Apl

CONTENTS
Vision, Mission, Objectives, Core Values Company Background Summary of Financial Performance Chairmans Review CEOs Review Stewardship Management Committee Review of Operations Estate Management Our Plantations Production & Yield Financial Review Corporate Social Responsibility Environment Report Our Human Resources Corporate Governance 2 3 4 5 7 8 10 11 15 16 17 18 21 28 30 31 Risk Management Financial Reports & Financial Calendar Directors Report Statement of Directors Responsibilities Auditors Report Income Statement Balance Sheet Cash Flow Statement Statement of Changes in Equity Notes to the Financial Statements Statement of Value Added Shareholder & Investor Information Glossary of Financial and Non Financial Terms Notice of Meeting Form of Proxy Corporate Information 35 39 41 44 45 46 47 48 49 50 77 78 79 80 81 Inner Back Cover
OUR VISION
To be the foremost producer of high quality Tea in full conformity with desired quality requirements
OUR MISSION
To produce the highest quality Tea whilst protecting and preserving the environment and safeguarding the interest of the community with whom we work, improving our asset base, developing our employee base and providing value to our shareholders
OUR BUSINESS OBJECTIVES

To lead the way in the technical and innovative development of the Tea Industry and operate with responsibility towards society and the community
OUR CORE VALUES

Integrity Courage Commitment
Agarapatana Plantations Limited
COMPANY BACKGROUND
Agarapatana Plantations Limited was incorporated on 22nd June 1992, under the Companies Act No. 17 of 1982 in terms of the provisions of the Conversion of Corporations and Government Owned Business Undertakings into Public Companies Act No. 23 of 1987, to take over the assets and liabilities of various estates owned by the Janatha Estates Development Board and the Sri Lanka State Plantations Corporation, the two Sri Lanka Government corporations which owned and managed almost all of the Governments plantation estates. Since its inception the Company was managed by Creasy Plantation Management Limited, which originally submitted a bid to manage the Company and was selected to do so until 1996. On 25th September 1996, Lankem Plantation Holdings Limited purchased 51% (7,599,000 ordinary shares) of the issued ordinary shares of Agarapatana Plantations and became the Holding Company of Agarapatana Plantations. Lankem Tea & Rubber Plantations (Pvt) Limited which is a wholly owned subsidiary of Lankem Plantation Holdings Limited became the Managing Agent of Agarapatana Plantations Limited, with effect from 1st November 1996. Later, in 2001 the Convertible Debentures of Rs.150,000,000 issued to Lankem Plantation Holdings Limited were converted to 4,255,319 ordinary shares of Rs.10/- each and the balance Rs.107,446,810 has been recognised to share premium. As a result, the Share Capital of the Company increased to Rs.191,553,200 and the Lankem Plantation Holdings Limited ownership in Agarapatana Plantations increased up to 61.88%.
Annual Report 2006 - 2007
SUMMARY OF FINANCIAL PERFORMANCE

2006/07 Rs.000 Results for the year Revenue Gross Profit Operating Profit before Net Financing Cost Profit/(Loss) before Tax Profit/(Loss) after Tax At the year end Shareholders Fund Ratios Gross Profit (%) Interest Cover (times) Current Ratio (times) Acid Ratio (times) Borrowings/Total Assets (%) 7.32 (1.06) 0.83 0.40 21.16 9.20 0.34 0.73 0.39 20.03 (20) (412) 14 3 (6) 13.65 1.89 0.73 0.42 25.44 462,879 494,188 (6) 500,663 1,880,529 137,731 (30,316) (58,811) (58,811) 1,758,548 161,725 17,392 (6,475) (6,475) 7 (15) (274) (808) (808) 1,563,303 213,334 88,154 69,007 67,931 2005/06 Rs.000 % Change 2004/05 Rs.000
Per Share Earnings/(Loss) (Rs.) Net Assets (year end) (Rs.) (3.07) 24.16 (0.34) 25.80 (803) (6) 3.55 26.14
CHAIRMANS REVIEW
I have pleasure in presenting the Companys Annual Report and Audited Accounts for the year ended 31st March 2007. November and the strike in the first two weeks of December and the corrective action that was necessary after the strike had a significant adverse impact on the final performance. The Tea Industry As a result of the depreciation of the rupee in the international monetary markets the cost of imported inputs were significantly high, resulting in a high cost of production. The tea market was buoyant throughout the year and high grown teas performed particularly well. Agarapatana Plantations consists entirely of high grown estates in the Western and Uva regions and the strong demand for high grown tea benefited the company. The Colombo auctions recorded the highest prices for all Tea auction centers in the world during the year 2006. The CIS countries continued to be the largest buyers of Sri Lankan teas. The Middle Eastern countries were also significant buyers. Company Development Despite the non-availability of concessionary funding, your Company continues to invest in field development and factory machinery. During the year the investment in field and factory development was Rs.65 million and 23.6 million respectively. The total investment since privatisation is Rs.534.4 million on Field Development, Rs.160 million on Factory Development and Rs.135 million on Social Welfare activities. The resulting loss of revenue for the Company is assessed at Rs.180 million and the loss of profit s at Rs.50 million. The annual production was 8.6 million kilograms of made tea. The final turnover for the year under review was Rs.1.881 billion, which is Rs.122 million ahead of last year. As mentioned above the Tea market was strong and favourable prices were obtained. The Company operated at a loss of Rs.59 million for the financial year 2006/07. The Plantation industry continues to be classified in the exempt category for VAT purposes and is therefore, not entitled to claim for VAT charged on inputs.
Company Performance As a result of prolonged trade union action in November and December 2006, the islands overall crop at about 310 million kilograms was 3% behind the previous year. It is estimated that the loss for the Company was about 561,500 kilograms of made tea, in Agras Valley 269,471 kilograms and 292,029 kilograms in the Uva region. Although the first half year performance of the Company was satisfactory, the go-slow in
CHAIRMANS REVIEW
The Dambatenne factory was developed and upgraded to meet international food processing standards and ISO 22000-2005 certification obtained. This certification covers HACCP requirements as well. In the new season 2007/2008 we intend developing and upgrading five more estates to meet ISO 22000 standards.
Conclusion Employees at all levels continue to give of their best in these challenging and difficult times. On behalf of the Board of Directors I wish to thank them for their efforts and contribution. I also wish to thank all shareholders, brokers and other stakeholders for their continued trust and confidence in the Company and my colleagues on the Board for their advice and guidance.
A. Rajaratnam Chairman
05th June 2007
CEOS REVIEW
I am pleased to welcome you to the 15 th consecutive Annual General Meeting and present your Companys Annual Report for the financial year ended 31st March 2007.
Importance of non-financial indicators

In addition to focusing on the financial performance of the Company, this year we at Agarapatana Plantations have also understood the importance of our core values which are Integrity, Courage, and Commitment. These values have been deeply inculcated amongst all categories of workers in the Company, which will no doubt be of benefit to the Company in the long term. Integrity which is one of the vital elements in any individuals working life,while the courage to make those daring decisions comes with dynamic personalities. The concept which drives the above two values is commitment which any individual must possess in order to achieve success. We at Agarapatana Plantations have gone to great extents to establish these three concepts in our day to day operations thus building these principles deep down amongst ourselves. This, I am sure, will help the Company to further appreciate its valuable human resources.
Year at glance
The year 2006/2007 was the period in which our Company had to face many adversities; the highlight being the six week estate worker strike action which severely crippled the Companys performance, hence resulting in a loss during the year.
Our core values

Our focus was to maintain a high quality end product and also give priority to our core values which are Integrity, Courage, and Commitment which will help us build a sound relationship with our most valued asset of human resources. However, we regard this years performance as only a blip in our radar and are confident that we are quite capable of turning around the Company within the next 12 months.
Turnover
Your Company generated a Turnover of Rs.1,880.5 million which was an increase of 7% when compared with the previous year. The revenue generated from Agras region was Rs.1,103.3 million thus an increase of nearly 8% over last year, while revenue generated from Uva region was Rs.777.2 million an increase of 6% over last year.
Thinking of environment
The Company also progressed in its diversification programme by planting timber in most of its estates. Most of the lands that were used were uneconomical for tea plantations or waste lands.
Thinking of tomorrow
We are in the process of establishing new channels of revenue and business in the form of direct sales and exports. This will no doubt help the Company minimise the dependence on a single channel of revenue. I believe such decisions must be taken in order to be ready to face the unforeseen challenges as we move towards the next 12 months which is going to be very important for the Company.
Profitability
The Company recorded a Gross Profit of Rs.137.7 million during the year.
Financial position
The Net Cash Flow from operating activities for the 2006/07 financial year is Rs.63.1 million. This is a decrease by Rs.122 million or 66% fall when compared to year ended 2005/06. The Net Asset Per Share is Rs.24.16.
D.S. AbeyRatna Thinking of the future

The Company continued to invest in Capital expenditure and the amount spent during the 2006/07 financial year was Rs.112.8 million. Chief Executive Officer Lankem Tea and Rubber Plantations (Pvt) Ltd Managing Agent 05th June 2007
STEWARDSHIP
A. Rajaratnam - Chairman
Mr. Rajaratnam is a Fellow of The Institute of Chartered Accountants of Sri Lanka. He began his career with a leading multinational company. He was appointed to the Board of The Colombo Fort Land & Building Company Limited in 1987. At present he is responsible for the restructuring and further development of the Group. Currently he is the Chairman of all operational sectors of the Group consisting of Manufacturing & Trading, Plantations, Leisure and the Motor sector.
J.H.J. Jayamaha - Director

Mr. Jayamaha holds a Bsc (Hons) degree from the University of Kelaniya and MPhil from the University of Glasgow, U K. He is a Class I Officer of the Sri Lanka Planning Service, counting over 25 years of service in the Ministry of Finance & Planning. Presently he holds the post of Additional Director General of the Department of External Resources. Mr. Jayamaha has a wide range of experience in development financing including project development, mobilisation of resources from foreign official development assistance sources and implementation of development projects.
S.D.R. Arudpragasam - Director

Mr. Arudpragasam is a Fellow of The Chartered Institute of Management Accountants U.K. Having served in many senior financial positions in the mercantile sector, he joined The Colombo Fort Land & Building Group where he is responsible for the Manufacturing and Trading Sector of the Group. His contribution to the Group has been for over 25 years and at present holds the positions of Deputy Chairman of Lankem Ceylon Ltd., and Managing Director of E.B.Creasy & Co Ltd., in addition to serving on the Boards of other Groups of Companies.
R.M.S.P. Ratnayake - Director

Mr. Ratnayake holds a BA (Hons) in Geography from University of Peradeniya, Post Graduate Diploma in Provincial Administration and Management of Finance from Post Graduate Institute of Management and Masters Degree in Human Resources Planning and Development from Guru Gobind Singh Indraprastha University of New Delhi.
C.P.R. Perera - Director D. Sunil AbeyRatna - Director

Mr. AbeyRatna is a Fellow of The Institute of Chartered Accountants of Sri Lanka, The Chartered Institute of Management Accountants U.K. and a Fellow of a number of Accounting Bodies. He is also a Certified Management Accountant of Australia. Having started his career with Turquand & Young he is also the head of AbeyRatna & Co., which represents AGN in Sri Lanka. Mr. AbeyRatna has been serving in several leading companies in the country for many years prior to joining the Board of Colombo Fort Land & Building Co Ltd., in 2000. He also serves on the Boards of other CFLB Group Companies. Mr. Chrisantha Perera holds Directorships in many private and public companies and he serves as a Committee Member of the Ceylon Chamber of Commerce. He is a past Chairman of the Sri Lanka Tea Board, Sri Lanka Insurance Corporation, Public Enterprises Reform Commission, and Bank of Ceylon. He retired as Chairman of Forbes & Walker Ltd and its subsidiary companies in June 2005 after almost 44 years of service. He is a Director of the Sri Lanka Business Development Center (SLBDC) and a Board Member of the Outward Bound Trust of Sri Lanka. Mr. Perera has served as a Committee Member of the Planters Association of Ceylon and on the Committee of Management of the Ceylon Planters Provident Society.
STEWARDSHIP
D.A. Ratwatte - Director

Mr. Ratwatte has contributed many years of his life into planting having commenced his career with Messers Whittals Estates and Agencies Ltd prior to nationalisation. After the nationalisation of estates he continued to be manager of two of the most prestigious plantations in up country after which he was invited to serve on the Board of the JEDB as a Regional Director in Kandy. After the privatisation of management of the Regional Plantation Companies in 1992, Mr. Ratwatte took charge of the operations of Maturata Plantations Ltd. In 1999 he joined Lankem Tea & Rubber Plantations (Pvt) Ltd., as a Regional Director and thereafter he was appointed as an Executive Director in 2002. He was appointed to the Board of Agarapatana Plantations Ltd in August 2006.
2006. He holds the position of Trustee of the Colombo Tea Traders Charity Trust and also is on the Executive Committee of the Colombo Tea Traders Association. He is currently the Deputy Chairman of the Planters Association of Ceylon and is a Committee member of the National Council for Economic Development. He is a member of the Ceylon Institute of Planting and a Fellow of the National Institute of Plantation Management.
R.C. Peries Director

Mr. Ranjith Peries is a member of The Ceylon Institute of Planting. Having started his career with Carsons Cumberbatch he then moved to George Steuarts, one of the premier Agency houses. He has served as Manager of some of the most prestigious rubber properties in the Low Country and also held senior appointments in the industry and served on the Rubber Research Board Advisory Panel. In 1983, he was appointed the Regional Director of the JEDB Hatton Board and in 1988 he was made Director General of the Kegalle Avissawella Zone of the JEDB. In 1992 after the privatisation of the management of plantations, he joined George Steuart Plantation Management Services as the General Manager of Low Country rubber estates of Kotagala Plantations Ltd. He continued to serve in this position even after the takeover by Lankem Tea & Rubber Plantations (Pvt) Ltd in 1995. Thereafter he was appointed as Executive Director Low Country. He was appointed to the Board of Agarapatna Plantations Ltd in August 2006. He is also a member of The Rubber Research Board and the Chairman of Lankaprene Marketing Company Ltd. He is presently Vice Chairman of The Colombo Rubber Traders Association, and is also a member of the Rubber Wages Board.
G.D.V. Perera - Director

Mr. Perera commenced his career in planting with Mackwoods Estates & Agencies Limited. With the nationalisation of estates, he worked as an Estate Manager and Visiting Agent and was subsequently promoted as a Director of JEDB in the Nuwara Eliya region. He has provided his services for the prestigious Commonwealth Development Corporation of UK on tea projects in Tanzania. After the privatisation of the management of Regional Plantation Companies, he returned to Sri Lanka and joined Forbes Plantation Management Services Ltd as a Plantation Director in 1993. He joined Lankem Tea & Rubber Plantations (Pvt) Ltd in 1996, and thereafter was appointed as an Executive Director in 2002. He was appointed to the Board of Agarapatana Plantations Ltd in August
MANAGEMENT COMMITTEE
H.D. Caldera General Manager - Plantations (Agras)
Mr. Dhyan Caldera is a Fellow of The Institute of Plantation Management of Sri Lanka. He began his planting career with George Steuart & Company and he had the rare distinction of serving as a Superintendent of Tea Research Institute for a period of six years. Later Mr. Caldera joined Balangoda Group and he has received number of awards for his performance. With the privatisation of the plantations Mr. Caldera was made a Group Director of Balangoda Plantations Limited under the management of Forbes & Walkers in 1992. He joined the Lankem Group in 1997 and presently holds the position of General Manager of Agras Region. After the privatisation of Regional Plantation Companies, Mr. Congreve joined Kotagala Plantations. Presently he holds the position of General Manager Manufacture of both Kotagala and Agarapatana Plantations. Further, Mr. Congreve is also a freelance consultant to the German Governmental Organisation GTZ, for their Tea Project in Azerbaijan.
K.M. Ramesh Financial Controller

Ms Kalvi Ramesh is a Fellow of The Chartered Institute of Management Accountants UK. She commenced her career with one of the leading conglomerates in the country and after which in 2002 she joined Kotagala Plantations Ltd. She counts over 14 years of experience in the field of finance and general administration. Currently she holds the position of Financial Controller of both plantation companies managed by Lankem Tea & Rubber Plantations (Pvt) Ltd.
M.S. Madugalle General Manager - Plantations (Uva)

Mr. Madugalle is a Diploma holder of the National Institute of Plantations Management. He commenced his planting career with JEDB and after the privatisation worked for Watawala Plantations Limited, managed by Lankem and subsequently joined Kotagala Plantations Limited, managed by George Steuart as Manager- Mount Vernon Estate. He was promoted as a Cluster General Manager of Mount Vernon and its Group in 1996 when Kotagala Plantations Limited was taken over by Lankem. Subsequently he was appointed as a Regional General Manager of the Kotagala region in 2003 and since 2004, is General Manager in charge of Uva region, managed by Agarapatana Plantations Limited.
A.M.S. Kulasekara Manager - Engineering

Having over 25 years of experience in the plantation sector Mr. Kulasekara is a Fellow of the Institution of Incorporated Engineers of Sri Lanka and an Associate of the Institution of Engineers of Sri Lanka. He also holds a post graduate diploma in Industrial Engineering and is a Corporate Member of Sri Lanka Energy Managers Association and Inventors Association. He is also a former Director-Engineering of Sri Lanka State Plantations Corporation (SLSPC).
J.K. Congreve General Manager - Manufacture

Coming from a plantation background Kenneth Congreve belongs to a fourth generation who have served in the Ceylon plantations industry and is a Diploma holder of The National Institute of Plantation Management. He began his career as a Tea Taster at Ceylon Tea Marketing Ltd and then joined Bosanquet & Skrine Limited as a Tea Executive in 1981.He later joined the JEDB as an Assistant Manager Tea Manufacture and in 1991 was appointed Manager Estates at JEDB Nawalapitiya.
J. Kariyawasam Manager - Legal Affairs

Ms Jeewa Kariyawasam at present functions as the Manager Legal Affairs. She is an Attorney-at-Law by profession and a Notary Public with over 14 years of experience. She was called to the Bar in November 1992 and was appointed a Commissioner for Oaths in 1993. She holds a Post Graduate Diploma in Intellectual Property Law from Sri Lanka Law College in collaboration with the Asia Pacific Legal Institute, Washington DC, USA.
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REVIEW OF OPERATIONS
Agarapatana Plantations (APL) comprises of 11 tea plantations in the Western high grown region and a further ten tea plantations in the Uva high grown regions. Estates in the Western high grown region covers an extent of 3,727 hectars of tea cultivation and produces an average of 5.1 million kg of tea per year, while estates in the Uva high grown region covers an extent of 2,903 hectars of tea cultivation and produces an average of 3.4 million kg of tea per year. In addition to in house production these Uva high grown region factories work closely with tea smallholders in the area and buy a significant amount of leaf from them. Bought Crop Kgs 000 35 35 38 445 366 700 Agras Valley Est Act Prev Est Haputale Act Prev
Bought Crop Operations

In order to meet increasing demands we continued our bought tea operations for another successful year. We continued to pay attractive prices to smallholders thus enabling us to not only attract more suppliers but also demand for a higher standard of leaf, which in turn helped in the process of a high quality end product which was sold at competitive prices.
Crop and Yield

Owing to estate workers strike action that prevailed for a period of six weeks during the latter part of 2006 in the Western high grown region and the Uva high grown where our estates are situated, the crop harvested was 15% below the budget while it also fell by 9% below last year. The actual crop this year was 8.6 million kg, which resulted in a yield per hectare of 1,296 kg. This was below the estimated yield per hectare of 1,519 kg, and was also below the previous years yield by 9%. The crop harvested in the Uva region which mainly consists of high grown Haputale region was 3.5 million kg. This was 12% below the estimated crop, while it was also below the previous year by 7%. The actual yield per hectare was 1,193 kg which was against a estimated yield per hectare of 1,360 kg. It was also a decrease of 8% when compared with the previous year. Agras Valley Est Crop Kgs 000 Yield Kgs/Ha 1,643 1,377 1,518 1,360 1,193 1,298 6,124 5,132 5,702 3,948 3,463 3,724 Act Prev Est Haputale Act Prev
We matched the estimated figure for bought crop in the Agras Valley region, which is below 8% compared with the previous years bought crop. Even though the actual crop in the Uva region failed to meet the estimated levels this year, bought crop in the Uva regions fell short of the estimate by 18%. This was also a decrease of 48% over the previous years bought leaf intake. The bought leaf operations in both regions fell short when compared with previous year due to the estate workers strike action for a period of six weeks. Having established an excellent relationship with tea smallholders, we are quite flexible to acquire leaf externally if and when required and also maintained a high standard of leaf as we pay attractive prices for our bought crop operations.
Cost of Production
The Cost of Production (COP) per kg increased in both regions at the end of this financial year. COP in Agras Valley region increased by almost 19% over last year while in the Haputale Region COP increased by almost 20% over the previous year.
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Estate workers strike action which crippled the operations of estates for a period of six weeks during the latter part of 2006 was the main contributing factor to the increase in COP for the 2006/07 financial year. Increase in fertiliser cost by 44% when compared with last year (fertiliser cost was Rs.108 million in 2006/07 and Rs.75 million in 2005/06) also contributed towards the increase in COP.
In the Agras Valley, the overall price was 19% above the previous year. Uva High Grown Haputale Region prices increased by 21% against the previous year. This year the Agras Region was able to record a profit while the Haputale Region made a loss. Agras Valley Act NSA Rs. 211.34 Pre 177.75 Haputale Act 199.14 Pre 164.55
Agras Valley Act COP Rs. 200.68 Pre 168.93
Haputale Act 211.75 Pre 175.83
Information Technology
Even though being in a industry that is labour intensive we have developed information strategies which are in line with the corporate strategies of the Company. We were able to computerise all our estates office operations this year and comprehensive training has been provided for effective usage of computers.
Markets
The 2006/07 financial year first quarter prices were almost at the same level as in 2005 up to mid May, and thereafter increased sharply. The sharp increase in the tea prices commenced in the latter part of the first quarter and continued during the second, third and fourth quarters. Attractive prices were recorded in the financial quarter of the financial year 2006/07, which is attributed to increased demand following severe production shortfall due to estate worker strike and the go-slow.
Training programme in progress
The general ledger, staff pay roll and worker check roll are computerised (the programmes were developed in house) and all estates are linked via e-mail (dial up), whilst the server is located in the
Diyagama West Tea Factory
Head Office (protected by sun solaris anti spyware system). There is a firewall system also installed at Head Office in order to prevent unauthorised access through the internet. At our head office we possess a web server, e-mail server, file server, proxy server and a AS 400 server and are presently using open sourced (Linux) soft wares for our own servers.
How we fared
The Net Sales Average (NSA) for High Grown teas both in the Western High Grown Agras Valley and in Uva High Grown Haputale regions increased during the year.
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The operation, maintenance and development of the entire system is by our own IT division. In order to increase the work efficiency in our estates we are currently establishing local area net work systems within estate offices. The advantages would be that major tasks can be carried out in many work stations at the same time and maintain proper back up procedures. At our Head Office we are in the process of computerising the operations of the administrative functions such as training programme managements, time attendance, performance evaluation of employees, and talent management. Head Office also has a comprehensive network security system which was installed during the year. Agarapatna Plantations is in the process of computerising the administrative functions of the bought leaf operations, which will further enhance our relationship with our valued stakeholder of bought leaf suppliers.
Factory development is given high priority to enable factories to have the capacity to cope with higher crops. We have commenced a programme to upgrade all our factories to meet the International Food & Safety Management system in the form ISO 22000-2005 which is inclusive of the HACCP certification.
Vision for Tomorrow

We envision Agarapatana Plantations as a provider of superior value to all our stakeholders. We strive to be the highest quality, low cost producer of the products we sell and the markets we serve. In order to provide our stakeholders with superior value, our strategies focus on long term growth with minimum adverse effects on the environment. Tea as a beverage has many competitors and in order to maintain and increase its market share it has to be of a fully acceptable in quality, packing and convenience. If tea does not meet the consumer expectations the competitors will increase market share.
Future Plans
In order to make optimum use of evolving information technology, we intend to computerise the tea and rubber manufacturing processes such as temperature controls inside the factory, weighing methods, and humidity control which will further enhance the quality of our end product. We are currently finalising plans to introduce computerised stock control systems for our warehouse and also for estate factories which will help to maintain optimum levels of stock always.
Quality is Key
At Agarapatana Plantations we strive to ensure that high quality levels are always maintained for our products. In order to maintain a high quality end product we ensure that better quality green leaf is harvested, good transport facilities are available to deliver the green leaf to the factories on time, and all machinery in the factories are in prime condition. We are also in the process of bringing all our factories to the level which will conform to HACCP standards which is a requirement of the European Union if tea is to be exported to the EU member countries. In order to further maintain a high quality for our tea Agarapatana Plantations runs its own warehouse which is maintained to standards laid down by the Tea Board.
Capital Expenditure
The Company continues to invest in capital expenditure and other long term projects. Capital expenditure in field development though replanting is limited to estates with adequate labour, and is focussed on a completed infilling programme on all estates.
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Shortages of Labour
It is expected, in time to come, that there will be a shortage of labour on all our estates. In order to overcome this, the Company has initiated mechanisation of field operations such as plucking, pruning etc.
To create an identity for our work force we have provided them with company uniforms. Distribution of lands for self help housing schemes is an on going process which has and will create loyalty and goodwill to the Company. All estates have well constructed crches manned by
Monorails have been placed in tea factories to spread green leaf to withering troughs, which was previously done manually. In order to prevent migration of the present labour we have constructed rooms for meals with all facilities, lockers to keep personal belongings, wash room facilities with showers which create a clean and healthy working environment for our estate labourers.
trained attendants and provided with all facilities for the benefit of our employees children. This gives the estate worker peace of mind and a sense of security, and will increase his/her contribution and loyalty towards the Company.
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ESTATE MANAGEMENT
Agras Region H D Caldera : General Manager - Plantations Albion A P B Jayasundera H S Wickramasinghe N L Weragama Balmoral B Vijayan U G N Manoj Kumar Diyagama East T R Tissera C U W Gunathilake Y D A Perera Diyagama West Chandika Brodie W M A Jayatilake I R K Kathriarachchi H M S B Narampanawa T G Sampath Niroshan Glasgow D H A Wijewardana I U P Jayaweera Marlon De La Harpe Hauteville B A M Koelmeyer H M C W Gunasekera Holmwood J B Alahakoon New Portmore K R Rajkumar Sandringham C Dawlagala Torrington S M U Samarakoon H M P Perera Waverley D C S De Silva M S Z Imithiyaz U R Samaradiwakara Haputale Region M S Madugalle : General Manager - Plantations Beauvais W P N Wasantha Dambetenna D R Madena M R Sinnen A M S B Attanayake
: Manager : Asst Manager : Asst Manager
: Manager
: General Manager : Asst Manager
: Manager : Deputy Manager : Asst Manager
Glenanore A S Ratwatte : Manager N W M D D Navaratne : Asst Manager Ratnavale Niranjan : Asst Manager Gonamotawa K G M A K Wijerathna : Acting Manager Haputale K J Murray D B Perera M A B Perera Kahagalla Chula Werakoon Buddika Kodagoda Nayabedde P K Ekanayake L C De Silva M S P Perera Pita Ratmalie P B N Saman Kumara A S B Ranaweera M H Jayalath Udaveriya S V J Wijesekera A B Wickramasinghe
: : : : :
Manager Deputy Manager Asst Manager Asst Manager Asst Manager
: General Manager : Asst Manager : Asst Manager
: Manager : Asst Manager
: General Manager : Asst Manager
: Manager
: Manager
: Manager : Deputy Manager : Asst Manager
: Manager
: Acting Manager : Asst Manager
: Manager : Asst Manager
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OUR PLANTATIONS
Estate Planting District Revenue Extent Tea (ha) Immature Extent (ha) Other Area (ha) Total (ha) No. of Workers
Agras Valley Region Albion Balmoral Diyagama East Diyagama West Glasgow Hauteville Holmwood New Portmore Sandringham Torrington Waverley Sub Total Nuwara Eliya Nuwara Eliya Nuwara Eliya Nuwara Eliya Nuwara Eliya Nuwara Eliya Nuwara Eliya Nuwara Eliya Nuwara Eliya Nuwara Eliya Nuwara Eliya 440.34 325.24 345.97 640.66 310.96 464.50 198.88 172.66 183.31 274.00 370.75 3,727.27 9.00 2.50 12.00 5.00 16.00 11.50 1.75 4.00 3.00 3.87 9.00 77.62 136.66 95.76 141.78 212.63 84.54 98.00 54.81 49.73 38.39 137.13 65.50 1,114.93 586.00 423.50 499.75 858.29 411.50 574.00 255.44 226.39 224.70 415.00 445.25 4,919.82 1,037 948 896 1,678 820 1,297 392 367 487 568 906 9,396
Haputale Region Beauvais Dambetenne Glenanore Gonamotawa Haputale Kahagalla Nayabedde Pita Ratmalie Oakwell Ohiya/Udaveria Sub Total Company Total Badulla Badulla Badulla Badulla Badulla Badulla Badulla Badulla Badulla Badulla 272.90 374.75 367.68 202.07 396.45 310.00 320.50 353.35 13.50 292.09 2,903.29 6,630.56 6.25 12.25 8.80 4.00 10.50 14.00 8.50 12.00 2.00 78.30 155.92 76.32 486.00 175.57 60.93 294.55 78.50 169.70 302.43 226.46 424.04 2,294.50 3,409.43 355.47 873.00 552.05 267.00 701.50 402.00 498.70 667.78 241.96 716.13 5,276.09 10,195.91 662 1,546 924 431 1,012 619 842 928 50 535 7,549 16,945
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PRODUCTION & YIELD

Estate Production (Kg 000) 06/07 05/06 04/05 03/04 02/03 Western High Grown Albion Balmoral Diyagama East Diyagama West Glasgow Hauteville Holmwood New Portmore Sandringham Torrington Waverley Sub Total 590 626 378 843 442 789 231 209 229 351 443 654 680 416 970 535 877 247 208 253 358 503 639 641 457 936 513 755 262 245 262 370 501 668 704 481 910 550 806 268 239 284 373 500 733 760 506 943 619 941 299 281 305 449 535 1,347 1,480 1,445 1,434 1,564 1,926 2,074 1,954 2,150 2,327 1,093 1,186 1,295 1,359 1,412 1,317 1,512 1,458 1,379 1,430 1,421 1,692 1,633 1,677 1,863 1,699 1,881 1,625 1,656 1,913 1,160 1,243 1,324 1,327 1,480 1,212 1,158 1,368 1,314 1,533 1,251 1,371 1,422 1,486 1,575 1,282 1,307 1,356 1,334 1,608 1,196 1,343 1,337 1,255 1,341 1,377 1,518 1,487 1,492 1,636 Yield Per Hectare (Kg) 06/07 05/06 04/05 03/04 02/03
5,131 5,701 5,581 5,783 6,371
Uva High Grown Beauvais Dambatenne Glenanore Gonamotawa Haputale Kahagalla Nayabedde Pita Ratmalie Oakwell Ohiya/Udaveria Sub Total Own Crop Bought Crop Company Total 237 746 393 222 503 287 479 409 6 180 279 799 410 249 539 305 505 455 8 175 252 662 386 220 504 257 464 410 8 170 253 764 426 283 596 332 556 482 7 232 238 718 445 227 520 291 531 437 5 256 868 1,092 983 1,089 977 1,991 2,138 1,772 2,049 1,876 1,069 1,114 1,052 1,161 1,149 1,100 1,220 1,084 1,403 1,077 1,269 1,332 1,246 1,467 1,224 925 987 830 1,052 910
1,493 1,560 1,438 1,699 1,429 1,158 1,271 1,164 1,317 1,202 462 576 627 443 293 922
616 1,400 1,347 1,779
3,462 3,724 3,333 3,931 3,668 8,594 9,425 8,914 9,714 10,039 401 738 406 181 86
1,193 1,298 1,165 1,369 1,228 1,296 1,423 1,347 1,440 1,459
8,995 10,163 9,320 9,895 10,125
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FINANCIAL REVIEW
The 2006/07 financial year was a period in which Agarapatana Plantations faced many unforeseen challenges. The Company recorded a loss of Rs.58.8 million for the year when compared with last year loss of Rs.6.47 million. revenue recorded for the year. Haputale Region accounted for the balance 41% which was Rs.777.2 million.
Earnings Before Interest, Tax, Depreciation and Amortisation (EBITDA)

The Companys Earnings Before Interest, Tax, Depreciation and Amortisation for the year ended 31st March 2007 was Rs.15.76 million.
Revenue
The Company obtained a revenue of Rs.1,880.5 million which was an increase by 7% when compared with the previous year.
Profit / (Loss) from Operations Segmental Analysis of Revenue

Agras Valley region generated a revenue of Rs.1,103.3 million which is 59% of the total The Company recorded a Loss from Operations which amounted to Rs.30.3 million for the year
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FINANCIAL REVIEW
ended 31st March 2007. Increases in estate wage cost and industrial strike action which crippled production were the major factors in recording a loss. We recorded a Profit from Operations of Rs17.4 million in the previous financial year.
Investments
The Company continued to invest in capital expenditure and the amount spent for the year ended 31st March 2007 was Rs.112.8 million.
Finance Cost
Long term borrowings, overdraft interest charges are closely monitored by senior management. Net Finance Cost for the year amounted to Rs.28.5 million which is a decrease of Rs.22.9 million (45%).
Working Capital
The working capital position for the year ended 31st March 2007 is a negative of Rs.98.3 million, although recording an improvement of 41% over last years negative working capital of Rs.166.5 million. The current asset ratio is 0.83 which is an increase
Taxation
The Company was not liable for any tax as we recorded a loss.
Exchange Rate
The fluctuation of exchange rates affects the Companys operations significantly. The depreciation of the rupee against other major currencies has an adverse impact on all import related inputs although it helps export commodity prices.
of 14% from last year while the acid test ratio increased from 0.39 to 0.40.
Interest Bearing Borrowings

The interest bearing borrowings of the Company increased by 8%. Compared to the previous year and as at the year end the total borrowings amounted to Rs.384.1 million.
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FINANCIAL REVIEW
Cash Flow
The Net Cash flow from operating activities for the 2006/07 financial year is Rs.63.2 million. This is a decrease of Rs.122.5 million when compared to last years Rs.185.6 million. The net cash used in capital investments amounts to Rs.56.5 million which is a decrease by 31% when compared to last year. The net cash used in financing activities was a negative of Rs.31.2 million which was mainly due to repayment of long term borrowings and leases. The net impact of total cash inflows amounted to a negative of Rs.24.7 million during the year resulted in a negative cash and cash equivalent position of Rs.205 million at the year end.
Shareholder Value
The net asset per share showed a 6% decrease compared to the previous year. The net asset per share of Rs.25.80 recorded in the previous year decreased to Rs.24.16 at the end of the current financial year.
Quarterly Performance
A summary of the quarterly financial performance is given below. (In Rs.Mn.) Cumulative Up to Revenue Operating Profit/(Loss) Profit /(Loss) after tax Shareholders Fund Total Assets Earnings(Loss) per Share Rs. Net Asset per Share Rs. 1st Qtr 2006 /07 2nd 3rd Qtr Qtr 2005/06 4th Qtr
575 1,007 1,392 1,880 1,758 37 26 62 43 24 (30) 17 (6)
2 (58.8)
527 551 516 463 494 1,826 1,732 1,786 1,811 1,783 1.38 2.26 0.09 (3.07) (0.34)
27.54 28.77 26.96 24.16 25.80
Performance Measurement Earnings/(Loss) per Share

The Earnings per share was a negative (loss) of Rs.3.07 hence a significant drop when compared to the previous years loss per share of Rs.0.34.
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CORPORATE SOCIAL RESPONSIBILITY

What is Corporate Social Responsibility (CSR)
Corporate social responsibility is necessarily an evolving term that does not have a standard definition or a fully recognised set of specific criteria. With the understanding that businesses play a key role on job and wealth creation in society, CSR is generally understood to be the way a company achieves a balance or integration of economic, environmental, and social imperatives while at the same time addressing stakeholder expectations. Corporations are motivated to involve stakeholders CSR is generally accepted as applying to firms wherever they operate in the domestic and global economy. The way businesses engage/involve the shareholders, employees, customers, suppliers, governments, non-governmental organisations, international organisations, and other stakeholders is usually a key feature of the concept. While business compliance with laws and regulations on social, environmental and economic objectives set the official level of CSR performance, CSR is often understood as involving the private sector commitments and activities that extend beyond this foundation of compliance with laws. From a progressive business perspective, CSR usually involves focussing on new opportunities as a way to respond to interrelated economic, societal and environmental demands in the marketplace. Many firms believe that this focus provides a clear competitive advantage and stimulates corporate innovation. CSR is generally seen as the business contribution to sustainable development which has been defined as development that meets the needs of the present without compromising the ability of future generations to meet their own needs, and is generally understood as focussing on how to achieve the integration of economic, environmental, and social imperatives. CSR also overlaps and often is synonymous with many features of other related concepts such as corporate sustainability, corporate This includes: Stronger financial performance and profitability (e.g. through eco-efficiency), Improved accountability to and assessments from the investment community, Enhanced employee commitment, Decreased vulnerability through stronger relationships with communities, and Improved reputation and branding. in their decision-making and to address societal challenges because todays stakeholders are increasingly aware of the importance and impact of corporate decisions upon society and the environment. The stakeholders can reward or punish corporations. Corporations can be motivated to change their corporate behaviour in response to the business case which a CSR approach potentially promises. accountability, corporate responsibility, corporate citizenship, corporate stewardship, etc. CSR commitments and activities typically address aspects of a firms behaviour (including its policies and practices) with respect to such key elements as; health and safety, environmental protection, human rights, human resource management practices, corporate governance, community development, and consumer protection, labour protection, supplier relations, business ethics, and stakeholder rights.
Historical Context of Corporate Social Responsibility

The view that a business can have obligations that extend beyond economic roles is not new in many respects. Throughout recorded history the roles of organisations producing goods and services for the marketplace were frequently linked with and include political, social, and/or military roles. For example, throughout the early evolutionary stages of company development in England (where
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organisations such as the Hudson Bay Company and the East India Company received broad mandates), there was a public policy understanding that corporations were to help achieve societal objectives such as the exploration of colonial territory, setting up settlements, providing transportation services, developing bank and financial services, etc. During the nineteenth century, the corporation as a business form of Organisation evolved rapidly in the US. It took on a commercial form that spelled out responsibilities of the board of directors and management to shareholders (i.e. fiduciary duty). In this later evolutionary form, public policy frequently addressed specific social domains such as health and safety for workers, consumer protection, labour practices, environmental protection, etc. Thus, corporations responded to social responsibilities because they were obligated to be in compliance with the law and public policy. They also responded voluntarily to market demands that reflected consumer morals and social tastes. By the mid-point of the twentieth century, corporate social responsibility was being discussed in the US by business management experts such as Peter Drucker and being considered in business literature. In 1970, economist Milton Friedmann outlined his view that the social responsibility of corporations is to make profits within the boundaries of societal morals and laws (but cautioned that socially responsible initiatives by corporations could lead to unfocused management directions, misallocations of resources, and reduced market competition, opportunity and choice). CSR emerged and continues to be a key business management, marketing, and accounting concern in the US, Europe, Canada, and other nations. In the last decade, CSR and related concepts such as corporate citizenship and corporate sustainability have expanded. This has perhaps occurred in response to new challenges such as those emanating from increased globalization on the agenda of business managers as well as for related stakeholder
communities. It is now more a part of both the vocabulary and agenda of academics, professionals, non-governmental organisations, consumer groups, employees, suppliers, shareholders, and investors.
Challenges and Opportunities that comes with Corporate Social Responsibility

There is increasing focus on both the private and public sectors to be proactive in the area of CSR. Various challenges are emanating from consumers, shareholders, non-governmental organisations, international organisations, and other stakeholders. These challenges are increasingly recognised in public policy debates as well as in the marketplace by companies and industry sector associations and they are frequently recognised as opportunities. Stakeholders challenge corporations to play social responsibility roles at both the domestic and international levels. Challenges usually focus on one or more elements of CSR such as environmental protection, health and safety, corporate governance, human resource management practices, human rights, community development and consumer protection. In many cases, the challenges are framed in an incremental way and on other occasions the challenges are spelled out in a more comprehensive and overarching manner. The challenges often call for voluntary actions by businesses to demonstrate responsible behaviour and effective responses to social and environmental problems - both in the domestic and international contexts. The demands also call upon the public sector to reinforce corporate leadership and to use other policy tools such as economic and regulatory instruments to encourage CSR. The challenges for action can differ considerably from one stakeholder group to another. For example, the demands can range from a call for more disclosure of information to demands for
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improved stakeholder involvement to requests for changes in management practices to proposals for altering the relationships between company directors, business managers, auditors, shareholders, debt holders, employees, suppliers, customers, community members, and other stakeholders. Some of the challenges are oriented to the ways that businesses manage their internal operations such as human resources management while others are directed at the ways that a business interacts with the rest of the community and society (e.g. human rights, consumers, and supplier relationships). We at Agarapatana Plantations are always ready to take up the challenges and opportunities that come with Corporate Social Responsibility also contribute to all possible aspects of social development both within the firm and to the external environment.
optimum levels. In order to enhance productivity we always maintain optimum recruitment levels to the actual requirements determined by the Company. The Company is a member of the Ceylon Employers Federation who advice on labour laws and all labour and staff related matters.
Fostering Career Development

At Agarapatana Plantations we take great pride in the development and success of our employees. We pursue a philosophy of developing people, to enhance their knowledge and skills and develop their character. At Agarapatana Plantations we continuously invest in training and career development initiatives to help our employees to be more productive. Over the past several training programmes were conducted which covered a wide range of relevant topics. These were conducted by professional trained individuals attached to various training bodies. The participants for these programmes were gathered from all levels of the organisations which included Directors, General Managers, Senior Managers, Plantation Managers, Factory staff, Head Office staff, and estate staff etc. Training programmes held focusing on the estate workers were based on how to increase yield, while programmes held with a focus on the estate managers were based on how they can improve themselves on overall general administration. In order to improve the linguistic abilities amongst the Head Office staff several programmes on the use of Business English were conducted successfully.
OUR HUMAN RESOURCES

We continue to be an equal opportunity employer and look forward to further develop this concept into the future. Equal opportunity is about valuing and recognising the contribution that individuals from different backgrounds, race and cultures can make in the work place, and helping them to make their contribution without any unfair harassment or discrimination. We provide numerous opportunities for continuous learning and skill building and have created a culture that appreciates the balance between work and family life. At Agarapatana Plantations there are individuals from almost all parts of the country, from different ethnic backgrounds and age groups, different cultures, and different educational skills and experience who contribute towards the success of the Company. We always ensure that the best personnel are recruited who can make the most of their potential for the company and develop their own careers to
Caring for Most Valuable Asset

A responsible Organisation carrying out business has an obligation to ensure that each employee who performs a work of activity for the purpose of the business is not exposed to risks to their health and safety.
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One of the key objectives at Agarapatana Plantations is employee health and safety.We strive to prevent work related injuries, illnesses and deaths. With the objective of continuously improving health and safety and a better working environment for the Company we carried out various employee welfare programmes of which a few are mentioned below. Dangers of Alcohol & Drugs - Focusing on our estate workers the Company has an on going awareness programme on the consequences of consuming alcohol and the dangers of using drugs in every day life. This has been a success for the Company as absentism among estate workers and alcohol related illnesses have reduced to minimum levels. Rest Rooms - For all factories, rest rooms(segregating males & females) are being constructed which helps to create a healthy working environment. Insurance - All employees of the Company have been fully insured against indoor and outdoor accidents, and other unforeseen events. How ever, in the event of a requirement of large funds for a critical ailment it has been evaluated on a case by case basis and assistance provided accordingly. Almost all estates have well constructed crches manned by trained attendants and are provided with toys and other play material to meet the needs of children. These crches gives our estate workers peace of mind and help improve their profitability thus creating a win situation for both parties.
Constructed houses
Child Welfare
Welfare activities have combined medical and health benefit aspects with educational and skills development, and Agarapatana Plantations are committed in this cause. We have continued to provide scholarships for higher education for our employees children.
REACHING OUT TO THE COMMUNITY

In recognition of the fact that our future depends on the next generation, it is our duty to upgrade the standards of living of our estate work force, cottage type houses have been constructed with the assistance of the Plantation Human Development Trust and Estate Worker Housing Co-Operative Society. Lands were given on the basis of seven perches per housing unit free of charge to the estate workers with a title to the estate worker housing co-operative society. Electricity and other essential utilities also have been provided.
Childrens sports meet at a creche
Tea Estate Assistance (TEA) Project in our estates

In order to improve living standards of our plantation community, we at Agarapatana Plantations Ltd have obtained the assistance of Care
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International in order to initiate this project. As productivity is the key for the sector viability. The community and the worker contribution to increasing productivity is critical. When workers work in a healthy environment, their productivity will be enhanced. The community satisfaction and the productivity increase are interrelated and interdependent. This phenomenon should seriously be considered in the process of designing development initiatives for the plantation sector. Tea Estate Assistance (TEA) is a project designed to addresses some of the key issues in the plantation context. It operates on five estates under Agarapatana Plantation Limited - New Portmore, Balmoral, Torrington, Sandringham and Diyagama West, aiming at improving the overall social security network of the residents of these estates. The project promotes collective decision-making forums; Participatory Teams (PT), a series of capacity building training and information centres on the project estates. The TEA project seeks to improve information and service provision on the estates. TEA works with the estate management and residents to establish co-managed services and facilities on the estates. The project also increases the ability of estate residents to access and use information and services. While the project participants comprise of the entire estate community, including the estate management, TEA will place special emphasis on reaching women and young people with appropriate information and services. As the first step in achieving the above objectives, Participatory Teams (PTs) were already formed and PTs were strengthened by organising and conducting various training programmes in the areas of alcoholism, money management, communication and basic documents, in addition to the regular PT meetings. To improve the access to information, PT has established Information Centres (IC) on project estates with necessary information on state services, banking and financial services, alcoholism, health
and sanitation. The Information Centre is the central place for both of estate community and outside organisations that provide basic and commercial services to the estate community and which increases and expedites the process of providing and obtaining basic services. Government officers such as Grama Niladharis and Samurdhi Development Officers visit the ICs and provide their services to the estate community. Mobile services for estate residents to obtain birth certificate are also underway. In addition, mini-projects have been identified to improve the facilities in the estates. If not for the support from the Agarapatana Plantation Company and the estate managements, the project would not have been a success. CARE wishes to collaborate with the Company in such endeavours and seeks the support of the Company to get the maximum impact.
Workshop in progress
Building Better Relationships

We at Agarapatana Plantations held our annual Christmas party and New Year party at our Head Office which as always been attended by all employees. Agarapatana Plantations also takes part in the annual plantations seven a side rugby tournament and annual plantations six a side cricket tournament on a regular basis which helps build individual relationships amongst our employees.
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RELATIONSHIP WITH OUR KEY STAKEHOLDER Brokers

We recognise the fact that brokers are also key stakeholder of our Company, hence it is of great importance in establishing a healthy relationship with our brokers which is also critical for the success of our business. Meetings are held on a regular basis with our brokers to exchange views on
Continuing life long traditions
performance, how to further improve performance, how the quality of our tea meets current market standards and where further improvements are required. We also invite brokers to our estates for tea tasting sessions.
COMMITTING VALUE AND QUALITY TO THE CUSTOMER

One of the main objectives of ours is to provide a high quality end product which adds value to our customer. We operate in a dynamic environment where customers and competitors are well armed with information, and therefore we have put in place strategies that match our customer needs and the Companys goals. We see a great shift in how consumers spend their wealth, therefore business models need to be flexible in order to be successful. In order to be two steps ahead of our nearest rivals we continue to improve our production and produce tea that will go beyond the quality levels expected by our customers and maintained by our competitors. This is being achieved by upgrading our production units to HACCP standards.
Suppliers
Suppliers are an integral part of the Companys extended family. The relationship we enjoy with our suppliers is a close and vital one. As Agarapatana Plantations maintains high standards in terms of quality of the tea it produces, we require well established suppliers with a strong sense of commitment that can keep pace with our growth. Our suppliers are aware of the quality levels we maintain and thus ensure high levels of quality are maintained in their supplies and delivered on time always.
Caring for our Community

The Company continued to work closely with local communities, more appropriately in the rural area focusing on the development of rural economies. Through the purchase of crop Agarapatana Plantations continues to provide funds for local economies and prevents unemployment levels from increasing. We at Agarapatana Plantations do focus on activities that uplift the standard of living of these communities.
Our golden tea fields
Flood Relief Providing of school uniforms, building materials, dry ration, and milk foods to villagers residing in our Agras Valley region.
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Environmental Protection & Improvement

At Agarapatana Plantations, our goal is to ensure that no damage is done to the environment. We strive to maintain the property we are privileged to use, and also protect the environment and natural resources. As Agarapatana Plantations is committed to environmental excellence through our corporate policies, we instill high environmental values in all our employees and do utilise the best environmental practices in our processing factories. We also seek to work diligently with regulators, public health groups, non-governmental organisations in order to identify and establish accepted standards which will improve our working environment.
Understanding the Environment and Sharing of Information

Our core business tea, is exposed to adverse climatic conditions which can affect the yield and crop. We continuously carry out work to recognise risks and uncertainties associated with adverse climatic conditions on our business and identify what steps we can take to minimise our contribution towards an adverse climatic change. We also keep our employees updated on the latest environmental initiatives that are carried out, and also identify how employee action can contribute to our environmental performance.
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ENVIRONMENT REPORT
There is an increasing recognition that good environmental performance makes good business sense. Environmental risks and uncertainties impact to some extent on all companies, and affect investment decisions, consumer behaviour and Government policy. Management of energy, natural resources or waste will affect current performance, failure to plan for a future in which environmental factors are likely to be increasingly significant may risk the long term future of business. Companies that measure, manage and communicate their environmental performance are inherently well placed. They understand how to improve their processes, reduce their costs, comply with regulatory requirements and stakeholder expectations and take advantage of new market opportunities. Nevertheless, the landscape of environmental, sustainability and corporate responsibility can be complex. However, guidelines are being developed to provide help to companies report their environmental in a meaningful and cost effective way. There is an increasing demand and a growing trend for company reporting to be sharper and more focused on the key impacts on the business and the environment. The requirement for a business review is designed to improve company reporting, and requires companies to report on environmental matters where necessary for an understanding of the business. The use of Key Performance Indicators (KPIs) will help companies manage and communicate the links between environmental and financial performance. We at Agarapatana Plantations acknowledge the importance of the impact of our operations on the environment. Environmental risk cannot be ignored, they form part of our strategic planning process which ensures a successful operation of our business. Establishing environmental responsibility as a corporate value. Carrying out innovative and flexible solutions to bring about a positive change, We also make use of Key Performance Indicators which are reported with relevant critical success factors on a monthly basis. This practice helps the Company to focus on environmental issues which are dealt with accordingly. Agarapatana Plantations is committed to: Identifying environmental issues and sharing information with our employees,
Identifying environmental issues and sharing information with our employees

Our core business being tea is vulnerable to adverse climatic conditions which influence the yield and crop. We work continuously to identify the risks and implications of adverse climatic changes, and what steps we can take to minimise our contribution towards these adverse changes. Our employees are well informed of the environmental initiatives that are carried out, and we also identify how employee action can contribute to our environmental performance.
CARRYING OUT INNOVATIVE AND FLEXIBLE SOLUTIONS TO BRING ABOUT A POSITIVE CHANGE Establishing environmental responsibility as a corporate value
Agarapatana Plantations Limited is committed to maintaining high standards of environmental and social performance throughout all of its operations and activities, and complies with applicable environmental and social laws and regulations. We ensure that environmental responsibility is embraced at all levels of the Company all the time.
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ENVIRONMENT REPORT
We will continue to add value to the environment within which we operate, through our operations, sharing our best practices, and through identified corporate social responsibility investments.
Conservator General of Forestry. Lands used are waste lands and lands that are uneconomic for tea plantations. The main objective in planting of timber is to prevent soil erosion in the estates. It also provides forest cover and there are cost savings on fuel for the Company. All operations including felling, clearing, extraction and transportation of timber is undertaken in conformity to the environmental standards with all precautionary measures in order to minimise soil erosions.
Minimising ground waste

The Company has undertaken to prevent soil erosion in all our estates, establishing soil conservation methods such as terracing including live terraces and draining on a regular basis.
Emission and Waste Reduction

Almost all our estates are equipped with effluent plants that are regularly upgraded in order to treat a large volume of effluent.
Timber & Cinnamon

Waste lands and lands that are uneconomical for the
Terracing
tea plantation have been used for planting of timber. The main objective of planting timber is to prevent soil erosion in the estates. It also provides forest cover and there are cost savings on fuel for the Company. Agarapatana Plantations has also undertaken the cultivation of cinnamon on lands uncultivated previously. This also helps to minimise soil erosion.
ENVIRONMENTAL RESPONSIBILITY
Timber
We have progressed to great extent on the timber planting project in both our plantation regions which we commenced last year. This project is a five-year-plan which was approved by the
Timber reserves
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OUR HUMAN RESOURCES
Workers 06/07 Total Employees Region Wise Agras Valley Haputale Head Office 05/06
Clerical,Technical & Executives Other Staff 06/07 05/06 06/07 05/06 750 413 309 28 750 769 424 313 32 769 90 27 23 40 90 85 28 23 34 85
Total 06/07 05/06
16,945 17,162 9,396 7,549 9,568 7,594
17,785 18,016 9,836 10,020 7,881 7,930 68 66 17,785 18,016
16,945 17,162
Gender Wise
Male Female
7,382 9,563
7,403 9,759
553 197 750
565 204 769
80 10 90
77 8 85
8,015 9,770
8,045 9,971
16,945 17,162
17,785 18,016
Age Distribution
Below 30 years 30 - 45 years Over 45 years
4,815 7,220 4,910
5,093 7,068 5,001
98 283 369 750
109 291 369 769
15 38 37 90
18 30 37 85
4,928 7,541 5,316
5,220 7,389 5,407
16,945 17,162
17,785 18,016
Service Distribution Below 5 years 6 - 15 years Over 15 years
3,791 5,016 8,138
3,600 5,152 8,410
238 177 335 750
242 177 350 769
38 36 16 90
32 33 20 85
4,067 5,229 8,489
3,874 5,362 8,780
16,945 17,162
17,785 18,016
10000 8000 6000
400 300 200
4000 2000 0 100 0
40 35 30 25 20 15 10 5 0
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CORPORATE GOVERNANCE
What is Corporate Governance
Corporate governance is the set of processes, customs, policies, laws and institutions affecting the way a corporation is directed, administered or controlled. Corporate governance also includes the relationships among the many players involved (the stakeholders) and the goals for which the corporation is governed. The principal players are the Shareholders, Management and the Board of Directors. Other stakeholders include Employees, Suppliers, Customers, Banks and Other Lenders, Regulators, the Environment and the Community at large. Corporate governance is a multi-faceted subject. Corporate governance deals with issues of accountability and fiduciary duty, essentially advocating the implementation of guidelines and mechanisms to ensure good behaviour and protect stakeholders. Another key focus is the economic efficiency view, through which the corporate governance system should aim to optimise economic results, with a strong emphasis on shareholders wealth. There are yet other sides to the corporate governance subject, such as the stakeholder view, which calls for more attention and accountability to players other than the shareholders (e.g. the employees or the environment). Recently there has been considerable interest in the corporate governance practices of modern corporations, particularly since the high-profile collapses of large US firms such as Enron Corporation and Worldcom. The term Corporate Governance has come to mean two things; processes by which companies are directed and controlled. a field in economics, which studies the many issues arising from the separation of ownership and control. Relevant rules include applicable laws of the land as well as internal rules of a corporation. Relationships include those between all related parties, the most In A Board Culture of Corporate Governance business author Gabrielle ODonovan defines corporate governance as an internal system encompassing policies, processes and people, which serves the needs of shareholders and other stakeholders, by directing and controlling management activities with good business savvy, objectivity and integrity. Sound corporate governance is reliant on external marketplace commitment and legislation, plus a healthy board culture which safeguards policies and processes. Corporate governance is used to monitor whether outcomes are in accordance with plans and to motivate the Organisation to be more fully informed in order to maintain or alter organisational activity. Corporate governance is the mechanism by which individuals are motivated to align their actual behaviours with the overall participants. important of which are the Owners, Managers, Board of Directors, Regulatory Authorities and to a lesser extent Employees and the Community at large. Systems and Processes deal with matters such as delegation of authority. The Corporate governance structure spells out the rules and procedures for making decisions on corporate affairs. It also provides the structure through which the company objectives are set, as well as the means of attaining and monitoring the performance of those objectives.
Principles
Key elements of good corporate governance principles include honesty, trust and integrity, openness, performance orientation, responsibility and accountability, mutual respect, and commitment to the organisation. Of importance is how directors and management develop a model of governance that aligns the values of the corporate participants and then evaluate this
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model periodically for its effectiveness. In particular, senior executives should conduct themselves honestly and ethically, especially concerning actual or apparent conflicts of interest, and disclosure in financial reports. We have established governance as a high priority for a simple reason it is the right thing to do. By investing in APL, shareholders are placing their trust in the Board to help shape the overall course of the Companys business and to hold management accountable for its performance. In the end, Governance is all about creating an environment that promotes informed objective decision making in the interest of all stakeholders. We at Agarapatana Plantations Limited are committed to maintain the highest standards of responsibility, transparency, accountability, integrity, ethical values and make sure all our stakeholders are treated equally and have the opportunity for redress for violation of their rights. For this purpose the Board of Directors assures that the highest standards of corporate governance is always practiced.
issues. The Chairman together with other Directors decides on the Agenda for the Board Meetings. All the Directors are well recognised business personalities who provide a strong balanced blend of skills and expertise. Prior to each meeting all Directors are given a detailed file of Board Papers which includes summarised Financial Statements, Crop and Yield Statements and a Progress Report covering all significant issues.This information is given at least seven days prior to the meeting which gives Directors adequate time for qualitative deliberation and analysis.
The Board of Directors ensures the following;

Each Director shall at all times represent the interests of the stakeholders of the Company. Each Director shall at all times exhibit high standards of integrity, commitment and independence of judgement. Each Director shall devote sufficient time, energy and attention to ensure the diligent performance of duties, including attendance at shareholder meetings and meetings of the Boards and committees. The Board encompass a range of talent, skill and expertise sufficient to provide sound and prudent guidance in respect of all of the Companys operations and interests. The Board reflect the diversity of the Companys shareholders, employees, customers, guests, and communities. Ms K.M Ramesh who is the Financial Controller also attends the Board Meetings. The core principles that reflects minimum standards of acceptable corporate governance are Responsibility, Accountability, Transparency and Fairness.
Board of Directors
Our Boards composition today is a strong, balanced blend of skills and experience, allowing it to offer guidance in core areas important to APL. A. Rajaratnam S.D.R. Arudpragasam D.S. AbeyRatna C.P.R. Perera D.A. Ratwatte R.C. Peries G.D.V. Perera J.H.J. Jayamaha R.M.S.P. Ratnayake
Board Meetings and Supply of Information

The Board of Directors have delegated the Management of Plantations to the Managing Agents who meet every month to discuss the operational
32
How effective and efficient the Company is in adhering to good corporate governance is detailed herein. A formal set of matters reserved for the decision making of the Board. Setting strategic direction and establishing goals for the Management. Monitoring performance against set goals and objectives. Assessing the adequacy and effectiveness of internal controls and management information. Identifying principle business risks of the Company and ensuring such risks are effectively managed. Determining remuneration of Senior Executives and other employees of the Company. Adopting annual and interim results before publication.
election. Retiring Directors are eligible for re-election by the shareholders.
Management Committee
The Management Committee comprises of Directors, Regional General Managers, Manager Engineering, Manager Legal Affairs and the Financial Controller.
Meetings of the Management Committee

Meetings are held once a month where a review in detail is carried out on the performance of each individual estate based on both financial and relevant nonfinancial indicators. Management committee meetings are always held prior to the monthly Board meetings.
Company Secretaries
All Directors may seek advice from Corporate Managers & Secretaries Limited who act as Company Secretaries and are qualified to act as per the provisions of the Companies Act No 7 of 2007.
Establishing a good relationship with Shareholders

The Company always welcomes the active participation of the shareholders at the Annual General Meeting. Questions put up by the shareholders are answered thus promoting a healthy dialogue. Whenever possible, the company implements their suggestions. The Companys principle communicator with all its stakeholders is its Annual Report. The Company also maintains a website under the name of its Managing Agents www.lankemplantations.lk which offer any interested individual or body information on the Company and its affairs.
Appointments to the Board

The Board as a whole decides on the appointment of directors. New directors are proposed for appointment after consultation with the Chairman of the Company. All appointments are approved by the Board of the Main Parent Company except for the Government Nominated Directors.
ACCOUNTABILITY AND AUDIT Re-election of Directors

In terms of the Articles of Association any Director appointed by the Board holds office until the next Annual General Meeting, at which he seeks election by the shareholders. The Articles require one-third of the Directors in office to retire at each Annual General Meeting. The Directors who retire are those who have been longest in office since their last
Going Concern
The Board of Directors after reviewing the financial position and cash flow of the Company are of the belief that the Company has adequate resources to continue operations well into the foreseeable future. Therefore, the Board adopts the going concern basis in preparing financial statements.
33
Financial Reporting
The Board attaches high priority to timely publication of annual results with comprehensive detail (both financial and non financial) going beyond statutory requirement. This enables both existing and prospective shareholders to make fair assessments on the Companys performance and future prospects. The Financial Statements are prepared in accordance with The Sri Lanka Accounting Standards, which are based on the International Accounting Standards. Hence the Companys Financial Statements comply with the International Accounting Standards in all material respects.
Compliance with Legal Requirements

The Board of Directors through the Companys Legal and Finance Divisions make every endeavour to ensure that the business complies with all laws and regulations.
Social & Environmental Matters

The Company has for many years recognised the benefits that accrue from responsible employment, environmental and community policies which are dealt within detail in the Corporate Social Responsibility Report.
Ethical Standard
The code of conduct is founded on three basic principles that is Integrity, Courage and Commitment. A series of best practices and techniques are now embedded in the business and applied intelligently within the Organisation. Areas of success already seen are in conformance with long term strategy and in working more effectively with a common focus on growth, productivity, and responsibility. Constant responsiveness to all stakeholder interests and an effective risk management process are critical success factors to ensure and provide confidence that the governance process will continue to add value in the future. In order to improve the Corporate Governance Practices already in place, we identify the latest best practices and implement them wherever gaps are found.
Internal Control
The Directors are responsible for maintaining an effective system of internal controls covering both financial and operational matters. The system is designed to safeguard assets from unauthorised access and or use or disposal and to ensure that timely and accurate information is generated.
Internal & External Audits

The Internal Audit Division comprises of the Internal Audit Manager and assistants who report directly to the Chief Executive Officer. They are empowered to examine and review the financial reporting systems, internal control procedures, accounting policies and compliance with accounting standards. It also reviews the adequacy of systems for compliance with legal, regulatory and ethical requirements and Company policies. The Company maintains a professional relationship with the external auditors, M/s Ernst & Young. This ensures their objectivity, independence and compliance with regulatory and ethical requirements. The Board of Directors retains the authority in determining their remuneration.
34
RISK MANAGEMENT
What is Risk Management

Risk management is attempting to identify and then manage threats that could severely impact or bring down the Organisation. Generally, this involves reviewing operations of the Organisation, identifying potential threats to the Organisation and the likelihood of their occurrence, and then taking appropriate actions to address the most likely threats. Traditionally, risk management was thought of as mostly a matter of getting the right insurance. Insurance coverage usually came in rather standard packages, so people tended to not take risk management seriously. However, this impression of risk management has changed dramatically. With the recent increase in rules and regulations, employee-related lawsuits and reliance on key resources, risk management is becoming a management practice that is every bit as important as financial or facilities management. Successful companies can no longer function within yesterdays risk management framework. Today, risk management strategies must be able to identify and quantify all potential risks, and also be an integral part of the decision making process of the company.
assessment of potential risks that the Organisation could face. This focused assessment should occur on a regular basis by a team of staff members representing all the major functions of the Organisation. The assessment is carefully planned, documented and methodically carried out. The Boards role is to review the risk reported and the response there to. The Company also maintains proper channels of communication in order to facilitate effective and efficient risk management. Risk management also faces a difficulty in allocating adequate resources. This is the concept of opportunity costs, resources spent on risk management could be better spent on more profitable activities. However, ideal risk management spends the least amount of resources in the process while reducing the effects of risks as much as possible. Key Performance Indicators of the Companys business units are continuously monitored. Reports by internal, external and corporate auditors are produced and reviewed. The Companys accounting and control functions, internal audit function, maintain and seek continually to improve the effectiveness of the reporting system and the internal controls in place.
Proactive monitoring of risk

We at Agarapatana Plantations understand the importance of the concept of Risk Management, thus regularly undertake comprehensive, focused Forms of Risk faced by Agarapatana Plantations Ltd Operational risk Consequences
The following are some of the major risk factors that the Company is exposed to while carrying out its business and actions implemented to reduce or eliminate such risk.
Risk Management measures in place at Agarapatana Plantations Ltd to address these risks
Continuity of business
The company carries out continuous planning, quality control, and disaster recovery management strategies are in place in order to ensure the continuous operation of business.
Company assets
Tangible assets are insured against identifiable risks and the insurance policies in question are reviewed and evaluated annually. Provision is also made for asset defects and malfunctions and for obsolescence due to advances in technology. The factories in the estates and other infrastructure are continuously upgraded when required.
35
RISK MANAGEMENT
Forms of Risk faced by Agarapatana Plantations Ltd
Consequences
Reputation of the Company
Exposure to reputation risk is minimised through product quality controls and comprehensive quality management processes which includes upgrading our factorys which adheres to HACCP standards.
Business Risk which would include global prices, markets supply chain risk
Effect On Company Revenue & stock outs, adverse price fluctuations.
Prices are cyclical and have a impact on earnings. Tea Auctions in Colombo are influenced by global demand and supply, and foreign currency exchange rates. The Company mitigates this impact by producing high quality tea. Initiatives have been taken for and diversification into other crops like cinnamon which will reduce the over dependence on tea. The Company possesses synergistic benefits from being in a Group which includes a chemical supplier and another company in the plantation business. Healthy relationships are maintained with our suppliers. Fluctuations in the exchange rates are closely monitored and hedging techniques applied when required.
Profitability
Financial loss, fall in shareholder confidence, loss of market share, fall in share price, drop in credit rating.
Owing to fall in profitability the Company can suffer financial losses which can cause a chain of events such as loss of shareholder confidence, companys credit rating being downgraded in financial markets, loss of competitive advantage over competitors thus a loss in market share. If not rectified at the initial stage this may lead to insolvency and there after threaten the going concern of the Company. The company has monthly Board meetings and senior management meetings where the Companys performance over the last month is discussed in detail. Monthly management accounts, marketing reports, production reports, estate performance reports are some of the key reports that are submitted by the respective departmental heads and discussed in detail in these meetings. We ensure that a high quality crop is harvested in order to manufacture a high quality end product which will receive remunerative prices.
36
RISK MANAGEMENT
Forms of Risk faced by Agarapatana Plantations Ltd Liquidity
Consequences
Working capital deficits
In a cyclical industry such as ours having adequate liquidity is crucial for the smooth operations. Our qualified and experienced Finance Division strives to ensure sufficient liquidity is available to meet our debt commitments and provide for our operational capital requirements. Loans and Overdraft facilities are arranged with banks to meet planned cash flow commitments. For our long term financial cash flows we obtain loans from Asian Development Bank at low interest rates, and we make use of the grants from the Plantation Human Development Trust and the Plantation Development Support Programme. Borrowings are suitably structured to ensure their maturity profiles match those of the investments they finance.
Interest rates
High operational leverage
The company strives to minimise the impact of adverse interest rate movements. In order to achieve this concessionary funding is utilised from sources such as Asian Development Bank. We also seek to maintain an appropriate mix of floating and fixed rate funding in our business.
Weather
Effect On Crop
As the Companys product being tea it is widely exposed to adverse weather conditions. This adversity is minimised to a great extent owing to the geographical distribution of our tea estates. The Company also has the option of increasing or decreasing quantities of bought crop according to weather patterns. Prudent agricultural practices such as planting of TRI recommended clones and other agricultural practices to minimise drought effects and proactive planning has helped the company to minimise the risk of adverse weather conditions.
Human resources
Work stoppages, compensation cost, low productivity
Agarapatana Plantations has entered into Collective Agreements with trade unions as a member of the Employers Federation. This helps ensure as far as possible industrial peace and a well negotiated and affordable wage. Human Resource Management is given priority, where continuous training and development programs and workshops are held in order to motivate and develop our human resources.
37
RISK MANAGEMENT
Forms of Risk faced by Agarapatana Plantations Ltd Employee related risks
Consequences
Breakdown of procedures & controls, financial loss and damage to reputation
Risks such as omissions, fraud, judgmental errors, negligence, are examples of employee related risks. The company has a set up a competent internal audit department which carries out exhaustive checks on a routine basis in order to eliminate the above mentioned risks. The Internal audit department functions independently and reports directly to the Chief Executive Officer. They ensure all receipts have been banked, lodging of funds have been deployed for the intended activity. Suitable delegated authority levels have been set up and succession plans are formulated. We maintain a conducive working environment for all staff.
Information
Disruption to the system, financial loss
Proper internal controls have been established in order to secure the information system. Routine and surprise audit checks are carried out to detect any deficiencies and improvements are suggested. The Company has implemented sound backup systems and procedures, and has also entered into maintenance contracts with established agents and uses licensed software. Further, the company has entered into insurance agreements in order to hedge financial losses arising from uncertainties.
Legal and regulatory
Adverse image, effect on business opportunities, financial implications (penalties and surcharges)
The Company addresses this area with great concern in order to protect its corporate image. Quality assurance standards in factories have been established over period of time (ISO, HACCP) and continuous reviews are conducted to ensure they are maintained. The Companys legal division ensures full compliance with all regulatory requirements including labour regulations, adherence to laws and instructions of governing authorities such as Provisions of the Companies Act, Securities & Exchange Commission and Colombo Stock Exchange requirements. The Company also obtains expert advice from its Auditors, Tax consultants, Actuaries, TRI, as and when required.
Governance Risk
Loss of reputation, goodwill possible litigation & financial loss.
These risks are dealt with preventively through the actions of the companys legal department and through frequent internal and external audits to monitor compliance. The companys management culture stresses ethical performance in this area, following best practices at all times.
38
FINANCIAL REPORTS & FINANCIAL CALENDAR

Directors Report Statement of Directors Responsibilities Auditors Report Income Statement Balance Sheet Cash Flow Statement Statement of Changes in Equity Notes to the Financial Statements Value Added Statement 41 - 43 44 45 46 47 48 49 50 - 76 77
Annual Report 2006/07 - 5th June 2007
15th AGM
On 11th July 2007 at 10.00 a.m. Grand Oriental Hotel, Colombo 01.
39
DIRECTORS REPORT
Directors Report
The Directors Report to be presented at the Fifteenth Annual General Meeting of Agarapatana Plantations Limited to be held on 11th July 2007 at 10.00 a.m. at the Grand Oriental Hotel, Colombo 1. The Managing Agents Fees charged for the year amounting to Rs.102.6 million (2005/06 Rs.97.9 million) is based on the same basis applied in the previous years.
Dividends
The Directors have pleasure in presenting to the members their Report together with the Audited Financial Statements of Agarapatana Plantations Limited for the year ended 31st March 2007. The Board of Directors do not recommend any Dividend for the year under review.
Property, Plant & Equipment

The capital expenditure during the year amounted to Rs.112.8 million (2005/06 Rs.84.3million) which includes Rs.65.5 million replanting expenditure (2005/06 Rs.56.3 million). Information relating to movements in Property, Plant and Equipment are given in Notes 9,10,11 and 12 to the Financial Statements.
Principal Activities & Business Review/Future Developments

Agarapatana Plantations Limited is a Regional Plantation Company which cultivates, processes and sells tea. A review of the Companys business and its performance during the year, with comments on financial results and future developments, is contained in the Chairmans Review, Operational Review and the Financial Review sections of this Annual Report.
Share Capital & Share Premium

The Company was incorporated in 1992 with 500,000 ordinary shares of Rs.10/- each. In August 1995 the issued share capital of the Company was increased by the allotment of bonus shares of 14,400,000 ordinary shares of Rs.10/- each and 1 Golden Share of Rs.10/- to the Secretary to the Treasury. Later, in 2002 the Convertible Debentures amounting to Rs.150 million held by Lankem Plantation Holdings were converted to 4,255,319 ordinary shares of Rs.10/- each and the balance Rs.107,446,810 has been recognised to share premium. As a result, the issued share capital of the Company increased to 19,155,320 shares of Rs.10/each. No changes have taken place since then.
Revenue
The revenue of the Company for the year was Rs.1880.5 million (2005/06 Rs.1,758.5 million) which comprise Rs.1103.3 million from Agras Valley Region (2005/06 Rs.1,024.8 million) and Rs.777.2 million from Haputale Region (2005/06 Rs.733.7 million).
Results
The Company made a Net Loss before tax of Rs.58.8 million against the loss of Rs.6.5 million in the previous year. The Company is not liable for income tax as a loss was recorded during the year.
Reserves
The total reserves of the Company as at 31st March 2007 amounts to Rs.271.2 million, comprising Share Premium of Rs.107.4 million and Retained Profit of Rs.163.8 million. The movement is shown in the Statement of Changes in Equity in the Financial Statements.
Managing Agent & Management Fee

Lankem Tea & Rubber Plantations (Pvt) Limited, a fully owned subsidiary of Lankem Plantation Holdings Limited, continue to manage the affairs of the Company.
41
DIRECTORS REPORT
Income Tax Expense, Economic Service Charge & Value Added Tax
In terms of the Inland Revenue Act, the Company is liable to pay tax at a concessionary rate of 15% on Specified Profits from cultivation. The corporate rate of tax applicable to other income would be 30%. Further, from the year of assessment 2005/06 the Inland Revenue allows only 35% of the total statutory income to be set off against the carried forward tax losses. However, no income tax payment arose for the year under review due to the carried forward tax losses, Advance Company Tax recoverable, Investment Tax Allowance and Economic Service Charge recoverable. Further details of Income Tax Expense are given in Note 7 to the Financial Statements on page 62. The Company is liable to pay Economic Service Charge (ESC) effective from 1st April 2005, as the liable turnover of the previous year of assessment has exceeded Rs.50 million. The turnover relating to agriculture activity and exports is liable to ESC at the rate of 0.5% and any other turnover is liable to ESC at 1%. ESC may be set off against income tax payable of the Company during the year in which the payment was made and within two years thereafter. Accordingly the Company has paid Rs.4.7 million during the year under review which can be set off when arriving at the income tax payable of next two years.
Capital Commitments & Contingent Liabilities

Capital Commitments and Contingent Liabilities as at the Balance Sheet date are disclosed in Notes 27 and 29 to the Financial Statements on pages 72 and 74 respectively.
Employment Policy
The Companys recruitment and employment policy is non-discriminatory. The occupational health and safety standards receive substantial attention. Appraisals of individual employees are carried out in order to evaluate their performance and realise their potential. This process benefits the Company and the employees. The number of persons employed by the Company at the year end was 17,785 (2005/06 - 18,016).
Statutory Payments
The Directors, to the best of their knowledge and belief, are satisfied that all statutory payments due in relation to employees and the government have been made promptly, up to date.
Environmental Protection
The Companys business activities can have direct and indirect effects on the environment. It is the Companys policy to minimise any adverse effects its activities have on the environment and to promote co-operation and compliance with the relevant authorities and regulations. We confirm that the Company has not undertaken any activities which have caused or likely to cause detriment to the environment.
Share Information
Information relating to earnings and net assets is given on pages 4 and 20 in this Report.
Corporate Governance/ Internal Control Events Occurring after the Balance Sheet date
No circumstances have arisen since the Balance Sheet date which would require adjustment, or disclosure in the Financial Statements, other than those disclosed in Note 30 to the Financial Statements on page 74. Adoption of good governance practices has become an essential requirement in todays corporate culture. The practices carried out by the Company are given in the Corporate Governance Statement on pages 31 to 34.
42
DIRECTORS REPORT
The Directors acknowledge their responsibility for the Companys system of internal control. The system is designed to give assurance regarding the safeguarding of assets, the maintenance of proper accounting records and the reliability of financial information generated. However, any system can ensure only reasonable, and not absolute, assurance that errors and irregularities are either prevented or detected within a reasonable period of time. The Board is satisfied with the effectiveness of the system of internal control for the period up to the date of signing the Financial Statements. August, 2006 retires and being eligible offers himself for re-election. Mr. A.C. Gunasinghe and Mr. N.H.B.S. Perera Retired from the Board of Directors on 15th May, 2006.
Directors Interest in Contracts

The Directors Interest in Contracts of the Company are disclosed in Note 31 to the Financial Statements on page 75 and have been declared at the meetings of the Directors. The Directors have no direct or indirect interest in any other contract or proposed contract of the Company.
Going Concern
As noted in the Statement of Directors Responsibilities on page 44. The Directors have adopted the going concern basis in preparing Financial Statements.
Directors Shareholdings
None of the Directors held shares in the Company as at 31st March 2007.
Directorate
The names and profiles of the Directors as at the date of report appear on pages 8 and 9. In terms of Articles 92 & 93 of the Articles of Association, Mr. D.S. AbeyRatna retires by rotation and being eligible offers himself for re-election. In terms of Article 98 of the Articles of Association Mr. D.A. Ratwatte the Director appointed on 4th August, 2006 retires and being eligible offers himself for re-election. In terms of Article 98 of the Articles of Association Mr. R.C. Peries the Director appointed on 4th August, 2006 retires and being eligible offers himself for re-election. In terms of Article 98 of the Articles of Association Mr. G.D.V. Perera the Director appointed on 4th
Auditors
The Financial Statements for the year have been audited by Messrs. Ernst & Young, Chartered Accountants, who are recommended for re-appointment. In accordance with the Companies Act No. 7 of 2007, a resolution proposing the re-appointment of them as Auditors to the Company will be submitted at the Annual General Meeting.
By Order of the Board CORPORATE MANAGERS & SECRETARIES LIMITED Secretaries Colombo. 05th June 2007
43
STATEMENT OF DIRECTORS RESPONSIBILITIES

The responsibilities of the Directors in relation to the Financial Statements of the Company differ from the responsibilities of the Auditors, which are set out in their report appearing on page 45. The Companies Act requires the Directors to prepare Financial Statements for each financial year giving a true and fair view of the state of affairs of the Company as at the end of the financial year and of the Profit & Loss of the Company for the financial year. In preparing the Financial Statements, appropriate accounting policies have been selected and applied consistently, reasonable and prudent judgements and estimates have been made and applicable accounting standards have been followed. The Directors are responsible for ensuring that the Company keeps sufficient accounting records to disclose with reasonable accuracy the financial position of the Company and for ensuring that the Financial Statements have been prepared and presented in accordance with the Sri Lanka Accounting Standards and provide the information required by the Companies Act. They are also responsible for taking reasonable measures to safeguard the assets of the Company, and in that context to have proper regard to the establishment On behalf of the Board S D R Arudpragasam D S AbeyRatna Directors Colombo. 05th June 2007 of appropriate systems of internal control with a view to the prevention and detection of fraud and other irregularities. The Directors are required to prepare the Financial Statements and to provide the Auditors with every opportunity to undertake whatever inspections they consider appropriate to enable them to submit their audit report. The Directors confirm that they have complied with these requirements. They have a reasonable expectation, after making enquiries and following a review of the Company's budget for the ensuing year including cash flows and borrowing facilities, that the Company have adequate resources to continue in operational existence for the foreseeable future, and therefore have continued to adopt the going concern basis in preparing the accounts.
44
AUDITORS REPORT
AUDITORS REPORT TO THE MEMBERS OF AGARAPATANA PLANTATIONS LIMITED

We have audited the Balance Sheet of Agarapatana Plantations Ltd., as at March 31, 2007 and the related Statements of Income, Cash Flows and Changes in Equity for the year then ended, together with the Accounting Policies and Notes exhibited on pages 50 to 76.
Respective Responsibilities of Directors & Auditors

The Directors are responsible for preparing and presenting these Financial Statements in accordance with the Sri Lanka Accounting Standards. Our responsibility is to express an opinion on these Financial Statements, based on our audit.
Basis of Opinion
We conducted our audit in accordance with the Sri Lanka Auditing Standards, which require that we plan and perform the audit to obtain reasonable assurance about whether the said Financial Statements are free of material misstatements. An audit includes examining, on a test basis evidence supporting the amounts and disclosures in the said Financial Statements, assessing the accounting principles used and significant estimates made by the Directors, evaluating the overall presentation of the Financial Statements, and determining whether the said Financial Statements are prepared and presented in accordance with the Sri Lanka Accounting Standards. We have obtained all the information and explanations, which to the best of our knowledge and belief were necessary for the purpose of our audit. We therefore believe that our audit provides a reasonable basis for our opinion.
Opinion
In our opinion, so far as appears from our examination, the Estates and the Head Office of the Company maintained proper books of account for the year ended March 31, 2007, and to the best of our information and according to the explanations given to us, the said Balance Sheet and related Statements of Income, Cash Flows and Changes in Equity and the Accounting Policies and Notes thereto, which are in agreement with the said books and have been prepared and presented in accordance with the Sri Lanka Accounting Standards, provide the information required by the Companies Act No: 17 of 1982 and give a true and fair view of the Companys state of affairs as at March 31, 2007 and its profit and Cash Flows for the year then ended. Without qualifying our opinion, we refer to the matter as explained in Accounting Policy 2.1.3 regarding the net current assets deficit position and a petition for winding up, which has been made by a creditor on the grounds of failure to pay its debts.
Directors Interest in Contracts with the Company

According to the information made available to us, the Directors of the Company were not directly or indirectly interested in contracts with the Company during the year ended March 31, 2007 except as stated in Note 31 to these Financial Statements.
Colombo 05th June 2007
45
INCOME STATEMENT
Year ended 31st March Note 2007 Rs. 2006 Rs.
Revenue Cost of Sales Gross Profit Other Income Administration Expenses Finance Cost Amortisation of Negative Goodwill Profit/(Loss) Before Taxation Income Tax Expense Net Profit/(Loss) for the year Earnings/(Loss) per Share
1,880,529,316 (1,742,798,430) 137,730,885
1,758,547,521 (1,596,822,352) 161,725,169 58,334,290 (202,667,005) (51,369,775) 27,502,065 (6,475,256) (6,475,256) (0.34)
18,453,711 (186,501,029)
(28,494,324) -
6 7
(58,810,757) (58,810,757)
(3.07)
The Accounting Policies and Notes on Pages 50 through 76 form an integral part of the Financial Statements. Colombo 05th June 2007
46
BALANCE SHEET
As at 31st March Note ASSETS Non Current Assets Leasehold right to bare land of JEDB/SLSPC estates Immovable leased assets of JEDB/ SLSPC estates Tangible assets (other than immature/mature plantations) Immature/mature plantations 9 10 11 12 2007 Rs. 246,385,669 143,283,228 294,043,816 509,204,751 1,192,917,464 8,050,000 95,159,558 1,296,127,022 268,375,406 93,741,439 60,569,404 3,582,618 21,508,296 48,303,088 456,984 18,088,248 514,625,482 1,810,752,504 2006 Rs. 252,827,124 152,645,914 272,570,903 448,142,448 1,126,186,389 8,050,000 203,405,978 1,337,642,367 202,375,315 97,601,367 61,970,181 1,972,071 16,824,706 46,092,776 456,984 18,396,661 445,690,061 1,783,332,428
Long Term Investment Long Term loans receivable from Related Companies Current Assets Inventories Trade and Other Receivables Long Term loans receivable from Related Companies Amounts due from Related Companies ESC Recoverable VAT Recoverable ACT Recoverable Cash and Bank Balances TOTAL ASSETS EQUITY AND LIABILITIES Capital and Reserves Share Capital Share Premium Retained Profit TOTAL EQUITY Non Current Liabilities and Deferred Income Interest Bearing Loans & Borrowings Retirement Benefit Obligations Deferred Income Net Liability to the Lessor
13 14
15 16 14 17
18 19
191,553,200 107,446,810 163,878,914 462,878,924 118,963,828 478,024,266 137,772,041 157,035 734,917,170 265,085,320 331,937,029 10,027,606 5,906,454 612,956,410 1,810,752,504 24.16
191,553,200 107,446,810 195,187,606 494,187,616 126,371,613 382,969,591 167,500,136 157,657 676,998,997 230,929,446 364,551,309 10,027,606 6,637,454 612,145,815 1,783,332,428 25.80
20 21 22 23
Current Liabilities Interest Bearing Loans & Borrowings Trade and Other Payables Dividends Payable Amounts due to Related Companies TOTAL EQUITY AND LIABILITIES Net Asset per Share
20 24 25 26
The Board of Directors is responsible for the preparation and presentation of these Financial Statements. Authorised and signed for and on behalf of the Board of Directors of Agarapatana Plantations Ltd.
S D R Arudpragasam Director
D S AbeyRatna Director
47
CASH FLOW STATEMENT

Year ended 31st March Note CASH FLOWS FROM OPERATING ACTIVITIES Net Profit/(Loss) before Taxation ADJUSTMENTS FOR Amortisation of Negative Goodwill Interest Income Interest Expenses Retiring Benefit Obligations - Provision Provision for Doubtful Debts Depreciation Amortisation Amortisation of Capital Grants Profit on Disposal of Property, Plant & Equipment Operating Profit/(Loss) before Working Capital Changes (Increase)/Decrease (Increase)/Decrease (Increase)/Decrease Increase/(Decrease) Increase/(Decrease) in in in in in Inventories Trade & Other Receivables Amounts Due from Related Companies Trade & Other Payables Amounts Due to Related Companies 2007 Rs. 2006 Rs.
(58,810,757)
(6,475,256)
22.1 4 6 21 5 5 22.2 4
(3,017,884) 28,494,324 124,994,245 30,272,917 15,804,142 (4,340,090) (365,043) 133,031,855 (66,000,091) 1,649,616 108,036,650 (32,614,280) (731,000) 143,372,750
(27,502,065) (193,530) 51,369,775 56,325,308 35,157,779 6,423,437 (4,247,394) (260,870) 110,597,184 (17,575,857) (3,975,370) 103,453,555 85,004,819 (8,173,357) 269,330,974 (24,734,638) 192,955 (51,369,775) (7,748,829) 185,670,687
Cash Generated from Operations Retiring Benefit Obligations - Payments Interest Received Interest Paid Payment of ESC Net Cash from/(used in) Operating Activities CASH FLOWS FROM INVESTING ACTIVITIES Proceeds from Sale of Property, Plant & Equipment Investment in Field Development Purchase of Property, Plant & Equipment Net Cash from/(used in) Investing Activities CASH FLOWS FROM FINANCING ACTIVITIES Payment of Lease Rental Grant Received Proceeds from Short Term Loans Repayment of Long Term Loans Net Cash from/(used in) Financing Activities Net Increase/(Decrease) in Cash & Cash Equivalents Cash & Cash Equivalents at the beginning of the year (Note A) Cash & Cash Equivalents at the end of the year (Note B) Colombo 05th June 2007 21
(29,939,570) 3,017,884 (48,628,633) (4,683,590) 63,138,841
12
365,043 (39,674,989) (17,250,009) (56,559,954)
260,870 (56,359,987) (25,334,553) (81,433,670)
22.2
(18,784,985) 2,114,059 10,000,000 (24,613,280) (31,284,205) (24,705,318) (180,298,425) (205,003,743)
(9,908,137) 8,625,908 45,000,000 (116,286,044) (72,568,273) 31,668,744 (211,967,169) (180,298,425)
48
CASH FLOW STATEMENT
Year ended 31st March
2007 Rs.
2006 Rs.
NOTE A Cash & Cash Equivalents at the beginning of the year Cash in Hand & Bank Bank Overdraft 18,396,661 (198,695,086) (180,298,425) NOTE B Cash & Cash Equivalents at the end of the year Cash in Hand & Bank Bank Overdraft 18,088,248 (223,091,991) (205,003,743) 18,396,661 (198,695,086) (180,298,425) 8,137,135 (220,104,304) (211,967,169)
The Accounting Policies and Notes on Pages 50 through 76 form an integral part of the Financial Statements.
STATEMENT OF CHANGES IN EQUITY

Share Capital Rs. Balance as at 1st April 2005 Net profit/(loss) for the year Balance as at 31st March 2006 Negative Goodwill Adjustment as per SLAS 25 (Note 22.1) Net profit/(loss) for the year 191,553,200 107,446,810 191,553,200 Share Premium Rs. 107,446,810 Retained Profit Rs. 201,662,862 (6,475,256) 195,187,606 Total Rs. 500,662,872 (6,475,256) 494,187,616
27,502,065 (58,810,757)
27,502,065 (58,810,757)
Balance as at 31st March 2007
191,553,200
107,446,810
163,878,914
462,878,924
49
NOTES TO THE FINANCIAL STATEMENT

1. CORPORATE INFORMATION
Property, and immovable JEDB/SLSPC estate assets on finance lease that have been measured at fair value. The Financial Statements are presented in Sri Lankan Rupees and all values are rounded to the nearest rupee.
1.1 Domicile and Legal Form

Agarapatana Plantations Ltd is a limited liability Company incorporated and domiciled in Sri Lanka, under the Companies Act No. 17 of 1982 in terms of the provisions of the Conversion of Public Corporations or Government Owned Business Undertaking into Public Companies Act No. 23 of 1987. The registered office of the Company is located at No. 53-1/1, Sir Baron Jayathilaka Mawatha, Colombo 01 and Plantations are situated in the planting districts of Badulla and Nuwara Eliya.
2.1.2 Statement of Compliance

The Balance Sheet, Statements of Income, Changes in Equity and Cash Flows, together with Accounting Policies and Notes, (Financial Statements) of the Company as at 31st March 2007 and for the year then ended, comply with Sri Lanka Accounting Standards.
1.2 Principal Activities and Nature of Operations

During the year, the principal activities of the company were the cultivation, manufacture and sale of tea.
2.1.3 Going Concern

The Directors have made an assessment of the Agarapatana Plantations Ltds ability to continue as a going concern and they do not intend either to liquidate or to cease trading. However, these Financial Statements are prepared on the assumption that the Company is a going concern, i.e. as continuing in operation for the foreseeable future. It is therefore assumed that the Company has neither the intention nor the necessity of liquidation or of curtailing materially the scale of its operations. However, a petition for winding up of Agarapatana Plantations Ltd. (APL) had been filed on 09th April 1997 in the District Court of Colombo by a creditor on the alleged grounds of failure to pay an outstanding debt. Despite the fact that the alleged debt was a disputed debt, the lawyers for APL tendered in open Court on 12th May 1997 a Bank Pay Order in favour of the said creditor in full settlement of the alleged claim. The Court having made note of the particulars of the Bank Pay Order handed over the same to the lawyer for the petitioner who accepted such Pay Order without demur.
1.3
Parent Enterprise and Ultimate parent Enterprise

The Companys parent undertaking is Lankem Plantations Holdings Limited.
1.4 Date of Authorization for Issue

The Financial Statements of Agarapatana Plantations Ltd. for the year ended 31st March 2007 were authorised for issue in accordance with a resolution of the Board of Directors on 5th June 2007.
2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
2.1 General Policies 2.1.1 Basis of Preparation

The Financial Statements have been prepared on a historical cost basis, except for Leasehold
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As far as APL was concerned it was believed that the debt had been discharged and that the petitioner would withdraw the Winding Up Petition. However on 28th May 1997 the petitioners lawyers for reasons best known only to themselves filed a Motion in the District Court of Colombo seeking to return the Bank Pay Order earlier accepted by them. On 6th June 1997 the District Court of Colombo refused to make an order for the petitioner to return the said Bank Pay Order. At the same time the District Court also rejected the request by APL for the dismissal of the Winding Up application. Thereafter, APL filed an Appeal in the Court of Appeal on 12th June 1997 seeking dismissal of the Winding Up Petition. The Court of Appeal thereupon issued a Stay Order on the proceedings in the District Court until 14th July 1997. This matter is pending in the Court of Appeal and the Stay Order has been extended on several occasions. The case has been re-fixed for argument in the Court of Appeal for 19th July 2007. As at 31st March 2007 Company's current liabilities exceeded its current assets by Rs.98,330,928 (2006 - 166,455,754) and the Company is dependent on creditors and borrowings for the continuation of its operations.
2.1.6 Changes In Accounting Policies

The accounting policies adopted are consistent with those of the previous financial year except as following: The Company has adopted the following new SLASs during the year SLAS 3 (revised) - Presentation of Financial Statements SLAS 5 (revised) - Inventories SLAS 10 (revised) - Accounting Policies, Changes in Accounting Estimates SLAS 12 (revised) - Events after the Balance Sheet Date SLAS 14 (revised) - Income Taxes SLAS 18 (revised) - Property, Plant and Equipment SLAS 19 (revised) - Leases SLAS 21 (revised) - The Effects of Changes in Foreign Exchange Rates SLAS 25 (revised) - Business Combinations SLAS 30 (revised) - Related Party Disclosures SLAS 34 (revised) - Earnings per Share SLAS 41 (revised) - Impairments of Assets There was no material effect to the Financial Statements on the adoption of the above revised standards except for effect on SLAS 25 which is disclosed below. Due to the change in SLAS 25 the unamortized negative goodwill balance of Rs.27,502,065 remained at the end of the last year derecognized with a corresponding adjustment to the opening balance of the retained earnings. Adjustment to the Financial Statement is reflected in the Equity Statement and note 22.1. The new accounting policy
2.1.4 Comparative Information

The accounting policies have been consistently applied by the Company and are consistent with those used in the previous year.
2.1.5 Segment Reporting

Segmental information has been disclosed in notes 3 to the Financial Statements in respect of the identifiable operating segments of the Company on a consolidated basis.
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requires the carrying amount of negative goodwill at the beginning of the annual period beginning on or after 01st June 2005 shall be recognized at the beginning of that period, with a corresponding adjustment to the opening balance of retained earnings.
losses, to the extent that it is probable that taxable profit will be available against which the deductible temporary differences, and the carry-forward of unused tax assets and unused tax losses can be utilised. The carrying amount of deferred income tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred income tax asset to be utilised. Deferred income tax assets and liabilities are measured at the tax rates that are expected to apply to the year when the asset is realised or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the balance sheet date. Deferred income tax relating to items recognised directly in equity is recognised in equity and not in the Income Statement.
2.1.7 Taxation (a) Current Taxes

The provision for income tax is based on the elements of income and expenditure as reported in the Financial Statements and computed in accordance with the provisions of the Inland Revenue Act and amendments thereto.
Deferred Taxation
Deferred income tax is provided, using the liability method, on all temporary differences at the balance sheet date between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes. Deferred income tax liabilities are recognised for all taxable temporary differences : except where the deferred income tax liability arises from goodwill amortisation or the initial recognition of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss; and in respect of taxable temporary differences associated with investments in subsidiaries, associates and interests in joint ventures, except where the timing of the reversal of the temporary differences can be controlled and it is probable that the temporary differences will not reverse in the foreseeable future. Deferred income tax assets are recognised for all deductible temporary differences, carryforward of unused tax assets and unused tax
2.1.8 Borrowing Costs

Borrowing costs are recognised as an expense in the period in which they are incurred, except to the extent where borrowing costs that are directly attributable to the acquisition, construction, or production of a qualifying asset that takes a substantial period of time to get ready for its intended use or sale is capitalised as part of the cost of that asset. The amount of borrowing costs eligible for capitalisation is determined in accordance with SLAS 20-Borrowing Costs Allowed Alternative Treatment. The capitalisation rate of 12.94% (2006 18.54%) percent was used. Borrowing Costs amounting to Rs.25,835,039 (2006 Rs.15,407,674) incurred on borrowings obtained to meet expenses relating to immature plantations have been capitalised as part of the cost of the immature plantations.
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2.1.9 Intangible Assets

Intangible assets acquired separately are measured on initial recognition at cost. The cost of intangible assets acquired in a business combination is fair value as at the date of acquisition. Following the initial recognition of the intangible assets, the cost model is applied requiring the assets to be carried at cost less any accumulated amortisation and accumulated impairment losses. Internally generated intangible assets, excluding capitalised development costs are not capitalised and expenditure is reflected in the income statement in the year in which the expenditure is incurred. The useful lives of intangible assets are assessed to be either finite or indefinite. Intangible assets with finite lives are amortised over the useful economic life and assessed for impairment whenever there is an indication that the intangible asset with a finite useful life is reviewed at least at each financial year end. Changes in the expected useful life or the expected pattern of consumption of future economic benefits embodied in the asset is accounted for by changing the amortisation period or method, as appropriate, and treated as changes in accounting estimates. The amortisation expense on intangible assets with finite lives is recognised in the income statement in the expense category consistent with the function of the intangible asset. Amortisation was commenced when the assets were available for use. As at the balance sheet date, company do not have any intangible assets with finite lives. Intangible assets with indefinite useful lives are tested for impairment annually either individually or at the cash generating unit level. Such intangibles are not amortised.
The useful life of an intangible asset with an indefinite life is reviewed annually to determine whether indefinite life assessment continues to be supportable. If not, the change in the useful life assessment from indefinite to finite is made on a prospective basis. Intangible assets that are not yet available for sale are tested for impairments at each financial year end, even if there is no indication that the asset is impaired. Gains or losses arising from derecognition of an intangible asset are measured as the difference between the net disposal proceeds and the carrying amount of the asset and are recognised in the income statement when the asset is derecognised.
2.2 VALUATION OF ASSETS AND THEIR MEASUREMENT BASES 2.2.1 Inventories

Inventories other than produce stocks are valued at the lower of cost and estimated net realisable value, after making due allowances for obsolete and slow moving items. Net realisable value is the price at which stocks can be sold in the normal course of business after allowing for cost of realisation and/or cost of conversion from their existing state to saleable condition.
Input Material At average cost

Growing Crop-Nurseries materials, direct labour and an appropriate proportion of directly attributable overheads.
Harvested Crop
Valued at estimated selling prices or since realised prices.
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Produce Stocks
Valued at estimated selling prices and since realised prices.
b) Cost and Valuation

All items of Property, Plant & Equipment are initially recorded at cost. Where items of Property, Plant and Equipment are subsequently revalued, the entire class of such assets is revalued. Revaluations are made with sufficient regularity to ensure that their carrying amounts do not differ materially from their fair values at the Balance Sheet date. Subsequent to the initial recognition as an asset at cost, revalued Property, Plant and Equipment are carried at revalued amounts less any subsequent depreciation thereon. All other Property, Plant and Equipment are stated at historical cost less depreciation. When an asset is revalued, any increase in the carrying amount is credited directly to a revaluation surplus unless it reverses a previous revaluation decrease relating to the same asset, which was previously recognised as an expense. In these circumstances the increase is recognised as income to the extent of the previous write down. When an assets carrying amount is decreased as a result of a revaluation, the decrease is recognised as an expense unless it reverses a previous increment relating to that asset, in which case it is charged against any related revaluation surplus, to the extent that the decrease does not exceed the amount held in the revaluation surplus in respect of that same asset. Any balance remaining in the revaluation surplus in respect of an asset, is transferred directly to Accumulated Profits on retirement or disposal of the asset.
Spares & Consumables

At actual cost.
2.2.2 Trade and Other Receivables

Trade receivables are stated at the amounts they are estimated to realise inclusive of provisions for bad and doubtful receivables. Other receivables and dues from related parties are recognised at cost less provision for bad and doubtful receivables.
2.2.3 Cash and Cash Equivalents

Cash and Cash Equivalents are defined as cash in hand, demand deposits and short-term highly liquid investments, readily convertible to known amounts of cash and subject to insignificant risk of changes in value. For the purpose of Cash Flow Statement, Cash and Cash Equivalent consists of cash in hand and deposits in banks net of outstanding bank overdrafts. Investments with short maturities i.e. three months or less from the date of acquisitions are also treated as Cash Equivalents. Interest paid and received is classified as operating Cash Flows. The Cash Flow Statement is reported based on indirect method.
2.2.4 Property, Plant and Equipment c) Depreciation a) Cost

Property, Plant & Equipment are recorded at cost less accumulated depreciation. The provision for depreciation is calculated on the cost or valuation of all property, plant and equipment other than freehold land, in order
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to write off such amounts over the estimated rates as follows: Buildings Plant & machinery Furniture & fittings Motor Vehicles Equipment Sanitation, Water Supply, Electricity Mature Plantation - Tea Roads 2.50% 7.50% 10.00% 20.00% 12.50% 5.00% 3.00% 4.00%
The cost of areas coming into bearing are transferred to mature plantations and depreciated over their useful life period.
2.2.6 Infilling Cost

Where infilling results in an increase in the economic life of the relevant field beyond its previously assessed standard of performance, the costs are capitalised in accordance with Sri Lanka Accounting Standard No. 32 and depreciated over the useful life at rates applicable to mature plantation.
The leasehold rights are being amortised in equal amounts over the following periods. Bare land Improvement to Land Mature Plantations - Tea Roads & Bridges Buildings Fences and Securities Machinery Water Supply Power Augmentation Vested Tea Over 53 years Over 30 years Over 30 years Over 40 years Over 25 years Over 20 years Over 15 years Over 20 years Over 20 years Over 30 years Infilling costs that are not capitalised have been charged to the Income Statement in the year in which they are incurred.
2.2.7 Leases
Property, plant and equipment on finance leases, (which effectively transfer to the company substantially all of the risks and benefits incidental to ownership of the leased item) are capitalised at their cash price, and depreciated/amortised over the period the company is expected to benefit from the use of the leased assets. The corresponding principal amount payable to the lessor is shown as a liability. The finance charges allocated to future periods are separately disclosed under Note 20.3.
The assets residual values useful lives and method of depreciation are reviewed and adjusted if appropriate at each financial year end.
2.2.5 Immature and Mature Plantations

The cost of Replanting and New Planting are classified as immature plantations upto the time of harvesting the crop. Further, the general charges incurred on the plantation are apportioned based on the labour days spent on respective Replanting and New Planting, and capitalised on the immature areas. The remaining portion of the general charges is expensed in the accounting period in which it is incurred.
The interest element of the rental obligation applicable to each financial year is charged to the Income Statement over the period of the lease so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period. The cost of improvements to or on leased property is capitalised, and depreciated over the unexpired period of the lease or the estimated useful lives of the improvements, whichever is shorter.
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2.2.8 Leasehold Property

Leasehold property comprising of land use rights obtained on a long term basis, is stated at the recorded carrying values as at the effective date of Sri Lanka Accounting Standard 19 Leases in line with Ruling of the Urgent Issues Task Force of The Institute of Chartered Accountants of Sri Lanka. Such carrying amounts are amortised over the remaining leased term or useful life of the leased property whichever is shorter.
This requires an estimation of the value in use of the cash generating units to which the goodwill is allocated. Estimating a value in use amount requires management to make an estimate of the expected future cash flows from the cash generating unit and also to choose a suitable discount rate in order to calculate present value of those cash flows. However, at present Company has not recorded any Goodwill as at the balance sheet date.
Deferred Tax Assets 2.3 Significant Accounting Judgments, Estimates and Assumptions Judgments
In the process of applying the Companys accounting policies, management has made the following judgments, apart from those involving estimations, which has the most significant effect on the amounts recognized in the Financial Statements. Deferred tax assets are recognised for all unused tax losses to the extent that it is probable that taxable profit will be available against which the losses can be utilised. Significant management judgment is required to determine the amount of deferred tax assets that can be recognised, based upon the likely timing and level of future taxable profits together with future tax planning strategies.
Inventory valuation Produce stock

The Company has valued part of the unsold produce stock which has been sold after the balance sheet date at since realised prices. The balance unsold stock as at the balance sheet date based on most recent selling prices available subsequent to the year end.
Defined Benefit Plans

The cost of defined benefit pension plan is determined using actuarial valuations. The actuarial valuation involves making assumptions about discount rates, expected rates of return on assets, future salary increases, mortality rates and future pension increases. Due to the long term nature of these plans, such estimates are subject to significant uncertainty.
Estimates and Assumptions

The key assumptions concerning the future and other key sources of estimation uncertainty at the balance sheet date, that have a significant risk of causing material adjustments to the carrying amounts of assets and liabilities within the next financial year are discussed below.
2.4 Liabilities and Provisions 2.4.1 Provisions

Provisions are recognized when the Company has a present obligation (legal or constructive) as a result of a past event, where it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation.
Impairment of Goodwill
The Company determines whether Goodwill is impaired at least on an annual basis.
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2.4.2 Retirement Benefit Obligations (a) Defined Benefit Plans Gratuity

The Retirement Benefit Plan adopted is as required under the Payment of Gratuity Act No. 12 of 1983 to eligible employees. This item is grouped under Retirement Benefit Obligations in the Balance Sheet.
(b)
Defined Contribution Plans Employees Provident Fund & Employees Trust Fund
Employees are eligible for Employees Provident Fund Contributions and Employees Trust Fund Contributions in line with the respective statutes and regulations. The Company contributes 12% and 3% of gross emoluments of employees to Employees Provident Fund and Employees Trust Fund respectively.
All Workers & Staff

Provision of gratuity for all workers and staff is on an actuarial basis, using the Projected Unit Credit (PUC) method as recommended by SLAS 16. The actuarial valuation was carried out by a professionally qualified actuary firm Messrs. Actuarial & Management Consultants (Pvt) Ltd as at 31st December 2006. The Company expects to carry out actuarial valuation once in every two years. The key assumptions used by the actuary include the following. a) Rate of Interest - 10% p.a. (net of tax) b) Salary increment Rate - Workers 11% every two years - Staff 7.5% p.a. c) Retirement Age Workers - Male - Female 60 years 60 years Staff 55 years 55 years
2.5 Deferred Income 2.5.1 Grants and Subsidies

Grants and subsidies are credited to the Income Statement over the periods necessary to match them with the related costs, which they are intended to compensate, on a systematic basis. Grants related to assets, including nonmonetary grants at fair value, is deferred in the Balance Sheet and credited to the Income Statement over the useful life of the related asset. Grants related to income are recognised in the Income Statement in the period in which it is receivable.
2.5.2 Impairment of Non Financial Assets

The Company assesses at each reporting date whether there is an indication that an asset may be impaired. If any such indication exists, or when annual impairment testing for an asset is required, the Company makes an estimate of the asset's recoverable amount. An asset's recoverable amount is the higher of an asset's or cash-generating unit's fair value less costs to sell and its value in use and is determined for an individual asset, unless the asset does not generate cash inflows that are
The Company will continue in business as a going concern. The liability is not externally funded. The actuarial present value of the accrued benefits as at 31st December 2006 is Rs.478,024,266. This item is grouped under retirement benefit obligations in the Balance Sheet.
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largely independent of those from other assets or groups of assets. Where the carrying amount of an asset exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. In determining fair value less costs to sell, an appropriate valuation model is used. These calculations are collaborated by valuation multiples, quoted share prices or other available fair value indicators. Impairment losses of continuing operations are recognised in the Income Statement in those expense categories consistent with the function of the impaired asset, except for property previously revalued where the revaluation was taken to equity. In this case the impairment is also recognised in equity up to the amount of any previous revaluation. For assets excluding goodwill, an assessment is made at each reporting date as to whether there is any indication that previously recognised impairment losses may no longer exist or may have decreased. If such indication exists, the Company makes an estimate of recoverable amount. A previously recognised impairment loss is reversed only if there has been a change in the estimates used to determine the asset's recoverable amount since the last impairment loss was recognised. If that is the case the carrying amount of the asset is increased to its recoverable amount. That increased amount cannot ''exceed' the carrying amount that would have been determined, net of depreciation, had no impairment loss been recognised for the asset
in prior years. Such reversal is recognised in the Income Statement unless the asset is carried at revalued amount, in which case the reversal is treated as a revaluation increase. Impairment losses recognised in relation to goodwill are not reversed for subsequent increases in its recoverable amount. The following criteria are also applied in assessing impairment of specific assets:
Goodwill
Goodwill is reviewed for impairment, annually or more frequently if events or changes in circumstances indicate that the carrying value may be impaired. Impairment is determined for goodwill by assessing the recoverable amount of the cash-generating unit (or group of cash-generating units), to which the goodwill relates. Where the recoverable amount of the cash-generating unit (or group of cash-generating units) is less than the carrying amount of the cash-generating unit (group of cash-generating units) to which goodwill has been allocated, an impairment loss is recognised. Impairment losses relating to Goodwill cannot be reversed in future periods. The Company performs its annual impairment test of goodwill as at 31 March. However, at present Company does not record any Goodwill as at the Balance Sheet date.
Intangible Assets
Intangible assets with indefinite useful lives are tested for impairment annually as of 31 March either individually or at the cash generating unit level, as appropriate. However, at present, the Company does not record any intangible assets as at the Balance Sheet date.
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2.6 Income Statement 2.6.1 Revenue and Expenses 2.6.1.1 Revenue Recognition
Revenue is recognised to the extent that it is probable that the economic benefits will flow to the Company and the revenue and associated costs incurred or to be incurred can be reliably measured. Revenue is measured at the fair value of the consideration received net of trade discounts and sales taxes. The following specific criteria are used for the purpose of recognition of revenue.
Dividends
Dividend income is recognised on a cash basis.
Rental Income
Rental income is recognised on an accrual basis.
2.6.1.2 Expenditure Recognition

(a) All expenditure incurred in the running of the business and in maintaining the property, plant and equipment in state of efficiency has been charged to revenue in arriving at the profit for the year. (b) For the purpose of presentation of Income Statement the Directors are of the opinion that the method of classification of expenses by function presents fairly the elements of the enterprises performance, hence such presentation method is adopted.
(a)
Sale of Goods
Revenue from the sale of goods is recognised when the significant risks and rewards of ownership of the goods have passed by the buyer, usually on dispatch of the goods.
Interests
Interests income is recognised as the interest accrued (taking into account the effective yield on the asset) unless collectibility is in doubt.
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Year ended 31st March 3. Revenue 3.1 Summary Tea Other 3.2 Segment Information Geographical Segment Results
2007 Rs. 1,854,079,674 26,449,641 1,880,529,316 Agras 2006 2007 Rs. Rs. 1,103,275,557 1,024,805,398 (907,869,047) (836,975,554) (17,102,845) (17,126,587) (3,287,418) (3,289,259) (57,519,573) (29,052,597) 117,496,674 138,361,401
2006 Rs. 1,750,038,183 8,509,338 1,758,547,521
Revenue Revenue Expenditure Depreciation Amortisation Gratuity Segment Results Other Income Unallocated Expenses Depreciation Gratuity Others Management Fees Finance Cost Amortisation of Negative Goodwill Profit/(Loss) before Taxation Segment Assets
Haputale Total 2007 2006 2007 2006 Rs. Rs. Rs. Rs. 777,253,759 733,742,123 1,880,529,316 1,758,547,521 (675,502,219) (670,687,951) (1,583,371,266) (1,507,663,505) (14,611,583) (12,932,128) (31,714,428) (30,058,715) (3,154,038) (3,134,178) (6,441,455) (6,423,437) (63,751,709) (23,624,098) (121,271,282) (52,676,695) 20,234,211 23,363,768 137,730,885 161,725,169 18,453,711 58,334,290 (7,921,176) (3,722,963) (72,175,523) (102,681,367) (28,494,324) (58,810,757) (5,099,064) (3,648,613) (95,998,628) (97,920,700) (51,369,775) 27,502,065 (6,475,256)
Agras Non Current Assets (Cost) Accumulated Depreciation/ (264,202,779) Amortisation Current Assets 185,250,127 806,334,583 Unallocated Non Current Assets (Cost) Accumulated Depreciation/Amortisation Amount due from Related Companies Current Assets Total Assets Segment Liabilities Non Current Liabilities Current Liabilities Unallocated Non Current Liabilities Current Liabilities Total Liability Capital and Reserves Deferred Income 2007 Rs. 885,287,235 2006 Rs. 835,514,516 (243,812,516) 133,337,681 725,039,681
Haputale 2007 2006 Rs. Rs. 755,786,480 695,117,663 (210,770,689) 149,432,255 694,448,046 (193,005,068) 116,535,037 618,647,632
1,641,073,715 (474,973,468) 334,682,382 1,500,782,629 63,335,824 (28,468,608) 95,159,558 179,943,100 309,969,875 1,810,752,504
1,530,632,179 (436,817,584) 249,872,718 1,343,687,313 60,969,226 (20,547,432) 203,405,978 195,817,343 439,645,115 1,783,332,428 365,783,661 144,274,135 510,057,796 143,715,200 467,871,680 611,586,880 1,121,644,676 494,187,616 167,500,136 661,687,752 1,783,332,428 83,565,308 762,732 84,328,040
242,663,686 63,554,621 306,218,307
195,517,082 66,603,748 262,120,830
220,225,750 82,524,115 302,749,865
170,266,579 77,670,387 247,936,966
462,889,436 146,078,736 608,968,173 134,255,693 466,877,673 601,133,366 1,210,101,539 462,878,924 137,772,041 600,650,965 1,810,752,504
Segment Capital Expenditure Cost 49,772,719 Unallocated Capital Expenditure Total Capital Expenditure
51,800,291
60,668,817
31,765,017
110,441,536 2,366,598 112,808,134
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Year ended 31st March
2007 Rs.
2006 Rs.
4.
Other Income
Amortisation of Capital Grants Profit on Disposal of Property, Plant & Equipment Factory/Towers Lease Rent Sale of Timber Compensation on Acquisition of Land Interest Income Others 4,340,090 365,043 1,910,744 7,180,981 3,017,884 1,638,969 18,453,711 4,247,393 260,870 2,207,298 23,437,802 23,423,183 193,530 4,564,214 58,334,290
5.
Finance Cost
Overdraft Interest Interest on Finance Lease Term Loan Interest Other Interest 25,835,039 5,725,108 17,996,097 4,773,119 54,329,363 Amount capitalised (25,835,039) 28,494,324 28,444,196 4,413,432 26,328,533 7,591,288 66,777,449 (15,407,674) 51,369,775
6.
Profit from Operating Activities is stated after Charging

Directors' Emoluments Auditor's Remuneration Depreciation Tangible assets (other than immature/mature plantations) Immature/mature plantations Amortisation Leasehold right to bare land of JEDB/SLSPC estates Immovable leased assets of JEDB/SLSPC estates Others Defined Benefit Plan Cost - Retiring Gratuity Managing Agents Fees Defined Contribution Plans Cost - EPF, ETF, ESPS & CPPS Wages & Staff Cost 124,994,245 102,681,367 140,308,456 971,667,889 56,325,308 97,920,700 141,999,692 957,936,532 6,441,455 9,362,686 6,423,437 9,593,472 25,825,193 4,447,725 22,662,025 2,902,282 1,799,000 1,564,000
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Year ended 31st March 2007 Rs. 2006 Rs.
7.
7.1
Income Tax Expense

Reconciliation between Current Tax Expenses/(Income) and the Product of Accounting Profit/(Loss) Accounting Profit before Tax Aggregate disallowed items Aggregate allowable expenses Aggregate allowable income Adjusted Profit/(Loss) Loss on Agriculture Profit on Sale of Property, Plant and Equipment Taxable Profit/(Loss) Tax Losses B/F Assessable Profit/(Loss) Investment Tax Allowance Utilised Taxable Profit/(Loss) C/F Statutory Tax Rate Income Tax Provided (58,810,757) 177,508,955 (197,981,379) (79,283,181) 53,912,563 (25,370,618) (290,857,954) (316,228,572) (316,228,572) 35% (6,475,256) 102,319,956 (153,980,634) (23,422,437) (81,558,371) 55,459,692 (26,098,679) (264,759,275) (290,857,954) (290,857,954) 32.5% -
7.2
The Company is liable for income tax at the rates of 35% on its profit from manufacture. However no provision has been made in these financial statements in view of adjusted tax losses of the Company. The carried forward tax losses of the Company as at 31st March 2007 amounts to Rs.316,228,572/(provisional) (as at 31st March 2006 Rs.290,857,954/-)
8.
Earnings per Share

Computation of the earning/ (loss) per share is based on the profit after taxation for the year divided by the weighted average number of ordinary shares outstanding during the year end. 2007 Rs. Amount used as the numerator Net profit/(loss) for the year after taxation (58,810,757) (6,475,256) 2006 Rs.
Amount used as the denominator Weighted average number of ordinary shares outstanding during the period 19,155,320 19,155,320
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9.
Leasehold right to bare land of JEDB/SLSPC estates

All the leases executed as at the Balance Sheet date will be retroactive to 22nd June, 1992, the date of formation of the Company. The leasehold right to bare land on all of these estates have been taken into the books of the Company as at 22nd June, 1992 immediately after the formation of Company in terms of the ruling obtained from the Urgent Issue Task Force (UITF) of the Institute of Chartered Accountants of Sri Lanka. For this purpose the Board decided at its meeting on March 8, 1995 that this bare land would be revalued at the value established for this land by valuation specialist D.R. Wickremasinghe just prior to the formation of the Company. The value taken into the 22nd June, 1992 balance sheet and amortisation of the leasehold rights upto 31st March, 2007 are as follows: Revaluation as at 22.06.92 Rs. Leasehold right to bare land of JEDB/ SLSPC estates 341,588,181 Accumulated Amortization 01.04.06 Rs. 88,761,057 Amortization during the Year Rs. 6,441,455 Accumulated Amortization 31.03.07 Rs. 95,202,512
W.D.V 31.03.07 Rs. 246,385,669
W.D.V 31.03.06 Rs. 252,827,124
10. Immovable leased assets of JEDB/ SLSPC estates

In terms of the ruling of the UITF of the Institute of Chartered Accountants of Sri Lanka, all immovable assets of the JEDB/SLSPC estates under finance leases have been taken into the books of the Company retroactive to 22nd June, 1992. For this purpose, the Board decided at its meeting on March 8, 1995 that these assets would be taken at their book values as they appear in the books of the JEDB/SLSPC, on the day immediately preceding the date of formation of the Company. These assets are taken into the Balance Sheet as at 22nd June, 1992 and depreciated as follows : Revaluation Transfers/ Revaluation Accumulated Depreciation Accumulated as at Immature to as at Depreciation for the Depreciation 22.06.92 Mature 01.04.06 01.04.06 year 31.03.07 (Adjustments) Rs. Rs. Rs. Rs. Rs. Rs. Improvement to Land Unimproved Land Roads and Bridges Buildings Fences and Securities Machinery Water Supply Power Augmentation Coffee, Pepper, Cardamom Mature Plantations Vested Tea Immature Plantations Immature Timber Other Vested Assets 5,406,507 - 5,406,507 2,471,531 997,894 997,894 677,397 677,397 233,252 62,634,210 - 62,634,210 34,495,817 35,631 48,598 48,598 8,822,759 (621,470) 8,201,289 7,809,768 6,158,249 - 6,158,249 4,238,315 668,699 971,614 971,614 305,380 305,380 37,457,145 141,635,755 179,092,900 66,697,848 556,183 - 1,222,661 1,222,661 141,635,755 (141,635,755) 4,135,759 - 4,135,759 30,500 30,000 30,500 270,504,428 (621,470) 269,882,958 117,237,044 180,614 16,920 2,501,190 2,788 297,173 307,190 48,466 5,967,953 40,393 -
W.D.V 31.03.07 Rs.
W.D.V 31.03.06 Rs.
2,652,145 2,754,362 2,934,976 997,894 997,894 250,172 427,225 444,145 36,997,007 25,637,203 28,138,393 38,419 10,179 12,967 8,106,941 94,348 391,521 4,545,505 1,612,744 1,919,934 717,165 254,449 302,915 305,380 305,380 72,665,801 106,427,099 112,395,052 596,576 626,085 666,478 - 4,135,759 4,135,759 30,000 500 500
9,362,686 126,599,730 143,283,228 152,645,914
Note: Investment in plantation assets which were immature at the time of handing over to the Company by way of estate leases are shown under immature plantation (revalued as at 22nd June, 1992). Further investment in such immature plantation to bring them to maturity are shown under note 12.
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11. Tangible assets (other than immature/mature plantations)

Balance as at 01.04.06 Cost/Valuation Buildings Water Supply Machinery Motor Vehicles Equipment & Tools Furniture & Fittings Roads Rs. 132,135,468 25,211,907 111,471,520 97,863,205 40,161,887 6,970,137 7,661,633 421,475,757 Balance as at 01.04.06 Depreciation Buildings Water Supply Machinery Motor Vehicles Equipment & Tools Furniture & Fittings Roads W.D.V Assets Acquired on Finance Lease Cost Machinery Motor Vehicles Rs. 14,390,654 9,309,908 49,462,228 97,341,092 31,722,361 5,291,292 1,627,610 209,145,145 212,330,612 Balance as at 01.04.06 Rs. 20,130,900 38,156,333 58,287,233 Balance as at 01.04.06 Rs. 3,732,657 17,710,830 21,443,487 36,843,746 Balance as at 01.04.06 Rs. Capital Work-in-Progress TOTAL 23,396,545 272,570,903 Additions/ Adjustments during the Year Rs. 20,285,099 520,720 1,802,778 822,000 4,405,747 698,383 28,534,725 Charge for the Year Adjustments Rs. 3,362,120 1,541,723 8,641,336 453,745 2,190,689 303,079 329,519 16,822,211 Disposals/ Adjustments during the Year Rs. (532,875) (532,875) Accumulated Depreciation on Disposals/ Rs. (532,875) (532,875) Balance as at 31.03.07 Rs. 152,420,567 25,732,627 113,274,298 98,152,330 44,567,634 7,668,520 7,661,633 449,477,607 Balance as at 31.03.07 Rs. 17,752,774 10,851,631 58,103,564 97,261,962 33,913,050 5,594,371 1,957,129 225,434,481 224,043,126 Balance as at 31.03.07 Rs. 41,924,528 43,703,542 85,628,069 Balance as at 31.03.07 Rs. 5,929,298 24,517,170 30,446,469 55,181,601 Balance as at 31.03.07 Rs. 14,819,089 294,043,816
Additions during the Year Rs. 21,793,628 5,547,209 27,340,836 Charge for the Year Rs. 2,196,641 6,806,340 9,002,982
Disposals during the Year Rs. Accumulated Depreciation on Disposals Rs. -
Depreciation Machinery Motor Vehicles W.D.V
Additions during the Year Rs. 13,658,927
Capitalised during the Year Rs. (22,236,383)
Note : The assets shown above are those movable assets vested in the Company by gazette notification on the date of formation of the Company (22nd June, 1992) and all investments in tangible assets by the Company since its formation. The assets taken over by way of estate leases are set out in notes 9 and 10.
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12.
Immature/mature plantations
Immature Plantations Rs. Cost At the beginning of the year Additions/Transfer during the year Disposal/Transfers At the end of the year 320,663,244 65,510,028 (40,632,176) 345,541,097 148,257,487 40,632,176 188,889,663 468,920,731 65,510,028 534,430,759 412,560,744 56,359,987 468,920,731 Mature Plantations Rs. Total as at 31.03.07 Rs. Total as at 31.03.06 Rs.
Depreciation At the beginning of the year Charge for the year At the end of the year 20,778,283 4,447,725 25,226,008 20,778,283 4,447,725 25,226,008 17,876,001 2,902,282 20,778,283
WDV at the end of the year
345,541,097
163,663,655
509,204,751
448,142,448
a.
These are investments in immature/mature plantations since the formation of the Company. The assets (including plantation assets) taken over by way of estate leases are set out in notes 9 and 10. Further investment in immature plantations taken over by way of these leases are shown in the above notes. When such plantations become mature, the additional investments since taken over to bring them to maturity are transferred from immature to mature under this note. A corresponding movement from immature to mature in respect of the investment undertaken by JEDB/SLSPC on the same plantation prior to the leases will be carried out under note 10.
b.
Borrowing costs amounting to Rs.25,835,039 (previous year Rs.15,407,674) incurred on long term loans obtained to meet expenses relating to immature plantations have been capitalised as part of the cost of the immature plantations. Capitalisation will cease when crops are ready for harvest.
13. Long Term Investments

2007 Rs. 805,000 Ordinary Shares of Rs.10/- each in Beruwala Resorts Ltd. 8,050,000 2006 Rs. 8,050,000
The investment of 805,000 - 9% Cumulative Redeemable Preference Shares of Rs.10/- each in the Capital of Beruwala Resorts Ltd. has been redeemed during the year.
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14. Long Term Loan Receivables

Receivable within one year Rs. Lankem Tea & Rubber Plantations (Pvt) Ltd.* Kotagala Plantations Ltd.** 58,424,645 2,144,759 60,569,404 95,159,558 95,159,558 153,584,203 2,144,759 155,728,963 208,736,532 163,547,946 372,284,478 Receivable after one year Rs. 2007 Rs. 2006 Rs.
In the previous year Company has converted the amount due from Lankem Tea & Rubber Plantations (Pvt) Ltd. amounting to Rs.158,599,264 (balance outstanding as at 31.03.2004) in agreement with the said company to a long term interest free loan repayable over the period of 10 years. Further, Lankem Tea & Rubber Plantations (Pvt) Ltd. has agreed to transfer/assign the monies receivable from the Company by way of management fees in future and set off the same against monies borrowed from the Company.
**
The Company has also converted the amount due from Kotagala Plantations Ltd. in agreement with the said company to a Long Term interest free loan repayable over a period of 10 years commencing from 01.04.2004.
15. Inventories
2007 Rs. Input Materials Growing Crop - Nurseries Produce Stocks - Tea Spares & Consumables 49,344,166 7,469,609 192,101,991 19,459,640 268,375,406 2006 Rs. 22,061,663 6,887,432 153,990,530 19,435,690 202,375,315
16. Trade & Other Receivables

Trade Debtors Employee Related Debtors Deposits, Advances & Prepayments Other Debtors 34,682,693 31,681,198 8,180,939 23,387,394 97,932,224 Less: Provision for Doubtful Debts (4,190,785) 93,741,439 24,077,978 23,189,412 2,794,652 52,045,117 102,107,159 (4,505,792) 97,601,367
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17. Amounts due from Related Companies

2007 Rs. Beruwala Resorts Ltd., Marawila Resorts Ltd., Sigiriya Village Hotels Ltd., Sherwood Holidays Ltd., 7,000 891,750 1,863,759 820,109 3,582,618 2006 Rs. 7,000 324,750 1,075,404 564,917 1,972,071
18. Share Capital

Authorised share capital 100,000,000 shares of Rs.10/- each and a Golden share of Rs.10/1,000,000,010 1,000,000,010
Issued and fully paid 19,155,319 Ordinary shares of Rs.10/- each and a Golden share of Rs.10/which has special rights, held by the Secretary to the Treasury At the end of the year 191,553,200 191,553,200 191,553,200 191,553,200
19. Share Premium

At the beginning of the year At the end of the year 107,446,810 107,446,810 107,446,810 107,446,810
On 22nd September 2001, the Company issued 4,255,319 Ordinary shares with a par value of Rs.10/- to Lankem Plantation Holdings Limited on conversion of its convertible debentures, the Company has recognised a share premium of Rs.107,446,810.
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20. Interest Bearing Loans & Borrowings

2007 2007 Repayable Repayable within within 1 year 2 to 5 years Rs. Rs. Long Term Loans Lease Creditors Bank Overdraft 20.1 20.3 20,848,280 10,000,000 11,145,050 223,091,991 265,085,320 20.1 Long Term Loans 70,113,120 29,190,080 99,303,200 2007 Repayable after 5 years Rs. 2007 Total 2006 2006 Repayable Repayable within within 1 year 2 to 5 years Rs. Rs. 21,978,156 2,081,000 8,175,204 73,433,120 15,195,461 88,628,581 Rate of Interest 2006 Repayable after 5 years Rs. 2006 Total
Rs.
Rs.
19,660,628 110,622,028 10,000,000 40,335,129
37,743,032 133,154,308 2,081,000 23,370,665
Short Term Loans 20.2
- 223,091,991 198,695,086 19,660,628 384,049,148 230,929,446 Repayable after 5 years Rs. Total As At 31.03.07 Rs. Total As At 31.03.06 Rs.
- 198,695,086 37,743,032 357,301,059 Term of Payment
Repayable Repayable within within 1 year 2 to 5 years Rs. Rs. 8,297,148 33,188,592
DFCC BANK - (ADB Loan) Disbursement 1 - 97/98 (14046) Disbursement 1 - 97/98 (16251 B) Disbursement 1 - 97/98 (16251 C) Disbursement 1 - 00/01 (21566) Disbursement 1 - 01/02 (238895) 17,528,280 70,113,120 19,660,628 107,302,028 124,830,308 933,372 3,733,488 1,011,153 5,678,013 6,611,385 17.75% 2,609,184 10,436,736 9,132,144 22,178,064 24,787,248 13.27% 999,996 3,999,984 1,666,660 6,666,640 7,666,636 11.75% 4,688,580 18,754,320 2,319,239 25,762,139 30,450,719 11.75% 5,531,432 47,017,172 55,314,320 13.70%
1st instalment of Rs.691,884 and 119 monthly instalments of Rs.691,429 payable commencing from 01.11.2002.
HATTON NATIONAL BANK Disbursement 1 - 03/04 3,320,000 3,320,000 8,324,000
20,848,280 70,113,120 19,660,628 110,622,028 133,154,308 20.2 Short Term Loans Repayable Repayable within within 1 year 2 to 5 years Rs. Rs. 10,000,000 10,000,000 Repayable after 5 years Rs. Total As At 31.03.07 Rs. Total As At 31.03.06 Rs. 2,081,000 2,081,000
Forbes & Walkers Indian Bank
- 10,000,000 - 10,000,000
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20.3 Lease Creditors
Repayable within 1 year Rs.
Repayable within 2 to 5 years Rs.
Repayable after 5 years Rs.
Total As At 31.03.07 Rs.
Total As At 31.03.06 Rs.
PEOPLES LEASING CO., LTD. Motor Vehicles Gross Liability Interest in Suspense Net Liability Machinery Items Gross Liability Interest in Suspense Net Liability CEYLINCO DEVELOPMENT BANK Motor Vehicles Gross Liability Interest in Suspense Net Liability COMMERCIAL LEASING Motor Vehicles Gross Liability Interest in Suspense Net Liability CENTRAL FINANCE Motor Vehicles Gross Liability Interest in Suspense Net Liability Colour Separator Gross Liability Interest in Suspense Net Liability ORIENT FINANCIAL SERVICES Motor Vehicles Gross Liability Interest in Suspense Net Liability LANKA ORIX LEASING Drier Gross Liability Interest in Suspense Net Liability Total
2,109,240 (401,262) 1,707,978
2,069,037 (155,609) 1,913,428
4,178,277 6,287,517 (556,871) (1,221,667) 3,621,406 5,065,850
7,359,984 (3,759,590) 3,600,394
25,214,280 (5,719,018) 19,495,262
32,574,264 (9,478,609) 23,095,655
1,915,056 (527,510) 1,387,546
3,351,420 (369,257) 2,982,163
5,266,476 7,181,532 (896,766) (1,654,461) 4,369,710 5,527,071
1,525,804 (685,889) 839,915
4,831,711 (951,767) 3,879,944
6,357,515 (1,637,656) 4,719,859
317,889 (19,317) 298,572
2,808,436 (165,628) 2,642,808
2,019,150 (67,951) 1,951,198
2,019,150 (67,951) 1,951,198
5,233,014 (420,595) 4,812,419
2,007,864 (349,845) 1,658,019 11,145,050
1,003,922 (84,640) 919,282 29,190,080
3,011,786 (434,485) 2,577,301
5,934,504 (910,559) 5,023,945
40,335,129 23,370,665
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21. Retirement Benefit Obligations

2007 Rs. At the beginning of the year Provisions made during the year Payments made during the year At the end of the year 382,969,591 124,994,245 (29,939,570) 478,024,266 2006 Rs. 351,378,921 56,325,308 (24,734,638) 382,969,591
In accordance with the actuarial valuation carried out by a professionally qualified actuary firm M/s. Actuarial and Management Consultants (Pvt) Ltd as at 31st March 2007 to Rs.478,024,266. If the Company had provided for gratuity for all employees on the basis of 14 days wages for workers and a half month salary for staff for each completed year of service for the year ended 31st March 2007, the liability would have been Rs.813,870,044. (2006 Rs.509,603,481) Hence, there is a contingent liability of Rs.335,845,778 (2006 Rs.126,633,890) which would crystalise only if the Company ceases to be a going concern.
22. Deferred Income

2007 Rs. Negative Goodwill (22.1) Deferred Grants and Subsidies (22.2) 137,772,041 137,772,041 2006 Rs. 27,502,065 139,998,071 167,500,136
22.1 Negative Goodwill

Cost At the beginning of the year Additions during the year At the end of the year 275,020,650 275,020,650 275,020,650 275,020,650
Amortisation Accumulated amortization b/f Amortization for the year Adjustment as per SLAS 25 Accumulated amortization c/f Net carrying amount at the end of the year 247,518,585 27,502,065 275,020,650 220,016,520 27,502,065 247,518,585 27,502,065
Due to the changes in SLAS (revised) effective current year, the unamortised negative goodwill balance remaining at the end of the last year amounting to Rs.27,502,065 was derecognised with a corresponding adjustment to the opening balance to the retained earnings in line with the transitional provisions of SLAS 25 (revised).
70
22.2 Deferred Grants and Subsidies

2007 Rs. Cost At the beginning of the year Grant received during the year Transfers At the end of the year 163,896,138 2,114,059 166,010,197 155,270,230 8,625,908 163,896,138 2006 Rs.
Amortisation Accumulated amortization b/f Amortization for the year Accumulated amortization c/f Net carrying amount at the end of the year 23,898,067 4,340,090 28,238,157 137,772,041 19,650,673 4,247,394 23,898,067 139,998,071
The Company has received funding from the Plantation Housing and Social Welfare Trust, Asian Development Bank, Plantation Reform Project and Ministry of Livestock Development for the development of worker welfare facilities such as re-roofing of line rooms, latrines, water supply and sanitation etc. The amounts spent are included under the relevant classification of Property, Plant and Equipment and the grant component is reflected under Deferred Income and Capital Grants.
23. Net Liability to the Lessor of JEDB/SLSPC Estates

2007 Rs. Gross liability Finance charges allocated to future periods Net liability 478,125 (321,090) 157,035 2006 Rs. 490,625 (332,968) 157,657
Net liability to lessor is the Net Present Value of annual lease rental over the life of the leases at a nominal discount rate of 8.16% per annum, consisting of a real discount rate of 4% per annum and projected inflation of 4% per annum.
71
2007 Rs.
2006 Rs.
24. Trade and Other Payables

Trade Creditors Payable to Employees EPF/ETF/CPPS/ESPS Payable EPF Surcharge Broker Advances Other Creditors 72,925,912 76,602,848 19,654,299 30,519,957 41,699,772 90,534,241 331,937,029 55,149,789 69,966,528 78,200,188 40,880,047 22,602,010 97,752,747 364,551,309
25. Dividends Payable

Unclaimed Dividends 10,027,606 10,027,606 10,027,606 10,027,606
26. Amounts due to Related Companies

Creasy Plantation Management Ltd Lankem Ceylon Ltd. Colombo Fort Land and Building Company Ltd 4,000,000 989,253 917,201 5,906,454 4,000,000 989,253 1,648,201 6,637,454
27. Capital Commitments

Followings are the capital commitments approved as at the balance sheet date. a) Field Development b) Machinery & Factory Development 57.8 million 71.8 million 52.8 million 32.6 million
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28. SECURITIES PLEDGED

The following assets have been pledged as securities for loan and other facilities. Nature of Assets Facility Rs.million 25 million. Nature of facility Bank Overdraft from Hatton National Bank
1 a) Concurrent mortgage for Rs.54 million over movable assets of the Company consisting of Stock in trade, work-in-progress and motor vehicles and an assignment of book debts. (Also secures the facility at Indian Bank for Rs.20 million.) b) A letter from Lankem Plantation Holdings Ltd confirming that the management fees will be drawn only on satisfactory conduct of the facilities extended by the Bank. c) Letter of comfort from Lankem Plantation Holdings Ltd. d) Corporate Guarantee of Lankem Plantation Holdings Ltd for Rs.45 million. e) A primary mortgage over leasehold rights to the land and buildings of Pitaratmale and Kahagale Estates.
20 million.
Term Loan from Hatton National Bank Ltd
2 a) A primary mortgage over leasehold rights to the land and buildings of Torrington Estate. b) Corporate Guarantee of Lankem Plantation Holdings Ltd for Rs.40 million. c) Stock in trade, movable assets & book debts under a paripassu agreement along with Hatton National Bank.
40 million.
Bank Overdraft from Indian Bank Short Term Loan from Indian Bank
10 million.
3 A primary mortgage over leasehold rights to the land and buildings of Glenanore and Haputale Estates. a) Primary mortgage over the leasehold rights of Holmwood Estate. b) Corporate Guarantee executed by E.B.Creasy & Company Limited Guaranteeing a sum of Rs.10.5 million. c) Primary mortgage over the leasehold rights of Holmwood Estate.
100 million.
Bank Overdraft from Bank of Ceylon
73
Nature of Assets
Facility Rs.million 137.7 million.
Nature of facility Term Loan from DFCC Bank under the ADB Credit
4 A primary mortgage over leasehold rights to the land and buildings of Balmoral, Hauteville and Nayabedde Estates.
5 A further mortgage over leasehold rights to the land and buildings of Balmoral, Hauteville and Nayabedde Estates.
88.4 million.
Term Loan from DFCC Bank under the ADB Credit Line
6 a) A further mortgage of leasehold rights to the land & buildings of Balmoral, Hauteville, Nayabedde & Glasgow Estates. b) A guarantee from Lankem Tea & Rubber Plantations (Pvt) Ltd
46.37 million. & 7.467 million.
Term Loans from DFCC Bank under the ADB Credit Line
7 The value of teas awaiting sale through the lender falls below the balance of the principal sum outstanding at any given time.
8 Mortgage of an immovable property of the New Portmore Estate.
10 million.
Bank Overdraft from Seylan Bank Ltd
29. CONTINGENCIES
Contingent liabilities that may result in a liability crystallising in the event of an unfavourable action amounts to approximately Rs.40.8 Million. However, the Company is in the view that this contingency will not arise. No known contingent liabilities exist as at the Balance Sheet date other than above and the matters disclosed in note 21.
30. POST BALANCE SHEET EVENTS

There have no material events occurring after the Balance Sheet date that require adjustments to or disclosure in the Financial Statements.
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31. DIRECTORS INTEREST IN CONTRACTS WITH THE COMPANY

Nature of Transaction Amount Charged/(Credited) 2007 Rs. 2006 Rs.
Mr. A. Rajaratnam, Mr. S.D.R. Arudpragasam, *Mr. A.C. Gunasinghe, *Mr. N.H.B.S. Perera, Mr. D.S. AbeyRatna, Mr. C.P.R. Perera, Mr. D.A. Ratwatta, Mr. R.C. Peries, Mr. G.D.V. Perera Directors of the Company are also Directors of Lankem Tea & Rubber Plantations (Pvt) Ltd. with which the company has had following transactions. Managing Agents Fee Short Term Advances Reimbursable Expenses (102,681,367) 68,277,950 14,997,954 (97,920,700) 55,770,097 4,075,357
Mr. A. Rajaratnam, Mr. S.D.R. Arudpragasam, *Mr. A.C. Gunasinghe & *Mr. N.H.B.S. Perera Directors of the Company are also Directors of Lankem Ceylon Ltd. with which the Company has had following transactions. Short Term Advances Purchase of Goods & Services Transfer of Balances (3,822,152) 4,000,000 (4,736,904) 3,927,774
Mr. A. Rajaratnam, Mr. S.D.R. Arudpragasam & *Mr. A.C. Gunasinghe, Directors of the Company are also Directors of Sigiriya Village Hotels Ltd. with which the Company has had following transactions. Rental Expenses Reimbursable Expenses Tea Sales (763,200) (25,155) (763,200) 347,393 -
Mr. A. Rajaratnam, Mr. S.D.R. Arudpragasam, *Mr. A.C. Gunasinghe, *Mr. N.H.B.S. Perera, Mr. D.S. AbeyRatna, Mr. C.P.R. Perera, Mr. D.A. Ratwatte Mr. R.C. Peries & Mr. G.D.V. Perera Directors of the Company are also Directors of Kotagala Plantations Ltd.with which the Company has had following transactions. Receipts on short term Loan Reimbursable Expenses Tea Sales (72,474,608) (16,393,615) (1,373,511) (95,545,000) (25,483,000) (2,743,000)
Mr. A. Rajaratnam, Mr. S.D.R. Arudpragasam, *Mr. A.C. Gunasinghe, *Mr. N.H.B.S. Perera & Mr. D.S. AbeyRatna, Directors of the Company are also Directors of The Colombo Fort Land & Building Company Ltd. with which the Company has had following transactions. Rent on Building 11,868,000 11,868,000
Mr. A. Rajaratnam, Mr. S.D.R. Arudpragasam & *Mr. A.C. Gunasinghe, Directors of the Company are also Directors of Creasy Plantation Management Ltd. with which the Company has had following transactions. Interest Expenses 480,000 480,000
75
Nature of Transaction
Amount Charged/(Credited) 2007 Rs. 2006 Rs.
Mr. A. Rajaratnam, Mr. S.D.R. Arudpragasam, *Mr. A.C. Gunasinghe, *Mr. N.H.B.S. Perera & Mr. D.S. AbeyRatna, Mr. D.A. Ratwatta & Mr. G.D.V. Perera Directors of the Company are also Directors of The Sherwood Holidays Ltd. with which the Company has had following transactions. Rent and Bungalow upkeep expenses (342,805) (330,768)
*Mr. A.C. Gunasinghe and Mr. N.H.B.S. Perera Retired from the Board of Directors of Agarapatana Plantations Ltd on 15th May 2006.
32. RELATED PARTY TRANSACTIONS

There are no related party transactions other than those disclosed in notes 13,14,17,26 and 31 to the accounts.
33. PRICING POLICY

Purchase of goods and services to related parties were made at normal trading terms under arm's length basis. Management Fee payment was made at Contractual basis.
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STATEMENT OF VALUE ADDED

2006/2007 Rs.million % 2005/2006 Rs.million %
Turnover Other Income
1,880 18 1,898
1,758 58 1,816 (573) 1,243
Cost of Material and Services bought VALUE ADDED
(646) 1,252
DISTRIBUTION OF VALUE ADDED
A - To Employees as Remuneration B - To Providers of Capital (Interest) C - Provision for Depreciation D - Profit/(Loss)
1,237 28 46 (59) 1,252
98.80 2.24 3.67 (4.71) 100.00
1,156 51 42 (6) 1,243
93.00 4.10 3.38 (0.48) 100.00
Value added is the quantum of wealth generated by the activities of the Company.
77
SHAREHOLDER & INVESTOR INFORMATION

Ten year summary 06/07 Rs.000 Trading Results Revenue Gross Profit Other Operating Income Operating Profit /(Loss) before Management Fee & Interest Profit /(Loss) after Income Tax 05/06 Rs.000 04/05 Rs.000 03/04 Rs.000 02/03 Rs.000 01/02 Rs.000 00/01 Rs.000 99/00 Rs.000 98/99 Rs.000 97/98 Rs.000
1,880,529 1,758,548 1,563,303 1,373,166 1,327,468 1,270,542 1,333,057 1,163,072 1,121,928 1,348,928 137,731 18,454 72,365 (58,811) 161,725 58,334 115,313 (6,475) (6,475) 213,334 31,398 170,998 69,007 67,931 161,576 42,868 90,910 7,434 7,434 88,567 48,495 54,625 (29,853) (29,283) 209,377 54,466 168,476 76,865 76,865 283,718 45,379 242,121 143,888 143,888 207,032 31,218 167,104 74,517 74,517 133,242 30,235 94,280 30,616 30,616 270,723 13,965 83,911 286,101 286,101
Profit /(Loss) before Income Tax (58,811)
Balance Sheet Non-Current Assets Current Assets 1,296,127 1,337,642 1,365,238 1,348,025 1,007,340 514,625 445,690 441,787 301,938 574,574 951,887 515,347 893,632 479,860 841,537 396,826 808,145 403,870 698,046 387,332
1,810,752 1,783,332 1,807,025 1,649,963 1,581,914 1,467,234 1,373,492 1,238,363 1,212,015 1,085,378 Issued Capital Share Premium Retained Profit/(Loss) Shareholders Funds Mandatory Convertible Debentures Deferred Income Interest Bearing Borrowings Retirement Benefit Obligations Net Liability To Lessor Current Liabilities 191,553 107,447 163,879 462,879 137,772 118,964 478,024 157 612,956 191,553 107,447 195,188 494,188 167,500 126,372 382,969 157 612,146 191,553 107,447 201,663 500,663 190,623 155,215 351,379 158 608,987 191,553 107,447 133,731 432,731 213,521 172,951 324,061 159 506,540 191,553 107,447 126,297 425,297 229,704 172,140 309,694 159 444,920 191,553 107,447 155,579 454,579 244,977 167,788 267,817 160 331,913 149,000 107,447 256,447 150,000 242,649 162,907 298,011 161 263,317 149,000 131,715 150,000 248,181 140,925 305,259 161 262,122 149,000 57,198 150,000 254,744 126,728 305,855 161 317,329 149,000 26,581 150,000 268,066 86,644 342,545 161 211,381
(17,285) (91,802) (122,419)
1,810,752 1,783,332 1,807,025 1,649,963 1,581,914 1,467,234 1,373,492 1,238,363 1,212,015 1,085,378 Net Cash Flow From/(Used in) Operating Activities From/(Used in) Investing Activities From/(Used in) Financing Activities Increase/(Decrease) in Cash & Cash Equivalents (24,705) 31,669 (39,286) (11,610) (51,066) (45,864) 5,939 15,060 (110,494) 53,68 (31,284) (72,568) 10,918 22,106 16,133 14,697 42,883 (11,445) 84,307 18,402 (56,560) (81,434) (72,184) (63,700) (86,389) (99,898) (32,246) (126,142) (132,242) (56,547) 63,139 185,671 21,980 29,984 19,190 39,337 (4,698) 152,647 (62,559) 91,825
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GLOSSARY OF FINANCIAL & NON FINANCIAL TERMS

FINANCIAL TERMS Accounting Policies The specific principles, bases, conventions, rules and practices adopted by an enterprise in preparing and presenting financial statements Contingent Liabilities A possible obligation that arises from past events and whose existence will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the enterprise Current Ratio Current Assets divided by Current Liabilities. A measure of liquidity Deferred Taxation The tax effect of timing differences deferred to/from other periods, which would only qualify for inclusion on a tax return at a future date Dividends Distribution of profits to holders of equity investments in proportion to their holdings of a particular class of capital Earnings per Share Profit attributable to ordinary shareholders divided by the weighted average number of ordinary shares in issue during the period EBITDA Earnings before Interest, Tax, Depreciation and Amortisation Gearing Proportion of borrowings to capital employed Interest Cover Profit before tax plus net finance cost and goodwill amortisation divided by net finance cost. Measure of an entity's debt service ability Net Assets per Share Shareholders Funds divided by the weighted average number of ordinary shares in issue. A basis of share valuation Related parties Parties who could control or significantly influence the financial and operating policies of the business Seedling Tea Tea grown from a seed Segment Constituent business units grouped in terms of similarity of operations and locations Value Additions The quantum of wealth generated by the activities of the Company measured as the difference between turnover and the cost of materials and services bought in Working Capital Capital required to finance the day-to-day operations computed as the excess of current assets over current liabilities NON FINANCIAL TERMS COP Cost of producing a kilo of Tea HACCP Hazard Analysis Critical Control Point system. A standard for safety of foods Immature Plantation The extent of plantation which is not taken in to the bearing and is in the process of development ISO International Standard Organisation Mature Plantation The extent of plantation from which crop is being harvested NSA Net Sales Average. Measures the average value of net selling price of a kilo of Tea
TRI Tea Research Institute
VP Tea Vegetatively Propagated. Tea grown from a cutting of branch of a tea plant
YPH Yield Per Hectare. The measure of average yearly output of produce from a hectare of mature plantation
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NOTICE OF MEETING
Notice is hereby given that the Fifteenth Annual General Meeting of Agarapatana Plantations Limited will be held at the Grand Oriental Hotel, No. 2, York Street, Colombo 1, on 11th July 2007, at 10.00 a.m. for the following purposes: 1. To receive and consider the Report of the Directors and the Statement of Accounts for the year ended 31st March, 2007 with the Report of the Auditors thereon. 2. To re-elect as a Director Mr. D.S. AbeyRatna who retires in accordance with Articles 92 & 93 of the Articles of Association. 3. To re-elect as a Director Mr. D. A. Ratwatte who retires in accordance with Article 98 of the Articles of Association. 4. To re-elect as a Director Mr. R.C. Peries who retires in accordance with Article 98 of the Articles of Association. 5. To re-elect as a Director Mr. G.D.V. Perera who retires in accordance with Article 98 of the Articles of Association. 6. To re-appoint as Auditors, Messrs. Ernst & Young and authorize the Directors to determine their remuneration.
By Order of the Board,
CORPORATE MANAGERS & SECRETARIES LIMITED Secretaries Colombo 5th June 2007
Notes: 1. A member is entitled to appoint a proxy to attend and vote instead of himself. 2. A proxy need not be a member of the Company. A Form of Proxy is attached for this purpose. 3. The instrument appointing a proxy must be deposited at the Registered Office of the Companys Secretaries at No. 8-5/2, Leyden Bastian Road, York Arcade Building, Colombo 1, not less than forty eight hours before the time fixed for the meeting.
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FORM OF PROXY
I/We .............................................................................................
of . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . being a member/members* of Agarapatana Plantations Limited hereby appoint . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . of . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . or failing him ALAGARAJAH RAJARATNAM SRI DHAMAN RAJENDRAM ARUDPRAGASAM JAYAMAHA HITIHAMILAGE JAYATILAKA JAYAMAHA DAMIAN SUNIL ABEYRATNA RATNAYAKE MUDIYANSELAGE SUSIL PREMA RATNAYAKE CHRISANTHA PRIYANGE RICHARD PERERA DEVAKA AJIT RATWATTE RANJIT CRISANTHA PERIES GANEGODAGE DHAMITHA VAAMAKA PERERA of of of of of of of of of Colombo Colombo Colombo Colombo Colombo Colombo Colombo Colombo Colombo or or or or or or or or failing failing failing failing failing failing failing failing him him him him him him him him
as my/our* proxy to represent me/us* to** ............ and to vote as indicated hereunder for me/us* and on my/our* behalf at the Fifteenth Annual General Meeting of the Company to be held on 11th July 2007 at 10.00 a.m. and at any adjournment thereof and at every poll that may be taken in consequence thereof. For 1. To receive the Report of the Directors and Statement of Accounts for the year ended 31st March 2007, with the Report of the Auditors thereon. 2. To re-elect Mr. D.S. AbeyRatna as a Director 3. To re-elect Mr. D.A. Ratwatte as a Director 4. To re-elect Mr. R.C. Peries as a Director 5. To re-elect Mr. G.D.V. Perera as a Director 6. To re-appoint as Auditors Messrs. Ernst & Young and authorise the Directors to determine their remuneration. Signed this . day of . Two Thousand and Seven. Against
Signature (s) Note : * Please delete the inappropriate words. 1. A Proxy need not be a member of the Company. 2. If no words are struck out or there is in view of the Proxy doubt (by reason of the way in which the instructions contained in the form of Proxy have been completed) as to the way in which the Proxy should vote, the Proxy will vote as he thinks fit. 3. Instructions as to completion are noted on the reverse hereof. 4. If you wish your proxy to speak at the meeting you should interpolate the word speak in the place indicated with ** and initial such interpolation. (Please bring this slip along when you attend the meeting)
NAME OF SHAREHOLDER (In Block Letters) SIGNATURE OF SHAREHOLDER
NAME OF PROXY (In Block Letters) SIGNATURE OF PROXY
PROXYS NIC NUMBER
81
INSTRUCTIONS AS TO COMPLETION 1. Please write legibly, your name, address and date and sign in the space provided. 2. The completed Form of Proxy should be received at the Registered Office of the Companys Secretaries, Corporate Managers & Secretaries Ltd. York Arcade Building, 8-5/2 Leyden Bastian Road, Colombo 1, not less than 48 hours before the time appointed for the holding of the meeting. 3. In case of a Company/Corporation, this Form of Proxy shall be executed either under its Common Seal or by its Attorney or by an officer on behalf of such Company/Corporation duly authorised in writing. 4. In the case of a Proxy signed by an Attorney, the Power of Attorney must be deposited at the Registered Office of the Companys Secretaries for registration.
82

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CONTENTS

OUR BUSINESS OBJECTIVES

OUR CORE VALUES

Agarapatana Plantations Limited

Annual Report 2006 - 2007

SUMMARY OF FINANCIAL PERFORMANCE

Agarapatana Plantations Limited

Annual Report 2006 - 2007

Agarapatana Plantations Limited

Importance of non-financial indicators

Our core values

D.S. AbeyRatna Thinking of the future

Annual Report 2006 - 2007

J.H.J. Jayamaha - Director

S.D.R. Arudpragasam - Director

R.M.S.P. Ratnayake - Director

C.P.R. Perera - Director D. Sunil AbeyRatna - Director

Agarapatana Plantations Limited

D.A. Ratwatte - Director

R.C. Peries Director

G.D.V. Perera - Director

Annual Report 2006 - 2007

K.M. Ramesh Financial Controller

M.S. Madugalle General Manager - Plantations (Uva)

A.M.S. Kulasekara Manager - Engineering

J.K. Congreve General Manager - Manufacture

J. Kariyawasam Manager - Legal Affairs

Agarapatana Plantations Limited

Bought Crop Operations

Crop and Yield

Annual Report 2006 - 2007

Agras Valley Act COP Rs. 200.68 Pre 168.93

Haputale Act 211.75 Pre 175.83

Training programme in progress

Agarapatana Plantations Limited

Vision for Tomorrow

Annual Report 2006 - 2007

Agarapatana Plantations Limited

: Manager : Asst Manager : Asst Manager

: General Manager : Asst Manager

: Manager : Deputy Manager : Asst Manager

: Manager : Asst Manager : Asst Manager

Manager Deputy Manager Asst Manager Asst Manager Asst Manager

: General Manager : Asst Manager : Asst Manager

: Manager : Asst Manager : Asst Manager

: Manager : Asst Manager

: General Manager : Asst Manager

: Manager : Asst Manager : Asst Manager

: Manager : Deputy Manager : Asst Manager

: Acting Manager : Asst Manager

: Manager : Asst Manager

: Manager : Asst Manager : Asst Manager

Annual Report 2006 - 2007

Agarapatana Plantations Limited

PRODUCTION & YIELD

5,131 5,701 5,581 5,783 6,371

616 1,400 1,347 1,779

8,995 10,163 9,320 9,895 10,125

Annual Report 2006 - 2007

Earnings Before Interest, Tax, Depreciation and Amortisation (EBITDA)

Profit / (Loss) from Operations Segmental Analysis of Revenue

Agarapatana Plantations Limited