Keells Food AR 2014 PDF

Keells Food Products PLC
Annual Report 2013/14

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Corporate Information
Name of Company
Audit Committee
Mr. M P Jayawardena
Mr. R Pieris
Mr. S H Amarasekera PC
Mr. A D E I Perera
Company Registration Number

PQ 3
Legal Form
Public Limited Liability Company
Established in 1982
Registered Office of the Company
No. 117, Sir Chittampalam A. Gardiner Mawatha,
Colombo 2,
Sri Lanka.
Tel: 2421101
Ekala Factory

Keells is presently Sri Lankas market leader in the processed meat industry. Keells started its operations in the year 1983, and
takes pride in being solely responsible for developing the Sri Lankan processed meats industry to its current heights.
Keells has kept abreast of the industry through strategic investments in state of the art food processing technology, quality
control systems and an aggressive Company-wide research and development orientation.
Keells world class sausages, meat balls, hams, bacons, cold meats and raw meats combine gourmet taste and nutrition while
offering superior quality. The range offers convenience to meet todays demanding lifestyles of consumers all over the world.
We serve certain markets in India, United Arab Emirates and Maldives and are currently in the process of strengthening our
presence in these regional markets.
Keells Food Products PLC (KFP) sustained its market leadership position in the processed foods category through a range
of marketing strategies aimed at strengthening its market share, whilst connecting more closely with the consumer. The
Company has been driving innovation and high brand recall in an effort to enhance the consumption of our products. Based
on a combination of consumer feedback and research and development efforts, we are constantly formulating new products
that fulfill the expectations of our consumers.
342
1218
No.16, Minuwangoda Road,Ekala, Ja-Ela.

Sri Lanka.
Tel: +94 11 2236317
Fax: +94 11 2236359
E-Mail: foods@keells.com
Web: www.keellsfoods.com
Pannala Factory
PO Box 14, Industrial State, Makadura,
Gonawila (NWP).
Sri Lanka.
Tel: +94 037 4933248-51
Fax: +94 031 2298195
Board of Directors
Mr. S C Ratnayake (Chairman)
Mr. A D Gunewardene
Mr. J R F Peiris
Mr. J R Gunaratne
Mr. R Pieris
Mr. A D E I Perera
Mr. M P Jayawardena
1146
Designed & produced by
Digital Plates & Printing by Printel (Pvt) Ltd.
Secretaries & Registrars

Keells Consultants (Pvt) Ltd
Colombo 02,
Sri Lanka.
Auditors
Ernst & Young , Chartered Accountants,
201, De Saram Place,
Colombo 10,
Sri Lanka.
Bankers
Bank of Ceylon Limited
Deutsche Bank AG
DFCC Vardhana Bank
DFCC Bank
Hongkong & Shanghai Banking Corporation Ltd.
Nation Trust Bank PLC
Stock Exchange Listing
The Ordinary Shares of the Company are Listed
with the Colombo Stock Exchange of Sri Lanka.
Subsidiary Company
John Keells Foods India Private Limited
any day. any time.

Good food, guaranteed quality
Good food is a must in every celebration and wherever theres good food, youre
sure to find Keells. Famed for our convenience, quality and taste, Keells Foods
offer a range of classic and unforgettable flavours that are known and trusted
by thousands of Sri Lankans islandwide because in true Sri Lankan style, we like
to keep our products simple, tasty and good.
Today were an integral part of many peoples lives and we are proud to know
that we shall continue to celebrate memorable moments with them for many
years to come.
Keells Foods, Celebrate any day, any time.
Contents
Financial Highlights
Our Products
Chairmans Review
Management Discussion & Analysis
Directors Profiles
Sustainability Report
Corporate Governance
Audit Committee Report
Enterprise Risk Management
Financial Calendar
Financial Information
Annual Report of the Board of Directors
On The Affairs of the Company
Statement of Directors Responsibility
Independent Auditors Report
4
5
6
9
16
19
27
67
70
77
77
78
84
85
Income Statement
Statement of Comprehensive Income
Statement of Financial Position
Statement of Cash Flows
Statement of Changes in Equity
Notes to the Financial Statements
Your Share in Detail
Ten Year Information at a Glance
Key Ratios and Information
Real Estate Portfolio
Glossary of Financial Terminology
Notice of Meeting
Notes
Form of Proxy (enclosed)
86
87
88
89
91
92
138
140
141
141
142
143
144
Financial Highlights
Group
Year ended 31st March
2014 2013 Change

%

Revenue
Rs. 000
2,280,142
2,197,482
Operating Profit/(Loss)
Rs. 000
(33,593)
64,959
Profit/(Loss) Before Tax
Rs. 000
(11,954)
115,214
Profit After Tax (PAT)
Rs. 000
467
90,883
Shareholders Funds
Rs. 000
1,549,530
1,597,616
Total Assets
Rs. 000
2,091,343
2,492,008
Total Debt
Rs. 000
246,997
264,734
Earnings per Share- ( Re-stated )
Rs.
0.02
4.82
Return on Capital Employed
%
(1.84)
5.41
Return on Equity
%
0.03
8.87
Market Price per Share as at 31st March
Rs.
55.00
70.00
Market Capitalisation
Rs. 000
1,402,500
1,785,000
Price Earning Ratio-(Re-stated)
No. of times
2,750
16
Quick Assets Ratio
No. of times
1.60
1.89
4
(152)
(110)
(99)
(3)
(16)
(7)
(100)
(134)
(100)
(21)
(21)
18,836
(16)
Note: Figures in brackets indicate an unfavorable fluctuates
Net Revenue and

Employees and Revenue

per Employee
Rs. Mn
Rs. Mn
2,500
200
150
2,000
100
1,500
Rs. Mn
6
5
4
0
2010 2011 2012 2013 2014
Net Revenue
-150
2,000
15
440
430
-100
Rs.
10
1,500
450
0
-50
Rs. Mn
480
460
500
No
470
50
1,000
Shareholders Funds and

Earnings per Share
0
1,000
-5
420
410
-10
500
-15
400
390
2010 2011 2012 2013 2014
Net Revenue Per Employee

Average No.of Employees
-20
2010 2011 2012 2013 2014
Shareholders Funds
EPS
Our Products
The Keells Sausage Range
The Keells Sausage Range is renowned as a superior brand. A pioneer in the processed meats industry, Keells
Sausages endorses our premium quality and adherence to strict hygienic manufacturing guidelines.
Chicken Sausages
Cheesy Blast
Chicken Garlic
Sausages
Chicken Cheese and

Onion Sausages
Spicy Bites
This sausage pays

homage to Sri Lankans
love for all things spicy.
A delicious mix of red
hot chillies and chunky
sausage, you can count
on Spicy Bites to turn
on the heat anytime,
anywhere.
Cheesy Blast is
full of wholesome
chicken and
generous dollops
of creamy and
nutritious cheese.
No wonder that
this sausage is a hit
among kids.
The oldest sausage

in the Keells family,
its classic recipe has
stood the test of time.
Its wholesome chicken
goodness remains a
crowd pleaser to this
day.
A mouth watering
favourite, this sausage
is packed with juicy
chicken and fresh
garlic, offering many
creative possibilities
in kitchens across the
country.
Everyone loves sausages,

but nothing stirs the
passion of fans like the
Chicken, Cheese and
Onion Sausage.
The Krest Range
The yummy Krest Range offers you a wide variety of snacks & bites. We offer delicious & ready to fry Formed
Meats, Chinese Rolls and Crispy Potato Chips.
French Fries (Potato

Chips)
Formed Meat
The superior
golden crispy
crumb delivers the
ultimate snacking
experience where
with each bite you
are guaranteed
the delicious Krest
experience.
Chinese Rolls
Being a Sri Lankan staple

during snack time, the
Chinese Roll has won
the hearts of many.
Synonymous with rolls is
Krest, our ready-tofry
Chinese Roll range which
is ideal for both snacks
and meal times. Beautifully
battered and crumbed,
they turn into hot, crisp,
appetizing feasts in
minutes.
This superior quality

product is imported
from Farm Friets, a world
renowned potato based
products manufacturer,
located in Netherlands
and distributed in Sri
Lanka under the brand
name of Krest.
The Elephant House Sausage Range
The Elephant House Sausage Range is a distinctively Sri Lankan brand launched in 1966. We offer a wide range
of handmade products created from our traditional recipes using the finest, freshest ingredients made to
international quality standards.
Chicken
Sausage
The most
popular
variant which
everybody
likes to
indulge in.
Pork Lingus
The favourite
legendary
Elephant House
Sausage taste
is most famous
for Lingus!
Bacon
Whopper
Sausage
The popular
chunky pork
sausage with
superior
bacon taste!
Beef
Sausage
The one and

only beef
variant in
the range
catering to
beef lovers.
Chairmans Review
The rebound in consumer sentiment and
spending patterns, would allow the Company
to penetrate into new markets and market
segments with KFPs versatile product
offerings that cater to a variety of snack and
meal choices. Moreover, with consumers
increasingly opting for convenient choices,
our offerings would look to secure a larger
cross section of the island-wide consumer
populace.
I am pleased to present to you the Annual Report and

Financial Statements of Keells Food Products PLC (KFP) for
the year ended 31st March 2014.
Brand Positioning
During the year under review, lower discretionary spending
patterns negatively impacted demand for some of our
products although volumes of both sausages and meat
balls our core products saw an increase. The proliferation of
vendors offering sub-standard, low cost frozen foods in loose
form, thereby compromising the integrity of the cold chain
and food handling standards, continues to be of concern.
In the face of such testing conditions, the focus was to
develop a compelling branding strategy coupled with
consumer education to underpin all marketing efforts for
the year. The brand proposition capitalised on our versatile
portfolio. The Keells and Krest range of products were
promoted as the brand of choice for the mass market to
satisfy a diverse variety of taste profiles and consumption
occasions, while the high-end Elephant House (EH) range
leveraged on its unique taste properties to fulfil the needs of
the more discerning palate.
Efficiency Enhancements
The state of the art production facility in Pannala now
produces the entire range of chicken sausages and the cold
meats. The new automated line for our formed meats was
installed during the year as well.
Performance for the Year

During the year, KFP reported a revenue growth of 4 per
cent and a growth in profit before tax and exceptional
expense of 13 per cent. The revenue for the year was Rs. 2.3
billion and the profit before tax and exceptional expense was
Rs. 131 million. The exceptional expense was Rs. 139 million,
being the cost of a Voluntary Retirement Scheme accepted
by 129 employees at the factory . After accounting for a tax
reversal of Rs. 12.4 million the Company posted a Profit after
Tax of Rs. 3.9 million compared to a Profit after Tax of Rs. 91.3
million in the previous year.
Share Performance and Dividends
Your Board has approved the payment of first and final
dividend of Rs. 2.00 per share for the year under review that
would result in a total dividend payout of Rs. 51 million.
Nurturing a Sustainable Business Model
Reiterating our commitment to our suppliers, as in the
past, we employed a proactive strategy to purchase poultry
and meat from identified local farmers benchmarked by
KFPs quality standards and ethical farming guidelines. Our
continuous engagement in providing technical support to
the network of suppliers, mainly small and medium farmers
of meat, spices and vegetables have helped them to improve
their productivity and overall yields.
Moreover, while ensuring an uninterrupted supply of high
quality spices and herbs, our farmer grower outreach
program in the Kandy district has also nurtured new
entrepreneurs with the desire to make a difference to their
communities. I believe the mutual benefits that accrue from
these partnerships have, not only enriched the lives and
livelihoods of these communities, but also augmented the
future progress of your Company.
Looking Ahead
The rebound in consumer sentiment and spending patterns, as
witnessed in the fourth quarter of the financial year 2013/14,
is expected to have a positive impact on the Fast Moving
Consumer Goods (FMCG) industry in the forthcoming year.
Should this trend materialise as foreseen, the prospects for
your Company too appear to be very encouraging.
Unlocking this potential would allow the Company to
penetrate into new markets and market segments with KFPs
versatile product offerings that cater to a variety of snack
and meal choices. Moreover, with consumers increasingly
opting for convenient choices, our offerings would look to
secure a larger cross section of the island-wide consumer

populace, by tapping into both the in-home and out-of-home
markets for wholesome meals and snacks. Meanwhile, the
countrys growing tourism and leisure sector would certainly
bolster our ability to harness the latent potential in the
hotels, restaurants and cafs channel (HORECA) in the years
ahead. While improving market share in these core areas is
a definite priority for your Company, the cost efficiencies
relayed through enhanced operational capabilities would
certainly be the catalyst in conveying the desired returns for
all stakeholders, in the longer term.
Acknowledgments
On behalf of the Board, I wish to express my appreciation to
our distributors for being with us during a challenging year.
I take this opportunity to thank the team at Keells Foods
Products PLC for their commitment and dedication and
convey my appreciation to my colleagues on the Board for
the support extended to me during the year.
I would also like to acknowledge all our shareholders for
continuing to have confidence in us and look forward to your
continued support in the year ahead.
Susantha Ratnayake
Chairman
30th May 2014
The Keells Sausage Range adds zest to any meal.

These wholesome and succulent products are
convenient to grill, fry or mix. We have the widest
choice of sausages for any occasion, offering variety
and taste to suit every market segment.
y. Tue
s
ay
.T
The simplest meal of rice

and curry turns into an
exciting taste adventure
with Keells sausages!
ea time.
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n
c
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Morning. T
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. Eng. Din
Sunday.
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Mo
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.
Tu
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Sun
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.
Din
iday
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. Th
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nday. Monda
Management
Discussion and
Analysis
Management Discussion and Analysis

FMCG Industry Overview 2013/14
The year proved to be quite a challenging one, with growth
prospects in the FMCG industry remaining dull. Fuelled by
the escalating cost of consumer goods, a slack in spending
was observed in the first two quarters of 2013/14. With
consumers expressing reluctance to spend in the immediate
aftermath of tax increases on consumer goods and the
electricity tariff increase, volume growth in the FMCG
industry was restrained in the first half of the year. However,
with consumer sentiments adjusting to the new cost bracket,
the industry experienced some respite and a subsequent
uptick in consumer spending materializing towards the latter
part of the year. Consequently, industry volumes also edged
up slightly to register satisfactory overall growth for the year.
The Pinnacle of Excellence
All products under the Keells Food Products PLC (KFP)
umbrella are manufactured using state-of-the-art technology
and innovation, on par with internationally accepted norms.
Uncompromising ethics and a deeply ingrained moral code,
demonstrates the Companys commitment to deliver a
superior product at all times. Renowned for product quality
and consistency, KFP's Keells, Krest and Elephant House
brands fulfil the needs of diverse socio-economic consumer
segments.
Affordably priced for the mass market, the Keells range
consists of product variations that appeal to a wide variety
of consumption occasions. Now a household name in Sri
Lanka the product range includes breakfast sausages, meat
balls and slices in chicken, pork and beef and value added
products such as cheese and onion sausages, frankfurters,
bockwurst and pork lingus, in addition to hams, bacon, hot
dogs and burgers.
The Krest range offers a gamut of ready-to-fry crumbed
products in a choice of chicken, fish and vegetable nuggets,
drumsticks, kievs and chinese rolls, as a healthy snack on the
go, for all ages and communities.
The Elephant House premium range is endowed with its own
distinctive taste and flavour profile. Complementing this
unique recipe and long standing performance in the market,
the brand has earned an enviable heritage position in the
market.
10
Marketing and Branding

In the face of growing competition at the lower end of the
sausage market, the year saw KFP competing at all levels with
more focus on the value added range of products on offer
in the market. Leveraging on the Keells brand value, KFPs
strategic marketing agenda for the year, featured a series
of well-planned initiatives aimed at ensuring customers
make an informed choice at all times. This was deemed to
be a timely move, particularly as it was felt that industry
hygiene standards were being severely compromised with
the proliferation of vendors in the general trade breaking up
bulk packs and selling sausages in loose form. Key efforts by
KFP during the year were designed to educate consumers
and encourage them to move away from purchasing frozen
sausages in loose form in favour of hygienically packed instore options.
Moreover, in sharp contrast to the mainstream offerings of
competitors, KFP continued to differentiate the profile of its
iconic product range to convey its unique selling proposition
to both the mass and niche markets. Demonstrating the
commitment to this effort, investments in both brand
building and marketing activities were pursued to support all
brands under the KFP umbrella.
Among the ensuing efforts introduced during the year,
was the launch of a vacuum packed product with 4 sticks
of sausages, priced at Rs. 57/- aimed at providing a more
affordable offering for the mass market.
By effectively reconfiguring the product range and
enhancing the versatility of the offerings in this manner, inhome consumption levels for all KFP products continued to
generate promising growth throughout the year. Moreover, a
conscious effort was also deployed to capture a larger share
of the HORECA (Hotels, Restaurants, and Cafs) channel,
where little or no brand visibility is made available to the
end-consumer. It is deemed that growing this medium would
certainly help the Company capitalize on the growth in the
tourism industry and reap the benefits of the exponential
growth in the number of outdoor meals and snacking
consumption. Although growing this revenue stream is
a key priority for KFP, it remains a formidable challenge,
given the stiff competition and highly price sensitive market
environment. However the focus on product differentiation,
specialty offerings and overall unparalleled high quality
standards have been the cornerstone in KFPs efforts to
break into this market, with encouraging early results that

indicate compelling growth prospects in the years ahead.
In yet another effort to ensure that premium quality
products reach the end consumer, KFP engaged its branded
franchise outlet model to deliver KFPs brand promise to
the mass market. Serving a range of snack foods based on
the Companys core product range, 50 new outlets were
commissioned in strategic locations across the island in the
year 2013/14.
In addition to offering farmers a secure livelihood, KFPs

seamless farmer out grower model for spices and vegetables
facilitates a guaranteed standardised supply to fulfil the
Companys requirements. Not only eliminating the need
for intermediaries, direct access to farmers and growers
through this programme also seeks to benchmark the
quality of produce sourced, thereby assuring all spices and
vegetables used in the product range conforms to uniform
quality specifications.
Distribution Networks
Operational Review
New Investments
An automated production line to manufacture formed
meats and crumbed products was installed in the last quarter
of 2013/14. The Pannala plant, manufactures the entire
production of chicken sausages, meat balls and slices, with
all pork products exclusively manufactured in Ja-ela. While
further enhancing capacity, the Pannala factory is expected
to relay substantial cost efficiencies for the Company, both in
terms of manning and material yield.
Supply Chain and Procurement Practices
Amid an outbreak of foot-and-mouth disease spreading in
five districts, Anuradhapura, Puttalam, Trincomalee, Ampara
and Vavuniya, health authorities directed a ban on all forms
of meat other than poultry, in an effort to contain the spread
of the disease even further . Consequently, with the supply
of beef and pork curtailed, for a two month period from
February 2014 proved to be a grave challenge for KFP, with
supplies being restored only after the end of the Financial
Year 2013/14. However, it is hoped that such eventualities
could be prevented in the future with adequate precautionary
measures to improve the supplier quality standards through
awareness, vaccinations etc.
On a more positive note, in this year too, KFP continued
with the supply chain management and seamless backward
integration initiatives practiced in the past few years. Driven
by an unwavering commitment to excellence, the Company
has always pursued relationships with local producers and
suppliers to help secure the consistent quality of the produce
used in the Companys products. Technical guidance and
knowledge transfer efforts initiated by KFP have assisted
suppliers to enhance their service standards and outputs in
conformity with internationally accepted benchmarks. While
promoting cost effective procurement practices.
The final phase of the Distributor Management System

(DMS) introduced in the previous year, was rolled out in
the year under review. Using a collection of applications
designed to monitor and control the entire distribution
network efficiently and reliably, the DMS acts as a decision
support system to assist the control of the field sales force.
At present the DMS plays a critical role in streamlining,
monitoring and controlling the entire distribution and sales
force deployed across the island, on a daily basis. While
improving the reliability and quality of service, the DMS has
also instilled a much needed sense of route discipline among
the distributor network. As a consequence of the resourceful
use of time, duplication has been eliminated and wastage
minimized. These key deliverables expected of the DMS have
been instrumental in creating a more efficient and profitable
distribution mechanism for the Company. Moreover, due
in large part to real-time monitoring and service mapping
that evaluates the performance at all service outlets, KFP
has been able to ensure that service gaps are dealt with
promptly. While promoting a greater degree of vigilance, this
mechanism also triggers proactive action to ensure service
fulfilment is not compromised at any time.
Awards and Accolades
During the year under review the Company received the
Merit and Top Ten awards at the CNCI awards for 2013
whilst the brand Elephant House Sausages for the campaign
Who would you share your secret with and the Keells karal
hathare pack eka won the prestigious Effi Awards for 2013
for the most successful advertising campaign of the year in
the food industry of Sri Lanka. The Company also won the
silver award in the manufacturing sector at the Annual Report
Awards of the Institute of Chartered Accountants for 2013.
11

Looking Ahead
As modern lifestyles continue to evolve, consumers are seen
to be, increasingly seeking more wholesome, easy to prepare
food choices. Consequently, the in-home consumption
market is deemed to grow in the years ahead. While education
would remain the key to cultivating this market in cognisance
with changing consumer paradigms, it also underpins the
importance of innovation in pursuing convenient preparation
methods. Meanwhile, an enriched offering of product
variations would be the catalyst in further penetrating
the in-home consumption market. In tandem with these
requirements, the Company hopes to augment its share of
fish and vegetable offerings, to appeal to a wider consumer
demographic. Also underscored by KFPs irrefutable brand
presence, the Company remains committed to make further
inroads into capturing a broader share of this key market, in
the years ahead.
Financial Review
Moreover, buoyed by the success of initial efforts, the

Company expects to further strengthen its presence in the
HORECA channel. By leveraging on business synergies that
culminate with KFPs enhanced manufacturing capacity
and superior technological capabilities, the Company is
well placed to explore new product variations to serve
the HORECA market. Moreover, given the low market
penetration levels, this market is expected to grow at a
faster pace, as economic conditions in the country continue
to stabilise in the years ahead, making it a highly lucrative
revenue stream for the future.
to unfavourable market condition experienced during the
Business Performance- Income Statement

Revenue
The Revenue at Company level increased by 4% to Rs. 2,280
million (Rs. 2,197 million in 2012/13) as a result of selective
price increases and change in the sales mix. The sausage
and meat ball categories grew by 13% and 8% in volume
respectively whilst other sub categories such as chinese rolls,
trading and raw pulled down the overall volume to a negative
growth of 1%. Our Company continues to be the market
leader of a range of processed meat products of very high
quality with a number of quality and process certifications in
the country. The Company was constrained in taking price
increases to mitigate the full impact of all cost increases due
year under the review.
Cost of Sales
The availability of one of the key raw materials - pork, was
not consistent during the year, resulting in price volatility of
pork in the market, which adversely impacted the Company.
Chicken prices declined marginally during this year. The
Sausage Volume Trend
Net Revenue and

Gross Profit
Rs. Mn
600
Rs. Mn
2500
500
2,000
Tons
Rs. Mn
2,500
400
350
2,000
300
400
1,500
250
1,500
300
1,000
200
500
100
0
2010 2011 2012 2013 2014
Net Revenue
12
Gross Profit
Overhead Cost Analysis
200
1,000
150
100
500
50
0
0
2010 2011 2012 2013 2014
Sausage Volume Trend
2010 2011 2012 2013 2014

Admin Cost
Finance Cost
Distribution Cost
depreciation of the rupee, the increase in customs duty and
Selling and Distribution Expenses
the escalation of world commodity prices caused the prices
Selling and Distribution expenses include the cost incurred
of imported raw materials to increase as well.

During the year factory wages and related costs declined
by 14% as 129 workers accepted the Voluntary Retirement
Scheme (VRS) offered by the Company to the Ja-Ela
manufacturing facility staff, in the month of November 2013.
The VRS was offered due to the automated production
capability at the new facility at Pannala.
Furthermore, cold storage charges declined by as much as
44%, as the new production facility at Pannala has its own
cold storage facility which enabled the Company to cease
the rental of outside cold room facilities.
However the increase in the power tariffs resulted in energy
costs increasing by 24% whilst the deprecation charge also
increased by as much as 132% due to the impact of a full
years depreciation on the machinery acquired at the Pannala
facility in 2012/13.
Gross Profit
Gross profit of the Company was Rs. 506 million representing
a 10% increase against Rs. 458 million recorded in the
previous year. Gross profit margin increased to 22% from the
previous year of 21%.
Other Operating Income
Other operating income at Company level increased to Rs.
4.9 million from the previous year of Rs. 4.5 million.
Administration Expenses
in the distribution of products, advertising and promotional

expenses as well as all other sales related expense.
Selling and Distribution expenses at the Company decreased
to Rs. 223 million from Rs. 233 million in the previous year.
Finance Cost
During the year the availability of excess cash for use reduced
the cost of short term borrowing to only Rs. 0.2 million as
against Rs. 6.7 million in the previous year.
Finance cost increased to Rs. 35.5 million from Rs. 19.6
million in the previous year was, as a result of the term loan
obtained from the Development Finance Corporation of
Ceylon (DFCC) to fund the purchase of additional machinery
to augment the new facility at Pannala in the latter part of
the previous year.
Finance Income
The Company also earned interest income of Rs. 57 million
during the year as a result of investing surplus funds.
Loss from Operating Activities
The Company posted a Loss of Rs. 8.5 million before taxes
as compared to a Profit of Rs. 116 million in the previous
year. The Loss was mainly due to the cost of Rs. 139 million
incurred on the Voluntary retirement scheme (VRS).
At a consolidated level the Loss Before Tax was Rs. 11.9 million
compared to a Profit of Rs. 115 million in the previous year.
Administration cost increased by 11% to Rs. 121 million from

Rs. 109 million in the previous year due to increase in staff
and administration costs related to the Pannala facility. At
a Group level administration expenses increased to Rs. 122
million against Rs. 110 million in the previous financial year.
13

Taxation
including the effects of changes in foreign exchange rates,
The tax reversal for the Company was Rs. 12.4 million as
interest rates and liquidity. Further details of the management
against a tax charge in the previous year of Rs. 24.3 million

due to a reversal in deferred tax.
Shareholders Funds
Shareholders funds reduced to Rs. 1,548 million from
Rs. 1,595 million the previous year representing a decrease
of 3% for the Company. This reduction was on account of
the decline in profitability during the year and the payment
of dividends amounting to Rs. 51 million. Shareholders fund
at Group level was at Rs. 1,549 million as against Rs. 1,598
million in the previous year.
of these risks are given in Note 12 to the financial statements.

The role of the Treasury is to ensure that appropriate financing
is available for all value-creating investments. Additionally,
the Treasury delivers financial services to allow the Company
to manage its financial transactions and exposures in an
efficient, timely and low-cost manner.
Cash flow from operating activities at Company level
amounted to Rs. 51.7 million (Rs. 103.6 million in 2012/13).
Cash generated from operations inclusive of working
capital changes was a negative figure of Rs. 237.1 million
in comparison to a positive figure of Rs. 121.3 million in the
previous year. The reduction in operating profit, reduction
in inventory, increase in trade debtors and decrease in trade
Asset Base
and other payables at the Company resulted in this decrease.
The asset base at the Company reduced to Rs. 2,090 million

from the previous year of Rs. 2,488 million mainly due to
The Gearing Ratio at Company level declined to 15.95%
the reduction of current assets (short term investments).
against 16.6% in the previous year.
The reduction in short term investments took place as the

Company settled the balance amount of Rs. 350 million, due
The Companys key sources of finance, for the foreseeable
on the acquisition of the manufacturing facility to D&W Food
future is likely to be cash generated from operations, with
Products (Pvt) Ltd. The Company also acquired Property,
an effective combination of long-term and short-term
Plant and Equipment
borrowings. Therefore it is expected that the said sources of
worth Rs. 345 million during the
financial year whilst disposals were Rs. 3 million.
finance will provide sufficient capacity of liquidity to service

debt and meet future working capital and capital expenditure
The Groups total assets base as at 31st March 2014 was Rs.
requirements.
2,091 million as against Rs. 2,492 million in 2012/13.

Shareholder Value
Cash Flow and Liquidity
The Companys strategic priorities are primarily focused
The Companys key sources of finance for the year under
on delivering shareholder value through the achievement
review were cash generated from operations and the
of sustainable, capital efficient and long term profitability
surplus funds from the previous year. The Company ensured
growth.
the adequacy of liquidity to service debt and meet future

requirements of working capital and capital expenditure.
The basic Earnings per Share (EPS) for the Group was at
Rs. 0.02 (Rs. 4.82 - 2012/13).
The Company operates its own treasury function assisted
14
by the Treasury division of the Parent Company John Keells
The Group's net assets per share at book value stood at
Holdings PLC based on the policies and plans approved by
Rs. 60.77 (Rs. 62.65 - 2012/13) whilst at Company Level it
the Board. Our Treasury manages a variety of market risks,
stood at Rs. 60.72 (Rs. 62.54 - 2012/13).
The Companys share price was Rs. 70 at the beginning of the

financial year and saw a decrease to Rs. 55 as at 31st March
2014 moving within a range of Rs. 50.10 to Rs. 82.40 during
the year. The market capitalisation of the Company was Rs.
1,403 million (Rs. 1,785 million in 2012/13) as at the end of
the financial year.
Return on Equity (ROE) for the Group was 0.3% (8.9% 2012/13) and for the Company 0.2% (8.9 % - 2012/13). Return
on Capital Employed (ROCE) at Group level was a negative
of 1.8% against a positive of 5.4% in the previous year while
for the Company it was 1.6% (5.4% - 2012/13).
Management Team
R F N Jayasooriya
Chief Executive Officer
(Resigned w.e.f. 19.06.2014)
S R Jayaweera
Chief Financial Officer
Consumer Foods & Retail
P N Fernando
Sector Financial Controller
Consumer Foods
D A N Samarasinghe - Head of Sales & Marketing
W S J Ihalagedara
- Head of Marketing
S Jayawardena
- Head of Management Accounting
Consumer Foods
N Jayasinghe
- Head of Industrial Relations
Consumer Foods
H M P Bandara
- Manager Engineering
W A V Boteju
- Manager Factory
S V R Boteju
- Assistant Manager Purchasing
K A V Fernando
Manager Production
T G T P K Gamage
- Manager Sales Administration
S H Jayaratne
- Quality Assurance Manager
J D Kanagaraj
- Finance Manager
A A N Lalantha
- Manager New Product
Development
A C Morris
- Finance Manager Management
Accounting
T D Nishantha
- Head of Human Resources
M C R Perera
- Manager Credit
C N Soza
- Manager Production
P B T Weerasekera
- Operational Manager
S Nanayakkara
- Brand Activation Manager
M Tissera
- Channel Manager Mass
G P I P Sampath
- Channel Manager Modern Trade
15
Directors Profiles
Susantha Ratnayake
Non-Independent Non-Executive, Director, Chairman
Mr. Ratnayake was appointed to the Board of Keells Food
Products PLC from the 1st of April 1993.
Mr. Ratnayake was appointed as the Chairman and CEO of
John Keells Holdings PLC (JKH) in January 2006 and has
served on the JKH Board since 1992/93 and has 36 years
of management experience, all of which is within the John
Keells Group.
He is the Chairman of Ceylon Tobacco Company PLC, Vice
Chairman of the Employers' Federation of Ceylon and serves
as a member of several clusters of the National Council of
Economic Development. A past Chairman of the Sri Lanka
Tea Board, immediate past Chairman of the Ceylon Chamber
of Commerce, he serves on the Board of the national carrier
Sri Lankan Airlines.
Ajit Gunewardene
Non-Independent Non-Executive, Director
Mr. Gunewardene was appointed to the Board of Keells Food
Products PLC from 1st October 2002.
Mr. Gunewardene is the Deputy Chairman of John Keells
Holdings PLC and has been a member of the Board for
over 20 years. He is a Director of many Companies in the
John Keells Group and is the Chairman of Union Assurance
PLC. He is a member of the Board of SLINTEC, a Company
established for the development of nanotechnology in Sri
Lanka under the auspices of the Ministry of Science and
Technology. He is also an Advisory Committee Member of
COSTI, the coordinating Secretariat for Science Technology
and Innovation under the purview of the Minister (Senior) of
Scientific Affairs. He has also served as the Chairman of the
Colombo Stock Exchange. Ajit has a Degree in Economics
and brings over 31 years of management experience.
Ronnie Peiris
Mr. Peiris was appointed to the Board of Keells Food Products
PLC from 1st June 2003.
Appointed to the John Keells Holdings PLC Board during
2002/03 as Group Finance Director, he has overall
responsibility for the Groups Finance and Accounting,
16
Taxation, Corporate Finance, Treasury, Group Initiatives and

the Information Technology functions. He is also Director
of several Companies in the John Keells Group. He was
previously the Managing Director of Anglo American
Corporation (Central Africa) Limited in Zambia.
He has over 40 years finance and general management
experience in Sri Lanka and abroad. He is a Fellow of the
Chartered Institute of Management Accountants, UK,
Association of Chartered Certified Accountants, UK, and
the Society of Certified Management Accountants, Sri Lanka
and holds an MBA from the University of Cape Town, South
Africa. He is a member of the Committee of the Ceylon
Chamber of Commerce, and serves on its Economic, Fiscal
and Policy Planning Sub Committee.
Jitendra Gunaratne
Mr. Gunaratne was appointed to the Board of Keells Food
Products PLC from 1st July 2005.
Mr. Gunaratne, is the President of the Consumer Foods
sector of the John Keells Group and was appointed to the
Board of Ceylon Cold Stores PLC in 2004/05. Prior to his
appointment as President, he overlooked the Plantations and
Retail sectors. His 33 years of management experience in the
Group also covers Leisure and Property. He is the President
of the Beverage Association of Sri Lanka and a member of
the Food & Beverage Steering Committee of the Ceylon
Chamber of Commerce.
Harsha Amarasekera PC
Independent Non-Executive, Director
Mr. Amarasekera was appointed to the Board of Keells Food
Products PLC from 1st July 2005 and is a member of the
Audit Committee of the Board of Directors.
Mr. Harsha Amarasekera, President Counsel has a wide
practice in the Original Courts as well as in the Appellate
Courts. He has specialised in Commercial Law, Business Law,
Securities Law, Banking Law and Intellectual Property Law.
He also serves as an Independent Director in several leading
listed Companies in the Colombo Stock Exchange including
Vallibel One Ltd., CIC Holdings PLC, Expo Lanka Holdings
PLC, Chevron Lubricants Lanka PLC, Amana Bank PLC,
Amaya Leisure PLC, & Vallibel Power Erathna PLC. He is also
a Director of CIC Agri Business Private Ltd.
Eardley Perera
Preethiraj Jayawardena
Independent Non-Executive Director
Mr. Perera was appointed to the Board of Keells Food

Products PLC from 1st October 2005 and is a member of
the Audit Committee of the Board of Directors.
Mr. Jayawardena was appointed to the Board of Keells Food

Products PLC from 10th May 2007 and is the Chairman of
the Audit Committee of the Board of Directors.
He is currently the Non- Executive Chairman of M&E (Private)

Limited and serves on the Boards of other Public and Private
Companies as a Non-Executive Director. He also serves as
a Member on the Board of Study, Postgraduate Institute of
Management (PIM), University of Sri Jayewardenepura. He is
a Chartered Marketer and senior member of the Chartered
Institute of Marketing, UK with many years of experience in
general management and marketing in trade and industry. His
focus has been on strategic marketing and business strategy,
in which areas he is also actively engaged in consultancy
assignments.
A Fellow of the Institute of Chartered Accountants of

Sri Lanka and Certified Professional Managers. He is a
Consultant to the Chemanex Group, Non-Executive
Chairman of The Finance Company PLC and Lanka Rating
Agency Limited, Non-Executive Director of CIC Holdings
PLC, Commercial Bank PLC and a number of other unlisted
Companies in the CIC Group. Served at Zambia Consolidated
Copper Mines Limited for 13 years and held several senior
positions including Head of Treasury. Member of the
Monetary Policy Consultative Committee of the Central
Bank of Sri Lanka and Deputy Chairman of Sri Lanka Institute
of Directors.
Ranil Pieris
Mr. Pieris was appointed to the Board of Keells Food
Products PLC from 1st July 2005 and is a member of the
Audit Committee of the Board of Directors.
He previously was Director and Chief Operating Officer
at Richard Pieris and Company PLC (RPC), at the time he
was on the Board of 13 Subsidiary Companies of RPC and
was Chairman of some of these. He conceptualised and
spearheaded the Arpico Super Centres and introduced the
hyper market concept to the local market. For a period he
was CEO at EDNA. More recently he was CEO/Managing
Director of GTECH Lanka (Pvt) Ltd., a fully owned Subsidiary
of GTECH Corporation (USA).
Today he is involved with developing a project in Real Estate.
In addition he is on the Board of Rajawella Holdings, Arel
Holdings and a Trustee of the Lionel Wendt. Mr. Pieris holds
a Bachelors degree from Florida International University in
the USA.
17
Legendary Elephant House sausages

are Sri Lanka's top favourite. The best
of all time !
y. Tue
s
Great times,
great fun,
great food.....
Keells Foods,
is always there when
youre celebrating
life!
ea time. Lunch
Morning. T
time.
rday.
Even
Satu
inner.
g. D
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ve ner.
. Eng. Din
Sunday.
Fri ay. Tu
da esda
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day
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Su
Sun
day
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.
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. Th
Mo turday. Morning. Tea time. L unc
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Sustainability
Report
Development
of the talent
pool
Social
Corporate
Social
Responsibility
Product
Responsibility
KFPs Triple
Bottom Line
Approach to
Sustainability
Environmental
Strongly aligned to the corporate sustainability philosophy

of the Parent John Keells Holdings PLC (JKH), the concept
was deeply ingrained into the Keells Food Products PLC
(KFP) operational fabric right from the inception. Combining
in equal measure, the elements of corporate accountability
and social responsibility, KFPs sustainability ethos seeks
to promote a distinctive brand identity that epitomises
our commitment to engender sustainable progress for all
stakeholders of the business. In setting out priorities, we
have sought to articulate change in cognisance with specific
areas within economic, environmental and social parameters
that impact the Companys bottom line. Not merely a
proclamation, sustainability at KFP is an ongoing process
that evolves to help us fulfil the day-to-day functions of our
business in a sustainable manner.
Resource
Efficency
20
Economic
Ethical
Sourcing
Product Responsibility
As a frontrunner in Sri Lankas processed food industry, our
brands are found in millions of households across the country
and consumers are therefore at the heart of our business.
Understanding their needs and aspirations as well as their
opinion of our brands will always remain the key to our success.
We are thus governed by a set of fundamental guidelines to
help us fulfil the promise of wholesome, convenient products
with a guarantee of high quality at all times.
Recognising that consistent quality plays a pivotal role
in retaining consumer loyalty towards our products, we
remain committed to deliver this promise vis--vis strategic
investments in technology. By augmenting capabilities at
both our manufacturing plants in Ja-ela and Pannala, we
aspire to become the pinnacle of manufacturing excellence.
Our state-of-the-art manufacturing technology has been
instrumental in revolutionising the industry and transforming
accepted norms and practices. As we strive to uphold the
tenets of our customer promise, we remain fully compliant
with all applicable regulatory standards for quality. Our
overriding emphasis on quality and food safety has
encouraged us to secure SLS quality systems certification
along with ISO 9001 certification for quality management
standards and ISO 22000 for Food Safety Standards.
Moreover, we also subscribe to a voluntary code of principles
for quality that dictates our actions, over and above that of
the mandatory stipulations.
With customer health and safety being of paramount
importance to us, we have structured all our systems and
processes to optimise process efficiency at every level
of the operation and ensure customer health and safety
is not compromised at any stage of the product life cycle.
The process is further supported by regular system audits
that ensure all processes maintain optimum performance
standards, with prompt remedial actions being initiated to
rectify irregularities and system malfunctions.
Our passion to deliver excellence stems the belief that the

only sure way forward is to become a truly consumer-centric
organisation that is sensitive to the needs of its customers.
Resonating throughout the organisation and reflected in
all aspects of the business, is KFPs commitment to build a
truly communicative, customer-centric culture. In place are
a series of highly focused consumer initiatives that help us,
not only to gain an insight into customer perceptions, but
also to table the customer receptivity to our product range
at varying stage of the product lifecycle. Supported by a
number of outdoor promotional initiatives, we continued our
close associations with customers across the country.
Research and development is another key area that is
inexorably linked to the objective of providing customers
with better and more user friendly products. Encompassing
not only product research but also process improvements
and technological developments as well, KFP focuses on a
multi-dimensional research platform, that allows us a 360
degree view of our business and underpins our commitment
to deliver sustainable products to the market.
Sustainable Sourcing
Sustainable sourcing is yet another key tenet enshrined in our
sustainability edict. We have always felt that the numerous
benefits ensuing from such practices could be channelled
towards creating aroader and a more meaningful impact at
national level. At KFP we consider our suppliers not merely
as raw material facilitators, but as active stakeholders
responsible for the growth and future sustainability of our
business. Spurred by the need for a reliable network of
farmers and growers to fulfil our raw material requirements,
we have made a conscious effort to nurture stable business
relationships accentuated by mutual trust and respect.
Having made considerable investments of our own towards
achieving this goal, KFP has also leveraged on the collective
group synergies to tap into an extended network of farmers
and growers across the country to procure the requirements
of chicken, pork, vegetables and spices needed for our range
of raw materials.
21
Sustainable Sourcing Projects of Keells Food Products PLC 2013/14
Product
Location
Primary Suppliers/
Project Partners
Pork
Kaluaggala, Divulapitiya
Bujjampola, Giriulla,
Weliweriya, Katana,
Kosgama, Pamunugama
Dambulla, Kandy.
Kaypro Farms, Maxies

Livestock, SN Brothers
Farm, Pussalla Farm,
Dilini Farms, CIC Farms
Sanjeewa Farms, St.
Anthonys Farm, DSD
Perera, WG Fernando.
Chicken
Wennappuwa
Kosgama,
Hanwella, Meethirigala.
Spices
Meegammana West,
Wattegama, Kandy.
Vegetables
Meegammana West,
Wattegama, Kandy.
No. of
Farmers
Maxies & Company,

Pussalla Farms, New
Anthonys Farms, JP
Poultry, Five Star, Weehena
Farms, Neo Farm.
Kandy Vanilla Growers
Association
Kandy Vanilla Growers
Association
Over the years our business demands have resulted in close

interactions with a great many small-scale entrepreneurs
across the country, which has helped us to promote the
concept of fair purchasing practices. It has always been our
goal to empower these communities and provide them with
Total Annual Supply

(Kgs)
Total Payment
(Rs.)
25
643,095
667,931,277
2200
1,634,205
2500
35,622
37,352,242
2500
138,923
13,247,324
the tools to re-engineer their livelihoods in a sustainable

manner. Our initiatives not only create wealth and improve
the quality of life, but also prove beneficial in a multitude of
ways that form the basis for a more progressive society.
Case Study
Entitled the Farmer Out-Grower Programme, in 2010, KFP launched a pioneering initiative to procure selected
vegetables and the entire range of spices through a sustainable integrated farmer community, formed under the Kandy
Vanilla Growers Association (KVGA).
Comprising of a registered farmer base of 2,306 farmers from seven districts, the KVGA also provides direct employment
to twenty villagers from the Raththota area under a value addition initiative that encourages them to cultivate onions and
sweet potatoes to earn an average income of anything between Rs. 15,000/- to Rs. 20,000/- per month, per villager.
With this initiative, the number of females who were engaged in the value addition process also increased from twenty to
thirty, during the same year.
KFPs commitment to this initiative saw over 90% of the Companys vegetable produce and spice requirements being
serviced by the KVGA at a guaranteed price. Thus the Company was able to secure a guaranteed supply of high quality
produce at very competitive prices. Furthermore, having effectively eliminated the middleman, the entire benefit was
passed down to the grower. Encouraged by the success of the initiative, the KVGA too has invested a sum of Rs. 1.5 million
towards a new spice mill, which would further enhance their production capacity.
The spices procured by KFP increased in volume as well as value from last year to this year and the total payout for the
spices procured for the year was Rs. 38 million. The Company procured vegetable for a total value of Rs. 13 million during
the year.
22
The streamlined supply management process that we adopt

enables us to ensure the quality of the produce that we
purchase. Placing much emphasis on the quality of the crops,
we also offer our grower community the relevant technical
input needed to improve their yield and conform to KFPs
quality assurance standards. In the case of animal farmers,
we strive to educate them on the critical aspects of animal
husbandry, including animal health, timely inoculations etc.
The overriding emphasis placed on quality has prompted
the KVGA to seek a Good Manufacturing Practices (GMP)
accreditation from the Sri Lanka Standards Institute for its
processing facility and grinding mill at Raththota.
Resource Efficiency
Notwithstanding our pursuit of business excellence,
protecting the environment has always been a predominant
concern in all that we do. Our efforts to lessen the impact
on the environment have encouraged us to adopt a holistic
approach towards managing all our resources. Strongly
aligned to the JKH Group energy policy, we have reshaped
not only our corporate strategies, but the very fabric of our
thought processes to emphasise the efficient consumption
of resources at every stage of the operational structure.
Being an energy intensive operation, our manufacturing
process commands the bulk of our energy resources, where
our requirements are met through a combination of electrical
energy , LP gas and furnace oil sources. As the predominant
energy source, electricity plays a critical role in determining
the strength of our environmental footprint. Having outlined
our priorities, we have envisioned a sustainable energy
blueprint which we expect would deliver the desired level of
change that we seek. Achieving the goals set therein would
undoubtedly help create a greener footprint for the Company,
while also conveying real benefits to key stakeholders who
derive economic value from our operations. These plans
have been put into action in the newly commissioned factory
at the Makandura Industrial zone in Pannala, where ultramodern technology is used to monitor energy usage. These
efforts are deemed to relay sizable savings for the Company,
in the years ahead, more than validating the initial outlay.
Meanwhile, at the Ja-ela manufacturing facility, efforts
are ongoing to improve the energy efficiency, with regular
investments being made to introduce suitable technological
modifications that would translate into real cost savings in
the longer term.
Water management is another key area that demands our
attention. Efforts in this regard are ongoing, and encompass
a broad spectrum of initiatives at both factories to promote
the prudent usage of water resources. Moreover, steps have

also been taken to create a keen awareness and promote
the importance of water conservation among employees. In
compliance with the Central Environmental Authority (CEA)
Guidelines, a fully-fledged water and effluent treatment
system is also in place at both locations for the handling
of both water and liquid waste prior to its release to the
environment.
Meanwhile incinerators have been installed at both facilities
to dispose of solid waste matter generated during the
production process. Equipped with capacities of up to 100kgs
per hour at Pannala and 150kgs per hour at Ja-ela, each
incinerator unit has been commissioned in strict conformity
with the mandatory stipulations of the CEA guidelines for
waste disposal.
We have successfully contained noise levels within
acceptable limits. All the noise measurements emanating
from the peripheries of the factory are compliant with the
Maximum Permissible Noise levels (MPNL) as per National
Environmental (Noise Control) Regulations No.1 1996. In
affirmation of our efforts to control noise emissions, we were
awarded the certificate of compliance issued by the CEA
in recognition of efforts towards the mitigation of sound
emission generated during the manufacturing process.
Development of the Talent Pool
At KFP we consider our employees an invaluable asset
and the driving force behind our business. As a sustainable
employer we look to encourage our people to align their
developmental goals in line with corporate aspirations, while
nurturing an environment which inspires them to discover
their full potential. By pursuing a culture imbued with shared
values, we hope to build a dynamic, motivated workforce that
would be a national asset.
Given that talent acquisition is a key deliverable in our
business agenda, we seek to recruit and retain the best
talent at all times. While attracting quality recruits is primarily
determined by the remuneration and benefits offered, our
status as preferred employer gives us a considerable edge in
drawing the crme-de-la-crme of the countrys employable
workforce. Our benefit plan is market driven and strives to
uphold market competitiveness.
As an equal opportunity employer, we do not endorse child
labour or forced or compulsory labour. Moreover, on par
with international standards, our procedures and practices
conform to all International Labour Organization (ILO)
guidelines.
23
Analysis on Executive
Service years
41%
44%
15%
10 years & above
Below 5 years
05 to 10 years
Employee Relations
As key stakeholders of our business, maintaining close
relationships with our employees forms a key part of our
endeavour to empower our human capital. In this regard,
KFPs association with the Ceylon Mercantile, Industrial and
General Workers Union (CMU), has been a long and fruitful
one, characterised by excellent relations throughout.
KFP Voluntary Retirement Scheme 2013
With the newly commissioned Pannala Manufacturing facility
with enhanced capacity and a high degree of automation
taking over a number of our key operations, certain aspects
of the Ja-ela manufacturing plant fell redundant with effect
from 2013. The Company offered the workers at the
Ja-ela factory a Voluntary Retirement Scheme (VRS) and 129
workers voluntarily accepted the scheme.
Employee Recognition
KFPs open-door culture facilitates regular forums which
provide an ideal platform not only for discussion and
conflict resolution, but also sets the stage for employees
to express their ideas for the betterment of the Company.
In this regard, V sparc awards are presented, in recognition
of the contribution made by employees towards improving
the versatility of operations and upholding KFPs promise of
excellence at all times.
24
Training and Development

We ensure our dynamic workforce remains well informed
and geared to embrace the challenges of an ever changing
business paradigm. With this clear goal in mind we continue
to invest in providing our employees with the tools to be a
step ahead, where integrated training is the key to helping
employees develop and mature in tandem with their overall
strategic direction. Hence our training agenda is a highly
focused multidimensional discipline that seeks to foster the
required skills in a timely and relevant manner.
Over the years, we have found that training and development
has emerged as a critical success factor in creating the
competitive edge to elicit sustainable corporate success.
At KFP we continue to stress the importance of training
employees to fine tune their capabilities and augment
their own individual sustainability aggregate. Culminating
in addressing both current and future needs, our training
and awareness agenda is thus a comprehensive knowledge
based tool designed to provide timely, relevant and accurate
information at each level of the employee hierarchy.
Employee Grade
AVP & Above
Total Number of Training

Hours
8
Manager
160
Assistant Manager
297
Executive Staff
411
Clerical Staff
378
Factory Staff
Total
Corporate Social Responsibility

Our commitment to develop sustainable communities is
deeply entrenched in our value code. It is our belief that
communities should be empowered with the knowledge and
tools to create meaningful change within the community and
make a positive contribution to society at large. In confluence
with this thinking we have engaged in a number of community
development projects to enhance the livelihoods and living
standards of many local communities across the country.
During the year 2013/14 the Company took on 43
undergraduates from universities across the country, being
part of the undergraduate training programme.
266
1,520
Health and Safety at the Workplace

Our work ethic has been conceptualized with a predominant
focus on the principles of workplace safety. All safety
procedures are detailed in a comprehensive safety manual
which contain details from simple precautions to more
complex measures to be adopted in specific situations.
We have made sure that basic safety instructions are
prominently displayed at all our premises along with clearly
defined demarcation lines and evacuations paths to be used
in an emergency. We provide personnel with the mandatory
protective equipment as defined by their job description.
Both the factories are certified for health and safety
management systems (OHSAS) 18001.
25
Our Krest range includes a variety

of delicious, ready to fry meats,
and especially crispy, scrumptious
Chinese Rolls.
y. Tue
s
ay
.T
For quick, easy, delicious

snacks at ANY time of the
day... it can only be Keells
Krest products!
inner.
g. D
nin
ve ner.
. Eng. Din
Corporate
Governance
ea time. Lunch
Morning. T
time.
rday.
Even
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1. Introduction

Keells Food Products PLC (KFP) and its Subsidiary John
Keells Foods India (Pvt) Limited (JKFIL) referred to
as the Group and its Holding Company John Keells
Holdings PLC (JKH) has a Corporate Governance
philosophy founded on a culture of performance
within a framework of conformance and compliance
to succeed in todays competitive business environs
in a manner that is sustainable and equitable to all our
stakeholders.
28
This philosophy has been institutionalised at all levels in

the Group through a strong set of corporate values and
a written code of conduct that all employees, Senior
Management and the Board of Directors are required
to follow in the performance of their official duties and
in other situations that could affect the Groups image.
The Directors and employees at all levels are expected

to display ethical and transparent behaviour through
their communication and role modeling. All the Groups
recognition schemes insist, as a minimum, that all
employees have lived the JKH values and the behaviour
of the Senior Management of the Group, is monitored
through an annual 360 degree feedback programme.
The Group is committed to the highest standards of

business integrity, ethical values and professionalism in
all its activities towards rewarding all its stakeholders
with greater creation of value, year-on-year. Our
governance framework which has been communicated
to all levels of management and staff in individual
businesses and functional units is based on the
following
The Board is responsible to the shareholders to fulfil

its stewardship obligations, in the best interest of the
Company and its stakeholders.
Maximising shareholder wealth-creation on a
sustainable basis while safeguarding the rights of
multiple stakeholders.

The methods we employ to achieve our goals are as
important to us as the goals themselves.

No one person has unfettered powers of decision
making.
Building and improving stakeholder relationships is
an integral aspect of board effectiveness and is a
responsible approach to business.
Opting, when practical, for early adoption of best
practice governance regulations and accounting
standards.

Our resolve to maintain strong governance practices
which present strong commercial advantages especially
through a lowering of our cost of capital as a result of
the strengthened stakeholder confidence, particularly
the confidence of our investors, both institutional and
individual.
The making of business decisions, and resource
allocations, in an efficient and timely manner, within
a framework that ensures transparent and ethical
dealings which are compliant with the laws of the
country and the standards of governance our
stakeholders expect of us.

2.
Corporate Governance Framework
JKH Corporate Governance System within a Sustainability Development Framework

Level
Internal governance structure
Group Executive Committee (GEC
Board of Directors and

Senior Management Committees
Human Resources Related Party
and Compensation Transaction
Review Committee
Committee
Chairman and
the Board of
Directors
Nominations
Committee
Audit
Committee
CEO
Assurance
Mechanisms
Integrated
Governance Systems
and Procedures
Strategy
Formulation and
Decision Making
Process
Human Resource
Governance
Integrated Risk
Management
IT Governance
Key components
Independent
Director
Employee
Participation
Internal Control
JKH Code of
Conduct
Ombudsman
Employees Empowerment
All Board sub committees are chaired by Independent

Directors
The Remuneration Committee and the Nomination
Committee of the Parent Company John Keells
Holdings PLC functions as the Remuneration
Committee and the Nomination Committee of the
Company and its Subsidiary.
The Related Party Transactions Review Committee
of The Parent Company John Keells Holdings PLC
functions as the The Related Party Transactions Review
Committee for the Company and its Subsidiary.
Companies Act No. 7

of 2007
Mandatory compliance
Audit
Committee
Management Committee (MC)

Stakeholder
Management
and Effective
Communication
Regulatory benchmarks
External
Control
Listing Rules of the

Colombo Stock
Exchange (CSE)
Mandatory compliance
The Code of Best

Practice on Corporate
Governance as published
by the Securities and
Exchange Commission
and the Institute of
Chartered Accountants,
Sri Lanka
Voluntary compliance
The meetings of the Audit Committee are attended

by the Chief Executive Officer, Chief Financial Officer,
Head Of Finance, Head of Group Business Process
Review, and External Auditors by invitation.
29
The Corporate Governance framework of the Group
entails three key components as summarised below and the
discussion within this report is sequenced to highlight the
different elements that combine to ensure a robust and a
sound governance framework.
1.

2.

3.

30
Internal Governance Structure

This comprises of the committees of the Parent
Company and the Group which formulate, execute
and monitor Group related strategies and initiatives as
well as processes and procedures which support these
committees to perform their roles effectively.
Assurance Mechanisms
This comprises of the bodies and mechanisms which
are employed in enabling regular review of progress
against objectives with a view to highlighting deviations
and quick redress and in providing assurance that
actual outcomes are in line with expectations.
Regulatory Framework
From an external perspective, adherence to laws and
best practices plays a pivotal role in directing the Group
towards conforming with established governance
related laws, regulations and best practices. The Groups
governance philosophy is practiced in full compliance
with the following Acts, rules & regulations;
Companies Act No. 7 of 2007 Mandatory compliance
Listing Rules of the Colombo Stock Exchange (CSE)
Mandatory compliance (Including subsequent revisions
up to 1 April 2014)
The Code of Best Practice on Corporate Governance as
published by the Securities and Exchange Commission
and the Institute of Chartered Accountants, Sri Lanka
Voluntary compliance
3.

Internal Governance Structure

The Internal Governance Structure encompasses two
main pillars as illustrated in the diagram and those are;
a. Board of Directors and Senior Management

Committees

Executive authority is well devolved and delegated
through a committee structure ensuring that the CEO,
and functional managers are accountable for the Group
and the business units/sub-functions respectively.

Clear definitions of authority limits, responsibilities and

accountabilities are set and agreed upon in advance
to achieve greater operating efficiency, expediency,
healthy debate and freedom of decision making.
b.

Integrated Governance Systems and Procedures

Promote good governance within the wider context
of achieving sustainable success which is beyond
mere conformance with regulations. The internal
governance structure, ensure implementation and
execution towards upholding the Groups Corporate
Governance framework by internal policies, processes
and procedures namely;
Strategy formulation and decision making

Employee performance governance
People and talent management
Stakeholder management
Effective & transparent communication
Integrated risk management
IT governance
3.1 Board of Directors

The Board of Directors, along with the Chairman, is

the apex body responsible and accountable for the
stewardship function. The Directors are collectively
responsible for upholding and ensuring the highest
standards of corporate governance and inculcating
ethics and integrity.
Please refer the Directors Profiles section for details

on expertise, experience and qualifications of the
Board of Directors.
Where necessary, and applicable, any deviations as

allowed by the relevant rules and regulations have been
explained.
3.1.1 Board Responsibilities and Decision Rights

Notwithstanding the functioning of the Board

Committees, the Board of Directors is collectively
responsible for the decisions and actions taken by
these Board sub-committees.
The Corporate Governance Framework of the Parent

Company John Keells Holdings PLC and the Group
expects the Board of Directors to:
Provide direction and guidance to the Company and

its Subsidiary, in the formulation of its high-level
strategies, with emphasis on the medium and long
term, in the pursuance of its sustainable development
goals.
Review and approve annual plans and longer term
business plans.
Track actual progress against plans.
Review HR processes with emphasis on top
management succession planning.
Review the performance of the Executive Director.
Monitor systems of governance and compliance.
Oversee systems of internal control, risk management

and establish whistle blowing conduits.
Determine any changes to the discretions/authorities
delegated from the Board to the executive levels.
Review and approve major acquisitions, disposals and
capital expenditure.
Approve any amendments to constitutional documents.
Approve the issue of equity.
Adopt voluntarily, best practices where relevant and
applicable.
3.1.2 Board Composition and Directors Independence

As at 31st March 2014, the Board consisted of eight

(8) Directors, of which four (4) are Non-Executive,
Independent Directors. As at the last Annual General
Meeting held on the 25th June 2013, the Board
consisted of the same number of Directors.
The Board members have a wide range of expertise as

well as significant experience in corporate, marketing,
legal and financial activities enabling them to discharge
their governance duties in an effective manner.
Involvement/
Interest in
Shareholding
Involvement/
Interest in
Management
Involvement/
Interest
in Supply
Contracts
Continuously
served for 9
years
Name of Director
Executive / Non Independent

Executive
/ Non
Independent
Mr. S C Ratnayake
Chairman
Non Executive
Non
Independent
Yes
No
No
N/A
Mr. A D Gunawardena
Non Executive
Non
Independent
No
No
No
N/A
Mr. J R F Peiris
Non Executive
Non
Independent
No
No
No
N/A
Mr. J R Gunaratne
Non Executive
Non
Independent
No
Yes
No
N/A
Mr. S H Amarasekara PC
Non Executive
Independent
No
No
No
No
Mr. R Pieris
Non Executive
Independent
No
No
No
No
Mr. A D E I Perera
Non Executive
Independent
No
No
No
No
Mr. M P Jayawardena
Non Executive
Independent
No
No
No
No
31
3.1.3 Non-Executive/Independent Directors and the Board
balance

Collectively, the Non-Executive Directors bring a

wealth of value adding knowledge, ranging from
domestic and international experience to specialized
functional know-how, thus ensuring adequate Board
diversity in accordance with principles of Corporate
Governance.
The Company is conscious of the need to maintain an

appropriate mix of skills and experience in the Board.
Independence of the Directors has been determined
in accordance with the criteria of the CSE Listing Rules
(revised in April 2011), and the Board confirms that its
present composition of Non-Executive Independent
Directors is in line with the requirements of the CSE
Listing Rules. The four (4) Independent Non-Executive
Directors have submitted signed confirmations of their
independence.
Group exposure, including intimate knowledge/

experience of its culture, over long periods of time
Large multinational and international organisational
exposure and experience
Portfolio management including mergers and
acquisitions skills

Export oriented companies, FMCGs and commercial
bank exposure and experience
Chambers of Commerce and industry associations
exposure and experience

HR Management and Industrial Relations skills

Accounting, Auditing and Risk Management skills

Sales and Marketing skills

Macro Finance, Economics and Treasury skills

Legal skills

Regulatory Bodies exposure and experience

All Non-Executive Directors (NED) are encouraged to

propose discussion items for the Board meetings.
3.1.4 Board Skills

32
Collectively, Non-Executive Directors (NEDs) bring a

wealth of diverse experience, exposure and knowledge
of domestic and international markets, specialised
functional know-how and independence of thought.
The Group is ever conscious of the need to maintain an
appropriate mix of skills and experience in the Board
through a regular review of its composition, in ensuring
that the skills representation is in sync with current and
future needs.
The following skills and exposure are currently
represented on the Board;
The Board consists of two senior qualified Accountants

with significant experience in the corporate sector.
Both of them possess the necessary knowledge and
expertise to offer the Board of Directors guidance on
matters of finance. One Director serves as the Finance
Director of the Parent Company whilst the other as the
Chairman of the Audit Committee.
3.1.5 Conflicts of Interest and Independence

Each Director has a continuing responsibility to

determine whether he or she has a potential or actual
conflict of interest arising from external associations,
interests in material matters and personal relationships
which may influence his judgment. Such potential
conflicts are reviewed by the Board from time to time.
Details of companies in which Board members hold

Board or Board committee membership are available
with the Company for inspection by shareholders on
request. In order to avoid potential conflicts or biasn,
Directors adhere to best practices as illustrated on the
following page.
Prior to Appointment
Nominees are requested

to make known their
various interests that could
potentially conflict with the
interests of the Company.
Directors obtain Board

clearance prior to:
Accepting a new position.

Engaging in any transaction

that could create a potential
conflict of interest.
All NEDs notify the

Chairman of any changes to
their current board representations or interests.
3.1.6 Board Tenure, Retirement and Re-election

The Directors are appointed and recommended for

re-election subject to the age limit as per statutory
provision at the time of the appointment.
At each Annual General Meeting one third of the
Directors, retire by rotation on the basis prescribed
in the Articles of Association of the Company and
are eligible for re-election. The Directors who retire
are those who have been longest in office since their
appointment / re-appointment. In addition any new
Director who was appointed to the Board during the
year is required to stand for re-election at the next
Annual General Meeting.
The re-election of Directors ensures that shareholders
have an opportunity to reassess the composition of the
Board. The names of the Directors submitted for reelection are provided to the shareholders in advance
to enable them to make an informed decision on their
election.
The names of the retiring Directors eligible for reelection this year are mentioned in the Notice of the
Annual General Meeting of the Company.
3.1.7 Access to Independent Professional Advice

During Board Meetings
Once Appointed
In order to preserve the independence of the Board,

and to strengthen the decision making, the Board
seeks independent professional advice when deemed
necessary.
Directors who have an interest

in a matter under discussion:

Excuse themselves from

deliberations on the subject
matter.
Abstain from voting

on the subject matter
(abstentions, where
applicable, from decisions,
are duly minuted).
Accordingly, the Board obtains independent

professional advice covering areas such as;
Impacts on business operations of the current and

emerging economic and geo-political shifts.

Legal, tax and accounting aspects, particularly where
independent external advice is deemed necessary in
ensuring the integrity of the subject decision.

Market surveys, architectural and engineering advisory
services as necessary for business operations.

Actuarial valuation of retirement benefits and valuation
of property including that of investment property.
Information
technology
consultancy
services
pertaining to the enterprise resource planning system,
the distributor management system or other major
projects.

Specific technical know-how and domain knowledge
for identified project feasibilities and evaluations.

Additionally, individual Directors are encouraged to

seek expert opinion and/or professional advice on
matters where they may not have full knowledge or
expertise.
3.1.8 Role of the Chairman of the Board

The Chairman is a Non-Executive Non-Independent

Director. The Chairman conducts Board Meetings
ensuring effective participation of all Directors.
33

The Chairman is responsible for providing leadership to

the Board and ensuring that proper order and effective
discharge of Board functions are carried out at all times
by the Board Members. The roles of the Chairman and
the Chief Executive Officer (CEO) are separate, with
a clear distinction of responsibilities between them.
The executive responsibility for the functioning of
the Companys business including implementation of
strategies approved by the Board, and developing and
recommending to the Board the business plans and
budgets that support the Companys strategy has been
entrusted to the CEO.
3.1.9 Board Meetings

3.1.9.1 Regularity of Meetings

The Board meets at the least, once every quarter. Any

absences are excused in advance and duly recorded
in the minutes. The absent members are immediately
briefed on the discussions and actions taken during the
meeting.
Directors are provided with the necessary information

well in advance (at least 2 weeks prior to the Board
meeting) in order to facilitate more informed decision
making. Board information packs supplied to the
Directors include the Board Resolutions and other
functional areas such as tax, human resources, treasury
and corporate social responsibility.
The attendance of the Directors at the Board Meetings

held for the period 1st April 2013-31st March 2014. As
follows;
Date
Directors
34
29th
July
2013
28th
22nd
October January
2013
2014
24th
April
2014
Mr. S C Ratnayake
Mr. A D Gunewardena
Mr. J F R Peiris
Mr. J R Gunaratne
Mr. R Peiris
Mr. A D E I Perera
Mr. P S Jayawardena
3.1.9.2 Typical Board Agenda

Confirmation of previous minutes.

Circular resolutions.
Board subcommittee reports and other matters
exclusive to the Board.

Matters arising from the previous minutes.

Status updates of major projects.

Review of performance in summary and in detail,
including high level commentary on actuals and outlook

Summation of strategic issues discussed at pre-board
meetings.

Approval of Quarterly and Annual financial statements.

Ratification of capital expenditure and donations.

Ratification of the use of the Company seal and share
certificates issued.

New resolutions.

Report on corporate social responsibility.
Review of risks, sustainability development, HR
practices and updates, etc.

Any other business.
3.1.9.3 Supply of information

In order to ensure robust discussion, informed

deliberation and effective decision making, the
Directors are provided access to;
Information as is necessary to carry out their duties and

responsibilities effectively and efficiently.
Information updates from management on topical
matters, new regulations and best practices as relevant
to the Groups business.
External and internal auditors.
Experts and other external professional services.
The services of the Company secretaries whose
appointment and/or removal is the responsibility of the
Board.
Periodic performance reports.
Senior Management under a structured arrangement.
3.1.10 Board Directors Delegation of Authority

The Board has delegated some of its functions to

Board committees while retaining final decision rights
pertaining to matters under the purview of these
committees.
The Board has, subject to pre-defined limits, delegated

its executive authority to the CEO who exercises this
equipped to execute these tasks and bring in a wealth

of experience and diversity to the Group in terms of
their expertise and exposure.
authority through the Management Committee (MC),

which he heads and to which he provides leadership
and direction.
3.1.11 Group Executive Committee of the Parent Company
3.1.12 Management Committee (MC)
The Group Executive Committee (GEC) of the

Parent Company JKH is the overlay structure under
the leadership and direction of the CEO of the
Group, which implements the policies and strategies
determined by the Board.
Policies that affect the JKH Group and strategic matters

that can be synergised across the JKH Group are
discussed at the GEC prior to it being recommended
to the KFP Board.
3.1.11.1 Composition

As at 31 March 2014, the 9 member GEC consisted
of the Chairman, the Deputy Chairman, the Group
Finance Director of JKH and the Presidents of each
business/function of JKH.
3.1.11.2 Key Responsibilities

Approving the Industry Groups short, medium and long
term strategies and annual plans and monitoring the
actual business performance against pre-set objectives
and key performance indicators on a quarterly basis.

Regularly reviewing the portfolio of businesses, and the
supporting functions, in terms of current performance,
future prospects and synergy.
Recommending to the Board new business
opportunities.
Assisting the Chairman in succession planning and
appointment of Presidents, Sector Heads, Functional
Heads and other Senior Managers.

Career management of Senior Executives (Assistant
Vice President and above).

Regularly reviewing the HR practices, including the
compensation philosophy of the Group through
surveys and other internally generated indicators.
3.1.12.1 Key Objective

A key responsibility of the members of the GEC is

to act as the enablers of the operating model of the
Group. Towards this end, GEC members, particularly
the Presidents, not only play a mentoring role, but are
totally accountable for the business units and functions
under their purview. The members of the GEC are well
The underlying intention of the MC is to encourage

the respective business units to take responsibility and
accountability to the lowest possible level, via suitably
structured committees and teams in a management by
objectives setting.
3.1.12.2 Scope

The agenda of the MC is carefully structured to avoid

duplication of effort and ensure that discussions
and debate are complementary both in terms of a
bottom-up and top-down flow of accountabilities and
information. Responsibility and accountability of the
effective functioning of the MC is vested upon the
CEO, the Functional Heads and managers as applicable.
The Good Manufacturing Practice (GMC) focus

is aligned to headline financial and non-financial
indicators, strategic priorities, and risk management,
implement strategies and policies determined by the
Board, the use of IT as a tool of competitive advantage,
new business development, continuous process
improvements , management of human resources and
managing through delegation and empowerment, the
business affairs of the respective sectors.
Responsibility for monitoring and achieving plans as

well as ensuring compliance with Group policies and
guidelines rests with the CEO and the Functional
Heads where applicable.
3.1.11.3 Enablers of the JKH Operating Model

The MC operates under the leadership of the CEO

and is dedicated and focused towards implementing
strategies and policies determined by the Board,
and designing, implementing and monitoring the
best practices in their respective functions, even at
departmental level where appropriate and material.
3.1.13 Audit Committee

The Audit Committee comprises solely of NonExecutive, Independent Directors and conforms to
the requirements of the Listing Rules of the Colombo
35
Stock Exchange. It is governed by a Charter, which inter
alia, covers the reviewing of policies and procedures
of Internal Control, business risk management,
compliance with laws and Company policies and the
independent audit function.

The Committee is also responsible for the consideration

and recommendation of the appointment of External
Auditors, the maintenance of a professional relationship
with them, reviewing the accounting principles, policies
and practices adopted in the preparation of public
financial information and examining all documents
representing the final Financial Statements.
A quarterly self certification program requires that the
Chief Executive Officer , Chief Financial Officer and the
Head of Finance of the Group to confirm compliance,
on a quarterly basis, with statutory requirements and
key control procedures and to identify any deviations
from the set requirements. In addition the PresidentCEO and the Functional Heads of the different
Department are also required to confirm operational
compliance with statutory and other regulations and
key control procedures, coupled with the identification
of any deviations from the expected norms. These
have significantly aided the committee in its efforts in
ensuring correct financial reporting, effective internal
control and risk management.
The Audit Committee had 6 meetings during the year
and attendance of the Audit Committee members are
indicated in the Audit Committee Report on page 68.
The CEO, the CFO, the Head of Finance and other
Functional Heads are invited to the meetings of the
Audit Committee. The detailed Audit Committee
report including areas reviewed during the financial
year 2013/14 is given on pages 68 to 69 of the Annual
Report.
3.1.14 Human Resources and Compensation Committee of

the Parent and Policy

36
The Human Resources and Compensation Committee

of the Parent Company John Keells Holdings PLC
functions as the Human Resources and Compensation
Committee of the Group and conforms to the
requirements of the Listing Rules of the Colombo
Stock Exchange.
The remuneration Committee of the Parent Company

consists of following five Non-Executive Independent
Directors:
Mr. E F G Amerasinghe Chairman

Dr. I Coomaraswamy
Mr. A R Gunasekara
Mrs. S S Tiruchelvam (Resigned w.e.f. 9/9/2013)
Mr. M A Omar (Appointed w.e.f. 28/05/2013)
Mr. N A Fonseka (Appointed w.e.f. 7/11/2013)
The key principles underlying the Remuneration Policy

of the Group are as follows:
All Executive roles across the JKH Group have been

banded by an independent third party on the basis of
the relative worth of jobs.
Compensation be set at levels that are competitive
to enable the recruitment and the retention of high
calibre executives in the identified job classes/bands
as guided by the best comparator set of Companies
(from Sri Lanka and the region, where relevant).
Compensation, comprising of fixed (base) payments,
short term incentives and long term incentives be tied
to performance, both individual and organisational.
Performance be measured annually on well-defined
objectives and matrices at each level- individual,
business and Group, thereby aligning shareholder
interests through a well established performance
management system.
The more senior the level of management, the higher
the proportion of the incentive component, thereby
lowering the proportion of the fixed (base) component
of total compensation.
As the seniority, and therefore the decision influencing
capability of the position on organisational results,
increases, the individual performance to hold lesser
weightage than the organisational performance when
determining total compensation and incentives.
3.1.15 Nominations Committee of the Parent

The Nominations Committee of the Parent Company

John Keells Holdings PLC functions as the Nominations
Committee of the Company and its Subsidiary and
conforms to the requirements of the Listing Rules of
the Colombo Stock Exchange.
Composition
The Chairperson must be a Non-Executive Director.

The Chairman of the Board is a member of the Nomination Committee
Mandate
Define and establish nomination process for NEDs, lead the process of board appointments and make
recommendations to the Board on the appointment of Non-Executive Directors.
Scope
i. Assess skills required on the Board given the need of the businesses.
ii. From time to time assess the extent to which required skills are represented on the Board.
iii. Prepare a clear description of the role and capabilities required for a particular appointment.
iv. Identify and recommend suitable candidates for appointments to the Board.
v. Ensure, on appointment to board, NEDs receive a formal letter of appointment specifying clearly.

Expectation in terms of time commitment.
Involvement outside of the formal board meetings.
Participation in committees.
( The appointment of Chairperson is a collective decision of the Board.)
The Nominations Committee members of the Parent

Company are as follows;
Mr. T Das - Chairman

Mr. S C Ratnayake
Mrs. S Tiruchelvam (Resigned w.e.f. 9/9/2013)
Mr. M A Omar (Appointed w.e.f. 7/11/2013)
Mr. E F G Amerasinghe (Appointed w.e.f. 7/11/2013)
Mr. D A Cabraal (Appointed w.e.f. 7/11/2013)
3.1.16 Related Party Transaction Review Committee of the

Parent (Effective from 01st April 2014)

of the Parent Company established a Related Party

Transaction Review Committee with effect from 1st
April 2014, to review all the related party transactions
of the listed Companies within the Group. This move
also complies with the early adoption of the Code of
Best Practice on Related Party Transactions issued by
the SEC. On the basis that the Parent Company is also
a listed Company, the SEC has permitted the Related
Party Transactions Review Committee of the Parent
Company, to represent the listed Companies in the
John Keells Group of which, Keells Food Products PLC
is a member.
With the goal of adding value, following global

benchmarking of its governance framework, the Board
Composition
The Related Party Transaction Review Committee of the Parent Company, John Keells Holding PLC,
functions as the Related Party Transaction Review Committee of the Company and its Subsidiary. It
comprises of three Non-Executive Independent Directors and two Non-Executive Non-Independent
Directors. The Chairperson is a Non-Executive Director.
Mandate
To ensure on behalf of the Board, that all Related Party Transactions of the Company and its Subsidiary
are consistent with the Code of Best Practices on Related Party Transactions issued by the SEC.
Scope
Develop, and recommend for adoption by the Board of Directors of the Company and its Subsidiary,
a Related Party Transaction Policy which is consistent with the Operating Model and the Delegated
Decision Rights of the Group.
ii. Update the Board of Directors the Related Party Transaction of each of the Companies of the Group
on a quarterly basis.
37
The Related Party Transaction Review Committee

members of the Parent Company are as follows;
Mr. N A Fonseka Chairman
Mr. E F G Amerasinghe
Mr. D A Cabraal
Mr. S C Ratnayake
Mr. J F R Peiris
3.1.19 Going Concern

The Board of Directors upon the recommendation of

the Audit Committee is satisfied that the Company and
its Subsidiary has sufficient resources to continue in
operation for the foreseeable future. In the event that
the net assets of the Company and its Subsidiary fall
below a half of shareholders' funds, shareholders would
be notified and an extraordinary resolution passed on
the proposed way forward.
The going concern principle has been adopted in

preparing the Financial Statements. All statutory and
material declarations are highlighted in the Annual
Report of the Board of Directors in the Annual Report.
Financial Statements are prepared in accordance with
the Sri Lanka Financial Reporting Standards (SLFRS)
and Lanka Accounting Standards (LKAS), including
all the new standards introduced during the subject
year, and International Accounting Standards (IAS), as
applicable.
Information in the financial statements of the Annual

Report are supplemented by a detailed Management
Discussion and Analysis which explains to shareholders
the strategic, operational, investment and risk related
aspects of the Company that have translated into
the reported financial performance and are likely to
influence future results.
3.1.17 Director Remuneration

3.1.17.1 Non-Executive Director Remuneration

Compensation of NEDs is determined in reference to

fees paid to other NEDs of comparable Companies
and is adjusted where necessary in keeping with the
Group complexity. The fees received by NEDs are
determined by the Board and reviewed annually. NEDs
do not receive any performance/incentive payments
and are not eligible to participate in any of the Groups
share option plans. Non-Executive fees are not subject
to time spent or defined by a maximum/minimum
number of hours committed to the Group per annum,
and hence are not subject to additional/lower fees for
additional/lesser time devoted.
3.1.17.2 Compensation for Early Termination

In the event of an early termination of the Directors
there are no compensation commitments other than
for Directors fee Payable if any, interims of contracts
for the NEDs.

3.1.18 Directors Responsibilities

The Statement of Directors Responsibilities in relation
to financial reporting is given in the Financial Information
section of the Annual Report. The Directors interests
in contracts of the Company are addressed in the
Annual Report of the Board of Directors.

38
The Board of Directors in consultation with the Audit

Committee have taken all reasonable steps in ensuring
the accuracy and timeliness of published information
and in presenting an honest and balanced assessment
of results in the quarterly and annual Financial
Statements.
As discussed in the shareholder relations section of
this note, all price sensitive information has been made
known to the Colombo Stock Exchange, shareholders
and the press in a timely manner and in keeping with
the regulations.
3.2 Integrated Governance Systems and Procedures
Integrated governance systems and procedures
Integrated governance systems and procedures

Strategy formulation and decision making process
Employee performance governance
People and talent management
Stakeholder management
Effective & transparent communication
IT governance
Integrated risk management
3.2.1 Strategy Formulation and Decision Making Process

Strategy formulation and evaluation cycle
5. Performance
evaluation of the
second half/full
year
4. Reforecasting
the targets for
the second half
of the year
3. Business
performance
evaluation of
first six months
against target
Continuous
performance
monitoring at
BU level
Customer and stakeholder needs and the expectations

of the society as a whole.
Organisations capabilities to generate the required
products and services .
Opportunities and threats that arise from competitive
environments.
Risks associated with the operating landscape.
Step 3
Upon the completion of the first half of the financial
year the Board and the Group Executive Committee
evaluates the performance of the businesses against
the plan with deviations being noted along with the
identification of corrective action.
Step 4
Reforecast Annual Plan for the second half of the
financial year is presented to the Board and the Group
Executive Committee for approval having taken into
consideration changes taking place at both a macro
and micro levels.
Step 5
Business performance during the second half of
the financial year as well as the full financial year is
evaluated against the reforecast plans and targets at
the end of the financial year.
Notwithstanding the aforementioned periodic

monitoring by the Group Executive Committee (GEC),
frequent and detailed performance evaluations take
place at regular intervals at the Company and its
industry group levels and if severe issues arise meetings
are called upon and immediate action is taken.
2. Board and
GEC approval
Step 1
Business Units and Functional Units of the Group carry
out detailed analysis on the following aspects when
formulating strategies for the forthcoming financial
year;
Step 2
The Board and the Group Executive Committee ensures
that the key enablers of performance, together with
organisational structures and processes are defined
and are in place to ensure the delivery of its goals and
objectives and approves annual plans.
1. Formulating
business strategy,
objectives and
risk management
for each BU for
the financial year
Formulated strategies are presented to the Board of

Directors of the Company and the Group Executive
Committee of the Parent Company JKH by the
respective business units for approval and the approved
strategies are then translated into numbers where
annual plans, key performance indicators (KPI) and
targets for each business unit are set.
3.2.2 Employee Performance Governance

As stated at the outset, a proven Performance

Management System and other supporting Human
Resource Management Processes are essential
in entrenching a culture of performance within
a framework of compliance, conformance and
sustainable development.
3.2.2.1 Performance Management

The Performance Management System as illustrated

below is at the heart of many supporting Human
Resource Management processes such as Learning
and Development, Career Development, Succession
Planning, Talent Management, Rewards/Recognition
and Compensation/Benefits.
39
Pay decisions are based on :

Performance rating.
Competency rating.
Ease of replacement rating.
Learning &
development
Compensation
& benefits
Nomination for awards :
Chairmans award.
Employee of the year.
Champion of the year.
Career
development
Identification of :
High performers.
Group talents.
Succession
planning
Talent
management
The Groups Performance Management System

has been very instrumental in empowering staff
in achieving organisational goals through relevant
training, recognition and reward.
3.2.2.2 Performance Based Compensation

40
Identification of :
Promotions.
Inter Company transfers.
Inter department transfers.
Performance
Management
System
Rewards &
recognition
Identification of :
Long term development plans.
Competency based training
needs.
Business focused training needs.
Manager and above given the high level of decision

making authority, the performance is measured
annually on well-defined individual, as well as
organisational objectives and matrices which reflect,
and are positively correlated to the Company and its
Subsidiarys objectives, thereby aligning employee
management and stakeholder interests.
Identification of :
Jobs at risk.
Suitable successors.
Readiness level of successors.
Development plans.
External recuitment.
Assistant Manager and Executive level measured only

by the individual performance rating as it is difficult for
these individuals to directly influence the performance
of their respective business units.
Clerical and Non-Executive At these levels the short

term incentive takes the form of a share of profits
(Group-wide) calculated as a multiple of basic salary.
No recognition is given to the individual performance
rating.
Satisfaction
Performance Management
Pay for performance
More than just a workplace
Greater prominence is given to the incentive component of

the total target compensation of the management.
Continuously focuses on creating a sound work environment

covering all aspects of employee satisfaction.
Compensation Policy
Compensation comprises of fixed (base) payments, short term incentives and long term incentives.
Higher the authority level within the Group, higher the incentive component.
Greater the decision influencing capability of a role, higher the weight given on organisational
performance as opposed to the individual performance.
Long term incentives in the form of Employee Share Options (ESOP).
External Equity
Internal Equity
Fixed compensation is set at competitive levels using the
Remuneration policy is built upon the premise of ensuring
median, 65th percentile and 75th percentile of the best

comparator set of companies (from Sri Lanka and the
region, where relevant) as a guide.
equal pay for equal roles.
Manager and above level roles are banded using the
Mercer methodology for job evaluation on the basis of the

relative worth of jobs.
Equity sharing
The employee share option schemes (ESOPs)
implemented by the Parent Company JKH, has been
offered to employees of the Group at defined career
levels based on pre-determined criteria which are
uniformly applied across the eligible levels. Such
options are offered at market prices prevailing on the
date of the offer.
Regular surveys are done to ensure that employees are not

under / over compensated.
The equity sharing scheme has primarily paved the way

for;
Improved employee commitment and buy-in to

management goals
Alignment of interest between employees and
shareholders
Emergence of a more transparent governance
mechanism
As per the historical data, the financial benefit of the

long term incentive scheme (ESOP) had been far
greater than that of short term incentives and these
long term incentives have been very instrumental
in inculcating, in the recipients, a deep sense of
ownership.
41
3.2.3 People and Talent Management
3.2.4.1 Employee Relations
The
Group believes that shareholders long term
interests are well served by involving employees actively
in safeguarding the Group Corporate Governance
framework, where the employees are encouraged and
empowered to positively contribute towards upholding
the principles of Corporate Governance.
Having considered its employees as its greatest asset,

the Group engages employees at various levels to
the internal governance structure and in recognition
of the same, policies, processes and systems are in
place to ensure effective recruitment, development
and retention as the Group is committed to hiring,
developing and promoting individuals who possess the
required competencies.
The Human Resources unit is designed in a manner

that enables high accessibility by any employee to
every level of management. Constant dialogue and
facilitation are also maintained, relating to workrelated issues as well as matters pertaining to general
interest that could affect employees and their families.
Therefore, the Group follows open-door policies for its
employees and key stakeholders and this is promoted
at all levels of the Group.
The Group also has skip level meetings where an

employee can discuss matters of concern with
superiors who are at a level higher than their own
immediate supervisor in an open but confidential
environment. A detailed discussion on employee
relations was discussed in the Effective and Transparent
Communication section under Internal Governance
Structure.
Moreover the Group provides a safe, secure and

conducive environment for its employees, allows
freedom of association and collective bargaining,
prohibits child labour, forced or compulsory labour and
any discrimination based on gender, race or religion,
and promotes workplaces which are free from physical,
verbal or sexual harassment, all of which compliment
effective Corporate Governance.
3.2.3.1 Employee Involvement and Empowerment

Top management and other senior staff are mandated

to involve, as appropriate, all levels of staff in
formulating goals, strategies and plans.
Decision rights are defined for each level in order to
instil a sense of ownership, reduce bureaucracy and
speed-up the decision making process.
A bottom-up approach is taken in the preparation of
annual and five year plans and the Group also ensures
employee involvement and empowerment in the
process.
Employee relations are designed to enable, and
facilitate, high accessibility by all employees to every
level of management.
3.2.4 Stakeholder Management

42
The KFP Board views effective stakeholder management

as a vital aspect in safeguarding the Groups Corporate
Governance philosophy.
3.2.4.2 Dialogue with Shareholders

The Group has opened up through the Parent Company,

several channels to ensure sound communication with
the shareholders.
3.2.4.3 Other Stakeholders: Corporate Social Responsibility

and Sustainability

The Group recognises that it exists not only to

maximise long term shareholder value but also to look
after the rights and appropriate claims of many nonshareholder groups such as employees, consumers,
clients, suppliers, lenders, environmentalists, host
communities and governments.
3.2.5 Effective and Transparent Communication

3.2.5.1 Employee Communication

The Group is continuously working towards

introducing innovative and effective ways of
employee communication and employee awareness.
The importance of communication - top-down,
bottom-up, and lateral communication in gaining
employee commitment to organisational goals has
been conveyed extensively and intensively through
various communiqus issued by the Chairman, CEO
and the management. Whilst employees have many

opportunities to interact with senior management, the
JKH Group has also created formal channels for such
communication through feedback as described below:

Corporate Communications - The primary goal of

corporate communications is to enhance and safeguard
the John Keells corporate brand, Elephant House and
Keells brands. Accordingly, it engages in activities to
build the brand amongst both current and prospective
employees in addition to creating awareness amongst
the general public at large.
Participation in JK Forum by KFP Employees This
is a quarterly event where employees are invited to
share their views, and knowledge, on a topical issue.
These meetings invariably end with useful employee
suggestions. At times, eminent persons are also invited
to share their knowledge and expertise on specific
subjects.
Participation in JKH Young Forum by KFP employees
An occasion, once every 2 months, where groups of
young ladies and gentlemen at various levels within the
Group meet with the Executive Directors in an informal
setting to express their views, shares their concerns
and makes suggestions. This has proved to be an
effective means of effective two way communication
and many positive developments have emerged from
these fora. The concept has now been further broadbased with each industry group/sector having its own
young forums.
3.2.5.2 Investor Communication

The Investor Relations team of the Parent Company

JKH Group is responsible for maintaining an active
dialogue with shareholders, potential investors,
investment banks, stock brokers and other interested
parties, towards developing an effective investor
communication channel. The Investor Relations unit of
JKH is responsible for;
Staying visible and building relationships.

Being factual.
Focusing on the long-term view and strength of the
balance sheet.

Responding to queries and clarifying on concerns of
investors.
Coordinating
media
relations
and
investor
communications.

3.2.5.3 Constructive use of the Annual General Meeting (AGM)

Shareholders have the opportunity at the AGM, to put

forward questions to the Board and to the Chairman and
the Chairman of the Audit Committee to have better
familiarity with the Groups business and operational
workings. The contents of this Annual Report will
enable existing and prospective stakeholders to make
better informed decisions in their dealings with the
Company.
In general, all steps are taken to facilitate the exercise

of shareholder rights at AGMs, including the receipt
of notice of the AGM and related documents within
the specified period, voting for the election of new
Directors, new long term incentive schemes or any
other issue of materiality that requires a shareholder
resolution.
3.2.6 Information Technology Governance

The Group believes that Information Technology is a

Strategic Asset and as such it needs to be managed to
leverage competitive business benefits for the Group.
3.2.6.1 IT Governance Objectives

To achieve the same, the Information Technology

Governance frame work is built upon the following set
of primal objectives:
Leverage IT as a Strategic Asset.

Create an Agile Governance Model .
Create better Alignment between business and IT.
Create greater business value with our investments in
IT.
Create a strong IT governance and regulatory
framework through a coherent set of policies,
processes and adoption of best practices in line with
world-class organisations.
The basic philosophy of the IT Governance is based on

Business Value Creation vis--vis Capital, Benefit, Cost
and Risk
The Governance is based on the following model in

aligning IT Value, Performance, Risk and Accountability
across the group through well-defined governance
structures, procedures, policies.
43
Based on the above the Group IT Strategy Map is drawn as
detailed in table below,
Business/IT
alignment
Deliver business value

IT
Governance
Accountability
Sustainability of
business value
Value
management
Sustainability of
business value
IT and Business
Requirements
Contextual
Business
Model - Why?
IT Strategy
Services Catalogue
IT blue print
Business
Requirements
Organizational
Considerations
Conceptual
Process
Model - What?
Change
Management
TCO and Business
Case
The IT governance framework used within the Group

leverages best practices and industry leading models
such as CoBIT (Control Objectives for Information and
Related Technology), ISO 31000, ISO 27001, ISO 9001,
COSO (Committee of Sponsoring Organisations of
the Treadway Commission) /BCP (Business Continuity
Planning), ISO 20000: ITIL (Information Technology
Infrastructure Library), in providing a best of breed
framework as illustrated below.
System
Requirements
Standards and
Constraints
Component
Model - With
What?
Governance
Best Practises
Operational
Lifecycle Mgmt.
Trade-offs and
Alternatives
Priority
Refinement
Solution
Enablement
Advocacy
Congruent
Methodologies
Continuous Improvement
Value
Objective
Drivers
Products and
Results
Logical System
Benefit/ Risk
Identification
Model - How?
Partnerships
and Collaboration
3.2.6.2 IT Governance Framework
44
Architectural
Views
Deliver business value

Risk
management
Drivers and
Objectives
Assurance
Performance
management goals
Risk
management goals
Performance metrics
Risk metrics
Enterprise Governance
IT Governance
Best Practices
Risk IT
ISO 31000
ITIL
ISO 20000
ISO
27001
PMI
ISO 9001/
CMMI
Policies/Procedures
IT risk
management
IT Service
management
Security/Risk
principles
Project
management
principles
Process
management
Cobit/COSO
3.2.6.3 JKH IT Governance Stewardship Roles

All of the above is governed through layered and

nested committees, cascading from the JKH Groups
Executive Committee to JKH Group IT Management
Committee to the Company and the Subsidiary IT
Operation Committee with well-defined roles and
responsibilities at a Group, Sector and Business unit
level.
Chairman
Board of Directors
Group IT Governance Committee
Chairman
GEC
Group CIO
Group IT MC
Company
Heads of SGIT
CEO
HoBSs
Functional Heads
Supporting executives/managers in moving the

organisation forward in a cohesive integrated and
aligned manner to improve performance, while
operating effectively, efficiently, ethically, legally, and
within the established limits for risk taking.
The detailed Risk Management report of the Annual

Report describes the process of risk management as
adopted by the Group and the identified key risks to
the achievement of the Groups strategic business
objectives.

4. Assurance

The Assurance element is the supervisory module
of the Corporate Governance Framework, where a
range of assurance mechanisms such as monitoring
and benchmarking are used with effectiveness tests
carried out, and corrective actions being proposed and
implemented.
Independent Directors
3.2.7 Integrated Risk Management

The MC along with the Parent Company JKH, has

adopted a Group-wide risk management programme
with focus on wider sustainability development, to
identify, evaluate and manage significant risks and to
stress-test various risk scenarios which the Group has
adopted. The programme ensures that a multitude
of risks, arising as a result of the Groups diverse
operations, are effectively managed in creating and
preserving shareholder and other stakeholder wealth.
Following steps are taken towards promoting the

Groups integrated risk management;
Integrating and aligning activities and processes related

to planning, policies/ procedures, culture, competency,
internal audit, financial management, monitoring and
reporting with risk management.
Assurance Mechanisms
Audit Committee
Employee Participation
Internal Control
JKH Code of Conduct
Ombudsman
External Audit
45
4.1
Independent Directors
Independent Directors represent more than one

third of the Non-Executive Directors in the Board to
preserve the corporate governance, as stake holders
need an independent party to voice their concerns on
a confidential note.
JKH and its Subsidiaries against globally renowned

organisations, makes visible areas of employee
concerns. Following such surveys, the Group engages
focused Discussion Groups in reviewing the highlighted
areas of concern and considers the Discussion
Groups suggestions where relevant and appropriate.
Experience has confirmed that this has contributed to
significant improvements in the employee perceptions
of the Group particularly in respect of practices,
policies and behaviours that build credibility, respect
and fairness.
4.2 Audit Committee

The Audit Committee plays an important supervisory

and monitoring role by focusing on the designated
areas of responsibility passed to it by the Board.
For more information refer to Audit Committee section
on pages 67 to 69.
4.3 Employee Participation In Assurance

Skip level meetings - Employees at Assistant Manager

and all levels above can discuss matters of concern
with superiors who are at a level higher than their
own immediate supervisor in an open but confidential
environment.
Exit interviews - This is mandated for all Executive

and above level. All such reports are forwarded to the
respective President and EVP for their comments and
are subsequently discussed by GEC once in every 2
months.
46
Whistleblower policy - The employees can report to

the Chairman through a communication link named
Chairman Direct, on any concerns about unethical
behavioural and any violation of Group values.
Employees reporting such incidents are guaranteed
complete confidentiality and such complaints are
investigated and addressed via a select committee
under the direction of the Chairman.
360 degree evaluation - All employees at Manager and

AVP and above levels, including the Chairman (direct
report evaluation only) is subject to a 360 degree
evaluation conducted by an independent 3rd party.
Great Place to Work Survey These anonymous surveys
are aimed at knowing, at regular intervals, whether
employees consider JKH and its Subsidiaries as great
workplaces. These surveys, through a benchmark of
Voice of Employee Survey- These are dip stick

surveys done at regular intervals to assess employee
satisfaction.
Securities trading policy - The Groups securities

trading policy prohibits all employees and agents
engaged by JKH who are aware of unpublished price
sensitive information from trading in JKH shares or the
shares of other companies in which the Group has a
present business interest.
The Board, GEC, GOC as well as certain identified

employees in senior executive roles who are privy to
JKHs results in part or in full prior to their availability to
the public are prohibited from trading during periods
leading up to the release of quarterly and annual results,
new investments, particularly mergers and acquisitions,
announcements of scrip issues and dividend payments.
The JKH Group adopts a zero tolerance policy against

the employees who are violating these policies.
Monitoring of financial data - Actual financials are

compared against the original plan on a monthly basis
and material variances are identified and explanations
are discussed at the MC and a mid-year reforecast is
done where necessary.
The President, Heads of Business Units and Functional

Managers are able to view either online or by circulation,
the information relevant to their areas of responsibility.
The Chairman and Non-Independent Non-Executive
Directors and Executive Directors are able to view key
financial information on a real time basis via the Group
ERP system.
4.4 Internal Control
4.5 Code of Conduct
The Board has taken necessary steps to ensure the

integrity of the Groups accounting and financial
reporting systems and internal control systems remain
effective via the review and monitoring of such systems
on a periodic basis. A brief description of some of the
key internal control systems are listed below:
Internal Compliance
A quarterly self-certification programme requires the
CEO, Chief Financial Officer the Head of Finance
to confirm compliance with financial standards and
regulations. Further the CEO and the Heads of business
unit are required to confirm operational compliance
with statutory and other regulations and key control
procedures, and also identify any significant deviations
from the expected norms.
System of Internal Control

The internal audit function in the Company is not
outsourced to the external auditor in a further attempt
to ensure external auditor independence. The Auditors
report on the Financial Statements of the Company
for the year under review is found in the Financial
Information section of the Annual Report.
The Risk Review Programme covering the internal

audit of the Company is outsourced to Messrs.
PriceWaterhouseCoopers (Private) Limited, a firm of
Chartered Accountants, and the reports arising out of
such audits are, in the first instance, considered and
discussed at the business / functional unit levels and
after review by the respective CEO of the Company and
the Subsidiary, are forwarded to the Audit Committee
on a regular basis. Further, the Audit Committee also
assess the effectiveness of the risk review process and
systems of internal control on a regular basis. Followups on internal audits are done on a structured basis.
The role of the internal auditor has been transformed
into a value adding function instead of merely a
policing function, where audit findings form an
integral input in modifying and improving our internal
processes.
The written Code of Conduct, to which all the

employees including the Board of Directors are
bound by, engraves the desired behaviours of staff
at executive and above level, particularly the senior
management. This is being constantly and rigorously
monitored.
Code of Conduct
Allegiance to the Company and the Group.

Compliance with rules and regulations
applying in the territories that the Group
operates in.
Conduct of business in an ethical manner
at all times and in keeping with acceptable
business practices.
Exercise of professionalism and integrity
in all business and public personal
transactions.

Group Values
The objectives of the Code of Conduct are further
affirmed by a strong set of corporate values which
are well institutionalised at all levels within the Group
through structured communication. The degree of
employee conformance with corporate values and
their degree of adherence to the JKH Code of Conduct
are key elements of reward and recognition schemes.
4.6 Ombudsperson

The Ombudsperson entertains complaints from an

individual employee or a group of employees of alleged
violations of the published Code of Conduct if the
complainant feels that the alleged violation has not
been addressed satisfactorily.
The findings and the recommendations of the

Ombudsperson arising subsequent to an independent
inquiry is confidentially communicated to the Chairman
upon which the duty of the Ombudsperson ceases.
47

The Chairman will place before the Board;
i.
ii.
iii.
The decision and the recommendations

Action taken based on the recommendations
Where the Chairman disagrees with any or all of the
findings and or the recommendations thereon, the
areas of disagreement and the reasons therefore.
In situation (iii) the Board is required to consider the

areas of disagreement and decide on the way forward.
The Chairman is expected to take such steps as are
necessary to ensure that the complainant is not
victimised for having invoked this process.

4.7 External Audit
48
Ernst & Young Chartered Accountants are the external

auditors of the Company (KFP) and Luthra and Luthra
Chartered Accountants of the Subsidiary (JKFIL).
Ernst & Young Chartered Accountants also audit the
Consolidated Financial Statements.
In addition to the normal audit services, Ernst & Young,

Luthra & Luthra and the other external auditors, also
provided certain non-audit services to the Group.
However, the lead/consolidating auditor would not
engage in any services which are in the restricted
category as defined by the CSE for external auditors.
All such services have been provided with the full
knowledge of the respective audit committees and
are assessed to ensure that there is no compromise of
external auditor independence.
5.

Corporate Governance Regulatory Framework

Compliance with Legal Requirements
The Board through the JKH Group Legal division, and
its other operating structures, strives to ensure that
the Company and its subsidiary comply with the laws
and regulations of the country.
The Board of Directors has also taken all reasonable

steps in ensuring that all Financial Statements are
prepared in accordance with the Sri Lanka Accounting
Standards, the requirements of the Colombo Stock
Exchange and other applicable authorities.
Sri Lanka Financial Reporting Standards (SLFRS) and

Lanka Accounting Standards (LKAS), as set by the
Institute of Chartered Accountants of Sri Lanka, are
those, which govern the preparation of the Financial
Statements. The Board is aware of the growing
importance of the disclosure of critical accounting
policies as a part of good governance and are of the
opinion that there are no instances where the use of
such concepts would have a material impact on the
Companys and the Groups financial performance.
Information on the Financial Statements of the Annual

Report are supplemented by a detailed Management
Discussion and Analysis which explains to shareholders
the strategic, operational, investment, sustainability
and risk related aspects of the Company that have
translated into the reported financial performance and
are likely to influence future results.
The Board has agreed that, such non-audit services

should not exceed the value of the total audit fees
charged by the subject auditor within the relevant
geographic territory. The external auditors also provide
a certificate of independence on an annual basis.
This Report has been prepared as per the rules and

regulations stipulated by the Corporate Governance
Listing Rules published by the Colombo Stock
Exchange (revised in 2013) and also by the Companies
Act No. 07 of 2007.
The audit and non-audit fees paid by the Group and

the Company to its auditors are separately classified in
the Note 7 to the Financial Statements of the Annual
Report.
The Group has also given due consideration and

adhered to the Code of Best Practice on Corporate
Governance Reporting guidelines jointly set out by the
Institute of Chartered Accountants of Sri Lanka and
the Securities & Exchange Commission in preparation
of this Corporate Governance Report, and where
necessary deviations have been explained as provided
within the rules and regulations.
4.3 Levels of Compliance with the Colombo Stock Exchanges New Listing Rules - Section 7.10, Rules on Corporate
Governance

(Mandatory Provisions Fully Complied)
Rule No.
Subject
Applicable Requirement
Compliance Action
Status
7.10 (a/b/c)
Compliance
Compliance with Corporate Governance

Rules
Compliant
Compliant with the

Rules and any deviations are
explained where applicable.
7.10.1(a/b/c)
Non-Executive Two or at least one third of the total number

of Directors should be Non-Executive
Directors
Directors.
(NED)
Compliant
8 out of the 8 Board

members are NEDs.
Company is conscious of
the need to maintain an
appropriate mix of skills and
experience in the Board and
to refresh progressively its
composition over time in line
with needs.
7.10.2(a)
Independent
Directors
Two or one third of Non-Executive Directors,

whichever is higher, should be independent.
Compliant
4 out of the 8 NEDs are

independent
7.10.2(b)
Independent
Directors
Each Non-Executive Director should submit

a declaration of independence / nonindependence in the prescribed format.
Compliant
Available with Secretaries for

Review.
Independence of the
Directors has been
determined in accordance
with CSE
Listing Rules and the 4
Independent Non-Executive
members have submitted
signed confirmation of their
independence.
7.10.3(a/b)
Disclosure
relating to
Directors
The Board shall annually make a

determination as to the independence or
otherwise of the Non-Executive Directors
and names of Independent Directors should
be disclosed in the Annual Report.
Compliant
Report
All Independent NonExecutive Directors have
submitted declarations as to
their independence.
49
50
Rule No.
Subject
Compliance Action
Status
7.10.3(c)
Disclosure
relating to
Directors
A brief resume of each Director should be

included in the Annual Report and should
include the Directors' areas of expertise.
Compliant
Refer to Directors Profile

section in the Annual Report
7.10.3(d)
Disclosure
relating to
Directors
Forthwith provide a brief resume of new

Directors appointed to the Board with
details specified in 7.10.3(a), (b) and (c) to the
Colombo Stock Exchange.
Compliant
No new Director were

appointed during the year.
7.10.4
(a-h)
Determination
of
Independence
Requirements for meeting criteria
Compliant
Refer to the Directors Profile

section in the Annual Report
7.10.5.(a1)
Remuneration
Committee
Remuneration Committee shall comprise

of NEDs, a majority of whom will be
independent
Compliant
The Human Resources and

Compensation Committee
of the Parent (equivalent
of the Remuneration
Committee with a wider
scope) only comprises of
Independent
Non-Executive Directors.
7.10.5(a2)
Composition
of
Remuneration
Committee
One Non-Executive Director shall be

appointed as Chairman of the Committee by
the board of directors
Compliant
The Senior Independent

Non-Executive Director of
the Parent is the Chairman
of the Committee.
7.10.5.(b)
Functions of
Remuneration
Committee
The Remuneration Committee shall

recommend the remuneration of the
Chairman and the Non-Executive NonIndependent Directors.
Compliant
The remuneration of the

Chairman and the NonExecutive Non- Independent
Directors of the Parent
is determined as per the
remuneration principles
of the JKH Group and
recommended by the
Human Resources and
Compensation Committee.
Rule No.
Subject
Compliance Action
Status
7.10.5.(c1)
Disclosure in
the Annual
Report
relating to
Remuneration
Committee
Names of Remuneration Committee

members
Compliant
Refer 3.1.14 of this report .
Statement of Remuneration policy
Compliant
Refer Director Remuneration

section of the Annual Report
Aggregate remuneration paid to and NEDs
Compliant
Refer Director Remuneration

section of the Annual Report
Audit Committee (AC) shall comprise

of NEDs, a majority of whom should be
independent
Compliant
The Audit Committee

comprises only of
Directors.
A NED shall be the Chairman of the

Committee
Compliant
Chairman of the Audit

Committee is an
Director.
CEO and CFO should attend the Audit

Committee meetings.
Compliant
Chief Executive Officer, the

Chief Financial Officer ,
Head of Finance and the
External Auditors attended
most parts of the
Audit Committee meetings
by invitation.
7.10.5.(c2)
7.10.5.(c3)
7.10.6(a1)
7.10.6(a2)
Composition
of the Audit
Committee
7.10.6(a3)
7.10.6(a4)
Composition
of the Audit
Committee
The Chairman of the Audit Committee or one Compliant

member should be a member of a
professional accounting body
The Chairman of the Audit

Committee is a member of
a professional accounting
body.
51
Rule No.
Compliance Action
Status
7.10.6(b1)
Overseeing of the preparation,

presentation and adequacy of disclosures in
the Financial Statements in accordance
with SLFRS/LKAS
Compliant
The Audit Committee assists

the Board in fulfilling its
oversight responsibilities for
the integrity of the Financial
Statements of the Group and
the Company.
7.10.6(b2)
Overseeing the compliance with financial

reporting requirements, information
requirements as per the laws and regulations
Compliant
The Audit Committee has

the overall responsibility for
overseeing the
preparation of Financial
Statements in accordance
with the laws and
regulations of the country
and also recommending to
the Board, on the
adoption of best accounting
policies
Ensuring the internal controls and risk

management are adequate, to meet the
requirements of the SLFRS/LKAS
Compliant
The Audit Committee

assesses the effectiveness of
internal
controls and risk
management
7.10.6(b4)
Assessment of the independence and

performance of the Entitys external auditors
Compliant
The Audit Committee

assesses the external
auditors performance,
qualifications and
independence
7.10.6(b5)
Make recommendations to the board

pertaining to external auditors
Compliant
The Committee is
responsible for appointment,
re-appointment, removal
of external auditors and
also the approval of the
remuneration and terms of
engagement
7.10.6(c1)
Names of the Audit Committee members

shall be disclosed
Compliant
Refer Report of the Audit

Committee in the Annual
Report
Audit Committee shall make a

determination of the independence of the
external auditors
Compliant

Report
Report on the manner in which Audit

Committee carried out its functions.
Compliant

Report
7.10.6(b3)
7.10.6(c2)
7.10.6(c3)
52
Subject
Functions
of the Audit
Committee
Disclosure
in Annual
Report relating
to Audit
Committee
Code of Best practice of Corporate Governance jointly issued by the Securities and Exchange Commission of Sri Lanka
(SEC) and the Institute of Chartered Accountants of Sri Lanka (CASL) - (Issued on 1st July 2008)
Voluntary Provisions Fully Complied
A. Directors
CSE Rule
Compliance Action
Status
A. 1 The Board
A. 1 Company to be headed by an
effective Board to direct and control
the Company
Yes
The Board of Directors, along with the Chairman, is the apex body
responsible and accountable for the stewardship function of the
Group. The Directors are collectively responsible for upholding
and ensuring the highest standards of corporate governance and
inculcating ethics and integrity across the Group.
A. 1. 1 Regular Board meetings
Yes
The Board of KFP meets at least once a quarter.
A. 1.2 Board should be responsible

for matters including implementation
of business strategy, skills and
succession of the management team,
integrity of information, internal
controls and risk management,
compliance with laws and ethical
standards, stakeholder interests,
adopting appropriate accounting
policies and fostering compliance
with financial regulations and fulfilling
other Board functions
Yes
Powers specifically vested in the Board to execute and gratify their

responsibility include:
Providing direction and guidance to the Company and the Subsidiary
Company in the formulation of its strategies, with emphasis on
the medium and long term, in the pursuance of its operational and
financial goals.
Reviewing and approving annual budget plans.
Reviewing HR processes with emphasis on top management
succession planning.
Monitoring systems of governance and compliance.
Overseeing systems of internal control and risk management.
Determining any changes to the discretions/authorities delegated
from the Board to the executive levels.
Reviewing and approving major acquisitions, disposals and capital
expenditure.
Approving any amendments to constitutional documents.
53
CSE Rule
Compliance Action
Status
A. 1. 3 Act in accordance with the laws Yes

of the country and obtain professional
advice as and when required
The Board seeks independent professional advice when deemed

necessary. During the year under review, professional advice was
sought on various matters, including the following:
Employee satisfaction survey and employee compensation and
benefit survey done to ensure that the Group is considered more
than just a work place by the employees.
Legal, tax and accounting aspects, particularly where independent
external advice was deemed necessary in ensuring the integrity of
the subject decision.
Market surveys, research and expert opinion on the products and
services offered as necessary for business operations.
Actuarial valuation of retirement benefits and valuation of property.
Specific technical know-how and domain knowledge required for
identified project feasibilities and evaluations.
A. 1. 4 Access to advice and services

of the Company Secretary
54
Yes
To ensure robust deliberation and optimum decision making, the

Directors have access to the services of the Company secretaries
whose appointment and/or removal is the responsibility of the
Board.
A. 1. 5 Bring independent judgment on Yes

various business
issues and standards of business
conduct
Collectively the NEDs bring wealth of value adding knowledge to

ensure adequate Board diversity is available to make independent
judgments on various business matters from a broader perspective
A. 1. 6 Dedication of adequate time

and effort
Every member of the Board has dedicated adequate time and

effort for the affairs of the Company by attending Board meetings,
Board sub-committee meetings and by making decisions via circular
resolutions. In addition, the Board members have meetings and
discussions with the management when required.
The Board met on four occasions during the year and the Chairman
and all Directors attended all meetings.
The Board is satisfied that the Chairman and the Non-Executive
Directors committed sufficient time during the year to fulfil their
duties.
Yes
CSE Rule
Compliance Action
Status
A. 1. 7 Board induction & training
Yes
In instances where Non-Executive Directors are newly appointed to

the Board, they are apprised of the:
Values and culture.
Operations of the Group and its strategies.
Operating model.
Policies, governance framework and processes.
Responsibilities as a Director in terms of prevailing legislation.
The Code of Conduct demanded by the Company.
Brief on important developments in the business activities of the
Group.
The Board policy on Directors training is to provide adequate
opportunities for continuous development, subject to requirement
and relevance for each Director.
The Directors are constantly updated on the latest trends and issues
facing the Company and the industry in general.
A. 2 Chairman and Chief Executive Officer

A.2 Division of responsibilities
between the Chairman and CEO
Yes
The positions of Chairman and CEO are separated to ensure a

balance of power and authority and to prevent any one individual
from possessing unfettered decision making authority.
A. 2. 1 Decision to combine the roles

of the Chairman and the CEO in one
person
Yes
In accordance with best practice and in order to maintain a clear

division of responsibilities, the roles of Chairman and CEO have not
been combined.
Yes
The Chairman is responsible for leading the Board and for its
effectiveness. In practice, this means taking responsibility for the
Boards composition, appraisal and development, ensuring that the
Board focuses on its key tasks and supports the President CEO.
The Chairman is also the ultimate point of contact for shareholders,
particularly on corporate governance issues.
A. 3 Chairmans Role
A. 3 Preserving order and facilitating
the effective discharge of Board
functions
The Board continued to have four Independent Non-Executive

Directors during 2013/14 in accordance with best practice.
55
CSE Rule
Compliance Action
Status
A 3.1 The Chairman should ensure

Yes
Board proceedings are conducted in a
proper manner
The Chairman is instrumental in;

Leading the Board for its effectiveness.
Directing the Board towards discharging stakeholder duties.
Setting the tone for the governance and ethical framework.
Ensuring that constructive working relations are maintained
between the Non-Executive members of the Board.
Guaranteeing that the Board is in control of the Companys affairs.
A. 4 Financial Acumen
Yes
Two out of the Eight Board members hold membership in

professional accounting bodies.
A. 5. 1 In the event the Chairman

and CEO is the same person, NonExecutive Directors should comprise
a majority of the Board.
Yes
Chairman & CEO are two different individuals.
A 5. 2 Where the constitution of the

Board of Directors includes only two
Non-Executive Directors, both such
Non-Executive Directors should be
Independent.
N/A
N/A
A. 5. 3 Definition of Independent
Directors
Yes
All the Independent Directors of the KFP Board are independent

of management and free of any business or other relationship that
could materially interfere with or could reasonably be perceived
to materially interfere with the exercise of their unfettered and
independent judgment.
A. 5. 4 Declaration of Independent
Directors
Yes
Each Non-Executive Director has submitted a signed and dated

declaration of his/her independence.
A. 5. 5 Board determinations on
Independence or Non-Independence
of Non-Executive Directors.
Yes
The names of the Independent Non-Executive Directors are

disclosed in the annual report.
A.5.6 If an alternate Director is

appointed by a Non-Executive
Director such alternate Director
should not be an executive of the
Company
N/A
No alternative Directors were appointed during the year ended 31st

March 2014.
A. 4 The Board should ensure the

availability within it of those with
sufficient financial acumen and
knowledge to offer guidance on
matters of finance.
A. 5 Board Balance
56
CSE Rule
Compliance Action
Status
A. 5. 7 In the event the Chairman

and CEO is the same person,
the Board should appoint one of
the Independent Non-Executive
Directors to be the Senior
Independent Director (SID)
N/A
The requirement to appoint a Senior Independent Director (SID)

does not arise as the roles of Chairman and the CEO are separated.
A. 5. 8 The Senior Independent

Director should make himself
available for confidential discussions
with other Directors who may have
concerns
N/A
Chairman and CEO are two different individuals.
A. 5. 9 The Chairman should hold

meetings with the Non-Executive
Directors only, without the Executive
Directors being present
Yes
Whilst there is no formal structure to have such meetings, Chairman

has an open door policy to allow Independent Directors to have a
discussion on any issue which in their opinion is significant. During
the year under review Chairman had discussions with Independent
Directors on an informal basis.
A. 5. 10 Where Directors have

concerns about the matters of
the Company which cannot be
unanimously resolved, they should
ensure their concerns are recorded in
the Board Minutes.
Yes
All Board meeting proceedings are comprehensively recorded in the

Board Minutes.
A. 6.1 Board should be provided with

timely information to enable it to
discharge its duties
Yes
The Board is provided with;
A. 6. 2 Timely submission of the

minutes, agenda and papers required
for the board meeting.
Yes
The Board papers are circulated a week prior to Board meetings.
Yes
Board appointments follow a transparent and formal process within

the purview of the Nominations Committee of the Parent Company.
There were no new Board appointments during the year 2013/14.
A. 6 Supply of information
Information as is necessary to carry out their duties and
responsibilities effectively and efficiently.
Information updates from management on topical matters, new
regulations and best practices as relevant to the business.
External and internal auditors.
Experts and other external professional services.
Periodic performance report.
Senior management under a structured arrangement.
A. 7 Appointments to the Board

A. 7 Formal and transparent
procedure for Board
appointments
57
CSE Rule
Compliance Action
Status
A. 7. 1 Nomination Committee to
make recommendations on new
Board appointments
Yes
It is the responsibility of the Nominations Committee of the

Parent Company to identify and propose suitable candidates for
appointment as Non-Executive Directors to the Board of KFP as
and when required, in keeping with the target Board composition
and skill requirements.
A. 7. 2 Assessment of the capability of

Board to meet strategic demands of
the Company
Yes
The emerging needs, combined with the objectives and the

strategies set for the future are considered key when identifying
skill sets required by potential Board members, especially skills
that may not be readily available within Sri Lanka. Based on these
requirements the Nominations Committee scans the external
environment to identify potential candidates that can add value to
the existing Board.
A. 7. 3 Disclosure of New Board

member profile and Interests
Yes
Currently the Board members have varying qualifications in

economic, environmental and social topics and are involved in many
committees and associations that serve the business community as
a whole.
Refer Directors Profiles for more information.
A. 8 Re Election
A. 8 / A. 8. 1 / A. 8. 2 Re-election
at regular intervals and should be
subject to election and re-election by
shareholders
Yes
The Non-Executive Directors are appointed for a term of three

years, ideally up to a maximum of three terms each, subject to the
age limit as per statutory provision at the time of re-appointment
following the end of term.
One third of the Directors, except the Chairman retire by rotation
on the basis prescribed in the articles of the Company. A Director
retiring by rotation or a Director who is subject to appointment is
eligible for re-election by a shareholder resolution at the AGM.
The resolutions for the AGM to be held on 30th June 2014 cover
re-election of:
Mr. J R F Peiris
Mr. M P Jayawardena
Refer the Directors profiles section of the Annual Report for a brief
description of the Directors up for re-election.
58
CSE Rule
Compliance Action
Status
A. 9 Appraisal of Board Performance

A. 9. 1 The Board should annually
appraise itself on its performance
in the discharge of its key
responsibilities
Yes
Yes
A. 9. 2 The Board should also
undertake an annual self-evaluation
of its own performance and that of its
Committees
A. 9. 3 The Board should state how
such performance evaluations have
been conducted
Although no formal process has been established, the openness and

the keenness displayed by the Non-Executive Directors reflect the
regular review of the Board performance.
Yes
A. 10 Disclosure of information in respect of Directors

A. 10. 1 Profiles of the Board of
Directors
Yes
Refer Directors' Profile section of the Annual Report.
A. 11 Appraisal of the Chief Executive Officer

A. 11. 1 / A. 11. 2 Appraisal of the CEO
against the set strategic targets
Yes
The Chairman and the Non-Executive Non-Independent Directors

appraises the performance of the CEO of the Company and the
CEO of the Subsidiary on the basis of pre-agreed objectives for the
Company and the Subsidiary, set in consultation with the Board,
59
B. Directors' Remuneration
CSE Rule
Compliance
Status
Action
Yes
The Human Resources and Compensation Committee of JKH

acts as the Remuneration Committee of the Group and functions
within agreed terms of reference.
B. 1 Remuneration Procedure
B. 1. 1 The Board of Directors should
set up a Remuneration Committee
Details and composition of the Remuneration Committee is

provided in the Remuneration Committee and Policy section in
the Corporate Governance Report.
B. 1. 2 Remuneration Committees
should consist exclusively of NonExecutive Directors
Yes
The Remuneration Committee only consists of Non-Executive

Directors and headed by the Senior Independent Director of JKH.
B. 1. 3 The Chairman and members of

the Remuneration Committee should
be listed in the Annual Report
each year.
Yes
Refer details on Board Committees.
B. 1. 4 Determination of the
remuneration of Non-Executive
Directors
Yes
NEDs receive a fee for devoting time and expertise for the benefit
of the Group in their capacity as Director and additional fees for
either chairing or being a member of a committee. NEDs do not
receive any performance/incentive payments and are not eligible
to participate in any of the Groups pension plans or share option
plans. Non-Executive fees are not time bound or defined by a
maximum/minimum of hours committed to the Group per annum,
and hence are not subject to additional/lower fees for additional/
lesser time devoted.
B. 1. 5 Access to professional advice
Yes
The Remuneration Committee has access to professional advice

from within and outside the Company.
B. 2 The Level and Makeup of Remuneration
60
B. 2. 1 to B. 2. 4 Performance related
elements in pay structure and
alignment to industry practices
Yes
The remuneration of the Senior Management has a higher variable

component relative to the lower rank executives because of the
impact on decision making .
B. 2. 5 Executive share options should

not be offered at a discount
Yes
The Senior Management is entitled to participate in the share

option scheme initiated by the JKH Group.
Executive share options were not offered at a discount.
CSE Rule
Compliance
Status
Action
B. 2. 6 Designing schemes of
performance-related remuneration
Yes
Basis of performance related remuneration schemes are known

up front. In terms of long term incentive schemes, the Senior
Management is entitled to participate in the share option scheme
initiated by the JKH Group.
Performance related remuneration schemes are not applied
retrospectively.
Annual bonuses are not pensionable.
Non-Executive Directors are not eligible to performance based
remuneration schemes.
B. 2. 7 / B. 2. 8 Compensation
commitments in the event of early
termination of the Directors
Yes
There are no terminal compensation commitments other than

gratuity in the Companys contracts of service.
B. 2. 9 Level of remuneration of NonExecutive Directors.
Yes
Compensation of NEDs is determined in reference to fees paid to

other NEDs of comparable Companies. The fees received by NEDs
are determined by the Board and reviewed annually.
Yes
In accordance with the guidelines of the Securities and Exchange

Commission of Sri Lanka aggregate remuneration paid to NonExecutive Directors during the financial year 2013/14 is disclosed
in Note 7 to the Financial Statements.
B. 3 Disclosure of Remuneration
B. 3 / B. 3. 1 Disclosure of
remuneration policy and aggregate
remuneration
C. Relations with Shareholders

C. 1 Constructive use of the Annual General Meeting (AGM) and Conduct of General Meetings
Shareholders have the opportunity at the AGM, to put forward questions to the Board and to the Chairman, CEO and the
Chairman of the Audit Committee to have better familiarity with the Groups business and operational workings.
CSE Rule
Compliance
Status
Action
C. 1. 1 Counting of proxy votes
Yes
Complied
C. 1. 2 Separate resolution to be
proposed for each item
Yes
Complied
C. 1. 3 Heads of Board subcommittees

to be available to answer queries
Yes
Head of the Audit Committee, CEO and CFO are available to

answer queries
61
CSE Rule
Compliance
Status
Action
C. 1. 4 Notice of Annual General

Meeting to be sent to shareholders
with other papers as per statute
Yes
Notice of the AGM and related documents are sent to

shareholders along with the Annual Report within the specified
period.
The contents of this Annual Report will enable existing and
prospective stakeholders to make better informed decisions in
their dealings with the Company.
Yes
A summary of the procedures governing voting at the AGM is

provided in the proxy form, which is circulated to shareholders 15
working days prior to the AGM.
C. 2. 1. Channel to reach all

shareholders to disseminate timely
information
Yes
Investor Relations team of the Parent is responsible for

maintaining an active dialogue with shareholders.
C. 2. 2 - C.2.7 Policy and methodology

of communication with shareholders
and implementation
Yes
Staying visible and building relationships.
C. 1. 5 Summary of procedures
governing voting at General
meetings to be informed
C. 2 Communication with shareholders
Focusing on the publicly known medium to long-term view and

strength of the Groups financial position and the Groups track
record of delivery.
Responding to queries and clarifying on concerns of shareholders.
Coordinating media relations and investor communications.
C. 3 Major and Material Transactions including major related party transactions

C. 3. 1 Disclosure of all material
facts involving any proposed
acquisition, sale or disposition of
assets
Yes
All material and price sensitive information about the Company is

promptly communicated to the Colombo Stock Exchange, where
the shares of the Company are listed, and released to the press
and shareholders. The Company also publishes Quarterly Interim
Financial Statements.
Compliance
Status
Action
Yes
The Board of Directors in consultation with the Audit committee

have taken all reasonable steps in ensuring the accuracy and
timeliness of published information and in presenting an honest
and balanced assessment of results in the quarterly and annual
Financial Statements.
D. Accountability and Audit

CSE Rule
D. 1 Financial Reporting
D. 1. 1 Disclosure of interim and
other price-sensitive and statutorily
mandated reports to Regulators
All price sensitive information has been made known to the

Colombo Stock Exchange, shareholders and the press in a timely
manner and in keeping with the regulations.
62
CSE Rule
Compliance
Status
Action
D. 1. 2 Declaration by the Directors

that the Company has not engaged
in any activities, which contravene
laws and regulations, declaration of
all material interests in contracts,
equitable treatment of shareholders
and going concern with supporting
assumptions or qualifications as
necessary
Yes
All statutory and material declarations are highlighted in the

Annual Report of the Board of Directors in the Annual Report.
D. 1. 3 Statement of Directors
responsibility
Yes
Refer Statement of Directors Responsibility.
D. 1. 4 Management Discussion and

Analysis
Yes
Refer Management Discussion and Analysis Section.
D. 1. 5 The Directors should report

that the business is a going concern,
with supporting assumptions or
qualifications as necessary.
Yes
The Board of Directors upon the recommendation of the Audit

Committee is satisfied that the Company and the Subsidiary
Company have sufficient resources to continue in operation for
the foreseeable future.
D. 1. 6 Remedial action at EGM if

net assets fall below 50% of value of
shareholders funds.
Yes
In the unlikely event that the net assets of the Company fall below
a half of shareholders funds, shareholders would be notified and
an extraordinary resolution passed on the proposed way forward.
D. 1. 7 Disclosure of Related Party

Transactions
Yes
Refer to page 133 in Notes to the Financial Statements.
D. 2. 1 Annual review of effectiveness

of system of Internal Control and
report to shareholders as required.
Yes
The Board has taken necessary steps to ensure the integrity of the
Groups accounting and financial reporting systems and internal
control systems remain effective via the review and monitoring
of such systems on a periodic basis. What follows is a brief
description of some of the key systems.
D. 2. 2 Internal Audit Function
Yes
The internal audit function in the Company and the Subsidiary

Company is not outsourced to the external auditor of that
Company in a further attempt to ensure external auditor
independence. The Auditors report on the Financial Statements
of the Company for the year under review is found in the Financial
Information section of the Annual Report.
D.2 Internal Control
The role of the internal auditor of the Company and its Subsidiary,
has transformed into a value adding function instead of merely a
policing function, where audit findings form an integral input in
modifying and improving our internal processes.
63
CSE Rule
Compliance
Status
Action
D. 2. 3 / D. 2. 4 Maintaining a sound
system of internal control
Yes
Risk Review Reports arising out of internal audits are, in the first
instance, considered and discussed at the functional unit levels
and after review by the respective CEO of the Company and its
Subsidiary are forwarded to the Audit Committee on a regular
basis. Further, the Audit Committee also assess the effectiveness
of the risk review process and systems of internal control on
a regular basis. Follow-ups on internal audits are done on a
structured basis.
D.3.1 The Audit Committee should

be comprised of a minimum of two
Independent Non-Executive Directors
or exclusively by Non-Executive
Directors, a majority of whom should
be Independent, whichever is higher.
The Chairman of the Committee
should be a Non-Executive Director,
appointed by the Board.
Yes
The Audit Committee comprises of four three independent NonExecutive Directors.
D.3.2 Terms of reference, duties and

responsibilities
Yes
The Audit Committee has the overall responsibility for overseeing

the preparation of Financial Statements in accordance with the
laws and regulations of the country and also recommending to the
Board, on the adoption of best accounting policies.
D. 3 Audit Committee
The Committee is also responsible for maintaining the relationship

with the external auditors and for assessing the role and the
effectiveness of the Group Business Process Review Division.
D.3.3 The Audit Committee is to have
written Terms of reference covering
the salient aspects as stipulated in the
section.
Yes
The Audit Committee has written Terms of reference outlining the

scope.
D.3.4 Disclosure of Audit Committee

membership
Yes
Refer Audit Committee Report.
D. 4 Code of Business Conduct and Ethics

D.4.1 Availability of a Code of Business
Conduct and Ethics and an affirmative
declaration that the Board of
Directors abide by such Code.
64
Yes
The written Code of Conduct, to which all the employees including

the Board of Directors are bound by, engraves the desired
behaviours of the staff at executive and above level, particularly
the Senior Management. This is being constantly and rigorously
monitored.
CSE Rule
Compliance
Status
Action
D.4.2 The Chairman must certify that

he/she is not aware of any violation of
any of the provisions of this Code.
Yes
The Chairman of the Board affirms that there has not been
any material violations of any of the provisions of the Code of
Conduct. In the instances where violations did take place, or were
alleged to have taken place, they were investigated and handled
through the Companys and its Subsidiarys well established
procedures which, among others, include direct and confidential
access to an independent, external Ombudsperson as discussed
above.
Yes
A Corporate Governance Section is included in the Annual Report.
Compliance
Status
Action
D.5 Corporate Governance disclosures

D.5.1 The Directors should include
in the Companys Annual Report a
Corporate Governance Report
E. Institutional investors
CSE Rule
E. 1 Shareholder voting
E.1.1 Conducting regular and structured Yes
dialogue with shareholders based on a
mutual understanding of objectives
The AGM is used as a forum to have a structured, objective dialogue

with shareholders. The Chairman ensures that the views expressed
at the AGM are communicated to the Board as a whole.
E. 2 Evaluation of Governance Disclosures

E.2. When evaluating Companys Yes
governance arrangements, particularly
those relating to Board structure and
composition, institutional investors
should be encouraged to give due
weight to all relevant factors drawn to
their attention
The corporate governance report in the annual report sets out the
Companys governance arrangements.
65
F. Other Investors
CSE Rule
Compliance
Status
Action
F.1 Investing Divesting Decision

F.1 Individual shareholders, investing Yes
directly in shares of Companies should
be encouraged to carry out adequate
analysis or seek independent advice in
investing or divesting decisions.
The Company, through the Parent Companys Investor Relations

division maintains an active dialogue with shareholders, potential
investors, investment banks, stock brokers and other interested
parties.
Also the annual report contains sufficient information to help make
an informed decision.
F.2 Shareholder Voting

F.2 Individual shareholders should be Yes
encouraged to participate in General
Meetings of the Company and exercise
their voting rights.
All steps are taken to facilitate the exercise of shareholder rights

at AGMs, including the receipt of notice of the AGM and related
documents within the specified period. Shareholders exercise their
voting rights for the election of new Directors, new long term
incentive schemes or any other issue of materiality that requires a
shareholder approval.
G. Sustainability Reporting
CSE Rule
Compliance
Status
Action
G Sustainability Reporting
G.1 G.1.7 Disclosure on adherence to Yes
sustainability principles.
Refer the Sustainability Report on page 20 to 25
The Group is committed to conducting its affairs, under a stakeholder model, with integrity, efficiency and fairness.
We believe that Corporate Governance in the future will reflect an increasing emphasis on customer satisfaction, both external
and internal customers, as a way of measuring the adaptability of the organisation over time. Additionally we also believe that
there will emerge a new type of corporate information and control architecture in the form of more specialised Board Groups
and Advisory Stakeholder Councils comprising employees, lead customers, suppliers and others. Our growing emphasis on
sustainability is the first step in this journey.
Our key areas of focus will be:
66
Creating operating structures which are agile and flexible in aligning to the constantly changing needs of the dynamic
environment that we operate in.
Maintaining appropriate internal controls and a robust framework of risk management and mitigation.
Reviewing, regularly, the internal processes and benchmarking them against international best practices.
Entrenching stakeholder relationships through more transparent information flows and proactive dialogue.

The powers and responsibilities of the Audit Committee are
governed by the Audit Committee Charter which is approved
and adopted by the Board. The terms of reference comply
with the requirements of the Corporate Governance Rules
as per Section 7.10 of the Listing Rules of the Colombo Stock
Exchange (CSE). The Audit Committees functions and scope
are in compliance with the requirements of the Code of
Best Practice on Audit Committee and conducted its affairs
in compliance with the requirements of the Code of Best
Practice on Audit Committees.
The Committee is tasked with assisting the Board in fulfilling
its oversight responsibility to the shareholders, potential
shareholders, the investment community and other
stakeholders in relation to the integrity of the Financial
Statements of the Group, ensuring that a good financial
reporting system is in place and is well managed in order to
give accurate, appropriate and timely information, that it is
in accordance with the Companys Act and other legislative
reporting requirements and that adequate disclosures are
made in the Financial Statements in accordance with the Sri
Lanka Accounting Standards.
The Audit Committee reviews the design and operational
effectiveness of internal controls and implement changes
where required and ensures that the risk management
processes are effective and adequate to identify and mitigate
risks.
The Audit Committee also ensures that the conduct of the
business is in compliance with applicable laws and regulations
and policies of the Group.
The Audit Committee also assesses the Groups ability to
continue as a going concern in the foreseeable future.
The Committee evaluates the performance and the
independence of the Internal Auditors and the External
Auditors. The Committee is also tasked with the responsibility
of recommending to the Board the re-appointment and
change of External Auditors and to recommend their
remuneration and terms of engagement.
In fulfilling its purpose, it is the responsibility of the Audit
Committee to maintain a free and open communication with
the Independent External Auditors, the outsourced Internal
Auditors and the management of the Company and to ensure
that all parties are aware of their responsibilities.
The Audit Committee is empowered to carry out any

investigations it deems necessary and review all internal
control systems and procedures, compliance reports, risk
management reports etc. to achieve the objectives as stated
above. The Committee has reviewed and discussed with
management and internal and external auditors, the audited
Financial Statements, the quarterly unaudited Financial
Statements as well as matters relating to the Companys
internal control over financial reporting, key judgments and
estimates in the preparation of Financial Statements and
the processes that support certification of the Financial
Statements by the Directors and the CFO.
Composition of the Audit Committee
The Audit Committee is a sub-committee of the Board of
Directors appointed by and responsible to the Board of
Directors. The Audit Committee consists of four Independent,
Non-Executive Directors in conformity with the Listing Rules
of The Colombo Stock Exchange, who are,

Mr. M P Jayawardena - Chairman

Mr. A D E I Perera
Mr. R Pieris
The Audit Committee comprises of individuals with extensive

experience and expertise in the fields of Finance, Corporate
Management, Legal and Marketing. The Chairman of the
Audit Committee is a Chartered Accountant. A brief profile
of each member of the Audit Committee is given on pages
16 and 17 of this report under the section Board of Directors.
Meetings of Audit Committee
The Audit Committee meets as often as may be deemed
necessary or appropriate in its judgment and at least quarterly
each year. During the year under review there were six (6)
meetings and the attendance of the committee members
are given in the table below.
The CEO, the CFO and the Head of Finance attended such
meetings by invitation and briefed the committee on specific
issues. The External Auditors and the Internal Auditors
were also invited to attend meetings when necessary. The
proceedings of the Audit Committee are reported to the
Board of Directors by the Chairman of the Audit Committee.
67
23rd July 2013
13th August 2013
22nd October 2013
21st January 2014
25th March 2014
Mr. M P
Jayawardena
Mr. S H
Amarasekera PC
Mr. A D E I
Perera
Mr. R Peiris
Name
17th May 2013
Summary of Activities during the Financial Year

Oversight of Company and Consolidated Financial
Statements
The Committee reviewed with the Independent External
Auditors who are responsible for expressing an opinion on
the truth and fairness of the audited Financial Statements
and their conformity with the Sri Lanka Financial Reporting
Standards (SLFRS) and Lanka Accounting Standards (LKAS).
The Committee also reviewed the Accounting Policies
of the Company and such other matters as are required
to be discussed with the Independent External Auditors
in compliance with Sri Lanka Auditing Standard 260
Communication of Audit Matters with those charged with
Governance. The quarterly Financial Statements were
also reviewed by the Committee and recommended their
adoption to the Board.
The Committee also reviewed the process to assess the
effectiveness of the internal financial controls that have been
designed to provide reasonable assurance to the Directors
that the Financial Reporting System can be relied upon in
preparation and presentation of the Financial Statements of
the Company and the Group.
Internal Audit
The Committee monitors the effectiveness of the internal
audit function and is responsible for approving their
appointment or removal and for ensuring they have adequate
access to information required to conduct their audits.
68
The internal audit function of the Company has been

outsourced to Messrs PricewaterhouseCoopers (Private)
Limited, a firm of Chartered Accountants. The Audit
Committee has agreed with the Internal Auditor as to the
frequency of audits to be carried out, the scope of the audit,
the areas to be covered and the fee to be paid for their
services.
During the year under review, the Audit Committee
has met the Internal Auditors to consider their reports,
management responses and matters requiring follow up
on the effectiveness of the internal controls and audit
recommendations.
The internal audit frequency depends on the risk profile of
each area, higher risk areas being on a shorter audit cycle. The
Audit Committee is of the opinion that the above approach
provides an optimal balance between the need to manage
risk and the costs thereof.
Risk and Control Review
The Audit Committee has reviewed the Business Risk
Management Process and procedures adopted to manage
and mitigate the effects of such risks and observed that the
risk analysis exercise has been conducted. The key risks that
could impact operations have been identified and wherever
necessary, appropriate action has been taken to mitigate
their impact to the minimum extent.
External Audit
The External Auditors of the Company Messrs Ernst & Young
Chartered Accountants submitted a detailed audit plan for
the financial year 2013/14, which specified, inter alia, the
areas of operations to be covered in respect of the Company.
The audit plan specified areas of special emphasis which
had been identified from the last audit and from a review of
current operations. The Audit committee had meetings with
the External Auditor to review the scope, timelines of the
audit plan and approach for the audits.
The areas of special emphasis have been selected due
to the probability of error and the material impact it can
have on the Financial Statements. At the conclusion of the
audit, the External Auditors met with the Audit Committee
to discuss and agree on the treatment of any matter of
concern discovered in the course of the audit and also to
discuss the Audit Management Letters. Actions taken by the
Management in response to the issues raised were discussed

with the CEO. There were no issues of significance during the
year under review.
The Audit Committee also reviewed the audit fees of the
External Auditors of the Company and recommended its
adoption by the Board. It also reviewed the other services
provided by the auditors in ensuring that their independence
as auditors was not compromised.
The Audit Committee has received a declaration from Messrs
Ernst & Young, as required by the Companies Act No. 7 of
2007, confirming that they do not have any relationship or
interest in the Company, which may have a bearing on their
independence within the meaning of the Code of Conduct
and Ethics of The Institute of Chartered Accountants of Sri
Lanka.
The Audit Committee has proposed to the Board of Directors
that Messrs Ernst & Young, Chartered Accountants, be
recommended for reappointment as auditors of the
Company for the financial year commencing 1st April 2014,
at the next Annual General Meeting.
Conclusion
The Audit Committee is satisfied that the effectiveness
of the organisational structure of the Group in the
implementation of the accounting policies and operational
controls, provide reasonable assurance that the affairs of the
Group are managed in accordance with accepted policies
and that assets are properly accounted for and adequately
safeguarded. The Committee is also satisfied that the
Groups Internal and External Auditors have been effective
and independent throughout the period under review.
M P Jayawardena
Chairman, Audit Committee
30 May 2014
Compliance with Financial Reporting and Statutory

Requirements
The Audit Committee receives a quarterly declaration
from the CEO, CFO and the Head of Finance, listing any
departures from financial reporting, statutory requirements
and Group policies. Reported exceptions, if any, are followed
up to ensure that appropriate corrective action has been
taken.
With a view of ensuring uniformity of reporting, the Group
has adopted the standardised format of Annual Financial
Statements developed by the ultimate Parent Company.
Support to the Committee
The Committee received excellent support and timely
information at all times from the Management during the
year to enable them to carry out its duties and responsibilities
effectively.
Evaluation of Committee
The Audit Committee formally evaluated the performance
of the Committee as well as the individual contribution of
each member. Steps have been taken to address the matters
highlighted following such evaluation.
69

Introduction
Keells Food Products PLC is exposed to various forms of
industrial, operational, environmental and financial risk
arising from transactions entered into and the economic
environment within which it operates. Enterprise Risk
Management (ERM), is very highly related and connected to
Sustainability and forms a part of the Companys business
process. The objective of the Risk Management Strategy of
the Company is to identify and manage risk, risk mitigation,
harness opportunities, adapt to changing environment and
adopt long-term and short-term strategies which link well
with the overall objectives of the Company and the John
Keells Group.
The annual risk management cycles begins at the Company
with a detailed discussion and identification of risks, impacts
and preventive, detective and corrective mitigation plans in
conjunction with the JKH ERM Division, which constitute
the bottom-up approach to ERM, where risk management
is believed to be an integral part of strategic decision
making. Risks are identified and assessed through a Risk
Control Self-Assessment (RCSA) document unique to the
Companys business . The Company rates its level of risk for
each identified risk event using an evaluation of the expected
severity of impact of the risk event and the likelihood of its

occurrence. Further, the velocity of impact of a risk event, or
the speed at which the risk event will impact the organisation,
in the RCSA document, has served to prioritise risks and their
relevant mitigation plans.
The Company is the ultimate owners of their risks and are
responsible for reviewing their RCSA form on a quarterly
basis. This reviewed RCSA form is then considered by the
JKH ERM division in consolidating risks for the John Keells
Group.
Bottom Up Approach of Risk Management Framework
The ERM framework adopted and implemented by the
Company involves the following:
i. Identification of types of Risk
A Risk Event
Any event with a degree of uncertainty which, if occurs, may
result in the Company not meeting its stated objectives.
Bottom Up Approach of Risk Management Framework

John Keells
Risk Universe
Headline Risks
Business
Strategies &
Policies
Business
Process
JKH PLC Audit Committee
Risk
Normalisation
Group Executive Committee (GEC)
Risk
Validation
KFP Audit Committee
Organisation
& People
Analysis &
Reporting
Technology &
Data
JK Group
Review Risk
Report &
Action
BU Review &
Sector Risk
Report &
Action
Management Committee
BU Risk
Report &
Action
Operational Units
Report Content
Risk Management Team

Risk and control Review Team
Sustainability Integration
Risk
Presentation
Risk
Identification
70
External
Environment
Core Sustainability Risks
ii. Establishment of Risk Grid with Likelihood of
Core Sustainability Risks are defined as those risks having

a catastrophic impact to and from the organisation, but may
have a very low or nil probability of occurrence.
Occurrence and Severity of Impact

Using the guideline in Table 1 given below, a Risk Grid is
established for the Company. Every Risk is analysed in terms
of Likelihood of Occurrence and Severity of Impact assigning
a number ranging from 1 (low probability/impact) to 5 (high
probability/impact) to signify the possibility of occurrence
and the level of impact to the organisation. Please see Table
1 for further details.
These are risks that threaten the sustainability or long term

viability of a business and are typically risks stemming from
the Companys impact on the environment or society that
will have an eventual negative impact on the longevity of the
business operations.
iii. Establishment of Level of Risk based on above

Based on the values assigned for each individual risk, using the
matrix given in Table 1, a level of risk is established by multiplying
the Likelihood of Occurrence with Severity of Impact.
Table 1 : Guideline for Rating Risks
Impact /Severity
Catastrophic/
extreme Impact
Major/ very high

impact
Moderate/
High Impact
Minor Impact
Low/ Insignificant
Impact
10
15
20
25
12
16
20
09
12
15
10
Rare/Remote to
occur
Unlikely to
occur
Possible to
occur
Likely to
occur
Almost certain
to occur
5
Occurrence/Likelihood
The Color Matrix implies the following;

Priority Level
Colour Code
Score
1 2 3 4 5
Ultra High
High
Medium
Low
Insignificant
15-25 9-14 4-8 2-3
71

Quarterly Review of the Risks Identified using the above
framework by the Company
The CEO and the Functional Heads are responsible to ensure
that each risk item is tracked over the course of the year
(reviewed at least on a quarterly basis) and to ensure that
mitigatory actions identified during the risk review process
are carried out adequately.
This ensures that the Company has a living document that is

updated based on internal and external conditions.
Risk Universe
The identified risks are broadly classified into the Risk
Universe as identified by the John Keells Group. The Risk
Universe is as follows in Table 2.
Table 2 : Risk Universe
Related Risks
Headline
Risk
External
Environment
Business Strategies
and Policies
Business Process
Organisation and
People
Analysing and
Reporting
Technology and
Data
Political
Reputation and
Brand Image
Internal Business
Process
Leadership
Performance
Measurement
and reporting
Technology
Infrastructure/
Architecture
Competitor
Capital and
Finance
Operations
Planning,
Production,
Process
Skills/
Competency/
Motivation
Budgeting/
Financial
Planning
Data
Relevance and
Integrity
Catastrophic
Loss
Strategy and
Innovation
Operations
Technology,
Design,
Execution,
Continuity
Change
Readiness
Accounting/ Tax Data

Information
Processing
Integrity
Customer
Expectations
Business/Product
Portfolio
Resource
Capacity and
Allocation
Communication
External
Reporting and
Disclosures
Technology
Reliability and
Recovery
Macro
Economic
Organisation
Structure
Vendor/Partner
Reliance
Performance
Incentives
Pricing /
Margins
IT Security
Foreign
Exchange and
Interest Rates
Stakeholders
Channel
Effectiveness
Accountability
Market
Intelligence
IT processes
Weather and
Climate
Investment,
Mergers and
Acquisitions
Interdependency
Fraud and Abuse Contract

Commitment
Environment,
Health and Safety
Customer
Satisfaction
Knowledge/
Intellectual
Capital
Legal, Regulatory
Compliance and
Privacy
Change
Integration
Innovation
Labor Relations
Property and
Equipment
Damage
Attrition
Liability
72
Insurable risks
Sustainable Risk Management

Risk management and sustainability are firmly intertwined
within the Company. The Company believes that sustainability
is a form of overall risk management, considering not only
the operational and financial risks faced by the Company,
but a process that also proactively manages the risks
faced by the Company resulting from possible impacts
on the environment, employees and community due to its
operations. Risks and issues identified herein were tracked on
the RCSA document of the Company.
Risk Management During the Reporting Year
The Enterprise Risk Management cycle begins during the
second quarter with the annual risk review of the Company.
The Chief Executive Officer and their respective Heads of
Departments and the Company comprehensively assess,
rate and set mitigation plans for any structural, operational,
financial and strategic risks relevant to each Department,
based on past information and horizon scanning. Awareness
and training are also provided to the Company regarding the
introduction of the above mentioned concept of velocity
and the streamlining and categorisation of mitigation plans
to ensure a more structured and focused approach to risk
mitigation.
Any high level risks or Core Sustainability Risks were then
reviewed by the Management Committee headed by the
Chief Executive Officer as a means of validating the risk
process at the Company level. The significant risk areas that
impact the achievement of the strategic business objectives
of the Company and the measures taken to address these
risks are given below;
The Company under the headline risk External
Environment has identified the following areas of risk;
Increase in cost of production due to Price Volatility of Raw
Materials
The Companys cost of production is largely dependent
upon the cost of meat sourced from local suppliers, the
depreciation of the rupee and duties and taxes which impacts
imported raw material.
Over the last few years there has been significant price
volatility in the market specially in the pork and chicken
categories. The Company has mitigated some of the risks
associated with price volatility as well as availability by entering
into long-term forward contracts at guaranteed terms as
well as by training the local farmers in best practices and

monitoring of such, and by establishing a strong relationship
with the farming community and other local suppliers, to
ensure continuous supply at stable price levels.
This risk has been categorized as medium for the Company
considering its likelihood of occurrence and impact. The risk
control measures identifying alternate suppliers, monitoring
of raw material prices on a continuous basis, backward
integration for selected raw materials and sustainable
sourcing initiatives have all been put in place.
Changes in Interest Rates
The Companys policy is to manage its interest rate risk by
using a mix of fixed and variable rate debt taking advantage
of the changes in the market rates. Guidance is received from
the JKH Group Treasury division with respect to forecasting
of interest rates which has been of immense value in the
management of this risk exposure.
This risk has been categorized as low for the Company given
the impact and likelihood of occurrence.
The Company under the head line risk Organization and
People has identified the following areas as risks;
Human Resources (HR) and Labour Relations
Key HR areas ranging from recruitment and selection,
career management, performance management, training
and development, competency frameworks and coaching
skills to talent appreciation, reward and recognition and
compensation and benefits have been reviewed and revised
to modern standards.
The Company has 361 employees in its cadre and 137 of the
staff are represented by unions. A deterioration of labour
relations or a significant increase in labour costs would have
a significant impact on the Company results. With a view
to addressing the above concerns, key HR areas ranging
from performance management, training and development,
coaching and mentoring skills to reward and recognition
and compensation and benefits have all been reviewed and
revised in keeping with modern trends and methodologies.
The Company maintains a dialogue, on a proactive basis with
unionised employees to maintain cordial industrial relations.
This risk of labour relations has been categorized as low
for the Company given that the impact and likelihood of
occurrence.
73

Deficiencies in skills/ knowledge/training amongst existing
staff cadre is identified as an area for improvement and the
Company has deployed specialised training programs which
are targeted to improve specialised skills and knowledge.
Limited availability of specialised staff in the market is also
a matter of concern. The Company believes in succession
planning to overcome this risk and has in place various
personal development programmes to develop skills and
capabilities of internal staff to take over higher responsibilities
and challenges
This risk of attrition among key expertise in management has
been categorized as medium for the Company given that the
impact and likelihood of occurrence given the risk control
measures in place as described above.
Reliance on Effective Internal Controls
Segregation of duties, definition of authority limits, operating
manuals, detective and preventive controls and internal &
external audit procedures which are independent of each
other enable the management to ensure that the operations
are being carried out as per laid down procedures.
This risk of fraud and corruption has been categorized as
insignificant for the Company based on that the impact and
likelihood of occurrence.
Fraud and Corruption
The Company promotes an organisational culture that
is committed to the highest level of honesty and ethical
dealings and will not tolerate any act of fraud or corruption.
The Anti Corruption Policy is designed to put these principles
into practice. It is the Company policy to protect itself and its
resources from fraud and other similar malpractices, whether
by members of the public, contractors, sub-contractors,
agents, intermediaries or its own employees.
Apart from the legal consequences of fraud and corruption,
improper acts have the potential to damage the Companys
image and reputation and financial position. Unresolved
allegations can also undermine an otherwise credible
position and reflect negatively on innocent individuals. All
staff must be above fraud and corruption. Sanctions will
74
apply to those who are not. In addition, staff must act so they
are not perceived to be involved in such activities. Through
transparent and accountable decision-making, together
with open discussion by staff and managers about the risks
of fraud and corruption, the Company seeks to foster an
organisational culture which does not tolerate fraud or
corruption.
This risk of fraud and corruption has been categorised as
low for the Company given the impact and likelihood of
occurrence.
The Company under the head line risk Business Process
has identified the following risks;
Product Liability (Risk of Food Contamination and
Poisoning)
The Company has identified Product liability which can arise
due to fault in the product as a core risk. Over the years the
Company has taken several steps to mitigate this risk which
includes certifying the manufacturing processes through
ISO 9001(2008) and ISO 22000 (2005), adherence to GMP
and Food Safety standards, compliance with all Consumer
Affairs Authority rules and regulations and other statutory
regulations. Further the Company has established a Hot line
to convey any message regarding the products to Company
officials and an internal mechanism has been established to
address these suggestions or complains promptly.
Products manufactured and sold by the Company have
a leading house hold brand name with high brand equity.
Therefore it must be managed and protected to survive and
prosper in the years to come. The irreparable damage done to
the brand following a crisis or catastrophe may substantially
outweigh the immediate and visible costs.
This risk has been categorized by the Company as low
considering the impact to the Company and the likelihood
of occurrence.
Meeting Quality Expectations

The food manufacturing industry is subject to general risks
of food spoilage or contamination, consumer preferences
with respect to nutrition and health related concerns,
governmental regulations, consumer liability claims etc. The
quality assurance system of the Company is administered by
qualified specialists using international Benchmarks. Towards
addressing nutritional concerns the Company has a food
nutritionist validating all products nutritional standards. With
respect to Governmental regulations, the Company ensures
only ingredients that satisfy international standards are
used in its product formulation. The Company also ensures
compliance to the ISO 22000 food safety standard with the
conduct of regular internal and external audits as applicable
to the industries and product lines we operate.
This risk has been categorised by the Company as low
considering the likelihood of occurrence being low due to
the above mentioned mitigatory processes.
Exposure to Credit Facilities
Credit facilities are offered to the Companys customers in
keeping with the business environment. This may expose the
Company to default of payments. The Company mitigates
such risk by offering credit within set limits following an
evaluation of creditworthiness together with measures to
adequately safeguard exposures with sufficient asset backed
securities.
This risk has been categorised by the Company as insignificant
considering the impact to the Company and the likelihood of
occurrence.
Ensure Compliance Legal and Regulatory Requirements
Compliance Risk is managed through the use of legal
advice from appropriately qualified and experienced legal
professionals supplemented by the JKH legal team. We
have put in place periodic reporting of compliance by the
respective functional managers.
This risk has been categorized by the Company as insignificant
considering the impact to the Company and the likelihood of
occurrence.
75
Meat Balls are the convenient option when it

comes to making meals in minutes.
Our Meat Balls category consists of frozen
and value added products, which deliver
variety and convenience to its consumers.
y. Tue
s
Who else offers you

such tasty, economical,
easy-to-prepare meals
for breakfast, lunch
and dinner? Only from
Keells Foods!
First Quarter Released on

24th July 2013
Second Quarter Released on
23rd October 2013
Third Quarter Released on
23rd January 2014
Fourth Quarter Released on
30th May 2014
5th June 2014
Thirty Second Annual General Meeting 30th June 2014
inner.
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Annual report of the Board of Directors

on the affairs of the Company
Income Statement
Financial
Statements
78
84
85
86
87
88
89
91
92

on the Affairs of the Company
The Board of Directors of Keells Food Products PLC has
pleasure in presenting their Annual Report together with the
Audited Financial Statements of Keells Food Products PLC
and the Audited Consolidated Financial Statements of the
Group for the year ended 31st March 2014.
The content of this Report has also considered the
requirements of the Companies Act No 7 of 2007, the
relevant Listing Rules of the Colombo Stock Exchange and
recommended best reporting practices.
The Company was incorporated on the 5th of November
1982 as a Public Limited Liability Company and the shares
of the Company are listed on the Colombo Stock Exchange.
Pursuant to the requirements of the new Companies Act
No.7 of 2007, the Company was re-registered and obtained
a new Company number PQ 3 on 15th June 2007.
Corporate Conduct
The business activities of the Company and its Subsidiary are
conducted with the highest level of ethical standards.
Principal Activities
Company
The principal activities of the Company are the manufacture
and sale of processed meats, crumbed products and raw
meats which remained unchanged.
Subsidiary
The principal activity of John Keells Foods India (Pvt) Limited
is marketing of processed meat products in India. The
Company was incorporated on the 7th April 2008.
Business Review
A review of the Groups performance during the year is given
in the Chairmans Review and the Management Discussion
and Analysis section. These reports form an integral part of
the Annual Report of the Board of Directors and together
with the audited Financial Statements provide a fair review of
the performance of the Company and its Subsidiary during
the financial year ended 31st March 2014.
Future Developments
An overview of the future developments of the Group is given
in the Chairmans Review (pages 6 to 7) and Management
Discussion and Analysis (pages 10 to 15).
78
Financial Statements and Auditors Report

The Financial Statements for the year ended 31st March 2014
has been prepared, in accordance with SLFRS/LKASs, the
Accounting Standards issued by The Institute of Chartered
Accountants of Sri Lanka to converge with International
Financial Reporting Standards (IFRS) and International
Accounting Standards (IAS).
The Financial Statements of the Group duly signed by the
Directors are set out on pages 86 to 136 and the Auditors
Report on the Financial Statements is provided on page 85
of this Annual Report.
Going Concern
After considering the financial position, operating
conditions, regulatory and other factors and such matters
required to be addressed in the Code of Best Practice on
Corporate Governance, issued jointly by the Institute of
Chartered Accountants of Sri Lanka and the Securities and
Exchange Commission of Sri Lanka, the Directors have a
reasonable expectation that the Company and its Subsidiary
possess adequate resources to continue in operation for
the foreseeable future. For this reason, they continue to
adopt the going concern basis in preparing the Financial
Statements.
Stated Capital
In compliance with the Companies Act No. 7 of 2007, the
Financial Statements reflect the Stated Capital of the
Company. The Stated Capital is the total of all amounts
received by the Company in respect of the issued Share
Capital.
The total Stated Capital of the Company as at 31st March
2014 was Rs. 1,295 million (Rs. 1.295 million as at 31st March
2013) details of which are provided in note 23 (page 129) to
the Financial Statements.
Significant Accounting Policies
The Accounting Policies based on Accounting Standard
issued by the Institute of Chartered Accountants of Sri Lanka
(SLFRS/LKASs) are provided in detail in the notes to the
Financial Statements on pages 92 to 106.
Revenue
The Net Revenue generated by the Company for the financial
year amounted to Rs. 2,280 million (Rs. 2,197 million in 2012/13)
and the Consolidated Net Revenue of the Group amounted to
Rs. 2,280 million (Rs. 2,197 million in 2012/13). An analysis of the
Net Revenue is given in Note 2 to the Financial Statements.
Financial Results and Appropriations

A Synopsis of the Groups performance is presented below;
Group
For the year ended 31 March
2014
2013
in Rs. 000s
Profit/(Loss) from Operating Activities
(33,593)
64,959
Finance Cost
(35,663)
(26,355)
Finance Income
57,302
76,610

Profit/(Loss) Before Tax
(11,954)
115,214
Taxation (Charge)/Reversal including Deferred Tax
12,421
(24,331)
Profit After Tax
467
90,883

Balance brought forward from the previous year
154,356
65,340
Transfer of General Reserve
-
20,305
Transfer of Dividend Reserve
-
134
Other Comprehensive Income/(Loss)
(2,732)
742
Direct cost on Rights Issue
-
(6,048)
Profit available for Appropriation
152,092
171,356

Appropriations
Dividend paid for previous year
(51,000)
(17,000)
Unappropriated Profit carried forward
101,092
154,356

First and Final dividend declared of Rs. 2/- per share (2012/13 -Rs. 2/-)
to be paid out of profits *
(51,000)
(51,000)
Balance to be carried forward to the next year
50,092
103,356
* The First and Final dividend recommended for this financial year has not been recognised at the date of the Statement of Financial
position in compliance with LKAS 10 Event after the reporting period.
Provision for Taxation
Corporate Donations
Provision for taxation has been computed at the rates given

Note 8, 20.1 and 27 to the Financial Statements.
During the year the Group made donations amounting to Rs.

1.9 million (Rs. 0.7 million in 2012/13). The Group made no
political donations.
Segment Reporting
A segmental analysis of the activities of the Company and
the Group is given in Note 2.1 to the Financial Statements.
Related Party Transactions
Related Party Transactions, exceeding the lower of 10% of
Equity or 5% of the total assets of the Company is detailed
below;
Jaykay Marketing Services (Pvt) Limited - Rs. 486 million (Rs.
473 million in 2012/13 ).
Directors have disclosed the transactions with related parties
in terms of Sri Lanka Accounting Standard LKAS 24 Related
Party Disclosures, in Note 31 to the Financial Statements.
Dividends
The Directors have declared a first and final dividend of
Rs. 2/- per share for the year ended 31st March 2014, from
the profits available for appropriation. The total dividend
payout amounts to Rs. 51 million in accordance with Sri
Lanka Accounting and Reporting Standards 10, events after
the reporting period, the declared dividend has not been
recognised as a liability as at 31st March 2014.
As required by sections 56 (2) of the Companies Act No.
7 of 2007, the Board of Directors have confirmed that
the Company satisfies the solvency test in accordance
with section 57 of Companies Act No. 7 of 2007 and have
79

obtained a certificate from the auditors prior to declaring
the first and final dividend of Rs. 2/- per share.
The dividends paid out are out of taxable profits of the
Company and will be subjected to a 10% withholding tax.
Property, Plant and Equipment
The details of Property, Plant and Equipment of the Company
and its Subsidiary are shown in Note 13 (pages 121 to 124).
Capital Expenditure
The total capital expenditure on acquisition of Property,
Plant and Equipment and intangible assets of the Company
amounted to Rs. 346 million (Rs. 207 million in 2012/13) details
of which are given in Note 13 to the Financial Statements.
The capital expenditure approved and contracted but not
provided in the Financial Statements, is given in Note 34 to
the Financial Statements.
Market Value of Freehold Properties
The Land and Buildings owned by the Company were
revalued by a professionally qualified independent valuer as
at 31 March 2013. The Directors are of the opinion that the
re-valued amounts are not in excess of the current market
values of such properties.
The details of the revalued land and buildings of the
Company as well as the extent of the land, location and
the number of buildings along with the relevant accounting
policies are given in note 1.4.4 and 13.4 of the Financial
Statements and the real estate portfolio on page 141 of the
Annual Report.
Investments
Details of investments held by the Company are disclosed in
Note 15 to the Financial Statements.
Reserves
Total reserves as at 31st March 2014 for the Company and
Group amounted to Rs. 253 million (Rs. 300 million in
2012/13) and Rs. 255 million (Rs. 303 million in 2012/13)
respectively.
The detailed movement of Reserves is given in the Statement
of Changes in Equity on page 91 of the Annual Report.
Events occurring after the reporting period
Events occurring after the date of the Statement of Financial
Position are given in Note 35 to the Financial Statements.
80
Contingent Liabilities and Capital Commitments

There were no material Contingent liabilities or Capital
commitments as at 31st March 2014 except those disclosed
in Note 33 and 34 to the Financial Statements.
Outstanding Litigation
In the opinion of the Directors and in consultation with the
Company lawyers, litigation currently pending against the
Company will not have a material impact on the reported
financial results or future operations of the Company.
Human Resources (HR)
The Group has an equal opportunity policy and these
principles are enshrined in specific selection, training,
development and promotion policies, ensuring that all
decisions are based on merit. The Group practices equality
of opportunity for all employees irrespective of ethnic origin,
religion, political opinion, gender, marital status or physical
disability.
The Number of persons directly employed by the Company
and its Subsidiary as at 31st March 2014 was 361 (31st March
2013- 483).
The Group is committed to pursuing various HR initiatives
that ensure the individual development of all our team as well
as facilitating the creation of value for themselves, the Group
and all other stakeholders.
There were no material issues pertaining to employees and
industrial relations during the year under review.
System of Internal Controls
The Directors acknowledge their responsibility for the system
of Internal Control and having conducted a review of internal
controls covering financial, operational, compliance controls
and risk management, have obtained reasonable assurance
of their effectiveness and successful adherence for the
period up to the date of signing the Financial Statements.
Corporate Governance practices and principles with respect
to the management and operations of the Group are set
out on pages 28 to 66 of the Annual Report. The Directors
confirm that the Group is in compliance with the Rules on
Corporate Governance as per the listing rules of Colombo
Stock Exchange.
The Directors declare that:

The Company and its Subsidiary have not engaged in any
activities, which contravene laws and regulations.
The Directors have declared all material interests in
contracts involving the Company and its Subsidiary and
refrained from voting on matters in which they were
materially involved.
The Company has made all endeavours to ensure the
equitable treatment of all shareholders.
Human Resources and Compensation Committee

As permitted by the Listing Rules of the Colombo Stock
Exchange, the Human Resources and Compensation
Committee of John Keells Holdings PLC, the Parent Company
of Keells Food Products PLC, functions as the Human
Resources and Compensation Committee of the Company.
The Human Resources and Compensation Committee of
John Keells Holdings PLC comprises of five Independent
Non-Executive Directors:
A review of Internal Controls covering financial,

operational and compliance controls and risk
management has been conducted and the Directors have
obtained a reasonable assurance of their effectiveness
and successful adherence.
Mr. E F G Amerasinghe
Dr. I Coomaraswamy
Mr. A R Gunesekara
Mrs. S Tiruchelvam
Mr. M A Omar
Mr. N A Fonseka
The Board of Directors is committed to maintaining an

effective Corporate Governance structure and process. A
full report on Corporate Governance is found on pages 28
to 66.
The Remuneration Policy of the Company and its Subsidiary

is detailed in the Corporate Governance Report on Page 36
of the Annual Report.
Risk Management
Share Information
The Board and the Executive Management of the Company

have put in place a comprehensive risk identification,
measurement and mitigation process. The Risk Management
process is an integral part of the annual strategic planning
cycle. A detailed overview of the process is outlined in the
Enterprise Risk Management Report on pages 70 to 75.
Audit Committee
The following Non-Executive, Independent Directors of the
Board served as members of the Audit Committee during
the year.
Mr. M P Jayawardena - Chairman
Mr. A D E I Perera
Mr. R Pieris
The report of the Audit Committee is given on pages 67 to
69 of the Annual Report. The Audit Committee has reviewed
all other services provided by the External Auditors to the
Group to ensure that their independence as Auditor has not
been compromised.
- Chairman
- Resigned w.e.f. 09/09/2013

- Appointed w.e.f. 28/05/2013
- Appointed w.e.f. 07/11/2013
An Ordinary Share of the Company was quoted on the

Colombo Stock Exchange at Rs. 55/- as at 31st March
2014 (31st March 2013 Rs. 70/-). Information relating to
earnings, dividends, net assets and market value per share is
given in the Ten Year Information section on page 140, and
Key Ratios and information on share trading is given on page
141 of this report.
Shareholdings
There were 1,038 registered shareholders, holding ordinary
voting shares as at 31st March 2014 (1,051 registered
shareholders as at 31st March 2013). The distribution of
shareholdings including the percentage held by the public
is given on page 137 of this report. The Company has made
every endeavour to ensure the equitable treatment of all
shareholders.
Equitable Treatment to all Shareholders
The Company has made every endeavour to ensure the
equitable treatment of all shareholders and has adopted
adequate measures to prevent information asymmetry.
Substantial Shareholdings
The list of the top twenty shareholders is given on page 138
of this report.
81

Information to Shareholders
Directors and CEOs Interests in Shares
The Board strives to be transparent and provide accurate

information to shareholders in all published material. The
quarterly financial information during the year has been sent
to the Colombo Stock Exchange in a timely manner.
The Directors individual shareholdings in the Company as at 31

March 2014 and 31st March 2013 were as follows;
Directorate
The Board of Directors of Keells Food Products PLC consisted of
eight Directors who served during the year and as at the end of
the Financial Year are given below.
Brief Profiles of the Director's appear on pages 16 to 17 of the
Annual Report.
No other Director held office during the period under review.
Mr. S C Ratnayake
(Chairman)
(Non Executive,Non
Independent)
Mr. A D Gunewardane
(Non Executive, Non

Independent)
Mr. J R F Peiris
(Non Executive, Non

Independent)
Mr. J R Gunaratne
(Non Executive, Non

Independent)
Mr. M P Jayawardena
(Non Executive, Independent)
Mr.S H Amarasekera PC (Non Executive, Independent)

Mr.A D E I Perera
Mr. R Pieris
The Board of Directors of John Keells Foods India (Pvt) Limited

who served during the year and as at the end of the Financial
Year are given below.
No other Director held office during the period under review.
Mr. S C Ratnayake
(Chairman)
(Non Executive, Non

Independent)
Mr. R S Fernando
(Non Executive, Non

Independent)
Mr. J R Gunaratne
(Non Executive, Non

Independent)

Retirement of Directors by Rotation or otherwise and their
Re-election
Mr. J R F Peiris and Mr. M P Jayawardana retire by rotation
in terms of Article 83 of the Articles of Association of the
Company, and being eligible offer themselves re-election.
82
Name of Directors
Mr.S C Ratnayake
(Chariman)
As at 31
March 2014
12,750
As at 31
March 2013
12,750
Mr.A D Gunewardane
Mr.J R F Peiris
Mr.J R Gunaratne
Mr.M P Jayawardane
Mr.S H Amarasekara PC
Mr.A D E I Perera
Mr.R Pieris
Mr.R F N Jayasooriya -CEO

Resigned w.e.f 19.06.2014
Remuneration to Directors
Executive Directors remuneration is established within a
framework approved by the Human Resources and Compensation
Committee. The Directors are of the opinion that the framework
assures appropriateness of remuneration and fairness for the
Company. The remuneration of the Non-Executive Directors
is determined according to scales of payment decided upon by
the Board previously. Details of Directors fees and emoluments
paid during the year are disclosed in the Note 7 to Financial
Statements.
Directors Meetings
Details of Directors meetings are presented on page 34 of this
report.
Interests Register
The Company has maintained an Interests Register as
contemplated by the Companies Act No 7 of 2007. In
compliance with the requirements of the Companies Act No 7
of 2007 this Annual Report contains particulars of entries made
in the Interests Register.
Particulars of Entries in the Interests Register for the Financial
Year 2013/14
a) Interests in Contracts - The Directors have all made a
General Disclosure to the Board of Directors as permitted
by Section 192 (2) of the Companies Act No. 7 of 2007 and
no additional interests have been disclosed by any Director.
b) Share Dealings: There have been no disclosures of share
dealings as at 31st March 2014.
c) Indemnities and Remuneration There have been no new

disclosures made in respect of indemnities and remuneration in
the Interest Register as at 31st March 2014.
Directors Responsibility for Financial Reporting
The Directors are responsible for the preparation of the Financial
Statements of the Company and its Subsidiary to reflect a true
and fair view of the state of its affairs. The Directors are of the
view that these Financial Statements have been prepared in
conformity with the requirements of the Sri Lanka Accounting
Standards, Companies Act No. 7 of 2007, Sri Lanka Accounting
and Auditing Standards Act No. 15 of 1995 and the Listing Rules
of the Colombo Stock Exchange.
resources and the environment, as well as addressing material

issues highlighted by other stakeholders such as the community
and employees. These steps have been encapsulated in a Groupwide sustainability initiative which has seen continuous progress
over the last few years.
Research and Development
The Group has an active approach to research and development
and recognises the contribution that it can make to the Groups
operations. Significant expenditure has taken place over the
years and substantial efforts will continue to be made to
introduce new products and processes and develop existing
products and processes to improve operational efficiency.
Compliance with Laws and Regulations
Auditors
The Company and its Subsidiary has complied with all applicable
laws and regulations. A compliance checklist is signed on a
quarterly basis by responsible officers and any violations are
reported to the Audit Committee and Board of Directors.
The Financial Statements for the year have been audited by

Messrs Ernst & Young Chartered Accountants. The retiring
auditors, Messrs Ernst & Young have intimated their willingness
to continue in office and a resolution to re-appoint them as
auditors and authorising the Directors to fix their remuneration;
will be proposed at the Annual General Meeting.
Supplier Policy
The Group endeavours to transact business with reputed
organisations capable of offering quality goods and services at
competitive prices with a view to building mutually beneficial
business relationships.
Statutory Payments
The Directors confirm to the best of their knowledge that all
taxes, duties and levies payable by the Group and all contributions,
levies and taxes payable on behalf of and in respect of the
employees of the Group and all other known statutory dues as
were due and payable by Group as at the date of the Statement
of Financial Position have been paid or where relevant provided.
Environment Protection
The Group is conscious of the impact, direct and indirect, on
the environment due to its business activities. Every endeavour
is made to minimise the adverse effects on the environment to
ensure sustainable continuity of our resources.
Voluntary Retirement Scheme (VRS)
During the year in review the Company offered a Voluntary
Retirement Scheme (VRS) to the staff at the Ja-Ela production
facility. The VRS was offered due to the automated production
capability at the new facility at Pannala. A total sum of Rs.139
million was paid out as compensation to the 129 members of
staff who opted for the scheme.
The Audit Committee reviews the appointment of the Auditor,

its effectiveness, independence and its relationship with the
Company, including the level of audit and non-audit fees paid
to the Auditor.
The details of fees paid to the Auditors for the Company and
its Subsidiary are set out in Note 7 to the Financial Statements.
As far as the Directors are aware, the Auditors have no other
relationship with the Company and its Subsidiary.
The Auditors Report of the Financial Statements is given on
page 85 of the Annual Report.
Approval of the Financial Statements
The audited Financial Statements were approved by the Board of
Directors on 30th May 2014.
Notice of Meeting
The Notice of Meeting relating to 32nd Annual General Meeting
is given on page 143 of the Annual Report.
This Annual Report is signed for and on behalf of the Board of
Directors by:
Sustainability
The Group pursues its business goals from a stakeholder approach
of business governance. Based on the findings of the continuous
stakeholder engagements, the Group has taken specific steps, in
focusing on material issues such as the conservation of natural
J. R. Gunaratne
Director
J. R. F. Peiris
Director

30th May 2014
Keells Consultants
(Private) Limited
Secretaries
83

The responsibility of the Directors, in relation to the Financial
Statements, is set out in the following statement.
The responsibility of the Auditors, in relation to the Financial
Statements prepared in accordance with the provisions of the
Companies Act No. 7 of 2007, is set out in the Independent
Auditors Report on page 85 of the Annual Report.
As per the provisions of the Companies Act No. 7 of 2007
the Directors are required to prepare, for each financial year
and place before a general meeting, Financial Statements
which comprise of;

A Statement of Income, which presents a true and

fair view of the profit or loss of the Company for the
financial year; and
A Statement of Other Comprehensive Income; and
A Statement of Financial Position, which presents a
true and fair view of the state of affairs of the Company
as at the end of the financial year.
The Directors have ensured that, in preparing these Financial

Statements:

Appropriate accounting policies, have been selected

and applied in a consistent manner and material
departures, if any have been disclosed and explained;
and
All applicable accounting standards as relevant have
been applied; and
Reasonable and prudent judgements and estimates
have been made so that the form and substance of
transactions are properly reflected; and
Provides the information required by and otherwise
comply with the Companies Act and the Listing Rules
of the Colombo Stock Exchange.
The Directors are also required to ensure that the Company

and its Subsidiary have adequate resources to continue
in operation to justify applying the going concern basis in
preparing these Financial Statements.
Further, the Directors have a responsibility to ensure that the
Company and its Subsidiary maintains sufficient accounting
records to disclose, with reasonable accuracy the Financial
Position of the Company and of the Group.
84
The Directors are also responsible for taking reasonable

steps to safeguard the assets of the Company and its
Subsidiary, and in this regard to give a proper consideration
to the establishment of appropriate internal control systems
with a view to preventing and detecting fraud and other
irregularities.
The Directors are required to prepare the Financial
Statements and to provide the Auditors with every
opportunity to take whatever steps and undertake whatever
inspections they may consider being appropriate to enable
them to give their audit opinion.
Further, as required by section 56(2) of the Companies Act
No. 7 of 2007, the Board of Directors have confirmed that
the Company, based on the information available, satisfies
the solvency test immediately after the distribution, in
accordance with Section 57 of the Companies Act No. 7 of
2007, and has obtained a certificate from the Auditors, prior
to declaring first and final dividend of Rs. 2/- per share for
this year to be paid on 17 June 2014.
The Directors are of the view that they have discharged their
responsibilities as set out in this statement.
Compliance Report
The Directors confirm that to the best of their knowledge,
all taxes, duties and levies payable by the Company and its
Subsidiary, all contributions, levies and taxes payable on
behalf of the employees of the Company and its Subsidiary,
and all other known statutory dues as were due and payable
by the Company and its Subsidiary as at the date of the
Statement of Financial Position have been paid or, where
relevant provided for except as specified in note 33 to the
Financial Statements covering contingent liabilities.
By Order of the Board

Keells Consultants (Private) Limited
Secretaries
30th May 2014
TO THE SHAREHOLDERS OF KEELLS FOOD PRODUCTS

PLC
Report on the Financial Statements
We have audited the accompanying Financial Statements of
Keells Food Products PLC (Company), the consolidated
financial statements of the Company and its subsidiary,
which comprise the statements of financial position as at
31 March 2014, and the income statements, the statements
of comprehensive income, statements of changes in equity
and statements of cash flows for the year then ended, and
a summary of significant accounting policies and other
explanatory notes.
Managements Responsibility for the Financial Statements
Management is responsible for the preparation and fair
presentation of these financial statements in accordance with
Sri Lanka Accounting Standards. This responsibility includes
designing, implementing and maintaining internal control
relevant to the preparation and fair presentation of financial
statements that are free from material misstatement,
whether due to fraud or error; selecting and applying
appropriate accounting policies; and making accounting
estimates that are reasonable in the circumstances.
Scope of Audit and Basis of Opinion
Our responsibility is to express an opinion on these financial
statements based on our audit. We conducted our audit
in accordance with Sri Lanka Auditing Standards. Those
standards require that we plan and perform the audit to obtain
reasonable assurance whether the financial statements are
free from material misstatement.
An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting

policies used and significant estimates made by management,
as well as evaluating the overall financial statement
presentation.
We have obtained all the information and explanations which
to the best of our knowledge and belief were necessary for
the purposes of our audit. We therefore believe that our
audit provides a reasonable basis for our opinion.
Opinion
In our opinion, so far as appears from our examination, the
Company maintained proper accounting records for the year
ended 31 March 2014 and the financial statements give a
true and fair view of the financial position of the Company
as at 31 March 2014 and its financial performance and cash
flows for the year then ended in accordance with Sri Lanka
Accounting Standards.
In our opinion, the consolidated financial statements give a
true and fair view of the financial position as at 31 March 2014
and its financial performance and cash flows for the year then
ended, in accordance with Sri Lanka Accounting Standards,
of the Company and its subsidiary dealt with thereby, so far
as concerns the shareholders of the Company.
Report on Other Legal and Regulatory Requirements
These financial statements also comply with the requirements
of Section 151(2) and Sections 153(2) to 153(7) of the
Companies Act No. 7 of 2007.
30 May 2014
Colombo
85
Income Statement

Group Company
For the year ended 31st March

Note
2014
2013
2014
2013

Rs
Rs
Rs
Rs

Revenue
2
2,280,142,439 2,197,482,358 2,280,142,439 2,197,482,358

Cost of sales
(1,774,514,655) (1,739,124,850) (1,774,514,655) (1,739,124,850)

Gross profit
505,627,784
458,357,508
505,627,784
458,357,508
Other operating income
3
4,926,330
4,780,231
4,926,330
4,493,739
Selling and distribution expenses
(223,068,736) (232,755,403) (222,583,268) (232,755,403)
Administrative expenses
(121,533,908)
(110,362,262) (120,832,409)
(109,366,681)
Voluntary retirement scheme expense
(139,017,140)
-
(139,017,140)
Other operating expenses
4
(60,527,291
(55,061,193)
(57,931,513)
(55,044,020)
(33,592,961)
64,958,881
(29,810,216)
65,685,143

Finance costs
5
(35,663,559)
(26,354,556)
(35,663,559)
(26,354,556)
Finance income
6
57,302,435
76,609,675
56,978,152
76,281,518
Net finance income
21,638,876
50,255,119
21,314,593
49,926,962

Profit/(Loss) before tax
7
(11,954,085)
115,214,000
(8,495,623)
115,612,105

Tax (expense)/reversal
8
12,421,477
(24,331,433)
12,421,477
(24,331,433)
Profit for the year
467,392
90,882,567
3,925,854
91,280,672

Attributable to:
Equity holders of the parent
467,392
90,882,567

467,392
90,882,567

Earnings per share
Basic
9
0.02
4.82

Dividend per share
10
2.00
2.00
The accounting policies and notes as set out in pages 92 to 136 form an integral part of these financial statements.
Figures in brackets indicate deductions.
86

Group Company

Note
2014
2013
2014
2013

Rs Rs Rs Rs

Profit for the year
467,392
90,882,567
3,925,854
91,280,672

Other comprehensive income
Currency translation of foreign operations
1,916,806
225,847
-
Revaluation of land and buildings
-
59,648,903
-
59,648,903
Income tax on other comprehensive income
8.2
-
(3,261,693)
-
(3,261,693)
Re-measurement gain/(loss) on defined benefit plans
28
(2,731,561)
741,979
(2,731,561)
741,979

Other comprehensive income/(loss) for the year, net of tax
(814,755)
57,355,036
(2,731,561)
57,129,189
Total comprehensive income/(loss) for the year, net of tax
(347,363)
148,237,603
1,194,293
148,409,861
Attributable to:
Equity holders of the parent
(347,363)
148,237,603

(347,363)
148,237,603
87

Group
Company
As at 31st March
Note
2014
2013
2014
2013

Rs
Rs
Rs
Rs
ASSETS
Non-current assets
Property, plant and equipment
13 1,158,501,374
878,975,105 1,158,501,374
878,975,105
Intangible assets
14
246,325,000
246,208,963
246,325,000 246,208,963
Investment in subsidiary
15
-
-
4,947,083
6,132,376
Other non-current financial assets
16
22,891,204
26,264,238
22,891,204
26,264,238
Other non-current assets
17
4,846,414
6,385,227
4,846,414
6,385,227
1,432,563,992
1,157,833,533
1,437,511,075 1,163,965,909
Current assets
Inventories
18
198,198,987
253,657,054
198,198,987
253,657,054
Trade and other receivables
19
231,131,169
203,541,307
231,131,169
201,406,164
Amounts due from related parties
31
78,493,314
71,937,890
78,493,314
71,937,890
Other current assets
20
31,173,509
19,890,763
30,400,991
18,725,221
Short term investments
21
100,568,439
766,591,841
95,101,260 760,582,048
Cash in hand and at bank
22
19,213,931
18,555,430
18,690,971
17,936,650

658,779,349 1,334,174,285
652,016,692 1,324,245,027
Total assets 2,091,343,341 2,492,007,818 2,089,527,767 2,488,210,936

EQUITY AND LIABILITIES
Equity attributable to equity holders of the parent
Stated capital
23 1,294,815,000 1,294,815,000 1,294,815,000 1,294,815,000
Revenue reserves
24
101,091,517
154,355,686
99,139,429
148,945,136
Other components of equity
25
153,623,305
148,445,295
154,302,276
151,041,072
Total equity 1,549,529,822
1,597,615,981 1,548,256,705 1,594,801,208
Non-current liabilities
Borrowings
26
Deferred tax liabilities
27
Employee benefit liabilities
28

183,333,333
18,019,794
53,100,545
254,453,672
233,333,333
30,494,360
60,280,195
324,107,888
183,333,333
18,019,794
53,100,545
254,453,672
233,333,333
30,494,360
60,280,195
324,107,888
Current liabilities
Trade and other payables
29
Amounts due to related parties
31
Current portion of borrowings
26
Other current liabilities
30
Bank overdrafts
22

Total equity and liabilities
214,303,955
7,607,680
51,102,738
1,784,821
12,560,653
287,359,847
2,091,343,341
519,646,824
9,462,817
18,330,571
9,774,085
13,069,652
570,283,949
2,492,007,818
213,761,498
518,664,715
7,607,680
9,462,817
51,102,738
18,330,571
1,784,821
9,774,085
12,560,653
13,069,652
286,817,390
569,301,840
2,089,527,767 2,488,210,936
I certify that the financial statements comply with the requirements of the Companies Act No. 7 of 2007.

S R Jayaweera
Chief Financial Officer
he Board of Directors is responsible for the preparation and presentation of these financial statements.
T
Signed for and on behalf of the board by,

J R F Peiris
J R Gunaratne
Director
Director
30th May 2014
88

Group
Company

Note
2014
2013
2014
2013

Rs
Rs
Rs
Rs

CASH FLOWS FROM OPERATING ACTIVITIES
Profit before working capital changes
A
46,720,014
102,853,849
51,688,052
103,580,111

(Increase) / Decrease in inventories
55,458,067
37,892,237
55,458,067
37,892,237
(Increase) / Decrease in trade and other receivables
(27,589,862)
16,146,402
(29,725,005)
15,308,353
(Increase) / Decrease in amounts due from related parties
(6,555,424)
(12,793,827)
(6,555,424)
(12,793,827)
(Increase) / Decrease in other current assets
53,106
(1,571,820)
(339,918)
(1,468,881)
(Increase) / Decrease in other non-current assets
1,538,813
(1,585,001)
1,538,813
(1,585,001)
(Increase) / Decrease in other non-current financial assets
5,536,041
5,789,424
5,536,041
5,789,424
Increase / (Decrease) in trade and other payables (305,342,869)
(32,215,485) (304,903,217)
(30,343,096)
Increase / (Decrease) in amounts due to related parties
(1,855,137)
2,105,324
(1,855,137)
2,105,324
Increase / (Decrease) in other current liabilities
(7,989,264)
2,772,837
(7,989,264)
2,861,549
Cash generated from (used in) operations
(240,026,515)
119,393,940
(237,146,992)
121,346,193

Finance income received
55,139,428
73,714,806
54,815,145
73,386,649
Finance expenses paid
(35,663,559)
(26,354,556)
(35,663,559)
(26,354,556)
Tax paid
(11,388,941)
(15,444,938)
(11,388,941)
(15,444,938)
Gratuity paid net of transfers
(20,241,568)
(3,573,118)
(20,241,568)
(3,573,118)
Net cash flow from / (used in) operating activities
(252,181,155)
147,736,134
(249,625,915)
149,360,230

CASH FLOWS FROM/(USED IN) INVESTING ACTIVITIES
Purchase and construction of property, plant and equipment (345,399,006)
(202,818,091) (345,399,006)
(202,818,091)
Purchase of assets - business combination
- (350,000,000)
- (350,000,000)
Purchase of intangible assets
(991,500)
(4,120,560)
(991,500)
(4,120,560)
Proceeds from sale of property, plant and
equipment and intangible assets
26,786
2,400,000
26,786
2,400,000
Net cash flow from/(used in) investing activities
(346,363,720) (554,538,651) (346,363,720) (554,538,651)

CASH FLOWS FROM/(USED IN) FINANCING ACTIVITIES
Proceeds from issue of shares
- 1,020,000,000
- 1,020,000,000
Direct cost on issue of shares
-
(6,048,362)
-
(6,048,362)
Dividend paid
(51,000,000)
(17,000,000)
(51,000,000)
(17,000,000)
Net of receipts/(repayments) of long term borrowings
(17,227,833)
251,663,904
(17,227,833)
251,663,904
Net cash flow from /(used in) financing activities
(68,227,833) 1,248,615,542
(68,227,833) 1,248,615,542

NET INCREASE / (DECREASE)
IN CASH AND CASH EQUIVALENTS
(666,772,708)
841,813,025
(664,217,468)
843,437,121

CASH AND CASH EQUIVALENTS AT THE BEGINNING
772,077,619
(69,961,253) 765,449,046
(77,988,075)

CASH AND CASH EQUIVALENTS AT THE END
105,304,911
771,851,772
101,231,578
765,449,046

89

Group
Company

Note
2014
2013
2014
2013

Rs
Rs
Rs
Rs

ANALYSIS OF CASH AND CASH EQUIVALENTS
Favourable balances
Other investments
21
100,568,439
766,591,841
95,101,260
760,582,048
22
19,213,931
18,555,430
18,690,971
17,936,650
Unfavourable balances
Bank overdrafts
22
(12,560,653)
(13,069,652)
(12,560,653)
(13,069,652)
Total cash and cash equivalents as previously reported
107,221,717
772,077,619
101,231,578
765,449,046
Effect of exchange rate changes
(1,916,806)
(225,847)
-
Cash and cash equivalents restated
105,304,911
771,851,772
101,231,578
765,449,046

Note A
Profit before working capital changes
(11,954,085)
115,214,000
(8,495,623)
115,612,105
Adjustments for:
Finance income
(57,302,435)
(76,609,675)
(56,978,152)
(76,281,518)
Finance costs
35,663,559
26,354,556
35,663,559
26,354,556
Depreciation of property, plant and equipment
65,872,737
29,200,494
65,872,737
29,200,494
Amortisation of intangible assets
875,463
179,643
875,463
179,643
Profit on sale of property, plant and
equipment and intangible assets
(26,786)
(1,141,119)
(26,786)
(1,141,119)
Gratuity provision and related costs
10,330,357
9,655,950
10,330,357
9,655,950
Share based payment expense
3,261,204
-
3,261,204
Impairment of investment in subsidiary
-
-
1,185,293

46,720,014
102,853,849
51,688,052
103,580,111
90

Stated Revaluation Foreign currency Employee
General
Dividend
Revenue
Total

capital
reserve
translation share option
reserve
reserve
reserves
equity

reserve
reserve
Group
Rs
Rs
Rs
Rs
Rs
Rs
Rs
Rs

As at 1 April 2012
Profit for the year
Total comprehensive income
Transfers
Issue of ordinary shares
Direct cost of share issue
First & Final dividend paid - 2011/12
As at 31 March 2013
274,815,000
-
-
-
-
1,020,000,000
-
-
94,653,862
-
56,387,210
56,387,210
-
-
-
-
(2,821,624)
-
225,847
225,847
-
-
-
-
20,305,176
-
-
-
(20,305,176)
-
-
-
1,294,815,000
151,041,072
(2,595,777)
133,875
65,340,451 452,426,740
- 90,882,567
90,882,567
-
741,979
57,355,036
- 91,624,546 148,237,603
(133,875)
20,439,051
-
- 1,020,000,000
- (6,048,362)
(6,048,362)
- (17,000,000) (17,000,000)
- 154,355,686
1,597,615,981
Profit for the year

467,392
467,392
-
-
1,916,806
-
-
-
(2,731,561)
(814,755)
-
-
1,916,806
-
-
-
(2,264,169)
(347,363)
Share based payments
-
-
-
3,261,204
-
-
-
3,261,204
-
-
-
-
-
- (51,000,000) (51,000,000)
As at 31 March 2014
1,294,815,000
151,041,072
(678,971)
3,261,204
101,091,517 1,549,529,822

Stated Revaluation Employee
General Dividend Revenue Total

capital
reserve share option
reserve
reserve
reserves
equity
reserve
Company
Rs
Rs
Rs
Rs
Rs
Rs
Rs

As at 1 April 2012
Profit for the year
Transfers
Issue of ordinary shares
Direct cost of share issue
274,815,000
-
-
-
-
1,020,000,000
-
-
94,653,862
-
56,387,210
56,387,210
-
-
-
-
20,305,176
-
-
-
(20,305,176)
-
-
-
133,875
59,531,796 449,439,709
-
91,280,672
91,280,672
-
741,979
57,129,189
- 92,022,651 148,409,861
(133,875)
20,439,051
-
- 1,020,000,000
- (6,048,362)
(6,048,362)
- (17,000,000) (17,000,000)
As at 31 March 2013
1,294,815,000
151,041,072
-
-
- 148,945,136 1,594,801,208
Profit for the year
3,925,854
3,925,854
-
-
-
-
-
(2,731,561)
(2,731,561)
-
-
-
-
-
1,194,293
1,194,293
Share based payments
-
-
3,261,204
-
-
-
3,261,204
-
-
-
-
- (51,000,000) (51,000,000)
As at 31 March 2014
1,294,815,000
151,041,072
3,261,204
99,139,429 1,548,256,705
91

1.

Reporting entity
Keells Food Products PLC (PQ3) is a Public Limited

Liability Company incorporated and domiciled in Sri
Lanka and is listed in the Colombo Stock Exchange.
The registered office of the Company is at the office of
Keells Consultants Private Limited, which was located
at No. 130, Glennie Street, Colombo 2, and was moved
to No. 117, Sir Chittampalam A. Gardiner Mawatha,
Colombo 2, and the principal place of business is at No.
16, Minuwangoda Road, Ekala, Ja Ela. The Company also
has a manufacturing facility at the Makandura Industrial
Estate in Pannala.
The issued ordinary shares of the Company are listed in

the Colombo Stock Exchange.
Principal activities and nature of operations
Company

During the year, the principal activities of the Company
were manufacture and sale of processed meats,
crumbed products and sale of raw meats.
The consolidated financial statements are presented

in Sri Lankan Rupees, which is the Groups functional
and presentation currency and all financial information
presented in Sri Lankan Rupees has been rounded to
the nearest rupee.
The significant accounting policies are discussed in

note 1.4 below.
Responsibility for Financial Statements

The Board of Directors are responsible for the preparation
and presentation of these Financial Statements.
The responsibility of the Directors in relation to the

financial statements is set out in The Statement of
Directors Responsibility on Page 84 in the Annual
Report.
Statement of compliance
The Financial Statements which comprise the
Statement of Financial Position, The Statement
of Income, Statement of Comprehensive income,
Statement of Changes in Equity and the Statement of
Cash Flows, together with the accounting policies and
notes (the financial statements) have been prepared
in accordance with Sri Lanka Accounting Standards
(SLFRS/LKAS) as issued by the Institute of Chartered
Accountants of Sri Lanka (CA Sri Lanka) and the
requirement of the Companies Act No. 7 of 2007.
Basis of consolidation
The consolidated financial statements comprise the
financial statements of the Company and its Subsidiary
as at 31st March 2014. The financial statements of the
Subsidiary is prepared in compliance with the Groups
accounting policies unless otherwise stated.
All intra-group balances, income and expenses and

unrealised gains and losses are eliminated in full.
Subsidiaries are fully consolidated from the date

of acquisition or incorporation, being the date on
which the Group obtains control, and continue to be
consolidated until the date that such control ceases.
The financial statements of the subsidiary is prepared

for the same reporting period as the Parent Company,
which is 12 months ending 31 March, using consistent
accounting policies.
Subsidiary

The principal activity of John Keells Foods India Private
Limited is the marketing of processed and formed
meat products.

92
In the report of the Directors and in the financial

statements the Company refers to Keells Food
Products PLC. The Group refers to Companies whose
accounts have been consolidated therein.
The Companys ultimate parent and controlling entity

is John Keells Holdings PLC, which is incorporated in Sri
Lanka.
Approval of Consolidated Financial Statements

The Consolidated Financial Statements of the Group
for the year ended 31st March 2014 were authorized
for issue by the Directors on the 30th May 2014.
1.2
Basis of Preparation
Bases of Measurement
The consolidated financial statements have been
prepared on an accrual basis and under the historical
cost convention unless stated otherwise.
Subsidiaries

Subsidiaries are those enterprises controlled by the
parent. Control exists when the parent holds more than
50% of the voting rights or otherwise has a controlling
interest.

The following Company has been consolidated under

section 152 of the Companies Act No. 7 of 2007, where
the Company controls the composition of the Board of
Directors of this Company.
John Keells Foods India Private Limited 100%

incorporated in India on the 7th of April 2008.
The total profit and losses for the year and all assets
and liabilities of the Company and of its Subsidiary are
included in consolidation are shown in the consolidated
income statement and statement of financial position
respectively.
was
The Consolidated Statements of Cash Flows includes

the cash flows of the Company and its Subsidiary.
Losses within a subsidiary are attributed to the noncontrolling interest even if that results in a deficit
balance.
A change in the ownership interest of a subsidiary,

without a loss of control, is accounted for as an equity
transaction.
If the Group loses control over a Subsidiary, it:
Derecognises the assets (including goodwill) and

liabilities of the subsidiary.
Derecognises the carrying amount of any noncontrolling interest.
Derecognises the cumulative translation differences,
recorded in equity.
Recognises the fair value of the consideration received.
Recognises the fair value of any investment retained.
Recognises any surplus or deficit in profit or loss.
Reclassifies the parents share of components
previously recognised in other comprehensive income
to profit or loss or retained earnings, as appropriate.
Non-controlling interest which represents the portion

of profit or loss and net assets not held by the Group,
are shown as a component of profit for the year in
the consolidated income statement and statement of
comprehensive income and as a component of equity
in the consolidated statement of financial position,
separately from parents shareholders equity.
The consolidated cash flow statement includes the

cash flows of the Company and its subsidiary.
1.3. Accounting Policies

1.3.1 Changes in Accounting Policies

The accounting policies adopted by the Group are
consistent with those used in the previous year except
for the following;

Share based payment note 1.4.12 which is an application

of new accounting for share based payments
transactions from the current financial year 2013/14.
The accounting policies adopted by the Group are

consistent with those used in the previous year except
for the retirement benefit obligations (Gratuity) note
1.4.13 which has been changed due to revisions made in
LKAS 19-Employee benefits.
As per the previous policy in the year of occurrence

actuarial gain/(loss) in full was recognized in the
Income Statement. Revised standard requires in the
year of occurrence that the actuarial gain/(loss) in
full should be recognized in the Statement of Other
Comprehensive Income (OCI).
Accordingly the Group has changed its policy

retrospectively, to recognize actuarial gain/(loss) in the
OCI. The change in the accounting policy did not have
an impact on the statement of cash flows and there is
no significant impact on the Groups basic EPS.
1.3.2 Significant Accounting Judgements, Estimates and

Assumptions

The preparation of the Financial Statements of the
Group require the management to make judgments,
estimates and assumptions, which may affect the
amounts of income, expenditure, assets , liabilities
and the disclosure of contingent liabilities, at the end
of the reporting period. In the process of applying the
93

Groups accounting policies, the key assumptions made
relating to the future and the sources of estimation at
the reporting date together with the related judgments
that have a significant risk of causing a material
adjustment to the carrying amounts of assets and
liabilities within the next financial year are discussed
below.

The valuer has used valuation techniques such as market

values and discounted cash flow methods where there
was lack of comparable market data available based on
the nature of the property.
Useful life of property, plant and equipment

The Group assesses the remaining useful lives of items
of property, plant and equipment at least at each
financial year-end. If expectations differ from previous
estimates, the changes accounted for as a change in
an accounting estimate in accordance with LKAS 8
Accounting Policies, Changes in Accounting Estimates
and Errors.
94
Revaluation of property, plant and equipment

The Group measures land and buildings at revalued
amounts with changes in fair value being recognised
in the statement of equity. The Group engaged
independent valuation specialists to determine fair
value of land and buildings as at 31 March 2014.
Impairment of non-financial assets

Impairment exists when the carrying value of an
asset or cash generating unit exceeds its recoverable
amount, which is the higher of its fair value less costs
to sell and its value in use (VIU). The fair value less costs
to sell calculation is based on available data from an
active market, in an arms length transaction, of similar
assets or observable market prices less incremental
costs for disposing of the asset. The value in use
calculation is based on a discounted cash flow model.
The future cash flows are derived from the budget for
the next five years and do not include restructuring
activities that the Group is not yet committed to or
significant future investments that will enhance the
assets performance of the cash generating unit being
tested. The recoverable amount is most sensitive to the
discount rate used for the discounted cash flow model
as well as the expected future cash inflows and the
growth rate used for extrapolation purposes.
The key assumptions used to determine the recoverable

amount for the different cash generating units, are
further explained in Note 14.1.
Taxes

The Group is subject to income tax and other taxes
including VAT. Significant judgment was required to
determine the total provision for current, deferred
and other taxes due to uncertainties that exist, with
respect to the interpretation of the applicability of tax
laws, at the time of the preparation of these financial
statements.

Uncertainties also with respect to the interpretation

of complex tax regulations and the amount and timing
of future taxable income. Given the wide range of
business relationships and the long-term nature
and complexity of existing contractual agreements,
differences arising between the actual results and
the assumptions made, or future changes to such
assumptions, could necessitate future adjustments to
tax income and expense already recorded. Where the
final tax outcome of such matters is different from the
amounts that were initially recorded, such differences
will impact the income and deferred tax amounts in the
period in which the determination is made.
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 the
level of future taxable profits together with future tax
planning strategies.
The Group has tax losses carried forward amounting

to Rs. 286 million (2012/13 - Rs. 12.1 million). These
losses relate to subsidiaries that have a history of
losses that do not expire and may not be used to offset
other tax liabilities and where the Subsidiary has no
taxable temporary differences nor any tax planning
opportunities available that could partly support the
recognition of these losses as deferred tax assets.
Further details on taxes are disclosed in Note 8
Employee Benefit Liability

The employee benefit liability of the Company is
based on the actuarial valuation carried out by
Messrs. Actuarial & Management Consultants (Pvt)
Ltd., actuaries. The actuarial valuations involve
making assumptions about discount rates and future
salary increases. The complexity of the valuation, the
underlying assumptions and its long term nature, the
defined benefit obligation is highly sensitive to changes
in these assumptions. All assumptions are reviewed at
each reporting date. Details of the key assumptions
used in the estimates are contained in Note 29.
Fair value of financial instruments

Where the fair value of financial assets and financial
liabilities recorded in the statement of Financial
Position cannot be derived from active markets, their
fair value is determined using valuation techniques
including the discounted cash flow model. The inputs
to these models are taken from observable markets
where possible.
Where this is not feasible, a degree of judgment is

required in establishing fair values. The judgments
include considerations of inputs such as liquidity risk,
credit risk and volatility. Changes in assumptions about
these factors could affect the reported fair value of
financial instruments refer Note 12.3.
1.4
Summary of Significant Accounting Policies
1.4.1 Business combinations & goodwill

Acquisitions are accounted for using the acquisition
method of accounting. The Group measures goodwill
at the acquisition date as the fair value of the
consideration transferred less the recognised amount
(generally fair value) of the identifiable assets acquired,
all measured as of the acquisition date.

Transaction costs, that the Group incurs in connection
with a business combination are expensed as incurred.

Goodwill is initially measured at cost being the excess
of the consideration transferred over the Companys
identifiable assets acquired. If this consideration is
lower than the fair value of the acquired assets, the
difference is recognised in the income statement.

After initial recognition, goodwill is measured at cost

less any accumulated impairment losses. Goodwill is
reviewed for impairment, annually or more frequently

if events or changes in circumstances indicate that the
carrying value maybe impaired.

For the purpose of impairment testing, goodwill

acquired in a business combination is, from the
acquisition date, allocated to the Groups cash
generating unit that is expected to benefit from the
combination, irrespective of whether other assets or
liabilities of the acquires are assigned to those units.
Impairment is determined by assessing the recoverable

amount of the cash-generating unit to which the
goodwill relates. Where the recoverable amount of the
cash generating unit is less than the carrying amount,
an impairment loss is recognised. The impairment loss
is allocated first to reduce the carrying amount of any
goodwill allocated to the unit and then to the other
assets pro-rata to the carrying amount of each asset in
the unit.
Where goodwill forms part of a cash-generating unit

and part of the operation within that unit is disposed
of, the goodwill associated with the operation disposed
of is included in the carrying amount of the operation
when determining the gain or loss on disposal of the
operation. Goodwill disposed of in this circumstance is
measured based on the relative values of the operation
disposed of and the portion of the cash-generating
unit retained.
1.4.2 Foreign currency translation

Foreign currency transactions and balances

The Groups Financial Statements are presented in
Sri Lanka rupees, which is the Groups functional and
presentation currency.

The functional currency is the currency of the primary

economic environment in which the entities of the
Group operate.
All foreign exchange transactions are converted to

functional currency, at the rates of exchange prevailing
at the time the transactions are effected.
Monetary assets and liabilities denominated in foreign

currency are retranslated to functional currency
equivalents at the spot exchange rate prevailing at the
reporting date.
95

Foreign operations
The statement of financial position and income
statement of the overseas Subsidiary which is deemed
to be foreign operation is translated to Sri Lanka rupees
at the rate of exchange prevailing as at the reporting
date and at the average annual rate of exchange for
the period respectively.
The exchange differences arising on the translation

are taken directly to other comprehensive income. On
disposal of a foreign entity, the deferred cumulative
amount recognised in other comprehensive income
relating to that particular foreign operation is
recognised in the income statement.
96
Non-monetary items that are measured in terms of

historical cost in a foreign currency are translated
using the exchange rates as at the dates of the initial
transactions. Non-monetary assets and liabilities are
translated using exchange rates that existed when the
values were determined. The gain or loss arising on
translation of non-monetary items is recognised in line
with the gain or loss of the item that gave rise to the
translation difference.
Any goodwill arising on the acquisition of a foreign

operation subsequent to 1 April 2012 and any fair value
adjustments to the carrying amounts of assets and
liabilities arising on the acquisition are treated as assets
and liabilities of the foreign operation and translated at
the closing rate.
Prior to 1 April 2012, the date of transition to SLFRS/
LKAS, the Group treated goodwill and any fair value
adjustments to the carrying amounts of assets and
liabilities arising on the acquisition as assets and
liabilities of the parent. Therefore, those assets and
liabilities are non-monetary items already expressed in
the functional currency of the parent and no further
translation differences occur.
During the year the extent of fluctuation in the Sri
Lankan Rupee exchange rate to the Indian Rupee can
be observed by looking at the two extremes in the
exchange rates that prevailed during the year which
is the highest and lowest rate set during the year. This
is especially important when deducing the potential
foreign currency translation impact that could affect
the Groups financial statements.
The exchange rates applicable during the period were

as follows:
Statement of
Financial Position
Closing
2013/14 2012/13
Rs.
Rs.
Indian rupee
2.18
2.33
Income
Statement
Average rate
2013/14 2012/13
Rs.
Rs.
2.15
2.39
1.4.3 Tax

Current tax

Current tax assets and liabilities for the current and
prior periods are measured at the amount expected to
be recovered from or paid to the taxation authorities.
The tax rates and tax laws used to compute the amount
are those that are enacted or substantively enacted, at
the reporting date.

Current income tax relating to items recognised

directly in equity is recognised in equity and for items
recognized in other comprehensive income shall be
recognised in other comprehensive income and not
in the income statement. Management periodically
evaluates positions taken in the tax returns with
respect to situations in which applicable tax regulations
are subject to interpretation and establishes provisions
where appropriate.
Deferred tax
Deferred tax is provided using the liability method on
temporary differences at the reporting date between
the tax bases of assets and liabilities and their carrying
amounts for financial reporting purposes.
Deferred tax liabilities are recognized for all taxable

temporary differences.
Deferred tax assets are recognised for all deductible

temporary differences, and unused tax credits and tax
losses carried forward, to the extent that it is probable
that taxable profit will be available against which the
deductible temporary differences and the unused tax
credits and tax losses carried forward can be utilized.
The carrying amount of deferred tax assets is reviewed

at each reporting date and reduced to the extent that
it is no longer probable that sufficient taxable profit will
be available to allow all or part of the deferred tax asset
to be utilised. Unrecognised deferred tax assets are

reassessed at each reporting date and are recognised
to the extent that it has become probable that future
taxable profit will allow the deferred tax asset to be
recovered.

Deferred tax assets and liabilities are measured at

tax rates that are expected to apply to the year when
the asset is realised or liability is settled, based on
the tax rates and tax laws that have been enacted or
substantively enacted as at the reporting date.
Deferred tax relating to items recognised outside profit

or loss is recognised outside profit or loss. Deferred tax
items are recognised in correlation to the underlying
transaction either in Other Comprehensive Income or
directly in Equity.
Deferred tax assets and deferred tax liabilities are

offset, if a legally enforceable right exists to set off
current tax assets against current tax liabilities and
when the deferred taxes relate to the same taxable
entity and the same taxation authority.
Tax benefits acquired as part of a business combination,

but not satisfying the criteria for separate recognition
at that date, would be recognised subsequently if new
information about facts and circumstances changed.
The adjustment would either be treated as a reduction
to goodwill (as long as it does not exceed goodwill) if it
is incurred during the measurement period or in profit
or loss.
Sales tax
Revenues, expenses and assets are recognised net of
the amount of sales tax except:
Where the sales tax incurred on a purchase of a
assets or services is not recoverable from the taxation
authority, in which case the sales tax is recognised as
part of the cost of acquisition of the asset or as part of
the expense item as applicable and
Receivables and payables that are stated with the
amount of sales tax included.
The net amount of sales tax recoverable from, or
payable to, the taxation authority is included as part of
receivables or payables in the Statement of Financial
Position.
1.4.4 Property, plant and equipment

Basis of recognition

Property, plant and equipment are recognized if it is
probable that future economic benefits associated
with the asset will flow to the Group and the cost of
the asset can be reliably measured.

Basis of measurement
Plant and equipment are stated at cost less accumulated
depreciation and any accumulated impairment loss.
Such cost includes the cost of replacing component
parts of the plant and equipment and borrowing costs
for long-term construction projects if the recognition
criteria are met. When significant parts of plant and
equipment are required to be replaced at intervals, the
Group derecognises the replaced part, and recognises
the new part with its own associated useful life and
depreciation. Likewise, when a major inspection is
performed, its cost is recognised in the carrying
amount of the plant and equipment as a replacement
if the recognition criteria are satisfied. All other repair
and maintenance costs are recognised in the income
statement as incurred. The present value of the
expected cost for the decommissioning of the asset
after its use is included in the cost of the respective
asset if the recognition criteria for a provision are met.
Land and buildings are measured at fair value less
accumulated depreciation on buildings and impairment
charged subsequent to the date of the revaluation.
The carrying values of property, plant and equipment

are reviewed for impairment when events or changes
in circumstances indicate that the carrying value may
not be recoverable.
Where land and buildings are subsequently revalued,

the entire class of such assets is revalued at fair value
on the date of revaluation. The Group has adopted
a policy of revaluing Land and Building at least once
every 5 years.
Any revaluation surplus is recognised in other

Comprehensive Income and accumulated in Equity
in the asset revaluation reserve, except to the extent
that it reverses a revaluation decrease of the same
asset previously recognised in the Income Statement,
in which case the increase is recognised in the Income
Statement. A revaluation deficit is recognised in the
Income Statement, except to the extent that it offsets
97

of the arrangement is dependent on the use of a
specific asset or assets or the arrangement conveys a
right to use the asset, even if that right is not explicitly
specified in an arrangement.
an existing surplus on the same asset recognised in the

asset revaluation reserve.

Accumulated depreciation as at the revaluation date

is eliminated against the gross carrying amount of the
asset and the net amount is restated to the revalued
amount of the asset. Upon disposal, any revaluation
reserve related to the particular asset being sold is
transferred to retained earnings.
Derecognition

An item of property, plant and equipment is
derecognised upon replacement, disposal or when no
future economic benefits are expected from its use.
Any gain or loss arising on derecognition of the asset is
included in the income statement in the year the asset
is derecognised.
Depreciation

Depreciation is calculated by using a straight-line
method on the cost or valuation of all property, plant
and equipment, other than freehold land, in order
to write off such amounts over the estimated useful
economic life of such assets.

Depreciation commences in the month of following

the purchase/commissioning of the assets and ceases
in the month of disposal/scrapped.
The estimated useful life of assets is as follows:

Assets

Buildings on Freehold Land

Buildings on Leasehold Land

Plant and machinery

Computer Equipment

Furniture and fittings

Motor vehicles
Freezers

Office Equipment

Other equipment

Years
33
10 - 35
10 - 15
4-5
8
5
8
6
2
The assets residual values and useful lives are reviewed,

and adjusted if appropriate ,at each financial year end.
1.4.5 Leases

The determination of whether an arrangement is,
or contains, a lease is based on the substance of the
arrangement at the inception date, whether fulfilment
98
For arrangement entered into prior to 1 April 2011,

the date of inception is deemed to be 1 April 2012
in accordance with the SLFRS 1. A leased asset is
depreciated over the useful life of the asset. However
if there is no reasonable certainty that the Company
will obtain ownership by the end of the lease term, the
asset is depreciated over the shorter of the estimated
useful life of the asset and the lease term.
Operating leases
Leases, where the lessor effectively retains substantially
all the risks and benefits of ownership over the terms
of the lease, are classified as operating leases.
Lease payments are recognized as an expense in the

income statement on a straight line basis over the
terms of the leases.
1.4.6 Leasehold property

Prepaid lease rentals paid to acquire land use rights are
amortised over the lease term in accordance with the
pattern of benefits provided.

Details of the Leasehold Property are given in Note 14
to the Financial Statements.
1.4.7 Intangible assets

Basis of recognition

An Intangible asset is recognised if it is probable that
future economic benefits associated with the asset
will flow to the Group and the cost of the asset can be
reliably measured.

Basis of measurement
Intangible assets acquired separately are measured on
initial recognition at cost. The cost of intangible assets
acquired in a business combination is the fair value as at
the date of acquisition.
Following initial recognition, intangible assets are

carried at cost less any accumulated amortisation and
any accumulated impairment losses.
Internally generated intangible assets, excluding

capitalised development costs, are not capitalised, and
expenditure is charged against income statement in

the year in which the expenditure is incurred.

Useful economic lives, amortization and impairment

The useful lives of intangible assets are assessed as
either finite or indefinite lives. Intangible assets with
finite lives are amortised over the useful economic
life and assessed for impairment whenever there is an
indication that the intangible asset may be impaired.
The amortisation period and the amortisation method
for an intangible asset with a finite useful life is
reviewed at least at each financial year-end and such
changes are treated as accounting estimates. The
amortisation expense on intangible assets with finite
lives is recognised in the income statement.
Intangible assets with indefinite useful lives are not
amortized but tested for impairment annually, or more
frequently when an indication of impairment exists
either individually or at the cash-generating unit level.
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.
Purchased software
Purchased software is recognised as intangible assets
and is amortised on a straight line basis over its useful
life.
Software license
Software license costs are recognised as an intangible
asset and amortised over the period of expected future
usage of related ERP systems.
A summary of the policies applied to the Groups
intangible assets is as follows.
Intangible
Useful life
Acquired/
Internally
generated
Impairment testing
Purchased
Software
5-4 years
Acquired
S of t wa re 5-4 years
License
Acquired
When indicators of
impairment arise.
The amortization
method is reviewed
at each financial
year end.
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.
1.4.8 Financial instruments initial recognition and

subsequent measurement
i) Financial assets

Initial recognition and measurement

Financial assets within the scope of LKAS 39 are
classified as financial assets at fair value through
profit or loss, loans and receivables, held-to-maturity
investments, available-for-sale financial assets, or as
derivatives designated as hedging instruments in an
effective hedge, as appropriate. The Group determines
the classification of its financial assets at initial
recognition.

All financial assets are recognised initially at fair value

plus, in the case of assets not at fair value through
profit or loss, directly attributable transaction costs.
Purchases or sales of financial assets that require
delivery of assets within a time frame established by
regulation or convention in the marketplace (regular
way trades) are recognised on the trade date, i.e., the
date that the Group commits to purchase or sell the
asset.
The Groups financial assets include cash and shortterm deposits, trade and other receivables, loans and
other receivables.
Subsequent measurement
The subsequent measurement of financial assets
depends on their classification as follows:
Loans and receivables

Loans and receivables are non-derivative financial
assets with fixed or determinable payments that
are not quoted in an active market. After initial
measurement, such financial assets are subsequently
measured at amortised cost using the effective
interest rate method (EIR), less impairment. Amortised
cost is calculated by taking into account any discount
or premium on acquisition and fees or costs that are
an integral part of the EIR. The EIR amortisation is
included in finance income in the income statement.
The losses arising from impairment are recognised in
the income statement in finance costs.
99

Derecognition

A financial asset (or, where applicable a part of a
financial asset or part of a Group of similar financial
assets) is derecognised when:

100
The rights to receive cash flows from the asset have

expired
The Group has transferred its rights to receive cash
flows from the asset or has assumed an obligation to
pay the received cash flows in full without material delay
to a third party under a pass-through arrangement;
and either (a) the Group has transferred substantially
all the risks and rewards of the asset, or (b) the Group
has neither transferred nor retained substantially all
the risks and rewards of the asset, but has transferred
control of the asset.
When the Group has transferred its rights to receive

cash flows from an asset or has entered into a passthrough arrangement, and has neither transferred
nor retained substantially all of the risks and rewards
of the asset nor transferred control of it, the asset is
recognised to the extent of the Groups continuing
involvement in it.
In that case, the Group also recognises an associated

liability. The transferred asset and the associated
liability are measured on a basis that reflects the rights
and obligations that the Group has retained.
Continuing involvement that takes the form of a

guarantee over the transferred asset is measured at
the lower of the original carrying amount of the asset
and the maximum amount of consideration that the
Group could be required to repay.
ii) Impairment of financial assets

The Group assesses at each reporting date whether
there is any objective evidence that a financial asset or
a group of financial assets is impaired. A financial asset
or a group of financial assets is deemed to be impaired
if, and only if, there is objective evidence of impairment
as a result of one or more events that has occurred
after the initial recognition of the asset (an incurred
loss event) and that loss event has an impact on the
estimated future cash flows of the financial asset or the
group of financial assets that can be reliably estimated.
Evidence of impairment may include indications that

the debtors or a group of debtors is experiencing
significant financial difficulty, default or delinquency
in interest or principal payments, the probability
that they will enter bankruptcy or other financial
reorganisation and where observable data indicate that
there is a measurable decrease in the estimated future
cash flows, such as changes in arrears or economic
conditions that correlate with defaults.
Financial assets carried at amortised cost
If there is objective evidence that an impairment loss

has been incurred, the amount of the loss is measured
as the difference between the assets carrying amount
and the present value of estimated future cash flows
(excluding future expected credit losses that have not
yet been incurred). The present value of the estimated
future cash flows is discounted at the financial assets
original effective interest rate. If a loan has a variable
interest rate, the discount rate for measuring any
impairment loss is the current effective interest rate.
The carrying amount of the asset is reduced through

the use of an allowance account and the amount of the
loss is recognised in the income statement. Interest
income continues to be accrued on the reduced
carrying amount and is accrued using the rate of
interest used to discount the future cash flows for
the purpose of measuring the impairment loss. The
interest income is recorded as part of finance income
in the income statement. Loans together with the
associated allowance are written off when there is no
realistic prospect of future recovery and all collateral
has been realised or has been transferred to the Group.
For financial assets carried at amortised cost, the

Group first assesses whether objective evidence of
impairment exists individually for financial assets that
are individually significant, or collectively for financial
assets that are not individually significant. If the
Company determines that no objective evidence of
impairment exists for an individually assessed financial
asset, whether significant or not, it includes the asset
in a Group of financial assets with similar credit risk
characteristics and collectively assesses them for
impairment. Assets that are individually assessed for
impairment and for which an impairment loss is, or
continues to be, recognised are not included in a
collective assessment of impairment.
If, in a subsequent year, the amount of the estimated

impairment loss increases or decreases because of an
event occurring after the impairment was recognised,
the previously recognised impairment loss is increased
or reduced by adjusting the allowance account. If a
future write-off is later recovered, the recovery is
credited to finance costs in the income statement.

iii) Financial liabilities
Amortised cost is calculated by taking into account

any discount or premium on acquisition and fees
or costs that are an integral part of the EIR. The EIR
amortisation is included in finance costs in the income
statement.
Derecognition

A financial liability is derecognised when the obligation
under the liability is discharged or cancelled or expires.
Initial recognition and measurement
Financial liabilities within the scope of LKAS 39 are

classified as financial liabilities at fair value through
profit or loss, loans and borrowings, or as derivatives
designated as hedging instruments in an effective
hedge, as appropriate. The Group determines
the classification of its financial liabilities at initial
recognition.
All financial liabilities are recognised initially at fair
value and, in the case of loans and borrowings, carried
at amortised cost. This includes directly attributable
transaction costs.
The Groups financial liabilities include trade and other
payables, bank overdrafts, loans and borrowings,
Subsequent measurement
The measurement of financial liabilities depends on
their classification as follows:
Financial liabilities at fair value through profit or loss

Financial liabilities at fair value through profit or loss
include financial liabilities held or trading and financial
liabilities designated upon initial recognition as at fair
value through profit or loss.
The Group has not designated any financial liabilities

upon initial recognition as at fair value through profit
or loss.
Loans and borrowings

After initial recognition, interest bearing loans and
borrowings are subsequently measured at amortised
cost using the effective interest rate method. Gains
and losses are recognised in the income statement
when the liabilities are derecognised as well as through
the effective interest rate method (EIR) amortisation
process.
When an existing financial liability is replaced by another

from the same lender on substantially different terms,
or the terms of an existing liability are substantially
modified, such an exchange or modification is treated
as a derecognition of the original liability and the
recognition of a new liability, and the difference in
the respective carrying amounts is recognised in the
income statement.
iv) Offsetting of financial instruments

Financial assets and financial liabilities are offset and
the net amount reported in the consolidated statement
of financial position if, and only if, there is a currently
enforceable legal right to offset the recognised
amounts and there is an intention to settle on a net
basis, or to realise the assets and settle the liabilities
simultaneously.
v) Fair value of financial instruments

For financial instruments not traded in an active market,
the fair value is determined using appropriate valuation
techniques. Such techniques may include using
recent arms length market transactions; reference
to the current fair value of another instrument that is
substantially the same; a discounted cash flow analysis
or other valuation models.
1.4.9 Impairment of non-financial assets

The Group assesses at each reporting date whether
there is an indication that an asset may be impaired. If
any such indication exists, or when annual impairment
testing for an asset is required, the Group makes an
estimate of the assets recoverable amount. An assets
recoverable amount is the higher of an assets or cash
generating units fair value less costs to sell and its
value in use and is determined for an individual asset,
unless the asset does not generate cash inflows that
are largely independent of those from other assets
or Groups of assets. Where the carrying amount of
101

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.

102
Impairment losses are recognised in the income

statement, except that, impairment losses in respect
of property, plant and equipment previously revalued
are recognised against the revaluation reserve through
the statement of other comprehensive income to the
extent that it reverses a previous revaluation surplus.
An assessment is made at each reporting date as
to whether there is any indication that previously
recognized impairment losses may no longer exist
or may have decreased. If such indication exists,
the recoverable amount is estimated. A previously
recognised impairment loss is reversed only if there has
been a change in the estimates used to determine the
assets 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. After such a reversal,
the depreciation charge is adjusted in future periods to
allocate the assets revised carrying amount, less any
residual value, on a systematic basis over its remaining
useful life.
The following criteria are also applied in assessing

impairment of specific assets:
Goodwill
Goodwill is tested for impairment annually and when
circumstances indicate that the carrying value may be
impaired.
Impairment is determined for goodwill by assessing

the recoverable amount of each cash-generating
unit (or Group of cash-generating units) to which
the goodwill relates. Where the recoverable amount

of the cash generating unit is less than their carrying
amount, an impairment loss is recognised. Impairment
losses relating to goodwill cannot be reversed in future
periods.
1.4.10 Inventories

Inventories are valued at the lower of cost and net
realizable value. Net realisable value is the estimated
selling price less estimated costs of completion and
the estimated costs necessary to make the sale.

The costs incurred in bringing inventories to its present

location and condition, are accounted for as follows:
Raw Materials
Actual cost on a weighted

average basis.
Manufactured
Finished Goods
At the actual cost of direct

materials, and an appropriate
proportion of productions
overheads.
Work in
Progress
At the cost of direct material

(excluding packing material) and
an appropriate proportion of
production overheads based on
percentage completed.
Finished Goods
Purchased
At actual cost on weighted

average basis.
Spares
At actual cost on weighted

average basis.
Other
Inventories
At actual cost.
1.4.11 Cash and cash equivalents

Cash and short-term deposits in the statement of
financial position comprise cash at banks and on hand
and short-term deposits with a maturity of three
months or less.

For the purpose of the cashflow statement, cash

and cash equivalents consist of cash and short-term
deposits as defined above, net of outstanding bank
overdrafts.
1.4.12 Employee share option plan

In accounting for employee remuneration in the form of
shares, SLFRS 2- Share Based Payments, is effective for
the Company, from the financial year beginning 2013/14.

Employees receive remuneration in the form of sharebased payment transactions, whereby employees
render services as consideration for equity instruments
(equity-settled transactions). The cost of the employee
services received in respect of the shares or share
options granted is recognised in the income statement
over the period that employees provide services, from
the time when the award is granted up to the vesting
date of the options. The overall cost of the award is
calculated using the number of share options expected
to vest and the fair value of the options at the date of
grant.
The employee remuneration expense resulting from
the John Keells Groups Employees share option
(ESOP) scheme to the employees of Keells Food
Products PLC is recognized in the income statements
of the Company. This transaction does not result in a
cash outflow and the expense recognised is met with a
corresponding equity reserve increase, thus having no
impact on the statement of financial position (SOFP).
The fair value of the options granted is determined by
using an option pricing model.
Equity-settled transactions
The cost of equity-settled transactions is recognised,
together with a corresponding increase in other
capital reserves in equity, over the period in which
the performance and service conditions are fulfilled.
The cumulative expense recognised for equity-settled
transactions at each reporting date until the vesting
date reflects the extent to which the vesting period has
expired and the Groups best estimate of the number of
equity instruments that will ultimately vest. The income
statement expense or credit for a period represents
the movement in cumulative expense recognised as at
the beginning and end of that period and is recognised
in the share based payment plan note 26.3.
where vesting is conditional upon a market or nonvesting condition, which are treated as vesting
irrespective of whether or not the market or nonvesting condition is satisfied, provided that all other
performance and service conditions are satisfied.

Where the terms of an equity-settled transaction

award are modified, the minimum expense recognised
is the expense as if the terms had not been modified,
if the original terms of the award are met. An
additional expense is recognised for any modification
that increases the total fair value of the share-based
payment transaction, or is otherwise beneficial to the
employee as measured at the date of modification.
Where an equity-settled award is cancelled, it is

treated as if it vested on the date of cancellation,
and any expense not yet recognised for the award is
recognised immediately. This includes any award where
non-vesting conditions within the control of either
the entity or the employee are not met. However, if a
new award is substituted for the cancelled award, and
designated as a replacement award on the date that it
is granted, the cancelled award and the new award are
treated as if they were a modification of the original
award, as described in the previous paragraph.
1.4.13 Defined benefit plan - gratuity

The liability recognised in the statement of financial
position is the present value of the defined benefit
obligation at the reporting date using the projected
unit credit method. Any actuarial gains or losses
arising are recognised immediately in statement of
comprehensive income.
1.4.14 Defined contribution plan - Employees Provident
Fund and Employees Trust Fund

Employees are eligible for Employees Provident Fund
contributions and Employees Trust Fund contributions
in line with respective statutes and regulations. The
companies contribute the defined percentages of
gross emoluments of employees to an approved
Employees Provident Fund and to the Employees
Trust Fund respectively, which are externally funded.
No expense is recognised for awards that do not

ultimately vest, except for equity-settled transactions
103

1.4.15 Provisions, contingent assets and contingent liabilities

Provisions are recognised when the Group has a
present obligation (legal or constructive) as a result
of a past event, 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. Where
the Group expects some or all of a provision to be
reimbursed, for example under an insurance contract,
the reimbursement is recognised as a separate asset
but only when the reimbursement is virtually certain.
The expense relating to any provision is presented in
the income statement net of any reimbursement.
Sale of goods
Revenue from the sale of goods is recognised when
the significant risk and rewards of ownership of the
goods have passed to the buyer with the Group
retaining neither a continuing managerial involvement
to the degree usually associated with ownership, nor an
effective control over the goods sold.
Turnover based taxes
Turnover based taxes include value added tax and
nation building tax. Companies in the Group pay such
taxes in accordance with the respective statutes.
Interest income
For all financial instruments measured at amortised
cost and interest bearing financial assets classified
as available for sale, interest income or expense is
recorded using the effective interest rate (EIR), which
is the rate that exactly discounts the estimated future
cash payments or receipts through the expected life
of the financial instrument or a shorter period, where
appropriate, to the net carrying amount of the financial
asset or liability. Interest income is included in finance
income in the income statement.
If the effect of the time value of money is material,

provisions are discounted using a current pre-tax rate
that reflects, where appropriate, the risks specific to
the liability. Where discounting is used, the increase in
the provision due to the passage of time is recognised
as a finance cost.
All contingent liabilities are disclosed as a note to the

financial statements unless the outflow of resources is
remote. A contingent liability recognised in a business
combination is initially measured at its fair value.
Subsequently, it is measured at the higher of:
The amount that would be recognised in accordance

with the general guidance for provisions above (LKAS
37) or
The amount initially recognised less, when appropriate,
cumulative amortisation recognised in accordance
with the guidance for revenue recognition (LKAS 18)
Gains and losses

Net gains and losses of a revenue nature arising from
the disposal of property, plant and equipment and
other non-current assets, including investments,
are accounted for in the income statement, after
deducting from the proceeds on disposal, the carrying
amount of such assets and the related selling expenses.
Gains and losses arising from activities incidental to the

main revenue generating activities and those arising
from a Group of similar transactions, which are not
material are aggregated, reported and presented on a
net basis.
Other income
Other income is recognised on an accrual basis.
Contingent assets are disclosed, where inflow of

economic benefit is probable.
1.4.16 Revenue recognition

Revenue is recognised to the extent that it is probable
that the economic benefits will flow to the Group,
and the revenue and associated costs incurred or
to be incurred can be reliably measured. Revenue
is measured at the fair value of the consideration
received or receivable, net of trade discounts and value
added taxes, after eliminating sales within the Group.

The following specific criteria are used for recognition
of revenue:
104
1.4.17 Expenditure recognition

Expenses are recognised in the income statement
on the basis of a direct association between the cost
incurred and the earning of specific items of income.

All expenditure incurred in the running of the business
and in maintaining the property, plant and equipment
in a state of efficiency has been charged to the income
statement.
For the purpose of presentation of the income
statement, the function of expenses method has
been adopted, on the basis that it presents fairly the
elements of the Groups performance.
Borrowing costs
Borrowing costs directly attributable to the acquisition,
construction or production of an asset that necessarily
takes a substantial period of time to get ready for its
intended use or sale are capitalised as part of the cost
of the respective assets. All other borrowing costs are
expensed in the period they occur. Borrowing costs
consist of interest and other costs that the Group
incurs in connection with the borrowing of funds.
1.5 Sri Lanka Accounting Standards (SLFRS/LKAS) Issued

But Not Yet Effective

Standards issued but not yet effective up to the date of
issuance of the Groups financial statements are listed
below. This listing is of standards and interpretations
issued, which the Group reasonably expects to be
applicable at a future date. The Group intends to adopt
those standards when they become effective.

a) SLFRS 9-Financial Instruments: Classification and

Measurement
SLFRS 9 as issued reflects the replacement of LKAS
39 and applies to classification and measurement of
financial assets and financial liabilities as defined in
LKAS 39. The standard is effective for annual periods
beginning on or after 1 January 2015. The adoption of
SLFRS 9 will have an effect on the classification and
measurement of the Companys financial assets, but
will potentially have no impact on classification and
measurements of financial liabilities. This mandatory
effective date of the standard has not been decided by
CA Sri Lanka.
b) SLFRS 10-Consolidated Financial Statements

SLFRS 10 replaces the portion of LKAS 27 Consolidated
and separate financial statements that addresses the
accounting for consolidated financial statements. It also
includes the issues raised in standing interpretations
committee SIC-12 Consolidation Special Purpose
Entities.
SLFRS 10 establishes a single control model that

applies to all entities including special purpose
entities. The changes introduced by SLFRS 10 will
require management to exercise significant judgment
to determine which entities are controlled, and
therefore are required to be consolidated by a parent,
compared with the requirements that were in LKAS 27.
This standard becomes effective for annual periods
beginning on or after 1st January 2014.
c) SLFRS 11-Joint Arrangements

SLFRS 11 replaces LKAS 31 Interests in Joint Ventures
and SIC-1e Jointly-controlled entities - Non-monetary
Contributions by ventures. SLFRS 11 removes the option
to account for jointly controlled entities (JCEs) using
proportionate consolidation. Instead, JCEs that meet
the definition of a joint venture must be accounted for
using the equity method. The application of this new
standard will impact the financial position of the Group.
This is due to the cessation proportionate consolidating
of joint ventures being changed to equity accounting.
d) SLFRS 12 Disclosure of Interests in other entities

SLFRS 12 includes all of the disclosures that were
previously in LKAS 27 related to consolidated financial
statements, as well as all of the disclosures that were
previously included in LKAS 31 and LKAS 28. These
disclosures relate to an entitys interests in subsidiaries,
joint arrangements, associates and structured entities.
A number of new disclosures are also required.
105
106
e) SLFRS 13-Fair Value Measurement

SLFRS 13 establishes a single source of guidance under
SLFRS for all fair value measurements. SLFRS 13 does
not state when an entity is required to use fair value,
but rather provides guidance on how to measure
fair value under SLFRS when fair value is required or
permitted. The Group is currently assessing the impact
that this standard will have on the financial position
and performance. This standard becomes effective for
annual periods beginning on or after 1st January 2014.
1.9

Segment Information
Operating segments
The Groups internal organisation and management is
structured based on individual products and services
which are similar in nature and process and where the
risk and return are similar.
There are two segments identified as Manufacturing

and Trading, these operating segments are monitored
and strategic decisions are made on the basis of each
segments operating results.
The measurement policies the Company uses for

segment reporting under SLFRS 8 are the same as
those used in its financial statements.
The activities of each of the reported business

segments of the Group are detailed in Note 2.1.
Segment information
Segment information has been prepared in conformity
with the Accounting Policies adopted for preparing
and presenting the Financial Statements of the Group.
2 Revenue

Group
Company

2014
2013
2014
2013

Rs
Rs
Rs
Rs

Revenue
2,280,142,439 2,197,482,358 2,280,142,439
2,197,482,358
Value Added Tax of Rs. 272,504,454/- (2012/13 Rs. 239,419,958/-) has been deducted in arriving at the revenue of the
Group and the Company.
2.1
Business Segment Analysis -Group

Revenue

Segment Results

Other operating income



Voluntary retirement scheme

Other operating expenses

Operating Profit/ (Loss)

Finance costs
Finance income
Net finance (cost)/ income
Profit /(Loss) before tax

Segment Assets

Segment Liabilities

Goodwill

Deferred tax liabilities

Purchase and construction of PPE

Purchase and construction of PPE
-business combination

Addition to IA

Depreciation of PPE

Amortisation of IA

Gratuity provision and related costs
20 14
2013
Manufacturing
Trading
Total Manufacturing
Trading
Total
Rs
Rs Rs Rs Rs Rs
2,174,123,143 106,019,296 2,280,142,439
479,990,767
25,637,017
505,627,784
4,926,330
-
4,926,330
(223,068,736)
- (223,068,736)
(121,533,908)
-
(121,533,908)
(139,017,140)
-
(139,017,140)
(60,527,291)
-
(60,527,291)
(59,229,978) 25,637,017
(33,592,961)
(35,663,559)
57,302,435
21,638,876
(37,591,102)
1,825,654,946
523,765,225
242,268,046
18,019,794
345,399,006
-
991,500
65,872,737
875,463
10,330,357
-
-
-
25,637,017
23,420,349
28,500
-
-
-
-
2,056,649,252
447,215,892
4,493,739
(232,755,403)
(110,362,262)
-
(55,061,193)
53,530,773
140,833,106
11,141,616
286,492
-
-
-
-
11,428,108
2,197,482,358
458,357,508
4,780,231
(232,755,403)
(110,362,262)
(55,061,193)
64,958,881
(35,663,559)
57,302,435
21,638,876
(26,354,556)
76,609,675
50,255,119
-
-
-
(26,354,556)
76,609,675
50,255,119
(11,954,085)
103,785,892
11,428,108
1,849,075,295
523,793,725
242,268,046
18,019,794
345,399,006
2,231,715,296
858,559,329
242,268,046
30,494,360
202,818,091
18,024,476
5,338,148
-
-
-
-
991,500
65,872,737
875,463
10,330,357
457,731,954
4,120,560
29,200,494
179,643
9,655,952
115,214,000
2,249,739,772
863,897,477
242,268,046
30,494,360
202,818,091
457,731,954
4,120,560
29,200,494
179,643
9,655,952
107
2.1.1 All Inter Company revenues, other income and expenses have been eliminated on consolidation
2.1.2 Segment assets, does not include goodwill arising from the business combination.
2.1.3 Non- current assets have not been allocated to the trading segment.

Group
Company
2014
2013
2014
2013
Rs Rs Rs Rs
2.2 Geographical segment analysis

(by location of customers)
Sri Lanka
Others
Total revenue
2,269,576,155
10,566,284
2,280,142,439


2,189,196,547
8,285,811
2,197,482,358
2,269,576,155
10,566,284
2,280,142,439
2,189,196,547
8,285,811
2,197,482,358
Group Company
2014
Rs
2013
Rs
2014
Rs
2013
Rs
3
Other Operating Income
Exchange gain
Profit on sale of property, plant and equipment
Royalty income
Sundry income

-
26,786
-
4,899,544
4,926,330
14,813
1,141,119
286,492
3,337,807
4,780,231
-
26,786
-
4,899,544
4,926,330
14,813
1,141,119
3,337,807
4,493,739
4
Other Operating Expenses

Other operating expenses includes Nation Building Tax of Rs. 37,895,064/- for the year ended 31st March 2014 (2012/13
Rs. 35,168,146/-) for the Group and the Company.

Group Company

2014
Rs
2013
Rs
2014
Rs
2013
Rs
35,467,567
195,992
35,663,559
19,624,795
6,729,761
26,354,556
5
Finance Cost
Interest expense on borrowings
Long term
Short term

108
35,467,567
195,992
35,663,559
19,624,795
6,729,761
26,354,556


Group Company
2014
Rs
2013
Rs
2014
Rs
2013
Rs
6
Finance Income

Interest income
Finance income from other financial instruments

53,506,481
3,795,954
57,302,435
72,050,831
4,558,844
76,609,675
53,182,198
3,795,954
56,978,152
71,722,674
4,558,844
76,281,518
Finance Income from other financial instruments includes notional interest pertaining to executive staff loans granted.


Group Company
2014
Rs
2013
Rs
2014
Rs
2013
Rs
7
Profit Before Tax
Profit before Income Tax is stated after charging all
expenses including the following;
Remuneration to Non Executive Directors
6,300,000
6,300,000
6,300,000
6,300,000
Auditors Fees and Expenses -Audit Service
879,980
879,074
758,760
745,000
- Non Audit Service
931,110
706,727
74,200
89,400
Costs of defined employee benefits
Defined benefit plan cost - Gratuity
10,330,357
9,655,950
10,330,357
9,655,950
Defined contribution plan cost - EPF and ETF
26,449,268
28,371,546
26,449,268
28,371,546
Staff expenses
263,556,877
288,274,828
263,556,877
288,274,828
Voluntary retirement scheme expense
139,017,140
-
139,017,140
Depreciation of property, plant and equipment
65,872,737
29,200,494
65,872,737
29,200,494
Amortisation of intangible assets
875,463
179,643
875,463
179,643
Operating lease payments
615,368
217,368
615,368
217,368
Research and Development
1,700,000
500,000
1,700,000
500,000
Donations
1,940,000
720,000
1,940,000
720,000
Bad debts
786,726
-
-
Exchange Loss
-
-
107,479
Impairment of Investment in subsidiary
-
-
1,185,292
-
109

8
Tax Expense


Note
Current income tax
Income Tax
Income Tax -Under / (Over) provision
8.1

Deferred Tax
Relating to origination and reversal
of temporary differences
8.2

Group Company
2014
Rs
-
53,089
- 53,089
(12,474,566)
(12,421,477)
2013
Rs
-
-
-
24,331,433
24,331,433
2014
Rs
2013
Rs
-
53,089
53,089
(12,474,566)
(12,421,477)
24,331,433
24,331,433
Applicable Rates of Income Tax

The Tax Liability of the Company is computed at the standard rate of 28% (2012/13 -28%) and for qualified exports at the rate
of 12% (2012/13 - 12%).

Group
Company

8.1 Reconciliation between tax expense and
the product of accounting profit/(loss)
Exempted profit
Other consolidation adjustments
Aggregate Accounting Profit/(Loss)
Profits not charged to income tax
Accounting Profit/(Loss) liable for Income Tax
110
2014
Rs
2013
Rs
2014
Rs
2013
Rs
(11,954,085)
115,214,000
(280)
(144)
3,458,462
398,105
(8,495,903)
115,611,961
-
(8,495,903)
115,611,961
(8,495,623)
(280)
-
(8,495,903)
(8,495,903)
115,612,105
(144)
115,611,961
Income Tax on Accounting Profit at the applicable rates

Under/ (Over) provision
The effect of non deductible expenses
Tax effect on deductions claimed
Net tax effect of unrecognised deferred tax assets

(2,378,853)
32,371,349
53,089
1,321,617
3,020,755
(9,943,482)
(11,329,996)
(1,473,848)
269,335
(12,421,477)
24,331,443
(2,378,853)
53,089
1,321,617
(9,943,482)
(1,473,848)
(12,421,477)
32,371,349
3,020,755
(11,329,996)
269,335
24,331,443
Income tax charged at;

Standard rate 28%
Concessionary rate of 12%
Under provision for previous years
Charge for the year
Deferred tax Charge/(reversal)
Total income tax expense/(reversal)
-
-
53,089
53,089
(12,474,566)
(12,421,477)
-
-
53,089
53,089
(12,474,566)
(12,421,477)
24,331,433
24,331,433
-
-
-
-
24,331,433
24,331,433
115,611,961
8.2

Group Company

2014
2013
2014
2013

Rs
Rs
Rs
Rs
Deferred tax expense
Income statement
Deferred tax expense arising from;
Accelerated depreciation for tax purposes
61,860,083
29,508,157
61,860,083
29,508,157
Employee benefit liability
2,010,294
(1,783,156)
2,010,294
(1,783,156)
Benefit arising from tax losses
(76,344,943)
(3,393,568)
(76,344,943)
(3,393,568)
Deferred tax charge
(12,474,566)
24,331,433
(12,474,566)
24,331,433
Deferred tax expense arising from;
Revaluation of land and building to fair value
-
3,261,693
-
Total deferred tax charge
(12,474,566)
27,593,126
(12,474,566)
3,261,693
27,593,126
The Subsidiary has carried forward tax losses amounting to Rs 206,237,623 /- (2012/13-Rs.219,433,013/-). Deferred Income
Tax asset arising from the carried forward losses has not been recognised in the Subsidiary Companys Financial Statements
as it is not probable that the taxable profits will be available in the foreseeable future against which the deductible temporary
difference can be utilised.


8.3

Tax losses
Tax losses brought forward
Adjustments on finalisation of liability
Tax losses arising during the year
Utilisation of tax losses
Tax losses carried forward
Group Company
2014
Rs
12,119,863
1,197,845
291,845,804
(19,185,295)
285,978,217
2013
Rs
-
-
37,917,118
(25,797,255)
12,119,863
2014
Rs
12,119,863
1,197,845
291,845,804
(19,185,295)
285,978,217
2013
Rs
37,917,118
(25,797,255)
12,119,863
8.4 Details of investment relief

Cost of approved Relief claimed on
Year of Investment
investment
investments

Rs. Rs.
2012/13
457,731,954
71,368,659
The Company is eligible for qualifying payment relief granted under Section 34(2)(s) of the Inland Revenue Act No. 10 of 2006
duly amended by the Inland Revenue (Amendment) Act No. 8 of 2012 and the Inland Revenue (Amendment) Act No. 18 of
2013. The Company has carried forward, the unclaimed investment relief to set of in future years.
111

9
Earnings Per Share

Note Group
2014
2013
9.1
Basic earnings per share
Profit attributable to equity holders of the parent
467,392
90,882,567

Weighted average number of ordinary shares
9.2

Basic earnings per share

25,500,000
0.02
18,862,256
4.82
Ordinary shares at the beginning of the year

Increase in shares due to the rights issue
Ordinary shares at the end of the year
25,500,000
-
25,500,000
8,500,000
17,000,000
25,500,000
Weighted average number of ordinary shares outstanding during the year
25,500,000
18,862,256
9.2 Amount used as denominator

2014 2013

Rs Rs Rs Rs
10
Dividend Per Share
Equity dividend on ordinary shares

10.1 Declared and paid during the year

First and Final dividend*
2.00
51,000,000
2.00
17,000,000

Total dividend
2.00
51,000,000
2.00
17,000,000

*Previous years final dividend paid in the current year.

10.2 Proposed dividend

First and Final dividend*
2.00
51,000,000
2.00
51,000,000

Total dividend
2.00
51,000,000
2.00
51,000,000
The first and final dividend proposed for this financial year has not been recognised in the Statement of Financial Position as at
31st March 2014 amounting to Rs. 51,000,000/- in compliance with LKAS 10- Events after the reporting period.
112
11
Financial Instruments
11.1 Financial Assets and Liabilities By Categories

Financial assets and liabilities in the tables below are split into categories in accordance with LKAS 39.
Financial assets by categories Loans and receivables

Group
As at 31st March

Financial instruments in non-current assets
Other non-current financial assets
Financial instruments in current assets
Total
Company
2014
2013
2014
2013
Rs Rs Rs Rs
22,891,204
26,264,238
22,891,204
26,264,238
231,131,169
78,493,314
100,568,439
19,213,931
452,298,057
203,541,307
71,937,890
766,591,841
18,555,430
1,086,890,706
231,131,169
78,493,314
95,101,260
18,690,971
446,307,918
201,406,164
71,937,890
760,582,048
17,936,650
1,078,126,990
The fair value of financial assets does not significantly vary from the value based on amortised cost.
Financial liabilities by categories Financial liabilities measured at amortised cost

Group Company
As at 31st March

2014
2013
2014
2013
Rs Rs Rs Rs
Financial instruments in non-current liabilities

Borrowings
183,333,333
233,333,333
183,333,333
233,333,333
Financial instruments in current liabilities
Trade and other payables
214,303,955
519,646,824
213,761,498
518,664,715
7,607,680
9,462,817
7,607,680
9,462,817
Current Portion of Borrowings
51,102,738
18,330,571
51,102,738
18,330,571
Bank overdrafts
12,560,653
13,069,652
12,560,653
13,069,652
Total
468,908,359
793,843,197
468,365,902
792,861,088
The fair value of financial liabilities does not significantly vary from the value based on amortised cost.
12
Financial Risk Management Objectives and Policies

he Company and its subsidiary has loans and other receivables, trade and other receivables, and cash and short-term deposits
T
that arise directly from its operations.
The Company and its subsidiarys principal financial liabilities, comprise of loans and borrowings, trade and other payables. The
main purpose of these financial liabilities is to finance the Company and its subsidiarys operations.

The Company and its subsidiary are exposed to market risk, credit risk and liquidity risk.
The fair value of the floating rate loan is determined by discounting the future cash flows using prevailing market rates. The
frequency of re-pricing per year affects the fair value. In general, a loan that is re-priced every six (6) months will have a
carrying value closer to the fair value with similar maturity and interest basis.
113

12.1 Credit risk

Credit risk is the risk that a counter party will not meet its obligations under a financial instrument or customer contract,
leading to a financial loss. The Company and its subsidiary is exposed to c
redit risk from its operating activities (primarily
trade receivables) and from its financing activities, including deposits with banks and financial institutions, foreign
exchange transactions and other financial instruments.

The Company and its subsidiary trades only with recognised, creditworthy third parties. It is the Company and its
subsidiarys policy that all clients who wish to trade on credit terms are subject to credit verification procedures. In
addition, receivable balances are monitored on an ongoing basis with the result that the Company and its subsidiarys
exposure to bad debts is not significant.
With respect to credit risk arising from the other financial assets of the Company and its subsidiary, such as cash and cash
equivalents the Company and its subsidiarys exposure to credit risk arises from default of the counterparty. The Group
manages its operations to avoid any excessive concentration of counterparty risk and the Company and its subsidiary
takes all reasonable steps to ensure the counterparties, fulfil their obligations.
12.1.1 Credit risk exposure

The maximum risk positions of financial assets which are generally subject to credit risk are equal to their carrying
amounts (without consideration of collateral, if available). Following table shows the maximum risk positions;

2014

Group
Notes
Other
non current
financial assets
Cash in
hand and
at bank
Trade and
Short
Amounts
Total
other
term
due from
receivables investments related parties
% of
allocation

Government securities 12.1.2 - - -
95,101,260 -
95,101,260
21

Deposits with bank
12.1.3 - - -
5,467,179 -
5,467,179 1

Loans to executives
12.1.4
22,891,204 -
7,166,308 - -
30,057,512 7

Trade and other receivables 12.1.5 - -
223,964,861 - -
223,964,861
49

12.1.6 - - - -
78,493,314
78,493,314
18

12.1.7
-
19,213,931
-
-
-
19,213,931
4

Total credit risk exposure 22,891,204
19,213,931 231,131,169 100,568,439 78,493,314 452,298,057
100
2013

Group
Notes
Other
non current
financial assets
Cash in
hand and
at bank
Trade and
Short
Amounts
Total
other
term
due from
% of
allocation

8,600,000 -
8,600,000 1

Deposits with bank
12.1.3 - - -
757,991,841 -
757,991,841
70

Loans to executives
12.1.4
26,264,238 -
10,277,100 - -
36,541,338 3

193,264,207 - -
193,264,207
18

12.1.6 - - - -
71,937,890
71,937,890 7

12.1.7
- 18,555,430
-
-
- 18,555,430
1

Total credit risk exposure 26,264,238 18,555,430 203,541,307 766,591,841 71,937,890 1,086,890,706
100
114
2014

Company
Notes
Other
non current
financial assets
Cash in
hand and
at bank
Trade and
Short
Amounts
Total
other
term
due from
% of
allocation

95,101,260 -
95,101,260
21

Deposits with bank
12.1.3 - - - - - -
Loans to executives
12.1.4
22,891,204 -
7,166,308 - -
30,057,512 7

223,964,861 - -
223,964,861
50

12.1.6 - - - -
78,493,314
78,493,314
18

12.1.7
- 18,690,971
-
-
- 18,690,971
4

Total credit risk exposure 22,891,204 18,690,971 231,131,169 95,101,260 78,493,314 446,307,918
100
2013

Company
Notes
Other
non current
financial assets
Cash in
hand and
at bank
Trade and
Short
Amounts
Total
other
term
due from
% of
allocation

8,600,000 -
8,600,000 1

Deposits with bank
12.1.3 - - -
751,982,048 -
751,982,048
70

Loans to executives
12.1.4
26,264,238 -
10,277,100 - -
36,541,338 3

191,129,064 - -
191,129,064
18

12.1.6 - - - -
71,937,890
71,937,890 7

12.1.7
- 17,936,650
-
-
- 17,936,650
1

Total credit risk exposure 26,264,238 17,936,650 201,406,164 760,582,048 71,937,890 1,078,126,990
100
12.1.2 Government securities

As at 31 March 2014 as shown in table above, for the Group and for the Company 21% (2012/13-1%) of debt securities
comprise investments in government securities that consist of treasury bonds, bills and reverse repo investments.
Government securities are usually referred to as risk free due to the sovereign nature of the instrument.
12.1.3 Deposits with bank

Deposits with banks mainly consist of fixed and call deposits as at 31st March 2014.

As at 31st March all fixed and call deposits were place with financial institutions rated A or better.

Group Company
As at 31st March
2014

Rs.

AAA*
AA *
AA+ *
Total
* rating agency Fitch
5,467,179
-
-
5,467,179
Rating %
of total
2013

Rs.
100 6,009,793
- 480,446,000
- 271,536,048
100 757,991,841
2014
Rating %
of total
Rs.
1
63
36
100
-
-
-
-
Rating %
of total
2013

Rs.
-
-
- 480,446,000
- 271,536,048
- 751,982,048
Rating %
of total
64
36
100
115

12.1.4 Loans to executives

Loans to executive portfolio is largely made up of vehicle loans which are given to staff at assistant manager level and
above. The Company has obtained the necessary Power of Attorney/promissory notes as collateral for the loans granted.
12.1.5 Trade and other receivables

As at 31st March

Neither past due nor impaired
0160 days
Past due but not impaired
6190 days
91120 days
121180 days
> 181 days
impaired
Gross carrying value
Less: impairment provision Individually
assessed impairment provision
Total
Group Company
2014 2013 2014 2013
Rs. Rs. Rs. Rs.
224,871,537
224,871,537
224,871,537
4,035,069
1,223,559
1,001,004
3,815,247
234,946,416

1,782,843

229,404

282,915

2,269,997

3,842,931
207,384,238
4,035,069
1,223,559
1,001,004
3,815,247
234,946,416

1,782,843

229,404

282,915

134,854

3,842,931
205,249,095
(3,815,247)
231,131,169
(3,842,931)
203,541,307
(3,815,247)
231,131,169
198,976,148
(3,842,931)
201,406,164
The Company has obtained bank guarantees from all distributors by reviewing their past performance and credit
worthiness, as collateral. The requirement for an impairment is analysed at each reporting date on an individual basis for
major clients. Additionally, a large number of minor receivables are grouped into homogenous groups and assessed for
impairment collectively. The calculation is based on actual incurred historical data.

12.1.6 Amounts due from related parties

The balance consists of amounts due from the Parent, Companies under common control, Joint Ventures and Associates
of the Parent.

12.1.7 Credit risk relating to cash and cash equivalents

In order to mitigate concentration, settlement and operational risks related to cash and cash equivalents, the Company
and its subsidiary limits the maximum cash amount that can be deposited with a single counterparty. In addition, the
Company and its subsidiary maintains an authorised list of acceptable cash counterparties based on current ratings
and economic outlook, taking into account analysis of fundamentals and market indicators. The Group held cash and
cash equivalents of Rs. 107,221,717/-as at 31st March 2014 (2013 Rs. 772,077,619/-). The Company held cash and cash
equivalents of Rs. 101,231,578/- as at 31 March 2014 (2013 Rs. 765,449,046/-).
12.2 Liquidity Risk

The Groups policy is to hold cash and undrawn committed facilities at a level sufficient to ensure that the Group
has available funds to meet its medium term capital and funding obligations, including organic growth and acquisition
activities, and to meet any unforeseen obligations and opportunities. The Group holds cash and undrawn committed
facilities to enable the Group to manage its liquidity risk.

116
The Company and its subsidiary monitors its risk to a shortage of funds using a daily cash management process. This
process considers the maturity of the Company and its subsidiarys financial investments and financial assets (e.g.
accounts receivable, other financial assets) and projected cash flows from operations.
The Company and its subsidiarys objective is to maintain a balance between continuity of funding and flexibility through
the use of multiple sources of funding including bank loans and overdrafts.

12.2.1 Net debt/(cash)

As at 31st March

Total liquid Assets
Borrowings
Bank overdrafts
Total liabilities
Net debt/ (cash)
Group
Company
2014 2013 2014 2013

Rs Rs Rs Rs
100,568,439
19,213,931
119,782,370
183,333,333
51,102,738
12,560,653
246,996,724
127,214,354
766,591,841
18,555,430
785,147,271
233,333,333
18,330,571
13,069,652
264,733,556
(520,413,715)
95,101,260
18,690,971
113,792,231
183,333,333
51,102,738
12,560,653
246,996,724
133,204,493
760,582,048
17,936,650
778,518,698
233,333,333
18,330,571
13,069,652
264,733,556
(513,785,142)
12.2.2 Liquidity risk management

The mixed approach combines elements of the cash flow matching approach and the liquid assets approach. The business
unit attempt to match cash outflows in each time bucket against a combination of contractual cash inflows plus other
inflows that can be generated through the sale of assets, repurchase agreement or other secured borrowing.

Maturity analysis

The table below summarises the maturity profile of both the Groups and Companys financial liabilities based on
contractual undiscounted payments.
Group
31st March 2014
Within 1 Between Between Between Between
More than
Total

year
1-2 years
2-3 years
3-4 years
4-5 years
5 years

Rs Rs Rs Rs Rs Rs Rs
Borrowings- Financial instruments
in non-current liabilities
- 50,000,000 50,000,000 50,000,000 33,333,333
- 183,333,333
Borrowings-Financial instruments
in current liabilities
51,102,738 - - - - -
51,102,738
Trade and other payables 214,303,955 - - - - -
214,303,955
Amounts due to related parties 7,607,680 - - - - -
7,607,680
Bank overdrafts
12,560,653 - - - - -
12,560,653

285,575,026 50,000,000 50,000,000 50,000,000 33,333,333
- 468,908,359
117

Group
31st March 2013
Within 1
Between
Between
Between
Between
More than
Total

year
1-2 years
2-3 years
3-4 years
4-5 years
5 years

- 50,000,000 50,000,000 50,000,000 50,000,000 33,333,333 233,333,333
18,330,571 - - - - -
18,330,571
519,646,824
9,462,817
Bank overdrafts
13,069,652 - - - - -
13,069,652

560,509,864 50,000,000 50,000,000 50,000,000 50,000,000 33,333,333 793,843,197
Company
31st March 2014

Within 1
Between
Between
Between
Between
More than
Total
year
1-2 years
2-3 years
3-4 years
4-5 years
5 years

- 50,000,000 50,000,000 50,000,000 33,333,333
- 183,333,333
51,102,738 - - - - -
51,102,738
213,761,498
7,607,680
Bank overdrafts
12,560,653 - - - - -
12,560,653

285,032,569 50,000,000 50,000,000 50,000,000 33,333,333
- 468,365,902
Company
31st March 2013

Within 1
Between
Between
Between
Between
More than
Total
year
1-2 years
2-3 years
3-4 years
4-5 years
5 years

- 50,000,000 50,000,000 50,000,000 50,000,000 33,333,333 233,333,333
18,330,571 - - - - -
18,330,571
518,664,715
9,462,817
Bank overdrafts
13,069,652 - - - - -
13,069,652

559,527,755 50,000,000 50,000,000 50,000,000 50,000,000 33,333,333 792,861,088
118
12.3 Market risk

Market risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes
in market prices.

Market risk comprise of the following risks:

* Interest rate risk

*Currency risk

The objective of market risk management is to manage and control market risk exposures within acceptable parameters,
while optimising the return.
The sensitivity analysis in the following sections relate to the position as at 31 March in 2014 and 2013 The analysis
excludes the impact of movements in market variables on; the carrying values of other post-retirement obligations;
provisions: and the non-financial assets and liabilities of foreign operations.
The following assumptions have been made in calculating the sensitivity analysis;
The statement of financial position sensitivity relates to derivatives and available-for-sale debt instruments The sensitivity
of the relevant income statement item is the effect of the assumed changes in respective market risks. This is based on
the financial assets and financial liabilities held at 31 March 2014 and 2013.

12.3.1 Interest rate risk

Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of
changes in market interest rates. The Groups exposure to the risk of changes in market interest rates relates primarily to
the Groups and Companys long-term debt obligations with floating interest rates.

Most lenders grant loans under floating interest rates. To manage this, based on the market condition & outlook of the
interest rate, the Group takes mitigating action such as interest rate swaps ,caps, etc.

The following table demonstrates the sensitivity to a reasonably possible change in interest rates, with all other variables
held constant, of profit/ (loss) before tax (through the impact on floating rate borrowings).

Increase/ (decrease)
Group
Company

in basis points
Rs.
Rs.

Rupee borrowings
2014
+200
(4,688,721 )
(4,688,721)

-200
4,688,721
4,688,721

2013
+150
(3,774,959) (3,774,959)

-150
3,774,959
3,774,959

The assumed spread of basis points for the interest rate sensitivity analysis is based on the currently observable market
environment changes to base floating interest rates.
119

12.3.2 Foreign currency risk

Foreign currency risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of
changes in foreign exchange rates. The Group has exposure to foreign currency risk where it has cash flows in overseas
operations and foreign currency transactions which are affected by foreign exchange movements. Group treasury (JKH)
analyses the market condition of foreign exchange and provides market updates to the senior management, with the use
of external consultants advice. Based on the suggestions made by Group treasury (JKH) the senior management takes
decisions on whether to hold, sell, or make forward bookings of foreign currency.
12.3.2.1 Effects of currency translation

For purposes of Keells Food Products PLCs consolidated financial statements, the income and expenses and the assets
and liabilities of the subsidiary located outside Sri Lanka are converted into Sri Lankan Rupees(LKR). Therefore, period-toperiod changes in average exchange rates may cause translation effects that have a significant impact on, for example,
revenue, segment results (earnings before interest and taxes EBIT) and assets and liabilities of the Group. Unlike
exchange rate transaction risk, exchange rate translation risk does not necessarily affect future cash flows. The Groups
equity position reflects changes in book values caused by exchange rates.

Group

Currency
Increase/(decrease)
Effect on profit
Effect on

in exchange rate
before tax LKR
equity LKR

Rs.
Rs.
2014
INR
6%
9,153
(338,642)

-6%
(9,153)
338,642
2013

INR
5%
324,276
(439,961)

-5%
(324,276)
439,961

Assumptions
The assumed movement, in the spread of the exchange rate sensitivity analysis, is based on the current observable market
environment.

12.4 Capital management

The primary objective of the Groups capital management is to ensure that it maintains a strong financial position and
healthy capital ratios in order to support its business and maximise shareholder value.

The Group manages its capital structure, and makes adjustments to it, in the light of changes in economic conditions. To
maintain or adjust the capital structure, the Group may issue new shares, have a rights issue or buy back of shares.

Group Company

2014 2013 2014 2013

Debt / Equity
15.94%
16.57%
15.95%
16.60%
120
121
Buildings
Plant and
Furniture
Machinery Fittings and
Motor
Freezers
Vehicles
Other
Assets
WIP
Capital
Total
2014
Total
2013
Rs Rs Rs Rs Rs Rs Rs Rs Rs Rs
Disposals
Revaluations
-
-
2,677,165 305,306,190
33,861,124
1,222,286
-
674,166
-
41,667,512
- (3,003,553)
- 12,816,235
674,166 31,854,830
11,616,563
1,601,585
10,014,978
- 1,092,725,022 421,535,421
- 457,731,954
- 50,215,110
21,775,545 1,435,120,475 1,092,725,022
- (3,003,553) (39,575,554)
21,775,545 345,399,006 202,818,091
Revaluations
-
-
(6,719,794) (49,381,368)
(3,570,051)
(3,558,011) (162,006,339) (19,797,705)
(2,186,171)
(674,166)
(2,421,475)
(19,827,915) (9,489,874)
- 3,003,553
(674,166) (20,645,297) (7,068,399)
- 9,433,792
- (276,619,101) (213,749,917)
38,316,673
- (14,189,000)
- 3,003,553
- (65,872,737) (15,011,494)
- (213,749,917) (232,299,888)
As at 31 March 2013
174,191,850 190,848,371 486,937,639
12,841,133
- 11,209,533
2,946,579
- 878,975,105
Carrying value
As at 31 March 2014
172,597,972 186,805,742 742,862,461 10,493,368
- 21,839,597
2,126,689 21,775,545 1,158,501,374
(1,593,878) (10,277,805) (211,387,707) (23,367,756)
At the end of the year
Disposals
(1,593,878)
business combination
Charge for the year -
Charge for the year
At the beginning of the year
Accumulated depreciation
174,191,850 197,083,547 954,250,168
Additions - business combination
174,191,850 194,406,382 648,943,978 32,638,838
Additions
13.1
Group
Cost or valuation
As at 31 st March
Land
Equipment
Leasehold
Land and Buildings on
13 Property, Plant and Equipment

122
Land and Buildings on

Plant and
Furniture
Motor
Freezers
Other
Capital
Total
Total
Buildings Leasehold Machinery Fittings and Vehicles
Assets
WIP
2014
2013

Land Equipment
Rs
Rs
Rs
Rs
Rs
Rs
Rs
Rs
Rs
Rs
Carrying value
As at 31 March 2014
172,597,972 186,805,742 742,862,461 10,493,368
- 21,839,597 2,126,689 21,775,545 1,158,501,374
As at 31 March 2013
174,191,850 190,848,371 486,937,639 12,841,133
- 11,209,533 2,946,579
- 878,975,105
Accumulated depreciation
and impairment

- (3,558,011) (162,006,339) (19,797,705) (674,166) (20,645,297) (7,068,399)
- (213,749,917) (232,299,888)
Charge for the year
(1,593,878) (6,719,794) (49,381,368) (3,570,051)
-
(2,186,171) (2,421,475)
- (65,872,737) (15,011,494)
Charge for the year business combination
-
-
-
-
-
-
-
-
- (14,189,000)
Disposals
-
-
-
-
- 3,003,553
-
-
3,003,553 38,316,673
Revaluations
-
-
-
-
-
-
-
-
- 9,433,792
(1,593,878) (10,277,805) (211,387,707) (23,367,756) (674,166) (19,827,915) (9,489,874)
- (276,619,101) (213,749,917)
Cost or valuation
At the beginning of the year 174,191,850 194,406,382 648,943,978 32,638,838 674,166 31,854,830 10,014,978
- 1,092,725,022 421,535,421
Additions
- 2,677,165 305,306,190 1,222,286
- 12,816,235 1,601,585 21,775,545 345,399,006 202,818,091
Additions - business combination
-
-
-
-
-
-
-
-
- 457,731,954
Disposals
-
-
-
-
- (3,003,553)
-
- (3,003,553) (39,575,554)
Revaluations
-
-
-
-
-
-
-
-
- 50,215,110
174,191,850 197,083,547 954,250,168 33,861,124 674,166
41,667,512 11,616,563 21,775,545 1,435,120,475 1,092,725,022
13.2 Company
Group
As at 31st March

13.3 Carrying value of total assets
At cost
At fair value

13.4 Land and Building

At fair value

Company
2014
Rs

2013
Rs

2014
Rs
2013
Rs
801,774,780
356,726,594
1,158,501,374

513,934,884
365,040,221
878,975,105
801,774,780
356,726,594
1,158,501,374
513,934,884
365,040,221
878,975,105
356,726,594
356,726,594
365,040,221
365,042,221
356,726,594
356,726,594
365,040,221
365,040,221
Revaluation of Land and Buildings

The Company uses the revaluation model of measurement for land and buildings. The Company engaged Messrs. P.B.
Kalugalagdara, & Associates an independent expert valuer, to determine the fair value of its land and buildings. Fair value is
determined by reference to market-based evidence. Valuations are based on active market prices, adjusted for any difference
in the nature, location or condition of the specific property. The date of the most recent revaluation was 3
1 March 2013.
Details of Land and Buildings stated at valuation are indicated below;
Property
Location

Method of
valuation
Effective date
of valuation
Independent
Valuer
Land and Buildings

Ja Ela
Open Market
31 March 2013
Messrs. P.B.

Value Method Kalugalagedera &

Associates
Chartered Valuation

Surveyor
Ja Ela
Open Market
31 March 2013
Messrs. P.B.


Associate
Chartered Valuation

Surveyor
Pannala
Open Market
31 March 2013
Messrs. P.B.


Associates
Chartered Valuation

Surveryor
123

13.5 The carrying amount of Revalued Building if they were carried at cost less depreciation,would be as follows;

Group Company
2014
As at 31st March
2013
2014
2013
Cost
215,961,000
215,961,000
215,961,000
215,961,000
Accumulated Depreciation
(35,410,970)
(29,985,944)
(35,410,970)
(29,985,944)

180,550,030
185,975,056
180,550,030
185,975,056

13.6 Property, Plant and Equipment with a cost of Rs. 156,698,775/- (2013 -Rs. 158,605,256/-) have been fully depreciated
and continue to be in use by the Company.

13.7 During the financial year, the Company acquired Property, Plant & Equipment to the aggregate value of Rs.
345,399,006/- (2013 -Rs. 660,550,045/-) cash payments amounting to Rs. 345,399,006/- (2013- Rs. 552,818,091/- )
were made during the year for purchase of Property, Plant and Equipment.

As at 31st March

Goodwill
Purchased
14
Intangible Assets
2014
2013
Software
Goodwill
Purchased
2014
2013
Rs Rs Rs Rs Rs Rs Rs Rs
Cost/carrying value
Additions / transfers
Acquisitions
4,120,560 242,268,046 246,388,606

991,500
991,500
-
4,120,560
- 242,268,046
5,112,060 242,268,046 247,380,106 246,388,606
4,120,560 242,268,046 246,388,606

991,500
991,500
4,120,560
- 242,268,046
5,112,060 242,268,046 247,380,106 246,388,606
Accumulated amortisation and impairment
(179,643)
(179,643)
(179,643)
(179,643)
Amortisation
(875,463)
(875,463)
(179,643)
(875,463)
(875,463)
(179,643)
(1,055,106)
(1,055,106)
(179,643)
(1,055,106)
(1,055,106)
(179,643)
Carrying value
As at 31 March 2014
4,056,954 242,268,046 246,325,000
As at 31 March 2013
124
Group Company
Software
3,940,917 242,268,046
- 246,208,963
4,056,954 242,268,046 246,325,000

3,940,917 242,268,046
- 246,208,963
14.1 Goodwill

Goodwill acquired through business combination is due to the purchase of the manufacturing facility (CGU) of D&W
Food Products (Pvt) Ltd and goodwill is tested for impairment as follows;

Cash Generating Unit (CGU)
Key assumptions used in the VIU calculations
The recoverable amount of the CGU has been determined based on the value in use (VIU) calculation.
Gross margins
The basis used to determine the value assigned to the budgeted gross margins, is the gross margins achieved in the year
preceding the budgeted year adjusted for projected market conditions.

Discount rates
Inflation
Volume growth
The discount rate used is the risk free rate, adjusted by the addition of an appropriate risk premium.
The basis used to determine the value assigned to the budgeted cost inflation, is the inflation rate, based on projected
economic conditions.
Volume growth has been budgeted on a reasonable and realistic basis by taking into account the growth rates of one to
four years immediately subsequent to the budgeted year based on Industry growth rates. Cash flows beyond the five year
period are extrapolated using a 5% growth rate.
125

Company
As at 31st March
Note
2014
2013
Rs Rs
15 Investment in Subsidiary
15.1 Carrying value
Investments in subsidiary
Unquoted- John Keells Foods India Pvt Ltd (JKFI)
220,291,730
220,291,730
Allowance for impairment of investment- JKFI

(215,344,647)
4,947,083
(214,159,354)
6,132,376
15.2 The Subsidiary Company John Keells Foods India Private Limited was restructured in June 2010, due to the significant losses
incurred. Despite efforts made by John Keells Foods India Private Limited to appoint a master distributor who could carry out
sales on their behalf, the Company was unable to agree terms which were beneficial to both parties. In the above context it
was considered prudent and appropriate to impair the investment in John Keells Foods India Private Limited. The amount of
Rs. 215,344,647/- was impaired of which Rs. 1,185,293/- was made in 2013/14, Rs. 119,727,152/- was made in 2010/11 and Rs.
94,432,202/- was made in 2009/10.

As at 31st March

16
Other Non- Current Financial Assets
Note

2014
Rs
Group Company
2013
2014
2013
Rs
Rs
Rs
Loans to executives
16.1
22,891,204
26,264,238
22,891,204
26,264,238

22,891,204
26,264,238
22,891,204
26,264,238

2014 2013 2014 2013

Rs
Rs
Rs
Rs
16.1 Loans to executives


36,541,338
39,195,516
36,541,338
39,195,516
Loans granted / transfers

5,964,480
12,595,484
5,964,480
12,595,484
Recoveries

(12,448,306)
(15,249,662)
(12,448,306)
(15,249,662)

30,057,512
36,541,338
30,057,512
36,541,338

Receivable within one year
19
7,166,308
10,277,100
7,166,308
10,277,100

Receivable between one and five years

22,891,204
26,264,238
22,891,204
26,264,238
Total Receivable

30,057,512
36,541,338
30,057,512
36,541,338

126
Group Company
As at 31st March

17
Other Non-Current Assets

Others -Pre paid staff cost

2014
Rs
2013
Rs
2014
Rs
2013
Rs
4,846,414
4,846,414
6,385,227
6,385,227
4,846,414
4,846,414
6,385,227
6,385,227
Pre paid staff cost represents the pre paid portion of executive staff loans granted.

Group Company
As at 31st March

2014
Rs
2013
Rs
2014
Rs
2013
Rs
Raw materials
Work-in-progress
Finished goods
Spare Parts
Other stocks

88,056,427
5,827,869
84,444,662
19,538,589
331,440
198,198,987
127,441,965
5,072,707
103,183,116
17,663,697
295,569
253,657,054
88,056,427
5,827,869
84,444,662
19,538,589
331,440
198,198,987
127,441,965
5,072,707
103,183,116
17,663,697
295,569
253,657,054
18 Inventories

As at 31st March

19
Group Company
Note

2014
Rs

2013
Rs

2014
Rs
2013
Rs
Trade and Other Receivables


227,780,108
197,107,138
Less: impairment of trade debtors

(3,815,247)
(3,842,931)
Loans to executives
16.1
7,166,308
10,277,100

231,131,169
203,541,307

An analysis of trade receivables (including past due and impaired) is given in note 12.1.5
227,780,108
(3,815,247)
7,166,308
231,131,169
194,971,995
(3,842,931)
10,277,100
201,406,164
Group Company
As at 31st March
Note
2014
2013

Rs
Rs

2014
Rs
2013
Rs
9,124,371
21,276,620
30,400,991
8,784,453
9,940,768
18,725,221
20
Other Current Assets
Other receivables
Tax refunds
20.1

9,896,889
21,276,620
31,173,509
9,949,995
9,940,768
19,890,763
127

Group Company
As at 31st March

20.1 Tax Refunds

Charge for the year

Income Tax -Under provision

Payments during the year

Refund transferred from income tax payable account

2014
Rs
2013
Rs
9,940,768
-
(53,089)
11,388,941
-
21,276,620

-
-
-
-
9,940,768
9,940,768

2014
Rs

9,940,768
-
(53,089)
11,388,941
-
21,276,620
2013
Rs
9,940,768
9,940,768
Group Company
As at 31st March 2014 2013 2014 2013
21
Short Term Investments
Rs
Rs
Rs
Rs
5,467,179
95,101,260
100,568,439

757,991,841
8,600,000
766,591,841

-
95,101,260
95,101,260
751,982,048
8,600,000
760,582,048
Bank deposits (less than 3 months maturity)

Government securities (less than 3 months maturity)
Reported for cash flow

Group Company
As at 31st March
2014 2013 2014 2013

Rs
Rs
Rs
Rs
22
Cash in Hand and at Bank
Cash in hand
Cash at bank
Favourable cash & cash equivalent balance

Bank overdraft
Unfavourable cash & cash equivalent balance
703,250
18,510,681
19,213,931

(12,560,653)
(12,560,653)
729,250
17,826,180
18,555,430

(13,069,652)
(13,069,652)
703,250
17,987,721
18,690,971
729,250
17,207,400
17,936,650
(12,560,653)
(12,560,653)
(13,069,652)
(13,069,652)
Facility
Security
Amount Rs.
Repayment
Terms
Security and repayment terms of borrowings

Type of facility

Lending
Institution
Nature of
Facility
Short term
HSBC
Bank overdraft
50,000,000
A letter of negative
pledge over Companys

unencumbered assets

assets in Ja Ela

Short term
Deutsche Bank
Bank overdraft
40,000,000
Clean basis
Short term
BOC
Bank overdraft
1,000,000
Clean basis
Short term
DFCC
Bank overdraft
50,000,000
Clean basis
128
On demand
On demand
On demand
On demand
2014 2013

As at 31st March

23
Stated Capital
Number of
shares

25,500,000
-
25,500,000

Value of
shares
1,294,815,000
-
1,294,815,000
8,500,000
17,000,000
25,500,000
274,815,000
1,020,000,000
1,294,815,000
Group
As at 31st March
Revenue Reserves
Company
2014
Rs

2013
Rs
2014
Rs
2013
Rs
101,091,517
101,091,517

154,355,686
154,355,686
99,139,429
99,139,429
148,945,136
148,945,136
Accumulated profit

Note
As at 31st March
25
Number of
shares
Rs.
Fully paid ordinary shares

Increase in number of shares

24
Value of
shares
Rs.
Other Components of Equity

Revaluation reserve
Foreign currency translation reserve
Employee share option reserve

25.1
25.2
25.3

Group
2014
Rs

Company
2013
Rs
2014
Rs
2013
Rs
151,041,072
-
3,261,204
154,302,276
151,041,072
151,041,072

151,041,072
(678,971)
3,261,204
153,623,305
151,041,072
(2,595,777)
-
148,445,295
25.1 Revaluation reserve consists of the surplus on the revaluation of Property, Plant and Equipment net of deferred tax effect.

25.2 Foreign currency translation reserve consists of currency translation difference from the Foreign Subsidiary.

25.3 Employee share option reserve

Under the John Keells Groups Employees share option scheme (ESOP), share options of the parent are granted to
senior executive of the Company and the subsidiary. With more than 12 months of service. The exercise price of the share
options is equal to the 30 day volume weighted average market price of the underlying shares on the date of grant. The
share options vest over a period of four years and is dependent on a performance criteria and a service criteria. The
performance criteria being a minimum performance achievement of Met Expectations and service criteria being that
the employee has to be in employment at the time the share options vest. The fair value of the share options is estimated
at the grant date using a binomial option pricing model, taking into account the terms and conditions upon which the
share options were granted.
The contractual term for each option granted is five years. There are no cash settlement alternatives. The Group does not
have a past practice of cash settlement for these share options.
129

The expense recognised for employee services received during the year is shown in the following table:

Group Company
2014
2013
2014
2013

Rs. Rs. Rs. Rs.
Expense arising from equity-settled share-based
payment transactions
3,261,204
-
3,261,204
Total expense arising from share-based
payment transactions
3,261,204
-
3,261,204

Movements in the year
The following table illustrates the number (No.) and weighted average exercise prices (WAEP) of, and movements in, share
options during the year:
Group Company
2014 2014 2014 2014
ESOP PLAN 8
No.
WAEP Rs.
No.
WAEP Rs.
Outstanding at 1 April 2013
-
-
-
Granted during the year
97,200
253.16
97,200
253.16
Lapses/Forfeited during the year
(16,384)
253.16
(16,384)
253.16
Adjustments
39,179
253.16
39,179
253.16
Outstanding at 31 March 2014
119,995
253.16
119,995
253.16

Fair value of the share options and assumptions
The fair value of the share options is estimated at the grant date using a binomial option pricing model, taking into account
the terms and conditions upon which the share options were granted. The valuation takes into account factors such as stock
price, expected time to maturity, exercise price, expected volatility of share price, expected dividend yield and risk free
interest rate.

As at 31st March

Group Company
2014
Rs
2013
Rs
2014
Rs
2013
Rs
251,663,904
-
(17,227,833)
234,436,071
-
251,663,904
-
251,663,904
251,663,904
-
(17,227,833)
234,436,071
251,663,904
251,663,904
Repayable within one year
51,102,738
18,330,571
51,102,738
18,330,571
Repayable after one year

Repayable between one and five years
Repayable after five years

Total borrowings

183,333,333
-
183,333,333
234,436,071
200,000,000
33,333,333
233,333,333
251,663,904
183,333,333
-
183,333,333
234,436,071
200,000,000
33,333,333
233,333,333
251,663,904
26 Borrowings
Movement
Additions
Repayments
130
Current position of borrowings
Security and repayment terms

ending
L
institution
Nature of
Security
facility
FCC
D
Project Loan

A corporate guarantee
from John Keells
Holdings PLC.
Notes
As at 31st March

27
Installment
remaining
60 equal installments
after a grace period
of 12 months
56
Group
Company
2014
2013
2014
2013
Rs Rs Rs Rs
Deferred Tax Liabilities

Charge/ (release)
8.2
The closing deferred tax asset and liability
balances relate to the following;
Accelerated depreciation for tax purposes
Employee benefit liability
(16,878,454)
Benefit arising from Tax Losses
(3,393,568)

30,494,360
(12,474,566)
18,019,794
2,901,234
27,593,126
30,494,360
30,494,360
(12,474,566)
18,019,794
2,901,234
27,593,126
30,494,360
112,961,855
(14,868,160)
50,766,382
(16,878,454)
112,961,855
(14,868,160)
50,766,382
(80,073,901)
(3,393,568)
(80,073,901)
18,019,794
30,494,360
18,019,794
Group
As at 31st March

28
Repayment
terms
30,494,360
Company
2014
2013
2014
2013
Rs. Rs. Rs. Rs.
Employee Benefit Liabilities

Current service cost
Transfers
Interest cost on benefit obligation
Payments
(3,779,835)
Actuarial (gain)/ loss
(741,979)
The expenses are recognised in the income
statement in the following line items;
Cost of sales

60,280,195
3,699,536
6,577,557
6,630,821
(26,819,125)
54,939,342
4,162,018
206,717
5,493,932
(3,779,835)
60,280,195
3,699,536
6,577,557
6,630,821
(26,819,125)
54,939,342
4,162,018
206,717
5,493,932
2,731,561
(741,979)
2,731,561
53,100,545
60,280,195
53,100,545
60,280,195
5,345,766
1,766,010
3,218,581
10,330,357
6,658,884
994,999
2,002,067
9,655,950
5,345,766
1,766,010
3,218,581
10,330,357
6,658,884
994,999
2,002,067
9,655,950
131

essrs. Actuarial and Management consultants (Pvt) Ltd.; Independent actuaries, carried out and actuarial valuation of the
M
defined benefit plan - gratuity.
The principal assumptions used in determining the cost of employee benefits were:

Discount rate
Future salary increases

Retirement Age
Clerical and labour staff
Sales Representatives
Executive staff

The liability to the above employee benefits is not externally funded.
2014 2013
11% p.a.
5%-10% p.a.
11% p.a.
6% - 10% p.a.
55 years
55 years
55 years
55 years
55 years
55 years
28.1 Sensitivity of assumptions used

Percentage point change in the assumptions would have the following effects:

Effect on the defined benefit
obligation liability
Increase by one percentage point above report
Decrease by one percentage point below report
Discount rate
Salary increment
2014 2013 2014

Rs. Rs. Rs.
(2,568,075)
2,829,518
(3,426,236)
3,802,233
3,040,945
(2,797,402)
Maturity analysis of the payments

The following payments are expected on employee benefit liabilities in future years;
2014
Rs.
Within the next 12 months
Between 1 and 5 years
Beyond 10 years
Total expected payments
The weighted average duration of the defined benefit plan obligation is 5.63 years.
132
10,945,890
10,234,048
10,306,039
13,050,925
8,563,643
53,100,545
Group Company
As at 31st March
29
2014 2013 2014 2013

Rs Rs Rs Rs
Trade and Other Payables
Trade payables
152,402,181
98,985,653
152,216,993
98,003,544
Sundry creditors including accrued expenses
61,901,774
420,661,171
61,544,505
420,661,171

214,303,955
519,646,824
213,761,498
518,664,715

Sundry creditors including accrued expenses as at 31st March 2013 included the amount of Rs. 350,000,000/- payable to D&W Food
Products (Pvt) Limited being the balance consideration payable for the acquisition of the manufacturing facility, which was settled in
full in July 2013.

Group Company
As at 31st March
30
2014 2013 2014 2013

Rs Rs Rs Rs
Other Current Liabilities

Other tax payables
1,784,821
9,774,085
1,784,821
9,774,085

1,784,821
9,774,085
1,784,821
9,774,085
31
Related Party Transactions
The Group and Company carried out transactions in the ordinary course of business with the following related entities.

Group Company
As at 31st March

31.1
31.2
Note


31.3/31.4
Ultimate Parent
Subsidiary
Companies under common control

31.3/31.4
Ultimate Parent
Subsidiary

2014
Rs
2013
Rs
2014
Rs
2013
Rs
-
-
78,493,314
78,493,314

71,937,890
71,937,890
-
-
78,493,314
78,493,314
71,937,890
71,937,890
2,165,861
-
5,441,819
7,607,680
3,005,642
6,457,175
9,462,817
2,165,861
-
5,441,819
7,607,680
3,005,642
6,457,175
9,462,817
133

31.3 As at 31st March

Ultimate Parent
John Keells Holdings PLC

Subsidiary
John Keells Foods India (Pvt) Ltd.

Asian Hotels and Properties PLC.
Ceylon Cold Stores PLC.
DHL Keells (Pvt) Ltd.
Habarana Lodge Ltd.
Habarana Walk Inn Ltd.
InfoMate (Pvt) Ltd.
JayKay Marketing Services (Pvt) Ltd.
NDO Lanka (Pvt) Ltd.
John Keells Office Automation (Pvt) Ltd.
John Keells PLC.
Kandy Walk Inn Ltd.
Keells Consultants (Pvt) Ltd.
Trans Asia Hotels PLC.
Trinco Holiday Resorts (Pvt) Ltd.
Union Assurance PLC.

31.4 As at 31st March

Ultimate Parent
Subsidiary
John Keells Foods India (Pvt) Ltd.

Asian Hotels and Properties PLC.
Ceylon Cold Stores PLC.
DHL Keells (Pvt) Ltd.
Habarana Lodge Ltd.
Habarana Walk Inn Ltd.
InfoMate (Pvt) Ltd.
JayKay Marketing Services (Pvt) Ltd.
NDO Lanka (Pvt) Ltd.
John Keells Office Automation (Pvt) Ltd.
John Keells PLC.
Kandy Walk Inn Ltd.
Keells Consultants (Pvt) Ltd.
Trans Asia Hotels PLC.
Trinco Holiday Resorts (Pvt) Ltd.
Union Assurance PLC.

134
Group
Amounts due from
2014
Rs
Amounts due to
2013
Rs
2014
Rs
2012
Rs
2,165,861
3,005,642
1,941,377
-
-
346,652
243,981
-
68,281,942
-
-
-
201,690
-
489,220
433,028
-
71,937,890
-
2,590,074
16,994
-
17,250
185,904
452,884
1,956,259
137,500
40,575
-
36,174
-
-
8,205
7,607,680
3,803,876
100,138
238,898
1,929,626
149,030
142,000
20,288
73,319
9,462,817

-
-
-
590,919
403,463
-
76,852,684
-
-
-
402,545
-
-
243,703
-
78,493,314

Company
Amounts due from

2014
Rs
Amounts due to
2013
Rs
2014
Rs
2013
Rs

2,165,861
3,005,642
1,941,377
-
-
346,652
243,981
-
68,281,942
-
-
-
201,690
-
489,220
433,028
-
71,937,890
-
2,590,074
16,994
-
17,250
185,904
452,884
1,956,259
137,500
40,575
-
36,174
-
-
8,205
7,607,680
3,803,876
100,138
238,898
1,929,626
149,030
142,000
20,288
73,319
9,462,817

-
-
-
590,919
403,463
-
76,852,684
-
-
-
402,545
-
-
243,703
-
78,493,314
Group
Company
31.5 For the year ended 31st March

Note
2014
2013
2014
2013

Rs
Rs
Rs
Rs

Transactions with related parties
Ultimate Parent
(Receiving) of services
(20,387,346)
(17,380,178)
(20,387,346)
(17,380,178)
Interest (paid)
-
(3,492,808)
-
(3,492,808)

Subsidiary
-
-
-

Sales of goods
503,507,841
521,846,905
503,507,841
521,846,905
(Purchase) of goods /services

(23,536,757)
(32,511,460)
(23,536,757)
(32,511,460)

31.6 Compensation of key management personnel
Key management personnel include members of the Board of Directors of Keells Food Products PLC and its Subsidiary and the
Parent Company John Keells Holdings PLC.
2014
2013
2014
2013

Rs
Rs
Rs
Rs
Short term employee benefits
(6,300,000)
(6,300,000)
(6,300,000)
(6,300,000)
31.7 Post employment benefits

Group Company

2014
2013
2014
2013

Rs
Rs
Rs
Rs

Post employment benefits
(4,453,213)
(4,563,746)
(4,453,213)
(4,563,746)

(4,453,213)
(4,563,746)
(4,453,213)
(4,563,746)

Group Company

2014
Rs
2013
Rs
2014
Rs
2013
Rs
31.8 Transactions with related parties - Associates

Nations Trust Bank PLC.
Interest received / (Interest paid)
2,062,394
(64,655)
2,062,394
(64,655)

The Group and the Company did not hold interest bearing deposits at Nations Trust Bank PLC as at 31 March 2014. (31.03.2013 Nil).

31.9 Terms and conditions of transactions with related parties
Transactions with related parties are carried out in the ordinary course of the business. Outstanding current account balances
as at year end are unsecured, interest free and settlement occurs in cash. There are no related party transactions other than
the above.

135

32. Reclassification of Comparatives

Note
Group
Company
As reported
Current
As reported
Current
previously Presentation previously Presentation
Income Statement

Cost of sales
(1,738,607,810)
(1,739,124,850)
(1,738,607,810)
(232,612,437)
(232,755,403)
(232,612,437)
(110,280,288)
(110,362,261)
(109,284,707)

(1,739,124,850)
(232,755,403)
(109,366,680)
Statement of Other Comprehensive Income

33
Re-measurement gain/(loss) on defined benefit plans

-
741,979
-
741,979

Re-measurement gain on defined benefit plans previously classified under the Income Statement amounting to Rs. 741,979/- was re
classified to the Statement of Other Comprehensive Income according to the requirements of LKAS-19 Employee Benefits.

Contingent Liabilities

There were no material contingencies as at the reporting date.

34
Capital and Other Commitments
Capital commitments approved as at the reporting date, but not provided for in the financial statements amounted to Rs.
17,982,379/- (2013 Rs. 181,325,416/-) for both the Group and the Company.

The Company has constructed a building on leasehold land obtained on lease, the details are stated below;

Property
Period of Lease
Rentals
2014
As at 31st March
Rs
New Post Estate, Temple Road,
Renewed for 10 years from
Within one year
Ekala, Ja Ela
1st September 2010
Between one and five years

After five years

Property
Period of Lease
Rentals
As at 31st March
35
136
217,368
1,086,840
86,947
1,391,155
2014
Rs
Industrial Estate
35 years from August 2012
Within one year
398,000
Makandura Pannala
Between one and five years
1,990,000

After five years
13,532,000

15,920,000

Events After the Reporting Period
There have been no material events occurring after the Statement of Financial Position date that require adjustments to or
disclosure in the Financial Statements other than the following:

As required by section 56(2) or the Companies Act No. 7 of 2007, the Board of Directors have confirmed that the Company
satisfies the solvency test in accordance with section 57 of the Companies Act No. 7 of 2007, and has obtained a certificate
from the Auditors, prior to approving a first and final dividend of Rs. 2/- per share to be paid on 17th June 2014.


Ordinary Shareholdings
Number of ordinary shares - 25,500,000
Distribution of Shareholders

31st March 2014
31st March 2013
Shareholding Range
No. of
No. of
%
No. of

Shareholders
Shares Held Shareholders

Less
than or equal to
1,000

870
164,128
0.64
874
1,001

to
10,000

130
438,320
1.72
136
10,001

to
100,000

30
950,011
3.73
33
100,001

to
1,000,000

5
1,024,299
4.02
5
Over 1,000,001

3
22,923,242
89.90
3

1,038 25,500,000
100.00
1,051
No. of
Shares Held
176,601
462,196
945,874
992,087
22,923,242
25,500,000
0.69
1.81
3.71
3.89
89.90
100.00

Shareholding Range

No. of
Shareholders
No.Of
Shares Held
John Keells Holdings & Subsidiaries

Directors & Spouses
Public
Total

Sri Lankan Residents
Non-Residents
Total
No. of
No.Of
%
Shareholders
Shares Held
8
1
1,029
1,038
23,350,658
12,750
2,136,592
25,500,000
91.57
0.05
8.38
100.00
8
1
1,042
1,051
23,350,658
12,750
2,136,592
25,500,000
91.57
0.05
8.38
100.00
1,023
15
1,038
25,366,672
133,328
25,500,000
99.48
0.52
100.00
1,034
17
1,051
25,374,550
125,450
25,500,000
99.51
0.49
100.00
137

Top 20 Shareholders
As at 31st March
2014
2013

No. of Shares
% of Issued
No. of Shares
% of Issued
Held Capital Held Capital
19,110,399
74.94
19,110,399
74.94
John Keells PLC
2,573,196
10.09
2,573,196
10.09
Walkers Tours Limited
1,239,647
4.86
1,239,647
4.86
Mack Air (Pvt)Limited
328,791
1.29
328,791
1.29
260,400
1.02
231,600
0.91
Waldock Mackenzie Limited /

Mr. Chamil A Damion Kohombanwickramage
Waldock Mackenzie Limited / Mr L P Hapangama
170,969
0.67
184,557
0.72
Deutsche Bank AG- Comtrust Equity Fund
159,419
0.63
142,419
0.56
Mr.J B Hirdaramani
104,720
0.41
104,720
0.41
Mr.D J M Blackler
90,000
0.35
90,000
0.35
Distilleries Company of Sri Lanka PLC

Mackinnon Mackenzie & Company (Ceylon) Limited
84,221
0.33
64,854
0.25
60,000
0.24
60,000
0.24
Mrs. N H Abdul Husein
57,000
0.22
36,935
0.14
Waldock Mackenzie Ltd /Mr. M Haradasa
50,700
0.20
50,700
0.20
Waldock Mackenzie Ltd /Mr. L H L M P Haradasa
47,445
0.19
49,960
0.20
Mr. M A H Esufally
46,660
0.18
45,200
0.18
Mr.H N Esufally
46,576
0.18
35,650
0.14
Sandwave Limited
31,280
0.12
21,300
0.08
J B Cocoshell ( Pvt ) Limited
30,000
0.12
30,000
0.12
Keells Realtors Limited
30,000
0.12
30,000
0.12
29,625
0.12
28,625
0.11
L H L Noris De Silva and Son (Pvt) Ltd

Share Prices
2014 2013
Rs Rs
Beginning of the year
70.00
100.00
Highest for year
82.40
(22-05-2013)
104.50
(21-06-2012)
Lowest for year
50.10
(26-02-2014)
60.10
(30-08-2012)
As at 31st March
55.00
70.00
138
Shareholders Funds
Rs. Mn
Rs. Mn
2,000
2,000
1,500
1,500
1,000
1,000
500
500
2010 2011 2012 2013 2014
2010 2011 2012 2013 2014
Net Asset Per Share
Market Price
Rs.
Rs.
80
150
70
120
60
50
90
40
60
30
20
30
10
0
2010 2011 2012 2013 2014
0
2010 2011 2012 2013 2014
139
140
1,294,815
154,356
148,445
1,597,616
324,108
18,331
13,070
538,883
-
2,492,008
223,696
-
2,091,343
275,479
38,447
2,492,008
309,624
50,388
2,091,343
1,294,815
101,092
153,623
1,549,530
254,454
51,102
12,561
878,975
278,858
766,592
253,657
1,158,501
274,063
100,568
198,199
64,959
50,255
115,214
(24,331)
90,883
2,197,482
2,280,142
(33,593)
21,639
(11,954)
12,421
467
2013
Group
2014
Group
5,504
818,812
216,221
274,815
85,780
91,832
452,427
57,841
-
86,820
287,210
9,622
818,812
189,236
33,959
7,237
291,549
184,177
(3,534)
180,644
(51,005)
129,639
2,328,752
2012
Group
25,330
778,460
178,384
274,815
(43,859)
92,007
322,963
53,428
-
198,355
276,844
1,839
778,460
173,635
18,636
8,957
298,548
110,209
(14,657)
95,552
(65,189)
30,363
2,196,156
2011
Group
-
672,576
222,829
274,815
(78,051)
92,803
289,567
51,897
-
108,283
236,716
26,175
672,576
176,005
12,816
29,484
191,381
(123,470)
(13,798)
(137,268)
(9,062)
(146,330)
1,833,113
2010
Group
-
690,343
158,663
274,815
86,395
92,803
454,013
50,746
-
26,921
263,698
18,974
690,343
180,163
15,382
22,369
189,757
41,364
(24,995)
16,369
(28,583)
(12,215)
1,792,635
2009
Group
17,955
568,141
150,189
99,815
123,072
92,803
315,690
49,294
-
35,013
215,968
4,258
568,141
170,853
14,466
5,800
156,796
132,458
(10,948)
121,510
(45,428)
76,082
1,552,000
2008
Company
21,449
513,084
124,859
99,815
59,490
32,417
191,723
46,326
128,727
193,846
48,736
513,084
114,920
-
-
155,582
91,215
(15,162)
76,054
(29,359)
46,695
1,401,620
2007
Company
-
422,118
521,614
103,015
136,390
90,479
110,382
99,815
49,041
35,223
184,079
98,131
181,529
98,128
521,614
151,575
-
-
90,381
54,312
(12,161)
42,151
(13,740)
28,411
1,153,900
2005
Company
99,815
12,795
35,223
147,833
73,424
151,055
15,936
422,118
131,086
-
-
124,041
(11,654)
(13,674)
(25,328)
(918)
(26,245)
1,201,182
2006
Company
All figures given are in Rs.000s unless otherwise stated.
The above indicates the simplified income Statement and the Statement of Financial Position of the Company for the year 2005 to 2008 and the Group for the year 2009 to 2014.

The Statement of Financial Position is categorised in to its key Assets and Liabilities.
What We Owned
Stated Capital
Revenue Reserves
Other components of equity
Total Equity
Non-current liabilities
Interest Bearing Borrowings
Trade and Other Payables including
dues to Related Parties
Provision for Taxation &\
Government - Levies

What We Owned
Property, Plant & Equipment
Non Current Assets / Goodwill
Inventories
Trade & Other receivable including
dues from Related Parties
Other Current Assets

Profit / (loss) from Operating activities

Net finance (costs)/income
Trading Profit/(Loss) after Finance charges
Income Tax Reversal/ (Expenses)
Net Profit/(Loss) after Tax

Revenue
Ten Year Information at a Glance
141

70.00

483
4,550
1,656

100.00

453
5,141
2,028
6.87
-
14.56
17.74

5.57
14.56
33.44
34.73
-
19.19
55.25

1.93
0.99
24.36

2012
Group

150.00

440
4,991
1,683
44.00
-
2.27
12.67

1.38
3.41
9.91
23.98
-
61.42
41.49

1.46
0.72
7.52

2011
Group
50.50
455
3,940
1,376
69.00
456
4,020
1,108
(36.82)
2.44
(2.72)
17.80
2.67
1.64
1.65
1.46
0.88
(8.95)
(4.20)
(0.55)
(23.81)
11.36
(0.68)
(1.37)
(3.17)
9.95
3.50
5.93
65.77
434
3,576
1,566
56.00
6.55
2.10
15.26
12.38
1.88
1.11
12.10
4.90
8.54
29.99
39.47
2.50
11.09
55.57
435
3,222
1,231
49.75
9.49
-
10.54
7.52
1.45
0.88
6.02
3.33
5.24
27.50
32.65
-
69.07
37.37
2009
2008
2007
Group Company Company
(7.98)
(16.43)
(39.36)
(28.10)
2.50
37.39
43.05
2010
Group
439
2,736
1,014
34.00
(11.54)
1.60
(8.67)
5.80
1.45
0.83
(0.85)
(2.18)
(2.95)
(15.81)
(4.17)
2.00
79.53
35.02
2006
Company
452
2,553
987
38.00
11.91
8.40
7.22
1.55
1.17
4.47
2.46
3.19
16.72
17.02
101.52
35.29
2005
Company
Number of
Buildings
Buildings
in (Sq. Ft)
1.00
4.08
Land in acres
Freehold
Leasehold
Keells Food Products PLC.

16, Minuwangoda Road, Ekala Ja Ela
5
44,869
3.00
16, Minuwangoda Road, Ekala Ja Ela
1
7,700
-
Industrial Estate Makandura Gonawila Pannala
3
28,700
-

Location
Real Estate Portfolio
The above ratios are based on the Income Statement and the Statement of Financial Position of the Company from the year 2005 to 2008 and the Group for the year 2009
to 2014 I FRS has been applied for the years of 2012 ,2013 & 2014

55.00

361
6,316
2,081
(D) Share Valuation

Market Value per Share (Rs.)

(E) Other Information
Number of Employees
Turnover per Employee (Rs. 000)
Value Added per Employee (Rs. 000)
14.53
7.28
6.88
62.65

4.14
4.82
8.87
5.41
2.00
16.57
64.11

2.34
1.89
2.46

0.02
0.02
0.03
(1.84)
2.00
15.94
74.09

2.29
1.60
(0.94)

2,750
2.41
0.04
60.77
2013
Group
2014
Group
Price Earnings Ratio (Times) - (Restated)

Dividend Cover ( Times)
Earnings Yield (%) - (Restated)
Net Assets per Share ( Rs) - (Restated)
(C) Investors Ratios
Net Profit Ratio (%)

Earnings/(Loss) per Share (Rs.) - (Restated)
Return on Equity (%)
Return on Capital employed (%)
Dividend Per Share - Paid
Debt Equity Ratio (%)
Shareholder Equity Ratio ( % )

(B) Liquidity
Current Ratio (Times)
Quick Ratio ( Times )
Interest Cover (Times)

Key Indicators
(A) Profitability & Return to Shareholders
Key Figures and Ratios
Glossary of Financial Terminology

Accrual Basis
Recording Revenues and Expenses in the period in which
they are earned or incurred regardless of whether cash is
received or disbursed in that period.
Capital Employed
Shareholders Funds plus Debt.
Contingent Liabilities
A condition or situation existing at the Reporting date due
to past events, where the financial effect is not recognised
because:
1. The obligation is crystalised by the occurrence or nonoccurrence of one or more future events or,
2. A probable outflow of economic resources is not
expected or,
3. It is unable to be measured with sufficient reliability.
Current Ratio
Current Assets over Current Liabilities.
Debt / Equity Ratio (Gearing)
Debt as a percentage of Shareholders Funds.
Dividend Cover
Earnings per Share over Dividends per Share.
Earnings per Share (EPS)
Profit After Tax attributable to Ordinary Share holding over
Weighted Average Numbers Shares in issue during the
period.
Earnings Yield
Earnings per Share as a percentage of Market price per
Share end of the period.
Effective Rate of Taxation
Income Tax, including Deferred Tax over Profit Before Tax.
142
Net Assets
Total Assets minus Current Liabilities minus Long Term
Liabilities minus Minority Interest.
Net Asset per Share
Net Assets divided by number of Ordinary Shares in issue at
the end of the period.
Net Turnover per Employee
Net Turnover over Average Number of Employees.
Price Earnings Ratio
Market Price per Share over Earnings per Share.
Quick Ratio
Cash plus Short term Investments plus Receivables over
Current Liabilities.
Return on Assets
Profit After Tax over Average Total Assets.
Return on Capital Employed
Earning Before interest and Tax as a percentage of Average
Shareholders Funds plus Total Debt.
Return on Equity
Consolidated Profit after Tax as a Percentage of Average
Shareholders Funds.
Shareholders Funds
Stated Capital, Capital Reserves and Revenue Reserves.
Total Debt
Long Term Loans plus Short Term Loans and Overdrafts
Total Value Added
The difference between Revenue (including Other Income)
and Expenses, Cost of Materials and Services Purchased
from External Sources.
Interest Cover
Profit Before Interest and Tax over Finance Expenses.
Total Assets
Fixed Assets plus Investments plus Non- Current Assets plus
Current Assets.
Number of Shares in issue at the end of period multiplied by
the Market price at end of period.
Dividends Payout Ratio

Total Dividend as percentage of Company Profits.
Notice of Meeting
Notice is hereby given that the 32nd Annual General Meeting
of Keells Food Products PLC will be held at the John Keells
Holdings PLC Auditorium, No. 186, Vauxhall Street,Colombo 2,
on Monday 30th June 2014 at 11.00 a.m.
Note:

A shareholder unable to attend is entitled to appoint a

proxy to attend and vote in his/her place.
The business to be brought before the meeting will be:
A proxy need not be a shareholder of the Company.
To read the Notice convening the meeting.
A shareholder wishing to vote by proxy at the meeting

may use the proxy form enclosed.
To receive and consider the Annual Report of the

Directors and the Financial Statements for the
Financial Year Ended 31st March 2014 with the Report
of the Auditors thereon.
To be valid, the completed proxy form must be lodged

at the Registered Office of the Company not less than
48 hours before the meeting.
If a poll is demanded, a vote can be taken on a show

of hands or by poll. Each share is entitled to one vote.
Votes can be cast in person, by proxy or corporate
representatives. In the event an individual shareholder
and his/her proxy holder are both present at the
meeting, only the shareholders vote will be counted.
If proxy holders appointor has indicated the manner of
voting, only the appointors indication of the manner of
vote will be used.
To re-elect as Director, Mr. James Ronnie Felitus Peiris

who retires by rotation in terms of Article 83 of the
Articles of Association. A brief profile of Mr. James
Ronnie Felitus Peiris is found in the Directors Profiles
section (Pages 16 and 17) in this Annual Report.
To re-elect as Director, Mr. Mahinda Preethiraj

Jayawardena who retires by rotation in terms of Article
83 of the Articles of Association A brief profile of
Mr. Mahinda Preethiraj Jayawardena is found in the
Directors Profiles section (Pages 16 and 17) in this
Annual Report.
To re-appoint Messrs. Ernst and Young, Chartered

Accountants as Auditors of the Company for the year
2014/15 and to authorise the Directors to determine
their remuneration.
To consider any other business of which due notice

has been given in terms of the relevant laws and
regulations.
By Order of the Board
Keells Consultants (Private) Limited

Secretaries
Colombo
5 June 2014
143
Notes
144
Form of Proxy
I/We ......................................................................................................................................................................................................................................of
..................................................................................................................................................................................................................................... being a
member/s of Keells Food Products PLC, hereby appoint:
................................................................................................................................................................................................................................................ of
................................................................................................................................................................................................................ or failing him/her
Mr. Susantha Chaminda Ratnayake of Colombo
Mr. Ajit Damon Gunewardene of Colombo
Mr. James Ronnie Felitus Peiris of Colombo
Mr. Jitendra Romesh Gunaratne of Colombo
Mr. Shiran Harsha Amarasekera PC of Colombo
Mr. Athulugamage Damian Eardley Ignatius Perera of Colombo
Mr. Ranil Pieris of Colombo
Mr. Mahinda Preethiraj Jayawardena of Colombo
or failing him
or failing him
or failing him
or failing him
or failing him
or failing him
or failing him
as my/our proxy to vote for me/us on my/our behalf at the 32nd Annual General Meeting of the Company to be held at 11 a.m
on the 30th of June 2014 and at any adjournment thereof and at every poll which may be taken in consequence thereof.
I/We, the undersigned, hereby direct my/our proxy to vote for me/us and on my/our behalf on the specified Resolution as
indicated by the letter X in the appropriate cage:
FOR
AGAINST
To re-elect as Director, Mr. James Ronnie Felitus Peiris, who retires
in terms of Article 83 of the Articles of Association of the Company.
To re-elect as Director, Mr. Mahinda Preethiraj Jayawardena who
retires in terms of Article 83 of the Articles of Association of the
Company.
To re-appoint Auditors and to authorise the Directors to determine
their remuneration.
Signed this .............................................. day of .............................................. Two Thousand and Fourteen (2014).
........................................................
Signature/s of shareholder/s
INSTRUCTIONS AS TO COMPLETION OF FORM OF PROXY ARE SET OUT ON THE REVERSE HEREOF.
Form of Proxy
INSTRUCTIONS AS TO COMPLETION OF PROXY
1.
Kindly complete the Form of Proxy by filling in legibly your full name and address and that of the Proxy holder. Please sign
in the space provided and fill in the date of signature.
2.
The instrument appointing a Proxy shall, in the case of an individual, be signed by the appointer or by his Attorney and in
the case of a Corporation must be executed under the Common Seal or in such other manner prescribed by its Articles
of Association or other Constitutional documents.
3.
If the Proxy Form is signed by an Attorney the relevant Power of Attorney or a notarially certified copy thereof, should
also accompany the completed Form of Proxy if it has not already been registered with the Company.
4.
To be valid, the completed Form of Proxy should be deposited at the Registered Office of the Company at No. 117, Sir
Chittampalam A. Gardiner Mawatha, Colombo 02, not less than 48 hours before the time appointed for the holding of
the meeting.
Scan this QR code with your smart device

to visit our official website
http://www.keellsfoods.com
Name of Company
Audit Committee
Mr. M P Jayawardena
Mr. R Pieris
Mr. A D E I Perera
Company Registration Number

PQ 3
Legal Form
Public Limited Liability Company
Established in 1982
Registered Office of the Company
Colombo 2,
Sri Lanka.
Tel: 2421101
Ekala Factory

Keells is presently Sri Lankas market leader in the processed meat industry. Keells started its operations in the year 1983, and
takes pride in being solely responsible for developing the Sri Lankan processed meats industry to its current heights.
Keells has kept abreast of the industry through strategic investments in state of the art food processing technology, quality
control systems and an aggressive Company-wide research and development orientation.
Keells world class sausages, meat balls, hams, bacons, cold meats and raw meats combine gourmet taste and nutrition while
offering superior quality. The range offers convenience to meet todays demanding lifestyles of consumers all over the world.
We serve certain markets in India, United Arab Emirates and Maldives and are currently in the process of strengthening our
presence in these regional markets.
Keells Food Products PLC (KFP) sustained its market leadership position in the processed foods category through a range
of marketing strategies aimed at strengthening its market share, whilst connecting more closely with the consumer. The
Company has been driving innovation and high brand recall in an effort to enhance the consumption of our products. Based
on a combination of consumer feedback and research and development efforts, we are constantly formulating new products
that fulfill the expectations of our consumers.
342
1218
No.16, Minuwangoda Road,Ekala, Ja-Ela.

Sri Lanka.
Tel: +94 11 2236317
Fax: +94 11 2236359
E-Mail: foods@keells.com
Web: www.keellsfoods.com
Pannala Factory
PO Box 14, Industrial State, Makadura,
Gonawila (NWP).
Sri Lanka.
Tel: +94 037 4933248-51
Fax: +94 031 2298195
Board of Directors
Mr. S C Ratnayake (Chairman)
Mr. A D Gunewardene
Mr. J R F Peiris
Mr. J R Gunaratne
Mr. R Pieris
Mr. A D E I Perera
Mr. M P Jayawardena
1146
Designed & produced by
Digital Plates & Printing by Printel (Pvt) Ltd.
Secretaries & Registrars

Keells Consultants (Pvt) Ltd
Colombo 02,
Sri Lanka.
Auditors
Ernst & Young , Chartered Accountants,
201, De Saram Place,
Colombo 10,
Sri Lanka.
Bankers
Bank of Ceylon Limited
Deutsche Bank AG
DFCC Vardhana Bank
DFCC Bank
Hongkong & Shanghai Banking Corporation Ltd.
Nation Trust Bank PLC
Stock Exchange Listing
The Ordinary Shares of the Company are Listed
with the Colombo Stock Exchange of Sri Lanka.
Subsidiary Company



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Keells Food Products PLC

Annual Report 2013/14

Keells Food Products PLC

Scan this QR code with your smart device

Keells Food Products PLC

Company Registration Number

Keells Food Products PLC

No.16, Minuwangoda Road,Ekala, Ja-Ela.

Secretaries & Registrars

any day. any time.

Annual Report 2013/14

Annual Report 2013/14

Note: Figures in brackets indicate an unfavorable fluctuates

Net Revenue and

Employees and Revenue

Shareholders Funds and

Net Revenue Per Employee

Chicken Cheese and

This sausage pays

The oldest sausage

Everyone loves sausages,

The Krest Range

French Fries (Potato

Being a Sri Lankan staple

This superior quality

The Elephant House Sausage Range

The one and

Annual Report 2013/14

I am pleased to present to you the Annual Report and

Performance for the Year

secure a larger cross section of the island-wide consumer

Annual Report 2013/14

The Keells Sausage Range adds zest to any meal.

The simplest meal of rice

Annual Report 2013/14

Management Discussion and Analysis

Marketing and Branding

break into this market, with encouraging early results that

In addition to offering farmers a secure livelihood, KFPs

The final phase of the Distributor Management System

Annual Report 2013/14

Management Discussion and Analysis

Moreover, buoyed by the success of initial efforts, the

to unfavourable market condition experienced during the

Business Performance- Income Statement

Sausage Volume Trend

Net Revenue and

Overhead Cost Analysis

2010 2011 2012 2013 2014

depreciation of the rupee, the increase in customs duty and

Selling and Distribution Expenses

the escalation of world commodity prices caused the prices

Selling and Distribution expenses include the cost incurred

of imported raw materials to increase as well.

in the distribution of products, advertising and promotional

Administration cost increased by 11% to Rs. 121 million from

Annual Report 2013/14

Management Discussion and Analysis

including the effects of changes in foreign exchange rates,

interest rates and liquidity. Further details of the management

against a tax charge in the previous year of Rs. 24.3 million

of these risks are given in Note 12 to the financial statements.