the receipt of noticeof the AGM and related documents within the specifiedperiod, voting for the election of new directors, new longterm incentive schemes or any other issue of materiality thatrequires a shareholder resolution.

Dialogue with institutional shareholdersThe company has a well-developed investor relationsprogramme to address the information needs of investmentinstitutions and analysts regarding the company, its strategy,performance and competitive position. Given the widegeographic distribution of the company's current andpotential shareholders, this programme includes regularroadshows to Asia Pacific, Europe and the USA conducted bythe Deputy Chairman and the Head of Investor Relations.Matters discussed, and issues raised, at these meetings are

brought to the attention of the GEC and/or the board, asappropriate, and addressed.

Major transactionsAll material and price sensitive information about thecompany is promptly communicated to the Colombo StockExchange, where the shares of the company are listed andreleased to the press and shareholders. The group alsopublishes quarterly, half-yearly and nine months endedinterim reports to all its shareholders in a timely manner. Theinterim and annual reports, contain a Chairman's messagewhich explains, at a high level, the performance, backgroundand rationale for all major transactions.

THE FUTUREJKH is committed to conducting its affairs with integrity,efficiency and fairness to all stakeholders. Our approach togovernance is of introspection, critical review, continuedbenchmarking and improvement. This, we believe, is not achoice as much as it is an essential, as the global investmentcommunity becomes more and more stakeholders oriented intheir expectations of how companies should conductbusiness. As a businesses based in an emerging market, nowsometimes referred to as a frontier market, we seek to remaina preferred choice for investment. Therefore, as in the pastfew years, our key areas of focus will continue as follows -

• Creating robust operating structures that are able toevolve to face the challenges of our strategic plans andcontinuous re-invention of our portfolio, whilemaintaining sound internal controls

• Developing the depth and reach of our externalstakeholder relationships, improving transparency andefficiency in information flows and promotingpartnership and mutual understanding betweenmanagement and external stakeholders

• Staying abreast of international best practices andadopting those that add value to the group and itsstakeholders, and

• Doing what we do, better than we already do.



REMUNERATION COMMITTEEREPORTThe Remuneration Committee met on several occasions, twoof them to conduct regular remuneration committee businessin accordance with its mandate and the requirements of theboard, and several other occasions to review the proposed“pay for performance scheme” and to consider the impacts ofthe Companies Act 2007 on director remuneration.

A water-shed in the financial year was the introduction of a“pay for performance” scheme, which significantlyaugmented the variable pay mind-set that the group hadnurtured in 2005/2006. The scheme, which was introducedand has now been accepted by all concerned, was adopted atall grades, executives and above. The company had thebenefit of arguably the best professional guidance in thisregard and the consensual methods adopted helped introducea very sensitive and radical change without any apparentopposition. The process which was customised to meet thespecific requirements of John Keells group has shown thatchange is possible in Sri Lanka, as long as there is adequatedialogue and fairness in dealing with possible areas of dissent.There is no doubt that a culture of granting remunerationbased on just the cost of living factors, without reference tothe corporate and individual performance, is not sustainablein the medium to long term and that, if allowed to continue,will lead to an erosion of an organisation's financial capacityand operating capability. The Committee is proud to havebeen associated with management in this farsighted, timelyand bold initiative.

The committee fulfilled its obligations in relation toremuneration of the executive directors, the Chairman andnon executive directors, following best practice, keeping inmind the special requirements of the organisation whilst alsorecognising market trends. Every effort has been made inensuring compliance with the requirements of theCompanies Act as it applies to director remuneration basedon advice received from legal experts.

The committee also had the task of reviewing the design of anew Employee Stock Option Plan, this being the fourth issuesince the company decided on granting long term benefits toemployees, at selected levels, in its quest for improved loyaltyand commitment of key executives by inculcating a sense ofbelonging. The enjoyment by employees of a long termbenefit through stock options, which is a universally popularmethod of recognising good performance, is an integral part

of the group's reward strategy. Given a lack of firm definitionregarding the future direction of the application of SriLankan accounting standards on share options and given thepossibility of such a definition being available in 2008, theboard recommended that the award be limited to a singleyear as opposed to it being spread over a period of three yearsas was the practice previously. This was duly approved at anExtraordinary General Meeting. It is likely that future ESOPschemes will follow the normal practice of being open for aperiod of three to five years with a view to creating a stabilityof employee expectations.

The committee interacted regularly with the HumanResource division and management in ensuring thatcompensation structures were in line with an overall grouppolicy subject to the specificities of different tradesand services. The key principles of the group’s remunerationpolicy are found in the Remuneration section of theCorporate governance report.

In conclusion, I wish to thank my colleagues, DeshamanyaDeva Rodrigo and Mohamed Muhsin, for their valuablecontributions to the work of the committee and also to oursecretary, Linda Starling.

Franklyn AmerasingheChairman, Remuneration Committee22 May 2008

MembersM V Muhsin, P D Rodrigo


BoardCommitteereports

AUDIT COMMITTEE REPORT

Composition of the Audit CommitteeThe Audit Committee consists of four independentnon-executive directors. The committee draws on theexpertise of members with leadership backgrounds infinance, audit, legal, human resource management andregulatory institutions. In keeping with the Guidelines forBest Practice on the “Role of Auditors” issued by theSecurities and Exchange Commission of Sri Lanka, theChairman of the committee is a Chartered Accountant andformer Senior Partner of PricewaterhouseCoopers, Sri Lanka.The Head of Group Risk and Control Review serves asSecretary to the Audit Committee.

MeetingsThere were five meetings of the committee held during theyear. The Chief Executive Officer and the Chief FinancialOfficer, both executive directors, together with the GroupFinancial Controller attend most parts of these meetings byinvitation. Other officials are invited to attend on a needsbasis. The Internal Auditors and External Auditors attendmeetings when matters pertaining to their functions come upfor consideration.

Terms of referenceThe committee is governed by the specific terms of referenceas set out in the Audit Committee Charter which is reviewedon a bi-annual basis. The terms of reference comply with andgo beyond the requirements of the listing rules of theColombo Stock Exchange.

The committee focuses on the following objectives indischarging its responsibilities -

(a) Oversees the functions of risk management

(b) Oversees the policies and procedures in place to have asystem of internal controls adequate in design andeffective in operation

(c) Ensures and strengthens the independence andobjectivity of the External (statutory) Auditors

(d) Reviews the appropriateness of the principal accountingpolicies used

(e) Reviews the financial statements

(f ) Ensures the integrity of the financial statements

Summary of activities• The committee reviewed the consistency and

appropriateness of the accounting policies adopted by thegroup and was assured that the policies used wereappropriate and were in compliance with the Sri LankaAccounting Standards. The committee reviewed anddeliberated on policy updates on internal procedures to

ascertain that the improvements are aligned to bestbusiness practices.

• During the course of the year, the committee reviewedthe effectiveness of the internal financial controls toensure they provide reasonable assurance to the directorsthat the financial reporting system adopted by the groupcan be relied on in the preparation and presentation ofthe quarterly and annual financial statements. Thesereviews included discussions on the effectiveness andsecurity of information processing and technologyplatforms.

• The committee considered the Internal and ExternalAudit reports of all group companies which were madeavailable to them and discussed, where necessary, areas ofconcern with the audit committee attendees with a viewto receiving assurance that the significant internal controland accounting issues highlighted by the Internal andExternal Auditors have been and/or are being addressedby the management and, where applicable, have beencorrectly recognised in the financial statements.

• The committee obtained quarterly declarations from theindustry groups and sectors confirming compliance withestablished group policies and procedures andhighlighting departures, if any, together with reasons,from financial reporting and statutory requirements.

• The committee held a special closed door meeting withthe External Auditors without the presence of anyexecutive directors or officers, to discuss in particularmatters relating to the co-operation, quality ofinformation, and representations received from themanagement. Such discussions also covered the internalrules and guidelines followed by the External Auditors inensuring independence.

• The committee met with the Head of Group Tax toreview the key group and sector specific tax issuesimpacting the group and the related status and actionplans taken.

• Based on the submissions made by management, thecommittee recommended the early adoption of SriLankan Accounting Standard 16 (revised) on EmployeeBenefits.

• The committee deliberated on the many representationsmade by the group to the relevant statutory andregulatory authorities directly to obtain clarity andguideline on matters of Accounting Standards, tax andother related issues. As at date of this report, a ruling isawaited from the Urgent Issues Task Force (UITF)Committee of the Institute of Chartered Accountants ofSri Lanka on the accounting treatment and disclosure tobe made in relation to the necessity of providing fordeferred tax on BOI and Tax Holiday Companies as perSri Lankan Accounting Standard 14 (revised) onIncome Taxes

• During the course of the year, the committee establishedprocesses, via a review of movements, variances and ratiosto vet the quarterly and annual financial statements of


Board Committee reports

John Keells Holdings PLC prior to recommendation tobe adopted by the board.

Risk and control reviewThe Audit Committee is supported by an established groupRisk and Control Review Department (R&CR), whichmanages the internal audit and risk managementrequirements of the group. The Head of Group R&CRreports functionally to the Chairman of the AuditCommittee on activities and key control issues. Internalaudits are outsourced to leading audit firms in line with anagreed annual audit plan. Regular follow up reviews areconducted by group R&CR to ascertain that auditrecommendations have been acted upon. Group R&CR alsoconducts special reviews as requested either by the AuditCommittee or by management.

The Internal Audit function, in addition to reviewing theefficacy of internal controls, reviews the actions taken tocontrol and mitigate operational and business risks andmonitors and reports on the compliance of group companieswith statutory requirements and group accounting andoperational policies. Internal audit reports provide anoverview of the risk profile of the business being audited, andthe internal audit frequency depends on the overall riskgrading, with higher risk areas being on a shorter audit cycle.

During the period under review, the board was apprised ofthe enterprise risk management programme implementedacross the group.

During the latter part of the year, with a view to synergise onthe functions of internal control, the internal audit, riskmanagement and risk transfer functions were brought underone risk umbrella with accountability lying with the groupR&CR Department.

Subsidiary company Audit CommitteesQuoted subsidiaries have appointed their own auditcommittees consisting of independent directors. Such auditcommittees are independent of the Audit Committee of JohnKeells Holdings PLC but maintain the standards agreed withJohn Keells Holdings PLC Audit Committee and report tothe JKH Audit Committee on any issue of significance. Theminutes of their meetings are made available to the AuditCommittee of John Keells Holdings PLC. The group R&CRDepartment provides secretarial and logistical support tosuch audit committees.

External AuditThe Audit Committee has discussed with the ExternalAuditors before the audit commenced, the nature, approachand scope of the audit and has reviewed the audit plan for thefinancial year 2007/2008.

The External Auditors have direct communication channelswith the Audit Committee and have kept the committeeadvised of matters of significance that arose during the courseof the audit.

The Audit Committee met with the External Auditors on16th and 22nd May 2008 to review and approve the financialstatements before presentation to the board for adoption.

The Audit Committee has reviewed the other servicesprovided by the External Auditors to the group toensure that their independence as auditors has notbeen compromised.

The Audit Committee has recommended to the board thatErnst & Young, Chartered Accountants, be appointedexternal auditors of John Keells Holdings PLC for thefinancial year ending 31st March 2009, subject to approvalby the Shareholders at the next Annual General Meeting.

ConclusionThe Audit Committee is satisfied that the group's accountingpolicies, operational controls, and risk management processprovides reasonable assurance that the affairs of the group aremanaged in accordance with group policies and that groupassets are properly accounted for and adequately safeguarded.

During the course of the year, Mukhlis Ismail replaced MikeAnthonisz as the Head of Risk and Control Review and asthe Secretary to the Audit Committee. Mike Anthonisz'scontribution to the committee is acknowledged.

Finally, I would like to thank Franklyn Amerasinghe, StevenEnderby and Ms Sithie Thiruchelvam who served on thecommittee and contributed immensely with theirprofessional expertise.

Deva RodrigoChairman, Audit Committee22 May 2008

MembersF Amerasinghe, S Enderby, S S Tiruchelvam


NOMINATIONS COMMITTEEREPORTThe Nominations Committee, as of 31st March 2008,consisted of four independent directors and the Chairman-CEO of John Keells Holdings PLC.

The mandate of the committee remains -

• To recommend to the board the process of selecting theChairman and the Deputy Chairman

• To identify suitable persons who could be considered forappointment to the board as non executive directors

• Make recommendation on matters referred to it bythe board

During the period under review, the committee met once,with all members in attendance.

The committee continues to work closely with the board inreviewing, regularly, its skills needs. The committee opinesthat the skills representation in the board is appropriate forthe group's current board level needs.

Tarun DasChairmanNominations Committee22 May 2008

MembersS Enderby, M V Muhsin, S S Tiruchelvam, S C Ratnayake


Board Committee reports

ThinkingBEYONDour currentthinkingManagement discussion and analysis

Highlights• JKH share performance during the year 2007/08

- The JKH share price fell 22.7 per cent during theyear 2007/08, against a fall of 17.1 per cent in theblue chip Milanka Price Index (MPI). Lower tradingvolumes compared to 2006/07 of the JKH share wasa key factor in the share underperforming theColombo Stock Exchange (CSE). The drop in theshare price resulted in a negative TSR of 19.5 percent in the current year.

• Optimising the capital structure

- IFC, a member of the World Bank Group, extendeda long term corporate investment facility of USD 75million on a floating rate basis to support JKH'sexpansion in key business areas in Sri Lanka andother countries in the region.

• Continued belief in financial position and financialperformance

- JKH retained its rating of AAA (Sri) assigned byFitch Ratings Lanka Limited on account of thecontinued strength of its balance sheet and strongbusiness fundamentals.

• Expansion of business portfolio

- In April 2008, JKH announced an investment ofUSD 5.72 million for a 44 per cent equity stake inQuatrro Finance & Accounting Solutions. QuatrroF&A is the India based Financial and Accounting(F&A) business of the Quatrro group. Quatrro F&Arecently acquired the Chicago based FinancialProcess Outsourcing LLC in a structured financingtransaction

- The group also invested in John Keells Foods IndiaPrivate Limited, a company incorporated in India tomanufacture and market processed meats to thegrowing Indian market.

- The group entered in to an MOU with its associate,Associated Motorways (AMW), and FinlaysColombo to jointly develop a contiguous 6.6 acreblock of land with access from Union Place andVauxhall street.

• Continuous re-evaluation of business portfolio

- In March 2008, JKH announced the sale of itsSystems Integration business with the divestment ofKeells Business Systems.

• Highest market capitalisation of shares in free float

- Despite the correction in the share price, JKH hasthe highest market capitalisation of shares in free

float of Rs. 56.79 billion, reflecting the relativelyhigher liquidity of the JKH share.

• Recognition for superior performance

- JKH was voted as the most respected entity InSri Lanka by LMD for the third consecutive yearsince the ranking's inception in 2005. JKH wasranked number 1 in the areas of management profile,quality consciousness, honesty, work environment,vision, CSR and national-mindedness.

- JKH was recognised as the best Corporate Citizen inSri Lanka at the Ten Best Corporate Citizens Award2007 organised by Ceylon Chamber of Commerce.

- The JKH annual report of 2006/07 won the Goldaward for corporate governance and was adjudgedone of the joint runners up in the “Overall Winner”category by the Institute of Chartered Accountantsof Sri Lanka.

- The JKH annual report of 2006/07 also won theGold award for corporate governance disclosure bythe South Asia Federation of Accountants.

The JKH shareThe Colombo Stock Exchange (CSE) experienced negativegrowth in 2007/08, compared to the positive growth in2006/07, due to declining investor confidence as a result ofan escalation of the North East conflict and higher interestrates. The All Share Price Index (ASPI) fell by 8.6 per cent to2,550 points, whilst the MPI fell by 17.1 per cent to 3,181points by 31st March 2008.

The JKH share fell 22.7 per cent to Rs. 119.75 as at 31stMarch 2008 compared with a closing price of Rs. 155.00 atthe end of the previous year. The JKH share traded betweena low of Rs. 116.25 and a high of Rs. 156.75 during the yearunder review. Generally depressed market conditions,coupled with lower trading volumes of the JKH share, as seenin the annualised share turn ratio, were the key reasons forthe fall in the JKH share price. However, it is pertinent tonote that the composition of shareholders changed duringthe year under review, with the shareholding of non-residentinvestors increasing to 49.9 per cent from 43.1 per cent inthe previous year, as a result of greater foreign institutionalinvestor interest.

During the initial months of the financial year under review,the JKH share performance was largely in line with themarket. However, relatively lower trading volumes of theJKH share beginning from September ‘07 through to the endof the financial year affected the JKH share price. Conversely,sustained margin trading on mid-cap companies' shares andthe occasional heavy trading on shares of large companieshelped to maintain CSE's performance at levels higher thanthat of JKH.


Investor information

The JKH share has been a solid long term value creator andis expected to remain so. As illustrated in the following graph,the JKH share has outperformed the ASPI and blue-chipMPI consistently over the last five years. Despite the fall inthe share price during the current year, the JKH share hasrecorded a compound annual growth rate of 32.5 per centover the last five years, outperforming the ASPI, MPI andDSI, which recorded compound annual growth rates of 28.1per cent, 20.4 per cent and 31.3 per cent respectively.

The performance of equity markets across the globe wasaffected negatively due to a move away from higher risk asset

classes. Due to the escalation of the conflict in Sri Lanka, theCSE and the JKH share underperformed regional stockexchanges such as the Sensex Index of the Mumbai StockExchange (BSESN), the Straits Times Index of Singapore(SGX) and the Kuala Lumpur Stock Exchange (KLSE)during the year under review.

Over a period of 5 years, the JKH share has outperformedregional stock markets such as Singapore and Kuala Lumpur,with a compound annual growth rate of 32.5 per centcompared with SGX's STI index growth of 18.9 per cent andKLSE's growth of 14.4 per cent. The JKH share has however,


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Jan-07

Apr-07

Jul-07

Oct-07

Jan-08

Index

JKH

MPI

ASPI

JKH outperforms ASPI & MPI (over 5 years)

underperformed the Mumbai Stock Exchange over the 5-yearperiod. This was mainly due to the rally in September 2007in Indian equities.

Issued share capitalThe new Companies Act, which came into effect on 3rd May2007, requires companies to present the previous sharecapital, share premium and preference share capital as one“stated capital” account. This account will reflect the total

amounts received by the company, or due and payable to thecompany, in the respect of the issue of shares and the callof shares.

The total number of shares in issue at the beginning of thefinancial year was 552.94 million. During the financial year,a total of 83.05 million shares were allotted, with 78.96million shares originating from a 1:7 scrip issue and 4.09million shares arising out of the exercise of employee shareoptions (ESOPs), resulting in the number of shares in issue


BSESN KLSE STI JKH

JKH share compared with key regional indices

60

70

80

90

100

110

120

130

140

150

160

170

Apr-07 May-07 Jun-07 Jul-07 Aug-07 Sep-07 Oct-07 Nov-07 Dec-07 Jan-08 Feb-08 Mar-08

JKH

Kuala Lumpur

Bombay

Singapore

Index

BSESN KLSE STI JKH

JKH share compared with key regional indices (over 5 years)

80

180

280

380

480

580

680

780

Apr-03 Oct-03 Apr-04 Oct-04 Apr-05 Oct-05 Apr-06 Oct-06 Apr-07 Oct-07

JKH

Kuala Lumpur

Bombay

Singapore

Index

increasing to 635.99 million. The 1:7 scrip issue, which wasdeclared on 13th March 2007, was allotted during thefinancial year 2007/08. In addition to the shares in issue,there are a further 34.86 million shares equivalent ofunexercised ESOPs as at 31st March 2008. These are eligiblefor immediate exercise as at the date of this report.

The balance of global depositary receipts (GDRs), inordinary share equivalents, increased to 1.11 million as at theend of the year from 0.97 million at the beginning of the yeardue to allotment of the scrip issue discussed above.

DividendsThe dividend policy of JKH seeks to ensure a dividendpayout which correlates with the growth in profits, whilstensuring that the company retains adequate funds to supportinvestments which facilitate the creation of sustainableshareholder value in the short, medium and long term.

During the year, the company has declared, and paid, twointerim dividends of Rs. 1 per share each and a one-offspecial dividend of Rs. 2 per share. The special dividend wasmade to reward the shareholders based on improved profitsafter tax of the company during the current financial year onaccount of a higher dividend income, interest income in ahigh interest rate environment and various cost savingmeasures. The company also announced a final dividend of



Market information on ordinary shares of the company

2007/08 Q4 Q3 Q2 Q1 2006/07

Share informationHighest price (Rs.) 156.75 128.00 134.00 146.00 156.75 183.25Lowest price (Rs.) 116.25 116.25 125.50 125.75 143.00 96.97As at period end (Rs.) 119.75 119.75 128.00 129.00 145.50 155.00Dividends paid (per share) 5.00 1.00 3.00 - 1.00 3.00

Trading statisticsNumber of transactions 9,048 2,701 2,748 2,088 1,511 17,449Number of shares traded (thousands) 104,754 16,814 20,795 38,395 28,751 117,968% of total shares in issue 16.5 2.6 3.3 6.0 4.5 21.30Value of all shares traded (Rs. mn) 13,930 2,028 2,695 4,957 4,249 20,112Average daily turnover (Rs. mn) 58.3 35.6 43.5 78.7 74.5 83.8% of total market turnover 16.1 9.9 10.7 26.3 19.3 17.1Market capitalisation (Rs.’000) 76,160 76,160 81,407 82,043 92,537 97,945% of total market capitalisation 9.2 9.2 9.9 10.0 11.2 11.1

Dividend Dividend payout

97%

2004 2005 2006 2007 20080.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

Rs.1.1 billionRs.1.2 billion

Rs.1.4 billion

Rs.3.2 billion

Dividends vs payout ratio

61%

Rs.0.8 billion

66% 63%

81%

Rs. billion

EMPLOYEE SHARE OPTION PLAN AS AT 31ST MARCH 2008

OptionDate of Shares Expiry grant Shares ** Lapsed/ Current

grant granted date price adjusted Exercised cancelled Outstanding price **

PLAN 2Award 2 12.11.2002 3,728,580 11.11.2007 76.00 6,810,320 6,679,392 130,928 - -Award 3 23.01.2004 2,994,209 22.01.2009 104.25 5,129,406 2,051,778 115,605 2,962,023 70.81

6,722,789 11,939,726 8,731,170 246,533 2,962,023PLAN 3Award 1 29.03.2005 5,503,850 28.03.2010 136.00 9,746,823 2,247,494 387,905 7,111,424 92.72Award 2 10.04.2006 6,645,575 09.04.2011 157.25 10,301,859 502,319 519,046 9,280,494 120.74Award 3 28.05.2007 10,551,062 27.05.2012 146.00 10,551,062 - 448,520 10,102,542 146.00

22,700,487 30,599,744 2,749,813 1,355,471 26,494,460PLAN 4

25.03.2008 5,405,945 24.03.2013 120.00 5,405,945 5,405,945 120.00

Total 34,829,221 47,945,415 11,480,983 1,602,004 34,862,428

** Adjusted for bonus issues and right issues

Rs. 1 per share based in the profits of the financial year2007/08 for payment on 27th June 2008. Accordingly, thedividend per share (DPS) in the current year increased to Rs. 5per share compared with Rs. 3 per share in the previous year.

The dividend payout ratio increased to 81 per cent comparedto 63 per cent the previous year, primarily due to the specialdividend of Rs. 2 per share. In absolute terms, the dividendpaid and payable out of 2007/08 profits will be Rs. 3.18billion compared to the dividend of Rs. 1.41 billion in theprevious year.

Earnings per shareThe fully diluted earnings per share (EPS) for the period grew32 per cent from Rs. 6.04 to Rs. 8.00. The cash EPS increased27 per cent from Rs. 7.50 to Rs. 9.54 in the current year.

Total shareholder returnsThe total shareholder returns (TSR) of the JKH share was anegative 19.5 per cent as a result of the 22.7 per cent fall inthe JKH share price during the year, offset by a higher DPS.The average 1-year T/bill rate for the same period was 17.6per cent. Even though the TSR on the JKH share yieldednegative returns, the JKH share has consistentlyoutperformed the 1-year T/bill yield in the past.

Capital productivityProfits attributable to equity holders for the year underreview increased by 45 per cent to Rs. 5.12 billion compared

with Rs. 3.53 billion in the previous year. As a result, thereturn on equity (ROE) increased to 12.3 per cent in2007/08, compared with 11.4 per cent in the previous year.Return on capital employed (ROCE) increased marginally to13.7 per cent from 13.6 per cent in the previous year. Furtherdiscussion on ROE and ROCE can be found in theconsolidated group performance section of this report.

Market capitalisation and entercprise valueTotal market capitalisation as at 31st March 2008 wasRs. 76.16 billion, recording a drop of 22 per cent from themarket capitalisation of Rs. 97.94 billion at the beginning ofthe year. The enterprise value as at 31st March 2008 dropped21 per cent to Rs. 76.18 billion as a result of the drop in themarket capitalisation.

Price earnings ratioThe price earnings ratio (PER) as at 31st March 2008 was15.0 times compared with 25.6 times the previous year as aresult of a lower share price and a higher EPS. The JKH PERstill remains attractive against the market PER of 10.4 timesas at 31st March 2008 as published by the CSE.

Price to bookAs at 31st March 2008, the price to book ratio of the groupwas 1.7 times, compared with 2.3 times and 2.9 times in thelast two years. The drop in the year was due to the drop inmarket value of JKH.


Key ratios2007/08 2006/07 2005/06

Market capitalisation (Rs. mn) 76,160 97,945 63,101EV/EBITDA (times) 7.8 13.0 10.7Diluted earnings per share (Rs.) 8.00 6.04 5.30PER (diluted) 15.0 25.6 21.4Price to book (times) 1.7 2.3 2.9Price/cash earnings 12.6 20.7 17.1Dividend yield (%) 4.2 2.3 3.0Total shareholder returns (19.5) 39.7 43.9Market value added (Rs. mn) 31,942 58,709 40,300Dividend payout ratio (%) 81.0 62.8 65.8

Annual TSR Indexed 5-year TSR

Five-year total shareholder returns

160%

43.9%

(19.5%)

114.7%

115%39.7%

231%

39.7%

322%

259%

2004 2005 2006 2007 2008

2004 2005 2006 2007 2008

20%

36%

22%

35%

23%

43% 49%

35%

34% 33% 35%

23% 20%

28% 25%

8% 7% 6% 5% 5%3% 2% 1% 1% 1%

Trend in composition of shareholders

Executive directors and spouses Executives and connected parties

Public non-resident and GDRsNon executive directors and connected parties Public resident

Shareholders' holding more than 10%

Liquidity• Average daily turnover of the JKH share was Rs. 58.3

million compared to a Rs. 362.3 million average dailyturnover recorded by the CSE.

• Liquidity of the JKH share marginally decreased to 16.1per cent of the total market turnover, compared with17.1 per cent recorded in the previous year.

• Total volumes of JKH shares traded during the yeardropped to 104.8 million shares from the 118.0 millionshares recorded in the previous year.

• The annualised share turn ratio decreased significantlyto 0.18 from 0.25, reflecting the lower trading volumesof the share.

• The free float of the shares as at 31st March 2008 was 74.6per cent compared to the 70.8 per cent at the end of last year.

Distribution and composition of shareholders• The total number of shareholders of JKH dropped to

8,475 from the 8,926 seen last year, as the shareholderslist was merged during the year to avoid duplicationof records.

• Distribution - 3 per cent of shareholders held 95 per centof the total shares, averaging 2.3 million shares per

shareholder while, 97 per cent of shareholders held 5 percent of the total shares at an average of 3,921 shares pershareholder.

• Composition - 74.6 per cent of the shares in issue wereheld by public, while 25.4 per cent of the shares wereheld by the directors, executives and connected parties asat 31st March 2008. Subsequent to the resignation ofMr R S Captain from the Board of Directors of JKHwith effect from 6th May 2008, the latter figure camedown to 5.9 per cent.

• Domicility - 50.1 per cent of shares were held byresidents and 49.9 per cent was held by non residents.

Shareholder information• The issued ordinary shares of JKH are listed on the

Colombo Stock Exchange (CSE)

• CSE ticker symbol for John Keells Holdings PLC shares:JKH.N0000

• Newswire codes:- Bloomberg: JKH.SL- Dow Jones: P.JKH- Reuters: JKH.CM



Distribution of shareholders

31 March 2008 31 March 2007Number of Number of Number of Number of

shareholders % shares held % shareholders % shares held %

Less than or equal to 1,000 5,151 60.78 1,229,290 0.19 5,608 62.83 1,173,369 0.211,001 to 5,000 1,717 20.26 4,123,286 0.65 1,780 19.94 4,206,227 0.765,001 to 10,000 477 5.63 3,380,914 0.53 506 5.67 3,672,648 0.6610,001 to 50,000 747 8.81 15,525,960 2.44 669 7.49 13,948,910 2.5250,001 to 100,000 115 1.36 7,916,985 1.24 117 1.31 7,989,449 1.44100,001 to 500,000 144 1.70 33,511,546 5.27 126 1.41 27,920,015 5.05500,001 to 1,000,000 31 0.37 23,687,289 3.72 34 0.38 24,880,442 4.50Over 1,000,001 93 1.10 546,619,292 85.95 86 0.96 469,148,927 84.85Grand total 8,475 100.00 635,994,562 100.00 8,926 100.00 552,939,987 100.00

Rs. million

Enterprisevalue

2004 2005 2006 2007 20080

20,000

40,000

60,000

80,000

100,000

Enterprise value composition

Market capitalisationNet debt

Rs. billion

2004 2005 2006 2007 20080

20,000

40,000

60,000

80,000

100,000

JKH market capitalisation and free float

Market Cap Market Cap in free-float

Composition of shareholders

31 March 2008 31 March 2007Number of Number of % Number of Number of %

shareholders shares held shareholders shares held

Executive directors and spouses 6 8,598,117 1.35 6 7,845,938 1.42Non-executive directors and connected parties* 12 124,274,250 19.54 12 124,823,768 22.57Executives and connected parties 123 28,901,205 4.54 160 28,626,702 5.18Public resident

Institution 560 73,491,771 11.56 603 74,421,962 13.10Individual 7,499 83,323,494 13.10 7,836 80,680,833 14.59

Public non residentIndividual 97 248,498,728 39.07 90 169,839,120 30.72Institution 177 67,794,301 10.66 218 67,728,063 12.25

Global depository receipts 1 1,112,686 0.17 1 973,601 0.17Shareholders holding more than 10% - - - - - -Total 8,475 635,994,552 100.00 8,926 552,939,987 100.00

* Subsequent to the resignation of Mr R S Captain on 6th May 2008, the percentage held by non executive directors and connected parties was 5.9 per cent.

Twenty largest shareholders of the company

31 March 2008 31 March 2007Shareholder’s name Number of shares % Number of shares %

1 Mr S E Captain 81,364,526 12.79 72,943,961 13.192 Mr R Rajaratnam 58,186,212 9.15 54,484,136 9.853 Galleon Technology Offshore Ltd 21,185,785 3.33 6,466,925 1.174 Genesis Smaller Companies 15,988,995 2.51 - -5 Estate of Mr A A N De Fonseka 15,819,977 2.49 17,224,005 3.116 Aberdeen Global Asia Pacific Fund 15,737,023 2.47 14,799,770 2.687 Arisaig India Fund Limited 14,783,475 2.32 12,935,541 2.348 Genesis Emerging Markets Opportunities Fund Limited 13,989,739 2.20 - -9 Genesis Group Trust Emerging Markets Fund 13,666,677 2.15 11,958,343 2.1610 Galleon Diversified Fund Limited 13,143,573 2.07 11,500,627 2.0811 FS Asia Pacific 12,062,964 1.90 6,580,021 1.1912 Rubber Investment Trust Limited 10,847,729 1.71 9,617,848 1.7413 Paints & General Industries Limited 8,440,325 1.33 9,097,010 1.6514 CEI Plastics Ltd 8,280,267 1.30 9,808,859 1.7715 Mr K Balendra 8,142,909 1.28 8,087,546 1.4616 Fast Gain International Limited 7,406,314 1.16 - -17 Aberdeen Asia Pacific Fund 7,194,843 1.13 6,295,488 1.1418 Ms L A Captain 7,058,272 1.11 7,295,813 1.3219 The Emerging Markets South Asian Fund 7,025,900 1.10 - -20 FS Global Emerging Markets Fund 6,955,246 1.09 6,295,816 1.14


Employee share options

Year ended Number of options31 March exercised* (million)

1997 0.021998 0.161999 0.272000 0.472001 0.022002 1.782003 2.302004 4.082005 1.532006 2.042007 3.672008 4.06

Directors’ shareholdings

Name 31 March 2008 31 March 2007

S C Ratnayake 3,227,747 3,057,223A D Gunewardene 4,018,568 3,749,192G S A Gunesekera 1,348,374 1,036,523J R F Peiris 3,428 3,000E F G Amerasinghe 4,136 3,619T Das Nil NilS Enderby Nil NilM V Muhsin 35,163 30,769P D Rodrigo Nil NilS S Tiruchelvam Nil NilR S Captain** 124,234,951 124,789,380

Options available under the employee share option plan of John KeellsHoldings PLC.

S C Ratnayake 1,931,981 1,389,159A D Gunewardene 1,759,824 1,352,302G S A Gunesekera 1,260,611 1,217,511J R F Peiris 1,587,617 883,667* First exercised in FY1997** Resigned with effect from 6th May 2008



History of dividends and scrip issues since 1992/93

Year ended Number of new31 March Issue Basis shares (million) Ex-date

1992 Rights @ Rs.160* 1:4 2.50 16-Jan-921993 Bonus 1:5 2.50 03-Sep-921994 GDRs n/a 4.50 n/a1995 Bonus 1:6 2.50 19-Jan-941995 Rights @ Rs.200* 1:6 2.50 19-Jan-941996 Bonus 1:7 3.50 20-Dec-951997 Bonus 1:7 4.00 20-Jan-971998 Bonus 1:4 8.02 09-Jan-982000 Bonus 1:5 8.09 15-Jun-992000 Bonus 1:4 12.14 05-Jan-002001 Bonus 2:1 122.36 27-Jul-002004 Bonus 1:4 46.94 10-Jun-032004 Private placement n/a 24.00 21-Oct-032004 Rights @ Rs.75* 1:7 37.42 07-Nov-032004 Bonus 1:10 30.02 13-May-042005 Bonus 1:5 66.34 10-May-052006 Bonus 1:7 57.16 13-Jun-062007 Rights @ Rs.140* 1:5 92.10 23-Jan-072007 Bonus 1:7 78.96 13-Mar-07

* Unadjusted prices

Share capital

Year ended Number of shares31 March in issue (million)

1990 10.001991 10.001992 12.501993 15.001994 24.501995 24.501996 28.001997 32.021998 40.211999 40.472000 61.182001 183.562002 185.352003 187.642004 300.082005 331.632006 400.002007 552.942008 635.99

GDR history (in terms of ordinary shares, million)

Year ended 31 March Issued* Converted Balance

1994 4.50 - 4.501995 - 0.21 4.291996 0.59 0.20 4.671997 0.27 2.80 2.141998 0.28 1.06 1.371999 - 0.75 0.632000 0.26 0.52 0.362001 0.72 0.23 0.852002 - 0.17 0.682003 - 0.16 0.522004 0.13 - 0.652005 0.06 - 0.712006 0.14 - 0.852007 0.12 - 0.972008 0.14 - 1.11

* First issued in FY1994 and subsequently increased along withbonus issues of ordinary shares

* GDRs/Ordinary shares = 1:2

Dividends since 1992/93

Year DPS Dividends(Rs.) (Rs.'000)

1991/92 3.00 34,7011992/93 2.50 35,7541993/94 2.50 47,3401994/95 3.50 84,2851995/96 2.80 77,5861996/97 3.00 92,0501997/98 4.00 155,7831998/99 4.00 151,3431999/00 3.00 168,1502000/01 2.00 353,1282001/02 2.00 329,8692002/03 2.00 342,2032003/04 2.50 725,7832004/05 3.00 1,027,4972005/06 3.00 1,199,4602006/07 3.00 1,412,3062007/08 5.00 3,176,302



Financial calendar2007/08Interim financial statementsThree months ended 30 June 2007 26 July 2007Six months ended 30 September 2007 26 October 2007Nine months ended 31 December 2007 24 January 2008

First interim dividend paid on 23 November 2007Special dividendSecond interim dividend paid on 21 March 2008Final dividend proposed to be paid on 6 July 2008Annual Report on or before 1 June 200828th Annual General Meeting 27 June 2008

2008/09Interim financial statementsThree months ended 30 June 2008 on or before 31 July 2008Six months ended 30 September 2008 on or before 30 October 2008Nine months ended 31 December 2008 on or before 29 January 2009

Annual Report 2008/09 on or before 29 May 200930th Annual General Meeting 26 June 2009

If you need help with the following… Contact the secretaries• Corporate information Keells Consultants Limited• Dividend payments or direct deposit of dividends into your 130, Glennie Streetbank account Colombo 02

• Change of address Sri Lanka• Transfer of shares• Loss of share certificates Telephone : + (94) 11 242 1101-9• Consolidation of multiple mailings to one shareholder Fax : + (94) 11 244 7087• Estate settlements

If you need help with the following… Contact the Investor Relations team• Latest news releases John Keells Holdings PLC• Company developments 130, Glennie Street• Financial results and clarifications Colombo 02

Sri LankaTelephone : + (94) 11 230 6739Fax : + (94) 11 230 6160E-mail : [email protected] : www.keells.com

Registered office AuditorsJohn Keells Holdings PLC Ernst & Young130, Glennie Street Chartered AccountantsColombo 02 P.O. Box 101Sri Lanka ColomboTel: + (94) 11 230 6000 Sri LankaFax : + (94) 11 244 7087

Highlights• Profit attributable to equity holders of the parent

increased by 45 per cent to Rs. 5.12 billion

• Group revenue excluding associates increased by 27 percent to Rs. 41.81 billion

• Earnings before interest and tax increased by 34 per centto Rs. 8.20 billion

• Profit before tax increased by 37 per cent to Rs. 6.58billion

• Fully diluted earnings per share increased by 32 per centto Rs. 8.00 per share

• Cash earnings per share increased by 27 per cent to Rs.9.54 per share

• Return on capital employed increased marginally from13.6 per cent to 13.7 per cent

• Return on equity increased from 11.4 per cent to 12.3per cent

Summary of key income statement items

Rs. million 2007/08 2006/07 Change % Explanatory highlights

Revenue 41,805 32,855 8,950 27 • Transportation revenue growth of Rs. 3.44 billion drivenby LMS

• Leisure growth of Rs. 2.20 billion due to commencementof operations of “Cinnamon Island Alidhoo”

• CF&R growth of Rs. 1.59 billion due to expansion ofRetail business

Cost of sales 30,847 23,236 7,611 33 • Increased to 74 per cent of revenue from 71 per cent dueto the inability to pass on all cost increases to customers

Share of associate 2,243 1,701 542 32 • Higher share of an increased SAGT profitcompany profits • Increase in profits of associates - NTB, UA and AMW

Other operating income 2,717 1,180 1,537 130 • Interest income on LKR investments and foreignexchange gains

Administrative expenses 5,122 4,261 861 20 • Operating and start up cost of “Cinnamon IslandAlidhoo” and depreciation charge on hotel investmentsand refurbishments

• Depreciation of new bottling line at CCS and operatingexpenses relating to supermarket expansion

EBIT 8,197 6,109 2,088 34 • Increase in EBIT of Plantation Services due to higher teavolumes and prices

• Increase in Transportation EBIT due to contributionfrom Ports and Shipping

• Interest income at the holding company

Finance expenses 1,618 1,314 304 23 • Despite a reduction in debt, the increase in the averageweighted prime lending rate had an impact due to higherproportion of borrowings on a floating rate

Profit before tax 6,579 4,795 1,784 37 • Growth in Transportation, Financial Services, PlantationServices and holding company

• Offset by reduction in PBT of Leisure and CF&R• PBT of Property and IT remain flat during the year

Tax expense 1,055 852 203 24 • Increase in taxable profits due to holding companyperformance

• End of tax holiday at LMS with effect from 1stDecember 2007

• SAGT, AHPL and Maldivian hotels helped in alleviatingthe overall effective tax rate

Profit for the period 5,524 3,943 1,581 40 • Growth of 40 per cent led by Transportation, PlantationServices, Financial Services and the holding company


Consolidated group andsegmental performance

OVERVIEW2007/08 was a challenging year characterised by highinflation, rising fuel and food prices, both locally andglobally, the escalation of military operations in the Northand the East and a sharp increase in incidence of ethnicconflict related violence outside the formal hostilities theatreof the North and the East. Resultantly, the economy hasslowed from the highest ever recorded 7.7 per cent growth in2006 to 6.8 per cent growth in the calendar year 2007.Growth in all three sectors, namely, services, industry andagriculture declined, with services, the largest component ofthe economy, growing by 7.1 per cent compared with 7.7 percent last year. This growth was led by the posts andtelecommunications, cargo handling, transport and financialservices segments. This was mirrored by the group'sbusinesses as the Transportation and Financial Servicesindustry groups performed well during the year on the backof increased volumes. However, the impact of the ongoinghostilities and unfavourable travel advisories from the maintourism generating countries adversely affected theperformance of the Leisure industry group with the totalnumber of tourist arrivals dropping by 12 per cent to494,008 from the 559,603 witnessed in the previous year.

The New Colombo Consumers' Price Index (CCPI-N)continued to rise, with the annual average inflation at 17.7per cent as at 31st March 2008. The point-to-point inflationas at end April was recorded at 25 per cent. The soaringinflation was due to a combination of factors, includingincreases in international oil prices and food relatedcommodities, such as sugar, wheat, milk powder and rice andalso partly due to the government's borrowing from thebanking system in the middle of the year. Monetary policy waskept under tight control throughout the year and interest ratesin all markets increased in line with the monetary policy. Callmoney market rates, however, fluctuated widely, ranging froma low of 12.36 per cent to a high of 42.25 per cent during thefinancial year. The average weighted prime lending rate(AWPLR), which is the base for a majority of the group'sborrowings, decreased to 18.61 per cent as at 31st March 2008from 20.01 per cent at the beginning of the financial year.However, the mean AWPLR during 2007/08 increased to17.57 per cent from an average 13.75 per cent during theprevious year. This had an impact on the finance expense ofthe group, in spite of a reduction in the overall debt.

The above factors had a varied impact on the group'sperformance. On the one hand, high inflation affected thepurchasing power of consumers due to increased prices ofessential commodities, which in turn affected volumes andprofitability of the Consumer Foods & Retail industry group,in particular, the beverage segment. The high inflationenvironment also affected the rate of new investmentsbecause of steeper hurdle rates. On the other hand, the groupthrived on the volatility of interest rates and a stronger SriLankan Rupee (LKR) by proactively managing its exposuresand opportunities. Further, the group's remuneration modelwhich is founded on a fixed element and a variablecomponent tied to performance/profitability helped to bufferthe negatives of high inflation.

Contrary to expectations, the LKR appreciated against theUS dollar by 1 per cent from the Rs. 109.32 to close at Rs.107.78 as at 31st March 2008. During the first half of thefinancial year, the LKR depreciated against the US dollar inline with expectations, reaching Rs. 113.50 in September2007, with forward premiums on US dollar forwardcontracts having implied interest rates of 20 per cent. TheGovernment of Sri Lanka's maiden sovereign bond for USD500 million at a fixed interest rate of 8.25 per cent wassuccessfully concluded in November 2007. The impact ofreceipt of bond proceeds, coupled with policy changesregarding the limits on bond investments for foreigninvestors had a favourable impact on the LKR, with the LKRsteadily appreciating against the US dollar, reaching a peak ofRs. 107.50 in March 2008. The appreciation of the LKRposed a challenge to all exporters having rupee coststructures. This was no different for the JKH group, whichhas a majority of its revenue streams denominated in USdollars, such as receipts from SAGT and LMS, apartmentsales, hotels (particularly in the Maldives), destinationmanagement business and the software developmentbusiness. The group was able to successfully mitigate adverseimpacts through appreciation of the LKR by entering into aseries of forward contracts based on its cash flow projections.Similarly, the import related businesses benefited from theappreciation of the rupee by managing its exposures inaccordance with perceived trends.

The year under review was also extremely volatile from aglobal standpoint. The sub prime crisis in the US directlyimpacted economic growth in the US, foreign exchangemarkets and interest rates, resulting in unprecedentedvolatility. With the aim of boosting growth, the US FederalReserve (Fed) began an aggressive monetary easing policycycle, which resulted in the LIBOR borrowing rates reducingfrom its high of 5.70 per cent in September 2007 to 2.70 percent by 31st March 2008. This had a positive impact on thecost of the group's US dollar borrowings in the Maldives,which are primarily on floating rates. The sub prime crisisand consequent write downs by large, reputed internationalbanks resulted in a shortage of liquidity in the market.Considering the environment, JKH concluded a standbyloan facility of USD 75 million with the InternationalFinance Corporation (IFC) in February 2008 to fund itsexpansion plans in Sri Lanka and the region. The loan isrepayable over 9 years from the date of drawdown, withinterest payable at LIBOR plus 275 basis points, which isattractive in the current Sri Lankan market environment. Inorder to lock-in the credit spread, JKH drew down on thetotal loan on the 4th of April 2008. These funds are now heldin foreign currency and would be available to fund thegroup's overseas investments. The currency exposures arisingdue to the drawdown are being proactively managed.


REVIEW 2007/08RevenueGroup revenue, excluding associate company turnover,registered an increase of 27 per cent from Rs. 32.85 billion toRs. 41.81 billion in 2007/08, while group revenue, includingshare of associate company turnover, increased by 29 per centfrom Rs. 39.00 billion to Rs. 50.28 billion. The increase isprimarily attributable to revenue growth fromTransportation, Leisure and Consumer Foods & Retail, allindustry groups with high turnover bases. Property alsorecorded impressive turnover growth, albeit off a lower base.Financial Services and Information Technology revenuesdeclined during the year. Revenues of the Plantation Servicessector also contributed to the increase in group revenue.

Transportation• Revenue, including share of associate company turnover,

recorded strong growth of 34 per cent from Rs. 12.43billion to Rs. 16.71 billion during the year.

• Growth led by South Asia Gateway Terminal (SAGT)and the bunkering subsidiary, Lanka Marine Services(LMS) on the back of increased volumes.

• Growing volumes also helped DHL Keells (DHL)increase turnover by 21 per cent over the previous year.

• The Airlines segment revenues remained flat as comparedto the previous year, mainly due to capacity constraintson movement of cargo from Colombo.

Leisure• Revenue grew by a healthy 29 per cent from Rs. 7.59

billion to Rs. 9.79 billion during the year.

• Maldivian resort hotels registered a 49 per cent revenuegrowth, supported by the commencement of operationsduring the year of the first Cinnamon resort in theMaldives, “Cinnamon Island Alidhoo”.

• In spite of being partially closed for refurbishment,Dhonveli and Ellaidhoo also recorded impressive growthin revenue during the period under review.

• Despite low tourist arrivals into the country, the SriLankan resorts also recorded an 18 per cent revenuegrowth, mainly as a result of the domestic segment. AllSri Lankan resorts recorded revenue growth, with theexception of Yala Village, which was affected by sporadicincidents of violence in the area resulting in the closureof the hotel for a period of 4 months.

• City Hotels registered a modest 13 per cent increase inrevenue boosted by a minimum rate imposition whichwas effective from 1st January 2008. This has led to anincrease in average room revenues.

• The Destination Management business also recorded a25 per cent revenue increase, primarily on account of thestrong performance of its Indian subsidiary, SereneHolidays, which opened 2 new branches in India duringthe year to meet growing market demand.

Property• Revenue increased by 79 per cent from Rs. 1.46 billion

to Rs. 2.62 billion during the year.

• Revenue recognition cycle of “The Monarch” was theprimary reason for the increase.

• Construction of “The Monarch” project was completedduring the year with a majority of the revenue relating tothe project being recognised in the current year.

• Recognition of revenue of “The Emperor” project, theconstruction of which is in progress, also contributed tothe increase in revenue.

• Real estate sector revenues grew on the back of improvedutilisation of the group's commercial office space.Revenue from “Crescat Boulevard” increased marginallyon account of improved occupancy.

Consumer Foods & Retail• Revenue increased by 16 per cent from Rs. 9.79 billion

to Rs. 11.38 billion during the year.

• Led by impressive growth of 31 per cent in the Retailbusiness, owing to the 11 new supermarket outlets whichopened during the year, coupled with growth in samestore revenues.

• The turnover of the Consumer Foods business grew by amodest 15 per cent compared with the previous year'sturnover.

Financial Services• Revenue, including share of associate company turnover,

increased by 39 per cent from Rs. 3.46 billion to Rs. 4.80billion during the year.

• Both associates in this industry group, Nations TrustBank (NTB) as well as Union Assurance (UA),performed well in the present macroeconomic


Consolidated group and segmental performance

Revenue 2007/08

Transportation

Leisure

Property

CF & R

Financial Services

IT

Others

33%

19%5%

23%

10%

4%5%

Revenue 2006/07

Transportation

Leisure

Property

CF & R

Financial Services

IT

Others

32%

19%4%

25%

9%

6%5%

conditions, registering 58 and 23 per cent revenuegrowth respectively.

• This increase was marginally offset by the revenuedecline in the stock broking business, due to the decreasein activity on the Colombo Stock Exchange (CSE).

Information Technology• Revenue, including share of associate company turnover,

decreased by 8 per cent from Rs. 2.45 billion to Rs. 2.24billion during the year.

• The decline is attributable to the Systems Integrationsegment, where many corporate customers postponedtheir planned capital expenditure.

• The decrease was offset to an extent by the 15 per centrevenue growth in the Software business. The ResourceAugmentation Service (RAS) business contributed togrowth in turnover with increased contribution from theMiddle Eastern markets.

• The Office Automation business also maintained itssteady performance with a modest 7 per cent increasein turnover.

Others (including Plantation Services)• Plantation Services revenue increased 51 per cent from

Rs. 1.80 billion to Rs. 2.72 billion during the year.

• Growth in revenue due to the excellent year recorded bythe tea industry, both in terms of record volumes andhigh international prices.

• Total revenue from Others increased by 51 per cent as aresult of Plantation Services.

Earnings before interest and tax (EBIT)Group EBIT increased by 34 per cent to Rs. 8.20 billioncompared with Rs. 6.11 billion during the previous year.EBIT contributions from Transportation, Leisure, Propertyand Others at Rs. 3.10 billion, Rs. 1.12 billion, Rs. 902million and Rs. 1.97 billion respectively, contributed to 87per cent of the group's total EBIT.

Plantation Services contributed an EBIT of Rs. 466 millionduring the year. The EBIT contribution from Others,including Plantation Services and the holding company,increased to 24 per cent of total EBIT from 3 per cent theprevious year.

Increases in group EBIT were due to growth in associatecompany profits from Rs. 1.70 billion to Rs. 2.24 billion andan increased contribution from the holding company. Shareof associate company contributions from SAGT, NTB, UA,as well as Associated Motorways (AMW) improved. Otheroperating income more than doubled to Rs. 2.72 billion ascompared to Rs. 1.18 billion in the previous year, the maincontributor being interest income of Rs. 2.08 billion andexchange gains of Rs. 275 million.

Transportation• Increased by Rs. 194 million to Rs. 3.10 billion from Rs.

2.91 billion in the previous year.

• Growth was primarily due to increased EBITcontributions from Ports and Shipping, led by SAGT.

• The increase was offset by the decrease in EBIT in theLogistics and Airlines businesses.

• DHL recorded lower margins on account of a higherdepreciation charge on investments in automatedoperational processes and the quality control centre in itsnew facility.

• Start up costs relating to the third party logisticsoperations of John Keells Logistics, and a difficult yearfor freight forwarding in India and Sri Lanka, alsoadversely impacted EBIT of the Logistics segment.

Leisure• Increased by Rs. 35 million to Rs. 1.12 billion from

Rs. 1.09 billion in the previous year.

• The EBIT of both the Sri Lankan and Maldivian resortsdecreased when compared to the previous year.

• This decrease was more than offset by the increase inEBIT in City Hotels, Destination Management and theHotel Management sectors.

• EBIT of the Maldivian resorts declined as two of theresorts, Dhonveli and Ellaidhoo, were operational foronly a part of the year on account of refurbishments;whilst Cinnamon Island Alidhoo, which commencedoperations in July 2007, became fully operational only inOctober due to teething issues.

• Given the unfavourable travel advisories issued by somemajor tourism generation countries and the resultantdrop in volumes, the Sri Lankan resorts experiencedlower margins due to the lower absorption of fixed costs.


Group EBIT composition 2006/07

Transportation

Leisure

Property

CF & R

Financial Services

IT

Others

47%

17%

6%

14%

11%

2% 3%

Group EBIT composition 2007/08

Transportation

Leisure

Property

CF & R

Financial Services

IT

Others

38%

14%11%

7%

5%

1%

24%

• The resorts in Yala and Habarana experienceddisruptions in operations during the year owing to thesecurity situation in these areas.

• Destination Management companies performed wellmainly on account of the cost savings generated fromprocess efficiencies at Walkers Tours and the sale of itssubsidiary, Unawatuna Walk Inn Limited.

• Hotel Management companies also recorded a higherEBIT on account of expansion of its portfolio ofproviding technical and other services.

Property• Increased by Rs. 32 million to Rs. 902 million from Rs.

870 million in the previous year.

• Increase was despite a reduction in the EBIT of KeellsRealtors, as the previous year’s EBIT included the profitsfrom the divestment of Nawam Mawatha property.

• Increase primarily on account of recognition of profitsarising from the receipt of the final tranche of “TheMonarch” project, and cash received on “The Emperor”project. The remaining profits from “The Monarch”project will be recognised during the first quarter of thefinancial year 2008/09.

• EBIT growth was also supported by the reduction inmaintenance costs through various cost saving initiatives.

Consumer Foods & Retail• Declined by Rs. 65 million to Rs. 580 million from

Rs. 645 million in the previous year.

• JayKay Marketing (JMSL), the owners of the “KeellsSuper” brand of retail outlets, did extremely well andmore than doubled their EBIT during the year supportedby the opening of 11 new outlets, which progressivelydilute the fixed costs of operations at the centre.

• The Convenience Foods segment also increased its EBITby 45 per cent, driven by growth in revenue and anincrease in margins.

• However, these increases were offset by the decrease inEBIT at Ceylon Cold Stores (CCS). In spite of revenuegrowth of 15 per cent, the CCS EBIT declined due tolonger than expected time required for installing the twonew bottling lines and the higher depreciation arisingfrom its capitalisation. The delay also resulted in anincrease in operating costs and a loss of sales volumeswhich resulted in an under-absorption of fixed costs.

• High commodity prices and local cost increases also hadan impact on the margins.

Financial Services• Increased by Rs. 84 million to Rs. 422 million from

Rs. 338 million in the previous year.

• Strong performances of associates NTB and UA withincreases of Rs. 92 million and Rs. 28 millionrespectively were the primary reasons for the increase.

• Increase partially offset by the reduction in EBIT of thestock broking business which was affected by reducedactivity at the CSE.

Information Technology• Declined by Rs. 4 million to Rs. 98 million from Rs. 102

million in the previous year.

• Reduction primarily due to losses in the business processoutsourcing (BPO) business, albeit within plan, owing tothe insufficient dilution of its high fixed cost base.

• This decrease was partially compensated by higher EBITfrom the Software Services business, John KeellsComputer Services (JKCS) as well as the OfficeAutomation business.

• The joint venture of JKCS with Air-Arabia is beginningto reap rewards, with its flagship reservation solution“AccelAero” in demand with a number of low costcarriers.

• The appreciation of the rupee, the resultant lower inputcosts and rationalising of the product portfolio, enabledthe Office Automation business to improveits EBIT.

Others, including Plantation Services• Plantation Services EBIT increased by Rs. 228 million

to Rs. 466 million from Rs. 238 million in the previousyear.

• Increased contributions from Tea Smallholders, JohnKeells PLC and John Keells Teas Limited on account ofhigher revenues and margins.

• As a result, total EBIT from Others, including PlantationServices, increased by Rs.1.81 billion in 2007/08, owingboth to the strong performance of the Plantation Servicessector as well as higher interest income arising from theeffective management of funds.

Industry group EBIT marginsEBIT margins of the group increased to 16.3 per cent against15.7 per cent in the previous year. Increased pressure on thecost structures and the inability to pass on all cost increases



Rs. million EBIT %

EBIT

EBIT margin

Group EBIT and EBIT margins

2006 2007 20080

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

9,000

15.7%16.3%

12

13

14

15

16

17

18

14.6%

to customers, resulted in EBIT margins of Transportation,Leisure and Consumer Foods & Retail declining whencompared with the previous year. This was offset byimpressive margins in Plantation Services and at the holdingcompany. Further details on EBIT margins can be found inthe ROCE discussion of this report.

Industry group EBIT margins

Finance expensesGroup finance expenses increased by 23 per cent to Rs. 1.62billion from Rs. 1.31 billion in the previous year. Althoughthe debt as at 31st March 2008 reduced to Rs. 12.67 billionas compared to Rs. 15.36 billion the previous year, theincrease in the mean AWPLR throughout the year to 17.57per cent from 13.75 per cent during the previous year,resulted in the increase in finance expenses. However, theimpact of rising interest rates were partially negated due toRs. 2 billion of debentures raised by JKH last year being onfixed rates and applicable “caps”. Proceeds from the rightsissue were partly utilised to retire short term debt. TheLeisure and Consumer Foods & Retail industry groupstogether accounted for Rs. 953 million of finance expenses,being 59 per cent of the total group. The finance expense ofthe holding company reduced to Rs. 529 million from Rs.570 million in the previous year.

TaxationGroup tax expense increased to Rs. 1.05 billion from Rs. 852million in the previous year, an increase of 24 per cent. Totaltax expense comprised primarily of Rs. 949 million as incometax and Rs. 184 million as dividend tax.

Despite the higher contribution to group profits by taxablecompanies and the impact of LMS ceasing its tax exemptionin December 2007, the overall effective group tax rate fellfrom 17.8 per cent to 16.0 per cent in the current year. Thisis primarily attributable to the holding company benefitingfrom set-off of tax losses in the current year, where thecompany had not recognised a corresponding deferred taxasset in the previous year. Moreover, resulting from changesin fiscal legislation, the group also benefited from the write-back of Economic Service Charge (ESC) of Rs. 33 million,which had been written off previously.

Profit after taxation (PAT)Group PAT increased to Rs. 5.52 billion, an increase of 40per cent from Rs. 3.94 billion in the previous year. Maincontributors towards PAT were Transportation at Rs. 2.90billion and Property at Rs. 785 million. Plantation Servicescontributed Rs. 277 million to PAT, while a contribution ofRs. 519 million came from the holding company.

Minority interestMinority interest remained almost flat at Rs. 406 million for2007/08 compared to the previous year. However, the MIshare of PAT reduced to 7.3 per cent from 10.4 percentrecorded during the previous year. The lower profits of CCSand the Maldivian resorts resulted in much lower minorityshares during the year, although this decrease was offset by anincrease in the minority share of the plantation subsidiaries.

Profit attributable to equity holders of the parentThe profit attributable to equity holders of the parentincreased by 45 per cent to Rs. 5.12 billion during the year.The net profit margin of the group also increased to 12.2 percent as compared to 10.8 per cent during the previous year.


Finance expense 2007/08

Transportation

Leisure

Property

CF & R

Financial Services

IT

Others

46%

4%12%

0%0%

35%

3%

Finance expense 2006/07

Transportation

Leisure

Property

CF & R

Financial Services

IT

Others

43%

2%8%0%

0%

46%

1%

Rs. million NP ratio %

Profit attributable to group

Net profit %

Net profit ratio and net profit

2004 2005 2006 2007 20080

1,000

2,000

3,000

4,000

5,000

6,000

0

2

4

6

8

10

12

14

8.5%9.8% 10.4% 10.8%

12.2%

2008 2007 2006

Transportation 18.6% 23.4% 22.6%Leisure 11.5% 14.3% 15.1%Property 34.5% 59.5% 34.8%CF & R 5.1% 6.6% 5.1%Financial Services 8.8% 9.8% 13.7%IT 4.3% 4.2% 6.8%

Quarterly performance at a glance

FY 2007/08

Rs. millions Q1 Q2 Q3 Q4 Total

Net turnover 8,468 9,669 11,066 12,602 41,805PBT 1,093 1,279 1,716 2,491 6,579Transportation 824 831 729 670 3,054Leisure (351) (66) 88 693 364Property 95 89 207 450 841CF&R 86 39 117 145 387Financial Services 113 141 123 45 422IT (26) 21 6 89 90Other 352 224 446 399 1,421

Profit attributable toshareholders 821 1,028 1,356 1,913 5,118Total assets 66,214 66,333 67,488 71,794 71,794Total equity 43,105 44,335 44,999 48,992 48,992Total debt 15,225 13,509 13,710 12,667 12,667Closing shareprice (Rs.) 145.50 129.00 128.00 119.75 119.75

The quarterly performance of the group depicts theimproving quarter on quarter performance with the lastquarter showing the strongest growth. Leisure recorded animpressive 4th quarter jump in profits owing to the goodperformance of the group's Maldivian resorts, all of whichwere fully operational during this quarter. Property alsorecorded the bulk of its profits in the 4th quarter based onrecognition of revenues on the receipt of the final tranche ofcustomer payments on “The Monarch”. Transportationshowed a slight decline in profits on the back offalling margins.

Return on equity and return on capital employedThe group capital employed increased by 6 per cent toRs. 61.66 billion as at 31st March 2008 from Rs. 58.20billion in the previous year. The ROCE for the groupimproved marginally to 13.7 per cent against the 13.6 percent recorded in 2006/07, on the back of the 34 per centincrease in EBIT to Rs. 8.20 billion from the Rs. 6.11 in theprevious year.

The return on equity (ROE) improved to 12.3 per cent in2007/08 from 11.4 per cent the previous year, on account ofthe 45 per cent growth in profits attributable to equityholders of the parent. Growth in ROE was driven primarilyby an increase in the return on assets from 7.5 per cent to 8.0per cent. The common earnings leverage (CEL) whichindicates the proportion of PAT that is allocable toshareholders, increased to 0.93 due to increased contributionfrom associate companies and a reduction in profits fromcompanies with a high MI. The capital structure leverage(CSL) which measures the degree to which shareholdersfunds are utilised to fund assets, fell to 1.65 due to theincrease in average shareholders equity.

Though group EBIT margins increased to 16.3 per cent from15.7 per cent last year, ROCE improved only marginally dueto the decrease in capital employed turnover to 0.84 ascompared to 0.87 in the previous year, indicating thatrevenues did not increase commensurately with the increasein capital employed.

From an industry group standpoint, Property, FinancialServices and Others contributed to higher ROCEs while theROCE of Transportation, Leisure, Consumer Foods & Retailand Information Technology declined, compared to theprevious year. The industry groups with the larger share ofcapital employed, namely, Transportation and Leisure whichtogether account for approximately 60 per cent of the group'scapital employed, registered a drop in EBIT margins whichimpacted the group's ROCE.

Transportation• ROCE of 28.3 per cent, an 8.5 percentage point drop as

compared to 36.8 per cent in the previous year.

• Although the average capital employed increased toRs. 10.96 billion from Rs. 7.90 billion in the previousyear due to the increased investment in SAGT inOctober 2006, the asset turnover at 1.30 remained inline with last year.

• The reduction in ROCE is primarily attributable to thedecrease in EBIT margins from 23.4 per cent last year to18.6 per cent during the year, primarily as a result oflower margins in the Transportation segment.



ROE ROCE

13.0%

16.0%

13.6%

16.3%

2004 2005 2006 2007 2008

ROE vs ROCE

14.7%

12.7%14.0%

11.4%12.3%

13.7%

ROE = ROA x CEL x CSL

2007/08 12.3% = 8.0% x 0.93 x 1.65

2006/07 11.4% = 7.5% x 0.90 x 1.70

ROCE = EBIT x Asset x Assets/margin turnover (Debt+

equity)

2007/08 13.7% = 16.3% x 0.73 x 1.15

2006/07 13.6% = 15.7% x 0.74 x 1.17

Leisure• ROCE of 4.9 per cent, a 1.4 percentage point drop as


• The average capital employed increased from Rs. 17.39billion to Rs. 22.90 billion due to the capitalisation ofrefurbishments costs of Dhonveli and Ellaidhoo and theacquisition of Tranquility (Pvt) Ltd.

• Turnover increases were in line with the increase incapital employed, resulting in similar assetturnover ratios.

• Decrease in ROCE is solely attributable to a fall in EBITmargins to 11.5 per cent from 14.3 per cent in theprevious year.

• EBIT margins were impacted by part closure of the twoMaldivian properties for refurbishments, the operatingcosts of Cinnamon Island Alidhoo and lower margins atthe Sri Lankan resorts.

• US dollar denominated contracts entered into previouslyat lower rates, coupled with increased rupee costs due tothe high inflation environment, affected margins in theSri Lankan resorts.

Property• ROCE of 19.2 per cent, 2.8 percentage points increase


• Although EBIT margins dropped significantly from 59.5per cent to 34.5 per cent, this decrease was more thanoffset by the increase in asset turnover, which doubled to0.48 compared to the previous year, due to the revenuerecognition cycle.

• EBIT margins were also higher in the previous year dueto the profits realised from the sale of the NawamMawatha property, the divestment of Crescat Restaurantsas well as the gains from the change in fair value ofinvestment property, all non recurring one time gains.

Consumer Foods & Retail• ROCE of 15.7 per cent, 7.6 percentage point drop


• Decrease on account of lower EBIT margins as well as alower asset turnover ratio.

• EBIT margins dropped to 5.1 per cent during the yearcompared to 6.6 per cent during the previous year,mainly on account of higher input costs and higherdepreciation of the two bottling lines installed.

• Average capital employed increased from Rs. 2.76 billionto Rs. 3.69 billion as at 31st March 2008 due to thecapitalisation of the two new bottling lines at CCS.

• However, the asset turnover reduced to 1.97 against theprevious year's 2.25 as the revenue generating capacity ofthe bottling lines were not fully utilised, given that theybecame fully operational only in October 2007.

Financial Services• ROCE of 25.7 per cent, an increase of 2.6 percentage

points compared to 23.1 per cent in the previous year.

• Increase primarily attributable to the increase in assetturnover, off a low capital base, to 2.50 from 2.17 in theprevious year, which more than offset the 1 percentagepoint EBIT margin drop to 8.8 percent.

• The drop in EBIT margins was due to a fall in themargins of the stock broking business, while margins atNTB and UA remained essentially the same.

Information Technology• ROCE of 5.4 per cent, 4.0 percentage point drop


• EBIT margins improved marginally to 4.3 per cent from4.2 per cent.

• The reduction in asset turnover to 1.0 from 1.6 theprevious year is a result of lower than expectedperformance of Keells Business Systems and theunabsorbed higher fixed costs at the still developingBPO business.


2007 2008

Sector-wise ROCE comparison

Transportation

Leisure

Property Development

Consumer Foods & Retail

Financial Services

Information Technology

0 5 10 15 20 25 30 35 40

19.2%

4.9%

28.3%36.8%

6.3%

16.4%

23.3%

23.1%5.4%

9.4%

ROCE %

15.7%

25.7%

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

Transportation 28.3% = 18.6% x 1.30 x 1.17Leisure 4.9% = 11.5% x 0.39 x 1.10Property 19.2% = 34.5% x 0.48 x 1.15CF&R 15.7% = 5.1% x 1.97 x 1.56Financial Services 25.7% = 8.8% x 2.50 x 1.17IT 5.4% = 4.3% x 0.98 x 1.26

• The average capital employed increased to Rs. 1.82billion from Rs. 1.09 billion in the previous year as aresult of more investment in the BPO business.

Further details on ROCE are available in the portfoliomovements and evaluation section.

Group outlookThe trend of rising inflation and the corresponding increasein interest rates is expected to have an impact on the growthof the Sri Lankan economy. Coupled with a slowdown in theUS and the Euro zone, which could affect the exports of thecountry, growth is forecasted to be lower than the presentyear. The Sri Lankan economy is projected to grow at 7.0 percent in 2008 as per the Central Bank of Sri Lanka.Independent forecasts from IMF, ADB and other analystsrange between 5.5 to 6.4 per cent. From a policy standpoint,the primary concern would be reduction of inflation. Withthis in mind, the Central Bank has reduced the reservemoney target. However, supply side factors such as high oilprices and sustained high price levels of essentialcommodities, would limit the impact of curbing demanddriven inflation. It is likely that inflation would remain atpresent levels in the initial portion of the financial year,although a fall in inflation could be anticipated towards theend of the year, aided by base effects. Whilst the decision toallow foreign investors to invest up to 10 per cent of treasurybills issued has resulted in lowering of yields, many forecastsare that interest rates would remain at present levels till suchtime inflation is on a definitive downward trend.

In such an environment, the group is conscious of theimportance of driving efficiencies, managing volatility andbeing proactive. The anticipated high inflationaryenvironment, coupled with increases in electricity tariffs areexpected to put further pressure on the cost structures,particularly in industry groups such as Leisure and CF&R.Whilst initiatives have been in place, renewed focus will bepaid to lowering energy costs across the board. As discussedin the Sustainability Report, the group has commissionedinternationally recognised consultants to assist the group inmeasuring its sustainable practices, which would includeaspects such as energy efficiencies, water preservation, paperrecycling and future measurement of the group'scarbon footprint.

Continuous and unprecedented rises in global commodityprices such as oil and sugar have posed challenges inmaintaining margins in some of the group’s key businesses.The group will monitor price movements closely and enterinto hedging instruments, where deemed necessary. Whilstmanaging costs is important, building scale in operations isalso crucial, particularly for the “Keells Super” chain ofsupermarkets. The operations of the central warehouse arebeing consolidated and this would enable the chain to bemore aggressive in its rollout of outlets, resulting in synergiesand economies of scale, which could have a positive impacton margins. In spite of rising raw material prices,construction costs of “The Emperor” are not expected to

increase significantly since the group has entered into a fixedprice US dollar contract with the contractor.

Although interest rate and inflation differentials wouldindicate depreciation of the LKR against the US dollar,inflows from foreign investors seeking to take advantage ofcarry trade opportunities would support the LKR, resultingin expectations for the LKR to remain at present levels andthen depreciate gradually in the latter part of the financialyear. Since the group's revenue streams from Maldivianhotels, final payment of “The Monarch” and advances of“The Emperor” and inflows from LMS are primarily in USdollars, the group will continuously evaluate hedgingmechanisms to optimise the effects from its USdollar receipts.

The high LKR interest rate environment is expected to havean impact on the finance expenses of the group, particularlyin Leisure and CF&R which have a higher level ofborrowings on floating rates. The easing of the interest ratepolicy by the US Fed and the corresponding reduction inLIBOR rates, should compensate for any adverse impacts inLeisure which has a significant portion of its borrowings inUS dollars. However, the group is conscious of the possibilityof an increase in LIBOR and will continuously evaluate theattractiveness of entering into interest rate swaps to fixinterest rates.

Outlook for industry groupsThe services sector of the economy has consistently grownover the last few years, with the performance of the ColomboPort expected to continue its growth momentum. This wouldpositively impact the Transportation industry group, withSAGT and LMS benefiting. During the ensuing year, thegroup would accelerate its thrust to expand its logisticsoperations in India.

Continuation of the conflict at heightened levels as seenduring the year would have an impact on the performance ofLeisure in the Sri Lankan market. The group invested a totalof USD 10.4 million in refurbishing and expanding thefacilities at Ellaidhoo and Dhonveli. With all four resorts inthe Maldives now fully operational, the group would be ableto mitigate adverse impacts, if any, in the Sri Lankan market.In order to strengthen its position in the Maldives, the groupis investing further in the construction of beach and shoreprotection measures at Alidhoo and Dhonveli. With a viewto further diversifying its risk in Sri Lanka and Maldives, theLeisure industry group is aggressively pursuing hotelinvestments in the Indo-China region. Meanwhile, SereneHolidays, the group's destination management business inIndia, is expected to expand, with the opening of newbranches on the cards.

Although the current environment is not conducive forinvestment in property development, the group will retain itsland bank and look to enter the market when factors are



more favourable. During the ensuing year, Property will lookto capitalise on the competencies built through constructionof “The Monarch” to embark on property developmentprojects in the South Asian and South East Asian region, inpartnership with reputed international developers. The grouprecently entered into a MOU with AMW and FinlaysColombo to jointly develop a contiguous 6.6 acre block ofland with access from Union Place and Vauxhall Street. Theproject is expected to commence in 2010, subject to marketconditions.

With expectations for inflation to remain high, and theresultant impact on disposable incomes of consumers, theCF&R industry group could potentially face a slowdown inmarket growth. Lower disposable incomes have also limitedthe quantum of cost escalations that could be passed on tothe consumer. The new bottling line at CCS is expected toimprove efficiency as well as give flexibility in marketing bycatering to consumer needs through different productofferings. Certain strategic initiatives are in place to ensurerationalisation of the portfolio, a new distribution model,automation of processes to increase production efficienciesand to optimise the use of its management informationsystem. In order to drive volumes in Convenience Foods, thegroup has invested in setting up a manufacturing plant inIndia to cater to its growing middle class. Once infrastructureand capacity are built, particularly relating to the cold chain,the group plans to ramp up production and cater to a widergeographical segment of the market.

The group's investment in Quatrro F&A is a first step in itsexpansion into the high value F&A vertical in the BPOspace, exploiting the potential of Sri Lanka. With theslowdown in the US and companies seeking to rationalisecosts, the BPO industry is expected to continue its growth.

The group will seek to expand the operations of the newlyacquired US-based F&A entity, Financial ProcessOutsourcing LLC, by adding seats in Sri Lanka and India.Moreover, Auxicogent, the group’s BPO arm is expected toincrease its capacity in Sri Lanka and India as it focussesaggressively on new customer acquisition. The SoftwareServices sector will focus on creating and owning IntellectualProperty rights that will enable it to increase its penetrationin to the UK and Middle Eastern markets.

The present high levels of interest rates have posedchallenges, whilst also creating opportunities, for thefinancial services industry. NTB and UA are expected tocontinue the growth momentum seen in the current year.Both entities are looking at launching new products toenhance the present levels of solutions offered to its clientbase. The partnership entered into with the leadingBangladeshi stock broking firm to participate in investmentbanking transactions and management of initial publicofferings by Bangladeshi corporates, is expected to have apositive impact on the profits of the stock broking arm ofthe group.

The volatile environment in Sri Lanka, and globally, willmake the year ahead a challenging one. However, as outlinedabove, the group is well positioned to overcome thesechallenges through the initiatives discussed above. At a timewhen the market is short of liquidity, the group has adequatecash resources in LKR and US dollars to funds its projectpipeline. The JKH group has delivered consistentperformance in the past. Through the numerous initiativesoutlined above and discussed in the Chairman's message, thegroup intends continuing its growth momentumtowards meeting its goal of providing shareholders with a 20per cent ROE.



Highlights

• Total assets increased by 9 per cent to Rs. 71.79 billion

• Cash and short term investments of Rs. 12.65 billion

• Total shareholders' funds increased by 13 per cent toRs. 44.22 billion

• Total debt reduced by 18 per cent to Rs. 12.67 billion

• Debt to equity reduced to 25.9 per cent

• Long term debt to total debt increased to 61.8 per cent

• Net cash flow from operations of Rs. 6.91 billion


Group financialposition and liquidity

Summary of key balance sheet items

Rs. million 2007/08 2006/07 Change % Explanatory highlights

Non current assetsProperty, plant and 33,811 25,165 8,646 34 • Acquisition of TPL, holding company of Alidhoo, addedequipment Rs. 3.31 billion as PPE(including leasehold • Rs. 2.79 billion investment in PPE, primarily in Leisureproperties) and CF&R

• Revaluation of group properties by Rs. 3.96 billion

Investments in 9,887 8,515 1,372 16 • Investment of Rs. 545 million in the BPO businessassociates • Investment of Rs. 313 million in the NTB rights issue

Other non current assets 1,806 1,435 371 26 • Addition of “The Monarch” work in progress partiallyoffset by transfer of similar amount to cost of sales andinventory

Current assetsInventories 3,985 3,400 585 17 • Transfer of “The Monarch” work in progress to inventory

Trade and other • Primarily due to increases in receivables of stock broking,receivables 6,753 6,592 161 2 JMSL and LMS, although partially offset by reduction in

Cinnamon Grand and JKMR

Short term investments • Retirement of selected debtand cash in hand 12,647 17,765 (5,118) (29) • Investment in BPO business and rights issue at NTB

• Enhanced dividend payment

Shareholders' funds 44,218 39,235 4,983 13 • Profit attributable to company of Rs. 5.12 billion, surpluson revaluation of land of Rs. 2.90 billion, lessRs. 3.18 billion as dividends paid

Non current liabilitiesInterest bearing 7,809 6,451 1,358 21 • Increased due to long term borrowings in the Maldivesborrowings to fund the construction of “Cinnamon Island

Alidhoo”

Current liabilitiesTrade and other 7,869 5,795 2,074 36 • Increase in trade payables of LMS, stock broking andpayables JMSL

Short term borrowings 375 2,688 (2,313) (86) • Repayment of short term loan raised to fund SAGTinvestment by the holding company

• Settlement of short term bridging finance to fundrefurbishment of properties in the Maldives

Current portion of 1,060 1,374 (314) (33) • Repayment of Rs. 500 million fixed rate note borrowinginterest bearing at the holding company and borrowings by Leisureborrowings

Bank overdraft 3,402 4,819 (1,417) (29) • Repayment of overdraft facilities of the holding companyof Rs. 2 billion

Balance sheet structureTotal assets grew from Rs. 65.95 billion to Rs. 71.79 billionas at 31st March 2008, a growth of 9 per cent.The composition of assets changed with cash and short terminvestments reducing to Rs. 12.65 billion from Rs. 17.77billion the previous year. This reduction was offset by anincrease in property, plant and equipment (PPE), inclusive ofleasehold property, to Rs. 33.81 billion from Rs. 25.17billion in the previous year. Total liabilities comprised of Rs.48.99 billion as total equity, Rs. 9.74 billion as non currentliabilities and Rs. 13.06 billion as current liabilities.

Non current assetsTotal non current assets increased by 27 per cent to Rs. 48.35billion from Rs. 38.19 billion in the previous year, onaccount of increases in PPE of Rs 8.77 billion and investmentin associates of Rs 1.37 billion. Non current assets comprisedprimarily of PPE of Rs. 29.17 billion, investments inassociates of Rs. 9.89 billion and leasehold property of Rs.4.64 billion.

Leisure accounted for a majority of the PPE within thegroup, with Rs. 18.81 billion of PPE. The increase in PPEwas also primarily attributable to Leisure on account of theaddition of Rs. 3.31 billion of PPE on account of theacquisition of TPL, the holding company of Alidhoo, as wellas capitalisation of refurbishment costs of Dhonveli andEllaidhoo. The addition of the new bottling lines at CCS alsohad an impact on the increase in PPE by Rs. 456 million.The group also revalued its real estate portfolio during theyear. The net addition to PPE as a result of the revaluationwas Rs. 3.96 billion. The bulk of the increase came fromAHPL and CCS.

Investments in associates increased on account of the group'sinvestment of Rs. 545 million in Auxicogent International,the BPO operating arm of the group, and Rs. 313 million inthe NTB rights issue.

Working capitalNet working capital decreased to Rs. 10.38 billion fromRs. 12.88 billion the previous year due to a proportionately

larger reduction in current assets compared with currentliabilities. The divestment of Keells Business Systems andUnawatuna Walk Inn (UWL), which no longer are treated assubsidiaries of the group, had an impact ofRs. 191 million and Rs. 163 million on current assets andcurrent liabilities respectively due to elimination of inventory,debtors and creditors of the company. Short terminvestments and cash reduced by Rs. 5.12 billion on accountof the holding company infusing Rs. 2.90 billion as capital toKeells Hotels, which was in turn used to repay debt, andrepayment of debt at the holding company level. Currentliabilities decreased by Rs. 1.82 billion due to repayment ofshort term borrowings and reductions in overdrafts, althoughpartially offset by an increase in trade and other payables ofRs. 2.07 billion. JKH utilised part of the proceeds from therights issue to repay short term borrowings that were taken tofund the investment in SAGT last year.

Activity and liquidity ratiosActivityAlthough turnover including associate companies grew by 29per cent during the year, the average asset base of the groupalso increased by 31 per cent. As a result, the asset turnoverof the group at 0.73, remained in line with that of last year.The PPE turnover remained at 1.7 in 2007/08.

LiquidityBoth liquidity ratios declined marginally in the year underreview from its high base in the previous year. The currentratio decreased to 1.8 from 1.9, while the quick ratiodecreased to 1.5 from 1.6 the previous year.

Cash flowCash generated from operations prior to working capitalchanges increased to Rs. 5.38 billion in 2007/08 comparedwith Rs. 4.83 billion the previous year. Cash generated fromoperations increased compared to the previous year, due topositive working capital changes when compared with lastyear. As a result, net cash generated from operating activitiesincreased to Rs. 6.91 billion against Rs. 2.52 billion theprevious year. Growth in cash from operating activities alsoemanated from the increase in interest received from Rs. 494million to Rs. 2.08 billion, as well as growth individend income.


Balance sheet structure

20,112

7,935

25,165

13,022

33,811

14,544

44,218

4,774

39,235

3,700

22,801

39,525 65,946 71,794 71,794 65,946 39,525

3,634

7,347

9,994

10,793 9,744

8,129

3,567

4,131

17,765

12,647 13,059

14,882

9,523

All figures inRs. million

Assets Liabilities

Cash and short term investments Current liabilities

Other non current assets Minority interestInventory and receivables Non current liabilities

Shareholders’ fundsProperty, plant & equipment

2006 2007 2008 2008 2007 2006

Rs. million

2004 2005 2006 2007 2008

Liquidity management

Cash and short-term investments Current liabilities Current assets

0

5,000

10,000

15,000

20,000

25,000

30,000

Net cash used in investment activities was Rs. 4.37 billionduring 2007/08, as against Rs. 10.09 billion the previousyear. The group invested a total of Rs. 1.16 billion in BPOrelated investments in Auxi BPO Solutions India, currentlytreated as an associate, and Quatrro F&A.

During the year, the group repaid higher cost short termborrowings using funds generated through the rights issue. Insummary, the group repaid Rs. 3.17 billion, net of proceedsreceived from new borrowings. The declaration and paymentof a special dividend, coupled with regular dividendsincreased the total dividend outlay of the group, includingdividends to minority shareholders, to Rs. 3.38 billion in2007/08, compared with Rs. 1.70 billion in the previousyear. As a result, the net cash used in financing activitiesincreased to Rs. 6.25 billion compared with net receipts ofRs. 18.42 billion the previous year. The net decrease in cashand cash equivalents was Rs. 3.71 billion, with cash and cashequivalents as at 31st March amounting to Rs. 9.24 billion.

Interest coverThe increase of EBIT by 34 per cent to Rs. 8.20 billion in2007/08 had a positive impact on the interest cover of thegroup which increased to 5.1 from 4.6 in the previous year.The cash interest cover of the group decreased marginally to3.3 from 3.7 in the previous year due the high growth infinance expense. The cash interest and tax cover of the groupwas 2.0 compared with 2.2 in the previous year. In spite ofa drop in the cash cover ratios, these are consideredhealthy levels.

Leverage and capital structureCapital structureTotal assets of the group increased to Rs. 71.79 billion as at31st March 2008, compared with Rs. 65.95 billion in theprevious year. Assets were funded by shareholders funds(62 per cent), minority interest (7 per cent), long termcreditors (13 per cent) and short term creditors (18 per cent).

Long term funding of assets was Rs. 58.74 billion, whichamounted to 82 per cent of total assets, funded in theproportion of 75 per cent, 8 per cent and 17 per cent byshareholders funds, minority interest and long term creditors,compared with 77 per cent, 7 per cent and 16 per centrespectively in the previous year.

DebtTotal debt of the group declined by Rs. 2.70 billion to Rs.12.67 billion as a result of repayment of debt using fundsgenerated through the rights issue last year. The reduction ofdebt was timely, given the significant increase in interest ratesduring the course of the year. The net debt position of thegroup was Rs. 20 million, compared to a net cash position ofRs. 2.40 billion in the previous year. Utilisation of cashavailable to repay higher cost short term debt resulted in thedebt to equity ratio of the group declining to 25.9 per centfrom 35.8 per cent the prior year. Whilst the group has atarget of increasing its debt to equity ratio, increasing leverageat current market interest rates is not justifiable. Thecomposition of debt in the group changed during the yearunder review, with a higher portion of long term debt in theportfolio. As a result, the long term debt to total debtincreased to 61.8 per cent from 42.2 per cent in theprevious year.

Of the total debt of Rs. 12.67 billion within the group,Leisure accounted for the majority of debt with Rs. 7.05billion of debt, with a large portion relating to borrowings tofinance its expansion in the Maldives. The balance debt inLeisure was primarily due to term borrowings outstandingrelating to refurbishment of the Cinnamon Grand. Theholding company also accounted for Rs. 3.46 billion of debt,which consists primarily of Rs. 2 billion of long termdebentures raised last year at attractive market rates.

Statement of changes in equityTotal shareholders funds increased by Rs. 4.98 billion to Rs.44.22 billion on account of an increase in profit for theperiod of Rs. 5.12 billion, Rs. 2.90 billion as surplus onrevaluation of land held by the group, offset by payment ofdividends amounting to Rs. 3.18 billion, which includes thespecial dividend made during the financial year.


Group financial position and liquidity

Rs. million No. of times

EBIT

Finance Expenses

Interest Cover

Interest coverage

2004 2005 2006 2007 20080

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

9,000

0

1

2

3

4

5

6

7

8

9

10

6.2

8.8

9.2

4.6

5.1

Active portfolio management and evaluation by JKH hasresulted in the group housing a portfolio of businesses thatlead in strategic growth sectors of the economy. The companywill continue to build its portfolio of investments by effectiveregional investments/expansion and enhancing itsinvestments in core industry groups.

The JKH portfolio evaluation and review process is groundedon four filters -

• “Financial Filter”- that has the JKH hurdle rate as itscornerstone

• “Growth Filter” - which evaluates a business in terms ofits industry attractiveness

• “Strategic Fit” - that critiques the long term competitiveadvantage of a business/industry by evaluating thestrength of competitive forces, specific industry/businessrisks, ability to control value drivers and thecompetencies and critical success factors already inherentin the group company

• “Complexity Filter” - which considers factors such assenior management time and the risk to brand, imageand reputation

JKH's hurdle rate (or required rate of return) is a function ofthe weighted average cost of capital (WACC), derived fromthe group's cost of equity, cost of debt, target leverage, tax ratesand the value creation premium required over and above theWACC. Strategic business units are risk assessed underheadings such as customer concentration, suppliers/JV partnerdependence, risk of international entrant, labour dependence,cyclicality, dependence on Sri Lankan economy, regulatorydependence and impact of the North-East conflict etc.

Given below is a graphical representation of an output of theJKH portfolio review and evaluation process. As indicated by

the graph, Hotel Management, Transportation, DestinationManagement, Financial Services and Property performedwell above the “Financial Filter” hurdle rate expectation.The Transportation industry group continues to generate thehighest return on capital employed (ROCE) of the portfolio,apart from the low capital-intensive Hotel Managementbusiness. Financial Services sector continued its strongperformance during the year under review led by theassociates NTB and UA. Property industry group generatedrelatively higher returns than the previous year due torecognition of most of the income from “The Monarch”during the year. Destination Management sector saw a majorturnaround with strong performance of Walkers Toursduring 2007/08. Gains on exchange translations due to theexercise of prudent hedging, process efficiencies whichresulted in significant cost savings and the gain on thedisposal of land were the key factors which contributed tothis growth. The Consumer Foods industry groupexperienced a relatively low ROCE, largely as a result of lowermargins due to cost pressures and a higher capital employedattributable to investment in 2 modern bottling lines byCCS. The Retail sector, though continuing to be below thehurdle rate, is expanding aggressively and the returns willimprove with the sector gaining scale through increasednumber of outlets. The Leisure industry group continues toperform well below the hurdle rate due to the ongoing ethnicconflict in Sri Lanka having an adverse impact on tourism.The Maldivian resorts, which have been the strongestperformer for the group's Leisure portfolio, experiencedrelatively low returns during 2007/08. This was due to theaddition of Alidhoo, the group's first Cinnamon property inthe Maldives and extensive refurbishments at Ellaidhoo andDhonveli, which enhanced the capital employed of theportfolio, further impacted by drop in revenues and profitsdue to closure of Ellaidhoo and Dhonveli for refurbishmentduring part of the year.


Portfolio movementsand evaluation

Hurdle Rate 18%

Rs. billionCapital employed

Portfolio analysis ROCE vs capital employed 2007/08

(10)

(5)

0

5

10

15

20

25

30

35

40

120ROCE (%)

Transportation

Hotel Management (120.7%)

City Hotels

Retail

IT

MaldivianResorts

DestinationManagement

Financial Services

Property ConsumerFoods

Sri Lankan Resorts

405 10 15 20 25 30 35 45


Investments

Mergers & restructuring

75.4% of MercantileLeasing for Rs. 0.5billion

Alidhoo island in the Maldives for USD 3million

Construction of resorton Alidhoo island forUSD 22.5 million

Rs. 313 millionsubscribed to the NTBrights issue to maintain stake at 29.9 per cent

2005 2006 2007 2008

Increased effective stake in Trans Asia to 85% for Rs. 1.6billion

80% of Yala Village hotel for Rs. 0.2 billion

15 year sub lease on Dhonveli island in the Maldives for USD 21 million

Rs. 2.9 billion inKeells Hotels PLC and increased stake to 92.69 per cent

Joint venture with Raman Roy Associates to develop BPObusiness in the region - USD 15 million

20% stake in Associated Motorwaysfor Rs. 0.7 billion

Investment of USD 6.0 million in thecompletion of theAlidhoo resort

14 year sub lease on Ellaidhoo island in the Maldives for USD12.5 million

Additional 7.5% stake in South Asia GatewayTerminals for Rs. 3.6billion

Creation of umbrellaholding company for resort hotels

Merger of Mercantile Leasing into NationsTrust Bank

Sports and RecreationBentota merged into parent CHR

Divestments Keells PlantationManagement Services ( Namunukulaplantation) for Rs. 0.2billion

Keells Restaurants andCrescat Restaurantsfor Rs. 0.2 billion

Unawatuna Walk Innfor a consideration ofRs. 81 million

Capital raisings

Property owned by Keells Realtors for Rs. 0.5 billion

74 per cent stake in Keells Business Systems Ltd for Rs. 70.7 million

Four DestinationManagement sectorcompanies mergedinto Walkers Tours

Debenture issue ofRs. 2 billion

Rights issue of Rs. 12.9 billion

Portfolio movements

10

20

30

40

50

60

70

2004 2005 2006 2007 2008

Transportation Leisure Property F & B Financial Services IT Centre & Other

Capital employedRs. billion

Acquisition in the BPO spaceOn 9th April 2008, JKH acquired a 44 per cent equity stakein Quatrro Finance & Accounting Solutions Private Limited(Quatrro F&A) for a value of USD 5.72 million. QuatrroF&A is the India based Financial and Accounting (F&A)business of the Quatrro group, headed by Raman Roy.Quatrro F&A recently acquired the Chicago based FinancialProcess Outsourcing LLC (FPO) in a structured financingtransaction using a combination of instruments includingdebt and equity. FPO is a niche player in the F&Aoutsourcing vertical, focusing on small and mediumenterprises. FPO currently has facilities in the USA andMumbai with approximately 500 staff.

The F&A outsourcing vertical has grown rapidly over the lastfew years as the cost advantages from labour arbitrage arecompelling. The investment in Quatrro F&A is a stepforward in JKH's plans of building a regional BPO business.JKH currently has BPO facilities located in Gurgaon andColombo with approximately 550 staff. With the investmentin Quatrro F&A, we believe that our presence in the BPObusiness will be significantly enhanced.

Investment in the Indian processed meats industryIn April 2008, Keells Food Products PLC (KFP)incorporated a 100 per cent subsidiary in India, John KeellsFoods India Pvt Ltd (JKFIL), to manufacture and marketprocessed meats in India. The planned initial investmenttotaling USD 2 million over a period of about a year wouldinvolve establishing manufacturing operations as well as amarketing and distribution network in key metros. Initialdistribution will also be supported by exports of selectedproducts of our range from Sri Lanka. We target to have ourproducts present in the top 20 metros in India comprising ofboth tier 1 and tier 2 cities by the end of 2009/10. There issignificant potential for the processed meats industry inIndia, which is in a very early stage of development incomparison to the rapid growth in modern retail formats,presenting an opportunity for the group to leverage itsexpertise.

Sale of Unawatuna Walk InnIn April 2007, JKH and its subsidiaries sold UnawatunaWalk Inn, of which the group had an effective stake of 87.29per cent for Rs. 81.0 million. The group made a book profitof Rs. 43.55 million from the sale. Unawatuna Walk Inn, theowning company of a 20.5 acres of freehold land onUnawatuna beach, which, did not fit with the group’s leisureportfolio development plans.

Sale of a majority stake in Keells Business SystemsDuring March 2008, JKH sold a 74 per cent stake in KeellsBusiness Systems Limited (KBSL), its systems integrationand solutions provider in the IT industry group for Rs. 70.7million to Co Serv (Pvt) Limited (CSL), which hasdiversification plans in the South Asian region. The groupmade a book profit of Rs. 11.6 million from the sale. The saleis a result of the group's portfolio evaluation process wherebywe look to dispose of businesses that take up adisproportionate amount of management time.

Lease on Velidhu Island in the Maldives expiresOn 25th March 2008 the lease held by the group on theVelidhu resort island, in the Ari Atoll, Maldives, expired. Thelease was held by Travel Club Maldives (Pvt) Limited(TCM), a 100 per cent subsidiary of John Keells Maldivianresorts. The 120-room resort, operated since 1995/96, wasthe group's first investment in the Maldives. The group atpresent has 440 rooms in the Maldives. During the financialyear 2006/07, TCM acquired a 14-year lease on the 94-roomEllaidhoo island resort, which is also located in the Ari Atoll,Maldives, in anticipation of the expiry of the Velidhu lease.The Ellaidhoo island resort was closed for a fullrefurbishment since May 2007 and was re-opened in January2008, as Chaaya Reef Ellaidhoo, with 112 rooms including24 water bungalows. We expect the new resort to fullycompensate for the loss of earnings from Velidhu by itssecond year of operations. Earnings from the Maldivianresort cluster is expected to achieve healthy growth in the year2008/09 given the first full year of earnings of our three newresorts, Chaaya Reef Ellaidhoo, Chaaya Island Dhonveli (alsoacquired during 2006/07) and the group's first premiumluxury resort, Cinnamon Island Alidhoo.

Active risk management - a core competence toexploit opportunitiesAt the John Keells Group, risk management is an integralpart of its value-driven corporate governance. Through aproactive risk management programme, risks, both at grouplevel and within all constituent businesses, the assets,financial position and earnings situation of the group aresecured enabling the business units and GEC to recogniseand analyse adverse trends early for prompt corrective action.

The enterprise risk management (ERM) process is structuredto align the key fundamentals of governance, strategies,business objectives, ethics, policies, standards andcompliance, and hence is an integral part of all our decisionsand business processes. The group recognises the complexityand the diversity of risks that surround its operationalactivities and endeavours, through a risk managementprogram, to maximise opportunities and minimise exposuresto risk while being cognisant of the risk/reward relationshipand the ranges of its risk appetite.


Risk management

Acquisitions, new businessand divestments

Efficient organisation of risk managementIn line with its vision, the group maintains an integrated,ERM program. The group has set up a central riskmanagement function to ensure that the GEC iscontinuously and promptly kept informed of importantdevelopments in risk management by the Group Risk andControl Review (R&CR) Department. During the latter partof the year, with a view to achieving synergies, on thefunctions of internal control, the internal audit, riskmanagement and risk transfer were brought under one riskumbrella with accountability lying with the Group R&CRDepartment.

The Chairman-CEO and under his direction, the GEC, arethe prime movers in setting the risk management policy ofthe group. The R&CR Department at the centre, convertsthe policy so set, into a set of processes, procedures andguidelines for the uniform adoption by the businesses withinthe group. The Audit Committee monitors the progressregularly.

The risks in the group are identified and analysed using auniversal risk register adapted, as appropriate, for the group.The individual risk categories are founded on the criticalsuccess factors for the implementation of the corporatestrategy and its objectives. The key operational and financialrisks include areas such as socio- economic, competition,internal processes, procurement, product, currency andinterest rate fluctuations, information technology, humanresources etc. Appropriate mitigating actions have beenidentified and have been put into place at the various levelsof the group.

The group rates its risk as ultra high, high, moderate, low andinsignificant after taking into consideration the probableimpact/severity ranking on one side and thelikelihood/occurrence ranking on the other.

Clear allocation of responsibilities for riskidentification, analysis and assessmentThe group has established a comprehensive and systematicrisk management system, the basic principles of which arelaid down in group guidelines. It is incumbent on theoperational management of the risk owner to take directresponsibility for the early recognition, management andcommunication of the risks. Under the risk managementsystem, the group companies adopt a bottom-up approachand report the status of any significant risks and any changesin those risks. In addition, any risks which arise at shortnotice or which have repercussions for the whole group arecommunicated directly to the appropriate personnel in thegroup, irrespective of the normal reporting channels.

The aim is to identify potential risks of our operations at anearly stage by incorporating them into a database, to assessthem using specific criteria, to evaluate the extent andcharacteristics of the risks and to introduce appropriateprecautionary and security measures.

Risk Management is analysed, evaluated and controlledefficiently at four broad levels. The risk champions at thebusiness units/sectors ensure the implementation of the

procedures under the leadership of the CEOs of the businessunits, sector heads and the presidents of the industry groups.

• At the first level of operations, responsibility for strategy,performance management and risk control lies with thechief executives of the business units,

• The top risks identified at the first operating level areconsidered along with the specific risks affecting theindustry and market by the sector/industry groups,

• The key risks identified at sector and industry grouplevels and macro risks are considered by the GroupExecutive Committee when identifying and assessing therisks faced by the group as a whole,

• The holding company and/or business unit auditcommittees review the findings of the risk managementprogram on a regular basis to gain assurance on itseffectiveness. The centre based R&CR function(Internal Audit) also audits the risk procedures as a partof its audit programs.

Consistent risk monitoringIt is the duty of every risk champion to see to theimplementation and effectiveness of risk management. Basedon periodic monthly reviews at business unit level andquarterly at sector levels, the business units are in a positionto continuously update and complete their risk profile andmatrix. Every six months, the GEC is presented with statusreports from the Group R&CR Department for discussionand review of progress and action plans.

The group R&CR department checks the central anddecentralised risk management reports for functionality,topicality, completeness, reliability and effectiveness andcollates the same for highlighting to the Group ExecutiveCommittee and the business unit audit committees. Inaddition, as a part of its audit programs, audits are performedat company level by the appointed outsourced internal auditfirms and external auditors.

Key risk areasA review of the JKH portfolio of risks saw a hardening in therisk ratings in certain areas due to prevailing economic andexternal factors and the relevant business units are developingappropriate action plans towards mitigating the impactsarising from this. The risk ratings after taking intoconsideration the implementation progress made onidentified action plans and other mitigation activities andcontrol measures are as detailed below -

Political and economic risksFinancial Year 2007/08 2006/07 2005/06

Risk Rating Ultra High Ultra High High

Action plansThe group is actively working with the government, privatesector and other relevant stakeholders in influencing progresstowards lasting peace, stability of economic factors and theoperating environment.


The group acknowledges the important role that the privatesector can play in increasing the quality of life by wealthcreation through good investment and increasingproductivity through training, development andempowerment.

Enabling infrastructure risksFinancial Year 2007/08 2006/07 2005/06

Risk Rating Ultra High Ultra High Ultra High

Action planThe lack of enabling infrastructure has been identified as oneof the key inhibitors of economic growth. It is most welcometo note that the government has, as one of its strategicpriorities, focused on developing and strengtheninginfrastructure that is required to create an enablingenvironment towards economic growth.

The group continues to lobby the authorities for progress inthis area through chambers, trade associations and lobbygroups and through direct dialogue.

Brand control and protection risksFinancial Year 2007/08 2006/07 2005/06

Risk Rating Moderate Moderate Moderate

Control and protection of the brand, the company's mostvaluable asset, is of utmost importance. During the yearmany action plans were put to place to mitigate theweaknesses highlighted in the brand audit conducted lastyear with the assistance of specialised consultants.

Internal operational processesFinancial Year 2007/08 2006/07 2005/06


Action planThe group’s commitment to mitigate this risk to acceptablelevels is ensured through continuous improvementsdeveloped around the concept of document, measure,analyse, and improve. These quality processes includedocumented work processes; documentedcorrective/preventative action process; effective problemsolving and root cause analysis; quality service measurementsbased on customer requirements; customer satisfactionmeasurements and vendor performance evaluations. Theseprocesses are taking root throughout most of our businessunits and are subject to periodic review by management.

Environmental, health and safety risksFinancial Year 2007/08 2006/07 2005/06


Action planJohn Keells promotes appropriate environment, health andsafety management systems at most of our operationalfacilities. This is a result on the strengths of ourenvironmental, health and safety efforts which include EHSsurveys, physical risk surveys, energy audits, safety awarenessprograms and training with the assistance of specialisedconsultants and organisations.

Legal and regulatory risksFinancial Year 2007/08 2006/07 2005/06

Risk Rating High High High

Action planIt's our business to stay abreast of constantly changingstatutory and regulatory requirements in order to ensure thatour operations and services remain in compliance. Towardsthis, quarterly compliance reviews and audits at sector andbusiness unit levels have been implemented. The groupcontinues to campaign through established lobby groups forclear and unambiguous policies and laws. This is still an areaof concern.

Financial risksFinancial Year 2007/08 2006/07 2005/06

Risk Rating Moderate High Moderate

Action planThe basic risk strategies for interest, currency and liquiditymanagement, and the objectives and principles governinggroup finances are determined by the central group treasuryfunction in discussion with the business units.

Business, financing and other forex exposure activities whichare not in the local currency inevitably lead to foreigncurrency exposures. The businesses actively monitor theresulting transaction risks themselves and agree appropriatehedging transactions with group treasury in line with agreedparameters.

Interest rate risks are also centrally managed. The groupevaluates potential interest rate risks, ascertains the interestrisk exposure in the major currencies and conducts sensitivityanalyses. Interest rate risks are actively managed using avariety of methods.

IT risksFinancial Year 2007/08 2006/07 2005/06


Action planTo minimise the risk of business processes being interruptedas a result of systems failure, numerous security and fallbackmeasures have been implemented. These include accesscontrol systems, contingency plans, an uninterruptedelectricity supply for critical systems, back-up systems anddata mirroring. In addition, we use firewall systems and virusscanners to counter data security risks arising fromunauthorised access to the IT systems. We also ensure theconfidentiality, availability and integrity of the data. Disasterrecovery plans are regularly reviewed as disruptions to criticalmanagement information systems could have a materialimpact on the group's continuing operations.

Personnel risksFinancial Year 2007/08 2006/07 2005/06



Action planJohn Keells continues to position itself as an attractiveemployer and will seek to ensure the long term loyalty of itscommitted team by training, development, recognition andreward. The rigorous management leadership programmeincludes the provision of development, mentoring, supportand advice, while the early identification and advancement ofhigh achievers and those with potential is promoted viaattractive performance incentive schemes.

The success of the group depends on the commitment,motivation and skills of its employees. The group isaddressing the issue of the shortage of qualified personnel insome fields by ensuring opportunities for professionaldevelopment. This strengthens our position as an attractiveemployer in the competitive market for suitably qualifiedemployees.

Stakeholder risksFinancial Year 2007/08 2006/07 2005/06

Risk Rating Moderate High High

Action planThe group believes that its success depends on the degree towhich it can balance both profit and the interests of all itsstakeholders.

We constantly conduct analyses of our market environmentand competitive situation. We obtain vital information aboutour customers' needs by maintaining regular contact withthem, and this enables us to stay close to the market. We usethe information we receive to develop and supply productstailored to suit the needs of the market and to enhance ourcompetitive position and level of market awareness.

The competence and commitment of employees are keyfactors for the successful development of the group and thisidea is anchored in JKH HR mission of “More than just aworkplace”. The group has already implemented a series ofmeasures to counter possible personnel risks.

This year, we focused much attention on how we as a groupaddress the issue of sustainability, and in order to successfullymeet these growing expectations, a group-wide sustainabilityaudit was commissioned through the service of specialisedconsultants. This exercise was completed after the end of thefinancial year and suitable action plans are now being drawnup with a view to be a more goal-driven in our sustainabilitypractices and align these with the activities of the John KeellsSocial Responsibility Foundation, the nerve centre for JKH'sCSR efforts.

Industry group/sector riskBy consolidating and aggregating the findings of our industrygroups/sectors, it is possible to form a view of the 10 mostimportant strategic risks across the group.

The table below shows the weighting of the top 10 strategicbusiness risks across the industry groups/sectors that westudied. While many risks were unique to a sector, a few keychallenges had a high or critical impact for many, or even allof the sectors. Hence the risks at the top of the chart are thosethat will do the most to influence markets and drivecorporate performance in 2008 and beyond.

This cannot, however, be used to definitively conclude thatone industry group/sector is more or less risky than another.However, we can infer that, compared with what we believeare the most common strategic business risks, some industrygroups/sectors are more exposed than others.

The future outlookThe experience gained during the past two years has nowenabled the R&CR team to roll out and implement effectivebusiness continuity and disaster recovery plans, not onlyfrom a technology perspective, but more importantly from acontinued business operational focus.


Risk management

Legal, regulatory & compliance

Environment health & safety

Political

Macro economic

Catastrophic loss

Reputation & brand image

Organisation and people

Technology reliability & recovery

Capital and finance

Internal business process

Transportation

Ultra High High Moderate Low

ConsumerFoods &

Retail

FinancialServices

(ExcludingAssociates)

IT Sector(Excluding

BPO)

PlantationServices

Leisure Property

Doingsimple thingsto make aBIGGERdifferenceSustainability Report

NOTE FROM THE CHAIRMANCorporate responsibility and a stakeholder focus have longbeen entrenched in the John Keells value system. We areconscious of the impact of our actions, not just on thebottom-line, but also on our role as an employer, provider,partner, investor and neighbour. Sustainable practices aregrowing in corporate priorities across the globe as it becomesapparent that sustainable growth of corporations will hingenot only on economic performance, but increasingly on theoften less obvious social and environmental performanceaspects. Accordingly, good sustainability reporting is growingin relevance, as stakeholders, including shareholders andproviders of capital, consumers, employees, partners,suppliers, governments, the public and their agents, raise thebar of expectation in relation to the responsible andsustainable practices of corporations.

This year, as the world battles with a food crisis and an energycrisis, we focused much attention on how we, as a groupaddress, the issue of sustainability, in order to successfullymeet these growing expectations. While we are aware of itssignificance and have, over the years, launched a number ofsuccessful initiatives that address valid societal needs,admittedly, our current practices and sustainability-drivenprojects have been generated in a more ad hoc fashion at theindustry group levels. We subscribe to the UN GlobalCompact and support the Millennium Development Goals.Nevertheless, we have identified the need for a more goal-driven internal process in order to translate “good intentions”into “sustainable business practices” and align these with theactivities of the John Keells Social Responsibility Foundation,the nerve centre for the group's CSR efforts.

Bearing these in mind, we commissioned a group-widesustainability assessment through the service of Det NorskeVeritas AS, assurance providers and specialists in the field ofsustainability reporting, in order to gain greater insight in towhat we do - and what we need to do better. The exercise, which

was completed after the end of the financial year, highlightedthe opportunities arising from within our businesses toachieve multiple stakeholder goals, as well as - curiously -certain relevant practices that were not captured by thepresent reporting process. Additionally, as a group, our abilityto capture data relevant to Global Reporting Initiative (GRI)G3 parameters differed among our diverse industry groups.As a result of these learnings, the following initiatives are inthe process of being introduced -

1. Incorporation of strategic priorities for environmentaland social performance into the group's annual and longterm planning processes

2. Improving capability among our industry groups topursue sustainability goals

3. Creating a robust reporting system to capture group-wide information relating to GRI-G3 parameters

Accordingly, I present to you, this year's SustainabilityReport, which briefly captures our key business impacts,stakeholder dialogue, and some of our ongoing sustainableinitiatives, with the intention of publishing our firstcomprehensive report in line with GRI-G3 guidelines uponthe successful implementation of the above initiatives.

I would like to thank my colleagues at JKH whosecommitment and dedication to continuous improvementhave enabled the group to take this large and yetessential stride.

Susantha RatnayakeChairman

REPORT PARAMETERSJohn Keells Holdings has been reporting its sustainabilitypractices on an annual basis as part of its Annual Report. Theinformation in this report covers material aspects pertainingto the financial year 2007/08 and covers relevant informationfrom the JKH Centre as well as all its subsidiaries in allindustry groups that have been detailed in the Group Profilesection of the annual report. Our most recent previous reportwas included in the annual report for the financial year2006/07. Any queries or clarifications required on this reportcould be addressed to [email protected].

Information included in this report has been gatheredthrough formal mechanisms and mainly cover issues ofmateriality whereby our industry groups have displayed theircommitment to business, environmental and social goals.While a formal monthly reporting exists for all activitiescarried out by the John Keells Social ResponsibilityFoundation, the information and data channels from theindustry groups require a more formalised system in order toenable us to report group-wide aggregate information on allof the GRI-G3 core and additional indicators. We arepresently in the process of putting in to place such formalisedsystems in accordance with strategic initiatives highlighted in

the Note from the Chairman, and have structured this reportto follow GRI-G3 guidelines as closely as possible.

As mentioned earlier, we have made a concerted effort toreduce the printed bulk of our Annual Report in making itmore functional and environmentally friendly, and haveaccordingly condensed our Sustainability Report in theprinted version. The printed form of this report contains thenote from the Chairman and key impacts of our industrygroups. The full report, provided in the CD accompanyingthe printed report, which can also be accessed on theInvestor Relations page of www.keells.com, includes detailson selected projects that highlight our environmental,economic and social performance and policies on labourpractices and human rights.

STAKEHOLDER ENGAGEMENTWith six very diverse industry groups, we as a group ofcompanies cater to the needs of a multiplicity of stakeholdersand continuously strive to anticipate and proactively addressemerging stakeholder needs. The following is a summary ofJKH's key stakeholder groups, our mode and frequency ofengagement with them, their respective interests and how we,as a group, address them.


Approach andStakeholder group Key interests frequency Our response

of stakeholderengagement

Shareholders and Profitability and Annual General • Releasing quarterly reports including a statementproviders of returns, sustained Meeting, timely from the Chairman within 3 weeks of the end ofcapital growth prospects, communications and the first three quarters of every year; releasing the

risk profile of press releases of audited annual results within 2 months of thebusinesses, ability material transactions, end of the financial yearto service road shows, Investorborrowings Relations effort, • Making the corporate website a good

regular updates of source of information, tracking patterns andcapital risk rating of usage and providing key contact points

• Ensuring that shareholders and their agents haveyear-round access to the highest governing body ofthe company via the Investor Relations division.The division also proactively caters to needs ofinstitutional investors via regular annual roadshows

Customers Quality of product/ Regular customer • Making customer feedback a focal point forservices, accessibility, feedback depending innovation and product/service developmentvalue for money, on the nature of the across the groupvalue addition, industry groupdelivery of product/ through surveys, • Adopting responsible marketing policies - eg: allservice promise one-on-ones, market group advertisements to be aired on multimedia

visits, mystery are vetted by a committee nominated by thecustomer surveys, Group Executive Committee for suitabilitymarket research of content

• Adopting international quality certification systemsand quality management systems (details givenlater)

• Enterprise resource planning for process efficiencyand continuously reviewing and enhancing thesystems

Employees Individual and Direct interactions - • Nurturing a culture of open communication,career development both formal and open-door policies and the creation of multipleprospects, informal, systematic channels for upward feedbackcompensation and performance (eg: skip level meetings, Chairman Direct)benefits, recognition, managementequal opportunity, scheme incorporating • Keeping abreast of new trends in employeework-life balance top-down, bottom-up, engagement, whereby employees are encouraged

and lateral feedback, to contribute at their best via suitable reward andopen-door policy, recognition systemsIntranet for news andcommunication, • Investing in training and development, a robustmeetings with trade performance management scheme and makingunions among others succession planning for senior executive and other

critical roles a board-level priority

• Allowing immediate access of relevant general andpersonal employment information through anEmployee Self Service (ESS) portal

• Creating working environments that are pleasant,safe and conducive for a healthy culture and workethic, in line with the group's HR vision of beingMore than just a workplace.

• We encourage dialogue at all levels and activelyengage in dialogue with employee representatives,including trade unions. We foster a workplacewhere there is freedom of association to engage inlawful trade union activity.


Sustainability report

STAKEHOLDER ENGAGEMENT

Approach andStakeholder group Key interests frequency Our response

of stakeholderengagement

• Organising sports events (inter and intraorganisational), year-end annual get-together,BU-based oubound training activities etc

• Organising CSR roadshows and encouragingemployee participation in their choice ofcommunity welfare projects

Suppliers Adequate returns, Regular vendor • Documenting and sharing planning cycle in ordersteady commitments, participation and balance vendor capacity utilisation interests andethical dealings and dialogue via a central with group's realistic delivery requirements via thetimely settlements, group sourcing Group Initiatives (central sourcing) functionprospects for growth function, periodicof business vendor reviews, • Sharing best practice learnings and knowledge

on-going interactions transferin developing smallscale suppliers, • Supporting small and medium industries byvendor education in providing them with know-how, fair prices andinvoicing etc towards ready markets through extensive engagement - eg:integrating with the the Ceylon Cold Stores vanilla and ginger farmerJKH ERP. projects and Jaykay Marketing Services’

Tambuttegama collection centre project

Governments, Sustainable revenue Focused interventions, • Participation in government, statutory andpolicy-makers, streams for the public-private sector business forums on issues relating to regulatoryregulators and broader economy, engagements, written and public policy framework that have a materialindustry creation of communications, impact on our businessesassociations employment, committee

compliances, participation • Linking matters of national interest with businesscountry- goals - eg: participation in the development ofcompetitiveness, the port of Colomboindustrycompetitiveness • Proactive and leading participation in industryand equality associations such as the Ceylon Chamber of

Commerce sub-committees as well as industryspecific associations relating to our businesses

Communities Environmental, Regular interaction • Taking on community development projects andsocietal and through core focus improving livelihoods via village adoption andcultural impact of projects of the John developing IT competencies and employmentoperations and Keells Social opportunities for village youth through extensiveexpansion projects, Responsibility engagement exercises covering pre andlivelihood generation, Foundation post-implementationprovision ofservices, aid • Maximising benefits to communities from

engagement - HIV/AIDS awareness campaigns,English language scholarship programmes,undergraduate soft-skills programmes, cataractsurgeries through the Vision Project

• Social Responsibility Foundation - working withthe industry groups in order to incorporatecommunity related aspects into theirsustainability projects


STAKEHOLDER ENGAGEMENT (Contd)

SUMMARY OF KEY IMPACTS AND RESPONSES

Areas of key impactIndustry group based on order of Current responses

materiality

Transportation Safety and health • Published and reviewed policies for zero accidents at our Port operation

• Periodic audits - HS&E Risk Management (March 2007)

• Checking and routine maintenance of equipment for safety and fit forpurpose, with equipment audits

• Continuous training on OHS

• Medical checks, medical centre availability, emergency treatment andmedical assistance

• Sound emergency response - trained team, dedicated emergencyequipment

Labour practices • Local hiring and local opportunities creation

• Ensuring group policies on minimum wages, equal opportunity, childlabour etc. are met, even for contract labour via the terms of contract

• Non-executive staff, employed in large numbers by port and bunkeringoperations, covered by collective agreements

Environment • Preventive maintenance of equipment, waste treatment and trainingpersonnel to counter and contain spillage in terminal spillagecontainment equipment and materials available

• Compliance with MARPOL regulations

• Disposing of hazardous wastes (sludge, waste oil and residues) to MPPauthorised agencies

• Ensuring industrial effluents comply with local regulatory requirements,treatment of sewage and monitoring and reporting of waste

Leisure Environment • Measures taken to preserve the bio-diversity of sensitive localities inwhich we operate hotels - Habarana, Trincomalee, Kandy and Yala inSri Lanka, as well as some of our resort locations in the Maldives

• Maintaining CEA standards of discharged effluents and recycling wastewater

• A number of our resorts practice recycling and reusing programmes forglass, plastic and paper products

• Implemented audit recommendations to reduce on power and energyconsumption

• All “Chaaya” and “Cinnamon” branded hotels have obtained ISO14001 environmental certification

• Our Destination Management business has opted for early adoption ofthe Environmental Emissions Act with regard to their fleet of vehicles

Safety, health and • All Cinnamon branded hotels and three of the five “Chaaya” resorts arehygiene certified for the food safety management system against ISO 22000

(others in progress)

• Minimum quality standards required to be maintained by our brandedhotels that cover FTO standards of health and safety practices, pestcontrol, safety and emergency preparedness etc.

• Training on HACCP in the supply chain

• Regular internal/external audits are carried out to ensure the standardsare maintained in facilities such as kitchens, rooms, public areas andbanquets




materiality

Society • Promoting responsible traveller concepts among our clients andshowcasing of local heritage and cultures as part of our brand promise

• Significant contributions to the local population in terms of hiring,procurement and indirect opportunities

• Active participation in JKH group social projects such as HIV/AIDSawareness, English language scholarship programme and villageadoption as strategic socio-economic activities

Property Safety and health • Building safety measures considering seismic activity zones, fireprotection according to BS standards, CCTV, access controls, shatterproof glasses, emergency plans

• Dedicated safety managers appointed for construction safety• Comprehensive clauses on health and safety built into contracts ofoutsourced contractors

Environment • Projects are undertaken after conducting an environmental impactassessment, where applicable

• Electricity consumption continuously monitored and savings accrued• Careful monitoring of water consumption• Systematic segregation of garbage and disposal to municipality, whereapplicable

Labour practices • Comprehensive clauses related to local labour, housing for labour, childlabour, fair wages and forced labour built in to contract of outsourcedcontractors

Consumer Product responsibility • Meat processing plant is ISO 9001:2004, HACCP certified and SLSI certifiedFoods and Retail • Responsible labelling in relation to product lifecycle

• Focus on maintaining high plant hygiene practices across all facilities• Rigorous training of staff in maintaining high food safety measures• Working closely with supply chain on maintaining required qualitystandards

Environment • Developmental programme to convert the slaughter waste into by-product like animal feed

• Sludge being generated from the ETP at the plant is tested and given tothe surrounding villages as manure

• Treatment of waste water/effluents• Energy and electricity monitoring for conservation and continuousefficiency targets

• Involvement in nurturing and promoting small farming communitiesalso includes creating awareness about healthy environmental practices,use of pesticides etc.

• Launch of the “Red Bag” towards promoting reduced use of polythene

Labour practices • Continuous health and safety monitoring and review• Systematic medical checks, emergency treatment and medical assistance• Focus on ensuring that group policies on equal opportunity, childlabour/forced labour etc. extend to proportionately large numbers ofcontract staff

Financial Services John Keells Stockbrokers is the only subsidiary in this sector. Sustainability practices of ourassociates, Nations Trust Bank PLC and Union Assurance PLC, are found in their respectiveAnnual Reports.



materiality

IT Technological • Building measures of countering risk of technological obsolescence inobsolescence and to product and service designinformation security • Building Intellectual Property (IP) by creation of new software products

• JKOA has many firsts in bringing new technologies to the country - e.g.Microsoft CRM packaging allowing for sales force automation, serviceinstructions and monitoring via short messaging services linked to in-house software programmes, field operating support system developedin-house

• Systems are being developed against ISO 27001 standard

Labour practices • Consultative sessions and engagements with employees - e.g. JKOA -Joint consultative committee

• Regular health checks• Continuous health and safety monitoring review

Environment • Greater initiatives towards Green IT concepts• Energy saving initiatives• Responsible disposal of e-waste after maximising recycling possibilities

Other Product responsibility • Three factories (that contribute to 40 per cent of production) are(Plantations related HACCP certifiedcompanies) • Focus on maintaining lowest residual pesticide levels

Labour practices • The commodity broking unit adopts the code of ethics of the ColomboTea Brokers' Association

• Transparent mechanism for financial dealing with tea suppliers andclients through uniform disclosures

• Employing a larger number of women in workforce - empowerment ofnon-urban women

Centre Economy • Entrenching sustainability values into corporate value system - robustgovernance, risk review and internal control systems

• Over the past decade 38.2 per cent of the group’s valued added wasdistributed to employees, 16.2 per cent to state coffers

• Focus on shareholder value creation while addressing the interests of allstakeholder groups

• Infrastructure investments that also provide public benefit - ports, bunkering• Creating 9,992 jobs for the local economy and significantly more inindirect opportunities

• Local sourcing and entrepreneur development through the GroupInitiatives (Central sourcing) function

• Internationalisation strategies gradually increasing foreign exchangeearnings repatriated to the country

Society • Financial, technical support to the John Keells Social ResponsibilityFoundation, a dedicated body for championing the group's socialresponsibility projects

• Providing educational supports such as English language scholarshipprogrammes, undergraduate soft skills programmes, neighbourhoodschools programme

• Involvement in core health related issues such as sponsoring cataractoperations for a targeted 2000 recipients and conducting extensive andfocused HIV/AIDS awareness campaigns

• Taking on community development projects and improving livelihoodsvia village adoption projects, creating sustainable employmentopportunities taking our BPO operations to villages, sponsoringSri Lankan arts



Small scaleoutsourcedproducers

Rural farmingcommunities

Small-scaledistributors

Shop-owners

Small-scaledistributors

SMEs

SMEs

Plantationsmallholders

Ruralsuppliers

SME-Clearingagents

Individual truckowners

Small scale outsourcedconstruction workers

SME-grademanufacturers

Leisure

Property

Consumerfoods and

retail

ITOther

(Plantationsrelated)

Transportation

Give

1. Fair prices2. Ready markets3. Regular cash-flows4. Technology transfer and know-how5. Best practice sharing6. Increasing margins and receipt of

competitive prices7. Greater livelihood options and exposure

Receive

1. Required quality2. Elimination of middle men3. Ability to pay competitive prices4. where applicable5. Market insights and feedback6. Innovative suggestions

Value added over a decade

Supporting small-scale suppliers

1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008

Retained earnings MI

Depreciation Tax

Dividends To Employees

Interest

0

2,000,000

4,000,000

6,000,000

8,000,000

10,000,000

12,000,000

14,000,000

16,000,000

ECONOMIC PERFORMANCEManagement approachThe John Keells group is committed to sustainablevalue creation, for its shareholders, varied stakeholdergroups and the geographies in which we operate.Our rapid growth in the past 5 years now requires us toincrease our investment exposure in the Asian region inorder to maintain the momentum of returns ourstakeholders have begun to expect of us, and we believe,to do this, we need to improve the competencies ofSri Lankan industry as well as its workforce.Our aspiration to create enduring value for the nationdrives us to achieve regional competencies within eachof our businesses and our people.

Value creationJKH's value addition has grown from Rs. 3.45 billion inFY 1997/98 to Rs. 16.23 billion in FY 2007/08; acompound annual growth rate of 16.7 per cent. Of thetotal value created during the decade, 15.6 per centaccrued to the state coffers while 36.8 per cent wasdistributed to employees. Total revenue of JKH duringthe period grew from Rs. 8.68 billion in FY 1997/98 toRs. 41.81 billion in FY 2007/08.

JKH and its subsidiaries, employ 9,992 persons whilecreating indirect employability and benefits for an evenlarger number. While our total numbers of staff havedeclined compared to 19,834 in FY 1997/98, this ismainly as a result of the group's strategic decision to exitits cyclical tea/rubber plantations businesses. Excludingthis sector, the group's employment creation has grownby 37.3 per cent in the last decade.

JKH is on a constant drive to be a superior value creatorfor its shareholders. Details of our performance in thisregard are included in the Investor Information sectionof the comprehensive Annual Report.

Infrastructure investmentJKH's total investments have grown from Rs. 2.22billion in 1997/98 to Rs. 23.66 billion in 2007/08, ofwhich 25 per cent is in the ports and bunkeringbusinesses, which are directly linked to thecompetitiveness of the national economy. Thesebusinesses have created 737 jobs for the nationaleconomy.

Additionally, JKH has, as part of activities undertakenby the John Keells Social Responsibility Foundation,invested in public infrastructure relating to irrigation,schools, maintenance of roads and railways, the detailsof which are included in the Social Performance sectionof this report.

Reaping economic gains of responsible sourcingThe Group Initiatives function had another successful


year with Rs. 220 million of savings derived from the groupsourcing initiative. The savings were achieved from 32categories under term contracts with preferred suppliers, ofwhich 13 categories were renewed in this financial year.The group sourcing initiative is currently in its fifth year ofbeing implemented and is in its second year of beinginstitutionalised across the group. Institutionalisation of thegroup sourcing initiative was carried out by means ofempowering user groups to manage and carry out thesourcing of various high valued products and services.The institutionalisation process has resulted in thestandardisation of all sourcing documentation such asrequests for proposals, supplier contracts for all sourcingcategories and the setting up of systems and processes forvendor management.

The cross-selling initiative focused on the reduction ofcustomer acquisition cost to the group companies whilstincreasing the overall customer retention by consolidating thegroup's existing customer database. The cross-sellinginitiative was initially launched in the Transportation andFinancial Services sectors with the formation of a group-widecross-selling team. This initiative resulted in incremental salesof Rs. 286 million during the financial year, predominantlyfrom the above two sectors.

Supporting small-scale suppliersThe nature and diversity of JKH's businesses enable thegroup to bring communities living on the periphery ofsociety into mainstream businesses. The group's engagementacross diverse value chains spans the farming community,small-scale distributors and shop owners, among others, inthe small and unorganised business sectors, as illustratedbelow. Our involvement has enabled these smaller suppliersto benefit from technological know-how, fair prices, marketaccess and sustainable livelihoods.

Sustainable livelihoods for farming communitiesSome of our best internal case study examples in the areaof supporting small-scale suppliers come from ourConsumer Foods and Retail industry group. As a keyplayer in the national consumer food industry, we areheavily dependent on an adequate and safe supply ofagricultural raw material inputs at required standards.Accordingly, over the past few years, companies in theindustry group have developed sustainable sourcinginitiatives and out-grower programmes that haveempowered and provided livelihoods to targeted farmingcommunities.

Companies in this industry group have worked withvarious farming communities over the past few years andbeen instrumental in rolling out sustainable sourcingprogrammes for ginger, vanilla, treacle, dairy, and mostrecently mango and cashew farming communities. Theseinitiatives have involved often creating new supplysystems, facilitating financial assistance for farmers,involving the relevant state or other institutions,providing technical and other supports, as well as

guaranteed prices and volumes for farmers. Thecompanies, in turn, are guaranteed of good quality andcontinuous supply.

No of No ofparticipants at participants

as at commencement31 March 2008 of initiative

Ginger 230 35Vanilla 2,300 80Treacle 14 12Dairy 1,200 900Cashew 40 10

Creating self-employment opportunitiesCommenced as an experimental move by John KeellsOffice Automation (JKOA) in 2006 in Colombo, thisself-employment initiative has since grown island-wide tocover a number of the company's key distributioncentres.

The programme was designed to enable technicallytrained JKOA employees to evolve into successfulentrepreneurs and carry out outsourced operations.Currently, 40 per cent of the active photocopier machinebase is maintained by such outsource partners, whilereceiving supports and regular monitoring of servicequality standards by JKOA to ensure compliance withrequired quality standards. The model has enabled thecompany to successfully control the growth in fixed costsand headcount in spite of growth in installed equipmentbase. The programme has grown to cover 13 serviceproviders as at 31st March 2008 compared to 2, as at31st March 2006.

Developing small scale service providersKeells Tours has partnered with 75 of its drivers in aproject that assisted them to purchase modern vehicleson a self-financed model. Having negotiated preferredrates on behalf of the 75 chauffeurs, Keells Tours alsoprovided a guaranteed minimum income each month.The programme has been very successful, with all 75drivers nearing the completion of their four-year leaseperiod, at the end of which they will take full ownershipof the vehicles, each worth over Rs. 2 million.

ENVIRONMENTAL PERFORMANCEManagement approachThe John Keells Group is aware of the environmental impactof its operations, particularly in terms of energy consumptionand related impacts, consumption of water and release ofeffluents and the generation of solid wastes. As a group, weendeavour to minimise our impact on the environment, andwhere possible, contribute positively to its conservation.Over the years, our industry groups have launched variousinitiatives to minimise the environmental footprint of their



respective operations in line with the group's valuesystem. In the future, we intend to unify these efforts,and as a first step, the group will launch “water positive”and “reduction of carbon footprint” initiatives in theyear 2008/09.

Selected environmental projects are highlighted asfollows.

Pioneering the green-building conceptIn February 2008, the John Keells Social ResponsibilityFoundation joined hands with the CentralEnvironment Authority (CEA) to establish a naturefield centre at Rumassala, in Galle. The Rs. 6.9 millionproject is being constructed on a section of the 0.8hectares of land managed by the CEA in this area.The facility, which will include an auditorium, libraryand canteen, will primarily target school children, andwill be operated by the regional staff of the CEA fromGalle. Designed by the faculty of architecture,university of Moratuwa, this building supports theconcept of “green” building in Sri Lanka and is expectedto be completed by May 2008.

The centre will conduct half-day programmes forgroups of 75-100 children to experience, observe andlearn about bio-diversity in the area, eco-friendlypractices and co-existing in harmony with theenvironment. Audio-visual tools will also be used toeducate visitors about global warming and thedetrimental effects of green house gases. NatureOdyssey, a member of the John Keells Group and aninbound tour operator specialising in nature andadventure, will also carry out quarterly programmes onbirds and butterflies; while the IUCN (The WorldConservation Union) would be involved in the study ofcoral reefs at the site.

A unique ecological initiativeOn 11th March 2008, Cinnamon Lodge, Habaranalaunched a simple but original initiative as anenvironmentally friendly gesture: selling 5 kg and 10 kgpacks of compost to its visitors and guests, as well asthose of the neighbouring Chaaya Village, Habarana.Sold at Rs. 100 and Rs. 180 respectively, the compost ismade up of the garden waste collected from the twohotels, along with farmyard manure, crop residue,dolomite and top soil, in order to improve its quality.

The idea was born because of the large amount ofgarden waste collected from the two hotels on a dailybasis: around 750kg to 1,000kg of dried leaves each day.Two large pits (approximately 20'x 20'x10' in size) werethen prepared in which to allow the leaves todecompose. The dried leaves are left in these pits for atotal period of six months. Meanwhile, separatecompost pits have been prepared for the purpose of thetwo hotels and the vegetable plots. The pits have thecapacity to produce 1,000kg of compost each month.


Preserving bio-diversityWith much focus on re-forestation and conservation attachedto the travel industry, the Leisure industry group, led by theinitiative of its subsidiary Nature Odyssey, has devised anumber of awareness and conservation programmes aimed atpreserving the rich bio-diversity of some of the locations ofour tourism operations. A few noteworthy examples aregiven below:

Creating butterfly habitats in HabaranaHabarana, in which we own and operate two hotels, is arich butterfly habitat area - a fact that has been, however,decreasingly evident with growing urbanisation. On 11thMarch 2008, the group launched a butterfly park atCinnamon Lodge, Habarana, with the help of projectconsultant, Dr. Michael van der Poorten, who hastremendous experience in habitat enrichment. Theproject also attracted the attention of the IUCN whopartnered the group in this unique effort at Habarana.

The first phase of the project was completed with morethan 300 larval host plants put in place. The initiative ofplanting more than 1000 ideal larval host plants toenrich a butterfly habitat will certainly speak for theefforts of the team, who believe that responsible travellerswill appreciate these efforts in sustaining theenvironment. The park also conducts regular awarenessevents for school children in the vicinity.

Preserving the sanctity of rural Sri LankaThe village of Hiriwadune is three kilometers away fromCinnamon Lodge, Habarana and breath-takingly scenictrails have been developed by Nature Odyssey as apopular village trek for the visiting tourists, giving theman insight into the nature and culture of thesesurroundings and people. The programme is greatlywelcomed by villagers who understand our efforts tocreate awareness among visitors in preserving the naturaland cultural sanctity of these localities. This activity hashelped many villagers economically, too, by enablingthem to participate in our excursions as suppliersand guides.

Snake awareness at YalaSince acquiring the Yala Village hotel in 2005/06, theNature Odyssey team has discovered many species ofsnakes endemic to the dry zone wilderness. The team alsodiscovered that many snakes faced serious injury withstaff, guests and surrounding villagers reacting to them infear. The group's naturalists commenced an awarenessprogram that helped hotel staff and villagers identifymany species of snakes and understand them, whichhelped to save dozens of snakes in the next two years. Onthe back of the success of these programmes, the teamwas invited by the Yala National Park warden to conducta similar awareness event for the park rangers. In the pasttwo years, 23 cat snakes, 16 cobras, 21 flying snakes,3 sand boas and countless reptiles were saved and releasedback into the wilds.

Systematic disposal of solid waste at the YalaVillage hotelIn line with continued measures to preserve the environmentand optimise the usage of its resources, the Yala Village teamdevised a method for the systematic disposal of garbage usingbio gas technology, given that over 50 per cent of the hotel'sdaily garbage consisted of digestible organic substances.

Accordingly, they instated a system consisting of 4 units of12ft. diameter and 6ft deep masonry underground chamberswith a lifting mechanism. Complete digestion of garbage in achamber takes approximately 4 months. As digestion takesplace in concealed bio gas chambers, the breeding ofmosquitoes as well as bad odours are eliminated. Bio-gasproduced as a by-product of this process is utilised to coverpart of the hotel's heating requirements (i.e. water, gas forcooking etc), whilst the residual organic digest providesfertilizer for the garden. This initiative, in line with thegroup's intensions to keep reducing our quantum of GHGemissions will be used as a benchmark for the other hotelswithin the chain.

Going green with the red bagIn April 2007, being mindful of the growing threat of plasticsand polythene to the environment, Keells Super became thepioneer supermarket chain in Sri Lanka to promote reusableshopping bags by launching an attractive “Red Bag” andencouraging customers to utilise the re-usable bag in place ofpolythene. The central purpose of the initiative was to reducethe usage of polythene bags which is heavily used within theindustry. The bag is given to the customer at cost and theKeells Super customers have responded positively bysubscribing to the initiative at most outlets. Based oncustomer feedback the chain recently introduced a biggerversion of the Red Bag which could carry more items in it.Since the launch of the initiative 125,000 red bags have beensold of which, 8600 (or 7 per cent of those sold) are in re-use.

Going green with ToshibaThe initiative was launched by John Keells OfficeAutomation (JKOA) in order to collect all empty Toshibatoner cartridges and re-cycle or dispose of the same in anenvironmentally-friendly manner. The project wasannounced to our customers through paper advertisements,direct mailers, notices and awareness campaigns, creatingawareness on the importance of using original toners, theconsequences of using fake tones and the importance ofprotecting the environment, among others.

The following benefits are awarded to customersparticipating in the programme:

No of empty Discount % or Vouchercartridges return

2 5 250/-4 7.5 500/-6 10 1,000/-



Cartridges thus collected are sent to Toshiba SingaporePte Ltd, JKOA's principals and confirmation receivedvia a certificate of environment friendly disposal fromthe re-cycling company.

Results: Of 98,290 cartridges sold in the past threeyears, 5,476 or 6 per cent have been returned,and recycled.

Leading industry practices in environmentalperformanceLanka Marine Services (LMS) has taken severalinitiatives to achieve leading industry practices in termsof quality and environmental performance. All productssupplied by LMS have much lower sulphur contentthan internationally accepted levels, because LMSimports products directly from refineries rather thanfrom traders. The company also continuously monitorsand changes the bunker/lube delivery procedures tomeet the requirements of customers and industrialstandards. LMS was one of the first bunker suppliers in2005 to comply with the Marpol Annexure VIrequirements in the region and is now working oncomplying with the Singapore Standard CP 60 fordelivery of bunkers. A six sigma programme, too isbeing considered in order to streamline LMS's processesand procedures.

SOCIAL PERFORMANCEManagement approachThe John Keells Social Responsibility Foundation(“Foundation”) is a registered voluntary social serviceorganisation through which the John Keells Group haschannelled its social responsibility activities since 2005.In 2007/08, the Foundation continued to dedicate itselfto already undertaken commitments, as well as acceptnew ones that would contribute further towardssustainable social and economic goals.

Chairman, John Keells Holdings, Susantha Ratnayake,heads the Executive Committee of the Foundation,while the three other executive directors of JKH PLCcomprise the board. The Foundation's initiatives andactivities are managed by the Foundation ManagementCommittee (MC), composed of a cross-functional teamof 18 senior executives drawn from various industrygroups within the company. Each project ischampioned by a member of the MC and implementedby a sub-committee drawn from volunteers across theGroup. The MC meets monthly and the Foundation'sCSR projects are audited annually.

The key focus areas of the Foundation are education,health, environment, community development, artsand culture and disaster relief.


CSR road showThe John Keells Group launched the CSR exhibition roadshow titled “I CAN make a difference” to create awarenessamong staff about the CSR activities undertaken by thegroup and to enlist volunteers for the different CSR projectschampioned by the Foundation. The road show waslaunched in June 2007 at the head office complex andtravelled to most business locations of the group covering3,530 visitors in 45 locations across the island. Due to theprevailing security situation, Club Oceanic and Yala Villagewere not covered. As a result of the initiative, 1,913employees volunteered to take part in the Foundation'svarious CSR activities.

Education and developmentOne of the main projects in this area is the English languagescholarship programme, commenced in 2004, in partnershipwith Gateway Language Centres, which has continued withits objective of contributing to English language teachingacross the island. The categories of scholarships offered underthe programme since its inception range from theinternationally-recognised two-year Edexcel DiplomaProgram (offered to students showing a good aptitude forEnglish), to the 4-month post-Advanced Level andpre-Ordinary Level English courses aimed at enhancing theemployability of school leavers through better Englishlanguage skills. The programme has also expanded to cater tocommunities with special needs. Accordingly, specialprogrammes have been designed and conducted for trackersof the Yala National Park through a work-related Englishcourse and the undergraduates of the university of Moratuwatransportation and logistics degree programme through acustomised English Course.

The scholarship programme has, to date, empowered thelives of over 1,400 students in nearly all parts of the island,from areas as diverse as Colombo and its suburbs, Galle,Kandy, Matara, Bandarawela, Wellawaya, Habarana,Batticaloa and Vavuniya, and succeeded in creating an earlyand abiding interest in the English language among talentedbut less fortunate children across the country.

In addition to the classes, the annual English Day was heldon 12th May 2007 at the Bishop's College auditorium inColombo. Over 250 scholars from each area in which thescholarship programmes were conducted during the past year- including Batticoloa - congregated in Colombo for thisevent where they were given an opportunity to showcase theirnewly-acquired skills by performing an item of their choice.

Another initiative is the support of the honours degree ofBachelor of Science in transport and logistics management(BSc (T&LM) Hons.) at the university of Moratuwa. Inaddition to the existing English language training andmentoring programmes implemented by the Foundation,through the group's Transportation sector, a scholarshipscheme was also launched to assist the undergraduates. Atotal of 26 scholarships will be awarded on both need-andmerit-basis. The first year students will have access to a need-

based scholarship while the second, third and fourth yearstudents will benefit from a merit-based scholarship. Therecipients of the scholarships will also be encouraged tofollow their industrial placement period at JKH; and JKHwould annually offer employment within the John KeellsGroup to at least five students who graduate from the BScT&LM degree.

“The Final Step”, a five-day series of soft skills workshops foruniversity undergraduates, was presented for the second timeby the Foundation, in collaboration with the Englishlanguage teaching unit (ELTU) of the university of Kelaniya.Designed to enhance the employability of graduates, theprogramme involved two panel discussions as well as threeinteractive workshops dealing with varied subjects such asEmployer Expectations, Team Building and LeadershipSkills, Adapting to the Corporate Environment, PersonalityDevelopment and Confidence Building, Personal Groomingand Corporate Hospitality, with each day of the workshopattracting over 250 undergraduates.

The Foundation was also instrumental in initiating thedevelopment of a comprehensive audio-visual careerguidance programme targeting pre- and post-Ordinary Levelschool children. Supported by the Ceylon Chamber ofCommerce, the programme covers over 100 career paths. It isintended for dissemination among all public schools in theisland as well as through national television.

Health and sanitationThe John Keells HIV/AIDS Awareness Programmecontinued with its second phase in 2007/08, carrying out itsdual objectives of creating awareness amongst vulnerablegroups as well as workplace education. A total number of 55sessions were carried out during 2007/08, targeting 4,200individuals. The sessions were carried out at a number ofvenues, including factories in the Biyagama Free Trade Zone,hotels in Beruwela, Hikkaduwa and the southern coast of thecountry, as well as the cultural triangle, the prison atKalutara, Triad Advertising, Standard Chartered Bank,Colombo and HSBC Global Data Processing, Rajagiriya.

John Keells Group employees were also part of the workplaceeducation programme. 23 sessions were carried out at“Cinnamon Grand” and “Trans Asia, Colombo” and“Chaaya Village, Habarana” for a total of 1,485 employees.

JKH was also the principal Sri Lankan corporate sponsor ofthe 8th ICAAP (International Congress on AIDS in Asia andthe Pacific), held in Colombo in August 2007. Over 3,500delegates from 60 countries attended the conference, whichcreated dialogue on critical issues affecting the region,including awareness and education, improved access to careand treatment and support of the affected.

Meanwhile, the John Keells Vision Project also flourishedduring this year, with 508 cataract operations beingsuccessfully carried out island wide. This brings the totalnumber of operations to 1,931 since the launch of the



initiative in 2004. Meanwhile, spectacles were given to 20deserving individuals. The target for 2008/09 is to complete700 cataract operations and donate 50 spectacles.

Economic and social uplifting

Community developmentSince the Foundation adopted the village of Halmillawe(20 km away from Habarana) in 2005, the developmentof the village has been positive and heartening. This hasbeen particularly beneficial to the womenfolk, as asavings scheme called “Diriyen Idiriyata” (signifying thatthey are moving forward with courage) was initiated inJune 2007, whereby the women save money and utilise itto supplement their family’s income. The Foundationmatches the women's savings one-for-one, in order toencourage them to be financially empowered. Thewomen now save up to Rs.200 per month under thisprogramme and have even taken a few loans from thescheme to finance their projects.

The Foundation also purchased seeds for the women andencouraged them to grow vegetables in their gardens fortheir own consumption. This has given them theopportunity to save money as well as ensure nutritiousmeals for their families. Meanwhile, a new pre-schoolwas also completed in September 2007, creating a saferenvironment for the tiny tots of the village to commencetheir eduction.

Other plans for the future include entrepreneurial skillsdevelopment programmes for the women to enhancetheir incomes. Assisting the Foundation in implementingthese projects are members of the “Wilpotha KanthaIthurum Parishramaya”, Puttalam, who have achievedoutstanding success, unaided, in similar projects in theirhometown.

The Foundation embarked on an outstanding andvisionary project in the e-village of Mahavilachchiya,close to Anuradhapura. Partnering with a newly-formedBPO company, On-Time Technologies, the Foundationlaunched a BPO operation unit that bridges thedichotomy between the city and the village. The JohnKeells Strategic Group IT division facilitated the set upof remote connectivity to JKH systems fromMahavilachchiya and On-Time's high speed internetlinks facilitate data access and transaction processing toInfoMate Ltd, a JKH Group company which is itself inthe business of providing outsourced accounting services.

A tripartite agreement between John Keells Holdings,Foundation for Advancing Rural Opportunity (FARO)and On-TimeTechnologies, was signed in May 2007 andcommercial operations between InfoMate and On-Timecommenced in the same month. Digitised images arecurrently electronically transmitted to On-Time Ltd andthe On-Time team carries out invoices processing anddocument indexing based on the images.

InfoMate Ltd provides staff of On-Time with training inthe BPO centre in Colombo. The trainees are takenthrough an induction programme as well as a structuredtraining programme in the processing of accountingtransactions. The Foundation provides the trainees withaccommodation in Colombo for the duration of thetraining. The initial group of six has been carrying outwork satisfactorily and InfoMate hopes to increase thenumber to 20 by the end of 2008/09.

Other community development initiatives include themaintenance of the Masjidul Jalmiya Road inColombo 2.

Disaster relief and philanthropic initiativesThe Foundation co-ordinated the following disaster reliefand philanthropic initiatives in 2007/08:

• Donation of emergency non-food essential items toresettled families at Vakarai, Batticoloa on 27thApril 2007.

• Opening of the 60 houses at Siribopura,Hambantota on 16th June 2007 (50 of which weresponsored through Galleon Tsunami Relief Fundand 10 by the Mayor of Champillion, France).

• Opening of the Bales pre-school in Viharagala,Hambantota on 11th November 2007, inpartnership with Bales Worldwide Limited.

• Distribution of school requirements to needychildren in the Galle district in December 2007.

• Donation of Rs.25,000 towards the AsiaFoundation's Books for Asia programme inMarch 2008.

• Sponsorship of equipment at the cost of Rs. 80,000for the Lady Ridgeway Children's Ophthalmic Unitin March 2008.

• Donation of funds to purchase books and stationeryfor deserving children in the Archdeaconry ofNuwara Eliya in March 2007.

Values and cultureSri Lanka's highly popular open-air art gallery cum art fair,“Kala Pola”, came alive on Sunday, 20th January 2008 at thelush Exhibition Grounds of the Viharamahadevi Park.Conceived and organised by the George Keyt Foundation,the Kala Pola enjoyed the unbroken patronage of the JohnKeells Group for the 15th consecutive year. Over 250 artistsand sculptors displayed their unbridled creativity to anincreasingly appreciative clientele at this event.


78%

83% 17%

91% 9%

82% 18%

78% 22%

67% 33%

72% 28%

42%

22%

Male Female

Gender-wise composition of employees at industry groups

Employee composition - gender-wise

Transportation

Leisure

Property

CF&R

Financial Services

IT

Centre & Other

Male Female

Employee composition - grade-wise

Industry group AVP & Asst Non Total Total above Managers managers Executives executives 31 March 31 March

& other 2008 2007

Transportation 12 37 41 216 414 720 632

Leisure 22 70 57 621 3,384 4,154 4,231

Property 6 9 8 26 69 118 149

Consumer Foods & Retail 14 60 93 198 2,531 2,896 2,567

Financial Services 2 3 5 14 - 24 27

IT 12 44 50 509 85 700 735

Centre & Other 26 42 38 94 1,180 1,380 1,362

Total 31 March 2008 94 265 292 1,678 7,663 9,992

Total 31 March 2007 97 311 275 1,641 7,379 9,703

58%

LABOUR PRACTICES AND HUMANRIGHTSEmploymentThe group actively engages in workforce planning toalign with its strategic objectives. Implementing theseplans have, at times, been difficult in Sri Lanka due tothe stringent labour law regime of the country, withwhich we fully comply, despite the obvious drawbacksin terms of competitiveness. The group's constant vigilin ensuring that the group has a workforce that lends toits strategic objectives continues to add value. In thisregard, the company has moved from traditional“lifelong” employment to fixed term contracts, incertain businesses, in line with the industryrequirements and norms.

Employee relationsCollective bargaining, formal and informal, is prevalentin the group and has worked well for all its stakeholders.We see a trend in formal institutionalised collectivebargaining with the intervention of recognised tradeunions, being replaced with one-on-one bargaining,such as between the employer and groups of employees.We believe that as the trust, transparency and effectivecommunication in the company increases, this wouldbe the norm, rather than the exception.

All business units have direct access to HR personnel.There is continuous dialogue, facilitated by HRpersonnel where appropriate, regarding work-relatedmatters, including productivity improvements, healthand safety maintenance, training and education relatingto work-related issues as well as pertaining to matters ofgeneral interest that could affect employees andtheir families.

There are many people management policies andpractices that contribute to building employeeengagement. These effective "Employee Engagement"initiatives enable the creation of organisatonalcitizenship and commitment which in return ensuresthe success of employee relations.

Learning and developmentThe function of Learning and Development (L&D) isto partner with the organisation towards achieving ourvision of “Building businesses that are leaders in theregion” by developing a pipeline of leaders at all levelsand building the required competence in employees, sothat they can perform their roles adequately to meetbusiness challenges.

Our competency framework captures the knowledge,skills and attitudes that have enabled our organisationto consistently grow and develop in the past, and wouldalso be essential for survival and growth in the future.Therefore, the competency framework forms the basisof all our HR initiatives, including L&D, as human



resource competencies will be the only non-replicablesustainable competitive advantage we have in today's world,where all other enablers could be replicated by others over aperiod of time.

To keep pace with the change in the business environment,L&D has become a continuous process. In addition totraining away from work, training on the job and jobrotation form part of the learning processes. Business resultsare impacted by the action people take. L&D supports thisby building people's adaptive capacity for effective action toachieve the desired results.

A few noteworthy events that showcase the group'scommitment in this area have been highlighted below.

Retail academyDuring the year, the Retail sector (of the CF&R industrygroup) formalised their ongoing training initiatives foremployees with the establishment of a Retail Academy atMoratuwa. The academy is accredited by NAITA forNVQ training and by the City & Guilds Institute of UKas an approved training institution. Over 11,000 man-days of training to non-executive staff and 2,600 man-days of training to the executive staff were provided.

Leisure group employees bag numerous awardsIn the Leisure industry group, consequent to thebranding of properties, the focus has been on continuousimprovement in the standards of services to deliver thebrand promise. Members of our hotel staff have wonnumerous awards in competitions organised by the hotelindustry in Sri Lanka, validating the effectiveness of ourtraining efforts. Hotels in the group produced the winnerand runner-up of the Marie Brizard bartendercompetition organised by the Sri Lanka Institute ofTourism and Hotel Management held in July 2007.At the Chefs' Guild competition in 2007, our resorthotel chefs bagged a total of 24 medals, including twogold and five silver. The Cinnamon Lodge produced thewinner the of E&J Gallo wine appreciation competitionheld in February 2008.

Non-binding work-study scholarship programmeThe John Keells Computer Services (JKCS) work-studyscholarship is an award of access to a private institutionoffering IT degrees granted to individual scholars, bothin terms of financial aid towards furthering theireducation as well as the chance to gain valuable workexperience in the field of software development.There are many exceptionally competent studentsdeserving of the opportunity who cannot afford a degree,and are enthusiastic recipients of work-studyscholarships. This in turn would be a good investmentfor JKCS.

JKCS initially awarded work-study scholarships inDecember 2007. The programme is run with theparticipation of the Imperial Institute of HigherEducation and in association with the University ofWales, in which required modules within the curriculumare specified by an MOU between JKCS and theinstitution. This four year work-study degree programmerequires 32 hours of work per week. Work-study studentsrecognise the challenge of balancing study time withwork, as their demanding schedule requires a fine balanceof time and energy, learning and work obligation.

This initiative is aimed at addressing the known gapbetween the supply and demand of IT graduates in SriLanka. It results in an output of quality graduates whoare immediately employable, having acquired four yearsof relevant work experience. The programme is a win-win proposition for all stakeholders: the student, theuniversity, the government, the local IT industryand JKCS.

Diversity and equal opportunityWe are an equal opportunity employer and do notdiscriminate on any indicators of diversity. The performanceoriented culture where promotions and remuneration arebased on merit alone supports this. Further, the group values,which are integrated into every aspect of the group'sprocesses and systems that touches employees and thewhistle-blowing mechanism that is in place for transgressionof JKH values, policies and grievance handling mechanismsthat are in place to ensure that the opportunity todiscriminate is minimised. The group has an anti-sexualharassment committee which is chaired by an executivemember of the board, demonstrating the group’scommitment to preserving the dignity of work for allemployees. Our commitment to diversity has been furtherstrengthened by the fact that the Employers’ Network onDisability of the Employers’ Federation of Ceylon, is alsochaired by an executive memeber of the JKH board.

Human rightsWe subscribe to the UN Global Compact. The principlesarticulated therein are but an extension of our value system.We do not discriminate and actively promote non-discrimination. We do not engage child labour, in forced orcompulsory labour. Overtime work is based on the needs ofthe market. Due importance is given on ensuring a work-lifebalance.


John Keells Holdings LMD Sri Lanka’s most respected entities - ranked firstCeylon Chamber of Commerce Best Corporate Citizen award - ranked firstSAFA award for Corporate Governance - ranked firstICASL Best Annual Report Awards - overall first runner upLMD 50 - ranked secondBusiness Today top ten - ranked fourth

Lanka Marine Services ISO 8217: 2005Delivery operations adhere to the latest Marpol RegulationsOperations and tankers inside the Port of Colombo adhere to the International Safety and Port Security(ISPS) Standards relevant to the Colombo Port

International Safety Management Certification (ISM)

Mackinnons American Express Travel

ISO 9001: 2000 Qatar Airways Top Agents Award 06/07Singapore Airlines Top Agents Award 06/07Malaysian Airlines Top Agents Award 07/08

Cinnamon Grand ISO 14000, ISO 22000, OSHAS 18001 The Lagoon -selected as 'Sri Lanka's Favourite Restaurant" by the readers ofLiving/LMD MagazinesThe Food & Beverage team won 7 Gold, 16 Silver & 7 Bronze medals at the Culinary Art 2007 organised by the Chefs Guild of Lanka Presidential Tourism Award for the Best Five Star City Hotel & the Best Restaurant - The Lagoon

Trans Asia

Cinnamon Lodge

Bentota Beach Hotel

ISO 14000, ISO 22000, OSHAS 18001

ISO 14001, ISO 22000 & OSHAS 18001

ISO 14001, ISO 22000, OSHAS 18001 & HACCP

Silver Award of the Human Resource Management Awards 2007

Good Food (One Rosette Award) from SAGA

Chaaya Village ISO 14001, ISO 22000, OSHAS 18001 PATA Gold for Eco Tourism 2007Kuoni Green Planet 20074 Star Clasification by Ceylon Tourist BoardPresidential Awards for Travel & Tourism - CSR

Leisure

Transportation

Walkers Air Services

Mack Air

DHL Keells

ISO 9001: 2000

ISO 9001: 2000

TSP -Transport Standardization ProcessFirst Choice (in progress)APSP Asia Pacific Sales Process (in progress)TAPA (A Grade)

Awarded Superbrand StatusRegional DHL Customer Service Award

Company/industry group Certifications Awards/recognition received

Chaaya Citadel ISO 14001, ISO 22000 & OSHAS 18001 Kuoni Green Planet Award 2007

Chaaya Lagoon Virgin Holidys Bronze Award 2007Neckermann Reisen Germany - Primo Award 2007

Velidhu

Keells Hotel Management Services

Chaaya Hotels & Resorts

Holiday Check - One of the 99 most favourite hotels worldwide

Gold Award of the Human Resource Management Awards 2007

PATA Gold - marketing media CD ROM category

CF & R

Keells Food Products ISO 9001 & HACCP"SLS Mark" product certification-Comminuted meat products- (SLS 1218)

Information Technology

John Keells Computer Services ISO 9001 :2000SW-CMM Level 3 certification

Silver Award at the Human Resource Management Awards 2007

John Keells Office Automation ISO 9001-2000 Toshiba, Singapore Silver Award in Network category 2007

Toshiba, Singapore Silver Award in Distributor category 2007

Toshiba, Singapore award for market share growth in projectors in Sri Lanka 2007 (B)

Toshiba, Singapore award for semester business growth in projectors for 2007 (A)

Toshiba, Singapore Bronze Award for year on year sales growthfor photocopier sales

Riso Kagaku Corporation, Japan outstanding performance awardfor RISO duplicator sales in Asia Pacific region for 2007.

InfoMate ISO 27001 (certification in progress)Accreditation as CIMA Training Partner

Plantations

Tea Smallholder Factories Ceylon Quality Certificate - One Star awarded by Sri Lanka Tea Board (for two factories)ISO 22000 & HACCP (for three factories)

John Keells Warehousing ISO 22000: 2005

Ceylon Cold Stores ISO 22000 ( certification in progress) & HACCP SLS ( for ice creams & soft drinks)

Annual Report 2007/08 - JOHN KEELLS HOLDINGS PLC

87


ANNEXUREAwards & certifications

1 2 3 4 5Financial Reports


Annual Report of the Board of Directors

The directors have pleasure in presenting the 29th annual reportof your company together with the audited financial statements ofJohn Keells Holdings PLC, and the audited consolidated financialstatements of the group for the year ended 31 March 2008.

PRINCIPAL ACTIVITIES

John Keells Holdings PLC, the group's holding company,manages a portfolio of diverse businesses, which togetherconstitute the John Keells group, and provides function basedservices to its subsidiaries and associates.

The companies within the group and their principal businessactivities are described in the group directory.

REVIEW OF BUSINESS SEGMENTS

A review of the financial and operational performance and futurebusiness developments of the group, sectors, and its businessunits are described in the management discussion and analysissection of the annual report. These reports together with theaudited financial statements reflect the state of the affairs of thecompany and the group.

Segment wise contribution to group revenue, results, assets andliabilities is provided in note 33 to the financial statements.

The group divested its investment in Unawatuna Walk Inn Ltdon 19 April 2007.

On 6 May 2007, the group acquired controlling interest inTranquility (Pte) Ltd via the purchase of a 100% equity stake byJohn Keells Maldivian Resorts (Pte) Ltd., at a purchaseconsideration of Rs. 554 mn. The results of Tranquility (Pte)Ltd., have been consolidated by the group from 6 May 2007.

John Keells Hotels PLC (KHL) successfully completed a rightsissue of ordinary shares in July 2007. Consequent to John KeellsHoldings PLC (JKH) subscribing to additional shares of thisrights issue, the group's effective holding in KHL increased to92.69%. The group's effective holding in the subsidiaries ofKHL also increased proportionately as a result of this additionalsubscription.

In August 2007, John Keells Hotels PLC increased its stake inYala Village (Pvt) Ltd. to 89.63% by subscribing to additionalshares of its rights issue. Accordingly, the group's effectiveholding in Yala Village (Pvt) Ltd. increased to 83.08%.

A major portion (74%) of the group's equity interest in KeellsBusiness Systems Ltd (KBSL) was divested on 31 March 2008.The group ceased to have the power to participate in thefinancial and operating policy decisions of KBSL with effectfrom 1 April 2008.

FINANCIAL STATEMENTS & AUDITOR’S REPORT

The complete financial statements duly signed by the directorsand the auditors report thereon for the year ended 31 March2008 are attached to this report.

REVENUE

Revenue generated by the company amounted to Rs. 604 mn(2007 - Rs. 482 mn), whilst group revenue amounted to Rs.41,805 mn (2007 - Rs. 32,855 mn). Contribution to grouprevenue from the different business segments is provided in note33 to the financial statements.

RESULTS AND APPROPRIATIONS

The profit after tax of the holding company was Rs. 3,803 mn(2007 - Rs. 2,145 mn) whilst the group profit attributable toequity holders of the parent for the year was Rs. 5,118 mn (2007- Rs. 3,535 mn).

Results of the company and of the group are given in the incomestatement.

The final dividend of Rs. 1.00 (2007 - Rs. 1.00) per share for thefinancial year 2006/07 paid on 6 July 2007 together with theinterim dividends (including a one off extraordinary dividend ofRs. 2.00) of Rs. 4.00 (2007 - Rs. 2.00) per share paid on 5December 2007, 18 February 2008 and 31 March 2008respectively, results in a total cash dividend pay out of Rs. 5.00(2007 - Rs. 3.00) per share during the year amounting to Rs.3,176 mn (2007 - Rs. 1,412 mn).

Dividend per share has been computed based on the amount ofdividends distributed to equity holders during the period. Asrequired by Section 56 (2) of the Companies Act No 7 of 2007,the Board of directors have confirmed that the company satisfiesthe solvency test in accordance with Section 57 of theCompanies Act No 7 of 2007, and have obtained a certificatefrom the auditors, prior to declaring a final dividend of Rs. 1.00per share for this year. As already announced, the final dividendwill be paid on 27 June 2008 to the shareholders of the companyas at the close of trading on 13 June 2008.

Detailed description of the results and appropriations are asfollows.



For the year ended 31st March 2008 2007In Rs. '000s

Profit earned before interestafter providing for all knownliabilities, bad and doubtfuldebts and depreciation onproperty, plant and equipment 5,898,939 4,239,719

Interest paid (1,618,255) (1,314,490)

4,280,684 2,925,229

Profit on sale of investments 55,151 58,952

Change in fair value ofinvestment property - 109,612

Profit accruing to the companyand subsidiaries 4,335,835 3,093,793

Share of results of associates 2,242,713 1,700,992

Profit before tax 6,578,548 4,794,785

Provision for taxationincluding deferred tax (1,054,742) (851,563)

Profit after tax 5,523,806 3,943,222

Profit attributable tominority shareholders (405,562) (408,548)

Amount available to thegroup's shareholders 5,118,244 3,534,674

Other adjustments (105,553) 961,686

Balance brought forward fromthe previous year 7,701,281 5,349,754

Amount available for appropriation 12,713,972 9,846,114

Transfers to general reserve - (500,000)

12,713,972 9,346,114

1st interim dividend ofRs. 1.00 per share (2007- Rs. 1.00)paid out of dividend received. (635,742) (459,442)

2nd interim dividend ofRs. 2.00 per share (2007- Rs. 1.00)paid out of dividend received. (1,271,896) (552,722)

3rd interim dividend ofRs. 1.00 per share (2007-Nil)paid out of dividend received. (635,995) -

10,170,339 8,333,950

Final dividend declared ofRs. 1.00 per share(2007-Rs. 1.00) paid outof dividend received. * (635,994) (632,669)

Balance to be carried forwardnext year 9,534,345 7,701,281

* The final dividend declared for this financial year has not beenrecognised as at the balance sheet date in compliance with SLAS12 (Revised 2005) - Events after the Balance Sheet Date.

ACCOUNTING POLICIES

The group decided on the early adoption of the Sri LankaAccounting Standard 16 (revised 2006) on Employee Benefits

and the liability recognized in the balance sheet reflects thepresent value of the defined benefit obligation at the balancesheet date using the projected unit credit method.

Details of accounting policies have been discussed in note 1 ofthe financial statements.

DONATIONS

Total donations made by the company and group during the yearamounted to Rs. 0.8 mn (2007 - Rs. 0.5 mn) and Rs. 22 mn(2007 - Rs. 5.3 mn), respectively. Of these, the donations toapproved charities were Rs. 0.1 mn (2007 - Rs. 0.03 mn) atcompany and Rs. 10 mn (2007 Rs. 2.5 mn) at group. Theamounts do not include contributions on account of corporatesocial responsibility (CSR) initiatives.

The John Keells Social Responsibility Foundation, whichoperates with funds contributed by each of the companies in thegroup, handles most of the group's CSR initiatives and activities.The Foundation manages a range of programmes that underpinits key principle of acting responsibly in all areas of business tobring about sustainable development. The CSR initiatives,including completed and on-going projects, are detailed in thesustainability report.

In quantifying the group's contribution to charities no accounthas been taken of 'in-house' costs or management time.

PROPERTY, PLANT AND EQUIPMENT

The book value of property, plant and equipment as at thebalance sheet date amounted to Rs. 289 mn (2007 - Rs. 380 mn)and Rs. 29,172 mn (2007 - Rs. 20,404 mn) for the company andgroup respectively.

Capital expenditure for the company and group amounted to Rs.20 mn (2007 - Rs. 125 mn) and Rs. 6,111 mn (2007 - Rs. 2,769mn), respectively.

Details of property, plant and equipment and their movementsare given in note 2 to the financial statements.

MARKET VALUE OF PROPERTIES

All land and buildings owned by group companies were revaluedas at 31-3-2008. Valuations were carried out by Mr. P BKalugalgedera, Chartered Valuation Surveyor, Mr R.GWijesinghe, Consultant Valuer and Assessor, Mr G.JSumanasena, Consultant Valuer and Assessor, Mr H.R de Silva,Chartered Valuation Surveyor(UK) and M/s A.Y Daniel & Son,Certified Valuers. The group share of the revaluation surplusrecorded amounted to Rs. 2,904 mn.

All properties classified as investment property were valued inaccordance with the requirements of SLAS 40 (2005). Thecarrying value of investment property of the company and groupamounted to Rs. 832 mn (2007 - Rs. 800 mn) and Rs. 2,288 mn(2007 - Rs. 2,505 mn) respectively. The directors have decidedto retain the fair values of investment property recognizedpreviously as at the balance sheet date.

Investment properties of business units, when significantlyoccupied by group companies, are classified as property, plant



and equipment in the consolidated financial statements incompliance with SLAS 40 (2005). This year, the land andbuilding owned by John Keells Properties (Pvt) Ltd wasreclassified as property, plant and equipment in the consolidatedfinancial statements as a result of a total group occupation.

Details of the revaluation of property, plant and equipment andinvestment property are provided in notes 2 and 4 to thefinancial statements.

Details of group properties as at 31March 2008 are disclosed in thereal estate portfolio section of the comprehensive annual report.

INVESTMENTS

Investments of the company and the group in subsidiaries,associates, joint ventures and other external investmentsamounted to Rs. 23,768 mn (2007 - Rs. 20,548 mn) andRs. 10,054 mn (2007 - Rs. 8,668 mn), respectively.

Detailed description of the long term investments held as at thebalance sheet date, are given in note 6 to the financial statements.

STATED CAPITAL

The Authorised Capital and Par Value concept in relation toshare capital were abolished by the Companies Act No 07 of2007. The total amounts received by the company in respect ofthe issue of shares are now referred to as stated capital. The totalstated capital of the company as at 31 March 2008 was Rs.22,464 mn (2007 - Rs. 22,246 mn).

Options in respect of 4,094,227 shares (2007 - 3,666,283 shares)were exercised during the year under the employee share optionplan, for a total consideration of Rs. 276 mn (2007 -Rs. 247 mn).

SHARE INFORMATION

The distribution schedule and composition of shareholders andthe information relating to earnings, dividend, net assets, marketvalue per share and share trading are given under the investorinformation section of the comprehensive annual report.

MAJOR SHAREHOLDERS

Details of the twenty largest shareholders of the company andthe percentages held by each of them are disclosed in the investorinformation section of the comprehensive annual report.

RESERVES

Total reserves as at 31 March 2008 (excluding share premium)for the company and group amounted to Rs. 6,343 mn (2007 -Rs. 5,716 mn) and Rs. 21,753 mn (2007 - Rs. 16,989 mn),respectively.

The movement and composition of the capital and revenuereserves are disclosed in the statement of changes in equity.

DIRECTORS

The Board of directors of the company as at 31 March 2008 andtheir brief profiles are given in the Board of directors section ofthe comprehensive annual report.

Mr. R S Captain resigned from the board with effect from6 May 2008.

In accordance with Article 84 of the Articles of Association of thecompany, Messrs G S A Gunesekera, E F G Amerasinghe and SEnderby retire by rotation and being eligible offer themselves forre-election.

The group directory details the names of persons holding officeas directors of the company and all its subsidiary and associatecompanies, as at 31 March 2008 and the names of persons whowere appointed or who ceased to hold office as directors duringthe period.

BOARD COMMITTEES

The following members serve on the Audit, Remuneration andNomination Committees of the Board;

Audit CommitteeP D Rodrigo - ChairmanE F G AmerasingheS EnderbyS S Tiruchelvam

The report of the Audit Committee is given under the Boardcommittee reports section of the comprehensive annual report.

Remuneration CommitteeE F G Amerasinghe - ChairmanM V MuhsinP D Rodrigo

The report of the Remuneration Committee is given under theBoard committee reports section of the comprehensive annualreport and the remuneration policy is given in the corporategovernance section.

Nominations CommitteeT Das - ChairmanS EnderbyM V MuhsinS C RatnayakeS S Tiruchelvam

The report of the Nominations Committee is given under theBoard committee reports section of the comprehensiveannual report.

INTERESTS REGISTER

The Company has maintained an Interests Register ascontemplated by the Companies Act No 7 of 2007 and entrieshave been made therein from 3 May 2007 being the date onwhich the Companies Act No 7 of 2007 came into operation.

In compliance with the requirements of the Companies Act No.7 of 2007, this annual report also contains particulars of anyentries made in the Interests Registers of subsidiaries which arepublic companies or private companies which have notdispensed with the requirement to maintain an Interests Registeras permitted by Section 30 of the Companies Act No 7 of 2007.



Particulars of entries in the JKH Interests Register

a) Interests in contractsThe directors have all made a general disclosure to the Boardof directors as permitted by Section 192 (2) of theCompanies Act No 7 of 2007 and no additional interestshave been disclosed by any director.

b) Relevant interests in shares and share dealings:The relevant interest of the directors in the shares of thecompany as at 31 March 2008 are as follows:

John Keells Holdings PLCS C Ratnayake - 3,227,747 (2007 - 3,057,223)A D Gunewardene - 4, 018,568 (2007 - 3,749,192)G S A Gunesekera - 1,348,374 (2007 - 1,036,523)J R F Peiris - 3,428 (2007 - 3,000)E F G Amerasinghe - 4,136 (2007 - 3,619)T Das - Nil (2007 - Nil)S Enderby - Nil (2007 - Nil)M V Muhsin - 35,163 (2007 - 30,769)P D Rodrigo - Nil (2007 - Nil)S S Tiruchelvam - Nil (2007 - Nil)R S Captain - 124,234,951 (2007 - 124,789,380)

Options available under the employee share option plan ofJohn Keells Holdings PLC.S C Ratnayake - 1,931,981 (2007 - 1,389,159)A D Gunewardene - 1,759,824 (2007 - 1,352,302)G S A Gunesekera - 1,260,611 (2007 - 1,217,511)J R F Peiris - 1,587,617 (2007 - 883,667)

Share dealings:

NAME OF NATURE OF AGGREGATE SHAREDIRECTOR DEALINGS FROM 3 MAY 2007

UPTO 31 MARCH 2008

Mr S C Ratnayake Sale of 680,000 shares of JKH

Mr A D Gunewardene Sale of 680,000 shares of JKH

Mr R S Captain Sale of 3,721,600 shares of JKH byPaints & General Industries Limited

Mr R S Captain Sale of 7,365,400 shares of JKH byCEI Plastics Limited

Mr R S Captain Sale of 2,568,000 shares of JKH byPolypak Secco Limited

Mr R S Captain Sale of 970,000 shares of JKH byPaints & General Industries (Exports) Limited

Mr R S Captain Sale of 2,000,000 shares of JKH byMr S E Captain

Mr G S A Gunesekera Sale of 250,000 shares of JKH

c) Indemnities and remunerationThe Board approved the payment to executive directors ofthe company, namely S C Ratnayake, Chairman/CEO, A DGunewardene, Deputy Chairman/President, G S AGunasekera, President and J R F Peiris, Group FinanceDirector, remuneration for the period 1 April 2007 to 31March 2008 comprising of;

• individual increments from 1 July 2007 based onindividual performance matrices;

• short term variable incentives based on individualperformance, organization performance and roleresponsibility;

• long term incentive in the nature of employee shareoptions in John Keells Holdings PLC dependant on theaforesaid performance rating, organisational rating androle responsibility,

as recommended by the Remuneration Committee havingconducted market surveys, spoken to experts and havingtaken into consideration the specific managementcomplexities associated with the John Keells group and inkeeping with the group remuneration policy.

Additional disclosures (not in Interests Register)

Given below, as additional disclosure, are the directors’shareholding in group companies:

Asian Hotels and Properties PLCS C Ratnayake - 10,000 (2007 - 10,000)M V Muhsin - 3,600 (2007 - 3,600)

Associated Motorways PLC

S C Ratnayake - 3,000 (2007 - 3,000)

Ceylon Cold Stores PLC

S C Ratnayake - 760 (2007 - 760)A D Gunewardene - 7,000 (2007 - 7,000)G S A Gunesekera - 3,812 (2007 - 3,812)J R F Peiris - 150 (2007 - 150)

John Keells Hotels PLC

S C Ratnayake - 468,984 (2007 - 255,810)A D Gunewardene - 62,480 (2007 - 62,480)G S A Gunesekera - 70,033 (2007 - 38,200)

Keells Food Products PLC

S C Ratnayake - 2,500 (2007 - 2,500)G S A Gunesekera - 1,666 (2007 - 1,666)

Nations Trust Bank PLC

A D Gunewardene - 3,281,933 (2007 - 1,118,001)G S A Gunesekera - 3,626 (2007 - 2,720)

Tea Smallholder Factories PLC

G S A Gunesekera - 1,000 (2007 - 1,000)

Trans Asia Hotels PLC

S C Ratnayake - 100 (2007 - 100)A D Gunewardene - 100 (2007 - 100)G S A Gunesekera - 100 (2007 - 100)J R F Peiris - 100 (2007 - 100)

Union Assurance PLC

A D Gunewardene - 3,746 (2007 - 2,498)

Further, warrants held at Nations Trust Bank PLC are as follows.

A D Gunewardene2,115,822 (Warrants 2010)1,057,911 (Warrants 2011)

G S A Gunesekera906 (Warrants 2010)453 (Warrants 2011)



Particulars of entries in Interests Registers of subsidiaries

Asian Hotels & Properties PLC

a) Relevant interests in shares and share dealings:The relevant interest of the directors in the shares of thecompany as at 31 March 2008 are as follows:

S C Ratnayake - 10,000 (2007 - 10,000)R J Karunarajah - 100 (2007 - 100)M T L Fernando - 5,001 (2007 - 5,001)B M Amerasekera - 70,700 (2007 - 70,700)

b) Indemnities and remunerationThe Board approved the payment to the executive director ofthe company, namely Mr R J Karunarajah of remunerationfor the period 1 April 2007 to 31 March 2008 comprising of:• an increase in the monthly salary;

• a variable element, based on the individualperformance and the performance of CinnamonGrand for the period 1 April 2006 to 31 March 2007;

• long term incentive in the nature of employee shareoptions in John Keells Holdings PLC dependant onindividual performance and the performance ofCinnamon Grand,

as recommended by the Remuneration Committee ofJohn Keells Holdings PLC, (being the holding companyof Asian Hotels & Properties PLC and as permitted bythe rules of the Colombo Stock Exchange), in keepingwith the JKH group remuneration policy.

Ceylon Cold Stores PLC


S C Ratnayake - 760 (2007 - 760)A D Gunewardene - 7,000 (2007 - 7,000)G S A Gunesekera - 3,812 (2007 - 3,812)J R F Peiris - 150 (2007 - 150)J R Gunaratne - 1,140 (2007 - 1,140)M D de Silva - 150 (2007 - 150)U P Liyanage - 300 (2007 - 300)P S Jayawardena - 300 (2007 - 300)A R Rasiah - 2,900 (2007 - 2,900)

b) Indemnities and remunerationThe Board approved payment to the executive directors ofthe company, namely Mr J R Gunaratne and Mr M D DeSilva of remuneration for the period 1 April 2007 to 31March 2008 comprising of :

• an increment from 1 July 2007 based on theindividual performance rating obtained by Mr J RGunaratne and Mr M D De Silva in terms of theperformance management system of the JohnKeells Group;

• a short term variable incentive for the period 1April 2006 to 31 March 2007 based on theindividual performance rating, organisation

performance rating and the respective career levelsof Mr J R Gunaratne and Mr M D De Silva interms of the variable pay plan of John KeellsHoldings PLC; and

• long term incentive in the nature of employeeshare options in John Keells Holdings PLCdependant on the aforesaid performance ratingand the organisational rating,

as recommended by the Remuneration Committee ofJohn Keells Holdings PLC (being the holding companyof Ceylon Cold Stores PLC) in keeping with the groupremuneration policy.

International Tourists and Hoteliers Ltd.

Relevant interests in shares and share dealings:The relevant interest of the directors in the shares of thecompany as at 31 March 2008 are as follows:

J E P Kehelpannala - 50 (2007 - 50)

John Keells PLC

Indemnities and remunerationThe Board approved the contract with and payment to Ms S TRatwatte, non executive director of fees as recommended by theRemuneration Committee of John Keells Holdings PLC (beingthe holding company of John Keells PLC and as permitted bythe rules of the Colombo Stock Exchange) commensurate withthe market and complexities of the business of the company

The Board also noted that Mr L D Ramanayake had resigned asan executive director with effect from 31 July 2007 and thatprior to such resignation the Board had authorised payment toMr L D Ramanayake of remuneration comprising of :

• an increment on his salary for July 2007 based on theindividual performance rating obtained by Mr. L DRamanayake in terms of the performance managementsystem of the John Keells Group.

• a short term variable incentive for the period 1 April2006 to 31 March 2007 based on the individualperformance rating, organisation performance rating andthe career level of Mr. L D Ramanayake in terms of thevariable pay plan of John Keells Holdings PLC; and

• long term incentive in the nature of employee shareoptions in John Keells Holdings PLC dependant on theaforesaid performance rating and the organisational rating,

as recommended by the Remuneration Committee of JohnKeells Holdings PLC in keeping with the JKH groupremuneration policy.

John Keells Hotels PLC


S C Ratnayake - 468,984 (2007 - 255,810)A D Gunewardene - 62,480 (2007 - 62,480)G S A Gunesekera - 70,033 (2007 - 38,200)



Keells Food Products PLC


S C Ratnayake - 2,500 (2007 - 2,500)

b) Indemnities and remunerationThe Board approved the contract with and payment to MrM P Jayawardene, non executive director, fees asrecommended by the Remuneration Committee of JohnKeells Holdings PLC (being the holding company of KeellsFood Products PLC and as permitted by the rules of theColombo Stock Exchange) commensurate with the marketand complexities of the business of the company.

Keells Hotel Management Services Ltd.

Indemnities and remunerationThe Board approved payment to the executive director of thecompany Mr J E P Kehelpannala of remuneration, comprising of :

• an increment from 1 July 2007 based on the individualperformance rating obtained by Mr. J E P Kehelpannalain terms of the performance management system of theJohn Keells Group.

• A short term variable incentive for the period 1 April2006 to 31 March 2007 based on the individualperformance rating, organisation performance rating andthe career level of Mr. J E P Kehelpannala in terms of thevariable pay plan of John Keells Holdings PLC; and

• long term incentive in the nature of employee shareoptions in John Keells Holdings PLC dependant on theaforesaid performance rating and the organisationalrating, as recommended by the RemunerationCommittee of John Keells Holdings PLC in keepingwith the JKH group remuneration policy.

Lanka Marine Services (Private) Ltd.

Indemnities and remunerationThe Board approved with effect from 1 August 2007

• payment of remuneration to Mr. L D Ramanayake,comprising of:

• a fixed element;

• a variable element in the form of a short termincentive which is based on the individualperformance and an organization performancewhich covers revenues and profit after tax; and

• long term incentive in the form of employee shareoptions at John Keells Holdings PLC.

as recommended by the Remuneration Committee of JohnKeells Holdings PLC in keeping with the groupremuneration policy.

Further, the Board approved with effect from 1 July 2007

• payment of remuneration to Mr. R S Fernando (whosubsequently resigned from the Board of directors witheffect from 1 August 2007) comprising of;

• an increment on his salary for July 2007 based on theindividual performance rating obtained by Mr. R SFernando in terms of the performance managementsystem of the John Keells Group.

• a short term variable incentive for the period 1 April2006 to 31 March 2007 based on the individualperformance rating, organisation performance ratingand the career level of Mr. R S Fernando in terms ofthe variable pay plan of John Keells Holdings PLC;and

• long term incentive in the nature of employee shareoptions in John Keells Holdings PLC dependant onthe aforesaid performance rating and theorganisational rating,

as recommended by the Remuneration Committee of JohnKeells Holdings PLC in keeping with the JKH groupremuneration policy.

Tea Smallholder Factories PLC


G S A Gunesekera - 1,000 (2007 - 1,000)R E Rambukwella - 2,300 (2007 - 2,300)J S Ratwatte - 1,000 (2007 - 1,000)

Trans Asia Hotels PLC

a) Relevant interests in shares and share dealings:The relevant interest of the directors in the shares of thecompany as at 31 March 2008 are as follows:S C Ratnayake - 100 (2007 - 100)A D Gunewardene - 100 (2007 - 100)G S A Gunesekera - 100 (2007 - 100)J R F Peiris - 100 (2007 - 100)D S J Pelpola - 100 (2007 - 100)N L Gooneratne - 94,301 (2007 - 94,301)R L Nanayakkara - 100 (2007 - 100)A R Gunasekara - 1,000 (2007 - Nil){Alt N Wijeyekoon 58,940 (2007 - 58,940)}

Share dealings:

NAME OF NATURE OF AGGREGATE SHAREDIRECTOR DEALINGS FROM 3 MAY 2007

UPTO 31 MARCH 2008

Mr A R Gunasekara Purchase of 1,000 shares by Mr A RGunasekera and Mrs S R Gunasekera

b) Indemnities and remunerationThe Board approved the contract with and payment to MrA R Gunasekera, non executive director, of fees asrecommended by the Remuneration Committee of JohnKeells Holdings PLC (being the holding company of Trans



Asia Hotels PLC and as permitted by the rules of theColombo Stock Exchange) commensurate with the marketand complexities of the business of the company.

Walkers Tours Ltd.

Indemnities and remunerationThe Board approved payment to the executive director of thecompany Mr V Leelananda of remuneration comprising of :

• an increment from 1 July 2007 based on individualperformance rating obtained by Mr. V. Leelananda interms of the performance management system of theJohn Keells Group.

• a short term variable incentive for the period 1 April2006 to 31 March 2007 based on individualperformance, organisation performance rating and thecareer level of Mr V Leelananda in terms of the variablepay plan of John Keells Holdings PLC; and

• long term incentive in the nature of employee shareoptions in John Keells Holdings PLC dependant on theaforesaid performance rating, organisational rating androle responsibility,

as recommended by the Remuneration Committee of JohnKeells Holdings PLC in keeping with the groupremuneration policy.

DIRECTORS' REMUNERATION

Details of the remuneration and other benefits received bythe directors are set out in note 29 of the financial statements.

EMPLOYEE SHARE OPTION PLAN

The current employee share option plan consists of the second,third and fourth plans approved by the shareholders on 29 June2001, 28 June 2004 and 13 December 2007 respectively.

Under the second plan, the company was authorized to issue upto five per cent of the issued share capital, with an annual limitof up to two per cent, of non-transferable call share options.Options granted under this plan have to be exercised within fiveyears of such grant. Under the third plan, the company wasauthorised to issue up to five per cent of the issued share capitalwithin an annual limit of up to two per cent of non-transferablecall share options and the options granted under this plan haveto be exercised within five years of such grant. The optionsoutstanding under the third award of plan 2 and all the awardsof plan 3 are valid for exercise as at 31 March 2008. On 13December 2007, the shareholders approved a fourth plan,whereby the company could issue non-transferable call shareoptions, not exceeding in aggregate 0.85% of the shares in issueof the company as at the date of granting the award.

Details of the options granted, options exercised, the grant priceand the options cancelled / outstanding as at the date of thedirectors' report have been tabulated below.

EMPLOYMENT

The group has an equal opportunity policy and these principlesare enshrined in specific selection, training, development andpromotion policies, ensuring that all decisions are based onmerit. The group practices equality of opportunity for allemployees irrespective of ethnic origin, religion, politicalopinion, gender, marital status or physical disability. Employeeownership in the company is facilitated through the employeeshare option plan.

Details of the group's human resource initiatives are detailed inthe employees' section of the sustainability report.

The number of persons employed by the company and group asat 31 March 2008 was 143 (2007 - 193) and 9,992 (2007 -9,703), respectively.

EMPLOYEE SHARE OPTION PLAN AS AT 31ST MARCH 2008

OptionDate of Shares Expiry Grant Shares ** Lapsed/ CurrentGrant Granted Date Price Adjusted Exercised Cancelled Outstanding Price **

PLAN 2

Award 2 12.11.2002 3,728,580 11.11.2007 76.00 6,810,320 6,679,392 130,928 - -

Award 3 23.01.2004 2,994,209 22.01.2009 104.25 5,129,406 2,051,778 115,605 2,962,023 70.81

6,722,789 11,939,726 8,731,170 246,533 2,962,023

PLAN 3

Award 1 29.03.2005 5,503,850 28.03.2010 136.00 9,746,823 2,247,494 387,905 7,111,424 92.72

Award 2 10.04.2006 6,645,575 09.04.2011 157.25 10,301,859 502,319 519,046 9,280,494 120.74

Award 3 28.05.2007 10,551,062 27.05.2012 146.00 10,551,062 - 448,520 10,102,542 146.00

22,700,487 30,599,744 2,749,813 1,355,471 26,494,460

PLAN 4

25.03.2008 5,405,945 24.03.2013 120.00 5,405,945 5,405,945 120.00

Total 34,829,221 47,945,415 11,480,983 1,602,004 34,862,428

** Adjusted for bonus issues and right issues



SUPPLIER POLICY

The group applies an overall policy of agreeing and clearlycommunicating terms of payment as part of the commercialagreements negotiated with suppliers, and endeavors to pay forall items properly charged in accordance with these agreed terms.As at 31 March 2008 the trade and other payables of thecompany and group amounted to Rs. 314 mn (2007 - Rs. 345mn) and Rs. 7,869 mn (2007 - Rs. 5,795 mn), respectively.

ENVIRONMENTAL PROTECTION

The group complies with the relevant environmental laws,regulations and endeavors to comply with best practicesapplicable in the country of operation. A summary of selectedgroup activities in the above area is contained in thesustainability report.

RESEARCH AND DEVELOPMENT

The group has an active approach to research and developmentand recognises the contribution that it can make to the group'soperations. Significant expenditure has taken place over the yearsand substantial efforts will continue to be made to introduce newproducts and processes and develop existing products andprocesses to improve operational efficiency.

STATUTORY PAYMENTS

The directors confirm that to the best of their knowledge, alltaxes, duties and levies payable by the company and itssubsidiaries, all contributions, levies and taxes payable on behalfof, and in respect of the employees of the company and itssubsidiaries, and all other known statutory dues as were due andpayable by the company and its subsidiaries as at the balancesheet date have been paid or, where relevant provided for, exceptas specified in note 35 to the financial statements, coveringcontingent liabilities.

RISK MANAGEMENT AND INTERNAL CONTROL

The Board confirms that there is an ongoing process foridentifying, evaluating and managing any significant risks facedby the group. Risk assessment and evaluation for each businessunit takes place as an integral part of the annual strategicplanning cycle and the principal risks and mitigating actions inplace are reviewed regularly by the Board and the AuditCommittee. The Board, through the involvement of the riskreview and control department takes steps to gain assurance onthe effectiveness of control systems in place. The AuditCommittee receives reports on the results of internal controlreviews and the head of the group risk review and controldepartment has direct access to the chairman of the AuditCommittee.

EVENTS OCCURRING AFTER THE BALANCE SHEETDATE

There have been no events subsequent to the balance sheet date,which would have any material effect on the company or on thegroup other than those disclosed in this report and in note 39 tothe financial statements.

GOING CONCERN

The directors are satisfied that the company, its subsidiaries andassociates, have adequate resources to continue in operationalexistence for the foreseeable future, to justify adopting the goingconcern basis in preparing these financial statements.

AUDITORS

Messrs Ernst & Young, Chartered Accountants, are willing tocontinue as Auditors of the company, and a resolution proposingtheir reappointment will be tabled at the annual general meeting.

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

The group works with many firms of Chartered Accountants inSri Lanka and aboard, namely, Ernst & Young, KPMG FordRhodes Thornton and Co, PricewaterhouseCoopers,Someswaran Jayawickrama and Co, Deloitte Haskins & Sellsand Luthra & Luthra. Details of audit fees are set out in note 29of the financial statements. The Auditors, do not have anyrelationship (other than that of an Auditor) with the company orany of its subsidiaries.

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

ANNUAL REPORT

The Board of directors approved the consolidated financialstatements on 22 May 2008. The appropriate number of copiesof this report will be submitted to the Colombo Stock Exchangeand to the Sri Lanka Accounting and Auditing StandardsMonitoring Board on 30 May 2008.

ANNUAL GENERAL MEETING

The annual general meeting will be held at the Institute ofChartered Accountants of Sri Lanka, 30A, MalalasekeraMawatha, Colombo 7, on Friday, 27 June 2008 at 09.30 a.m.The notice of the annual general meeting appears on page 162.

This annual report is signed for and on behalf of the Board ofdirectors.

Director Director

Keells Consultants Ltd.

Secretaries

22 May 2008


Statement of directors’ responsibility

The responsibility of the directors in relation to the financialstatements is set out in the following statement. Theresponsibility of the auditors, in relation to the financialstatements prepared in accordance with the provision of theCompanies Act No 7 of 2007, is set out in the Report ofthe Auditors.

The financial statements comprise of:

• a balance sheet, which presents a true and fair view of thestate of affairs of the company and its subsidiaries as at theend of the financial year and

• an income statement, which presents a true and fair view ofthe profit and loss of the company and its subsidiaries for thefinancial year; which comply with the requirements ofthe act.

The directors are required to ensure that, in preparing thesefinancial statements:

• the appropriate accounting polices have been selected andapplied in a consistent manner and material departures, ifany, have been disclosed and explained;

• all applicable Accounting Standards, as relevant, have beenfollowed;

• judgements and estimates have been made which arereasonable and prudent.

The directors are also required to ensure that the company hasadequate resources to continue in operation to justify applyingthe going concern basis in preparing these financial statements.

Further, the directors have a responsibility to ensure that thecompany maintains sufficient accounting records to disclose,with reasonable accuracy the financial position of the companyand of the group, and to ensure that the financial statementspresented comply with the requirements of the act.

The directors are also responsible for taking reasonable steps tosafeguard the assets of the company and of the group and in thisregard to give proper consideration to the establishment ofappropriate internal control systems with a view to preventingand detecting fraud and other irregularities.

The directors are required to prepare the financial statements andto provide the auditors with every opportunity to take whateversteps and undertake whatever inspections they may consider tobe appropriate to enable them to give their independentaudit opinion.

Further, as required by Section 56 (2) of the Companies Act No7 of 2007, the Board of directors have confirmed that thecompany, based on the information available, satisfies thesolvency test immediately after the distribution, in accordancewith Section 57 of the Companies Act no 7 of 2007, and hasobtained a certificate from the auditors, prior to declaring a finaldividend of Rs 1.00 per share for this year, to be paid on 27June 2008.

The directors are of the view that they have discharged theirresponsibilities as set out in this statement.

Compliance Report

The directors confirm that to the best of their knowledge, alltaxes, duties and levies payable by the company and itssubsidiaries, all contributions, levies and taxes payable on behalfof and in respect of the employees of the company and itssubsidiaries, and all other known statutory dues as were due andpayable by the company and its subsidiaries as at the balancesheet date have been paid, or where relevant provided for, exceptas specified in Note 35 to the financial statements coveringcontingent liabilities

By order of the Board

Keells Consultants Ltd

Secretaries

22 May 2008


Report of the Auditors

INDEPENDENT AUDITORS' REPORT

TO THE SHAREHOLDERS OF JOHN KEELLS HOLDINGS PLC

Report on the Financial Statements

We have audited the accompanying financial statements of JohnKeells Holdings PLC (“Company”), the consolidated financialstatements of the Company and its subsidiaries which comprisethe balance sheets as at 31 March 2008, and the incomestatements, statements of changes in equity and cash flowstatements for the year then ended, and a summary of significantaccounting policies and other explanatory notes.

Management's Responsibility for the Financial Statements

Management is responsible for the preparation and fairpresentation of these financial statements in accordance with SriLanka Accounting Standards. This responsibility includes:designing, implementing and maintaining internal controlrelevant to the preparation and fair presentation of financialstatements that are free from material misstatement, whether dueto fraud or error; selecting and applying appropriate accountingpolicies; and making accounting estimates that are reasonable inthe circumstances.

Scope of Audit and Basis of Opinion

Our responsibility is to express an opinion on these financialstatements based on our audit. We conducted our audit inaccordance with Sri Lanka Auditing Standards. Those standardsrequire that we plan and perform the audit to obtain reasonableassurance whether the financial statements are free from materialmisstatement.

An audit includes examining, on a test basis, evidence supportingthe amounts and disclosures in the financial statements. An auditalso includes assessing the accounting principles used andsignificant estimates made by management, as well as evaluatingthe overall financial statement presentation.

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

Opinion

In our opinion, so far as appears from our examination, theCompany maintained proper accounting records for the yearended 31 March 2008 and the financial statements give a trueand fair view of the Company's state of affairs as at 31 March2008 and its profit and cash flows for the year then ended inaccordance with Sri Lanka Accounting Standards.

In our opinion, the consolidated financial statements give a trueand fair view of the state of affairs as at 31 March 2008 and theprofit and cash flows for the year then ended, in accordance withSri Lanka Accounting Standards, of the Company and itssubsidiaries dealt with thereby, so far as concerns theshareholders of the Company.

Report on Other Legal and Regulatory Requirements

In our opinion, these financial statements also comply with therequirements of Sections 151(2) and 153(2) to 153(7) of theCompanies Act No. 07 of 2007.

22 May 2008

Colombo.

Balance sheet


Group CompanyAs at 31st March Note 2008 2007 2008 2007In Rs.'000s

ASSETSNon-current assetsProperty, plant and equipment 2 29,172,301 20,403,696 289,430 380,139Leasehold property 3 4,638,234 4,761,503 - -Investment property 4 2,288,442 2,505,321 832,158 800,000Intangible assets 5 341,253 338,761 - -Investments in subsidiaries and joint ventures 6 5,115 5,115 17,452,415 14,445,881Investments in associates 6 9,886,520 8,515,037 6,204,776 5,995,133Other investments 6 125,224 148,257 94,957 106,917Deferred tax asset 7 91,074 74,013 - -Other non-current assets 8 1,805,938 1,435,438 65,687 99,896

48,354,101 38,187,141 24,939,423 21,827,966

Current assetsInventories 9 3,985,025 3,400,576 825 847Investments held for sale 6 37,331 - 15,860 -Trade and other receivables 10 6,753,452 6,592,062 263,336 146,612Amounts due from related parties 34 17,485 1,588 227,481 824,014Short term investments 11 10,455,366 16,138,609 6,984,736 12,301,694Cash in hand and at bank 2,191,251 1,626,473 242,702 25,348

23,439,910 27,759,308 7,734,940 13,298,515Total assets 71,794,011 65,946,449 32,674,363 35,126,481

EQUITY AND LIABILITIESEquity attributable to equity holders of the parentStated capital 12 22,464,267 22,245,894 22,464,267 22,245,894Capital reserves 13 6,065,251 3,137,392 - -Revenue reserves 14 15,688,302 13,851,913 6,342,817 5,716,029

44,217,820 39,235,199 28,807,084 27,961,923Minority interest 4,774,044 3,700,313 - -

Total equity 48,991,864 42,935,512 28,807,084 27,961,923

Non-current liabilitiesNon-interest bearing borrowings 15 21,000 30,000 - -Interest bearing borrowings 16 7,809,452 6,451,133 2,595,493 2,895,493Deferred tax liabilities 17 755,366 591,867 - -Employee benefit liabilities 18 798,600 718,315 80,330 86,316Other deferred liabilities 19 7,110 3,762 - -Other non-current liabilities 352,051 334,249 - -

9,743,579 8,129,326 2,675,823 2,981,809Current liabilitiesTrade and other payables 20 7,869,039 5,795,041 313,634 344,826Amounts due to related parties 34 24,953 16,935 9,996 128,218Income tax liabilities 21 328,104 188,250 - 4,766Short term borrowings 22 375,000 2,688,311 - 500,000Current portion of interest bearing borrowings 16 1,059,752 1,374,413 300,000 700,000Bank overdrafts 3,401,720 4,818,661 567,826 2,504,939

13,058,568 14,881,611 1,191,456 4,182,749Total equity and liabilities 71,794,011 65,946,449 32,674,363 35,126,481

I certify that the financial statements comply with the requirements of the Companies Act No. 7 of 2007.

M.J.S. RajakariarGroup Financial Controller

The Board of Directors is responsible for the preparation and presentation of these financial statements.

S.C. Ratnayake J.R.F. PeirisChairman Group Finance Director

The accounting policies and notes from pages 106 to 144 form an integral part of these financial statements.22 May 2008


Income statement

Group CompanyFor the year ended 31st March Note 2008 2007 2008 2007In Rs.'000s

Revenue 23 41,805,343 32,855,021 603,665 481,637

Cost of sales (30,847,496) (23,236,174) (274,505) (233,574)

Gross profit 10,957,847 9,618,847 329,160 248,063

Dividend income 24 93,405 48,634 3,159,389 2,894,213

Other operating income 25 2,716,887 1,180,285 1,644,114 214,755

Distribution expenses (1,339,501) (1,236,332) - -

Administrative expenses (5,121,517) (4,261,210) (637,441) (588,044)

Other operating expenses 26 (1,408,182) (1,110,505) (36,872) (21,299)

Finance expenses 27 (1,618,255) (1,314,490) (583,794) (632,423)

Change in fair value of investment property 4 - 109,612 - -

Share of results of associates 2,242,713 1,700,992 - -

Profit on sale of non-current investments 28 55,151 58,952 41,236 37,039

Profit before tax 29 6,578,548 4,794,785 3,915,792 2,152,304

Tax expense 30 (1,054,742) (851,563) (112,702) (7,664)

Profit for the year 5,523,806 3,943,222 3,803,090 2,144,640

Attributable to:Equity holders of the parent 5,118,244 3,534,674

Minority interest 405,562 408,548

5,523,806 3,943,222

Rs. Rs.

Earnings per shareBasic 31 8.06 6.13Diluted 31 8.00 6.04

Dividend per share 32 5.00 3.00

Figures in brackets indicate deductions.The accounting policies and notes from pages 106 to 144 form an integral part of these financial statements.

22 May 2008


Cash flow statement

Group CompanyFor the year ended 31st March Note 2008 2007 2008 2007In Rs.'000s

CASH FLOWS FROM OPERATING ACTIVITIESProfit before working capital changes A 5,381,238 4,827,013 4,576,086 2,838,273

(Increase)/decrease in inventories 93,864 (115,785) 22 27(Increase)/decrease in receivables and prepayments 213,624 (1,469,655) 526,884 (462,443)(Increase)/decrease in other non-current assets (1,044,783) (1,179,314) 26,257 -Increase/(decrease) in creditors and accruals 1,451,893 891,505 (154,269) 237,353Cash generated from operations 6,095,836 2,953,764 4,974,980 2,613,210

Interest received 2,083,916 493,759 - -Finance expenses paid (1,618,255) (1,314,490) (583,794) (632,423)Dividend received 1,491,552 1,301,400 - -Tax paid (1,061,346) (859,074) (151,736) (46,458)Gratuity paid (77,830) (52,824) (13,704) (2,203)

Net cash flow from operating activities 6,913,873 2,522,535 4,225,746 1,932,126

CASH FLOWS FROM/(USED IN) INVESTING ACTIVITIESPurchase and construction of property, plant and equipment (2,778,167) (2,676,134) (19,723) (100,705)Addition to investment property (21,384) (238,263) (32,158) -Purchase of lease rights - (3,518,678) - -Advances paid on investment (615,358) - - -Acquisition of subsidiary B (331,410) - - -Increase in interest in subsidiaries (1,952) (5,325) (3,022,226) (1,625,115)Acquisition of associate - (718,147) - (705,457)Increase in interest in associates (858,036) (3,623,729) (209,643) (3,623,729)Proceeds from sale of property, plant and equipment 105,107 69,932 410 9,375Proceeds from sale of investment property - 511,941 - -Proceeds from sale of non-current investments C 137,706 141,209 53,032 60,079Proceeds from sale of other investments - - - 9,100Addition to intangible assets - (31,060) - -Grants received for investing activities 4,970 - - -

Net cash flow from / (used in) investing activities (4,358,524) (10,088,254) (3,230,308) (5,976,452)

CASH FLOWS FROM/(USED IN) FINANCING ACTIVITIESProceeds from issue of shares - company 218,373 13,040,621 218,373 13,040,621Proceeds from minority on issue of rights in subsidiaries 86,900 - - -Dividend paid to equity holders of parent (3,176,302) (1,412,306) (3,176,302) (1,412,306)Dividend paid to minority shareholders (205,304) (282,794) - -Proceeds from long term borrowings 1,139,239 5,900,207 - 2,995,493Repayment of long term borrowings (2,011,519) (545,366) (700,000) (164,974)Proceeds from/(repayment of ) short term borrowings (net) (2,313,311) 1,721,291 (500,000) -

Net cash flow from/(used in) financing activities (6,261,924) 18,421,653 (4,157,929) 14,458,834

NET INCREASE / (DECREASE) IN CASH AND CASH EQUIVALENTS (3,706,575) 10,855,934 (3,162,491) 10,414,508

CASH AND CASH EQUIVALENTS AT THE BEGINNING 12,951,472 2,090,487 9,822,103 (592,405)

CASH AND CASH EQUIVALENTS AT THE END 9,244,897 12,946,421 6,659,612 9,822,103

ANALYSIS OF CASH AND CASH EQUIVALENTSFavourable balancesCash in hand and at bank 2,191,251 1,626,473 242,702 25,348Short term investments 10,455,366 16,138,609 6,984,736 12,301,694Unfavourable balancesBank overdrafts (3,401,720) (4,818,661) (567,826) (2,504,939)Total cash and cash equivalents as previously reported 9,244,897 12,946,421 6,659,612 9,822,103Effect of exchange rate changes - 5,051 - -Cash and cash equivalents restated 9,244,897 12,951,472 6,659,612 9,822,103

Figures in brackets indicate deductions.The accounting policies and notes from pages 106 to 144 form an integral part of these financial statements.


Cash flow statement

Group CompanyFor the year ended 31st March 2008 2007 2008 2007In Rs.'000s

A Profit before working capital changesProfit before tax 6,578,548 4,794,785 3,915,792 2,152,304Adjustments for:Interest income (2,083,916) (493,759) -Dividend income (93,405) (48,634) - -Finance expenses 1,618,255 1,314,490 583,794 632,423Change in fair value of investment property - (109,612) - -Share of results of associates (2,242,713) (1,700,992) - -(Profit) / loss on sale of non-current investments (55,151) (58,952) (41,236) (37,039)Depreciation of property, plant and equipment 1,444,165 1,124,116 110,116 91,244Amortisation / depreciation of non-current assets 178,420 133,553 - -Amortisation of other deferred liabilities (1,622) (1,635) - -Gratuity provision and related costs 165,417 152,815 7,718 14,685Impairment losses on property, plant & equipment and investments 3,283 11,678 - -(Profit) / loss on sale of property, plant and equipment (69,346) (25,261) (94) (6,725)(Profit) / loss on sale of investment property - (201,941) - -(Profit) / loss on sale of other investments - - (4) (8,619)(Gain) / loss on foreign exchange (5,051) (1,377) - -(Gain) / loss on revaluation of property, plant and equipment (155) - - -Negative goodwill on acquisitions (56,625) (66,531) - -Unrealised profits 1,134 4,270 - -

5,381,238 4,827,013 4,576,086 2,838,273

B Acquisition of subsidiaryThe fair value of assets acquired and liabilities assumed of Tranquility (Pte) Ltd. were as follows.

Property, plant and equipment (3,310,266)Trade and other receivables (23,092)Interest bearing borrowings 1,961,985Trade and other payables 806,601Cash and cash equivalents 5,930Total net assets (558,842)Minority interest 544Negative goodwill 4,548Cash consideration paid on acquisition of subsidiary (553,750)Cash and cash equivalents acquired (5,930)Advances paid on investment 228,270Net cash outflow on acquisition of subsidiary (331,410)

C Disposal of non current investmentsThe fair value of net assets disposed of Unawatuna Walk Inn Ltd. and Keells Business Systems Ltd. were as follows.

Property, plant and equipment 55,493Deferred tax assets 1,752Other non-current assets 9,519Inventories 58,433Trade and other receivables 136,446Employee benefit liabilities (7,695)Trade and other payables (155,787)Cash and cash equivalents (4,288)Total net assets 93,873Minority interest (1,774)Unamortised goodwill 467Transferred to other investments (14,299)Profit on disposal of non current investments 55,151Cash consideration received on disposal of non current investments 133,418Cash and cash equivalents disposed 4,288Net cash inflow on disposal of non current investments 137,706


Statement of changes in equityG

ROU

PAt

trib

utab

leto

equi

tyho

lder

sofp

aren

tEx

chan

geO

ther

Oth

erSh

are

Shar

eSt

ated

Reva

luat

ion

tran

slatio

nca

pita

lreve

nue

Accu

mul

ated

Min

ority

Tota

lInRs.'000s

capi

tal

prem

ium

capi

tal

rese

rve

rese

rve

rese

rves

rese

rves

prof

itTo

tal

interest

Equi

ty

Asat

1Ap

ril20

064,

000,

070

5,20

5,20

3-

1,77

8,27

961

8,07

441

8,64

05,

030,

944

5,74

9,89

622

,801

,106

3,63

3,75

926

,434

,865

Bonusissueofshares

571,632

(571,632)

--

--

--

--

-Rightissueofshares

921,035

11,872,838

-12,793,873

12,793,873

Shareoptionsexercised

36,663

210,085

--

--

--

246,748

-246,748

Currencytranslationdifferences

--

--

137,883

--

-137,883

20,900

158,783

Netgain/(loss)recogniseddirectlyinequity

EffectofadoptingrevisedSLAS25('2004)

--

--

--

-882,181

882,181

-882,181

Revaluations/transfers

--

-(3,151)

(12,981)

16,132

--

-Acquisitions,disposalsandchangesinholding

--

--

--

(1,775)

(1,775)

(5,958)

(7,733)

Associatecompanyshareofnetassets

--

--

187,667

--

(22,533)

165,134

-165,134

Others

--

--

--

-11,562

11,562

1,977

13,539

Profitfortheyear

--

--

--

-3,534,674

3,534,674

408,548

3,943,222

Finaldividendpaid-2005/06

--

--

--

-(400,142)

(400,142)

-(400,142)

Interim

dividendpaid-2006/07

--

--

--

-(1,012,164)

(1,012,164)

-(1,012,164)

Subsidiarydividendtominorityshareholders

--

--

--

-76,119

76,119

(358,913)

(282,794)

Reservedduringtheyear

--

--

--

500,000

(500,000)

--

-

Asat

31M

arch

2007

5,52

9,40

016

,716

,494

-1,

775,

128

943,

624

418,

640

5,51

7,96

38,

333,

950

39,2

35,1

993,

700,

313

42,9

35,5

12

Shareissueexpenses

(incurredpriorto3May2007)

-(58,036)

--

--

--

(58,036)

-(58,036)

Transfers

(5,529,400)

(16,658,458)

22,187,858

--

--

--

--


--

276,409

--

--

-276,409

-276,409

Currencytranslationdifferences

--

--

6,837

--

-6,837

(5,122)

1,715

Netgain/(loss)recogniseddirectlyinequity

Surplusonrevaluation

--

-2,904,462

--

2,904,462

882,392

3,786,854

Acquisitions,disposalsandchangesinholding

--

--

--

(628)

(628)

44,006

43,378

Associatecompanyshareofnetassets

--

-58,722

(42,162)

--

(152,728)

(136,168)

-(136,168)

Profitfortheyear

5,118,244

5,118,244

405,562

5,523,806


--

--

--

-(632,669)

(632,669)

-(632,669)

Interim


--

--

--

-(2,543,633)

(2,543,633)

-(2,543,633)

Subsidiarydividendtominorityshareholders

--

--

--

-47,803

47,803

(253,107)

(205,304)

Asat

31M

arch

2008

--

22,4

64,2

674,

738,

312

908,

299

418,

640

5,51

7,96

310

,170

,339

44,2

17,8

204,

774,

044

48,9

91,8

64

DetailsofotherrevenuereserveshavebeendisclosedinNote14.

Figuresinbracketsindicatedeductions.

Theaccountingpoliciesandnotesfrompages106to144formanintegralpartofthesefinancialstatements.


Statement of changes in equity

CO

MPA

NY

Inve

stm

ent

Shar

eSh

are

Stat

edG

ener

alD

ivid

end

equa

lisat

ion

Accu

mul

ated

Tota

lInRs.'000s

capi

tal

prem

ium

capi

tal

rese

rve

rese

rve

rese

rve

prof

iteq

uity

Asat

1Ap

ril20

064,

000,

070

5,20

5,20

3-

2,10

0,00

01,

519,

322

75,0

001,

289,

373

14,1

88,9

68

Bonusissueofshares

571,632

(571,632)

--

--

--

Rightsissueofshares

921,035

11,872,838

12,793,873


36,663

210,085

--

--

-246,748

Profitfortheyear

--

--

--

2,144,640

2,144,640


--

--

--

(400,142)

(400,142)

Interim


--

--

--

(1,012,164)

(1,012,164)

Reservedduringtheyear

--

-500,000

--

(500,000)

-

Asat

31M

arch

2007

5,52

9,40

016

,716

,494

-2,

600,

000

1,51

9,32

275

,000

1,52

1,70

727

,961

,923

Shareissueexpenses(incurredpriorto3May2007)

-(58,036)

--

--

-(58,036)

Transfers

(5,529,400)

(16,658,458)

22,187,858

--

--

-


--

276,409

--

--

276,409

Profitfortheyear

--

--

--

3,803,090

3,803,090


--

--

--

(632,669)

(632,669)

Interim


--

--

--

(2,543,633)

(2,543,633)

Asat

31M

arch

2008

--

22,4

64,2

672,

600,

000

1,51

9,32

275

,000

2,14

8,49

528

,807

,084

Figuresinbracketsindicatedeductions.

Theaccountingpoliciesandnotesfrompages106to144formanintegralpartofthesefinancialstatements.


Notes to the financial statements

1. ACCOUNTING POLICIES

John Keells Holdings PLC. is a public limited liabilitycompany incorporated and domiciled in Sri Lanka andlisted on the Colombo Stock Exchange. The registeredoffice and principal place of business of the company islocated at 130, Glennie Street, Colombo 2.

Ordinary shares of the company are listed on theColombo Stock Exchange. Global depository receipts(GDRs) of John Keells Holdings PLC. are listed on theLuxembourg Stock Exchange.

In the annual report of the Board of directors and in thefinancial statements, ”the company” refers to JohnKeells Holdings PLC. as the holding company and ”thegroup” refers to the companies whose accounts havebeen consolidated therein. The financial statements forthe year ended 31 March 2008 were authorised for issueby the directors on 22 May 2008.

John Keells Holdings PLC. became the holdingcompany of the group during the financial year ended31 March 1986. The principal activities of the group arestated in the annual report of the Board of directors.

All values presented in the financial statements are in SriLanka rupees thousands (Rs.'000s) unless otherwiseindicated. The significant accounting policies are beingdiscussed below.

1.1. GENERAL POLICIES

1.1.1. Statement of compliance

The balance sheet, statement of income, statement ofchanges in equity and the cash flow statement, togetherwith the accounting policies and notes (the ”financialstatements”) have been prepared in compliance with theSri Lanka Accounting Standards (SLAS) issued by theInstitute of Chartered Accountants of Sri Lanka.

1.1.2. Basis of preparation

The financial statements, presented in Sri Lanka rupees,have been prepared on an accrual basis and under thehistorical cost convention unless stated otherwise.

1.1.3. Changes in accounting policies and adoption of newand revised Sri Lanka Accounting Standards duringthe year.

The accounting policies adopted are consistent withthose of the previous financial year except for theadoption of SLAS 16 (Revised 2006)-EmployeeBenefits.

The group has elected to early adopt SLAS 16 (Revised2006) on Employee Benefits, which requires the groupto recognize a liability when an employee has provideda service in exchange for benefits to be paid in thefuture; and recognise an expense when the entityconsumes the economic benefit arising from the serviceprovided by an employee in exchange for employeebenefits.

1.1.4. Comparative information

The accounting policies applied by the group are, unlessotherwise stated, consistent with those used in theprevious year. Previous year’s figures and phrases havebeen re-arranged, wherever necessary, to conform to thecurrent year's presentation.

1.1.5. Events after the balance sheet date

All material post balance sheet events have beenconsidered and appropriate adjustments or disclosureshave been made in the respective notes to the financialstatements.

1.2. CONSOLIDATION POLICY

1.2.1. Basis of consolidation

The consolidated financial statements include thefinancial statements of the company, its subsidiaries andother companies over which it has control.

The group's financial statements comprise of theconsolidated financial statements of the company andthe group which have been prepared in compliance withthe group's accounting policies.

All intra group balances, income and expenses andprofits and losses resulting from intra group transactionsare eliminated in full.

1.2.2. Acquisitions and divestments

Acquisitions of subsidiaries are accounted for using thepurchase method of accounting. The results ofsubsidiaries, joint ventures and associates acquired orincorporated during the year have been included fromthe date of acquisition, or incorporation while results ofsubsidiaries, joint ventures and associates disposed havebeen included up to the date of disposal.

1.2.3. Subsidiaries

Subsidiaries are those enterprises controlled by theparent. Control exists when the parent holds more than50% of the voting rights or otherwise has a controllinginterest.

Subsidiaries are consolidated from the date the parentobtains control until the date that control ceases.

Subsidiaries consolidated have been listed in thegroup directory.

The following subsidiaries have been incorporatedoutside Sri Lanka:



Name Country ofincorporation

Matheson Keells Air Services (Pvt) Limited India

Matheson Keells Enterprises (Pvt) Limited India

Auxicogent Alpha (Pvt) Limited Mauritius

Auxicogent Holdings (Pvt) Limited Mauritius

Auxicogent International (Pvt) Limited Mauritius

Auxicogent InvestmentsMauritius (Pvt) Limited MauritiusAuxicogent US Inc. USA

John Keells MaldivianResorts (Pte) Limited Republic of Maldives

Serene Holidays (Pvt) Limited. India

Travel Club (Pte) Limited Republic of Maldives

Tranquility (Pte) Limited. Republic of Maldives

Fantasea World Investments(Pte) Limited Republic of Maldives

Mack Air Services Maldives(Pte) Limited Republic of Maldives

John Keells Singapore (Pte) Limited Singapore

John Keells Business Systems(UK) Limited United Kingdom

The total profits and losses for the period, of thecompany and of its subsidiaries included inconsolidation and all assets and liabilities of thecompany and of its subsidiaries included inconsolidation are shown in the consolidated incomestatement and balance sheet respectively.

Minority interests which represents the portion of profitor loss and net assets not held by the group, are shownas a component of profit for the period in the incomestatement and as a component of equity in theconsolidated balance sheet, separately from parentshareholders' equity.

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

1.2.4. Joint venture

A joint venture is a contractual arrangement, wherebythe group and other parties undertake an economicactivity that is subject to joint control. The grouprecognises its interest in the joint venture using theproportionate consolidation method. The group's shareof each of the assets, liabilities, income and expenses ofthe joint venture are combined with the similar items,line by line, in the consolidated financial statements.

Information Systems Associates (a joint venture) hasbeen incorporated in United Arab Emirates.

1.2.5. Associates

Associates are those investments over which the grouphas significant influence and holds 20% to 50% of theequity and which are neither subsidiaries nor jointventures of the group.

Associate companies of the group which have beenaccounted for under the equity method of accountingare:

Associated Motorways PLC.Auxicogent BPO Solutions (Pvt) Ltd.Maersk Lanka (Pvt) Ltd.Nations Trust Bank PLC.South Asia Gateway Terminals (Pvt) Ltd.Union Assurance PLC.

All associates are incorporated in Sri Lanka, except forAuxicogent BPO Solutions (Pvt) Ltd. which isincorporated in India.

The investments in associates are carried in the balancesheet at cost plus post acquisition changes in the group'sshare of net assets of the associates. Goodwill relating toan associate is included in the carrying amount of theinvestment. After application of the equity method, thegroup determines whether it is necessary to recogniseany additional impairment loss with respect to thegroup's net investment in the associate. The incomestatement reflects the share of the results of operationsof the associate. Where there has been a changerecognised directly in the equity of the associate, thegroup recognises its share of any changes in thestatement of changes in equity.

When the group's share of losses in an associate equalsor exceeds the interest in the undertaking, the groupdoes not recognise further losses unless it has incurredobligations or made payments on behalf of the entity.

The group ceases to use the equity method ofaccounting on the date from which it no longer hassignificant influence in the associate.

The accounting policies of associate companies conformto those used for similar transactions of the group.Accounting policies that are specific to the business ofassociate companies are discussed in note 1.8.

1.2.6. Goodwill

Goodwill acquired in a business combination is initiallymeasured at cost being the excess of the cost of thebusiness combination over the group's interest in thenet fair value of the identifiable assets, liabilities andcontingent liabilities. Following initial recognition,goodwill is measured at cost less any accumulatedimpairment losses. Goodwill is reviewed forimpairment, annually or more frequently if events orchanges in circumstances indicate that the carryingvalue may be impaired.

For the purpose of impairment testing, goodwillacquired in a business combination is, from theacquisition date, allocated to groups of cash-generatingunits that are expected to benefit from the synergies ofthe combination.



Impairment is determined by assessing the recoverableamount of the cash-generating unit to which thegoodwill relates. Where the recoverable amount of thecash generating unit is less than the carrying amount, animpairment loss is recognised. The impairment loss isallocated first to reduce the carrying amount of anygoodwill allocated to the unit and then to the otherassets pro-rata to the carrying amount of each asset inthe unit.

Goodwill and fair value adjustments arising on theacquisition of a foreign operation are treated as assetsand liabilities of the foreign operation and translated atthe closing rate.

Where goodwill forms part of a cash-generating unitand part of the operation within that unit is disposed of,the goodwill associated with the operation disposed of isincluded in the carrying amount of the operation whendetermining the gain or loss on disposal of theoperation.

1.2.7. Financial year

As per the group policy, results of all subsidiaries, jointventures and associates with alternate year ends aretreated as follows:

Subsidiaries: 12 month period drawn up to 31 March

Joint ventures and associates: 12 month period using theassociate's or joint venture's year end

In the case of joint ventures and associates, where thereporting dates are different to group reporting dates,adjustments are made for any significant transactions orevents upto 31 March.

1.3. FOREIGN CURRENCY TRANSLATION

1.3.1. Foreign currency transactions

The consolidated financial statements are presented inSri Lanka rupees, which is the company's functional andpresentation currency.

The functional currency is the currency of the primaryeconomic environment in which the entities of thegroup operate.

All foreign exchange transactions are converted to SriLanka rupees, at the rates of exchange prevailing at thetime the transactions are effected.

Monetary assets and liabilities denominated in foreigncurrency are retranslated to Sri Lanka rupee equivalentsat the exchange rate prevailing at the balance sheet date.Non-monetary assets and liabilities are translated usingexchange rates that existed when the values weredetermined. The resulting gains and losses areaccounted for in the income statement.

1.3.2. Foreign operations

The balance sheet and income statement of overseassubsidiaries and joint ventures which are deemed to beforeign operations are translated to Sri Lanka rupees atthe rate of exchange prevailing as at the balance sheetdate and at the average annual rate of exchange for theperiod respectively.

The exchange differences arising on the translation aretaken directly to a separate component of equity. Ondisposal of a foreign entity, the deferred cumulativeamount recognised in equity relating to that particularforeign operation is recognised in the income statement.

The exchange rates applicable during the period were asfollows:

IncomeBalance statementsheet average rate

2007/08 2006/07 2007/08 2006/07Rs. Rs. Rs. Rs.

Singapore dollar 78.16 71.99 74.84 67.47

Pound sterling 215.01 214.32 220.74 199.82

US dollar 107.78 109.20 110.30 105.51

Indian rupee 2.72 2.52 2.75 2.34

UAE dhiram 29.35 29.74 30.03 28.73



1.4. TAX

1.4.1. Current tax

Provision for income tax is based on the elements ofincome and expenditure as reported in the financialstatements and is computed in accordance with theprovisions of the relevant tax statutes.

1.4.2. Deferred tax

Deferred taxation is the tax attributable to thetemporary differences that arise when taxationauthorities recognize and measure assets and liabilitieswith rules, that differ from those of the consolidatedfinancial statements.

Deferred tax is provided using the liability method ontemporary differences at the balance sheet date betweenthe tax bases of assets and liabilities and their carryingamounts for financial reporting purposes.

Deferred tax assets are recognised for all deductibletemporary differences, carry-forward of unused taxcredits and unused tax losses, to the extent that it isprobable that taxable profit will be available againstwhich the deductible temporary differences, and thecarry-forward of unused tax credits and unused taxlosses can be utilized.

The carrying amount of deferred tax assets is reviewed ateach balance sheet date and reduced to the extent that itis no longer probable that sufficient taxable profit willbe available to allow all or part of the deferred tax assetto be utilised. Unrecognised deferred tax assets arereassessed at each balance sheet date and are recognisedto the extent that it has become probable that futuretaxable profit will allow the deferred tax asset to berecovered.

Deferred tax assets and liabilities are measured at taxrates that are expected to apply to the year when theasset is realised or liability is settled, based on the taxrates and tax laws that have been enacted orsubstantively enacted as at the balance sheet date.

Deferred tax assets and deferred tax liabilities are offset,if a legally enforceable right exists to set off current taxassets against current tax liabilities and when thedeferred taxes relate to the same taxable entity and thesame taxation authority.

Deferred tax relating to items recognised directly inequity is recognised in equity.

1.5. VALUATION OF ASSETS AND THEIR BASES OFMEASUREMENT

1.5.1. Property, plant and equipment

Property, plant and equipment is stated at cost or fairvalue less accumulated depreciation and anyaccumulated impairment in value.

The carrying values of property plant and equipmentare reviewed for impairment when events or changes in

circumstances indicate that the carrying value may notbe recoverable.

All items of property, plant and equipment are initiallyrecorded at cost. Where items of property, plant andequipment are subsequently revalued, the entire class ofsuch assets are revalued at fair value. The group hasadopted a policy of revaluing assets every 5 years, exceptfor properties held for rental and occupied mainly bygroup companies, which are revalued every 3 years.

When an asset is revalued, any increase in the carryingamount is credited directly to a revaluation reserve,except to the extent that it reverses a revaluationdecrease of the same asset previously recognised in theincome statement, in which case the increase isrecognised in the income statement. Any revaluationdeficit that offsets a previous surplus in the same asset isdirectly offset against the surplus in the revaluationreserve and any excess recognised as an expense. Upondisposal, any revaluation reserve relating to the asset soldis transferred to retained earnings.

Items of property, plant and equipment arederecognized upon replacement, disposal or when nofuture economic benefits are expected from its use. Anygain or loss arising on derecognition of the asset isincluded in the income statement in the year the asset isderecognised.

a) Depreciation

Provision for depreciation is calculated by using astraight line method on the cost or valuation of allproperty, plant and equipment, other than freeholdland, in order to write off such amounts over theestimated useful economic life of such assets.

The estimated useful life of assets are as follows:

Assets Years

Buildings (other than hotels) 50Hotel buildings 60 - 75Plant and machinery 10 - 20Equipment 3 - 8Furniture and fittings 8 - 15Motor vehicles 5 - 10

The useful life and residual value of assets are reviewed,and adjusted if required, at the end of each financialyear.

b) Finance leases

Property, plant and equipment on finance leases, whicheffectively transfer to the group substantially all the riskand benefits incidental to ownership of the leased items,are capitalised and disclosed as finance leases at theircash price and depreciated over the period the group isexpected to benefit from the use of the leased assets.

The corresponding principal amount payable to thelessor is shown as a liability. Lease payments areapportioned between the finance charges and reduction



of the lease liability so as to achieve a constant rate ofinterest on the outstanding balance of the liability. Theinterest payable over the period of the lease is transferredto an interest in suspense account. The interest element ofthe rental obligations pertaining to each financial year ischarged to the income statement over the period of lease.

The cost of improvements to leasehold property iscapitalised, disclosed as leasehold improvements, anddepreciated over the unexpired period of the lease or theestimated useful life of the improvements, whicheveris shorter.

c) Operating leases

Leases, where the lessor effectively retains substantiallyall of the risks and benefits of ownership over the termof the lease, are classified as operating leases.

Lease payments are recognised as an expense in theincome statement over the term of the lease.

1.5.2. Leasehold property

Prepaid lease rentals paid to acquire land use rights areamortised over the lease term in accordance with thepattern of benefits provided. Leasehold property aretested for impairment annually and is written downwhere applicable. The impairment loss if any, isrecognised in the income statement.

1.5.3. Investment property

Properties held to earn rental income, and propertiesheld for capital appreciation have been classified asinvestment property.

Investment properties are initially recognised at cost.Subsequent to initial recognition the investmentproperties are stated at fair values, which reflect marketconditions at the balance sheet date.

Gains or losses arising from changes in fair value areincluded in the income statement in the year in whichthey arise.

Investment properties are derecognised when disposed,or permanently withdrawn from use because no futureeconomic benefits are expected. Any gains or losses onretirement or disposal are recognised in the incomestatement in the year of retirement or disposal.

Transfers are made to investment property, when thereis a change in use, evidenced by ending of owner-occupation, commencement of an operating lease toanother party or ending of construction ordevelopment. Transfers are made from investmentproperty, when there is a change in use, evidenced bycommencement of owner-occupation orcommencement of development with a view to sale.

Where group companies occupy a significant portion ofthe investment property of a subsidiary, such investmentproperties are treated as property, plant and equipment

in the consolidated financial statements, and accountedfor as per SLAS 18 (revised) Property, Plant andEquipment.

1.5.4. Intangible assets

An intangible asset is initially recognised at cost, if it isprobable that future economic benefit will flow to theenterprise, and the cost of the asset can be measuredreliably.

Following initial recognition, intangible assets arecarried at cost less any accumulated amortisation andany accumulated impairment losses.

Intangible assets with finite lives are amortised over theuseful economic life and assessed for impairmentwhenever there is an indication that the intangible assetmay be impaired. The amortisation period and theamortisation method for an intangible asset with a finiteuseful life is reviewed at least at each financial year-end.

Intangible assets with indefinite useful lives are testedfor impairment annually either individually or at thecash-generating unit level.

1.5.5. Investments

All quoted and unquoted securities, which are held asnon-current investments, are valued at cost. The cost ofthe investment is the cost of acquisition inclusive ofbrokerage and costs of transaction. The carryingamounts of long term investments are reduced torecognise a decline which is considered other thantemporary, in the value of investments, determined onan individual investment basis.

In the company's financial statements, investments insubsidiaries, joint ventures and associate companieshave been accounted for at cost, net of any impairmentlosses which are charged to the income statement.Income from these investments are recognised only tothe extent of dividends received.

1.5.6. Impairment of assets

The group assesses at each reporting date whether there isan indication that an asset may be impaired. If any suchindication exists, or when annual impairment testing foran asset is required, the group makes an estimate of theasset's recoverable amount. An asset's recoverable amountis the higher of an asset's or cash generating unit's fairvalue less costs to sell and its value in use and isdetermined for an individual asset, unless the asset doesnot generate cash inflows that are largely independent ofthose from other assets or groups of assets. Where thecarrying amount of an asset exceeds its recoverableamount, the asset is considered impaired and is writtendown to its recoverable amount. In assessing value in use,the estimated future cash flows are discounted to theirpresent value using a pre-tax discount rate that reflectscurrent market assessments of the time value of moneyand the risks specific to the asset.



Impairment losses are recognised in the incomestatement except for impairment losses in respect ofproperty, plant and equipment which are recognisedagainst the revaluation reserve to the extent that itreverses a previous revaluation surplus.

An assessment is made at each reporting date as towhether there is any indication that previouslyrecognized impairment losses may no longer exist ormay have decreased. Previously recognised impairmentlosses other than in respect of goodwill, are reversed onlyif there has been an increase in the recoverable amountof the asset. Such increase is recognised to the extent ofthe carrying amount had no impairment losses beenrecognised previously.

1.5.7. Other non-current assets

Bottle depreciation of Ceylon Cold Stores PLC.

Returnable glass bottles are reflected under non-currentassets at cost less depreciation. Depreciation is providedover its useful life of 5 years up to the net realisablevalue. The net realisable value of returnable glass bottlesequals to the deposits received by the company or costwhichever is lower.

The written down value of bottle breakages during thefinancial year is written off to the income statement.

Upon termination of dealership, the weighted averagecost of bottles not returned less the deposit is written offto the income statement.

1.5.8. Inventories

Inventories are valued at the lower of cost and netrealizable value. Net realisable value is the estimatedselling price less estimated costs of completion and theestimated costs necessary to make the sale.

The costs incurred in bringing inventories to its presentlocation and condition, are accounted for as follows:

Raw materials - On a weighted average basis

Finished goods and - At the cost of direct materialswork-in-progress direct labour and an appropriate

proportion of fixed productionoverheads based on normaloperating capacity;

Produce inventories - At since realised price;

Other inventories - At actual cost.

1.5.9. Trade and other receivables

Trade and other receivables are stated at the amountsthey are estimated to realise, net of provisions for badand doubtful receivables.

A provision for doubtful debts is made when the debtexceeds 180 days, and collection of the full amount is nolonger probable. Bad debts are written off whenidentified.

1.5.10. Short-term investments

Treasury bills and other interest bearing securities heldfor resale in the near future to benefit from short-termmarket movements are accounted for at cost plus therelevant proportion of the discounts or premiums.

1.5.11. Cash and cash equivalents

Cash and cash equivalents in the cash flow statementcomprise cash at bank and in hand and short termdeposits with a maturity of 3 months or less, net ofoutstanding bank overdrafts.

1.6. LIABILITIES AND PROVISIONS

1.6.1. Defined benefit plan - gratuity

The liability recognized in the balance sheet is thepresent value of the defined benefit obligation at thebalance sheet date using the projected unit creditmethod.

1.6.2. Defined contribution plan - Employees' ProvidentFund and Employees' Trust Fund

Employees are eligible for Employees' Provident Fundcontributions and Employees' Trust Fund contributionsin line with respective statutes and regulations. Thecompanies contribute the defined percentages of grossemoluments of employees to an approved Employees'Provident Fund and to the Employees' Trust Fundrespectively, which are externally funded.

1.6.3. Grants and subsidies

Grants and subsidies are recognised at their fair value. Agrant received to compensate an expense is credited tothe income statement on a systematic basis to match therelated costs. Grants and subsidies related to assets aredeferred and credited to the income statement over theuseful life of the asset.

1.6.4. Provisions, contingent assets and contingent liabilities

Provisions are made for all obligations existing as at thebalance sheet date when it is probable that such anobligation will result in an outflow of resources and areliable estimate can be made of the quantum of theoutflow.

All contingent liabilities are disclosed as a note to thefinancial statements unless the outflow of resourcesis remote.

Contingent assets are disclosed, where inflow ofeconomic benefit is probable.

1.7. INCOME STATEMENT

1.7.1. Revenue recognition

Revenue is recognised to the extent that it is probablethat the economic benefits will flow to the group, andthe revenue and associated costs incurred or to beincurred can be reliably measured. Revenue is measuredat the fair value of the consideration received or



receivable, net of trade discounts and value added taxes,after eliminating sales within the group.

The following specific criteria are used for recognitionof revenue:

a) Sale of goods

Revenue from the sale of goods is recognised when thesignificant risk and rewards of ownership of the goodshave passed to the buyer with the group retainingneither a continuing managerial involvement to thedegree usually associated with ownership, nor aneffective control over the goods sold.

b) Rendering of services

Revenue from rendering of services is recognised in theaccounting period in which the services are rendered orperformed.

c) Turnover based taxes

Turnover based taxes include value added tax, economicservice charge, turnover tax and tourism developmentlevy. Companies in the group pay such taxes inaccordance with the respective statutes.

1.7.2. Dividend

Dividend income is recognised on a cash basis.

1.7.3. Rental income

Rental income is recognised on an accrual basis over theterm of the lease.

1.7.4. Gains and losses

Net gains and losses of a revenue nature arising from thedisposal of property, plant and equipment and othernon-current assets, including investments, areaccounted for in the income statement, after deductingfrom the proceeds on disposal, the carrying amount ofsuch assets and the related selling expenses.

Gains and losses arising from activities incidental to themain revenue generating activities and those arisingfrom a group of similar transactions which are notmaterial, are aggregated, reported and presented on anet basis.

Any losses arising from guaranteed rentals are accountedfor in the year of incurring the same. A provision isrecognised if the best estimate indicates a loss.

1.7.5. Other income

Other income is recognised on an accrual basis.

1.7.6. Expenditure recognition

Expenses are recognised in the income statement on thebasis of a direct association between the cost incurredand the earning of specific items of income. Allexpenditure incurred in the running of the business andin maintaining the property, plant and equipment in a

state of efficiency has been charged to the incomestatement.

For the purpose of presentation of the incomestatement, the “function of expenses” method has beenadopted, on the basis that it presents fairly the elementsof the company and group's performance.

1.7.7. Borrowing costs

Borrowing costs are recognised as an expense in theperiod in which they are incurred, unless they areincurred in respect of qualifying assets in which case it iscapitalised.

1.8. SIGNIFICANT ACCOUNTING POLICIES THATARE SPECIFIC TO THE BUSINESS OFASSOCIATE COMPANIES

1.8.1. Union Assurance PLC

a) General Insurance Business - Gross Written Premium

Gross written premium is generally recognised aswritten upon inception of the policy. Upon inception ofthe contract, premiums are recorded as written and areearned primarily on a pro-rata basis over the term of therelated policy coverage. However, for those contracts forwhich the period of risk differs significantly from thecontract period, premiums are earned over the period ofrisk in proportion to the amount of insuranceprotection provided. Earned premiums are computedon the 24th basis except for marine business, which iscomputed on a 60-40 basis.

b) Life Insurance Business - Gross Written Premium

Premiums from traditional life insurance contracts,including participating contracts and non participatingcontracts, are recognised as revenue when cash isreceived from the policyholder.

1.8.2. Nations Trust Bank PLC

Revenue Recognition

(a) Interest Income from Customer Advances

In terms of the provisions of the Sri Lanka AccountingStandard No. 23 on Revenue Recognition andDisclosures in the Financial Statements of banks and theguidelines issued by the Central Bank of Sri Lanka,interest receivable is recognised on an accrual basis.Interest ceases to be taken into revenue when therecovery of interest or principal is in arrears for overthree (3) months and interest accrued until suchadvances being classified as nonperforming are alsoeliminated from interest income and transferred tointerest in suspense. The interest income on non-performing advances is recognised on a cash basis.

(b) Income on Discounting of Bills of Exchange

Income from discounting of Bills of Exchange isrecognized proportionately over the period of theinstrument.



(c) Income from Government and Other DiscountedSecurities

Discounts on Treasury Bills, Treasury Bonds andCommercial Papers are recognised on a straight-linebasis over the period to maturity as income. Premiumon Treasury Bonds are accounted for on a similar basis.The discount and the premium are dealt within theIncome Statement.

Income from all other interest-bearing investments isrecognised as revenue on an accrual basis.

(d) Fees and Commission Income

Fees and commission income comprise mainly of feesreceivable from customers for guarantees, factoring,credit cards and other services provided by the Banktogether with foreign and domestic tariff. Such incomeis recognised as revenue as the services are provided.

(e) Profit or Loss on Sale of Securities

Profit or loss arising from the sale of marketablesecurities is accounted for on a cash basis and iscategorised under other income.

(f) Lease Income

The Bank follows the finance method of accounting forlease income.

1.8.3. South Asia Gateway Terminals (Pvt) Ltd.

Revenue Recognition

Stevedoring revenue is recognised on the berthing timeof the vessel. Storage revenue is recognised on the issueof delivery advice.

1.9. EMPLOYEE SHARE OPTION PLAN

On 29 June 2001, shareholders approved a second plan,whereby the company could issue annually,non-transferable call share options, not exceeding inaggregate 2% of the total issued capital of the companyas at the date of granting every award under this plan, toa total of 5% of the total issued share capital as at thedate of the last award. Approvals of the CSE and theSEC have been obtained for this plan. As at 31 March2008, the total number of options granted under thisplan, after allowing for bonus issues and rights issues,was 11,939,726 of which 8,731,170 have beenexercised, 246,533 have lapsed and 2,962,023 remainedunexercised.

On 28 June 2004, shareholders approved a third plan,whereby the company could issue annually non-transferable call share options, not exceeding inaggregate 2% of the total issued capital of the companyas at the date of granting every award under this plan, toa total of 5% of the total issued share capital as at thedate of the last award. Approvals of the CSE and SEChave been obtained for this plan. As at 31 March 2008,the total number of options granted under this plan,after allowing for bonus issues and rights issues, was

30,599,744 of which 2,749,813 have been exercised,1,355,471 have lapsed and 26,494,460 remainunexercised.

On 13 December 2007, shareholders approved a fourthplan, whereby the company could issue non-transferablecall share options, not exceeding in aggregate 0.85% ofthe shares in issue of the company as at the date ofgranting the award. Approvals of the CSE and SEC havebeen obtained for this plan. As at 31 March 2008, thetotal number of options granted under this plan, was5,405,945. All of the options under this award remainunexercised.

As at 31 March 2008, the total number of optionsgranted under the second, third and fourth plans, afterallowing for bonus issues and rights issues, was47,945,415. Of this total, 11,480,983 options havebeen exercised, 1,602,004 options have lapsed and34,862,428 remain unexercised.

Of the 34,862,428 options unexercised and outstandingas at 31 March 2008 (2007 - 23,874,575), 2,962,023are exercisable before 22 January 2009, 7,111,424 areexercisable before 28 March 2010, 9,280,494 areexercisable before 9 April 2011, 10,102,542 areexercisable before 27 May 2012 and 5,405,945 areexercisable before 24 March 2013.

1.10. SEGMENT INFORMATION

1.10.1. Reporting segments

The group's internal organisation and management isstructured based on individual products and serviceswhich are similar in nature and process and where therisk and return are similar. The primary segmentsrepresent this business structure.

The secondary segments are determined based on thegroup's geographical spread of operations. Thegeographical analysis of turnover and profits are basedon location of customers and assets respectively.

The activities of each of the reported business segmentsof the group are detailed in the group directory.

1.10.2. Segment information

Segment information has been prepared in conformitywith the accounting policies adopted for preparing andpresenting the consolidated financial statements ofthe group.



2 PROPERTY, PLANT AND EQUIPMENT2.1 Group

Land Buildings on Plant and Equipment, Motor Others Capital Total Totaland leasehold machinery furniture vehicles work in 2008 2007

buildings land and fittings progressIn Rs. '000s

Cost or valuationAt the beginning of the year 10,793,808 5,276,300 3,893,818 3,703,079 477,267 2,453,071 187,453 26,784,796 24,717,639Additions 72,887 221,692 585,173 408,755 61,734 189,617 1,260,978 2,800,836 2,768,945Acquisition of subsidiary - 2,744,381 217,930 291,066 35,292 21,597 - 3,310,266 -Disposals (2,789) (421,172) (180,565) (158,332) (45,497) (57,123) (1,158) (866,636) (228,757)Adjustment due to sale of

non-current investments (30,962) - - (28,436) (889) - (16,895) (77,182) (286,435)Revaluations 3,170,858 9,367 (293,003) (20,609) - (4,113) - 2,862,500 -Impairment (2,380) - - 1,106 - (275) (237) (1,786) (13,918)Reclassified as IP 238,263 - - - - - - 238,263 -Transfers 889,251 (92,163) 87,231 296,678 (10,256) 17,321 (1,200,438) (12,376) (172,678)At the end of the year 15,128,936 7,738,405 4,310,584 4,493,307 517,651 2,620,095 229,703 35,038,681 26,784,796

Accumulated depreciationAt the beginning of the year (158,082) (877,446) (2,029,777) (1,727,143) (245,642) (1,343,010) - (6,381,100) (5,573,915)Charge for the year (106,429) (262,066) (245,099) (477,195) (47,114) (306,262) - (1,444,165) (1,124,116)Disposals 1,675 421,041 171,922 150,765 34,459 51,014 - 830,876 184,086Adjustment due to sale of

non-current investments 61 - - 20,739 889 - - 21,689 130,717Revaluations 373,031 361,825 349,640 10,736 - 3,497 - 1,098,729 -Impairment 897 - - (2,394) - - - (1,497) 2,394Transfers (151,377) 29,717 51,108 63,225 (242) 16,657 - 9,088 (266)At the end of the year (40,224) (326,929) (1,702,206) (1,961,267) (257,650) (1,578,104) - (5,866,380) (6,381,100)

Carrying valueAs at 31 March 2008 15,088,712 7,411,476 2,608,378 2,532,040 260,001 1,041,991 229,703 29,172,301As at 31 March 2007 10,635,726 4,398,854 1,864,041 1,975,936 231,625 1,110,061 187,453 20,403,696

2.2 Company

Plant and Equipment, Motor Total Totalmachinery furniture vehicles 2008 2007

and fittingsIn Rs. '000s

CostAt the beginning of the year 30,678 581,778 29,114 641,570 530,149Additions 1,117 18,606 - 19,723 124,671Disposals - (990) - (990) (13,250)At the end of the year 31,795 599,394 29,114 660,303 641,570

Accumulated depreciationAt the beginning of the year (21,239) (230,790) (9,402) (261,431) (180,787)Charge for the year (1,230) (107,473) (1,413) (110,116) (91,244)Disposals - 674 - 674 10,600At the end of the year (22,469) (337,589) (10,815) (370,873) (261,431)

Carrying valueAs at 31 March 2008 9,326 261,805 18,299 289,430As at 31 March 2007 9,438 350,989 19,712 380,139



Group CompanyAs at 31st March 2008 2007 2008 2007In Rs. '000s

2.3 Land and buildingAt cost 3,721,230 6,131,501 - -At valuation 18,778,958 8,903,079 - -Net book value 22,500,188 15,034,580 - -

2.4 Carrying valueAt cost 16,234,301 10,551,261 289,430 380,139At valuation 12,909,282 9,827,672 - -On finance lease 28,718 24,763 - -

29,172,301 20,403,696 289,430 380,139

Details of group land, building and other properties stated at valuation are indicated below

Method of Effective PropertyProperty valuation date of valuation valuer

Leasehold land, buildings and other properties of Land and building method 20 October 2005 Mr. R.G Wijesinghe,Yala Village (Pvt) Ltd. Consultant Valuer and Assessor

Land and buildings of Open market value method 31 March 2006 Mr. G.J Sumanasena,John Keells PLC. Incorporated ValuerJohn Keells Holdings PLC.Whittall Boustead Ltd.

Mattakuliya property of Keells Realtors Ltd. Open market value method 31 March 2006 Mr. G.J Sumanasena,Incorporated Valuer

Land and buildings of Contractors test method 31 March 2006 Mr. G.J Sumanasena,Mackinnons and Keells Financial Services Ltd. Incorporated Valuer

Leasehold land, buildings and other properties of Open market value method 04 May 2007 Mr. Haleen GouseTranquility (Pte) Ltd Incorporated Valuer

Land and buildings of Open market value method 31 March 2008 Mr. P.B Kalugalgedara,Ceylon Cold Stores PLC Chartered Valuation Surveyor.Keells Food Products PLCWhittall Boustead Ltd.

Land of Resort Hotels Ltd Land and building method 31 March 2008 Mr. R.G Wijesinghe,Consultant Valuer and Assessor

Land and buildings of Land and building method 31 March 2008 Mr. R.G Wijesinghe,Ceylon Holiday Resorts Ltd - Bentota Beach Hotel Consultant Valuer and AssessorHabarana Lodge LtdHabarana Walk Inn LtdKandy Walk Inn LtdTransware Logistics (Pvt)LtdTrinco Walk Inn Ltd

Land and buildings, storage tanks of Open market value method 31 March 2008 Mr. G.J Sumanasena,Lanka Marine Services (Pvt) Ltd. Consultant Valuer

Land and buildings of Land and building method, 31 March 2008 Mr. G.J Sumanasena,Tea Smallholder Factories PLC Consultant Valuer

Plant and machinery of Contractors test method 31 March 2008 Mr. G.J Sumanasena,Tea Smallholder Factories PLC Consultant Valuer

Buildings of Trans Asia Hotels PLC Land and building method 31 March 2008 M/s A.Y.Daniel & SonCertified Valuer

Land, building and other properties of Land and building method 31 March 2008 Mr. H.R de Silva,Ceylon Holiday Resort Ltd - Coral Gardens Hotel Chartered Valuation

Surveyor (UK)

Land and buildings of Contractors (cost) 31 March 2008 M/s A.Y.Daniel & Son

Asian Hotels and Properties PLC Summation basis Certified Valuer



The carrying amount of revalued land and buildings if they were carried at cost less depreciation, would be as follows

GroupAs at 31st March 2008 2007In Rs. '000s

Cost 9,609,211 7,534,917Accumulated depreciation (1,658,641) (1,425,083)Carrying value 7,950,570 6,109,834

2.5 Finance leasesProperty plant and equipment include capitalised finance leases. The carrying value of these assets are as follows:

Accumulated GroupCost depreciation 2008 2007

Plant and machinery - - - 928Motor vehicles - - - 23,835Equipment, furniture and fittings 34,407 (5,689) 28,718 -

34,407 (5,689) 28,718 24,763

2.6 Exchange gain / (loss)Additions to property, plant and equipment include exchange differences arising from the transalation of balances to Sri Lanka rupees.


Land and buildings (88,475) 40,841Plant and machinery (7,361) 3,040Equipment, furniture and fittings 40,471 7,009Motor vehicles 52,073 931Other assets (4,770) 727

(8,062) 52,548

2.7 Group land and buildings with a carrying value of Rs. 1,348 mn (2007 - Rs. 1,682 mn) have been pledged as security for term loans obtained,details of which are disclosed in Note 16.3.

2.8 Group property, plant and equipment with a cost of Rs. 1,476 mn (2007 - Rs. 775.8 mn) have been fully depreciated and continue to be in useby the group. The cost of fully depreciated assets of the company amounts to Rs. 59 mn (2007 - Rs. 57 mn).




3 LEASEHOLD PROPERTYCost 4,803,400 4,656,821Accumulated amortisation (115,014) (76,074)Exchange gain / (loss) (50,152) 180,756

4,638,234 4,761,503

Lease rentals prepaid to acquire land use rights in John Keells Maldivian Resorts (Pte) Ltd and Travel Club (Pte) Ltd, which was previously shownunder other non current assets have now been re-classified under leasehold property. Prepaid lease rentals paid to acquire land use rights areamortised over the lease term in accordance with the pattern of benefits provided.

3.1 Details of leasehold property

AmountProperty Land extent (in acres) Lease period 2008 2007

John Keells Maldivian Resorts (Pte.) Ltd

Dhonveli Beach & Spa Resort,Republic of Maldives 36.96 15 years from 16-5-2006 2,205,367 2,270,093

John Keells Warehousing (Pvt) Ltd.Muthurajawela 6 50 years from 19-9-2001 45,647 46,736

Rajawella Hotels Ltd. 10.00 95 years and 10 months from2-2-2000 36,294 36,690

Tea Smallholder Factories PLC. 50 years from 15-8-1997Karawita tea factory 4.99 from 2001/2002 12,893 13,201

Trans Asia Hotels PLC.Colombo 7.20 99 years from 7-8-1981 893,088 905,492

Travel Club (Pte) Ltd. 13.75Ellaidhoo Island Resort, Republic of Maldives 14 years from 4-8-2006 1,359,369 1,400,721

Yala Village (Pvt) Ltd. 10 30 years from 27-11-1997 85,576 88,5704,638,234 4,761,503


4 INVESTMENT PROPERTYAt the beginning of the year 2,505,321 2,467,446 800,000 800,000Additions 21,384 238,263 32,158 -Reclassified as property, plant and equipment (238,263) - - -Disposals - (310,000) - -Change in fair value during the year - 109,612 - -At the end of the year 2,288,442 2,505,321 832,158 800,000

Having studied the current income levels and market conditions of similar properties situated within close proximity, the directors of thecompany confirm that the value of investment property as at 31 March 2008 is Rs. 2,288 mn for the group and Rs. 832 mn for the company.



4.1 Valuation details of investment property (IP)

The investment properties were valued by qualified professional valuers in 2006, details of which are as follows.

Property Method of valuation Valuer

Group

Asian Hotels and Properties PLC. Investment method Mr. P.B. Kalugalagedera, Chartered Valuation SurveyorCrescat Boulevard, Colombo 3

Tea Smallholder Factories PLC. Investment method Mr. G.J. Sumanasena, Incorporated ValuerStores Complex, Peliyagoda

Trans Asia Hotels PLC. Accredited contractor basis M/S A.Y.Daniel & Son, Incorporated ValuerCommercial Centre, Colombo 2

Company

John Keells Holdings PLC. Open market value Mr. G.J. Sumanasena, Incorporated ValuerGalaha Building, Colombo 2

Rental income earned from investment property by the group and company amount to Rs. 239 mn (2007 - Rs. 191 mn) and Rs. 36 mn. (2007- Rs. 34 mn) respectively. Direct operating expenses incurred by the group and company amounted to Rs. 50 mn (2007 - Rs. 65 mn) and Rs. 3mn (2007 - Rs. 5 mn) respectively.

GroupAs at 31st March Software Goodwill 2008 2007In Rs. '000s

5 INTANGIBLE ASSETSCost/carrying valueAt the beginning of the year 26,831 318,680 345,511 853,795Additions / transfers - 11,676 11,676 (466,622)Adjustment due to sale of non-current investments - (467) (467) (41,662)At the end of the year 26,831 329,889 356,720 345,511

Accumulated amortisationAt the beginning of the year (6,750) - (6,750) (10,257)Amortisation (8,717) - (8,717) (13,376)Adjustment due to sale of non-current investments - - - 16,862Exchange translation difference - - - 21At the end of the year (15,467) - (15,467) (6,750)Net carrying value 11,364 329,889 341,253 338,761

Software with a finite life is amortised over the period of the expected economic benefit. As from 1 April 2006, goodwill is no longer amortisedbut tested for impairment annually. Goodwill acquired through business combinations have been allocated to seven (07) cash generating units(CGU's) for impairment testing as follows:

Net Carrying Value of Goodwill

Chaaya Hotels and Resorts 148,000Logistics, Ports and Shipping 126,888Cinnamon Hotels and Resorts 40,116Property 13,874Airlines 468Destination Management 408Food and Beverage 135

329,889

The recoverable amount of all CGUs have been determined based on the fair value less cost to sell or the value in use (VIU) calculation.



Key assumptions used in the VIU calculations

Gross marginsThe basis used to determine the value assigned to the budgeted gross margins is the gross margins achieved in the year preceeding the budgetedyear adjusted for projected market conditions.

Discount ratesThe discount rate used is the risk free rate, adjusted by the addition of an appropriate risk premium.

InflationThe basis used to determine the value assigned to the budgeted cost inflation is the inflation rate based on projected economic conditions.

Volume growthVolume growth has been budgeted on a reasonable and realistic basis by taking into account the growth rates of the two years immediatelypreceeding the budgeted year and future industry growth rates. Cashflows beyond the five year period are extrapolated using a zero growth rate.

Group CompanyAt at 31st March Note 2008 2007 2008 2007In Rs.'000s

6 INVESTMENTS

6.1 Carrying valueInvestments in subsidiariesInvestments consolidated

Quoted 6.2 - - 13,126,857 10,241,005Unquoted 6.3 - - 4,273,961 4,169,600

Investments not consolidatedUnquoted 6.4 5,115 5,115 5,115 5,115

5,115 5,115 17,405,933 14,415,720Investments in joint ventures 6.5 - - 46,482 30,161Investments in subsidiaries and joint ventures 5,115 5,115 17,452,415 14,445,881

Investments in associates 6.6 9,886,520 8,515,037 6,204,776 5,995,133

Other investmentsQuoted 6.7 30 30 - -Unquoted 6.8 125,194 148,227 94,957 106,917

125,224 148,257 94,957 106,917

Investments held for sale 6.9 37,331 - 15,860 -10,054,190 8,668,409 23,768,008 20,547,931

Group CompanyAt at 31st March Number of 2008 2007 Number of 2008 2007

shares sharesIn Rs.'000s

6.2 Group quoted investmentsAsian Hotels and Properties PLC. 185,530,612 5,564,807 5,564,807 185,530,612 5,564,807 5,564,807Ceylon Cold Stores PLC. 12,331,038 190,599 190,599 10,010,111 177,562 177,562Ceylon Cold Stores PLC.- preference shares 118 1 1 118 1 1John Keells Hotels PLC. 1,012,239,871 5,381,179 2,611,753 1,012,239,871 5,381,179 2,611,753John Keells PLC. 11,551,396 294,174 177,748 11,551,396 294,174 177,748Keells Food Products PLC. 3,784,755 77,648 77,711 2,553,420 51,003 51,003Tea Smallholder Factories PLC. 5,643,000 63,466 63,466 5,643,000 63,466 63,466Trans Asia Hotels PLC. 46,026,821 2,254,710 2,254,710 24,321,064 1,594,665 1,594,665

13,826,584 10,940,795 13,126,857 10,241,005

Market value of these quoted investments were Rs. 21,319 mn (2007 - Rs. 20,555 mn) and Rs. 19,240 mn (2007 - Rs. 17,958 mn) for the groupand company respectively.



Group CompanyAs at 31st March Number of shares 2008 2007 Number of shares 2008 2007In Rs.'000s

6.3 Group unquoted investmentsAuxicogent Alpha (Pvt) Ltd. 7,350 792 - - - -Auxicogent Alpha (Pvt) Ltd. - Preference A 57,200,000 615,358 - - - -Auxicogent Holdings (Pvt) Ltd. 15,000,000 1,543,353 1,543,353 - - -Auxicogent International (Pvt) Ltd. 1,500,000,000 1,615,204 - - - -Auxicogent International Lanka (Pvt) Ltd. 15,950,000 160,352 50,000 - - -Auxicogent Investment Mauritius (Pvt) Ltd. 14,700 1,584 - - - -Auxicogent Investment Mauritius (Pvt) Ltd.- Preference A 57,200,000 615,358 - - - -Ceylon Holiday Resorts Ltd. 7,734,544 566,571 566,096 - - -DHL Keells (Pvt) Ltd. 1,000,000 10,000 10,000 1,000,000 10,000 10,000Elephant House Farms Ltd. 400,000 4,000 4,000 - - -Fantasea World Investments (Pte) Ltd. 7,297 433,708 433,708 - - -Habarana Lodge Ltd. 12,981,548 695,082 470,419 - - -Habarana Walk Inn Ltd. 4,321,381 311,981 211,315 - - -InfoMate (Pvt) Ltd. 2,000,000 20,000 20,000 2,000,000 20,000 20,000International Tourists and Hoteliers Ltd. 7,545,593 247,495 247,495 - - -J K Packaging (Pvt) Ltd. 1,450,000 - - 1,450,000 - -J K Properties (Pvt) Ltd. 24,000,000 240,000 240,000 24,000,000 240,000 240,000JayKay Marketing Services (Pvt) Ltd. 49,800,000 522,892 522,892 - - -John Keells Business Systems (UK) Ltd. 98 9 9 98 9 9John Keells Computer Services (Pvt) Ltd. 9,650,000 96,500 96,500 9,650,000 96,500 96,500John Keells Conventions (Pvt) Ltd. 50,000 - 500 - - -John Keells International (Pvt) Ltd. 154,500,000 1,545,000 1,545,000 154,500,000 1,545,000 1,545,000John Keells Logistics (Pvt) Ltd. 20,000,000 200,000 80,000 20,000,000 200,000 80,000John Keells Maldivian Resorts (Pte) Ltd. 31,321,738 3,172,350 2,222,348 - - -John Keells Office Automation (Pvt) Ltd. 500,000 5,000 5,000 500,000 5,000 5,000John Keells Singapore (Pte) Ltd. 160,000 4,209 4,209 160,000 4,209 4,209John Keells Software Technologies (Pvt) Ltd. 800,000 - - 800,000 - -John Keells Stock Brokers (Pvt) Ltd. 750,000 500 500 180,000 120 120John Keells Teas (Pvt) Ltd. 12,000 120 120 12,000 120 120John Keells Warehousing (Pvt) Ltd. 12,000,000 120,000 120,000 - - -Kandy Walk Inn Ltd. 5,160,309 367,324 367,295 - - -Keells Business Systems Ltd. - - 15,000 - - 15,000Keells Consultants Ltd. 15,700 1,299 1,299 15,700 1,299 1,299Keells Hotel Management Services Ltd. 1,000,000 19,055 19,055 1,000,000 19,055 19,055Keells Realtors Ltd. 7,500,000 75,000 75,000 3,000,000 30,000 30,000Keells Shipping (Pvt) Ltd. 50,000 502 502 50,000 502 502Keells Tours (Pvt) Ltd. - - 5,500 - - -Lanka Marine Services (Pvt) Ltd. 34,805,470 1,325,218 1,325,218 34,805,470 1,325,218 1,325,218Mack Air Ltd. 500,000 60 60 500,000 60 60Mack Air Services Maldives (Pte) Ltd. 4,900 2,035 2,035 4,700 2,021 2,021Mack International Freight (Pvt) Ltd. 2,500,000 69 69 2,500,000 69 69Mackinnon & Keells Financial Services Ltd. 1,080,000 12,806 12,806 972,000 11,912 11,912Mackinnon Mackenzie andCompany (Shipping) Ltd. 500,000 14,200 14,200 - - -Mackinnon Mackenzie andCompany of Ceylon Ltd. 9,000 - - 6,600 - -Mackinnons American Express Travel (Pvt) Ltd. 350,000 161 161 350,000 161 161Mackinnons Tours (Pvt) Ltd. - - 3,000 - - -Matheson Keells Air Services (Pvt) Ltd. 94,921 - - 94,921 - -Matheson Keells Enterprises (Pvt) Ltd. 627,999 - - 627,999 - -




Matheson Keells Enterprises (Pvt) Ltd. - -- Redeemable non voting preference shares 2,600,000 41,098 41,098 2,600,000 41,097 41,098Mortlake Ltd. 300 327,240 327,240 300 327,240 327,240Nature Odyssey (Pvt) Ltd. - - 100 - - -Nexus Networks (Pvt) Ltd. 10,000 100 100 10,000 100 100Rajawella Hotels Ltd. 2,000,000 20,000 20,000 - - -Resort Hotels Ltd. 75,007 750 750 - - -Serene Holidays (Pvt) Ltd. 250,000 6,385 6,385 - - -Tranquility (Pte) Ltd. 10,000 553,750 - - - -Transware Logistics (Pvt) Ltd. 11,000,000 111,100 111,100 11,000,000 111,100 111,100Travel Club (Pte) Ltd. 29,059 302,640 302,640 - - -Trinco Walk Inn Ltd. 3,000,000 95,940 95,940 - - -Unawatuna Walk Inn Ltd. - - 40,155 - - -Walkers Air Services Ltd. 750,000 7,503 7,503 750,000 7,503 7,503Walkers Tours Ltd. 4,925,577 128,140 128,088 4,925,577 128,141 128,088Whittall Boustead (Travel) Ltd. 750,000 40,984 40,984 675,000 40,935 40,935Whittall Boustead (Pvt) Ltd. 9,918,880 133,382 133,382 7,258,264 106,590 106,590Whittall Boustead (Pvt) Ltd. - Preference A - - 152 - - 152Whittall Boustead (Pvt) Ltd. - Preference B - - 539 - - 539Wirawila Walk Inn Ltd. 1,500,000 21,885 21,885 - - -Yala Village (Pvt) Ltd. 16,210,800 200,000 75,000 - - -Yala Village (Pvt) Ltd.- non votingpreference shares 10,000,000 100,000 100,000 - - -

16,656,044 11,687,705 4,273,961 4,169,600

Directors' valuation of unquoted investments amount to Rs. 16,656 mn (2007 - Rs. 11,688 mn ) and Rs. 4,274 mn (2007 - Rs. 4,170 mn) forthe group and company respectively.


6.4 Investments in subsidiaries not consolidatedKeells Systems Integrators Ltd. 500,000 5,115 5,115 500,000 5,115 5,115

5,115 5,115 5,115 5,115

Keells System Integrators Ltd. is a non-operating subsidiary, currently under liquidation, with a net asset value that equals the book value ofinvestments.

6.5 Investments in joint venturesInformation Systems Associates 73 46,482 30,161 73 46,482 30,161

46,482 30,161 46,482 30,161

The directors' valuation of the unquoted investments referred to in notes 6.4 and 6.5 amount to Rs 52 mn (2007 - Rs. 35 mn)




6.6 Investments in associatesQuotedNations Trust Bank PLC. 50,146,685 965,863 652,447 33,542,933 612,730 403,087Union Assurance PLC. 13,863,163 275,886 275,886 9,840,685 268,232 268,232Associated Motorways PLC. 11,138,808 705,458 705,458 11,138,808 705,458 705,458

UnquotedSouth Asia Gateway Terminals (Pvt) Ltd. 127,861,400 4,647,103 4,647,103 127,861,400 4,618,206 4,618,206Maersk Lanka (Pvt) Ltd. 30,000 150 150 30,000 150 150Auxicogent BPO Solutions (Pvt) Ltd. 49,000 12,689 12,689 - - -Auxicogent BPO Solutions (Pvt) Ltd.- Preference A 12,593,506 544,620 - - - -

Profit accruing to the group net of dividend 2,087,288 1,436,543 - -Adjustment on account of associate companyshare of net assets 560,434 696,598 - -Negative goodwill on acquisition of associates 92,433 92,433 - -Unrealised profit on transactionswith associate companies (5,404) (4,270) - -

9,886,520 8,515,037 6,204,776 5,995,133

Summarised financial information of associates

Group share of balance sheetTotal assets 29,197,055 24,806,076Total liabilities (22,408,157) (19,389,795)Net assets 6,788,898 5,416,281Goodwill 3,103,026 3,103,026Unrealised profits on transactions with associates (5,404) (4,270)

9,886,520 8,515,037

Group share of revenue and profitRevenue 9,623,341 5,650,596Profit 2,250,048 1,700,992

Market value of quoted associate investments were Rs. 3,663 mn (2007 - Rs.3,730 mn) and Rs.2,940 mn (2007 - Rs. 3,082 mn) for the groupand company respectively. The directors' valuation of unquoted associate investments amounts to Rs 7,171 mn (2007- Rs 6,277 mn) and Rs4,618 mn (2007 - Rs 4,618 mn) for the group and company respectively.

6.7 Other quoted investmentsCeylon Hotels Corporation 500 30 30

30 30

Market value of other quoted investments were Rs. 0.01 mn (2007 - Rs. 0.1 mn)




6.8 Other unquoted investmentsACW Insurance Co. Ltd. 450,000 1,269 1,269 - - -Asia Power (Pvt) Ltd. 777,055 79,507 79,507 777,055 79,507 79,507Crescat Restaurants (Pvt) Ltd - - 6,494 - - -Facets (Pvt) Ltd. 15,000 450 450 15,000 450 450Keells Restaurants (Pvt) Ltd - - 16,539 1,196,000 - 11,960Pyramid Unit Trust 310,000 3,100 3,100 - - -Rainforest Ecolodge (Pvt) Ltd. 2,500,000 25,000 25,000 - - -Rajawella Holdings Ltd. 3,000,000 15,000 15,000 3,000,000 15,000 15,000SLFFA Cargo Services Ltd. 64,642 716 716 - - -Sri Lanka Hotel Tourism Training Institute 15,004 150 150 - - -Sri Lanka Port Management &Consultancy Services Ltd. 100 1 1 - - -The York Company Ltd. 100 1 1 - - -

125,194 148,227 94,957 106,917

6.9 Investments held for saleCrescat Restaurants (Pvt) Ltd 104,000 6,494 - - -Keells Business Systems Ltd 390,000 14,299 - 3,900 -Keells Restaurants (Pvt) Ltd 1,196,000 16,538 - 11,960 -

37,331 - 15,860 -

Total value of investments including subsidiaries 40,583,300 31,327,070 23,768,008 20,547,931Group investments (30,529,110) (22,658,661) - -Total value of investments 10,054,190 8,668,409 23,768,008 20,547,931

The director's valuation of other unquoted investments and investments held for sale, referred to in Note 6.8 and 6.9 amounts to Rs. 162 mn(2007 - Rs. 148 mn) and Rs. 110 mn (2007 - Rs. 107 mn) for the group and company respectively.

Group CompanyAs at 31st March 2008 2007 2008 2007In Rs.'000s

6.10 Movement in total investmentsAt the beginning of the year 8,668,409 3,700,943 20,547,931 14,617,151Additions 858,036 4,341,876 3,231,869 3,623,844New acquisitions - - - 2,330,457Disposals and transfers 14,299 (7,128) (11,792) (23,521)Net movement in fall in value of investments / impairment - (154) - -Adjustment on account of associate company share of net assets (136,164) 182,092 - -Share of results of associates net of dividend 650,744 291,859 - -(Goodwill) / negative goodwill on associate companies - 163,191 - -Unrealised profit on transactions with associate companies (1,134) (4,270) - -At the end of the year 10,054,190 8,668,409 23,768,008 20,547,931

GroupAs at 31st March 2008 2007In Rs.'000s

7 DEFERRED TAX ASSETAt the beginning of the year 74,013 65,004Credit / (release) 23,143 12,266Adjustment due to sale of non-current investments (1,752) -Transfers / exchange translation difference (4,330) (3,257)At the end of the year 91,074 74,013

The closing deferred tax asset balance relates to the following:Accelerated depreciation for tax purposes (73,763) (65,741)Adjustment relating to land and building - (5,657)Employee benefit liability 50,160 42,781Losses available for offset against future taxable income 102,374 92,181Others 12,303 10,449

91,074 74,013

The group has tax losses amounting to Rs. 2,648 (2007 - Rs. 2,580 mn) that are available indefinitely for offset against future taxable profits ofthe companies in which the tax losses arose.

Deferred tax assets amounting to Rs. 210 mn (2007- 267 mn) for the group and Rs. 575 mn (2007 - Rs. 741 mn) for the company have notbeen recognized since the companies do not expect these assets to reverse in the forseeable future.


8 OTHER NON-CURRENT ASSETSLoans and advances 649,485 245,270 - -Bottle stocks 490,273 477,706 - -Loans to executives 8.1 266,089 230,454 44,687 61,944Treasury bonds 202,192 203,840 - -Work-in-progress and unsold apartments 192,899 258,158 - -Others 5,000 20,010 - -Loans to subsidiaries - - 21,000 37,952

1,805,938 1,435,438 65,687 99,896






8.1 Loans to executivesAt the beginning of the year 400,145 300,179 72,116 251,242Loans granted / transfers 167,943 475,756 26,022 151,393Loans recovered (191,638) (370,455) (39,598) (330,519)Adjustment due to sale of non-current investments (12,354) (5,335) - -At the end of the year 364,096 400,145 58,540 72,116

Receivable within one year 98,007 169,691 13,853 10,172Receivable after one year 266,089 230,454 44,687 61,944

364,096 400,145 58,540 72,116


9 INVENTORIESRaw materials 188,313 194,226 - -Work-in-progress 776,382 1,247,892 - -Finished goods 2,399,708 1,491,147 - -Produce stocks 249,628 134,152 - -Other stocks 370,994 333,159 825 847

3,985,025 3,400,576 825 847

Group inventories with a carrying value of Rs. 44 mn (2007 - Rs. 51 mn) have been pledged as security for term loans obtained, details of whichare disclosed in note 16.3.


10 TRADE AND OTHER RECEIVABLESTrade and other receivables 5,466,539 5,179,151 235,342 122,299Tax refunds 1,188,906 1,243,220 14,141 14,141Loans to executives 8.1 98,007 169,691 13,853 10,172

6,753,452 6,592,062 263,336 146,612


11 SHORT TERM INVESTMENTSTreasury bills 6,262,114 4,898,168 5,444,836 3,500,000Commercial papers 1,222,182 1,068,479 1,214,900 1,068,479Fixed and call deposits 2,971,070 10,171,962 325,000 7,733,215

10,455,366 16,138,609 6,984,736 12,301,694

As at 31st March 2008 2007Number of Value of Number of Value of

shares shares shares sharesin '000s in Rs. '000s in '000s in Rs. '000s

12 Stated CapitalFully paid ordinary sharesAt the beginning of the year 552,940 22,245,894 400,007 9,205,273Share options exercised 4,094 276,409 3,666 246,748Bonus issue /share issue expenses 78,960 (58,036) 57,163 -Rights issue - - 92,104 12,793,873At the end of the year 635,994 22,464,267 552,940 22,245,894

The composition of shares in issue is given under the investor information section of the comprehensive annual report.

34,862,428 shares (2007 - 23,874,575) have been reserved to be issued under the employee share option plan as at 31 March 2008. The numberof issued and fully paid shares is disclosed in the report of the Board of directors.

The authorised capital and par value concept in relation to share capital were abolished by the Companies Act No 07 of 2007. The total amountreceived by the company in respect of the issue of shares are referred to as stated capital. Comparative figures have been restated accordingly.

GroupAs at 31st March Note 2008 2007In Rs.'000s

13 CAPITAL RESERVESRevaluation reserve 13.1 4,738,312 1,775,128Exchange translation reserve 13.2 908,299 943,624Other capital reserves 13.3 418,640 418,640

6,065,251 3,137,392

13.1 Revaluation reserve consists of the net surplus on the revaluation of property, plant and equipment as described in note 2.

13.2 Exchange translation reserve comprises the net exchange movement arising on the translation of net equity investments of overseas subsidiaries,joint venture and associates into Sri Lankan rupees.

13.3 Other capital reserves comprises of capital redemption reserve funds arising from the redemption of preference shares of subsidiaries.


14 REVENUE RESERVESGeneral reserves 14.1 3,870,775 3,870,775 2,600,000 2,600,000Dividend reserve 14.2 1,572,188 1,572,188 1,519,322 1,519,322Investment equalisation reserve 14.3 75,000 75,000 75,000 75,000Other revenue reserves 5,517,963 5,517,963 4,194,322 4,194,322Accumulated profit 10,170,339 8,333,950 2,148,495 1,521,707

15,688,302 13,851,913 6,342,817 5,716,029

14.1 General reserve represents amounts set aside by the directors for future expansion, and to meet any contingencies.

14.2 Dividend reserve represents dividend received and available for distribution

14.3 Investment equalisation reserve comprises amounts set aside by the directors for impairment of long term investments of the company.






15 NON-INTEREST BEARING BORROWINGSAt the beginning of the year 30,000 35,000Repayments (9,000) (5,000)At the end of the year 21,000 30,000

Repayable within one year - -Repayable after one year 21,000 30,000

21,000 30,000


16 INTEREST BEARING BORROWINGS

16.1 MovementAt the beginning of the year 7,825,546 2,488,880 3,595,493 764,974Additions 1,153,846 5,925,365 - 2,995,493Adjustment due to sale of non-current investments 1,961,985 (48,333) - -Repayments (2,002,519) (540,366) (700,000) (164,974)Adjustments / exchange difference (69,654) - - -At the end of the year 8,869,204 7,825,546 2,895,493 3,595,493

Repayable within one year 1,059,752 1,374,413 300,000 700,000Repayable after one year 7,809,452 6,451,133 2,595,493 2,895,493

8,869,204 7,825,546 2,895,493 3,595,493

Group interest bearing borrowings include finance lease obligations amounting to Rs. 40 mn (2007 - Rs. 34 mn), details of which are disclosedin note 16.2


16.2 Finance leasesAt the beginning of the year 34,223 13,520Additions 14,607 25,158Repayments (8,836) (4,455)At the end of the year 39,994 34,223

Finance lease obligations repayable within 1 yearGross liability 8,408 8,427Finance charges (2,009) (2,026)Net lease obligation 6,399 6,401

Finance lease obligations repayable between 1 and 5 yearsGross liability 35,936 30,737Finance charges (5,194) (7,203)Net lease obligation 30,742 23,534

Finance lease obligations repayable after 5 yearsGross liability 2,853 4,288Finance charges - -Net lease obligation 2,853 4,288

16.3 Security and repayment terms

Lending Nature of Interest rate Repaymentinstitution facility and security terms 2008 2007

John Keells Holdings PLC Debentures Fixed, semi fixed Bullet repayment at end 1,995,493 1,995,493& floating of tenure of 4 years,

Bi-annual repayments.

DFCC Term loan AWPLR+0.25% Quarterly installments 800,000 1,000,000revised quarterly over 5 years with a grace

period of 6 months.

HNB pension & Fixed rate 10.6%, unsecured On 29-7-2008 100,000 100,000retirement fund note

ETF Fixed rate - 200,000note

EPF Fixed rate - 200,000note

WML Term loan - 100,000note

2,895,493 3,595,493

Group companiesAsian Hotels and Properties PLCCinnamon Grand Commercial Term loan AWPLR, revised 13 quarterly installments 573,291 755,018

Bank quarterly unsecured with a grace periodof 18 months

HNB Term loan AWPLR, unsecured 24 monthly installments 557,980 728,000with a grace periodof 18 months

Crescat Division NDB Finance lease - 3

Ceylon Cold Stores PLC. NDB Term loan 10.5%, unsecured 60 monthly installments - 33,333commencing Aug 2004

NDB E Friendly 6.5%, Kaduwela land, 60 monthly installments 16,996 17,284loan building and machinery commencing March 2008

of soft drink plant

NDB Project loan 10.5%, Kaduwela land, 60 monthly installments 194,135 198,396building and machinery commencing Aug 2007of soft drink plant

DFCC Project loan 10.5%, Kaduwela land, 48 monthly installments 223,958 198,396building and machinery commencing Nov 2007of soft drink plant

DFCC Term loan 18.25%, Kaduwela land, 48 monthly installments 120,000 -building and machinery commencing July 2008of soft drink plant

Ceylon Holiday Resorts Ltd. NTB Finance lease 5,082 6,500

Habarana Lodge Ltd. NTB Finance lease 2,541 3,250

Habarana Walk Inn Ltd. HNB Term loan AWPLR -0.15%, revised Bi-annual repayment - 140,000quarterly, corporate commencing June 2007guarantee ofJohn Keells Hotels PLC.

NTB Finance Leas 2,541 3,250





16.3 Security and Repayment Terms

Lending Nature of Interest rate Repaymentinstitution facility and security terms 2008 2007

Jaykay Marketing Services HNB Term loan 6 month TB rate+1.35%, 60 monthly installments 19,250 40,160(Pvt) Ltd. negative pledge of stocks commencing March 2004

and debtors of KeellsSuper Mt. Lavinia,Nugegoda and Borella

John Keells Hotels PLC. Commercial Term loan - 417,000Bank

John Keells Logistics NTB Finance lease 12,173 -(Pvt) Ltd.

John Keells Maldivian Sampath Term loan 3 months LIBOR + 1.3% 30 quarterly installments 1,293,360 1,310,400Resorts (Pte) Ltd. Bank for first two years and commencing after a grace

LIBOR + 1.5% thereafter, period of 18 monthsrevised quarterly

John Keells Warehousing Deutsche Asset backed 21.98%, corporate Repayment over 10 years 75,483 80,120(Pvt) Ltd. Bank notes guarantee of commencing May 2003

John Keells PLC.

Kandy Walk Inn Ltd. NTB Finance lease 2,541 3,250

Keells Foods Products PLC. HNB Term loan 6 monthTB Rate 36 monthly installments 3,700 27,100+1.75% p.a to be commencing June 2004,reviewed bi-annually, with a grace period of 1 yearnegative pledge overland and building atEkala, Ja-Ela

Mackinnon and Keells NDB Term loan 8.5%, unsecured 60 monthly installments - 13Financial Services Ltd. commencing May 2002

Tea Smallholder People's bank Term loan 9% 83 equal monthly payments 14,953 -Factories PLC

Trans Asia Hotels PLC. Sampath Term loan AWPLR, unsecured 48 monthly installments 90,411 125,415Bank commencing Nov. 2007

UDA Finance lease 10,034 11,470

Trinco Walk Inn Ltd. NTB Finance lease 2,541 3,250

Travel Club (Pte) Ltd BOC Maldives Term loan LIBOR + 2% 28 equal quarterly 916,130 -installments

Tranquility (Pte) Ltd BOC Maldives Term loan LIBOR + 1.5%, leased 5 years 1,833,925 -back security

Whittal Boustead Ltd. Debenture 7.5%, unsecured 145 195

Yala Village (Pvt) Ltd. BOC Term loan AWPLR-1.0%, unsecured Bi-annual repayment over 5 - 125,000years commencing June 2007,with a grace period of 1 year

NTB Finance lease 2,541 3,250

8,869,204 7,825,546




17 DEFERRED TAX LIABILITIESAt the beginning of the year 591,867 541,664Charge 167,807 73,522Adjustment due to sale of non-current investments - (20,181)Transfers/ exchange translation difference (4,308) (3,138)At the end of the year 755,366 591,867

The closing deferred tax liability balance relates to the following:Accelerated depreciation for tax purposes 685,953 462,290Revaluation of land and building to fair value 203,538 213,367Revaluation of investment property to fair value 36,427 36,427Employee benefit liability (112,331) (90,899)Losses available for offset against future taxable income (83,799) (42,862)Deferred tax effect on consolidation adjustments & others 25,578 13,544

755,366 591,867

17.1 Deferred tax for tax holiday companies

Sri Lanka Accounting Standard 14 - Income Taxes does not specify the recognition and measurement of deferred tax for companies which enjoytax holidays under local jurisdictions.

Section 17 of the Board of Investment Law No 4 of 1978, under which The Board of Investment (BOI) in Sri Lanka is set up, has given theBoard the power to grant exemptions from the Inland Revenue Act. The Board on entering into agreement with entities in the group has statedthat the provisions of the respective Inland Revenue Acts relating to the imposition, payment and recovery of income tax in respect of the profitsand income of the enterprise shall not apply during the period of the tax exemption. For certain companies the BOI has given the option to paytax as a percentage of turnover or at a concessionary rate after the expiration of the tax holiday period.

The Urgent Issues Task Force (UITF) of the Institute of Chartered Accountants of Sri Lanka is at present interpreting the applicability of SLAS14 to companies under BOI tax holidays and if deemed applicable will specify the method of computing and the timing of accounting fordeferred tax during the tax holiday period.

The group awaits the ruling of the UITF to determine the accounting for deferred tax in relation to tax holiday companies.


18 EMPLOYEE BENEFIT LIABILITIESAt the beginning of the year 718,315 624,473 86,316 73,834Charge 105,040 152,815 6,229 16,805Transfers - - (4,173) (2,120)Interest cost 71,831 - 8,631 -(Gain)/Loss arising from changes in assumptions ordue to (over)/under provision in the previous year (11,454) - (2,969) -Payments (77,830) (52,824) (13,704) (2,203)Adjustment due to sale of non-current investments (7,695) (6,575) - -Exchange translation difference 393 426 - -At the end of the year 798,600 718,315 80,330 86,316

The employee benefit liability of listed companies with more than 100 employees is based on the actuarial valuation carried out by Messrs.Actuarial & Management Consultants (Pvt) Ltd., actuaries. With the exception of Jaykay Marketing Services (Pvt) Ltd, the employee benefitliability of all other companies in the group are based on the gratuity formula in appendix E of SLAS 16 - Employee Benefits.

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




19 OTHER DEFERRED LIABILITIESAt the beginning of the year 3,762 5,397Grants received 4,970 -Amortisation (1,622) (1,635)At the end of the year 7,110 3,762

Amounts expected to be amortised within 1 year 2,078 2,182Amounts expected to be amortised after 1 year 5,032 1,580

7,110 3,762

Basis of amortisationTea Smallholder Factories PLC.Plantations Housing and Social Welfare Trust 2.5% p.a. - 726Sri Lanka Tea Board Subsidy 10% p.a. 3,887 3,036

Yala Village (Pvt) LtdCeylon Chamber of Commerce grant 10% p.a. 3,223 -

7,110 3,762


20 TRADE AND OTHER PAYABLESTrade payables 3,813,965 2,614,725 - -Advances and deposits 1,348,782 1,003,023 - -Sundry creditors including accrued expenses 2,139,094 1,591,369 313,634 344,826Other payables 567,198 585,924 - -

7,869,039 5,795,041 313,634 344,826


21 INCOME TAX LIABILITIESAt the beginning of the year 188,250 212,484 4,766 30,519Provision 744,550 503,067 136,419 -Payments and set off against refunds (604,696) (522,450) (141,185) (25,753)Adjustment due to sale of non-current investments - (4,851) - -At the end of the year 328,104 188,250 - 4,766


22 SHORT TERM BORROWINGSLoans 375,000 2,688,311 - 500,000

375,000 2,688,311 - 500,000




23 REVENUE

23.1 Gross revenueGross revenue 42,181,917 33,496,604 603,665 481,637Turnover tax (376,574) (641,583) - -Net revenue 41,805,343 32,855,021 603,665 481,637

Value added tax of Rs. 2,287 mn (2007 - Rs.2,189 mn) for the group and Rs. 73 mn (2007 - Rs.56 mn) for the company has been deducted inarriving at gross revenue.

2008 2007Group Group

Sale of Rendering of external Sale of Rendering of externalgoods services revenue goods services revenue

23.2 Business segment analysisTransportation 11,310,964 1,708,045 13,019,009 7,947,957 1,628,333 9,576,290Leisure - 9,791,701 9,791,701 - 7,589,264 7,589,264Property - 2,617,565 2,617,565 - 1,462,514 1,462,514Consumer Foods & Retail 5,548,617 5,835,326 11,383,943 5,343,032 4,447,626 9,790,658Financial Services - 163,284 163,284 - 191,972 191,972Information Technology 1,466,723 621,089 2,087,812 1,878,701 547,602 2,426,303Others - 2,742,029 2,742,029 1,733,374 84,646 1,818,020Group revenue 18,326,304 23,479,039 41,805,343 16,903,064 15,951,957 32,855,021

Group2008 2007

23.3 Geographical segment analysis (by location of customers)Sri Lanka 34,967,270 27,803,196Asia (excluding Sri Lanka) 4,900,930 3,700,254Europe 392,395 1,181,781Others 1,544,748 169,790Total group external revenue 41,805,343 32,855,021


24 DIVIDEND INCOME

Income from investments in related parties - - 3,067,373 2,846,968

Income from other investments 93,405 48,634 92,016 47,245

93,405 48,634 3,159,389 2,894,213


25 OTHER OPERATING INCOMEInterest income 2,083,916 493,759 1,633,980 190,622Exchange gain 274,510 243,496 - 474Profit on sale of property, plant and equipment 69,346 25,261 94 6,725Profit on sale of investment property - 201,941 - -Profit on sale of other investments 4 - 4 8,619Negative goodwill on acquisitions 56,625 66,531 - -Sundry income 232,486 149,297 10,036 8,315

2,716,887 1,180,285 1,644,114 214,755



26 OTHER OPERATING EXPENSESOther operating expenses consists mainly of power and energy costs, repairs and maintenance expenditure of the group.


27 FINANCE EXPENSESInterest expense on borrowingsLong term 961,825 571,894 505,326 341,493Short term 656,430 742,596 78,468 290,930

1,618,255 1,314,490 583,794 632,423


28 PROFIT ON SALE OF NON-CURRENT INVESTMENTSCrescat Restaurants (Pvt) Ltd - 9,321 - -Keells Business Systems Ltd 11,601 - 41,236Keells Restaurants (Pvt) Ltd - 49,631 - 37,039Unawatuna Walk Inn Ltd 43,550 - - -

55,151 58,952 41,236 37,039

The Group disposed its investment in Unawatuna Walk Inn Ltd (UWI) for a total consideration of Rs. 81 mn on 19 April 2007 and 74% of itsinvestment in Keells Business Systems Ltd (KBSL) for a total consideration of Rs. 52 mn on 31 March 2008.

KBSL contributed Rs. 380 mn to group revenue and Rs. 19.4 mn to the group profit before tax up to the date of disposal. The remaining 26%of the investment in KBSL, has been classified as "investments held for sale".


29 PROFIT BEFORE TAXProfit before tax is stated after charging all expenses including the followingRemuneration to executive directors 191,431 184,280 100,026 93,554Remuneration to non executive directors 23,142 20,251 12,476 10,749Auditors’ remunerationAudit 32,173 24,713 4,033 2,600Non-audit 479 5,961 260 5,545

Costs of defined employee benefitsDefined benefit plan cost 165,417 152,815 7,718 14,685Defined contribution plan cost - EPF and ETF 339,593 335,156 40,980 43,377

Staff expenses 3,649,785 3,397,229 278,193 265,636Depreciation 1,444,165 1,124,116 110,116 91,244Amortisation of finite life intangible assets 8,717 13,376 - -Impairment losses 3,283 11,678 - -Operating lease payments 525,344 436,424 - -Donations 21,823 5,306 797 487




30 TAX EXPENSECurrent income taxCurrent tax charge 948,573 653,680 136,419 -(Over)/under provision of current tax of previous years (5,157) 1,252 - -Economic service charge 30.2 (40,843) 1,612 (23,717) 7,66410% Withholding tax on inter company dividends 184,203 139,969 -

Deferred income taxRelating to origination and reversal of temporary differences 30.3 (32,034) 55,050 - -

1,054,742 851,563 112,702 7,664

30.1 Reconciliation between tax expense and the product of accounting profitProfit before tax 6,578,548 4,794,785 3,915,792 2,152,304Dividend income from group companies 4,087,683 3,407,096 - -Share of results of associates (2,242,713) (1,700,992) - -Other consolidation adjustments (7,070) 41,248 - -

8,416,448 6,542,137 3,915,792 2,152,304Exempt profits (1,967,851) (1,909,243) - -Profits not charged to income tax (821,735) (981,000) (41,241) (48,725)Resident dividend (3,505,174) (3,103,544) (3,156,274) (2,875,217)

Accounting profit / (loss) chargable to income taxes 2,121,688 548,350 718,277 (771,638)

Tax effect on chargeable profits 727,456 203,628 250,664 (270,073)Tax effect on non deductible expenses 79,730 100,669 21,243 20,669Tax effect on deductions claimed (36,746) (11,059) (34,580) -Net tax effect of unrecognised deferred tax assets for the year 53,398 266,825 - 249,404Net tax effect of unrecognised deferred tax assets for prior years (110,265) (11,508) (102,259) -Tax effect on rate differentials (6,815) (329) - -Consolidation adjustments 11,974 14,845 - -(Over)/under provision for previous years (5,157) 1,252 - -Other income based taxesEconomic service charge (32,790) (6,459) (23,717) 7,664Social responsibility levy 8,190 4,896 1,351 -Fringe benefit tax (indian companies) 2,209 1,430 - -10% WHT on inter company dividends 184,203 139,969 - -

Current and deferred tax share of associates 179,355 147,404 - -1,054,742 851,563 112,702 7,664

Income tax charged atStandard rate 35% 654,711 479,191 134,757 -Standard rate 35% (2007-15% where taxable income < Rs. 5 mn) 11,038 5,429 - -Concessionary Rate of 15% 80,722 12,439 - -Off-Shore dividend 10% 324 12 311 -Off-Shore profits at varying rates 1,493 4,744 - -

(Over)/under provision for previous years (5,157) 1,252 - -743,131 503,067 135,068 -

Deferred tax charge / (reversal) (29,556) 61,256 - -Other income based taxesEconomic service charge (32,790) (6,459) (23,717) 7,664Social responsibility levy 8,190 4,896 1,351 -Fringe benefit tax (indian companies) 2,209 1,430 - -10% WHT on inter company dividends 184,203 139,969 - -

Current and deferred tax share of associates 179,355 147,404 - -

Total income tax expense 1,054,742 851,563 112,702 7,664

Group tax expense is based on the taxable profit of individual companies within the group. At present the tax laws of Sri Lanka do not providefor group taxation.




30.2 Economic service charge (ESC)ESC written-off/(written back) (32,790) (6,459) (23,717) 7,664Share of associate company ESC (8,053) 8,071 - -

(40,843) 1,612 (23,717) 7,664


30.3 Deferred tax expenseIncome statementDeferred tax expense arising fromAccelerated depreciation for tax purposes (12,160) 40,672 - -Retirement benefit obligations (22,364) (20,342) - -Benefit arising from tax losses (4,849) 22,694 - -Others 9,817 18,232 - -

(29,556) 61,256Share of associate company deferred tax (2,478) (6,206) - -

Deferred tax charge (32,034) 55,050

Statement of changes in equityDeferred tax expense arising fromRevaluation of land and building to fair value 174,220 - - -

Total deferred tax charge 142,186 55,050 - -

Deferred tax has been computed taking into consideration the revised tax rates effective from 1 April 2007, which are 35% for all standard ratecompanies (including listed companies) and at rates as disclosed in note 30.6 and 30.7.

Temporary differences associated with investments in subsidiaries, associates and joint ventures, for which a deferred tax liability has not beenrecognised, amounts to Rs. 1,220 mn (2007 - Rs. 1,090 mn).

The deferred tax effect on undistributed reserves of subsidiaries has not been recognised since the parent can control the timing of the reversalof these temporary differences. The deferred tax liability on temporary differences relating to undistributed profits of associates has not beenrecognised as there is no current intention of distributing retained earnings to the holding company. However, the group has recognised thedeferred tax impact pertaining to the current year on declared dividends of subsidiaries and associates amounting to Rs. 34 mn.


30.4 Tax losses carried forwardTax losses brought forward 2,579,686 1,601,537 1,439,750 699,215Adjustments on finalization of liability 129,009 31,708 62,110 -Tax losses arising during the year 437,338 1,203,903 - 740,535Utilisation of tax losses (463,695) (257,462) (261,312) -Adjustments due to acquisitions / disposals / mergers (34,317) - - -

2,648,021 2,579,686 1,240,548 1,439,750



Liability toadditional

Cost of tax onYear of approved Relief disposal of

investment investment claimed investments

30.5 Details of investment reliefCompany 1999/2000 579,036 175,015 -

The company is eligible for qualifying payment relief granted under Section 31(2)(s) of the Inland Revenue Act, No.28 of 1979 and thetransitional provisions at Section 218 of the Inland Revenue Act No. 10 of 2006. The company had claimed qualifying payment relief of Rs. 97mn for the year and the balance investment relief has been carried forward for set off in future years.

30.6 Applicable rates of income tax

The tax liability of resident companies are computed at the standard rate of 35% except for the following companies which enjoy full or partialexemptions and concessions.

Exemptions/Company / Sector Basis concessions Period

Exemptions / concessions granted under the Inland Revenue Act

Ceylon Cold Stores PLC Off-Shore activities for payment Exempt Open-endedin foreign currency

John Keells Computer Services (Pvt) Ltd - do - - do - - do -John Keels Office Automation (Pvt) Ltd - do - - do - - do -Keells Hotel Management Services Ltd. - do - - do - - do -Walkers Tours Ltd. - do - - do - - do -Ceylon Cold Stores PLC Manufacture of dairy produce Exempt Upto 31 March 2011Leisure Sector Promotion of tourism 15% Open-endedMackinnons American Express Travels (Pvt.) Ltd. - do - - do - - do -Consumer Foods and Retail Sector Qualified export profits 15% Upto 31 March 2014John Keells Computer Services (Pvt) Ltd. - do - - do - - do -

Exemptions / concessions granted under the Board of Investment Law

Asian Hotels and Properties PLC. Construction and operation of Exempt 15 years from April 1996 with aoffice and apartment complex 3 year extension on merger

Auxicogent International Lanka (Pvt) Ltd. Business / knowledge process Exempt 8 years from 1st year of profitoutsourcing centre or 2 years from operations

InfoMate (Pvt) Ltd. Provision of IT enabled services Exempt 3 years from April 2007

John Keells International (Pvt) Ltd Regional operating headquarters Exempt 3 years from April 2006

John Keells Logistics (Pvt) Ltd Integrated supply chain Exempt 5 years from 1st year of profitmanagement or 2 years from operations

Lanka Marine Services Ltd. Supply of petroleum / bunkering Exempt 5 year concession uptoand marine lubricants December 2007 15% thereafter

South Asia Gateway Terminals (Pvt) Ltd. "Port Services" at Exempt 20 years from September 1999Queen Elizabeth Quay

John Keells Warehousing (Pvt) Ltd Construction and operation of 15% 7 years from April 2003warehouse complex

Yala Village (Pvt) Ltd Construction and operation of 15% 15 years from September 2003safari-styled tourist hotel



Other miscellaneous concessions

Exemption on interest income earned from foreign currency denominated accounts.

Gains from sale of shares held for less than two years and / or not charged with share transaction levy, are subject to an income tax at the rate of 15%.

Income / profits from off-shore dividends are taxed at a rate of 10%

30.7 Income tax rates of off-shore subsidiaries

Country of incorporation Rate

Auxicogent Alpha (Pvt) Ltd. Mauritius 3% (Effective)Auxicogent Holdings (Pvt) Ltd. Mauritius 3% (Effective)Auxicogent International (Pvt) Ltd. Mauritius 3% (Effective)Auxicogent US Inc. USA 35% (Max)Auxicogent Investments Mauritius (Pvt) Ltd. Mauritius 3% (Effective)Fantasea World Investments (Pte) Ltd. Republic of Maldives NilInformation System Associates United Arab Emirates NilJohn Keells Business Systems (UK) Ltd. United Kingdom 35%John Keells Maldivian Resorts (Pte) Ltd. Republic of Maldives NilJohn Keells Singapore (Pte) Ltd. Singapore 18%Mack Air Services Maldives (Pte) Ltd. Republic of Maldives NilMatheson Keells Air Services (Pvt) Ltd. India 33.99% (Effective)Matheson Keells Enterprises (Pvt) Ltd. India 33.99% (Effective)Serene Holidays (Pvt) Ltd. India 33.99% (Effective)Tranquility (Pte) Ltd. Republic of Maldives NilTravel Club (Pte) Ltd. Republic of Maldives Nil

Companies incorporated in India are subject to a Fringe Benefit Tax (FBT), charged on selected expenses at specified rates, against each itemof expense. Applicable rates of FBT vary from 5%-100% depending on the item of expense.

GroupFor the year ended 31st March 2008 2007In Rs.'000s

31 EARNINGS PER SHARE

31.1 Basic earnings per share

Profit attributable to equity holders of the parent 5,118,244 3,534,674Weighted average number of ordinary shares 31.3 635,194 576,449

Basic earnings per share 8.06 6.13

31.2 Diluted earnings per share

Profit attributable to equity holders of the parent 5,118,244 3,534,674Adjusted weighted average number of ordinary shares 31.3 639,771 584,882

Diluted earnings per share 8.00 6.04

In '000s

31.3 Amount used as denominator

Ordinary shares at the beginning of the year 552,940 400,007Bonus shares issued 78,960 136,123Bonus element of rights issue - 30,267Effect of share options exercised and rights issue of shares 3,294 10,052Weighted average number of ordinary shares in issue before dilution 635,194 576,449

Number of shares outstanding under the share option scheme 30,941 19,283Number of shares that would have been issued at fair value (26,364) (10,850)Adjusted weighted average number of ordinary shares 639,771 584,882

For the year ended 31st March 2008 2007In Rs.'000s Rs. Rs.

32 DIVIDEND PER SHAREEquity dividend on ordinary shares

Declared and paid during the yearFinal dividend* 1.00 632,669 1.00 400,142Interim dividend 4.00 2,543,633 2.00 1,012,164Total dividend 5.00 3,176,302 3.00 1,412,306*Previous years' final dividend paid in the current year.




Notes to the financial statements33

SEG

MEN

TIN

FORM

ATIO

N

33.1

Prim

ary

segm

ents

(bus

ines

sse

gmen

ts)

Tran

spor

tatio

nLe

isure

Prop

erty

Con

sum

erFo

od&

Ret

ail

Fina

ncialS

ervice

sIn

form

atio

nTe

chno

logy

Oth

ers

Gro

upTo

tal

Fort

heye

aren

ded

31st

March

2008

2007

2008

2007

2008

2007

2008

2007

2008

2007

2008

2007

2008

2007

2008

2007

InRs.’000s

Totalrevenue

13,2

04,4

899,686,562

10,4

71,5

068,176,210

2,77

1,08

01,579,527

11,6

73,7

2810,093,670

163,

284

191,972

2,29

5,22

82,650,047

3,31

8,86

92,213,276

43,8

98,1

8434,591,264

Intrasegmentrevenue

--

(607

,835

)(534,009)

(2,5

21)

-(2

56,4

45)

(255,009)

--

(9,4

14)

(7,428)

(63,

663)

(39,961)

(939

,878

)(836,407)

Segm

entr

even

ue13

,204

,489

9,686,562

9,86

3,67

17,642,201

2,76

8,55

91,579,527

11,4

17,2

839,838,661

163,

284

191,972

2,28

5,81

42,642,619

3,25

5,20

62,173,315

42,9

58,3

0633,754,857

Intersegmentrevenue

(185

,480

)(110,272)

(71,

970)

(52,937)

(150

,994

)(117,013)

(33,

340)

(48,003)

--

(198

,002

)(216,316)

(513

,177

)(355,295)

(1,1

52,9

63)

(899,836)

Rev

enue

13,0

19,0

099,576,290

9,79

1,70

17,589,264

2,61

7,56

51,462,514

11,3

83,9

439,790,658

163,

284

191,972

2,08

7,81

22,426,303

2,74

2,02

91,818,020

41,8

05,3

4332,855,021

Segm

entr

esul

ts1,

098,

993

1,447,897

1,03

3,73

91,025,852

823,

821

720,326

567,

345

632,065

50,9

9493,473

66,8

46131,132

(29,

050)

(273,414)

3,61

2,68

83,777,331

Eliminations/unallocated

2,28

6,25

1462,388

5,89

8,93

94,239,719

Financeexpenses

(46,

886)

(18,745)

(760

,312

)(570,330)

(61,

395)

(26,260)

(192

,445

)(104,721)

(44)

(608)

(7,8

16)

(2,482)

(549

,357

)(591,344)

(1,6

18,2

55)(1,314,490)

Changeinfairvalueof

investmentproperties

--

--

-109,612

--

--

--

--

-109,612

Shareofresultsofassociate

1,86

6,00

81,379,016

--

--

--

347,

814

227,116

(98,

267)

(12,484)

127,

158

107,344

2,24

2,71

31,700,992

Profitonsaleofnoncurrent

investments

--

--

--

--

--

--

55,1

5158,952

55,1

5158,952

Prof

it/(

loss)b

efor

eta

x3,

054,

403

2,887,271

363,

906

518,549

840,

850

843,862

387,

323

539,924

421,

911

337,459

89,7

2999,962

1,42

0,42

6(432,242)

6,57

8,54

84,794,785

Taxexpense

(150

,807

)(130,421)

(16,

899)

(18,814)

(55,

449)

(30,425)

(138

,861

)(226,804)

(129

,860

)(112,293)

(46,

340)

(43,810)

(516

,526

)(288,996)

(1,0

54,7

42)

(851,563)

Prof

it/(lo

ss)f

orth

eye

ar2,

903,

596

2,756,850

347,

007

499,735

785,

401

813,437

248,

462

313,120

292,

051

225,166

43,3

8956,152

903,

900

(721,238)

5,52

3,80

63,943,222

Attrib

utab

leto

:Equityholdersoftheparent

2,86

3,80

82,719,567

333,

048

445,235

663,

900

699,149

153,

601

181,944

283,

469

212,203

43,3

8956,152

777,

029

(779,576)

5,11

8,24

43,534,674

Minorityinterest

39,7

8837,283

13,9

5954,500

121,

501

114,288

94,8

61131,176

8,58

212,963

--

126,

871

58,338

405,

562

408,548

2,90

3,59

62,756,850

347,

007

499,735

785,

401

813,437

248,

462

313,120

292,

051

225,166

43,3

8956,152

903,

900

(721,238)

5,52

3,80

63,943,222

Purchaseofproperty,plant&

equipment

244,

087

151,183

1,58

0,13

51,395,107

60,8

8863,016

753,

688

926,039

290

4,755

118,

573

46,161

43,1

75182,684

2,80

0,83

62,768,945

Depreciation

84,3

2554,684

821,

516

609,679

26,9

2839,791

311,

702

261,259

2,67

01,950

26,3

2010,577

170,

704

146,176

1,44

4,16

51,124,116

Gratuityprovisionandrelatedcosts

21,3

9214,025

44,7

1344,301

2,24

83,646

56,3

0047,534

1,72

61,546

17,8

9612,858

21,1

4228,905

165,

417

152,815

Inadditiontosegmentresultsotherinformationsuchasfinanceexpenses,taxexpenseshavebeenallocatedtosegmentsforbetterpresentation.


Notes to the financial statements33

.2Pr

imar

yse

gmen

ts(b

usin

essse

gmen

ts)

Tran

spor

tatio

nLe

isure

Prop

erty

Con

sum

erFo

ods&

Ret

ail

Fina

ncialS

ervice

sIn

form

atio

nTe

chno

logy

Oth

ers

Gro

upTo

tal

Asat

31st

Mar

ch20

082007

2008

2007

2008

2007

2008

2007

2008

2007

2008

2007

2008

2007

2008

2007

InRs.’000s

Property,plantandequipment

1,72

9,62

21,276,460

18,8

13,8

3512,626,220

759,

031

276,828

3,67

8,99

52,437,567

6,27

28,651

168,

134

100,798

1,12

9,24

71,059,165

26,2

85,1

3617,785,689

Leaseholdproperty

--

4,57

9,69

44,701,567

--

--

--

--

58,5

4059,936

4,63

8,23

44,761,503

Investmentproperties

--

1,13

0,75

51,110,870

2,37

8,92

82,597,605

--

--

--

1,79

3,09

51,534,730

5,30

2,77

85,243,205

Intangibleassets

--

--

--

--

--

11,3

6420,081

-11

,364

20,081

Otherinvestments

715

465

25,0

8325,083

12,4

458,114

3,10

03,100

--

--

100,

782

111,496

142,

125

148,258

Othernon-currentassets

58,8

0030,501

248,

473

469,138

199,

348

1,047,227

580,

288

477,706

10,1

0620,000

649,

908

33,700

59,0

15146,234

1,80

5,93

82,224,506,

Intercompanylending

43,9

5043,950

2,53

5,59

71,462,251

--

--

--

12,4

27-

21,0

0037,952

2,61

2,97

41,544,153

Segm

entn

on-c

urre

ntas

sets

1,83

3,08

71,351,376

27,3

33,4

3720,395,129

3,34

9,75

23,929,774

4,26

2,38

32,918,373

16,3

7828,651

841,

833

154,579

3,16

1,67

92,949,513

40,7

98,5

4931,727,395

Investmentsinassociates

6,73

9,94

76,275,170

1,86

0,67

41,426,649

425,

406

525

860,

493

812,693

9,88

6,52

08,515,037

Investmentinsubsidiariesandjointventure

5,11

55,115

Deferredtaxassets

91,0

7474,013

Goodwill

329,

889

318,680

Eliminations/adjustments

(2,7

57,0

46)(2,453,099)

Tota

lnon

-cur

rent

asse

ts48

,354

,101

38,187,141

Inventories

1,53

5,43

1846,206

228,

330

199,138

740,

125

1,234,338

1,14

8,69

4802,418

--

74,5

38172,147

268,

292

153,534

3,99

5,41

03,407,781

Trade&

otherreceivables

1,12

5,10

61,225,928

3,88

4,81

93,544,192

120,

015

181,909

1,06

0,31

71,097,422

528,

654

149,353

458,

894

676,185

1,09

5,40

41,194,453

8,27

3,20

98,069,442

Investmentsheldforsale

--

--

6,49

4-

--

--

-30

,837

37,3

31-

Shortterminvestments

1,39

8,16

71,139,676

250,

129

96,009

1,09

8,42

5916,346

5,80

01,800

143,

000

119,400

145,

403

1,459,140

7,41

4,44

312,406,238

10,4

55,3

6716,138,609

Cashinhandandatbank

633,

877

489,287

746,

475

612,934

(6,7

71)

79,942

87,8

93172,530

3,76

39,603

249,

984

88,720

445,

589

173,457

2,16

0,81

01,626,473

Segm

entc

urre

ntas

sets

4,69

2,58

13,701,097

5,10

9,75

34,452,273

1,95

8,28

82,412,535

2,30

2,70

42,074,170

675,

417

278,356

928,

819

2,396,192

9,25

4,56

513,927,682

24,9

22,1

2729,242,305

Taxrefunds

1,18

8,90

61,243,220


(2,6

71,1

23)(2,726,217)

Tota

lcur

rent

asse

ts23

,439

,910

27,759,308

Tota

lasset

s71

,794

,011

65,946,449

Noninterestbearingborrowings

85,9

50133,950

3,39

4,44

22,853,975

(774

,049

)-

--

--

--

--

2,70

6,34

32,987,925

Interestbearingborrowings

12,1

73-

4,70

0,73

83,102,359

-208

421,

831

377,590

--

-2,

674,

710

2,970,976

7,80

9,45

26,451,133

Employeebenefitliability

78,9

5764,386

232,

543

205,076

24,0

0012,929

256,

828

217,129

9,86

58,304

60,4

5357,574

135,

954

152,917

798,

600

718,315

Otherdeferredliabilities

--

3,22

3-

--

--

--

--

3,88

73,762

7,11

03,762

Othernoncurrentliabilities

--

--

--

352,

051

334,249

--

--

--

352,

051

334,249

Segm

entn

on-c

urre

ntlia

bilit

ies

177,

080

198,336

8,33

0,94

66,161,410

(750

,049

)13,137

1,03

0,71

0928,968

9,86

58,304

60,4

5357,574

2,81

4,55

13,127,655

11,6

73,5

5610,495,384

Deferredtaxliabilities

755,

366

591,867


(2,6

85,3

43)(2,957,925)

Tota

lnon

-cur

rent

liabi

lities

9,74

3,57

98,129,326

Trade&

otherpayables

2,32

5,21

01,480,929

2,76

4,56

43,156,564

497,

787

955,808

1,56

4,22

5887,878

535,

945

152,373

321,

673

634,259

926,

470

734,472

8,93

5,87

48,002,283

Shorttermborrowings

90,9

58-

1,36

2,55

11,841,730

56,0

0046,581

473,

077

300,000

--

--

39,3

87500,000

2,02

1,97

32,688,311

Currentportionofinterest

--

--

--

--

--

--

--

--

bearingborrowings

--

592,

180

532,694

-3

156,

207

137,080

--

--

311,

365

704,636

1,05

9,75

21,374,413

Bankoverdrafts

238,

593

149,484

1,75

3,84

51,269,042

81,8

68180,616

618,

730

511,338

12,3

5346,707

1,71

216,495

694,

619

2,644,979

3,40

1,72

04,818,661

Segm

entc

urre

ntlia

bilit

ies

2,65

4,76

11,630,413

6,47

3,14

06,800,030

635,

655

1,183,008

2,81

2,23

91,836,296

548,

298

199,080

323,

385

650,754

1,97

1,84

14,584,087

15,4

19,3

1916,883,668

Incometaxliabilities

328,

104

188,250


(2,6

88,8

55)(2,190,307)

Tota

lcur

rent

liabi

lities

13,0

58,5

6814,881,611

Tota

lliabi

lities

22,8

02,1

4723,010,937

Totalsegmentassets

6,52

5,66

85,052,473

32,4

43,1

9024,847,402

5,30

8,04

06,342,309

6,56

5,08

74,992,543

691,

795

307,007

1,77

0,65

22,550,771

12,4

16,2

4416,877,195

65,7

20,6

7660,969,700

Totalsegmentliabilities

2,83

1,84

11,828,749

14,8

04,0

8612,961,440

(114

,394

)1,196,145

3,84

2,94

92,765,264

558,

163

207,384

383,

838

708,328

4,78

6,39

27,711,742

27,0

92,8

7527,379,052



33.3 Secondary segments (geographical segments, based on the location of assets)

Sri Lanka Asia (excluding Sri Lanka) Others Group Total2008 2007 2008 2007 2008 2007 2008 2007

Segment revenue 38,216,931 30,674,219 4,704,444 3,040,881 36,931 39,757 42,958,306 33,754,857Segment results 3,161,569 2,954,471 492,142 791,333 (41,023) 31,527 3,612,688 3,777,331Segment assets 49,933,192 50,063,059 14,321,458 10,862,009 1,466,026 44,632 65,720,676 60,969,700Segment liabilities 16,453,744 20,690,877 10,586,619 6,671,408 52,512 16,767 27,092,875 27,379,052Investment in associates 9,461,114 8,514,512 - 525 425,406 - 9,886,520 8,515,037Purchase of property,plant and equipment 1,495,096 2,540,482 1,305,594 220,622 146 7,841 2,800,836 2,768,945Depreciation 1,125,351 948,436 315,989 175,619 2,825 61 1,444,165 1,124,116Gratuity provision andrelated costs 165,748 148,500 (331) 3,979 - 336 165,417 152,815

Impairment losses 3,283 11,678 - - - - 3,283 11,678Grants and subsidies amortised 1,622 1,635 - - - - 1,622 1,635

34 RELATED PARTY TRANSACTIONSThe company carried out transactions in the ordinary course of business at commercial rates with the following related entities. The list ofdirectors at each of the subsidiary and associate companies have been disclosed in the group directory.

Group Company2008 2007 2008 2007

34.1 Amounts due from related partiesSubsidiaries - - 227,276 822,616Joint ventures 13,171 - - -Associates 4,314 1,588 205 1,398Companies under common control - - - -Key management personnel (KMP) - - - -Close family members of KMP - - - -Companies controlled / jointly controlled / significantly - - - -influenced by KMP and their close family members - - - -Post employment benefit plan - - - -

17,485 1,588 227,481 824,014

34.2 Amounts due to related partiesSubsidiaries - - 9,996 128,218Joint ventures - - - -Associates 692 - - -Companies under common control - - - -Key management personnel - - - -Close family members of KMP - - - -Companies controlled / jointly controlled / significantly - - - -influenced by KMP and their close family members 24,261 16,935 - -Post Employment Benefit Plan - - - -

24,953 16,935 9,996 128,218


34.3 Transactions with related parties

Subsidiaries(Purchases) / Sales of goods - - (3,042) (82,286)(Receiving) / Rendering of services - - (436,845) (326,541)(Purchases of property plant & equipment) - - 410 -(Loans taken) / Loans given - - 308,000 (46,866)Interest received / (Interest paid) - - 47,728 55,712Rent (taken) / Given - - (17,330) (17,719)(Guarantees taken) / Guarantees given - - 859 1,371




Joint Ventures(Receiving) / Rendering of services 13,338 56,216 - -

Associates(Purchases) / Sales of goods (396) 5,467 - -(Receiving) / Rendering of services (311,856) (416,302) (2,149) (4,795)(Loans taken) / Loans given - (100,000) - -Interest received / (Interest paid) 1,345,788 77,068 365,161 (1,676)(Leases taken) (12,173) (22,750) - -

Key management personnel(Receiving) / Rendering of services 4,592 4,244 - -

Close family members of KMP(Receiving) / Rendering of services 1,893 1,691 - -

Companies controlled / jointly controlled / significantlyinfluenced by KMP and their close family members(Purchases) / Sales of goods (76,522) (104,493) - -(Receiving) / Rendering of services 4,781 5493 - -

Post employment benefit planContributions to the provident fund 165,825 133,052 35,668 38,236

34.4 Terms and conditions of transactions with related partiesTransactions with related parties are carried out in the ordinary course of the business. Outstanding balances at year end are unsecured, interestfree and settlement occurs in cash.

34.5 Compensation of key management personnelKey management personnel include members of the Board of directors of John Keells Holdings PLC and its subsidiary companies.


Short-term employee benefits 214,573 204,531 112,502 104,303Post employment benefits - - - -Other long-term benefits - - - -Termination benefits - - - -Share based payments - - - -

214,573 204,531 112,502 104,303

Directors' interest in the employee share option plan of the company

As at 31 March 2008, the executive members of the Board of directors held options to purchase ordinary shares under the employee share optionplan as follows

744,800 Ordinary Shares at a price of Rs. 70.81 each, exercisable before 22-1-20091,504,648 Ordinary Shares at a price of Rs. 92.72 each, exercisable before 28-3-20101,369,897 Ordinary Shares at a price of Rs. 120.74 each, exercisable before 9-4-20111,380,403 Ordinary Shares at a price of Rs. 146.00 each, exercisable before 27-5-20121,540,325 Ordinary Shares at a price of Rs. 120.00 each, exercisable before 23-3-2013

No share options have been granted to the non-executive members of the Board of directors under the employee share option plan.



35 CONTINGENT LIABILITIES

John Keells Holdings PLC. - Goods and Services Tax (GST) / Value Added Tax (VAT)The company has been issued with assessments under the Goods and Services Tax Act and the Value Added Tax Act in relation to taxable periodsApril to July 2002 and August 2002 to March 2003, respectively, against which appeals have been filed. In hearing the appeals, the CommissionerGeneral of Inland Revenue has determined a liability of Rs. 16.2 million and 53.2 million for GST and VAT, respectively.

The company's appeal against the Commissioner General's determination is to be heard before the Board of Review contsituted under the InlandRevenue Act.

Based on the information available and on expert advice, the directors are confident that the ultimate resolution of the above contingency isunlikely to have a material adverse effect on the financial position of the company.

Lanka Marine Services Ltd. (LMS)Value Added Tax (VAT) refunds amounting to Rs. 355 mn are in dispute with the Department of Inland Revenue. The company contends thatthe supply of bunkers to ships constitutes an export that qualifies for zero rating and that it is entitled to a refund of VAT paid on inputs. TheDepartment of Inland Revenue, which earlier accepted the company's claim, has now reversed its position. Legal opinions from independent taxconsultants and independent legal counsel all support the company's position and the company intends to pursue its claim in accordance withthe provisions in the Value Added Tax Act, No. 14 of 2002 for resolution of disputes. The appeals made by the company are currently with theBoard of Review of the Department of Inland Revenue.

The company has appealed against income tax assessments relating to years of assessments 2001/02 and 2002/03, where refunds have beenclaimed on the basis that its business activity is that of an export, which has been disputed by the Department of Inland Revenue. Taxes assessedamount to Rs. 92 mn. The appeal made by the company is currently with the Board of Review of the Department of Inland Revenue.

The company has also disputed a post privatisation turnover tax to the value of Rs. 64 mn levied by the Western Provincial Council on the basisthat its business activity is that of an export. The appeal made by the company is pending further review by the Western Provincial Council.

Sri Lanka Customs have claimed Rs. 38 million as Excise Duty and VAT on a single gas procurement from Ceylon Petroleum Corporation. Thecustoms inquiry was held and the show-cause letter has been issued. However, LMS made an application to the court of appeal to quash the ordermade by the inquiring officer. The matter is pending before the court of appeal.

Two petitions have been filed in the Supreme Court of Sri Lanka by a member of the public, to set aside the privatisation by the Governmentof Sri Lanka of LMS and to set aside the concessions granted by the Board of Investment of Sri Lanka to LMS. The hearing before the SupremeCourt commenced in January 2008, in the first case and hearings in the second case is due to commence on 5 May 2008. John Keells HoldingsPLC and LMS have been advised that due process has been followed by them and the law has been duly and properly complied with.

Tea Smallholder Factories PLCDuring the year 2006/07 the company was issued with assessments in respect of income tax, disallowing the management fee in excess of Rs. 1mn for the years 2003/04, 2004/05 and 2005/06 for an aggregate additional amount of Rs. 16 mn.While appeals have been lodged against the assessment, the company will contest the validity of such assessments in accordance with theprovisions in the income tax law.Based on the information available, the directors are confident the the ultimate resolution of the above contingency is not likely to have a materialadverse effect on the financial position of the company.

Other contingent liabilities - groupOther contingent liabilities of the group as at the balance sheet date, on account of guarantees issued to or on behalf of associate companiesand other third parties amounted to Rs.421 mn (2007 - Rs. 287.7 mn).

36 CAPITAL COMMITMENTS

GroupCapital commitments approved and contracted as at the balance sheet date, not provided for in financial statements amounts to Rs. 3,917 mn.

Details are given below.

As at 31st March 2008 2007In Rs. '000s

Asian Hotels and Properties PLC. - Crescat Division 3,782,710 3,276,389Asian Hotels and Properties PLC.- Cinnamon Grand 32,105 28,833AuxiCogent International Lanka (Pvt) Ltd. - 23,537Ceylon Cold Stores PLC. 30,971 241,000Lanka Marine Services Ltd. 66,088 -Mackinnons American Express Travel (Pvt) Ltd. - 7,735Tea Smallholder Factories PLC. - 3,246Trans Asia Hotels PLC. 4,848 1,562

CompanyThe company does not have significant capital committments as at the balance sheet date




37 LEASE COMMITMENTSLease rentals due on non-cancellable operating leases:Within one year 1,052,888 649,416Between one and five years 4,436,478 2,721,832After 5 years 16,916,811 6,427,598

22,406,177 9,798,846

37.1 Details of leases

Company Lessor Leased properties

Ceylon Cold Stores PLC Colombo Divisional Secretariat Land occupied.

Ceylon Holiday Resorts Ltd.Bentota Beach Hotel Sri Lanka Tourist board Land occupied.Coral Gardens Hotel. Sri Lanka Tourist board Land occupied.

Fantasea World Investment (Pte) Ltd. Government of Maldives Land occupied.

Habarana Lodge Ltd. Kekirawa Divisional Secretariat Land occupied.

Habarana Walk Inn Ltd. Kekirawa Divisional Secretariat Land occupied.

John Keells Maldivian Resorts (Pte) Ltd Government of Maldives Land occupied.

Jaykay Marketing Services (Pvt) Ltd. R.J. S. Exports (Pvt) Ltd/Mr. Ramesh Abeywardena Land occupied.

John Keells PLC. Divisional Secretariat Land occupied.

John Keells Singapore (Pte) Ltd. Mengiwa (Pvt) Limited Office space occupied.

Mack Air Services Maldives (Pte) Ltd State Trading Organization PLC. Office space occupied.

Travel Club (Pte) Ltd. Government of Maldives & a Sub Lease with Land occupied.

Tranquility (Pte) Ltd Government of Maldives Land occupied.Yacht Tours Maldives (Pvt) Ltd.

Yala Village ( Pvt) Ltd. Sri Lanka Tourist board Land occupied.

38 ASSETS PLEDGED

Share certificates pledged by John Keells Holdings PLC

Pledged to Share certificates of No of shares

Bankers Trustee Company Limited South Asia Gateway Terminals (Pvt) Ltd 99,447,756International Finance Corporation Asian Hotels and Properties PLC 185,530,612International Finance Corporation John Keells Hotels PLC 1,012,239,871

39 POST BALANCE SHEET EVENTS

The standby loan granted by International Finance Corporation for USD 75 mn was drawn down on 4 April 2008.

In April 2008, JKH announced an investment of USD 5.72 mn for a 44% equity stake in Quatrro Finance and Accounting Solutions (Pvt) Ltd,the India based finance and accounting (F&A) business of the Quatrro group.

The group invested in John Keells Foods India (Pvt) Ltd, a company incorporated in India to manufacture and market processed meats.

The company recently entered into a memorandum of understanding with Associated Motorways PLC and James Finlay & Company(Colombo) PLC to develop a contiguous 6.6 acre block of land in Colombo under a “City within City” theme.

As required by Section 56(2) of the Companies Act No. 07 of 2007, the Board of directors have confirmed that the company satisfies the solvencytest in accordance with Section 57 of the Companies Act No. 7 of 2007, and has obtained a certificate from the auditors, prior to declaring afinal dividend of Rs. 1.00 per share for this year, to be paid on 27 June 2008.

In accordance with the Sri Lankan Accounting Standard 12 (revised 2005), Events after the Balance sheet date, the final dividend declared hasnot been recognised as a liability in the financial statements as at 31 March 2008.


Consolidated value added statement

For the year ended 31st March 2008 2007 2006 2005 2004In Rs. '000s

Value AddedRevenue 41,805,343 32,855,021 29,462,674 23,232,371 21,865,844Other operating income 2,716,887 1,180,285 453,594 441,917 367,197

44,522,230 34,035,306 29,916,268 23,674,288 22,233,041Cost of materials and services (28,295,386) (21,235,283) (18,680,747) (14,102,568) (14,478,886)

16,226,844 12,800,023 11,235,521 9,571,720 7,754,155

Distribution of value added

% % % % %

To employeesSalaries and other benefits 4,369,368 27 4,089,731 32 4,191,174 37 3,909,896 41 3,131,835 40

To government revenueTaxes 3,271,250 20 2,328,464 18 1,943,929 17 1,492,417 16 1,211,406 16

To providers of capitalDividends to shareholders 3,176,302 20 1,412,306 11 1,197,481 11 1,075,253 11 459,936 6Minority interest 405,562 2 408,548 3 441,480 4 413,692 4 201,685 3Interest on borrowings 1,618,255 10 1,314,490 10 525,339 5 403,903 4 457,708 6

To maintain operationsDepreciation 1,444,165 9 1,124,116 9 1,083,459 10 1,074,559 11 862,596 11

Retained within the businessReserves 1,941,942 12 2,122,368 17 1,852,659 16 1,202,000 13 1,428,989 18

16,226,844 100 12,800,023 100 11,235,521 100 9,571,720 100 7,754,155 100

2007/08 2006/07

To Employees

To Government Revenue

To providers of capital

To maintain operations

Retained within the business

27%

20%32%

9%

12%

32%

17%24%

9%

17%


1870-1948Edwin John set out to Ceylon to join his brother George, aproduce and exchange broker. On 1 January 1901, the companybecame E. John & Co., produce, exchange and share brokers.The business remained a partnership until 1948 when itamalgamated with two London tea broking firms, William Jasand Hy Thompson and Co., and Geo White and Co., andrenamed itself E. John, Thompson, White & Co., Ltd, evolvinginto a private limited liability company.

1949-1973E. John, Thompson, White & Co., Ltd. then sought to expandits activities and in 1960 merged with Keell & Waldock Ltd.,another long established company engaged in produce, share andfreight broking. The new entity John Keells Thompson WhiteLtd. marked its entry into the leisure industry with theacquisition of Walkers Tours and Travels Ceylon Ltd. one ofcountry's leading tour operators in 1973.

1974-1985In 1974, the firm became John Keells Ltd, a rupee quoted publiccompany. In 1979, John Keels Holdings Ltd (JKH) wasincorporated to hold, control and manage the many companiesunder the Keells umbrella. Mackinnons group of companies wasbrought into the John Keells fold bringing with it, the agenciesfor P&O and British Steam Navigation Co. With both Walkersand Mackinnons already engaged in tourism, John Keellsinvested heavily between 1978 and 1983 in the hotel and travelindustry which was set to become a high growth sector.

1986-1990In October 1986, John Keells Holdings Ltd., having acquiredcontrolling interests in John Keells Ltd., and its subsidiary andassociate companies, was quoted on the Colombo StockExchange following a doubly oversubscribed public share issue of4,968,400 ten rupee ordinary shares. The group made steadyinroads into other key areas of the economy, moving in 1987into the export sector with Keells Diamonds Ltd. Another exportventure, Keells Aquariums Ltd., was established in 1990 for thebreeding of ornamental fish.

1991-1993JKH acquired the Whittall Boustead & Co. Ltd in the largestever deal at the time; a purchase that brought with it a vastamount of real estate in Colombo, Ceylon Cold Stores Ltd.,Ceylon Holiday Resorts which owned Coral Gardens Hotel,Bentota Beach Hotel, a land in Trincomalee and a stake in UnionAssurance. In 1992, the company entered into a joint venturewith DHL International to form DHL Keells, the first fullyrepresented Air Express company in Sri Lanka.

1994 - 1995In 1994, John Keells Holdings became the first Sri Lankan entityto make a global issue of shares; with 2.25 million globaldepository receipts listed on the Luxembourg Stock Exchangeand traded over the counter (OTC) world-wide. In the same yearWaldock Mackenzie Ltd., an investment bank wholly owned byJohn Keells Holdings Ltd., began operations.

In a 50-50 joint venture with Richard Pieris & Co. Ltd., RPKManagement Services (PVT) Ltd., was incorporated. Thiscompany acquired a controlling interest in Kegalle PlantationsLtd., and Maskeliya Plantations Ltd., in the privatization ofregional plantation companies. The John Keells Group with theNational Development Bank and the Central Finance Co. Ltd.also had a controlling stake in Tea Smallholders Factories Ltd.,which was offered on sale by the Government.

1996-1999In 1996, in the group's first major investment overseas, itacquired a lease on Velidhu Island Resort in the Maldives. KeellsPlantations Management Services acquires a controlling interestin Namunukula Plantations which owns 12,000 hectares of teaand rubber.

John Keells Holdings was the first Sri Lankan company to postpre tax profits of over a billion rupees in the financial year1997/08. A year later, Fortune magazine named JKH “One ofthe ten best Asian stocks to buy”. John Keells Computer Serviceswas established to takeover the operations of John KeellsSoftware.

In 1998 Nations Trust Bank (NTB) was established in a jointventure with the IFC and Central Finance. NTB subsequentlyacquired the business of the Colombo branch of Overseas TrustBank of Hong Kong. During the year JKH also began operatinga second Maldivian resort, Hakuraa Club.

Times treasuredin history


1999-2000The group became the largest local shareholder of South AsiaGateway Terminals-a massive infrastructure project to own,operate and develop the Queen Elizabeth quay of the port ofColombo. The project was the largest private sector investmentin Sri Lanka and was launched in alliance with severalinternational and multilateral organizations.

2000-2001JKH was rated among the best 300 small companies in the worldby Forbes Global magazine, the only Sri Lankan company to beamong the list. JKH also became the first company in Sri Lanka;to obtain the SLAAA rating from Fitch Rating Ltd. Moreover,JKH was the only Sri Lankan company to be admitted as a fullmember of the World Economic Forum. During this period twointernational operations were launched-Matheson KeellsEnterprises in Cochin, India (the shipping agent for PIL) andMack Air Services, Maldives (the GSA for American Airlines,Gulf Air, Leisure Cargo and Jet Airways in the Maldives). PizzaHut Sri Lanka was named the “Franchisee of the Year” for theIndian sub continent.

2001-2002JKH continued to be the highest capitalized company on theColombo Stock Exchange for the fifth successive year. JKH wasranked one of the “world's best 200 small companies”, the onlySri Lankan entity to be named in the list by Forbes globalmagazine.

2002-2003JKH acquired Lanka Marine Services, the only bunkering facilityat the port of Colombo. Nations Trust Bank acquired the localoperations of American Express. During the year the groupexited from its vegetarian food franchise Komala's. “ElephantHouse Super-Pola” is added to the group's supermarket network.

2003-2004In the largest ever transaction on the Colombo Stock Exchange,JKH acquired Asian Hotels & Properties, an acquisition thatbrought with it 40% of the five star room capacity in Colombo.The group sold its 50% stake in RPK Management Services(Pvt) Ltd.

2004-2005In restructuring the Resort Hotel Sector of the group, JohnKeells Hotels Limited (KHL) made a voluntary offer to acquirethe shares of all group resort companies. JKH acquired acontrolling stake in Mercantile Leasing Limited (MLL). TheJohn Keells Social Responsibility Foundation, the group's CSRarm, was established as a charitable company and registered as avoluntary social service organization.

2005-2006The group entered into a MOU to develop a third resort in theMaldives on Alidhoo Island. JKH acquired 80% of Yala VillageHotel. With the sale of Keells plantations, the group exited fromthe ownership of plantations. JKH entered into the BPO spacethrough a joint venture with Raman Roy Associates. The groupalso launched its new hotel brands “Cinnamon” and “Chaaya”.NTB merged with Mercantile Leasing Limited. John KeellsSocial Responsibility Foundation, the Corporate SocialResponsibility vehicle of the Group, obtained formal Charitystatus.

2006-2007The group acquired a lease on Dhonveli Beach and Spa in theMaldives and Ellaidhoo Tourist Resort in the Maldives, furtherenhancing its regional presence. Furthermore, JKH acquired 20per cent of Associated Motorways PLC. JKH increased its stakein South Asia Gateway Terminals (Pvt) Limited by 7.5 per centto 33.75 per cent. The group exited its restaurant businesses withthe sale of Keells Restaurants (Pvt) Limited and CrescatRestaurants (Pvt) Limited.

2007-2008Please refer operating highlights in the “Profile and Discussion”section.

Decade at aglance

Goup milestones

31st March 2008 2007 2006 2005 2004 2003 2002 2001 2000 1999Rs.’000s

OPERATING RESULTSGroup revenue 41,805,343 32,855,021 29,462,674 23,232,371 22,284,764 16,784,203 11,777,320 11,821,849 10,461,949 9,453,237

EBIT 8,196,803 6,109,275 4,835,800 3,554,938 3,441,746 2,183,333 1,206,287 1,527,182 1,696,337 1,317,700

Finance expenses (1,618,255) (1,314,490) (525,339) (403,903) (457,708) (329,478) (323,732) (221,806) (246,241) (142,925)

Share of results of associates 2,242,713 1,700,992 957,958 832,856 703,378 451,015 321,753 265,750 152,604 131,844

Profit before tax 6,578,548 4,794,785 4,310,461 3,151,035 2,376,191 1,808,855 882,555 1,305,376 1,450,096 1,174,775

Tax expense (1,054,742) (851,563) (818,841) (645,517) (285,581) (315,837) (290,208) (304,262) (285,375) (274,191)

Profit after tax 5,523,806 3,943,222 3,491,620 2,505,518 2,090,610 1,493,018 592,347 1,001,114 1,164,721 900,584

Extra-ordinary item - 185,427 - - - - - -Profit for the year 5,523,806 3,943,222 3,491,620 2,690,945 2,090,610 1,493,018 592,347 1,001,114 1,164,721 900,584

Attributable to:Minority interest 405,562 408,548 441,480 413,692 201,685 169,593 48,966 221,428 246,778 176,576Equity holders of the parent 5,118,244 3,534,674 3,050,140 2,277,253 1,888,925 1,323,425 543,381 779,686 917,943 724,008

5,523,806 3,943,222 3,491,620 2,690,945 2,090,610 1,493,018 592,347 1,001,114 1,164,721 900,584

CAPITAL EMPLOYEDStated capital 22,464,267 22,245,894 9,205,277 9,095,136 9,004,501 2,793,623 2,690,739 2,619,983 2,619,108 2,574,106Capital reserves 6,065,251 3,137,392 2,814,989 2,115,481 1,892,398 1,937,943 1,631,936 1,787,526 1,570,605 1,586,292Revenue reserves 15,688,302 13,851,913 10,780,840 7,461,581 6,330,723 5,082,482 3,961,474 3,772,915 3,351,356 2,629,585

44,217,820 39,235,199 22,801,106 18,672,198 17,227,622 9,814,048 8,284,149 8,180,424 7,541,069 6,789,983

Minority interest 4,774,044 3,700,313 3,633,759 3,715,890 4,939,611 2,061,439 1,801,799 1,959,408 2,058,045 1,961,806

Total equity 48,991,864 42,935,512 26,434,865 22,388,088 22,167,233 11,875,487 10,085,948 10,139,832 9,599,114 8,751,789

Total debt 12,666,924 15,362,518 5,327,263 9,104,658 4,055,555 4,120,606 3,568,460 2,587,777 2,266,597 1,891,98961,658,788 58,298,030 31,762,128 31,492,746 26,222,788 15,996,093 13,654,408 12,727,609 11,865,711 10,643,778

ASSETS EMPLOYEDProperty, plant and equipment 29,172,301 20,403,696 19,143,724 20,017,707 18,824,542 10,172,219 8,928,274 9,135,100 3,962,923 4,107,527Other non-current assets 19,181,800 17,783,445 8,903,699 6,093,532 3,717,326 3,797,260 2,972,882 2,203,266 6,602,139 5,121,637Current assets 23,439,910 27,759,308 11,478,005 13,588,612 9,797,444 6,134,068 9,242,458 8,304,191 7,993,422 7,491,176Liabilities net of debt (10,135,223) (7,648,419) (7,763,300) (8,207,105) (6,116,524) (4,107,454) (7,489,206) (6,914,948) (6,692,773) (6,076,562)

61,658,788 58,298,030 31,762,128 31,492,746 26,222,788 15,996,093 13,654,408 12,727,609 11,865,711 10,643,778

CASH FLOWCash flows fromoperating activities 6,913,873 2,522,535 2,664,316 4,619,654 3,138,269 1,891,398 1,148,559 1,638,322 2,154,065 1,779,377Cash flows from / (used in)investing activities (4,358,524) (10,088,254) (2,847,880) (4,482,420) (6,745,616) (2,002,460) (1,000,606) (1,261,461) (1,848,091) (1,454,607)Cashflows from / (used in)financing activities (6,261,924) 18,421,653 (1,027,361) 271,430 5,414,227 (31,311) (330,360) (644,611) 518,189 (94,505)Net increase / (decrease) incash and cash equivalents (3,706,575) 10,855,934 (1,210,925) 408,664 1,806,880 (142,373) (182,407) (267,750) 824,163 230,265

KEY INDICATORSBasic earnings per share (Rs.) 8.1 6.1 5.3 4.0 3.5 2.6 1.1 1.5 1.8 1.4Interest cover (no. of times) 5.1 4.6 9.2 8.8 6.2 6.5 3.7 6.9 6.9 9.2

Net assets per share (Rs.) * 69.6 68.1 40.0 27.4 31.6 18.9 16.2 16.1 14.8 13.2Enterprise value (Rs. ’000’s) 76,180,588 95,961,715 64,389,111 46,559,017 33,578,080 15,841,225 9,968,310 4,424,421 5,511,554 5,454,801EV / EBITDA 7.8 13.0 10.7 10.0 9.1 5.5 5.1 2.0 2.5 3.1Debt / equity ratio (%) 25.9 35.8 20.2 27.8 18.3 34.7 35.4 26.1 23.8 21.9Net dividend payout 3,176,302 1,412,306 1,197,481 1,075,253 725,783 342,203 329,869 353,128 168,150 151,343Current ratio (no. of times) 1.8 1.9 1.4 1.2 1.6 1.2 1.1 1.1 1.2 1.2

Market price per share (Rs.) * 119.8 155.0 157.8 135.5 84.1 40.8 33.4 19.3 23.4 23.0Bonus issues (ratio) - 1:7 - 1:5 1:4 & 1:10 - - 2:1 1:4 & 1:5 -Rights issues (ratio) - 1:5 - - 1:7 - - - - -Rights price (Rs.) - 140.00 - - 7.5 - - - - -

* Adjusted for dilution.


Decade at a glance - Selected goup financial data


Indicative US dollar financial statements

Balance sheetFor information purposes only

Group CompanyAs at 31st March 2008 2007 2008 2007In USD'000s

ASSETSNon-current assetsProperty, plant and equipment 270,665 186,845 2,685 3,482Leasehold property 43,034 43,604 - -Investment property 21,233 22,943 7,721 7,326Intangible assets 3,166 3,102 - -Investments in subsidiaries and joint ventures 47 47 161,926 132,288Investments in associates 91,729 77,977 57,569 54,900Other investments 1,162 1,358 881 979Deferred tax asset 845 678 - -Other non-current assets 16,756 13,145 609 915

448,637 349,699 231,391 199,890Current assetsInventories 36,974 31,141 8 8Investments held for sale 346 - 147 -Trade and other receivable 62,660 60,367 2,443 1,343Amounts due from related parties 162 15 2,111 7,546Short term investments 97,007 147,789 64,805 112,653Cash in hand and at bank 20,331 14,894 2,252 232

217,480 254,206 71,766 121,782

Total assets 666,117 603,905 303,157 321,672

EQUITY AND LIABILITIESEquity attributable to equity holders of the parentStated capital 208,427 203,717 208,427 203,717Capital reserves 56,274 28,731 - -Revenue reserves 145,559 126,849 58,850 52,345

410,260 359,297 267,277 256,062

Minority interest 44,294 33,886 - -

Total equity 454,554 393,183 267,277 256,062

Non-current liabilitiesNon-interest bearing borrowings 195 275 - -Interest bearing borrowings 72,457 59,076 24,081 31,415Deferred tax liabilities 7,008 5,420 - -Employee benefit liabilities 7,410 6,578 745 790Other deferred liabilities 66 34 - -Other non-current liabilities 3,266 3,061 - -

90,402 74,444 24,826 32,205

Current liabilitiesTrade and other payables 73,011 53,068 2,910 3,158Amounts due to related parties 232 155 93 1,174Income tax liabilities 3,044 1,724 - 44Short term borrowings 3,479 24,618 - 4,579Current portion of interest bearing borrowings 9,833 12,586 2,783 1,511Bank overdrafts 31,562 44,127 5,268 22,939

121,161 136,278 11,054 33,405

Total equity and liabilities 666,117 603,905 303,157 321,672

Exchange rate 107.78 109.20 107.78 109.20


Indicative US dollar financial statements

Income statementFor information purposes only

Group CompanyFor the year ended 31st March 2008 2007 2008 2007In USD'000s

Revenue 387,877 300,870 5,601 4,411

Cost of sales (286,208) (212,785) (2,547) (2,139)

Gross profit 101,669 88,085 3,054 2,272

Dividend income 867 445 29,313 26,504

Other operating income 25,208 10,808 15,254 1,967

Distribution expenses (12,428) (11,322) - -

Administrative expenses (47,518) (39,022) (5,914) (5,385)

Other operating expenses (13,065) (10,169) (342) (195)

Finance expenses (15,014) (12,037) (5,417) (5,791)

Change in fair value of investment property - 1,004 - -

Share of results of associates 20,808 15,577 - -

Profit on sale of non-current investments 512 540 383 339

Profit before tax 61,039 43,909 36,331 19,711

Tax expense (9,786) (7,798) (1,046) (70)

Profit for the year 51,253 36,111 35,285 19,641

Attributable to:

Equity holders of the parent 47,490 32,369

Minority interest 3,763 3,742

51,253 36,111

Exchange rate 107.78 109.20 107.78 109.20

This information does not constitute a full set of financial statements in compliance with SLAS. The financial statements should be read together withthe Auditors' opinion and the financial statements from pages 106 to 144. Exchange rates prevailing at each year end have been used to convert theincome statement and balance sheet.

Net book valueBuildings Land in acres 2008 2007

Owning company and location in (Sq. Ft) Freehold Leasehold Rs. '000s Rs. '000s

PROPERTIES IN COLOMBOCeylon Cold Stores PLC.Slave Island Complex, Colombo 2. 94,655 4.97 3.16 933,259 490,690

John Keells Holdings PLC.320,320/1, Colvin R. De Silva Mawatha, Colombo 2. 86,600 1.94 - 822,376 792,974

John Keells PLC.130 , Glennie Street , Colombo 2. 119,286 1.78 0.58 606,018 604,96556/1, 58, 58 1/1 Kirulapone Avenue, Colombo 5. 0.08 1,250 1,250

John Keells Properties (Pvt) Ltd125, Glennie Street, Colombo 2. 30,000 0.49 - 237,463 238,263

Keells Realtors Ltd.427 & 429, Ferguson Road, Colombo 15 27,750 1.29 - 97,014 97,714

Lanka Marine Services Ltd.69, Walls Lane, Colombo 15. 33,566 8.64 - 785,279 715,384

Mackinnon & Keells Financial Services Ltd.Leyden Bastian Road, York Street, Colombo 01. 34,733 0.45 - 296,548 297,652

Whittall Boustead Ltd.148, Vauxhall Street, Colombo 2. 61,044 3.07 - 875,303 875,869

487,634 22.71 3.74 4,654,510 4,114,761

PROPERTIES OUTSIDE COLOMBOCeylon Cold Stores PLC.Kaduwela 242,439 26.15 - 517,846 225,854Trincomalee 24,906 1.14 - 30,021 30,021

Jaykay Marketing Services (Pvt) Ltd.385, Negombo Road, Wattala. 12,820 - 0.30 10,909 12,262Liberty Plaza, Colombo 3. 10,000 - -388, Galle Road, Mount Lavinia. 6,000 - 0.24 9,070 10,524

John Keells PLC.17/1, Temple Road, Ekala, Ja-Ela. 3,180 3.25 - 42,190 42,190

John Keells Warehousing (Pvt) Ltd.Muthurajawela. 141,276 - 6.00 152,984 156,456

Keells Food Products PLC.41, Temple Road, Ekala, Ja-Ela. 50,199 3.00 3.26 126,282 57,336

Tea Smallholder Factories PLC.Peliyagoda. 31,633 - 0.99 79,000 77,500Neluwa. 46,706 18.27 - 32,186 22,275Hingalgoda. 56,796 12.52 - 35,934 31,222Halwitigala. 56,686 12.27 - 31,426 23,193Kurupanawa. 62,401 12.40 - 40,069 23,198Pasgoda. 40,354 5.41 - 22,222 17,704New Panawenna. 41,772 10.59 - 30,272 18,628Randola. 47,596 15.58 - 18,798 16,633Broadlands. 58,063 4.14 - 35,946 35,548Raxawa. 24,623 1.22 - 11,860 7,122Karawita. 66,874 - 4.99 93,854 84,016Hindul Oya. 10,500 0.97 - 1,819 1,986

Transware-Logistics ( Pvt) Ltd.Tudella, Ja-Ela. 65,000 22.00 - 427,763 197,615

Whittall Boustead Ltd.150, Badulla Road, Nuwara Eliya. 4,346 0.46 - 70,000 2,512

1,104,170 149.37 15.78 1,820,451 1,093,795


Group real estate portfolio

Net book valueBuildings Land in acres 2008 2007

Owning company and location in (Sq. Ft) Freehold Leasehold Rs. '000s Rs. '000s

HOTEL PROPERTIESAsian Hotels and Properties PLC.Cinnamon Grand Premises, Colombo 2. 648,813 11.04 - 8,212,004 5,790,801Crescat Boulevard, Colombo 2. 180,144 - - 1,078,688 1,296,914

Ceylon Holiday Resorts Ltd.Bentota Beach Hotel & Club Intersport, Bentota. 201,356 0.70 11.02 456,151 476,565Coral Gardens Hotel , Hikkaduwa. 167,350 - 4.36 175,000 231,163Central Laundary. 16,110 1.40 - 30,073 26,418

Fantasea World Investments (Pte) Ltd.Club Hakururaa, Republic of Maldives. 66,759 - 13.42 559,846 573,419

Habarana Lodge Ltd.The Lodge, Habarana. 194,606 - 25.47 489,238 346,577

Habarana Walk Inn Ltd.Chaaya Village, Habarana. 162,323 - 9.34 209,846 210,281

International Tourists and Hoteliers Ltd.Hotel Bayroo, Beruwela. - 6.55 - 50,800 50,875

John Keells Maldivian Resorts (Pte) LtdDhonveli, Republic of Maldives. 216,114 - 36.96 2,382,860 2,270,093

Kandy Walk Inn Ltd.The Citadel, Kandy. 116,725 5.79 - 311,831 257,154

Resort Hotels Ltd.Nilaveli. 4,485 44.37 - 107,900 84,666

Rajawella Hotels Ltd. 3,700 - 10.00 36,889 36,860

Trans Asia Hotels PLC.115, Sir Chittampalam A Gardiner Mawatha, Colombo 2. 425,386 - 7.20 3,688,842 3,418,744

Tranquility (Pvt) LtdAlidhoo, Republic of Maldives. 19,973 - - 2,732,224 -

Travel Club (Pte) Ltd.Ellidhoo, Republic of Maldives. 159,815 - 13.75 1,951,615 1,400,721Velidhu, Republic of Maldives. - - - - 160,708

Trinco Walk Inn Ltd.Club Oceanic, Trincomalee. 86,960 28.24 - 220,718 169,857

Unawatuna Walk Inn Ltd.Unawatuna - - - - 30,899

Wirawila Walk Inn Ltd.Randunukelle Estate, Wirawila. - 25.15 - 20,120 20,120

Yala Village (Pvt) Ltd.The Village, Yala. 67,330 10.00 237,258 240,013

2,737,949 123.24 141.52 22,951,903 17,092,848

Consolidated Value of Land and Buildings 4,329,753 295.32 161.04 29,426,864 22,301,404


Group real estate portfolio

TRANSPORTATION GROUP

Ports and Shipping

Keells Shipping (Pvt) Ltd (100%)Shipping Agency Representation and Logistics ServicesNo. 11, York Street, Colombo 1.�: 2475200Directors: S C Ratnayake – Chairman, J R F Peiris, R M David,R S Fernando (Resigned w.e.f 01.08.2007), L D Ramanayake(appointed w.e.f 01.08.2007)Stated capital: Rs. 500,000

Lanka Marine Services Ltd (99.44%)Importer and Supplier of Heavy Marine Fuel Oils and LubricantsNo. 69, Walls Lane, Colombo 15.�: 2522494, 2524531Directors: S C Ratnayake – Chairman, A D Gunewardene,J R F Peiris, R M David, R S Fernando (resigned w.e.f 01.08.2007)L D Ramanayake (appointed w.e.f 01.08.2007)Stated capital: Rs. 350,000,000

Maersk Lanka (Pvt) Ltd (30%)Shipping Agency Representation and Logistics ServicesNo. 36, D. R Wijewardene Mawatha, Colombo 10.�: 0112423700Directors: W T Ellawala, H O Madsen, Dinesh Lal, Hariharan Iyer,R M DavidStated capital: Rs. 10,000,000

South Asia Gateway Terminals (Pvt) Ltd (33.75%)Ports and Shipping ServicesPort of Colombo, P.O. Box 141, Colombo 01.�: 2457500Directors: S C Ratnayake – Chairman, A D Gunewardene,J R F Peiris, R M David, C Kuo Cheng, D Duff H O Madsen,R Vokes, R S Fernando (resigned w.e.f 01.08.2007), C J Childs(resigned w.e.f 10.04.2007), N A West (resigned w.e.f 22.05.2007),N M Naik (resigned w.e.f 22.05.2007), S Wickramasuriya (resignedw.e.f 12.06.2007), L D Ramanayake (appointed w.e.f 01.08.2007),H M Jepsen (appointed w.e.f 22.05.2007), H G Wieske (appointedw.e.f 22.05.2007), S Senerath (appointed w.e.f 23.05.2007),W G Samaratunge (appointed w.e.f 16.10.2007), J H Madsen(appointed w.e.f 12.11.2007)Stated capital: Rs. 3,788,485,900

Logistics

DHL Keells (Pvt) Ltd (50%)Express Courier ServicesNo. 148, Vauxhall Street, Colombo 02.�: 2304304 / 4798600Directors: S C Ratnayake – Chairman, R M David, J R F Peiris,G K A Tanner, R S Fernando (resigned w.e.f 01.08.2007),M A Monteiro (appointed w.e.f 05.09.2007)Stated capital: Rs. 20,000,020

John Keells Logistics (Pvt) Ltd (100%)Integrated Supply Chain and Third Party Logistics SolutionsNo. 11, York Street, Colombo 1.�: 2475200Directors: S C Ratnayake – Chairman, J R F Peiris, R M David,R S Fernando (resigned w.e.f 01.08.2007), A D Gunawardene(appointed w.e.f 09.04.2007), L D Ramanayake (appointed w.e.f01.08.2007)Stated capital: Rs. 80,000,000

Mack International Freight (Pvt) Ltd (100%)International Freight Forwarder and Logistics ServicesNo. 11, York Street, Colombo 01.�: 2475200Directors: S C Ratnayake– Chairman, J R F Peiris, R M David,R S Fernando (resigned w.e.f 01.08.2007), L D Ramanayake(appointed w.e.f 01.08.2007)Stated capital: Rs. 25,000,000

Mackinnon Mackenzie & Co (Shipping) Ltd (99.69%)Shipping Agency Representation and Logistics ServicesNo. 148, Vauxhall Street, Colombo 02.�: 2307526Directors: S C Ratnayake – Chairman, J R F Peiris, R M David,R S Fernando (resigned w.e.f 01.08.2007) L D Ramanayake(appointed w.e.f 01.08.2007)Stated capital: Rs. 5,000,000

Mackinnon Mackenzie & Co of Ceylon Ltd (99.5%)Foreign Recruitment Agents and ConsultantsNo. 11, York Street, Colombo 01.�: 2475200Directors: S C Ratnayake – Chairman, J R F Peiris, R M DavidStated capital: Rs. 90,000

Matheson Keells Enterprises (Pvt) Ltd (51%)Shipping Agency Representation and Logistics ServicesNo. 3627A, 7th Cross 13th Main, HAL 2nd Stage Indiranagar,Bangalore - 560008, India.�: +91(080)25201926 / 25201927Directors: S C Ratnayake – Chairman, R M David, R S Fernando,A Poddar, B K Sarronwala, B K Poddar, S R Kalyanam,L D Ramanayake (appointed w.e.f 24.09.2007)Share capital: Rs. 78,103,873

Trans-ware Logistics (Pvt) Ltd (50%)Integrated Container Depot. Operations and Logistics ServicesNo. 150, 150/1, Pamunugama Road, Thudella, Ja-Ela.�: 2232577 - 87Directors: S C Ratnayake – Chairman, J R F Peiris, R M David,Q K Liang, H B M Nashir, R S Fernando (resigned w.e.f 01.08.2007),R Sundaralingam (resigned w.e.f 01.04.2007), Z M Amin (appointedw.e.f 01.04.2007)Stated capital: Rs. 220,000,000

Whittall Boustead (Pvt) Ltd - Cargo Division (99.96%)International Freight Forwarder and Logistics ServicesNo. 11, York Street, Colombo 01.�: 2475299Directors: S C Ratnayake – Chairman, A D Gunewardene,J R F Peiris, R M David, S Rajendra, R S Fernando (resigned w.e.f01.08.2007)Stated capital: Rs. 99,304,300

AirlinesMack Air (Pvt) Ltd (100%)General Sales Agents for AirlinesNo. 01, Justice Akbar Mawatha, Colombo 02.�: Jet Airways - 2318770Gulf Air - 2318749 / 750Directors: S C Ratnayake – Chairman, J R F Peiris, R M David,C N Lawrence, R S Fernando (resigned w.e.f 01.08.2007),L D Ramanayake (appointed w.e.f 01.08.2007)Stated capital: Rs. 5,000,000

Mack Air Services Maldives (Pte) Ltd (49%)General Sales Agents for Airlines in the Maldives4th Floor, STO Aifaanu Building,Boduthakurufaanu Magu, Male 20-05, Republic of Maldives.


Group directory

�: +9603334708 - 09Directors: S C Ratnayake – Chairman, J R F Peiris, R M David,S Hameed, A ShihabShare capital: Rs. 677,891

Mackinnons American Express Travel (Pvt) Ltd (70%)IATA Accredited Travel Agent and Travel related ServicesCeylon Cold Stores BuildingNo. 1 Justice Akbar Mawatha, Colombo 02.�: 2318600 - 2318619Directors: S C Ratnayake – Chairman, R M David, K K Mukerji,S S Ahmed, R S Fernando (resigned w.e.f 01.08.2007)Stated capital: Rs. 5,000,000

Matheson Keells Air Services (Pvt) Ltd ( 51%)General Sales Agents for Airlines in India.Off 1 & 2 F.X TowersSwatantra Path, Opp. MPT InstituteVasco-da-Gama - 403 802�: 0832 2501425/ 2501426Directors: S C Ratnayake – Chairman, R M David, A Poddar,B K Sarronwala, S R Kalyanam L D Ramanayake(appointed w.e.f 24.09.2007)Share capital: Rs. 3,179,899

Walkers Air Services (Pvt) Ltd (100%)General Sales Agents for AirlinesNo. 11A, York Street, Colombo 01.�: 2422903/ 2422590Directors: S C Ratnayake – Chairman, J R F Peiris, R M David,R S Fernando (resigned w.e.f 01.08.2007) L D Ramanayake(appointed w.e.f 01.08.2007)Stated capital: Rs. 7,500,000

LEISURE GROUP

Hotel Management

John Keells Hotels PLC (92.69%)Holding Company of Group Resort Hotel Companies in Sri Lankaand the MaldivesNo.130, Glennie Street, Colombo 02.�: 2421101-8Directors: S C Ratnayake – Chairman, A D Gunewardene,J R F Peiris, J E P Kehelpannala, M A Omar, R T Wijesinha,D A Cabraal, R J Karunarajah (resigned w.e.f 24.07.2007),G S A Gunasekara (appointed w.e.f 24.07.2007)Stated capital: Rs. 5,859,879,989

Keells Hotel Management Services Ltd (100%)Manager and Marketer of Resort HotelsNo.130, Glennie Street, Colombo 02.� : 2421101-8Directors: S C Ratnayake – Chairman, A D Gunewardene,J R F Peiris, J E P KehelpannalaStated capital: Rs. 19,520,000

John Keells Maldivian Resorts (Pte) Ltd (92.69%)Hotel Holding Company in the Maldives4th Floor, STO Aifaanu Building,Boduthakurufaanu Magu, Male.� : 00960 3313738 /00960 3332867Directors: S C Ratnayake – Chairman, A D Gunewardene,J R F Peiris, J E P KehelpannalaShare capital: Rs. 2,411,168,681

Cinnamon Hotels and Resorts

Asian Hotels and Properties PLC - Cinnamon Grand(83.80%)Owner and Operator of the Five Star City Hotel "Cinnamon Grand"77, Galle Road, Colombo 3.�: 2437437 /2497442Directors: S C Ratnayake - Chairman, A D Gunewardene,J R F Peiris, R J Karunarajah, M T L Fernando, B M Amarasekera,I Samarawickrama, S RajendraStated capital: Rs. 3,345,118,112

Ceylon Holiday Resorts Ltd - Bentota Beach Hotel(90.77%)Owner and Operator of "Bentota Beach Hotel" in BentotaGalle Road, Bentota.�: 034 2275176 / 034 2275266Directors: S C Ratnayake – Chairman, A D Gunewardene,J R F Peiris, J E P KehelpannalaStated capital: Rs. 258,803,341

Habarana Lodge Ltd (91.15%)Owner and Operator of "The Lodge" in HabaranaP.O. Box2, Habarana.�: 066 2270011-2/ 066 2270072Directors: S C Ratnayake – Chairman, A D Gunewardene,J R F Peiris, J E P Kehelpannala, G S A Gunasekara(appointed w.e.f 24.07.2007)Stated capital: Rs. 116,555,262

Trans Asia Hotels PLC (85.02%)Owner and Operator of the Five Star City Hotel "Trans Asia".No. 115, Sir Chittampalam A. GardinerMawatha, Colombo 02.�: 2491000Directors: S C Ratnayake – Chairman, G S A Gunesekera,A D Gunewardene, J R F Peiris, D S J Pelpola, N L Gooneratne,R L Nanayakkara, A R Gunasekara (appointed w.e.f 01.09.2007)Stated capital: Rs. 1,112,879,750

Chaaya Hotels and Resorts

Ceylon Holiday Resorts Ltd - Coral Gardens Hotel(90.77%)Owner and Operator of "Coral Gardens Hotel" in HikkaduwaP.O. Box 1, Galle Road, Hikkaduwa�: 091 2277023/ 091 2277421Directors: S C Ratnayake – Chairman, A D Gunewardene,J R F Peiris, J E P KehelpannalaStated capital: Rs. 258,803,341

Fantasea World Investments (Pte) Ltd (92.69%)Owner and Operator of "Chaaya Lagoon Hakuraa Huraa" in theMaldives.Meemu Atoll, Republic of Maldives.�: 00960 6720014 /00960 6720065Directors: S C Ratnayake – Chairman, A D Gunewardene,J R F Peiris, J E P KehelpannalaShare capital: Rs. 341,573,190

Habarana Walk Inn Ltd (91.55%)Owner and Operator of "Chaaya Village Habarana"P.O Box1, Habarana.�: 066 2270046-7/ 066 2270077Directors: S C Ratnayake – Chairman, A D Gunewardene,J R F Peiris, J E P KehelpannalaStated capital: Rs. 25,475,000


Group directory

International Tourists and Hoteliers Ltd (90.24%)Owner and Operator of "Beach Hotel Bayroo" in BeruwelaNo.130, Glennie street, Colombo 02.�: 2421101-8Directors: S C Ratnayake – Chairman, A D Gunewardene,J R F Peiris, J E P Kehelpannala, H G Arrawawala, W M S Fernando,D C AlagaratnamStated capital: Rs. 89,525,925

John Keells Maldivian Resorts (Pte) Ltd (92.69%)Operator of "Chaaya Island Dhonveli " in the Maldives4th Floor, STO Aifaanu Building,Boduthakurufaanu Magu, Male.�: 00960 3313738 /00960 3332867Directors: S C Ratnayake – Chairman, A D Gunewardene,J R F Peiris, J E P KehelpannalaShare capital: Rs. 2,411,168,681

Kandy Walk Inn Ltd (91.1%)Owner and Operator of "The Citadel" in KandyNo.124, Srimath Kuda Ratwatte Mawatha, Kandy.�: 081 2234365-6/ 081 2237273-4Directors: S C Ratnayake – Chairman, A D Gunewardene,J R F Peiris, J E P Kehelpannala, R T MolligodaStated capital: Rs. 73,182,009

Rajawella Hotels Ltd (92.69%)Owner of Real EstateNo.130, Glennie street, Colombo 02.�: 2306780Directors: S C Ratnayake – Chairman, A D Gunewardene,J R F PeirisStated capital: Rs. 20,000,000

Resort Hotels Ltd (90.77%)Owner of Real EstateNo.130, Glennie street, Colombo 02.�: 2306780Directors: S C Ratnayake – Chairman, A D Gunewardene,J R F PeirisStated capital: Rs. 750,070

Travel Club (Pte) Ltd (92.69%)Operator of "Chaaya Reef Ellaidhoo" in the MaldivesNorth Air Atoll, Republic of Maldives.�: 00960 6660595 /00960 6660551Directors: S C Ratnayake – Chairman, A D Gunewardene,J R F Peiris, J E P KehelpannalaShare capital: Rs. 143,172,000

Trinco Walk Inn Ltd (92.69%)Owner and Operator of "The Club Oceanic Hotel" in TrincomaleeAlles Garden, Uppuveli,Sampathiv Post, Trincomalee.�: 026 2222307 /026 2221611Directors: S C Ratnayake – Chairman, A D Gunewardene,J R F Peiris, J E P KehelpannalaStated capital: Rs. 119,850,070

Wirawila Walk Inn Ltd (92.69%)Owner of Real EstateNo.130, Glennie street, Colombo 02.�: 2306780Directors: S C Ratnayake – Chairman, A D Gunewardene,G S A GunasekaraStated capital: Rs. 15,000,000

Yala Village (Pvt) Ltd (83.08%)Owner and Operator of "Yala Village" in YalaP.O Box 1, Kirinda, Tissamaharama.

�: 047 2239449-52Directors: M A Perera - Chairman, S C Ratnayake – DeputyChairman, A D Gunewardene, J R F Peiris, J A Davis,J E P KehelpannalaStated capital: Rs. 318.749,980

Tranquility (Pte) Ltd (92.69%)Owner and Operator of "Cinnamon Island Alidhoo" in the Maldives7th Floor, HOSAWA Building(MAAFANNU), BodhuthakurufaanuMagu, Male' 20252, Republic of Maldives.Directors: S C Ratnayake – Chairman (appointed w.e.f 05.05.2007),A D Gunewardene (appointed w.e.f 05.05.2007), J E P Kehelpannala(appointed w.e.f 05.05.2007)Share capital: Rs. 8,686,233

Destination Management

Serene Holidays (Pvt) Ltd (99.24%)Tour Operators421, Midas, Shar plaza, JB Cpitals Nagar,Andheri, kurla road, andheri(East), Mumbai 400 059, India.�: 091+2240053036-8Directors: A D Gunewardene - Chairman, V LeelanandaShare capital: Rs. 6,250,000

Walkers Tours Ltd (98.51%)Inbound Tour OperatorsNo.130, Glennie street, Colombo 02.�: 2421101-9Directors: S C Ratnayake – Chairman, A D Gunewardene,J R F Peiris, V LeelanandaStated capital: Rs. 51,374,200

Whittall Boustead (Travel) Ltd (100%)Inbound Tour OperatorsNo. 148, Vauxhall Street, Colombo 02.�: 2496700Directors: S C Ratnayake – Chairman, A D Gunewardene,J R F Peiris, V LeelanandaStated capital: Rs. 7,500,000

PROPERTY GROUPAsian Hotels and Properties Ltd - CrescatResidencies/Crescat Boulevard(83.8%)Developer and Manager of Integrated PropertiesNo.77, Galle Road, Colombo 03.�: 5540404Directors: S C Ratnayake – Chairman, A D Gunewardene,J R F Peiris, R J Karunarajah, M T L Fernando, B M Amarasekera,I Samarawickrama, S RajendraStated capital: Rs. 3,345,118,012

John Keells Properties (Pvt) Ltd (100%)Property DevelopersNo.130, Glennie street, Colombo 02.�: 2306000 /2421101-9Directors: S C Ratnayake – Chairman, A D Gunewardene,J R F PeirisStated capital: Rs. 240,000,030

Keells Realtors Ltd (92.07%)Owner of Land and BuildingNo.130, Glennie street, Colombo 02.�: 2306000 /2421101-9Directors: S C Ratnayake – Chairman, A D Gunewardene,J R F Peiris, S RajendraStated capital: Rs. 75,000,000


Group directory

CONSUMER FOODS AND RETAIL GROUP

ManufacturingCeylon Cold Stores PLC (57.08%)Beverages, Frozen Confectionery, Processed Meats, Dairy Productsand Holding company of JayKay Marketing Services (Pvt) Ltd.No. 1, Justice Akbar Mawatha, Colombo 02.�: 2328221/7, 2318798Directors: S C Ratnayake – Chairman, A D Gunewardene,J R F Peiris, J R Gunaratne, M D de Silva, U P Liyanage,P S Jayawardena, A R RasiahStated capital: Rs. 270,200,000

Keells Food Products PLC (73.32%)Manufacturer and Distributor of Branded Meat and ConvenienceFood Products.P.O Box 10,No.16, Minuwangoda Road, Ekala, Ja-Ela.�: 2236317/ 2236364Directors: S C Ratnayake – Chairman, A D Gunewardene,J R F Peiris, J R Gunaratne, M D de Silva, R Pieris ,S H Amarasekera, A D E I Perera, M P Jayawardena(appointed w.e.f 10.05.2007),Stated capital: Rs. 99,815,000

RetailJayKay Marketing Services (Pvt) Ltd (57.08%)Operator of "Keells Super" chain of SupermarketsNo.125, Glennie Street, Colombo 02.�: 2343792 / 2343794-98Directors: S C Ratnayake (Chairman), J R F Peiris, J R Gunaratne,M R N Jayasundera-MoraesStated capital: Rs. 498,000,000

FINANCIAL SERVICES GROUP

John Keells Stock Brokers (Pvt) Ltd (81.74%)Share Broking ServicesNo.130, Glennie Street, Colombo 02.�: 2446694-5 /2338066 / 4710721-4Directors: A D Gunewardene - Chairman, S C Ratnayake,J R F Peiris, K N J Balendra (appointed w.e.f 07.05.2007)Stated capital: Rs. 7,500,000

Nations Trust Bank PLC (29.9%)Commercial Banking and Leasing OperationsNo. 242, Union Place, Colombo 02.�: 4313131Directors:A D Gunewardene - Chairman S C Ratnayake, J R F Peiris,A K Gunaratne, E H Wijenaike, Z H Zavahir, C H S K Piyaratna,A R Rasiah, D Weerakoon M E WickremesingheStated capital as at 31.12.2007: Rs. 2,061,553,991

Union Assurance PLC (36.96 %)Life and General Insurance UnderwritersNo.20, St. Michaels' Road, Colombo 03.�: 2428428Directors:A D Gunewardene - Chairman, H Selvanathan (resignedw.e.f 01.04.2007) S C Ratnayake (resigned w.e.f 01.04.2007),D C R Gunawardena, H A Rehmanjee, J R F Peiris, P C P Tissera,M A Tharmaratnam, J D Bandaranayake (appointed w.e.f 01.04.2007)Stated capital: Rs. 388,433,000

INFORMATION TECHNOLOGY GROUPAuxicogent BPO Solutions (Pvt) Ltd (49%)BPO Operations267, Udyog Vihar Phase II, Gurgaon, Haryana 2, India.�: +91 124 4561000Directors: R Roy - Chairman, J R F Peiris, R M David, R Dutta,Sunil Rawal (appointed w.e.f. 07.01.2008) Upendra Singh (appointedw.e.f. 07.01.2008)Share capital: Rs. 22,500,000

Auxicogent Holdings (Pvt) Ltd.(100%)Holdong company of Auxi group companiesNo.4, Leyden Bastian Road, Colombo 01.�: 2475375Directors: S C Ratnayake – Chairman, A D Gunewardene,J R F Peiris, R M David, K D Joory, F Soreefan, A R Muttiah(resigned w.e.f. 31.07.2007), R Roy (resigned w.e.f 04.02.2008)D Rajorshi (resigned w.e.f. 04.02.2008)Share capital: 15,000,000

Auxicogent International (Pvt) Ltd (100%)BPO OperationsIFS Court, TwentyEight, Cybercity, Ebene, Mauritius.�: (230) 467 3000Directors: S C Ratnayake – Chairman, A D, Gunewardene,J R F Peiris, R M David, K D Joory, F Soreefan (appointed23.04.2007, R Roy (resigned w.e.f 08.02.2008), R Dutta(resigned w.e.f. 08.02.2008)Share capital: Rs. 1,541,700,000

Auxicogent International Lanka (Pvt) Ltd.(100%)BPO OperationsNo.4, Leyden Bastian Road, Colombo 01.�: 2475375Directors: S C Ratnayake – Chairman, A D Gunewardene,J R F Peiris, R M David, A R M Muttiah (resigned w.e.f 31.07.2007),R S Fernando (appointed w.e.f 01.08.2007)Stated capital: Rs. 159,500,000

Auxicogent Investments Mauritius Pvt Ltd (100%)Investment holdingIFS Court, TwentyEight, Cybercity, Ebene, Mauritius.�: (230) 467 3000Directors: S C Ratnayake – Chairman (appointed w.e.f 23.04.2007),A D Gunewardene (appointed w.e.f 23.04.2007), J R F Peiris(appointed w.e.f 23.04.2007), R M David (appointed w.e.f23.04.2007), K D Joory (appointed w.e.f 23.04.2007), F Soreefan(appointed w.e.f 23.04.2007),Share Capital: USD 14,000

Auxicogent Alpha Pvt Ltd (100%)Investment holdingIFS Court, TwentyEight, Cybercity, Ebene, Mauritius.�: (230) 467 3000Directors: S C Ratnayake – Chairman (appointed w.e.f 23.04.2007),A D Gunewardene (appointed w.e.f 23.04.2007), J R F Peiris(appointed w.e.f 23.04.2007), R M David (appointed w.e.f23.04.2007), K D Joory (appointed w.e.f 23.04.2007), F Soreefan(appointed w.e.f 23.04.2007),Share Capital: USD 7.350

InfoMate (Pvt) Ltd (100%)IT Enabled ServicesNo. 320/1, Union Place, Colombo 02.�: 2318224 /2318240Directors: S C Ratnayake - Chairman, J R F Peiris, M J S RajakariarStated capital: Rs. 20,000,000


Group directory

Information Systems Associates (49%)Software Development Services (Bahrain)PO Box. 132, Sajaah, UAE.�: 97165088810Directors: A Ali - Chairman, D Hubbarb, A Hamdany, J R F Peiris,R M David, G S DewarajaStated capital: Rs. 97,594,274

John Keells Business Systems (UK) Ltd (100%)Software Development Services (UK)Thompson House 42-44 Dolben Street, London. SC1 0UQ�: 2300770 -606Directors: A D Gunewardene - Chairman, G S Dewaraja , R M DavidStated capital: Rs. 9,507

John Keells Computer Services (Pvt) Ltd (100%)Software ServicesNo. 148, Vauxhall Street, Colombo 02.�: 2300770Directors: A D Gunewardene - Chairman, S C Ratnayake, J R FPeiris, G S Dewaraja, R M DavidStated capital: Rs. 96,500,000

John Keells Office Automation (Pvt) Ltd (100%)Dealers in Office Automation EquipmentNo.320/1, Union Place, Colombo 02�: 2431576 / 4702611Directors: A D Gunewardene - Chairman, J R F Peiris, G S Dewaraja,R M DavidStated capital: Rs. 5,000,000

John Keells Software Technologies (Pvt) Ltd (100%)Marketer of Software PackagesNo. 148, Vauxhall Street, Colombo 02.�: 2300770 -606Directors: A D Gunewardene - Chairman, J R F Peiris, G S Dewaraja,R M DavidStated capital: Rs. 8,000,000

OTHERSAssociated Motorways PLC (20.02%)Sales, repairs and servicing of motorvehicles. Rebuilding of tyres and marketing,trading and export of rubber goodsNo.185, Union Place, Colombo 02.�: 2309300 /2433371-6Directors:A de Zoysa- Chairman,T de ZoyzaJ B L de Silva, G B R de SilvaH S A K Caldera, A R Peiris, D A de Zoysa,A S de Zoysa, S C Rathnayake, K KanagIsvaran, A A De Silva (resigned w.e.f.31.12.2007), L J de Alwis (appointed w.e.f01.01.2008)Stated capital: Rs. 55,647,600

J K Packaging (Pvt) Ltd (100%)Printing and Packaging Services Providerfor the Export MarketNo. 148, Vauxhall Street,Colombo 02.�: 2475308Directors: S C Ratnayake (Chairman),R M David, R S FernandoStated capital: Rs. 14,500,000

John Keells (Teas) Ltd (100%)Manager of Bought Tea Factories andOthersNo.130, Glennie street, Colombo 02.�: 2335880Directors: S C Ratnayake – Chairman,G S A Gunesekera, J R F Peiris, L D Ramanayake(resigned w.e.f 01.08.2007)Stated capital: Rs. 120,000

John Keells Holdings PLCGroup Holding Company and Function BasedServicesNo. 130, Glennie street, Colombo 02.�: 2306000 /2421101-9Directors: S C Ratnayake – Chairman,A D Gunewardene - Deputy Chairman,G S A Gunesekera, J R F Peiris, E F G AmerasingheT Das, Steven Enderby, M V Muhsin,P D Rodrigo, S S Thiruchelvam, R S Captain (resignedw.e.f 06.05.2008)Stated capital: Rs. 22,464,268,185

John Keells International (Pvt) Ltd(100%)Regional Holding Company providingAdministrative and Function based servicesNo. 130, Glennie street, Colombo 02.�: 2306000 /2421101-9Directors: S C Ratnayake – Chairman,A D Gunewardene, J R F PeirisStated capital: Rs. 1,545,000,000

John Keells PLC (76%)Commodity BrokersNo.130, Glennie street, Colombo 02.�: 2306000 /2421101-9Directors: S C Ratnayake – Chairman,A D Gunewardene, G S A Gunesekera, J R F Peiris,K D W Ratnayake, T de Zoysa, Y A JordonHansen, L D Ramanayake (resignedw.e.f 31.07 2007), S.T. Ratwatte(appointed w.e.f. 09.05. 2007 )Stated capital: Rs. 152,000,000

John Keells Singapore (Pte) Ltd (80%)International Trading ServicesNo. 30, Bideford Road, Thongsia Building,Singapore-2.�: 65 67329636Directors: S C Ratnayake – Chairman,A D Gunewardene, J R F Peiris, R M David,R Ponnampalam, R S Fernando (resignedw.e.f 01.08.2007)Stated capital: Rs. 9,638,000

John Keells Warehousing (Pvt) Ltd (76%)Warehousing of Rubber and TeaNo. 93,1st Lane,Kerawalapitiya, Wattala,Muturajawala.�: 4819560Directors: S C Ratnayake – Chairman,G S A Gunesekera, J R F Peiris, L D Ramanayake(resigned w.e.f 01.08.2007)Stated capital: Rs. 120,000,000


Group directory

Keells Consultants Ltd (98.13%)Company Secretarial Services to theGroupNo.130, Glennie street, Colombo 02.�: 2421101-9Directors: S C Ratnayake – Chairman,A D Gunewardene, J R F Peiris,D C AlagaratnamStated capital: Rs. 160,000

Mackinnon and Keells FinancialServices Ltd (99.81%)Rental of Office SpaceNo. 4, Layden Bastian Road, Colombo 01.�: 2475102-3Directors: S C Ratnayake – Chairman,A.D Gunewardene, J R F Peiris, S RajendraStated capital: Rs. 10,800,000

Mortlake Ltd (100%)Investment CompanyNo. 148, Vauxhall Street,Colombo 02.�: 2475308Directors: S C Ratnayake – Chairman,A.D Gunewardene, G S A Gunesekera,J R F PeirisStated capital: Rs. 3,000

Nexus Networks (Pvt) Ltd (99.99%)Operator of a Loyalty Card ProgrammeNo. 125, Glennie Street, Colombo 02.�: 2343792 / 2343794-98Directors: S C Ratnayake - Chairman,J R F Peiris , J R Gunaratne,M R N Jayasundera- MoraesStated capital: Rs. 100,000

Tea Smallholder Factories Ltd (37.62%)Owner and Operator of Factories for TeaSmallholders320/1, Union Place,Colombo 02.�: 2335880 / 5332071Directors: S C Ratnayake - Chairman,J R Guneratne, A D Gunewardene,G S A Gunesekera, J R F Peiris, E H WijenaikeR Seevaratnam, R E RambukwellaA S Jayatilleke, J S Ratwatte,L D Ramanayake (resigned w.e.f 01.08.2007)Stated capital: Rs. 150,000,000

Whittall Boustead Ltd - PrintingDivision (99.96%)Printing and Packaging Services Providerfor the Local MarketDirectors: S C Ratnayake,A D Gunewardene, J R F Peiris, R M David ,S Rajendra, R S Fernando (resigned)Stated capital: Rs.99,304,300

Whittall Boustead Ltd - Real EstateDivision (99.96%)Company Secretarial Services and Rentingof Office SpaceNo. 148, Vauxhall Street,Colombo 02.�: 2329161 /2327805Directors: S C Ratnayake,A D Gunewardene, J R F Peiris, R M David,S Rajendra, R S Fernando (resigned)Stated capital: Rs. 99,304,400

Effective holding percentags indicated in brackets.


Group directory


Macro snapshot

Macro economic outlook - 2008Despite hopes that inflation would reduce from the elevated levels ithad hit in the previous year, it accelerated further. However, thoughheadline economic growth slowed, it still remained at a relativelyhigh level and for the first time growth exceeded 6per cent for threeconsecutive years.

Apart from the usual concerns with regard to the war, poorinfrastructure and timely implementation of appropriate macro andsector policies, in the year ahead, the Sri Lankan economy will alsohave to face the impact of a global slowdown and recession in the US.Globally increasing food and commodity prices are also likely toaffect Sri Lanka's economic prospects though agricultural exportsbenefit from the trend of higher commodity prices.

Though the Balance of Payments was positive for the third successiveyear, the current account deficit was only bridged through anincreased reliance on commercial and short term borrowing. Bothrating agencies have highlighted risks of this dependence in recentnegative outlooks on the economy. Therefore in the coming yearsthere is an increasing risk on the stability of the balance of paymentsshould the flows of commercial capital reverse or slow down sharply.

The economic growth forecast for 2008 at 6.4 per cent by the IMFand 6 per cent by the ADB are lower than that achieved in 2007while the CBSL forecasts a 7per cent growth for 2008. However,agency forecasts do see a moderation in inflation pressures with theCCPI annual average reducing to 11 per cent as per the IMF and16.2 per cent as per the ADB.

Year that WasThe GDP growth slowed to 6.8 per cent in 2007, a drop from theprevious year's 7.7 per cent. Growth in all three sectors declined,with services, the largest component of the economy, growing by 7.1per cent compared to 7.7 per cent last year. This growth was led byposts & telecommunications, cargo handling, transport and financialservices segments. The hotels and restaurants segment contractedchiefly due to the country's security situation and the slowdown inimport and domestic trade activities.

The industrial sector grew by 7.6 per cent compared to 8.1 per centlast year with the factory industry sector growing by 6.7 per cent.Construction, export manufacturing, and mining & quarryingactivities also performed well in this sector. Growth in theAgriculture sector fell to 3.3 per cent from 6.3 per cent last year. Thesharp drop was primarily on account of 2006 growth been boostedby the post tsunami rebound of fisheries. A drop in production intea, paddy and tobacco also negatively affected the agricultural sector.

The annual unemployment rate fell further to 6.0 per cent, thelowest reported unemployment rate, whilst the per capita incomerose to US dollars 1,617. Gross National Product grew by 7.1 percent yoy in 2007.

Over the year, there was a slowdown in real domestic aggregatedemand, with growth in consumption and investment demand in

real terms reducing to 4.9 per cent and 8.7 per cent in 2007 from 7.1per cent and 13.4 per cent respectively in 2006. However the exportof goods and services increased by 6.8 per cent in real termscompared to 3.8 per cent in 2006

The New Colombo Consumers' Price Index (CCPI(N)) continuedits climb, with an annual average increase of 15.8 and a point topoint percentage change of 18.8 per cent in 2007, compared to 10per cent in 2006. By March 2008 the yoy growth had reached 23.8per cent while on the old CCPI the yoy increase was 28.1per cent.The government attributed the soaring inflation to the result ofglobal fuel and food price increases, while some outside agenciesplaced government borrowing from the banking system in themiddle of the year as a possible factor. Interest rates in all marketsincreased in line with a tightening of monetary policy. Call moneyrates fluctuated widely ranging from a low of 12.36 per cent to a highof 42.25 per cent during 2007.

Export earnings in 2007 increased by 12.5per cent to USD 7.74billion. Agricultural and industrial exports grew by 16.6 per cent and10.0 per cent respectively over the previous year. Industrial exportscontinued to be dominated by textiles & garments, but strongergrowth in other industrial exports led to continuation of the recenttrend of falling reliance on garment exports. Other categories ofindustrial exports that grew within the year were food, beverages &tobacco, rubber products, diamonds & jewellery and machinery &equipment. Tea export earnings surpassed USD 1 billion in 2007.

Imports increased by 10.2 per cent to USD 11.3 billion, mainly onaccount of import of investments goods, petroleum, textiles, clothingand chemicals. Petroleum contributed to 40 per cent of the growthin imports over the previous year. However, exports outgrew importsand this helped limit the expansion of the trade deficit.

Despite the widened current account deficit, the balance of paymentsrecorded a surplus of USD 531 million largely due to the sovereignbond issue of USD 500 million. The gross official reserves excludingACU receipts rose to USD 3.06 billion . About 70 per cent of thetrade deficit was financed by continued strong worker remittances.This combined with the increase in services account surplus helpedcontain the current account deficit. Gross FDI inflows rose to USD734 million.

Tourist arrivals during 2007 fell significantly by 11.7 per cent to494,008 from 559,603 in 2006. The ongoing security situation andunfavourable travel advisories from the main tourism generatingcountries led to the poor performance in this sector. Though grosstourist receipts remained flat when compared against 2006, earningsfrom tourism fell to USD 385 million in 2007. Of the tourists, 67per cent came for holiday purposes followed by 11per cent forbusiness purposes.

The All Share Price Index (ASPI) declined by 6.7 per cent yoy to2,541.0 points from 2,722.4 points in 2006, whilst the MilankaPrice Index (MPI) fell by 11.3 per cent yoy to 3,292 points. Duringthe first three months of 2008, despite global markets falling sharply,the ASPI ended the quarter slightly higher at 2,550 though the MPIlost ground to end at 3,181.

Summary Indicator Units 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007GDP Growth Per cent 4.7 4.3 6.0 -1.5 4.0 5.9 5.4 6.2 7.7 6.8GDP(current prices) Rs. Billion 1,018 1,106 1,258 1,407 1,582 1,822 2,091 2,453 2,939 3,578GDP(current prices) USD Billion 15.8 15.7 16.6 15.7 16.5 18.9 20.7 24.4 28.3 32.3GDP per Capita (USD) Growth Per cent 3.4 -2.4 4.5 -6.5 3.5 12.8 8.3 16.9 14.5 13.8GDP per Capita USD 881 860 899 841 870 981 1,062 1,241 1,421 1,617Inflation (CCPI- Old ) YoY Per cent 9.4 4.7 6.2 14.2 9.6 6.3 7.6 11.6 13.7 17.5Current Account Balance USD Billion -0.2 -0.6 -1.1 -0.2 -0.2 -0.07 -0.6 -0.7 -1.5 -1.4Current Account % of GDP Per cent -1.4 -3.6 -6.4 -1.4 -1.4 -0.4 -3.1 -2.7 -5.3 -4.2Population Million 18.8 19.0 19.1 18.8 19.0 19.3 19.5 19.7 19.9 20.0Exchange Rate (Annual Average) USD/Rs. 64.59 70.4 75.8 89.4 95.7 96.5 101.2 100.5 104.0 110.6Exchange Rate Change (Annual Average) Per cent 9.5 9.0 7.7 17.9 7.0 0.9 4.8 -0.7 3.4 6.412m T-Bill yield (yr-end) Per cent 12.6 12.8 18.2 13.7 9.9 8.0 8.9 10.4 13.0 20.0Prime Lending Rate (yr-end) Per cent 14.9 15.9 21.5 14.3 12.2 9.3 10.2 12.2 15.2 18.0M2b Money supply growth Per cent 13.2 13.4 12.9 13.6 13.4 15.3 19.6 19.1 17.8 16.6Exports USD Billion 4.8 4.6 5.5 4.8 4.7 5.1 5.8 6.3 6.7 7.7Imports USD Billion 5.9 6.0 7.3 6.0 6.1 6.7 8.0 8.9 10.3 11.3Balance of Payments Per cent of GDP 0.2 -1.7 -3.1 1.3 2.0 2.7 -1.0 2.1 0.7 1.6Budget Deficit Per cent of GDP -9.2 -7.5 -9.9 -10.8 -8.9 -7.7 -7.9 -8.4 -8.0 -7.7Unemployment Rate Per cent 9.2 8.9 7.6 7.9 8.8 8.4 8.3 7.2 6.5 6.0All Share Index (yr-end) Points 597 573 448 621 815 1,062 1,507 1,922 2,722 2,541Tourist Arrivals No.' 000 381 436 400 337 393 501 566 549 560 494

Accrual basisRecording revenues & expenses in the period in which they areearned or incurred regardless of whether cash is received or disbursedin that period.

Capital employedShareholders’ funds plus minority interest and debt.

Capital structure leverageAverage total assets divided by average shareholders equity.

Cash earnings per shareProfit after tax adjusted for non cash items minus share of associatecompany profits plus dividends from associate companies divided by theweighted average number of ordinary shares in issue during the period.

Cash to price earningsDiluted market price per share divided by diluted cash earnings per share.

Cash interest coverCash flow from operations before working capital changes divided bycash interest payment.

Cash interest and tax coverCash flow from operations before working capital changes divided bycash interest and tax payments.

Cash ratioCash plus short term investments divided by current liabilities.

Capital employed turnoverCapital structure leverage into common earnings leverage.

Common earnings leverageProfit attributable to equity holders of the parent divided by profitafter tax.

Contingent liabilitiesA condition or situation existing at the balance sheet date due to pastevents, where the financial effect is not recognised because:

1. the obligation is crystalised by the occurrence or non occurrenceof one or more future events or,

2. a probable outflow of economic resources is not expected or,3. it is unable to be measured with sufficient reliability.

Current ratioCurrent assets divided by current liabilities.

Debt/equity ratioDebt as a percentage of shareholders’ funds and minority interest.

Diluted EPSProfit attributable to equity holders of the parent divided by theweighted average number of ordinary shares in issue during theperiod adjusted for options granted but not exercised.

Dividend payout ratioTotal dividend as a percentage of company profits adjusted for noncash gains/losses.

Dividend yieldDividend per share as a percentage of the share price at the end of theperiod.

Earnings per shareProfit attributable to equity holders of the parent divided by theweighted average number of ordinary shares in issue during theperiod.

EBITEarnings before interest and tax (includes other operating income).

EBIT marginEBIT divided by turnover inclusive of share of associate companyturnover.

EBITDAEarnings before interest, tax, depreciation and amortisation.

Effective rate of taxationTax expense divided by profit before tax.

EV (enterprise value)Market capitalisation plus net debt.

Financial leverage multiplierTotal assets divided by the shareholders’ funds plus minority interest.

Interest coverConsolidated profit before interest and tax over finance expenses.

Long term debt to total debtLong term loans as a percentage of total debt.

Market capitalisationNumber of shares in issue at the end of period multiplied by themarket price at end of period.

Market value addedMarket capitalisation minus shareholder’s funds.

Net assetsTotal assets minus current liabilities minus long term liabilitiesminus minority interest.

Net assets per shareNet assets over weighted average number of ordinary shares in issueduring the period adjusted for options granted but not exercised.

Net debtTotal debt minus (cash plus short term deposits).

Net profit marginProfit after tax divided by turnover inclusive of share of associatecompany turnover.

Net working capitalCurrent assets minus current liabilities.

Pre-tax return on capital employedConsolidated profit before interest and tax as a percentage of averagecapital employed.

Price earnings ratioMarket price per share (diluted) over diluted earnings per share.

Price to book ratioMarket price per share (diluted) over net asset value per share.

Property, plant and equipment turnoverTurnover excluding share of associate company turnover divided byaverage property, plant and equipment balances.

Quick ratioCash plus short term investments plus receivables, divided by currentliabilities.

Return on assetsProfit after tax divided by the average total assets.

Return on equityProfit attributable to shareholders as a percentage of averageshareholders’ funds.

Sales to assets ratio/total asset turnoverTurnover including share of associate company turnover divided byaverage total assets.

Share turn ratioTotal volume of shares traded during the year divided by averagenumber of shares in issue.

Shareholders’ fundsTotal of issued and fully paid share capital, capital reserves andrevenue reserves.

Total debtLong term loans plus short term loans and overdrafts.

Total equityShareholders’ funds plus minority interest.

Total shareholder return(P1 - P0 +D) / P0 x 100P1 = Market price at the end of the financial yearP0 = Diluted market price at the end of the previous financial yearD = Adjusted dividend for the year

Total value addedThe difference between net revenue (including other income) andexpenses, cost of materials & services purchased from externalsources.


Glossary of financial terms


Corporate information

Name of company

John Keells Holdings PLC

Legal form

Public Limited Liability CompanyIncorporated in Sri Lanka in 1979Ordinary Shares listed on the Colombo Stock Exchange GDRslisted on the Luxembourg Stock Exchange

Company registration no.

PQ 14

Directors

Mr S C Ratnayake – ChairmanMr A D Gunewardene – Deputy ChairmanMr G S A GunesekeraMr J R F PeirisMr E F G AmerasingheMr T DasMr S EnderbyMr M V MuhsinMr P D RodrigoMs S S TiruchelvamMr R S Captain (resigned w.e.f. 6 May 2008)

Audit Committee

Mr P D Rodrigo – ChairmanMr E F G AmerasingheMr S EnderbyMs S S Tiruchelvam

Remuneration Committee

Mr E F G Amerasinghe – ChairmanMr M V MuhsinMr P D Rodrigo

Nominations Committee

Mr T Das – ChairmanMr S EnderbyMr M V MuhsinMr S C RatnayakeMs S S Tiruchelvam

Secretaries and registrars

Keells Consultants Limited130 Glennie StreetColombo 2Sri Lanka

Auditors

Ernst & YoungChartered AccountantsP.O. Box 101ColomboSri Lanka

Bankers

Bank of CeylonCitiBank N.ACommercial BankDeutsche Bank A.GDFCC BankDFCC Vardhana BankHatton National BankHongkong and Shanghai Banking CorporationICICI BankNations Trust BankNDB BankPeople’s BankSampath BankSeylan BankStandard Chartered Bank

Depository for GDRs

CitiBank NANew York

Registered office of the company

130 Glennie StreetColombo 2Sri Lanka

Contact details

P.O. Box 76130 Glennie StreetColombo 2Sri Lanka

Telephone : +(94) 11 230 6000Facsimile : +(94) 11 244 7087

Internet : www.keells.comEmail : [email protected]


Notice of meeting

Notice is hereby given that the Twenty Ninth Annual General Meeting of John Keells Holdings PLC will be held on 27th June 2008 at9.30 a.m. at The Auditorium, The Institute of Chartered Accountants of Sri Lanka, 30A, Malalasekera Mawatha (Longdon Place),Colombo 7.

The business to be brought before the meeting will be:

• to read the notice convening the meeting.

• to receive and consider the Annual Report and Financial Statements of the Company for the Financial Year ended 31st March 2008with the Report of the Auditors thereon.

• to re-elect as Director, Mr. G S A Gunesekera, who retires in terms of Article 84 of the Articles of Association of the Company.

• to re-elect as Director, Mr. E F G Amerasinghe, who retires in terms of Article 84 of the Articles of Association of the Company.

• to re-elect as Director, Mr. S Enderby, who retires in terms of Article 84 of the Article of Association of the Company.

• to authorise the Directors to determine and make donations.

• to re-appoint Auditors and to authorise the Directors to determine their remuneration.

• to consider any other business of which due notice has been given.

By Order of the BoardJOHN KEELLS HOLDINGS PLC

Keells Consultants Limited

Secretaries

30 May 2008

Notes:

i. A member unable to attend is entitled to appoint a Proxy to attend and vote in his/her place.

ii. A Proxy need not be a member of the Company.

iii. A member wishing to vote by Proxy at the Meeting may use the Proxy Form enclosed.

iv. In order to be valid, the completed Proxy Form must be lodged at the Registered Office of the Company not less than 48 hoursbefore the meeting.


Form of proxy

I/We ……………………………………………………….....................................................……………………..………………. of

.....................................................…………………………………………………………………………………………….... being a

member/s of John Keells Holdings PLC hereby appoint .....................................………………………………...…………..………of

…………………………………………………………......................................………………….……………… or failing him/her

MR. SUSANTHA CHAMINDA RATNAYAKE of Colombo, or failing him

MR. AJIT DAMON GUNEWARDENE of Colombo, or failing him

MR. GERARD SUMITHRA ABEYWARDENE GUNESEKERA of Colombo, or failing him

MR. JAMES RONNIE FELITUS PEIRIS of Colombo, or failing him

MR. EMMANUEL FRANKLYN GAMINI AMERASINGHE of Colombo, or failing him

MR. TARUN DAS of India, or failing him

MR. STEVEN ENDERBY of India, or failing him

MR. MOHAMED VAZIR MUHSIN of USA, or failing him

MR. PARAKRAMA DEVASIRI RODRIGO of Colombo, or failing him

MRS. SITHIE SUBAHNIYA TIRUCHELVAM of Colombo

as my/our proxy to represent me/us and vote on my/our behalf at the Twenty Ninth Annual General Meeting of the Company to beheld on 27th June 2008 at 9.30 a.m. and at any adjournment thereof, and at every poll which may be taken in consequence thereof.

Signed on this ………………… day of ……………………Two Thousand and Eight.

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

Signature/s of Shareholder/s

NOTE:

INSTRUCTIONS AS TO COMPLETION OF PROXY FORM ARE NOTED ON THE REVERSE.


INSTRUCTIONS AS TO COMPLETION OF PROXY

1. Please perfect the Form of Proxy by filling in legibly your full name and address, signing in the space provided and filling in thedate of signature.

2. The completed Form of Proxy should be deposited at the Registered Office of the Company at No. 130, Glennie Street, Colombo2, not later than 48 hours before the time appointed for the holding of the Meeting.

3. If the Form of Proxy is signed by an Attorney, the relevant Power of Attorney should accompany the completed Form of Proxy forregistration, if such Power of Attorney has not already been registered with the Company.

4. If the appointer is a company or Corporation, the Form of Proxy should be executed under its Common Seal or by a duly authorisedofficer of the company or Corporation in accordance with its Articles of Association or Constitution.

5. If this Form of Proxy is returned without any indication of how the person appointed as Proxy shall vote, then the Proxy shallexercise his/her discretion as to how he/she votes or, whether or not he/she abstains from voting.

Please fill in the following details:

Name : ……………………………………………………………………………………

Address : ……………………………………………………………………………………

…………………………………………………………………………………….

…………………………………………………………………………………….

Jointly with : ……………………………………………………………………………………

Share Folio No. : ……………………………………………………………………………………

22 May 2008

Dear Shareholder,

JKH Annual Report 2007/08

The printed report enclosed herewith is an abridged version of the Annual Report of John Keells Holdings PLC for

the financial year 2007/08. This report has been produced mainly for ease of reference and is a compilation of the

most popularly accessed material of the main Annual Report.

The Compact Disk (CD) found on the back cover of this report, contains the comprehensive Annual Report,

including board committee reports, Annual Report of the Board of Directors, statement of directors responsibility

as well as complete financial reports and notes. It also contains the full corporate governance, sustainability and risk

management reports.

The comprehensive Annual Report is also featured on the Investor Relations page of www.keells.com. Should you

experience any difficulty in accessing the information on the CD or website, or wish to request a printed copy of the

full report, please contact -

The Head of Investor Relations

John Keells Holdings PLC

130, Glennie Street

Colombo 02

Sri Lanka

Tel: +94 11 2306739, 2306809

Fax: +94 11 2306160

E mail: [email protected]

A printed Request Form has been provided overleaf for your convenience. An on-line request may also be submitted

on the aforementioned website.

Yours faithfully,

For John Keells Holdings PLC

Keells Consultants Limited

Secretaries

REQUEST FORMThe Head of Investor RelationsJohn Keells Holdings PLC130, Glennie StreetColombo 02Sri Lanka

I wish to request for a copy of the comprehensive Annual Report of John Keells Holdings PLC for the financialyear 2007/08.

Please mark (x) as appropriate.1. I will collect a copy from your office

2. Please hand over a copy to bearer of this form

Full name of bearer: .............................................................................................................................

3. Please mail it to my address given below

Please fill all fields given below.Full name of shareholder : .........................................................................................................................

Mailing address : ........................................................................................................................

: ........................................................................................................................City Country

Contact telephone no. : ....................... (country code) .......................................................................

E-mail address : ........................................................................................................................(Optional)

jkh annual report 2007 08

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