MALWATTE VALLEY PLANTATIONS PLC ANNUAL REPORT...

Malwatte Valley Plantations PLC Annual Report 2011 ii

MALWATTE VALLEY PLANTATIONS PLC

ANNUAL REPORT

2011

VISIONOur vision is to become the model plantation company in the world through innovation, diversification and quality.

MISSION

Malwatte Valley Plantations PLC (MVPLC) is committed to achieve excellence in every sphere of activity. We will become an increasingly profitable, stable and growth oriented model private sector corporate entity whilst affording the highest priority to the environmental and social needs by:

◆ Maintaining highest standard of ethics in dealing with our most valued employees, shareholders, competitors, business associates and general public:

◆ Consolidating tea and rubber production with increased productivity and improved value addition in order to enhance the overall profitability of the company:

◆ Maximizing utilization of land through the adoption of modern agricultural practices by venturing into high value added export oriented products and services:

◆ Developing all profitable diversification opportunities, in crop as well as non-crop sectors;

◆ Motivating personnel to perform at optimum levels through training and development and rewarding them handsomely for excellence;

◆ Providing maximum satisfaction to our stakeholders;

◆ Expanding the company’s existing customer base, by providing high quality ISO standard products and by branding products to enhance customer awareness towards creation of a niche market;

◆ Meeting the impact of globalizations by keeping abreast of advancement in Information Technology and towards retaining a competitive edge in the market.

Malwatte Valley Plantations PLC Annual Report 20111

Contents

Financial Highlights 2

Corporate Information 3

Notice of Meeting 4

Chairman’s Review 5

Corporate Governance 10

Risk Management 13

Directors Report 15

Director’s Responsibilities 17

Report of the Auditors 18

Balance Sheet 19

Income Statements 20

Statement of Changes In Equity 21

Cash Flow Statement 22

Notes to the Financial Statements 23-53

Shareholders & Investors Information 54-56

Form of Proxy 58

Malwatte Valley Plantations PLC Annual Report 2011 2

Financial HighlightsYear ended 31st December

2011 2010 (12 Months) (12 Months) Rs’000 Rs. ‘000

Turnover 3,020,153 3,410,108

Gross Profit 220,320 578,075

Gross Profit on Cost of Sales - % 7.8 20

Gross Profit on Turnover - % 7.2 17

Profit /(Loss) before Tax 108,221 433,728

Taxation 21,536 9,509

Profit/(Loss) after Tax 86,685 424,219

Fixed Assets 2,715,328 2,577,687

Current Assets 1,057,218 900,826

Current Liabilities 646,284 509,393

Shareholder’s Fund 1,843,594 1,756,909

Capital Expenditure 149,337 95,402

Earnings per share (Rs) 0.45 18.10

Net Assets per Share (Rs) 7.45 70.96

Dividend Rate (%) - 5% -

Stated Capital 373,000 373,000

Capital Employed 2,239,529 2,115,830

Net Assets 1,843,594 1,756,909

Return on Capital Employed (%) 5% 20%

Market Capitalisation 982,692 1,850,621


Corporate Information

NAME OF THE COMPANYMalwatte Valley Plantations PLC

(PQ 111)

DATE OF INCORPORATION22nd June 1992

BOARD OF DIRECTORSMr. W. L. Bogtstra

(Chairman / Managing Director)Mr. Lucas BogtstraMr . T. R. Gerlach

Mrs. C. A. Gerlach (Alternative Director Mr. W. H. Gerlach)

Mr. K. G. M. Piyaratne FCA, FSCMA, ACMA(UK), CGMA, MSc (Mgt & IT)Mr. K A S Gunesekera BA (Cey), SLAS

Mr. G. C. De Silva MBA,FCA,FCMA(UK), FCCA (UK), CA(SD)Mr. Frits Bogtstra MBA, BSc (Hon) (UK),

(Alternative Director Ms. Prasani Malalasekera Attorney-At-Law)

SECRETARIESManagement Application (Pvt) Limited

12, Rotunda Gardens, Colombo – 03.

Tel. No: 2445751/2327595

REGISTERED OFFICENo. 280, Dam Street,

Colombo – 12, Sri Lanka. Tel. No: 5388800

AUDITORSErnst & Young

Chartered Accountants No. 201, De Sarem Place,

Colombo - 10.

BANKERS Hatton National Bank PLC

Union Bank PLC


Notice of Meeting

NOTICE IS HEREBY GIVEN that the EIGHTEENTH ANNUAL GENERAL MEETING of MALWATTE VALLEY PLANTATIONS PLC will be held on 4th July 2012 at 10.30 a.m., at the Sri Lanka Foundation Institute , No. 100, Independence Square, Colombo 7, for the following purpose:

AGENDA

1 To receive and consider the Report of the Directors, Statement of Accounts and the Balance Sheet of the Company for the year ended 31st December 2011 and the Report of the Auditors thereon.

2 To declare a First and Final Dividend of -/05 Cents per Share on the Ordinary Shares of the Company.

3 To pass the following Ordinary Resolution pursuant to Section 211 of the Companies Act, No. 7 of 2007:

“Resolved that Mr. W. L. Bogtstra who has reached the age of 79 years be and is hereby re-elected a Director of the Company and it is hereby declared that the age limit of 70 years referred to in Section 210 of the Companies Act, No. 7 of 2007 shall not apply to the said Director”.

4 To re-appoint M/s. Ernst and Young, Chartered Accountants as Auditors of the Company and to authorize the Directors to determine their remuneration.

5 To authorize the Directors to determine Donations for the year 2012 and up to the date of the next Annual General Meeting.

BY ORDER OF THE BOARD

MANAGEMENT APPLICATIONS (PVT) LTD.SECRETARIESColombo

Dated 6th June 2012

Note:

1 A member is entitled to appoint a proxy to attend and vote at the Meeting on his/her behalf. A form of proxy is enclosed for this purpose.

2 A proxy need not be a member of the Company. 3 To be valid the completed Form of Proxy should be lodged at the Registered Office of the

Company at No. 280, Dam Street, Colombo 12, not less than 48 hours before the appointed time for holding the meeting.

4 For security reasons Shareholders/Proxy holders attending the Meeting are kindly requested to bring their National Identity Card or Passport.


Chairman’s Review Company Performance Many countries are still effected by the global economic crisis which erupted in 2008. Some economies are on the brink of collapse. The political unrest which in turn affected the economics in the Middle-Eastern region had a significant impact on the Sri Lanka tea market as well during the second half of 2011.The economic sanctions on Iran by US and the west are playing havoc with the tea industry of countries such as Sri Lanka due to the significant volumes they absorb.

In spite of many challenges faced by the industry, the Company had a satisfactory performance during the year under review.

The so called Collective “Agreement” signed during the year under review in the teeth of the Middle East crises saw an astronomical wage increase of approximately 42%! As mentioned in our last review, this Company debilitating increase has impacted costs beyond reason. In addition, a self inflicted penal and retroactive gratuity clause eroded most Company bottom lines.

It is rumored that some sources now suggest an “Out grower System” as a last life saving spasm. This may really be the last nail in the industry's coffin.

Hopefully, Tea cum Rubber Companies such as ours can still survive.

The total extra cost to our company as a result of this wage increase is about Rs. 525 Mn (including gratuity Provision of Rs. 260 Mn) in the year under review.

The Company’s turnover for the year under review decreased by 11% over the previous year to Rs. 3.02 billion and recorded a net profit after tax of Rs. 86.68 million, as against a net profit after tax of Rs. 424.22million in 2010.

Operating Profit - Profit Before interest and tax - Last 05 years

Description Year Year Year Year Year ended ended ended ended ended 31.12.2011 31.12.2010 31.12.2009 31.12.2008 31.12.2007

Gross Operating Profit (Rs. Mn) 161 539 221 449 512

Other Income (Rs. Mn) 87 112 118 92 80

Total 248 651 339 458 592

The main contribution to the top line was from Tea with a 58% (SLRs.1764 Million) share while Rubber contributed 23% (SLRs.690 Million). However segment profits have indicated an inverse pattern with a 227 Million reduction contribution from Tea while Rubber contributed 409 Million.

Performance of Company's Tea Sector

Tea 2011 2010 2009 2008 2007 Production ('000 kg) 5084 6484 5023 6665 6708 Yield Kg/Ha 814 1052 923 1198 1163 Turnover (SLRs Mn) 1764 2173 1797 1879 1742 NSA 354 335 357 284 257 COP 418 304 355 244 222 Margin -64 31 2 40 35


The drought affected the company’s annual production of 5.08 million Kg reflects a decrease of 22% over the previous year. Tea Net Sales Average (NSA) per Kg was SLRs. 354 while Cost of Production (COP) per Kg was SLRs.418 in 2011. The profit margin (NSA –COP) decreased significantly mainly due to the increased wage cost.

Tea IndustrySri Lanka tea sector had a turbulent experience during 2011 primarily due to the volatile situation in its largest target markets. Coupled with the rising labour costs. Production for the year 2011 stood at 328 million Kg which represents a marginal decline of 331 million Kg last year.

Tea Production (Units : Mkg)

Category Jan - Dec Change

2011 2010 Qty %

Elevation

High 79.21 79.13 0.08 0.02Medium 52.53 56.13 -3.60 -1.09Low 196.63 196.17 0.46 0.14Total 328.37 331.43 -3.06 -0.92Processing Method

Orthodox 302.85 309.73 -6.88 -2.22CTC 22.53 18.39 4.14 22.5Green Tea 2.99 3.31 -0.32 -9.66Total 328.37 331.43 -3.06 -0.92

Source: Sri Lanka Tea Board

A Moderate drop in average auction price at Colombo tea auction during first half year intensified sharply from August till end fourth quarter caused mainly by the lower demand from its key markets.

Segmental Turnover 2010 Segmental Turnover 2011

Tea

Rubber

Other

Tea

Rubber

Other


Sri Lanka’s tea exports have witnessed 0.2% drop on the back of increased production and lower prices by most producing countries and tight economies of importing countries, in the whole year under review.

Tea exports during the year 2011 (FOB : Rs./Kg,)

Category 2011 Qty (kg) FOB Value

Bulk 179,175,816 440.04 78,845

Packets 95,727,866 491.82 47,081

Tea Bags 23,867,216 912.47 21,778

Instant Tea 3,065,307 640.40 1,963

Green Tea 2,659,018 944.93 2,512

Other Tea 2,560,313 1,017.73 2,605

Sub Total 307,055,536 504.10 154,785

Re Exports 16,660,954 622.69 10,374

Total 323,716,490 510.20 165,160

Source: Sri Lanka Tea Board

Rubber IndustryThe rubber sector benefitted from a rising demand for natural rubber from BRIC countries which was assisted by a price substitution effect away from synthetic rubber for industrial purposes on account of rising oil prices. This led to an increase in sector contribution.

Global total rubber supply increased by 6.6% in 2011 to 26.1 million tonnes, while NR supply expanded by 5.5% to 11.0 million tonnes and SR output by 7.3% to 15.1 million tonnes in the same period.

Elevation Avarage prices

2011

2010

450.00

400.00

350.00

250.00

200.00

150.00

100.00

50.00

0.00

High Medium Low

Elevation

SLR

S


Sri Lanka is considered to be the world’s ninth largest exporter of natural rubber. In 2011 the rubber industry grew 58.7 per cent, reaching US$ 884.8 million. Last year’s demand was mostly driven by China and India, which absorbed most of the global production as prices of synthetic rubber continued to increase due to high oil costs.

In the first quarter of the year both Crepe rubber and RSS prices improved steadily with Crepe 1X continuing to improve from Rs. 570 to Rs. 670 in February. However, prices experienced a sudden drop by mid March to Rs. 500 for Crepe 1x and Rs. 450 for RSS1. The drop was short-lived and the industry saw a quick turnaround by the end of March where the price of Crepe 1X fetched Rs. 700 in one auction sale and RSS1 reached Rs. 654. These were the highest-ever recorded prices. The price of RSS1 at the sale of 30 December was Rs. 365 per kilo.

Performance of Company's Rubber Sector

Rubber 2011 2010 2009 2008 2007

Production ('000 kg) 1495 1623 1525 1698 2025Yield Kg/Ha 763 825 761 819 976Turnover (SLRs Mn) 691 617 330 394 449NSA 460 379 217 231 222COP 186 146 144 110 96Margin 274 233 73 121 126

Rubber NSA indicated a significant increase of 21% YOY in 2011 to SLRs.460 per Kg and COP increased by 27% to SLRS.186 per kg. Rubber profit margin increased from 233 to 274 during the FY2011.

PEPPER PROJECTM.V.P.PLC has undertaken large extents of pepper cultivation by way of diversification of the unviable tea fields and other uncultivated lands on our estates with spices and fruits.

We have initially scheduled one of our estates namely Unugalla, Hali Ela, for conversion into spice garden as its elevation, soil and climatic conditions are excellent for the growing of spice crops.

We have todate under this programme planted 50,000 pepper vines and scheduled to plant a further 50,000 vines in the year 2012.

Sri Lanka Rubber Production MT 000

200

150

100

50

0

Total Production Growth Rate %

SLR

S14%

12%

10%

8%

6%

4%

2%

0%

2007 2008 2009 2010 2011


We have obtained a very high income from the small area of mature pepper which demonstrated its resilient growth.

The Company has a plan to establish a small scale pepper processing centre to go for value additions.

RAMBUTTANHarvests are increasing, but the increase slowed down due to bad weather conditions during the year under review.

FRUITS

AVOCADO/MANGO The Company is promoting more investments on fruit cultivation by observing the economical growth outlook as the prices have moved ahead strongly and have cultivated larger extents of avocados and mangoes.

In the year 2012 we expect to commence planting of mandarin in these estates.

ONE DAY TRIP FOR SHAREHOLDERSThe share holders participated in the outing in the second year which was organized by the Company.

Accordingly, 37 shareholders participated in this outing to visit one of our estates which was a very interesting one, arranged for our valuable share holders.

Corporate Social ResponsibiltyThe Company acknowledges its responsibility to the community and stakeholders by contnuing its Corparate Social Responsibility activities this year too. There was further recognition by the Plantation Human Development Trust, of the estates’ social welfare activities, namely the impovements to housing of the residents and provision of water, sanitation , and electricity.

EnvironmentProtection of the environment was given continuous attention, especially by the Rubber estates.

Tea factoriesThere are six operational factories that have been developed to assure a regular high quality product for the market.

W. L. Bogtstra Chairman/Managing Director

Colombo 20th May 2012


Corporate Governance

Corporate Governance is the system by which the Company is directed and controlled. A good Corporate Governance structure encourages and establishes accountability and transparency commensurate with the inherent risks and opportunities available to the Company. It influences how the objectives of the Company are set and achieved, risks identified and managed and organizational performance optimized. The Board of Directors ensures that all activities of the Board are conducted upholding the highest standards of transparency, accountability and ethics.

The Company is primarily guided by the Code of best practices on Corporate Governance issued by the Institute of Chartered Accountants of Sri Lanka and the Listing Rules of the Colombo Stock Exchange on Corporate Governance. This report sets out the Company’s Corporate Governance practices.

The Board of DirectorsThe Board of Directors comprise of eight Directors including the Chairman/Managing Director. The Company believes that the present composition of the Board has at its disposal, a vast reservoir of knowledge and experience in all areas of the Company’s operations and the names of the Directors are given on page 15 of this report.

The Board meets at least four times each year and in addition a regular update takes place in the months when no formal meeting is scheduled. The agenda for each Board meeting is set by the Company Secretary in consultation with the Chairman. Board members receive a monthly report of the company’s activities which incorporates an update on progress against objectives and the management of business risks.

The Board Directors are responsible for;

● Formulation of business strategies ● Implementing and monitoring of such strategies. ● Reviewing and ratifying systems in operation relating to risk management, internal

control, codes of conduct and compliance with the laws, statues and regulations. ● Reviewing monitoring and ratifying all capital expenditure, acquisitions and divestitures. ● Monitoring senior management performance ● Ensuring that effective information and audit systems are in place ● Ensuring that due attention is given to annual and interim financial statements prior to

Publication ● Determining the quantum of the final dividend for approval by the shareholders. ● Approving and monitoring financial and other reporting

The Board in discharging its duties seeks independent professional advice from external parties when necessary at the Company’s expense.

The Company Secretaries advice the Board on matters relating to the Companies Act, Colombo Stock Exchange regulations and other applicable rules and regulations and ensures appropriate, timely and accurate information is submitted to the Board and its committees.

All of company directors bring independent judgment to bear on issues of strategy, performance, resources, key appointments and standards.

New directors receive a full introduction to the company. This consists of information covering the operations of the Board as well as meetings with the Board, Chief Executive and other executive directors. All non-executives have direct contact with the company’s senior executives between


Board meetings and also visit the company’s operations in order to familiarize themselves with its activities and to meet and engage with staff.

Board BalanceThe Board currently comprises the Chairman, five executive directors and two independent non-executive directors. The Board functions effectively and efficiently and is considered to be of an appropriate size. The directors provide the company with the knowledge, mix of skills, experience and networks of contacts required. The Board Committees comprise directors with a variety of relevant skills and experience so that no undue reliance is placed on any individual.

The non-executive directors combine broad business and commercial experience with independent and objective judgement. The balance between non-executive and executive directors enables the Board to provide clear and effective leadership and maintain the highest standards of integrity across the company’s business activities.

Supply of informationThe Board recognizes that the decision making process is highly dependent on the quality of information furnished. As such, all Directors have full and unrestricted access to any information pertaining to Malwatte Valley Plantations PLC.

The Chairman plays a key role in ensuring that all Directors have full and timely access to information relevant to matters that will be deliberated at the Board meeting. The agenda and set of Board papers are circulated in advance of the Board meetings. A comprehensive balance of financial and non-financial information is encapsulated in the papers covering strategic, operational, financial, regulatory and marketing issues.

All Directors have access to the advice and services of the Company Secretary, who ensures that the Board receives appropriate and timely information for its decision-making, that Board procedures are followed and the statutory and regulatory requirements are met. The Secretary also assists the Chairman in ensuring that all Directors are properly briefed on issues arising at Board meetings. The Board believes that the current Company Secretary is capable of carrying out the appropriate duties to ensure the effective functioning of the Board while the terms of appointment permit the removal and appointment by the Board as a whole.

Appointment to the Board There is a clear and transparent procedure for the appointment of Directors to the Board. The Articles of Association of the Company empower the Board of Directors to either fill a casual vacancy in the directorate or appoint additional directors. In terms of the Articles of Association any Director appointed by the Board holds office until the next Annual General Meeting at which he seeks election by the shareholders.

Management CommitteeThe Board of Directors devotes adequate time to the fulfillment of their duties as Directors of the Company. The Board has delegated the day to day operations of the Company and the group to the Management Committee. The Management Committee is chaired by the Managing Director who is also the Chief Executive Officer, and meets once a month. The committee comprises of Heads of Divisions such as Plantation, Finance, Marketing and Legal.

The functions of the Management Committee are to innovate, develop, implement and review the strategies in order to achieve the corporate objectives and discuss matters in relation to the Operational activities of the Company.


Directors Remuneration The total remuneration of the Directors is disclosed in Note 23 to the Financial Statements.

Accountability and AuditThe Statement of Director’s Responsibilities are presented on Page 17 of the Annual Report.

The Board has implemented a sound system of internal control and Risk Management to safeguard the shareholders investment and the Company’s assets. The details of the Company’s Risk Management system are provided on of this Annual Report.

Audit CommitteeThe Audit Committee consists of the following members:

Mr. G C de SilvaMr. K G M PiyaratneMr. K A S Gunasekera

Two of the above are Non-executive Directors of the company having a vide experience in Plantation and Finance enabling them to have a sound control over operations as well as the of finance.

Objectives of the Internal Audit CommitteeAudit Committee was set up with the following objectives while keeping in line with the objectives defined by the Securities and Exchange Commission.

● To evaluate internal control procedure with close liaison with internal auditors and ensure smooth operation with a sound control over the operations.

● Continuous implementation of improvements and corrective action on deviations observed by internal auditors and monitoring the success of implementation.

● Analytical review of the business risks towards the company and making sure sufficient risk management techniques are in operation based on observations.

● To ensure that the company adheres to all statutory compliance and carries out the operation in accordance with commercially and ethically accepted management practices.

● Enhancing the public confidence in the credibility and objective of financial statements.● Ensure the greater independence of internal and external auditors and providing

autonomous reporting system. Audit Committee also assists the Board of Directors to maintain the stewardship

responsibilities towards shareholders.

Activities of the Audit Committee● Review the compliance with corporate governance requirements.● Advising and suggesting scope and responsibilities of internal audits.● Assisting in conducting investigations.● Liaison with Internal and External Auditors.● Assessing and commenting on all financial reports internal and external, audit findings.● Communication with Directors and Managers on further investigations on audit findings

before corrective action.● Implementation of corrective action required and follow-up on success of implementation.


Risk Management

Importance of risk management in listed companies has increased over the years with the dynamic environment. Risk can be identified as a condition in which there exists a quantifiable dispersion in the possible outcomes from any activity. All organizations face risks. Only by taking some risk organizations can potentially benefit.

Currently the environment with in which Malwatte Valley Plantations is exposed to risks associated with the cultivation, processing and marketing of Tea and Rubber in the economic and political environment within which it operates. The comprehensive risk management process practices by the company to identify, assess, manage and monitor the risk have allowed Malwatte valley to perform successfully.

Business RiskIt is the potential volatility in profit caused by the nature and type of the business operations involved. Management of business risks is given due attention with an effective system of financial, operational and other controls put in place, to mitigate same as most business risks are inherent in business and cannot be reduced or eliminate. However company diversification strategy will help to reduce business risk to a larger extent.

Product Quality RiskCompany exposes to a risk of maintain consistency in quality which causes low prices and poor demand. As risk mitigation strategy quality assurance measures are implemented at every stage of manufacture and cultivation.

Operational RiskPeriodic system audits are carried out at estate level to ensure the quality and cost effectiveness of the internal controls that are in place. Follow up audits are carried out to see the compliance of the system. Periodic reviews are undertaken to ensure that appropriate infrastructure and sufficient insurance covers are available to safeguard the Company’s assets to minimize any financial losses.

Climatic ChangesThis risk arises due to adverse climatic changes which affect the performance of the Company. Tea and rubber production is highly vulnerable to the adverse effect of climate change. The change in pattern of rain fall and higher evaporation will lead to more water scarcity. The warmer night temperatures will increase the incidence of attack by insects and pets in crops.

In order to mitigate this risk company have adopted soil and soil moisture conservation methods, soil improvement, intercropping, crop diversification, and establishment and management of shade trees ,selection of suitable lands for new planting or replanting, use of drought and heat tolerant cultivars.

Human ResourceAs the Tea and Rubber plantation is highly labour intensive work stoppage will result in a major impact on the company performance. The Company maintains a Bank of Trainees at any given point to enable it to fill in vacancies that may arise.

In order to promote Industrial Harmony, a Collective Agreement has been signed between the Unions and the Employer’s Federation of which your Company is member. In addition, numerous programmes have been carried out to uplift the living standards of employees and their families.


These have resulted in a better relationship with the workforce as it has improved their quality of life.

Performance Oriented Reward Schemes are in place to motivate staff and labour. This helps high performance to improve earnings, which motivates them further.

Credit RiskThe Company sells most of its produce through the auction mechanism. There is a satisfactory system to control & maximize the recovery of debts arising from direct sales including credit control policies and a system of evaluation of credit worthiness of the direct buyers. Direct Exports are usually covered by letters of credit or bank drafts.

Interest Rate RiskInterest rate risk is the Company’s exposure to the adverse movement in interest rates. The Company has taken steps to minimize the interest cost by maintaining the effective Capital structure of the Company. The Company fully utilized the ADB credit line and, E-Friend scheme of HNB, at lower interest cost. The Company also obtained multi facilities from various banks, so as to ensure maximum advantage from varying terms and conditions.

Risk of Land acquisition The Company is exposed to the risk of acquisition of productive land for public purposes. These are as far as possible resolved by discussion and negotiation to enable losses to be minimized. Compensation claims are lodged for any lands acquired.

Legal & Regulatory RiskThe legal division of Malwatte valley provides guidance to protect against unexpected losses arising from legal consequences of the transactions the company enters in to. Further it assists the company to ensure compliance with all legal, company secretarial, stock market and other regulations.

Reputation RiskThis risk caused by failing to address some other risk.non compliance may lead to loss of reputation. It is important manage reputation risk as reputation is considered as the one of the most valued asset of the company.


Directors Report

Share CapitalThe total issued and paid-up ordinary shares capital of the Company as at 31st December 2011 consists of Voting Shares amounting to Rs. 350,000,010/- and Non-voting Shares amounting to Rs. 23,000,000/.

Major ShareholdersThe names of the 20 largest shareholders of the Company as at 31st December 2011 together with an analysis of shareholders are given in the shareholder and investor information pages of this Report.

Fixed AssetsThe Company has invested Rs. 149 million on acquisition of fixed assets during the year which includes acquisition of plant and machinery, motor vehicles, land improvements, land and buildings etc. information relating to the movements of fixed assets is given in the notes to the accounts.

DonationsNo donations have been made during the year under review.

DirectorsThe following Directors held office during the period under review:

Mr. W. L. Bogtstra

Mr. T.R. Gerlach

Mr. Lucas Bogtstra

Ms. C. A. Gerlach

Mr. W. H. Gerlach (Alternate Director to Ms. C. A. Gerlach)

Mr. K.G.M. Piyaratna

Mr. K. A. S. Gunasekara – Independent Non Executive Director

Mr. G. Chamindra De Silva – Independent Non Executive Director

Mr. Frits Bogtstra

Ms. Prasani Malalasekera (Alternate Director to Mr. Frits Bogtstra)

Directors Direct and Indirect ShareholdingsDetails pertaining to Directors shareholdings as required under the Colombo Stock Exchange Rules are given in the shareholder and Investor information pages of this report.

Interest Register – Particulars of entries made during the yearRelated party disclosures of the Company are disclosed in Note Nos. 11 and 31.1 to the Financial Statements.


TaxationAccording to the Inland Revenue Act, the Company need to pay income tax on its agricultural activities at the rate of 10%. All other activities of the Company are liable to income tax at the rate of 28%.

Post Balance Sheet EventsNo material events have taken place since the Balance Sheet date, which would require adjustments or disclosures in Notes to the year’s financial statements.

Contingent LiabilitiesDuring the period under review, except as in the notes give to the financial statements no known contingent liabilities exist.

Directors Interest in ContractsDuring the period under review, except as in the notes given to the financial statements, no Director of the Company has direct or indirect interest in any other contract entered into by the Company.

AuditorsThe accounts for the year under review have been audited by M/s. Ernst and Young who being eligible to offer themselves for re-appointment. The remuneration paid to them for the year 2011 was Rs. 2.4 million. A resolution relating to their re-appointment and authorizing the Directors to determine their remuneration will be proposed at the Annual General Meeting. As far as the Directors are aware, the Auditors do not have any relationship (other than as Auditors) with the Company.

Going ConcernThe Board being satisfied that the Company has adequate resources to continue its operation in the foreseeable future has adopted the going concern basis in preparing the financial statements.

By Order of the Board

Management Applications (Pvt) Ltd

Secretaries Colombo

Dated 20th May 2012


Director’s Responsibilities

The Companies Act requires the Directors to prepare Financial Statements for each financial year giving a true and fair view of the State of Affairs of the Company as at the end of the financial year and of the Profit and Loss of the Company for the financial year. In preparing the financial statements, appropriate accounting policies have been selected and applied consistently, reasonable and prudent judgment and estimates have been made, and applicable accounting standards have been followed.

The Directors are responsible for ensuring that the Company keeps sufficient accounting records to disclose with reasonable accuracy the financial position of the Company and for ensuring that the Financial Statements have been prepared and presented in accordance with the Sri Lanka Accounting Slandered and provide the information required by the Companies Act No.7 of 2007 and the Rules of the Colombo Stock Exchange. They are also responsible for taking reasonable measures to safeguard the assets of the Company, and in that context to have proper to the establishment of appropriate systems of internal control with a view to the prevention and detection of frauds and other irregularities.

The Auditors have carried out review and sample checks on the system of internal controls as they considered appropriate and necessary for expressing their opinion on the financial statements. The Directors have extended full co-operation to the Auditors and have provided them every opportunity to carry out their statutory obligation of expressing an opinion on the financial statements.

The Directors also confirm that to the best of their knowledge all taxes and levies payable by the Company, all contributions, levies and taxes payable on behalf of and in respect of the employees and all other known statutory obligations as were due as at the Balance Sheet date have been either duly paid or appropriately provided for in the financial statements.

On behalf of the Board

W. L. Bogtstra Chairman/Managing Director

Colombo 20th May 2012


ADBT/GP/PNG

INDEPENDENT AUDITORS’ REPORT TO THE SHAREHOLDERS OF MALWATTE VALLEY PLANTATIONS PLC

Report on the Financial Statements

We have audited the accompanying Financial Statements of Malwatte Valley Plantations PLC which comprise the Balance Sheet as at December 31, 2011 and the Income Statement, Statement of Changes in Equity and Cash Flow Statement for the year then ended, and a summary of significant Accounting Policies and other explanatory notes.

Management’s 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 misstatements.

An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the Financial Statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall Financial Statement presentation.

We have obtained all the information and explanations which to the best of our knowledge and belief were necessary for the purpose of our audit. We therefore believe that our audit provides a reasonable basis for our opinion.

Opinion

In our opinion, so far as appears from our examination, the Company maintained proper accounting records for the year ended December 31, 2011, and the Financial Statements give a true and fair view of the Company’s state of affairs as at December 31, 2011 and its profit and cash flows for the year then ended in accordance with Sri Lanka Accounting Standards.

Without qualifying our opinion we draw the attention to the accounting policy 2.6.14 and Notes 7 & 21 to the financial statements on the valuation of timber on all tea estates. The policy is adopted based on the International Accounting Standard 41 on agriculture as there is no Sri Lanka Accounting Standard on timber.

Report on Other Legal and Regulatory Requirements

In our opinion, these Financial Statements also comply with the requirements of Section 151(2) of the Companies Act No. 07 of 2007.

11 April 2012

Colombo

Report of the Auditors

Chartered Accountants201 De Saram Place P.O. Box 101 Colombo 10 Sri Lanka.Tel : (0) 11 2463500 Fax Gen : (0) 11 2697369 Tax : (0) 11 [email protected]

Partners : A D B Talwatte FCA FCMA, M P D Cooray FCA FCMA, R N de Saram ACA FCMA, Ms. N A De Silva ACA, Ms. Y A de Silva ACA, W R H Fernando FCA FCMA, W K B S P Fernando FCA FCMA, A P A Gunasekara FCA FCMA, A Herath FCA, D K Hulangamuwa FCA, FCMA, LLB (Lond), H M A Jayesinghe FCA FCMA, Ms. A A Ludowyke FCA FCMA, Ms G G S Manatunga ACA, Ms L C G Nanayakkara FCA FCMA, N M Sulaiman ACA ACMA, B E Wijesuriya ACA ACMA


Note 2011 2010ASSETS Rs. Rs.

Non Current Assets Leasehold Property, Plant & Equipment 3 392,328,721 414,410,328 Property, Plant & Equipment 4 985,499,361 915,743,746 Improvement to Leasehold Property 5 730,670,432 669,777,241 Investments 6 15,790 15,790 Timber Stocks 7 606,813,473 577,739,71 2,715,327,777 2,577,686,819 Current Assets Inventories 8 382,441,358 397,076,836 ACT Receivables 9,530 9,530 WHT Receivables 4,027,585 2,133,689 ESC Receivables 9 12,843,681 4,404,307 VAT Receivables 802,863 802,863 Trade and other receivables 10 102,861,580 154,223,805 Amounts Due From Related Parties 11 66,521,619 46,298,692 Short Term Investments 374,144,243 232,507,117 Cash and bank balances 113,565,461 63,369,162 1,057,217,920 900,826,001 TOTAL ASSETS 3,772,545,697 3,478,512,820 EQUITY AND LIABILITIES Capital and Reserves Stated Capital 12 373,000,010 373,000,010 Accumulated Profit/ (Losses) 1,470,594,065 1,383,908,919 Total Equity 1,843,594,075 1,756,908,929 Non Current Liabilities & Deferred Income . Interest Bearing Loans & Borrowings 13 241,354,027 201,942,574 Retiring Benefit Obligations 14 759,954,933 719,640,953 Deferred Income 15 126,778,710 133,648,662 Net liability to the Lessor payable after one year 16 154,580,159 156,978,929 1,282,667,829 1,212,211,118 Current Liabilities Trade and other payables 17 329,126,302 345,233,424 Dividend Payables 18 3,236,653 3,346,123 Interest Bearing Loans & Borrowings 13 110,348,652 140,263,664 Net liability to the Lessor payable within one year 16 2,313,263 2,224,291 ESC Payables 1,706,523 2,427,004 VAT Payables 834,176 - NBT Payables 163,380 309,096 Income Tax Payable 16,128,425 1,082,228 Bank overdraft 182,426,419 14,506,943 646,283,793 509,392,773 Total Equity and Liabilities 3,772,545,697 3,478,512,820 These Financial Statements are in compliance with the requirements of the Companies Act No. 07 of 2007.

............................................................... Chief Financial Officer

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

Approved and signed for and on behalf of the Board of Directors of Malwatte Valley Plantations PLC

............................................................. ................................................................... Managing Director/CEO Director

The accounting policies and notes on pages 23 through 53 form an integral part of the financial statements.

Colombo, 11 April 2012

Balance SheetAs at 31st December 2011


Income Statements Year Ended 31st December 2011

Note 2011 2010 - Rs. Rs. REVENUE 19 3,020,153,044 3,410,108,877 COST OF SALES (2,799,832,510) (2,832,033,456) GROSS PROFIT 220,320,534 578,075,421 OTHER INCOME 20 87,578,517 112,336,405 ADMINISTRATIVE EXPENSES (173,346,760) (158,310,319) GAIN/ (LOSS) ON CHANGE IN FAIR VALUE OF TIMBER STOCK 21 27,239,568 7,795,713 FINANCE COST 22 (53,569,937) (106,168,778) PROFIT BEFORE TAXATION 23 108,221,922 433,728,442 INCOME TAX EXPENSE 24 (21,536,776) (9,509,058) PROFIT FOR THE YEAR 86,685,146 424,219,384 BASIC EARNINGS PER SHARE 25 0.45 18.10



Statement of Changes in Equity Year Ended 31st December 2011

Accumulated Total Stated Capital Profit Rs Rs Rs

Balance as at 31 December 2009 350,000,010 1,025,038,350 1,375,038,360

Income Tax Adjustment for 2007,2008 and 2009 - (42,889,799) (42,889,799)

Issue of Non Voting Shares 23,000,000 - 23,000,000

Net Profit for the year - 424,219,384 424,219,384

Dividend Paid - (22,459,016) (22,459,016)


Net Profit for the year - 86,685,146 86,685,146

Dividend Paid - - -




Cash Flow Statement Year Ended 31st December 2011 CASH FLOWS FROM OPERATING ACTIVITIES Note 2011 2010 Rs. Rs.

Net Profit / (Loss) before Taxation 108,221,922 433,728,442 ADJUSTMENTS FOR Dividend Income 20 (3,637) (1,238)Interest Income 20 (21,285,754) (20,232,420)Depreciation/Amortisation 23 95,419,393 101,884,302 Provision for Defined Benefit Plan 14 116,571,413 97,889,236 Amortisation of Grants 15 (9,348,366) (9,321,058)Finance Costs 22 53,569,937 106,168,778 Profit on disposal of Property, Plant & Equipments 20 (7,964,028) (9,428,096)Change in fair value of Timber Stock 21 (27,239,568) (7,795,713) Operating Profit before Working Capital Changes 307,941,312 692,892,233 (Increase)/Decrease in Trade and other receivables 41,028,955 (21,298,746)(Increase)/Decrease in Inventories 14,635,478 (105,880,008)Increase/(Decrease) in Trade and other payables (3,512,214) 21,926,084 (Increase)/Decrease in amounts due from Related Parties 11 (20,222,927) 1,850,482 Cash Generated from Operations 339,870,604 589,490,045 Finance Costs Paid (38,853,734) (78,862,709)Tax Paid (21,536,776) (52,398,857)Defined Benefit Plan Costs paid 14 (76,257,433) (52,372,539) Net Cash from Operating Activities 203,222,661 405,855,940

CASH FLOWS FROM (USED IN) INVESTING ACTIVITIES Purchase of Investments (141,637,126) (54,026,692)Dividend Income Received 20 3,637 1,238 Grants Received 15 2,478,414 4,341,362 Proceeds from Sale of Property, Plant & Equipments 7,964,028 14,953,522 Field Development Expenditure 5 (85,553,273) (53,146,890)Expenditure on Timber Cultivation 7 (1,834,191) (359,455)Purchase of Property, Plant & Equipment (118,433,320) (89,341,215)Interest Income 20 21,285,754 20,232,420 Net Cash used in Investing Activities (315,726,077) (157,345,710) CASH FLOWS FROM (USED IN) FINANCING ACTIVITIES Dividends Paid - (22,459,016)Payment of Government lease rentals (14,716,203) (27,306,069)Proceeds from loans 634,354,720 546,723,005 Payment of loans (624,858,278) (793,266,575)Proceeds from issue of non voting shares - 23,000,000 Net Cash from (used in) Financing Activities (5,219,761) (273,308,655) Net Increase/(Decrease) in Cash & Cash Equivalents (117,723,177) (24,798,425) A. Cash & Cash Equivalents at the beginning of the year 48,862,219 73,660,644 B. Cash & Cash Equivalents at the end of the year (68,860,958) 48,862,219 NOTE A Cash & Cash Equivalents at the beginning of the year Cash & Bank Balances 63,369,162 128,904,606 Bank Overdrafts (14,506,943) (55,243,962) 48,862,219 73,660,644 NOTE B Cash & Cash Equivalents at the end of the year Cash & Bank Balances 113,565,461 63,369,162 Bank Overdrafts (182,426,419) (14,506,943) (68,860,958) 48,862,219 The accounting policies and notes on pages 23 through 53 form an integral part of the financial statements.


1 CORPORATE INFORMATION

1.1 General Malwatte Valley Plantations PLC is a limited liability Company incorporated and domiciled

in Sri Lanka, under the Companies Act No. 17 of 1982 (the company re-registered under the Companies Act No: 07 of 2007) in terms of the provisions of the Conversion of Public Corporations or Government Owned Business Undertakings into Public Companies Act No. 23 of 1987. The registered office of the Company is located at No.280, Dam Street, Colombo 12 and Plantations are situated in the planting region of Bandarawela, Badulla and Avissawella.

1.2 Principal Activities and Nature of Operations During the year, the principal activities of the Company were the cultivation, manufacture

and sale of black tea, rubber and other crop.

1.3 Parent Enterprise and Ultimate Parent Enterprise. The Company’s parent undertaking is Wayamba Plantations (Pvt) Ltd, which is incorporated

in Sri Lanka.

1.4 Date of Authorization for issue. The financial statements of Malwatte Valley Plantations PLC for the year ended 31 December

2011 were authorized for issue in accordance with a resolution of the board of directors on 11 April 2012.

Notes to the Financial Statements Year Ended 31st December 2011



2 BASIS OF PREPARATION These Financial Statements have been prepared on a historical cost basis except for leasehold

property, timber stocks and the produce stocks which were measured at fair value/ revaluation as described under specific policies in the Financial Statements. The Financial Statements are presented in Sri Lankan Rupees and all values are rounded to the nearest Rupee.

2.1 Statement of Compliance The Financial Statements of Malwatte Valley Plantations PLC has been prepared in accordance

with the Sri Lanka Accounting Standards adopted by the institute of Chartered Accountants of Sri Lanka and also in compliance with the requirements of the Companies Act No. 07 of 2007.

2.2 Going Concern The Directors have made an assessment of the Company’s ability to continue as a going

concern and they do not intend either to liquidate or to cease trading.

2.3 Comparative Information The accounting policies have been consistently applied by the Company and are consistent

with those used in the previous year unless otherwise stated.

2.4 Segment Information Segment Information Segmental information has been disclosed in notes 19.1 to 19.2 to the Financial Statements in

respect of the identifiable operating segments of the company on a consolidated basis.

Reporting Segments The segment results are determined based on the Company’s geographical spread of

operations. The geographical analysis of turnover and profits are based on location of customers and assets respectively.



2.5 Significant Accounting Judgments, Estimates and Assumptions

Judgments In the process of applying the Company’s accounting policies, management has made the

following judgments , apart from those involving estimations, which have the most significant effect on the amounts recognized in the Financial Statements.

Inventory valuation Company has valued unsold produce stock as at the balance sheet date at their actual or

estimated realizable values, net of direct selling expenses based on most recent selling prices available subsequent to the year end.

Estimates and Assumptions The key assumptions concerning the future and other key sources of estimation uncertainty

at the balance sheet date , that have a significant risk of causing a material adjustments to the carrying amounts of assets and liabilities within the next financial year are discussed below.

Deferred Tax Assets Deferred tax assets are recognized for all unused tax losses to the extent that it is probable

that taxable profit will be available against which the losses can be utilised. Significant management judgment is required to determine the amount of deferred tax assets that can be recognised, based upon the likely timing and level of future taxable profits together with future tax planning strategies. The carrying value of the unrecognized deferred tax assets as at 31 December 2011 was Rs.42,796,399 /-.(2010-Rs.54,570,080/-).

Defined Benefit Plans The cost of defined benefit pension plan is determined using actuarial valuations. The

actuarial valuation involves making assumptions about discount rates, expected rates of return on assets, future salary increases, mortality rates and future pension increases. Due to the long term nature of these plans, such estimates are subject to significant uncertainty. The net employee liability as per actuary as at 31 December 2011 is Rs. 759,954,933 (2010 - Rs. 719, 640, 953/-). Further details are given in Note 14.

2.6 Summary of Significant Accounting Policies

2.6.1 Foreign Currency Translation The financial statements are presented in Sri Lankan rupees, which is the Company's

functional and presentation currency. Transactions in foreign currencies are initially recorded at the functional currency rate ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are retranslated at the functional currency rate of exchange ruling at the Balance Sheet date. All differences are taken to Income Statement with the exception of differences on foreign currency borrowings that provide a hedge against a net investment in a foreign entity. These are taken directly to equity until the disposal of the net investment, at which time they are recognized in Income Statement. Tax charges and credits attributable to exchange differences on those borrowings are also dealt with in equity. 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 items measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value was determined. Any goodwill arising on the acquisition of a foreign operation 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.

2.6.2 Taxation

a) Current Taxes Current income tax assets and liabilities for the current and prior periods are measured

at the amount expected to be recovered from or paid to the commissioner general of Inland Revenue. The tax rates and tax laws used for the computation are those that are enacted or substantively enacted by the balance sheet date.

The provision for income tax is based on the elements of income and expenditure as reported in the Financial Statements and computed in accordance with the provisions of the relevant tax legislation

b) Deferred Taxation Deferred taxation is provided, using the liability method, on all the temporary differences

at balance sheet date between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes.

Deferred income tax liabilities are recognised for all taxable temporary differences:

• except where the deferred income tax liability arises from goodwill amortisation or the initial recognition of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss; and

• in respect of taxable temporary differences associated with investments in subsidiaries, associates and interests in joint ventures, except where the timing of the reversal of the temporary differences can be controlled and it is probable that the temporary differences will not reverse in the foreseeable future.

Deferred income tax assets are recognised for all deductible temporary differences, carry-forward of unused tax assets and unused tax losses, to the extent that it is probable that taxable profit will be available against which the deductible temporary differences, and the carry-forward of unused tax assets and unused tax losses can be utilised:

• except where the deferred income tax asset relating to the deductible temporary difference arises from the initial recognition of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss; and

• in respect of deductible temporary differences associated with investments in subsidiaries, associates and interests in joint ventures, deferred tax assets are only


recognised to the extent that it is probable that the temporary differences will reverse in the foreseeable future and taxable profit will be available against which the temporary differences can be utilised.

The carrying amount of deferred income tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred income tax asset to be utilised.

Deferred income tax assets and liabilities are measured at the tax rates that are expected to apply to the year when the asset is realised or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the balance sheet date.

Deferred income tax relating to items recognized directly in equity is recognized in equity and not in the income statement.

2.6.3 Borrowing costs Borrowing costs are recognised as an expense in the period in which they are incurred,

except to the extent where borrowing costs that are directly attributable to the acquisition, construction, or production of a qualifying asset that takes a substantial period of time to get ready for its intended use or sale is capitalised as part of that asset.

In 2011, the borrowing costs have not been capitalized as immature plantations which was financed by ADB as borrowings have come in to bearing

2.6.4 Intangible Assets Intangible assets acquired separately are measured on initial recognition at cost. The cost of

intangible assets acquired in a business combination is fair value as at the date of acquisition. Following the initial recognition of the intangible assets, the cost model is applied requiring the assets to be carried at cost less any accumulated amortization and accumulated impairment losses. Internally generated intangible assets, excluding capitalized development costs are not capitalized and expenditure is reflected in the income statement in the year in which the expenditure is incurred.

The useful lives of intangible assets are assessed to be either finite or indefinite.

Intangible assets with finite lives are amortized over the useful economic life and assessed for impairment whenever there is an indication that the intangible asset may be impaired. The amortization period and the amortization method for an intangible asset with a finite useful life is reviewed at least at each financial year end. Changes in the expected useful life or the expected pattern of consumption of future economic benefits embodied in the asset is accounted for by changing the amortization period or method, as appropriate, and treated as changes in accounting estimates. The amortization expense on intangible assets with finite lives is recognized in the income statement in the expense category consistent with the function of the intangible asset. Amortization was commenced when the assets were available for use.

As at the balance sheet date, Company does not have any intangible assets with finite lives.




Intangible assets with indefinite useful lives are tested for impairment annually either individually or at the cash generating unit level. Such intangibles are not amortized. The useful life of an intangible asset with an indefinite life is reviewed annually to determine whether indefinite life assessment continues to be supportable. If not, the change in the useful life assessment from indefinite to finite is made on a prospective basis.

Intangible assets that are not yet available for sale are tested for impairments at each financial year end, even if there is no indication that the asset is impaired. As at the balance sheet date, Company does not have any intangible assets with indefinite lives.

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 recognized in the income statement when the asset is derecognized

2.6.5 Deferred Expenditure Expenditure which is deemed to have a benefit or relationship to more than one financial

year is classified as deferred expenditure. Such expenditure is written off over the period, to which it relates, on a straight-line basis.

2.6.6 Inventories Inventories other than produce stocks are valued at the lower of cost and net realisable value,

after making due allowances for obsolete and slow moving items. Net realisable value is the price at which inventories can be sold in the ordinary course of business less the estimated cost of completion and estimated cost necessary to make the sale. The cost incurred in bringing inventories to its present location and condition is accounted using the following cost formular.

Input Material At average cost.

Growing Crop-Nurseries At the cost of direct materials, direct labour and an appropriate proportion of directly attributable overheads less provision for over grown plants.

Produce Stocks Valued at estimated selling prices or since realised prices.

Spares & Consumables At average cost

2.6.7 Trade and Other Receivables Trade receivables are stated at the amounts they are estimated to realise net of allowances for

bad and doubtful receivables.

Other receivables and dues from related parties are recognised at cost less provision for bad and doubtful receivables.

2.6.8 Cash and Cash Equivalents Cash and Cash Equivalents are defined as cash in hand, demand deposits and short-term

highly liquid investments readily convertible to known amounts of cash and subject to insignificant risk of changes in value.


For the purpose of Cash Flow Statement Cash and Cash Equivalent consists of cash in hand and deposits in banks net of outstanding bank overdrafts. Investments with short term maturities i.e. three months or less from the date of acquisitions are also treated as Cash Equivalents.

Interest paid and received is classified as investing Cash Flows.

The Cash Flow Statement reported based on indirect method.

2.6.9 Property, Plant and Equipment Plant and equipment is stated at cost, excluding the costs of day to day servicing, less

accumulated depreciation and accumulated impairment in value. Such cost includes the cost of replacing part of the plant and equipment when that cost is incurred, if the recognition criteria are met.

Land and buildings are measured at fair value less depreciation on buildings and impairment charged subsequent to the date of the revaluation.

Depreciation is calculated on a straight line basis over the useful life of the assets as follows:

Buildings 40 Years (2.5%) Plant & Machinery 13 1/3 Years (7.5%) Furniture & Fittings 10 Years (10%) Vehicles 5 Years (20%) Equipment 8 Years (12.5%) Land Improvements 10 Years (10%)

Mature Plantation Tea 33 1/3 Years (3%) Rubber 20 Years (5%) Coconut 50 Years (2%) Sanitation, Water Supply, Electricity 20 Years (5%)

Leasehold Rights Leasehold Property Over 53 years Buildings Over 25 years Machinery Over 15 years Improvements to Land Over 30 years

The asset's residual values, useful lives and methods of depreciation are reviewed, and adjusted if appropriate, at each financial year end.

2.6.10 Immature and Mature Plantations The cost of Replanting and New Planting are classified as immature plantations up-to the

time of harvesting the crop.

Further, the general charges incurred on the plantation are apportioned based on the labour days spent on respective Replanting and New Planting, and capitalised on the immature areas. The remaining portion of the general charges is expensed in the accounting period in which it is incurred.




The cost of areas coming into bearing are transferred to mature plantations and depreciated over their useful life period.

2.6.11 Infilling Cost Where infilling results in an increase in the economic life of the relevant field beyond its

previously assessed standard of performance, the costs are capitalised in accordance with Sri Lanka Accounting Standard No. 32 and depreciated over the useful life at rates applicable to mature plantation.

Infilling costs that are not capitalised have been charged to the Income Statement in the year in which they are incurred.

2.6.12 Leases

a) Finance leases - where the Company is the lessee Property, plant and equipment on finance leases, (which effectively transfer to the

Company substantially all of the risks and benefits incidental to ownership of the leased item) are capitalized at their cash price, and depreciated/amortized over the period the Company is expected to benefit from the use of the leased assets.

The corresponding principal amount payable to the lessor is shown as a liability.

The finance charges allocated to future periods are separately disclosed under Notes 13.4 & 16.

The interest element of the rental obligation applicable to each financial year is charged to the Income Statement over the period of the lease so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period.

The cost of improvements to or on leased property is capitalized, and depreciated over the unexpired period of the lease or the estimated useful lives of the improvements, whichever is shorter.

b) Assets leased to third parties under agreements that transfer substantially all the risks and rewards associated with ownership other than legal title, are classified as finance leases. Lease rentals receivable from the lessee shown in the balance sheet.

c) Operating Leases Leases where the lessor effectively retains substantially all the risks and benefits of

ownership over the lease term are classified as operating leases. Lease payments (exclusing costs for services such as insurance and maintenance) paid under operating leases are recognized as an expense in the income statement on a straight – line basis over the lease term.

d) Leasehold Property Leasehold property comprising of land use rights obtained on a long term basis, is

stated at the recorded carrying values as at the effective date of Sri Lanka Accounting Standard 19 – Leases in line with Ruling of the Urgent Issues Task Force of The Institute


of Chartered Accountants of Sri Lanka. Such carrying amounts are amortized over the remaining lease term or useful life of the leased property whichever is shorter.

2.6.13 Provisions Provisions are recognized when the Company has a present obligation (legal or constructive)

as a result of a past event, where it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. If the effect of the time value of money is material, provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and, where appropriate, the risks specific to the liability. Where discounting is used, the increase in the provision due to the passage of time is recognized as an interest expense.

2.6.14 Timber The accounting polices adopted for timber on plantations which is a consumable biological

asset is stated at fair value less estimated point of sale cost, the policy is adopted based on the international accounting standard 41 agriculture as there is no Sri Lanka accounting Standard on timber. Point of sales costs include all costs that would be necessary to sell the assets, including costs necessary to get the assets to market. The Company has engaged a reputed valuer Mr. K. Arthur Perera in determining the fair value of timber stock. The valuer has valued the timber stock per tree valuation basis by using prices available at the Sri Lanka Timber Corporation less point of Sale Cost. The Company measures the timber stock at fair value less estimated point of sale cost as at each balance sheet date. Accordingly initial recognition and changes in fair value of timber at each balance sheet date are dealt with the income statement.

2.6.15 Investments

Long Term Investments Long term investments are stated at cost. Carrying amounts are reduced to recognize a

decline other than temporary determined for each investment individually. These reductions for other than temporary declines in carrying amounts are charged to income statement.

Short Term Investments Current investments are carried at the lower of cost and market value determined on the

basis of aggregate portfolio.

2.6.16 Retirement Benefit Obligation

(a) Defined Benefit Plans - Gratuity The Retirement benefit plan adopted is as required under the Payment of Gratuity Act

No 12 of 1983 and Indian repatriate Act No 34 of 1978 to eligible employees.

The Company measures the present value of the promised retirement benefits of gratuity which is a defined benefit plan with the advice of an actuary every two years using projected benefits valuation method as recommended by Sri Lanka Accounting Standard




on Retirement Benefits Costs. Actuarial gains and losses are recognized as income or expenses over the expected average remaining working lives of the participants of the plan. The key assumptions used by the actuary include the followings:

a) Rate of Discount 10% p.a. b) Rate of Salary Increase - Workers 18% every two years

- Staff Employees 10% p.a c) Retirement Age - Workers (Male & Female) 60 years

- Other categories of staff (male & female) 58 years

d) The Company will continue as a going concern

The actuarial present value of the accrued benefits as at 31st December 2011 is Rs. 759,954,933/= this item is grouped under retirement benefit obligations in the balance sheet. The liability is not externally funded.

(b) Defined Contribution Plans – EPF & ETF Employees are eligible for Employees’ Provident Fund contributions and Employees’

Trust Fund Contributions in line with respective statutes and regulations. The Company contributes 12% and 3% of gross emoluments to Employee’s Provident Fund and Employee’s Trust Fund respectively.

2.6.17 Grants and Subsidies Grants and subsidies are credited to the income statement over the periods necessary to

match them with the related costs, which they are intended to compensate, on a systematic basis.

Grants related to assets, including non-monetary grants at fair value, is deferred in the balance sheet and credited to the income statement over the useful life of the related asset.

Grants related to income are recognized in the Income Statement in the period in which it is receivable.

2.6.18 Income Statement

Revenue Recognition Revenue is recognized to the extent that it is probable that the economic benefits will flow to

the Company and the revenue and associated costs incurred or to be incurred can be reliably measured. Revenue is measured at the fair value of the consideration received or receivable net of trade discounts and sales taxes. The following specific criteria are used for the purpose of recognition of revenue.

(a) Sale of Goods In keeping with the practice in the plantation industry revenue and profit or loss on

perennial crops are recognised in the financial period of harvesting. Revenue is recorded at invoice value net of brokerage, public sale expenses and other levies related to turnover.


(b) Interest Interest Income is recognized as the interest accrued (taking into account the effective

yield on the asset) unless collectability is in doubt.

(c) Dividends Dividend income is recognized on a cash basis.

(d) Others Other income is recognized on an accrual basis.

Net Gains and losses of a revenue nature on the disposal of property, plant & equipment and other non current assets including investments have been accounted for in the income statement, having deducted from proceeds on disposal, the carrying amount of the assets and related selling expenses. On disposal of revalued property, plant and equipment, amount remaining in Revaluation Reserve relating to that asset is transferred directly to Accumulated Profit / (Loss).

Gains and losses arising from incidental activities to 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.

2.6.19 Expenditure Recognition (a) 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 & equipment in state of efficiency has been charged to revenue in arriving at the profit for the year.

(b) For the purpose of presentation of Income Statement the directors are of the opinion that function of expenses method presents fairly the elements of the enterprises performance, hence such presentation method is adopted.




2011 2010 Rs Rs

3. LEASEHOLD PROPERTY, PLANT & EQUIPMENT Leasehold Right to bare land 3.1 226,780,595 233,555,981 Immovable Lease assets 3.2 165,548,126 180,854,347 392,328,721 414,410,328

3.1 LEASEHOLD RIGHT TO BARE LAND Leases have been executed for all estates for a period of 53 years. All of these leases are

retroactive to 22nd June 1992 the date of formation of the company. The leasehold right to the land on all of these estates have been taken into the books of the company on 22nd June 1992 immediately after formation of the company, in terms of the ruling obtained from the Urgent Issue TasK Force (UITF) of the Institute of Chartered Accountants of Sri Lanka. For this purpose the Board decided at its meeting on 8th March 1995 that this bare land would be revalued at the value established for this land by valuation specialist , Mr. D R Wickramasinghe just prior to the formation of the company.

The above mentioned leasehold right to bare land comprising of land use rights obtained on a long term basis is re-classified as leasehold property and stated at the recorded carrying values as at the effective date of Sri Lanka Accounting Standard 19 Leases, in line with revised Ruling of the Urgent Issues Task Force of the Institute of Chartered Accountants of Sri Lanka. Such carrying amounts are amortized over the remaining lease term or useful life of the leased property whichever is shorter. The leasehold right to land is disclosed under non current assets under leasehold property.

The revised UITF ruling does not permit further revaluation of Leasehold Property. The values taken into the 22nd June 1992 balance sheet and amortization of the leasehold property up to 31st December 2011 are as follows.

Accumulated Accumulated Revaluation Amortization Amortization Amortization Balance Balance as at as at for the as at as at as at 22.06.92 01.01.11 year 31.12.11 31.12.11 31.12.10 Rs. Rs. Rs. Rs. Rs. Rs.

Leasehold Property 359,095,312 125,539,331 6,775,386 132,314,717 226,780,595 233,555,981

The leasehold property is being amortised by equal amounts over a 53 year period and the unexpired period of the lease as at the Balance Sheet date is 35 years.



3.2 IMMOVABLE LEASE ASSETS

As morefully explained in Note 3.1 all JEDB/SLSPC estates leases have been executed as at the Balance Sheet date, in terms of the ruling of the UITF of the Institute of Chartered Accountants of Sri Lanka, all immovable assets in these estates under finance leases have been taken into the books of the Company retroactive to 22nd June 1992. For this purpose the Board decided at its meeting on March 8, 1995 that these assets would be taken at their book values as they appear in the books of the JEDB/SLSPC,on the day immediately preceding the date of formation of the Company. These assets are taken into the 22nd June 1992 balance sheet and amortised as follows:

Improvement Plant to Mature Machinery &

Land Plantations Buildings Others Total Rs. Rs. Rs. Rs. Rs.

Revaluation as at 22.06.92 18,757,900 304,622,853 113,171,583 16,503,578 453,055,914

Transferred to mature - - - - -

Balance as at 31.12.11 18,757,900 304,622,853 113,171,583 16,503,578 453,055,914

Accumulated amortisation as at 01.01.11 11,585,356 160,350,720 83,761,913 16,503,578 272,201,567

Amortisation during the year 625,263 10,154,095 4,526,863 - 15,306,221

Accumulated amortisation as at 31.12.11 12,210,619 170,504,815 88,288,776 16,503,578 287,507,788

Written down value as at 31.12.11 6,547,281 134,118,038 24,882,807 - 165,548,126

Written down value as at 31.12.10 7,172,544 144,272,133 29,409,670 - 180,854,347

Investment in plantation assets which were immature at the time of handing over to the company by way of estate leases are shown under immature plantation (revalued as at 22nd June 1992). all of which have been transferred to mature Plantations as at Balance Sheet date.


4 PROPERTY, PLANT & EQUIPMENT Balance Additions Disposals Balance as at for the during the as at 01.01.11 Year Year 31.12.11 Rs. Rs. Rs. Rs. Cost Buildings 313,508,594 45,357,772 - 358,866,366 Motor Vehicles 133,899,860 39,642,941 (15,346,074) 158,196,727 Plant & Machinery 125,707,381 4,492,381 - 130,199,762 Furniture & Fittings 26,232,228 3,548,782 - 29,781,010 Equipments 99,330,386 3,573,652 - 102,904,038 Land Improvements 437,783,272 1,929,763 - 439,713,035 Water & Sanitations and Others 56,943,014 1,775,932 - 58,718,946 1,193,404,735 100,321,223 (15,346,074) 1,278,379,884 Balance Charged Accumulated Balance as at for the depreciation as at 01.01.11 Year on disposals 31.12.11 Rs. Rs. Rs. Rs. Depreciation Buildings 40,001,972 9,039,677 - 49,041,649 Motor Vehicles 107,179,012 16,254,157 (11,342,814) 112,090,355 Plant & Machinery 82,539,519 10,137,035 - 92,676,554 Furniture & Fittings 12,444,473 2,005,665 - 14,450,138 Equipments 62,867,998 4,765,945 - 67,633,943 Land Improvement 13,721,770 2,837,565 - 16,559,335 Water & Sanitations and Others 29,563,533 2,907,832 - 32,471,365 348,318,277 47,947,876 (11,342,814) 384,923,339

W.D.V 845,086,458 893,456,545

Assets Acquired on Finance Lease Balance Additions Disposals Balance as at during the during the as at 01.01.11 Year Year 31.12.11 Rs. Rs. Rs. Rs. Cost Motor Vehicles 74,716,999 - (7,650,000) 67,066,999 Machinery 49,123,052 36,090,364 - 85,213,416 123,840,051 36,090,364 (7,650,000) 152,280,415




Balance Charge Accumulated Balance as at for the Depreciation as at 01.01.11 Year on Disposals 31.12.11 Depreciation Rs. Rs. Rs. Rs.

Motor Vehicles 40,850,451 10,271,637 (4,590,000) 46,532,088 Machinery 31,779,052 6,391,006 - 38,170,058 72,629,503 16,662,643 (4,590,000) 84,702,146 W.D.V 51,210,548 67,578,269

Balance Additions Capitalised Balance as at for the during the as at 01.01.11 Year Year 31.12.11 Rs. Rs. Rs. Rs. Capital Work-in-Progress 19,446,740 12,926,728 (7,908,921) 24,464,547 TOTAL WRITTEN DOWN VALUE 915,743,746 985,499,361

Note : (a) The assets shown above are those movable assets vested in the Company by gazette

notification at the date of formation of the company (22nd June 1992) and all investments in tangible assets by the company since its formation. The assets taken over by way of estate leases are set out in notes 3.1 & 3.2.


5 IMPROVEMENT TO LEASEHOLD PROPERTY (IMMATURE/MATURE PLANTATIONS)

Immature Mature Total Total Cost Plantations Plantations 2011 2010 Rs. Rs. Rs Rs.

At the beginning of the year 208,024,285 653,503,985 861,528,270 808,381,380 Additions 85,553,273 44,185,840 129,739,113 59,156,715 Transfers (44,185,840) - (44,185,840) (6,009,825) At the end of the year 249,391,718 697,689,825 947,081,543 861,528,270

Depreciation At the beginning of the year - 191,751,029 191,751,029 168,358,536 Charge for the year - 24,660,082 24,660,082 23,392,493 At the end of the year - 216,411,111 216,411,111 191,751,029 Written Down Value 249,391,718 481,278,714 730,670,432 669,777,241

Note : These are investments in immature/mature plantations since the formation of the Company. The assets (including plantation assets) taken over by way of estate leases are set out in Notes 3.1 and 3.2. Further investment in immature plantations taken over by way of these leases are shown in the above note. When such plantations become mature, the additional investments since take over to bring them to maturity, will be moved from immature to mature under this note.

2011 20106 INVESTMENTS Rs. Rs. Balance at the beginning of the year 15,790 15,790 Disposals made during the year - - Balance at the end of the year 15,790 15,790 The balance represents the investment in shares (Rs.100/=) in the following companies.

Agalawatte Plantation, Balangoda Plantation, Bogawantalawa Plantation, Hapugasthenne Plantation, Horana Plantation, Kahawatte Plantation, Kegalle Plantation, Kotagala Plantation, Kelani Valley Plantation, Madulsima Plantation, Namunukula Plantation, Talawakelle Plantation, Udapussellawa Plantation, Watawala Plantation.




2011 20107 TIMBER STOCKS Rs. Rs.

Carrying amount at the beginning 577,739,714 569,584,546 Increase/ (Decrease) due to value changes/Harvesting 27,239,568 7,795,713 Increase due to new planting 1,834,191 359,455 Carrying amount at the end 606,813,473 577,739,714 The timber on plantation was measured at it's fair value on a tree basis during the year ended

31.12.2011 by Mr. K. Arthur who is an independent valuer. The results of such valuation were incorporated in these financial statements from it's effective date, 31.12.2011. The gain / (Loss) arising from the revaluation was transferred to Income Statement.

8 INVENTORIES Input Materials 40,223,245 35,521,362 Nurseries 6,672,135 9,200,015 Consumables & Spares 14,044,546 10,954,091 Harvested Crops 326,466,235 346,366,171 387,406,161 402,041,639 Less: Provision for Obsolete Stocks (4,964,803) (4,964,803) 382,441,358 397,076,836 9 ECONOMIC SERVICE CHARGE RECEIVABLES At the beginning of the year 4,404,307 18,654,649 Economic Service Charges for the year 8,439,374 7,740,122 Set off during the year - (21,990,464) At the end of the year 12,843,681 4,404,307 10 TRADE AND OTHER RECEIVABLES Produce debtors 24,617,538 55,694,502 Advances & Prepayments 15,898,318 26,321,225 Other debtors 25,424,516 39,836,636 Staff Debtors 42,235,523 37,685,757 108,175,895 159,538,120 Less: Provision for Bad Debts (5,314,315) (5,314,315) 102,861,580 154,223,805 11 AMOUNTS DUE FROM RELATED PARTIES Wayamba Plantations (Pvt) Ltd 10,500,888 10,500,888 Bloemendal Flower Company (Pvt) Ltd 19,418,160 18,784,065 Oreocromis Dynamics (Pvt) Ltd 14,836,014 14,545,470 Bogtstra & Gerlach (Pvt) Ltd 2,468,268 2,468,269 Malwatte Hotel & Resort (Pvt) Ltd. 19,298,289 - 66,521,619 46,298,692 No interest is charged on these current account balances.


12 STATED CAPITAL 2011 2010 Issued and Fully Paid Number of Shares No. of Voting Ordinary Shares including one Golden Share held by the 224,590,161 22,459,017 Treasury which has special rights No. of Non- Voting Ordinary Shares 23,000,000 2,300,000 247,590,161 24,759,017

Rs. Rs. Stated Capital including one Golden Share held by the 350,000,010 350,000,010 Treasury which has special rights Issue of Non - Voting Ordinary Shares 23,000,000 23,000,000 373,000,010 373,000,010

Stated capital represents the amount paid to the company in respect of issuing 22,459,017 ordinary shares including one Golden Share which has special rights and 2,300,000 Non-Voting Ordinary Shares. The Company subdivided its shares on 4th April 2011 in the proportion of 10 shares for every 01 share held. Accordingly the number of fully paid ordinary shares excluding 01 Golden share held by the Trassury is 224,590,160and the number of Non Voting shares is 23,000,000.With the enactment of the Companies Act No. 7 of 2007 which is applicable with effective from 3rd May 2007, the concept of authorised share capital and par value is no longer applicable.



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of U

SD 2,

750/

=

Lo

an -0

2 3,

983,3

33

12,28

1,806

-

12

,281,8

06

16,26

5,139

20

,248,4

73

Inter

est F

ree

72 eq

ual m

onth

ly in

stallm

ents

3

,983,3

33

12,28

1,806

-

12

,281,8

06

16,26

5,139

22

,462,2

23

UN

ION

BANK

3,

976,4

12

-

-

-

3,97

6,412

7,

916,0

94 2

5% on

redu

cing b

alanc

e

and fi

nal in

stallm

ent o

f Rs 1

,169,9

84 fr

om O

ct -05

3,

976,4

12

-

-

-

3,97

6,412

7,

916,0

94

48

insta

llmen

ts fro

m N

ov 08

Hatto

n Nati

onal

Bank

6,

000,0

00

122,8

30,00

0 -

12

2,830

,000

128,8

30,00

0 -

AW

PLR

Revie

wed m

onth

ly Ca

pital

to be

paid

after

an in

itial

grac

e per

iod

6,00

0,000

12

2,830

,000

-

122,8

30,00

0 12

8,830

,000

-

of

10 m

onth

s by 4

8 ins

tallm

ents

com

men

cing f

rom

Sep 2

012

13.3

SHOR

T TE

RM L

OANS

HN

B - C

omm

ercial

Pape

rs -

-

-

-

-

40

,000,0

00

15.75

% Th

is loa

n has

been

prov

ide f

or 3

mon

ths.

After

com

pleti

on of

3 m

onth

s tha

t will

be re

newe

d aga

in

BO

C - P

ackin

g Cred

it Lo

an

32,88

7,086

-

-

-

32

,887,0

86

14,24

2,161

Not

es to

the

Fina

ncia

l Sta

tem

ents

Ye

ar E

nded

31s

t Dec

embe

r 201

1


13.4 LEASE CREDITORS Repayable Repayable Total Repayable Repayable Total within after 01 Year As At within after 01 Year As At 01 Year Less than 31.12.11 01 Year Less than 31.12.10 05 Years 05 Years Rs. Rs. Rs. Rs. Rs. Rs. Hattion National Bank Motor Vehicles

Gross Liability 17,246,424 35,038,676 52,285,100 6,004,825 15,749,899 21,754,724

Interest In Suspense (4,508,427) (3,806,343) (8,314,770) (2,129,399) (2,427,605) (4,557,004)

Net Liability 12,737,997 31,232,333 43,970,330 3,875,426 13,322,294 17,197,720

Union Bank

Motor Vehicles

Gross Liability 6,875,247 3,858,966 10,734,213 10,255,709 13,017,714 23,273,423

Interest In Suspense (1,477,086) (299,634) (1,776,720) (3,060,669) (1,967,254) (5,027,923)

Net Liability 5,398,161 3,559,332 8,957,493 7,195,040 11,050,460 18,245,500

DFCC Bank

Motor Vehicles

Gross Liability - - - 1,216,035 - 1,216,035

Interest In Suspense - - - (43,162) - (43,162)

Net Liability - - - 1,172,873 - 1,172,873

Total Gross Liability 24,121,671 38,897,642 63,019,313 17,476,569 28,767,613 46,244,182

Total Interest In Suspense (5,985,513) (4,105,977) (10,091,490) (5,233,230) (4,394,859) (9,628,089)

Total Net Liability 18,136,158 34,791,665 52,927,823 12,243,339 24,372,754 36,616,093



2011 201014. RETIRING BENEFIT OBLIGATIONS Rs Rs

At the beginning of the year 719,640,953 674,124,256 Provisions for the year 116,571,413 97,889,236 Payments for the year (76,257,433) (52,372,539) At the end of the year 759,954,933 719,640,953 According to the interim actual valuation conducted by Piyal S Goonetilleke and Associates

as at 31 December 2011 the liability for all employees is Rs.759,954,933/= If the company had provided for gratuity on the basis of fourteen days wages and half month salary for each completed year of service, the liability would have been Rs. 925,667,509/=. Hence there is a contingent liability of Rs.165,712,576/= which would crystallise only if the company ceases to be a going concern.

15. DEFERRED GRANTS AND SUBSIDIES At the beginning of the year 133,648,662 138,628,358 Add : Grants received during the year 2,478,414 4,341,362 Amortisation for the year (9,348,366) (9,321,058) Less : At the end of the year 126,778,710 133,648,662 The Company has received funding from the Plantation Housing and Social Welfare Trust and

Asian Development Bank for the development of workers facilities such as re-roofing of line rooms, latrines, water supply and sanitation etc. The amounts spent are included under the relevant classification of property, plant & equipment and the grant component is reflected under Deferred Grants and Subsidies.



Not

es to

the

Fina

ncia

l Sta

tem

ents

Ye

ar E

nded

31s

t Dec

embe

r 201

1

16.

N

ET L

IABI

LITY

TO

LES

SOR

.

Repa

yabl

e R

epay

able

R

epay

able

R

epay

able

To

tal

Repa

yabl

e R

epay

able

R

epay

able

R

epay

able

To

tal

wi

thin

A

fter 1

year

A

fter 5

year

s A

fter 1

year

as

at

with

in

Afte

r 1 ye

ar

Afte

r 5 ye

ars

Afte

r 1 ye

ar

as at

1 yea

r le

ss th

an 5

year

s

31

.12.11

1 y

ear

less

than

5 ye

ars

31.12

.10

Rs

. R

s.

Rs.

R

s.

Rs.

Rs.

Rs.

R

s.

Rs.

Rs

Gro

ss L

iabi

lity

8,5

89,0

00

34,

356,

000

2

44,3

74,6

99

278

,730

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2

87,3

19,6

99

8,5

89,0

00

34,

356,

000

2

53,2

08,4

27

287

,564

,427

2

96,1

53,4

27

Le

ss: F

inan

ce C

harg

es

(6,2

75,7

37)

(24,

139,

884)

(1

00,0

10,6

56)

(124

,150

,540

) (1

30,4

26,2

77)

(6,3

64,7

09)

(24,

532,

812)

(1

06,0

52,6

86)

(130

,585

,498

) (1

36,9

50,2

07)

Net

Lia

bilit

y 2

,313

,263

1

0,21

6,11

6

144

,364

,043

1

54,5

80,1

59

156

,893

,422

2

,224

,291

9

,823

,188

1

47,1

55,7

41

156

,978

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1

59,2

03,2

20

Th

e le

ase

of th

e es

tate

s hav

e be

en a

men

ded,

with

effe

ct fr

om 2

2nd

June

199

6 to

an

amou

nt su

bsta

ntia

lly h

ighe

r tha

n th

e pr

evio

us le

ase

rent

al o

f Rs.

500/

= pe

r est

ate

per a

nnum

. The

firs

t ren

tal p

ayab

le u

nder

th

e re

vise

d ba

sis i

s Rs.

8.59

mill

ion

from

22n

d Ju

ne 1

996

to 2

1st J

une

1997

. Thi

s am

ount

is to

be

infla

ted

annu

ally

by

the

Gro

ss D

omes

tic P

rodu

ct (G

DP)

defl

ator

, and

is in

the

form

of a

con

tinge

nt re

ntal

.

17.

TR

AD

E A

ND

OTH

ER P

AYA

BLES

.

20

11

2010

Rs

Rs

Tr

ade

Cre

dito

rs

165

,494

,697

1

73,2

27,6

46

E

mpl

oyee

Rel

ated

Cre

dito

rs

147

,182

,491

1

30,2

92,0

26

A

ccru

ed E

xpen

ses

13,

897,

950

3

3,90

8,98

5

O

ther

s

2

,551

,164

7

,804

,767

329

,126

,302

3

45,2

33,4

24

18.

D

IVID

END

S PA

YABL

ES

2011

20

1018

.1

Div

iden

d Pa

id/U

ncla

imed

R

s R

s

O

rdin

ary

Div

iden

d U

ncla

imed

3

,236

,653

3

,346

,123

3,2

36,6

53

3,3

46,1

23

2011

20

10

R

s R

s18

.2

Div

iden

ds P

ropo

sed

afte

r the

Yea

r End

D

ivid

end

on O

rdin

ary

Shar

es

-

-

-

-


19

REV

ENU

E

20

11

2010

19.1

Su

mm

ary

Rs.

R

s.

Sale

of P

rodu

ce

Te

a

1,7

64,2

42,1

99

2,1

73,8

41,0

72

Ru

bber

6

90,5

94,0

14

617

,428

,371

Coc

onut

2

,984

,332

3

,053

,770

Oth

ers

562

,332

,499

6

15,7

85,6

64

3,0

20,1

53,0

44

3,4

10,1

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77

19.2

Se

gmen

t Inf

orm

atio

n

Geo

grap

hica

l Seg

men

t Te

a

R

ubbe

r

Coc

onut

Oth

ers

To

tal

2011

20

10

2011

20

10

2011

20

10

2011

20

10

2011

20

10

R

s.

Rs.

R

s.

Rs.

R

s.

Rs.

R

s.

Rs.

R

s.

Rs.

Re

venu

e 1

,764

,242

,199

2

,173

,841

,072

6

90,5

94,0

14

617

,428

,371

2

,984

,332

3

,053

,770

5

62,3

32,4

99

615

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,664

3

,020

,153

,044

3

,410

,108

,877

Reve

nue

Expe

nditu

re

(1,

828,

658,

037)

(1,

928,

133,

464)

(2

40,8

17,5

06)

(208

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,617

) (1

,636

,362

) (1

,362

,424

) (5

25,2

90,2

48)

(561

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,613

) (2

,596

,402

,152

) (2

,699

,237

,119

)

Dep

reci

atio

n /

Am

ortiz

atio

n

(57,

532,

470)

(5

5,96

7,04

5)

(31,

768,

500)

(2

8,82

1,42

8)

-

-

-

-

(89,

300,

969)

(8

4,78

8,47

3)

Gra

tuity

(

105,

309,

629)

(4

1,32

7,54

6)

(8,8

19,7

60)

(6,6

80,3

18)

-

-

-

-

(114

,129

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) (4

8,00

7,86

4)

Se

gmen

t Res

ults

(

227,

257,

937)

1

48,4

13,0

17

409

,188

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3

73,5

68,0

08

1,3

47,9

70

1,6

91,3

46

37,

042,

251

5

4,40

3,05

1

220

,320

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5

78,0

75,4

21

G

ain/

(Los

s) o

n Ti

mbe

r

2

7,23

9,56

8

7,7

95,7

13

O

ther

Inco

me

87,

578,

517

1

12,3

36,4

05

U

nallo

cate

d Ex

pens

es

(17

3,34

6,76

2)

(158

,310

,319

)

Fina

nce

Cos

t

(

53,5

69,9

37)

(106

,168

,778

)

Profi

t for

the

year

1

08,2

21,9

22

433

,728

,442

Se

gmen

t Ass

ets

Non

Cur

rent

Ass

ets

C

ost

2,2

89,5

85,3

73

2,1

71,6

93,8

71

853

,162

,385

7

94,2

60,8

75

-

-

-

-

3,14

2,74

7,75

8

2,96

5,95

4,74

6

Acc

umul

ated

Dep

reci

atio

n /

Am

ortiz

atio

n

(73

9,14

2,91

5)

(688

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) (2

86,1

68,6

37)

(255

,421

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) -

-

-

-

(1

,025

,311

,552

) (9

43,6

17,9

78)

Cur

rent

Ass

ets

329

,812

,890

3

61,8

13,0

81

119

,235

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1

15,5

77,4

52

-

-

-

-

449

,048

,506

4

77,3

90,5

33

1,88

0,25

5,34

8

1,84

5,31

0,61

2

686

,229

,364

6

54,4

16,6

89

-

-

-

-

2,56

6,48

4,71

2

2,49

9,72

7,30

1

U

n A

lloca

ted

C

ost

678

,439

,117

6

22,1

71,7

83

Acc

umul

ated

Dep

reci

atio

n /

Am

ortiz

atio

n

(80

,547

,547

) (6

6,82

1,73

1)

C

urre

nt A

sset

s

6

06,5

45,3

35

423

,435

,467

T

otal

Ass

ets

3,7

70,9

21,6

17

3,4

78,5

12,8

20

Not

es to

the

Fina

ncia

l Sta

tem

ents

Ye

ar E

nded

31s

t Dec

embe

r 201

1


Se

gmen

t Lia

bilit

ies

Non

Cur

rent

Lia

bilit

ies

860

,057

,175

8

21,4

01,1

89

56,

529,

387

5

7,15

6,29

5

-

-

-

-

916

,586

,562

8

78,5

57,4

84

Cur

rent

Lia

bilit

ies

257

,901

,976

2

77,4

75,6

94

42,

248,

291

3

4,50

9,13

7

-

-

-

-

300

,150

,268

3

11,9

84,8

32

1,11

7,95

9,15

1

1,09

8,87

6,88

3

98,

777,

678

9

1,66

5,43

2

-

-

-

-

1,21

6,73

6,83

0

1,19

0,54

2,31

6

U

n A

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N

on C

urre

nt L

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s

3

66,0

81,2

66

333

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C

urre

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s

3

30,0

05,1

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197

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696,

086,

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5

31,1

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Tota

l Lia

bilit

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1

,912

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1

,721

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Se

gmen

t Cap

ital E

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ditu

re

Fi

eld

Dev

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men

t 4

2,69

5,93

8

5,5

61,9

59

42,

857,

335

3

1,14

5,76

1

-

-

-

-

85,

553,

273

3

6,70

7,72

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Prop

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, Pla

nt &

Equ

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ent

54,

376,

978

2

5,57

8,52

8

17,

150,

681

1

9,93

9,04

5

-

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-

-

71,

527,

659

4

5,51

7,57

3

97,0

72,9

16

31,

140,

487

6

0,00

8,01

6

51,

084,

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-

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-

1

57,0

80,9

32

82,

225,

293

U

n A

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69

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6

0,62

2,26

7

T

otal

Cap

ital E

xpen

ditu

re

22

6,98

2,66

8

142

,847

,560

Not

es to

the

Fina

ncia

l Sta

tem

ents

Ye

ar E

nded

31s

t Dec

embe

r 201

1

Tea

Rub

ber

C

ocon

ut

O

ther

s

Tota

l

20

11

2010

20

11

2010

20

11

2010

20

11

2010

20

11

2010

Rs.

R

s.

Rs.

R

s.

Rs.

R

s.

Rs.

R

s.

Rs.

R

s.



2011 2010 Rs. Rs.20 OTHER INCOME Amortisation of Capital Grants 9,348,366 9,321,058 Profit on Disposal of Property, Plants & Equipments 7,964,028 9,428,096 Dividend Income 3,637 1,238 Sale of Trees 19,813,175 44,474,000 Sundry Income 29,163,557 28,879,593 Interest Income 21,285,754 20,232,420 87,578,517 112,336,405

21. GAIN/LOSS ON CHANGE IN FAIR VALUE OF TIMBER STOCK 2011 2010 Rs. Rs. Increase/ (Decrease) due to volume changes 16,890,257 5,196,485 Increase/ (Decrease) due to price changes 10,349,311 2,599,228 27,239,568 7,795,713 Timber on plantations available in all 18 tea estates as at 31 December 2002 has been initially valued at

Rs. 404,563,700/= on 15 August 2003 by Mr. K.Arthur Perera (AMIV Sri Lanka) a reputed valuer. The timber valuation is in accordance with the company policy which is adopted based on International Accounting Standard 41 as there is no Sri Lanka Accounting Standard relating to this aspect. The timber available on all tea estates was measured at fair value as at 31 December 2011 by the previous valuer, Mr. K. Arthur Perera. The gain on change in fair value amounting to Rs. 27,239,568/= ascertained by the same valuer was accounted for in the income statement for the year ended 31 December 2011.

22. FINANCE COST 2011 2010 Rs. Rs. Interest on Overdraft 6,526,265 10,037,044 Interest on Finance Lease 8,333,049 5,799,869 Interest on Term Loan 18,396,086 42,048,665 Interest on Government Lease 6,364,709 6,450,258 Variable Lease Rental 8,265,988 27,051,301 VAT on Finance Lease Interest 2,788,545 2,385,857 Bank Charges & Others 1,483,225 4,467,357 Interest on Commercial Papers - 4,665,570 Interest on Packing Credit 1,412,070 3,262,857 53,569,937 106,168,778



23. PROFIT BEFORE TAXATION IS STATED AFTER CHARGING 2011 2010 Rs. Rs. Directors' emoluments 11,058,807 9,129,000 Auditors' fees 2,421,792 2,171,614 Depreciation /Amortisation Leashold Property 6,775,386 6,775,386 Immovable Estate Assets On Finance Lease 15,306,221 15,306,221 Tangible Assets 47,947,876 38,039,050 Immuature/Mature Plantations 24,660,082 23,392,493 Personnel Cost Defined Benefit Plant Costs-Gratuity 116,571,414 106,168,778 Salaries and Wages 1,004,322,420 1,118,051,472 Defined Contribution Plan Costs - EPF & ETF 162,969,244 139,841,651 24. INCOME TAX EXPENSE The Company is liable for income tax on its profit from manufacture and profit from agriculture at the

rate of 28% & 10% respectively. The carried forward tax losses of the company as at 31 December 2011 amounts to Rs.822,363,210/= (2010 - Rs.834,869,483/=).

2011 2010 Current Tax Expenses Rs. Rs. Current Income Tax Expenses 21,536,776 9,509,058 Income tax expense reported in the Income Statement 21,536,776 9,509,058

24.1 PROFIT 2011 2010 Rs. Rs.

Profit before tax 108,221,922 433,728,442 108,221,922 433,728,442 Aggregate Disallowed Item 255,176,463 195,333,630 Aggregate Allowable Item (231,955,708) (216,311,279) Profit not charged to income tax (94,873,863) (386,078,395) Accounting Profit/(Loss) chargeable to income taxes 36,568,814 26,672,398 Tax effect on Profit from Agriculture - Rs. 22,838,400 @ 10% (2010/11 - Exempt) 2,283,840 9,335,339 Tax effect on Balance Taxable Income - Rs. 13,730,414 @ 28% (2010/11 - 35%) 3,844,516 - Deemed Dividend Tax (15%) 15,408,420 - Social responsibility levy - 173,719 Total Income Tax Expenses 21,536,776 9,509,058


25 BASIC EARNINGS PER SHARE 25.1 The calculation of the basic earnings per share is based on after tax profit for the year divided by the

weighted average number of ordinary shares outstanding during the period.. 25.2 The following reflects the income and share data used in the basic earnings per share computation. 2011 2010 Rs Rs Amounts used as the Numerator : Net profit/(loss) applicable to ordinary share holders 86,685,146 424,219,384 86,685,146 424,219,384 Amounts used as the Denominator : Weighted average number of ordinary shares in issue 190,814,007 23,442,031 190,814,007 23,442,031

26. SECURITIES PLEDGED Following assets have been pledged as security for liabilities.

Nature of Liability Loan/Facility Security Carrying amount of assets pledged Rs. 2011 2010 Rs. Rs.

A.D.B. Loan through DFCC 70,843,000 Primary mortgage over leasehold 8,693,100 12,705,300 rights of Welimada Estate.

A.D.B. Loan through NDB 170,609,600 Primary mortgage over leasehold 28,972,175 41,348,255 rights of Dickwella, St.James, Uva Highlands, Sarnia and Neluwa Estates.

A.D.B. Loan through HNB E- Friend 7,500,000 Mortgage over leasehold rights of 575,375 1,438,535 Warwick, Ledgerwatte & Unugalla Estates.

A.D.B. Loan through HNB 92,153,096 Primary mortgage over leasehold rights 31,095,595 40,317,595 of Warwick, Unugalla, Ledgerwatte, Hakgalla, Ellawela Estates.

ADB loan through LOLC 20,000,000 Primary mortgage over leasehold 6,999,974 10,999,982 rights of Chesteford Estates.

Long term loan through Union Bank 13,757,000 Primary mortgage over 3,976,412 7,916,094 Colour Separator

Long term loan through 90,000,000 Fixed Deposit for Rs.100,000,000 - 58,500,000 Commercial Bank Primary mortgage over Property at

75,900,000 No.204,Canel Road , Handala Wattala 40,480,000 55,660,000

Long term loan - 23,900,000 16,265,139 20,248,473 Lanka Mount Castle (Pvt) Ltd

7,590,000 - 2,213,750




Overdraft - HNB 210,000,000 Primary mortgage over leasehold 134,657,606 - rights of Warwick, Hakgalla, Ledgerwatte, Unugalla, Keenakelle, Downside & Queentown Estates.

Overdraft - Union Bank 80,000,000 Primary mortgage over leasehold rights 45,349,047 - of Dyraba & Aislaby Estates.

HNB - Long Term Loan 122,830,000 Primary mortgage over leasehold rights 122,830,000 - of Land, Buildings and immovable Machinery of Chelsea, attempitiya and Uva Ketawela.

27. CAPITAL COMMITMENTS 2011 2010 Rs. Rs. Followings are the capital commitments as at the balance sheet date. Contracted , but not provided for Nil Nil Total Nil Nil

29. CONTINGENCIES

No known contingent liabilities exist as at the balance sheet date, other than those disclosed in Note 14.

30. POST BALANCE SHEET EVENTS

There have been no material events occurring after the balance sheet date that require adjustments or disclosures in the Financial statements .

Nature of Liability Loan/Facility Security Carrying amount of assets pledged Rs. 2011 2010 Rs. Rs.


31 RELATED PARTY DISCLOSURES

31.1 Details of Significant Related Party Disclosures are as follows.

Amount Charged/ (Credited) 2011 2010 Transactions with the parent and related entities Rs. Rs.

Nature of the Company Relationship Name of Director Nature of Transaction

Wayamba Plantations (Pvt) Ltd. Parent Company Mr. W.L.Bogtstra Loan recovery - (2,000,000) Mr. Lucas Bogtstra Mr.T.R.Gerlach Oreocromis Dynamics (Pvt) Ltd. Related Company Mr. W.L.Bogtstra Investments 290,544 580,852 Mr. Lucas Bogtstra Mr.T.R.Gerlach Mr.K.G.M.Piyaratne Bloemendal Flower Company (Pvt) Ltd. Related Company Mr. W.L.Bogtstra Investments 634,095 553,666 Mr. Lucas Bogtstra Mr.T.R.Gerlach Mr.K.G.M.Piyaratne Bogtstra & Gerlach (Pvt) Ltd. Related Company Mr. W.L.Bogtstra Loan recovery - (985,000) Mr.T.R.Gerlach Malwatte Hotel and Resort (Private) Ltd. Related Company Mr. W.L.Bogtstra Loan recovery 19,298,289 - Mr. Lucas Bogtstra

Mr.T.R.Gerlach 31.2 Transactions with the key management personnel of the company or parent

There were no material transactions with the Key Management Personnel of the Company and its parent

other than those disclosed in Notes 23 & 31.1 to the Financial Statements.

32 RELATED PARTY TRANSACTIONS

There are no related party transactions other than those disclosed in Notes 11 & 31 to the financial statements.



Shareholders & Investors InformationDistribution of Shares

Voting

No of Shares Held No of Share No of Share Total Total Holders Holders % Holdings Holdings % 1 - 1,000 8,022 40.87% 3,814,542.00 1.70% 1,001 - 10,000 11,119 56.65% 23,187,668.00 10.32% 10,001 - 100,000 427 2.18% 13,355,490.00 5.95% 100,001 - 1,000,000 55 0.28% 16,100,330.00 7.17% 1,000,001 & over 5 0.02% 168,132,130.00 74.86% Grand Total 19,628 100.00% 224,590,160.00 100.00%

Analysis Report of Shareholder's as at 31St December 2011 No of Share No of Share Total Total Holders Holders % Holdings Holdings % Individual 19,510 99.40% 61,886,870.00 27.56%Institution 118 0.60% 162,703,290.00 72.44% Grand Total 19,628 100.00% 224,590,160.00 100.00% Share Holder's Categorised Summary Report As at 31st December 2011

Non Voting

No of Shares Held No of Share No of Share Total Total Holders Holders % Holdings Holdings % 1 - 1,000 218 47.19% 113,075.00 0.49% 1,001 - 10,000 187 40.48% 807,425.00 3.51% 10,001 - 100,000 50 10.82% 1,430,200.00 6.22% 100,001 - 1,000,000 6 1.30% 1,483,300.00 6.45% 1,000,001 & over 1 0.21% 19,166,000.00 83.33% Grand Total 462 100.00% 23,000,000.00 100.00%

Analysis Report of Shareholder's as at 31St December 2011

No of Share No of Share Total Total Holders Holders % Holdings Holdings % Individual 447 96.75% 2632200 11.44%Institution 15 3.25% 20367800 88.56% Grand Total 462 100.00% 23000000 100.00% Residence 462 100% 23,000,000 100%Non - Residence % % Grand Total 462 100% 23,000,000 100%


Name/Address No of % of Issued

Shares Capital

01 Wayamba Plantation (Private) Limited 139,839,160 62.2602 Mr. Willem Lucas Bogtstra 11,790,970 5.2503 Pershing LLC S/A Avernach Grauson & Co. 8,420,000 3.7504 Phillip Securities (Pvt) Ltd 4,462,000 1.9905 Mr. Maripapillai Radhakrishnan 3,620,000 1.6106 Dr. Niranjan Deepal Gunawardena 1,000,000 .45 07 Mr.P Somadasa 873,600 .3908 Pan Asia Banking Corporation PLC/B R Fernando 846,900 .38 09 Employees provident Fund 792,000 .3510 Carlines Holdings (Pvt) Limited 755,520 .3411 Cocoshell Activated Carbon Company Limited 677,000 .3012 Commercial Bank of Ceylon PLC/D.S.J.V.Costa 558,800 .2513 Goldman Sachs & S/A Wexford Spectrum Trading Ltd 535,000 .2414 Tranz Dominion,L.L.C. 520,000 .2315 Seylan Bank PLC/Mr.S N W M B C Kandegeda 462,000 .2116 K C Vignarajah 438,000 .2017 Mr. B Prithiviraj 425,000 .1918 Waldock Mackenzie Ltd/Mr.M.Udayasunder 398,800 .1819 Bhadra Investments Limited 391,000 .1720 Qualitea Ceylon (Pvt) Ltd 355,000 .16Public Shareholding % - 32.4%

Directors Shareholdings in the Company - Voting

Name As at 31.12.2011 As at 31.12.2010

Mr. W L Bogtstra 11,790,970 1,239,597

Mr. Lucas Bogtstra 10,000 10,000

Mr. T R Gerlach Nil Nil

Mrs. C A Gerlach Nil Nil

Mr. K G M Piyaratne Nil Nil

Mr. K A S Gunasekera Nil Nil

Mr.G.C.De Silva Nil Nil

Mr.Frits Bogtstra Nil Nil

Shareholders & Investors InformationTOP 20 VOTING SHAREHOLDER’S LIST AS AT 31st DECEMBER 2011


Name/Address No of % of Issued

Shares Capital

01 Lanka Mountcastle (Pvt) Ltd 19,166,000 83.3302 Wadock Mackenzie Limited/Mr.H M S Abdulhussein 500,000 2.1703 Employees Provident Fund 346,000 1.5004 Mr.Yusuf Husseinally Abdulhussein 224,500 .9805 Mr. Poopalasingam Poongunaseelan 195,800 .8506 Seylan Bank PLC/Jayantha Dewage 112,000 .4907 Mr.Kurugama Upali Dissanayake 105,000 .4608 Mr. M.H. Muhammath Fawsan 97,800 .4309 Mr. J.Dias Senerath Gunasekera 96,400 .4210 Eskimo Fashion Knitwear (Pvt) Ltd 90,000 .3911 Essajee Carimjee & Company (Pvt) Ltd 86,400 .3812 Mr.Llewllyn Alphonsus Joseph Fiedelis Morais 50,000 .2213 Mr.Jayawickrama Gunapala 50,000 .2214 Mr. R.S.S. Kumara Anagipura 47,000 .2015 Mrs.Gnei Leona Rahim 45,000 .2016 Mr.Liyanarachchige Don Deepaka Yasalal Perera 40,000 .1717 Mr. Abdul Rahuman Ibrahim 37,000 .1618 Mr. A. I. Chandrakumar Manickam 35,000 .1519 Mrs. H.M.Pathma Jayashanthi 32,100 .1420 Miss. D.A.Sanjeewani Weerasinghe 32,000 .14 Public Shareholding % - 16.6%

Directors Shareholdings in the Company - Non Voting

Name As at 31.12.2011 As at 31.12.2010

Mr. W L Bogtstra Nil Nil

Mr. Lucas Bogtstra Nil Nil

Mr. T R Gerlach Nil Nil

Mrs. C A Gerlach Nil Nil

Mr. K G M Piyaratne Nil Nil

Mr. K A S Gunasekera Nil Nil

Mr.G.C.De Silva Nil Nil

Mr.Frits Bogtstra Nil Nil

Shareholders & Investors InformationTOP 20 NON-VOTING SHAREHOLDER’S LIST AS AT 31ST DECEMBER 2011


The following estates are managed by the company, which were formally owned and managed by the Janatha Estate Development Board and Sri Lanka State Plantations Corporation.

Tea Estates

Estate Name

Hali Ela Zone Dickwella Estate Ledgerwatte Estate Unugalla Estate Sarnia Estate (Keenakellie Estate has been amalgamated) Queenstown Estate Uva Ketawala Estate

Bandarawela Zone Uva Highlands Estate (Ellawala Estate has been amalgamated) Aislaby Estate Chelsea Estate St.James Estate Neluwa Estate Attampitiya Estate

Welimada Zone Downside Estate Welimada Estate

Dyraaba Estate Hugoland Estate

Ambawela Zone Warwick Estate Hakgala Estate

Rubber Estate

Awissawella Estate Chesterford Estate Glenesk Estate Moralioya Estate Sunnycroft Estate Talduwa Estate Vincit Estate

FORM OF PROXY

* I/We .........................................................................................................................................................................................................of .................................................................................................................................................................................................................being * a member/members of the above Company, do hereby appoint ..................................................................................................................................................................................................................of..................................................................................................................................................................................................... or failing Mr. W. L. Bogtstra, (Chairman of the Company) of Colombo or failing him, one of the Directors of the Company as *my/our Proxy to represent me/us and * ……………………………………to vote on *my/our behalf at the EIGHTEENTH ANNUAL GENERAL MEETING of the company to be held on …………………………………….…2012, at ………… and at every poll which may be taken in consequent of the aforesaid meeting and at any adjournment thereof:

*I/we indicate *my/our vote on the resolutions below as follows:

FOR AGAINST1. To receive and consider the Report of the Directors, Statement of Accounts

and the Balance Sheet of the Company for the year ended 31st December 2011 and the Report of the Auditors thereon.

2 To declare a First and Final Dividend of -/05 Cents per Share on the Ordinary Shares of the Company.

3 To pass the following Ordinary Resolution pursuant to Section 211 of the Companies Act, No. 7 of 2007:

“Resolved that Mr. W. L. Bogtstra who has reached the age of 79 years be and is hereby re-elected a Director of the Company and it is hereby declared that the age limit of 70 years referred to in Section 210 of the Companies Act, No. 7 of 2007 shall not apply to the said Director”.

4 To re-appoint M/s. Ernst and Young, Chartered Accountants as Auditors of the Company and to authorize the Directors to determine their remuneration.

5 To authorize the Directors to determine Donations for the year 2012 and up to the date of the next Annual General Meeting.

Signed this ……………………….day of …………………….Two Thousand and Twelve.

…………………………. *Signature/s

Note : 1. * Please delete the inappropriate words.

2. Instructions as to completion appear on the reverse.

3. If you wish your proxy to speak at the meeting you should interpolate the words “to speak and” at the asterisk immediately before the words “to vote”.

INSTRUCTIONS AS TO COMPLETION

1. To be valid this Form of Proxy should be deposited at the Registered Office of the company No. 280, Dam Street, Colombo 12 by 10.30 a.m. on 2nd July 2012.

2. In perfecting the Form of Proxy, ensure that all details are eligible.

3. If you wish to appoint a person other than the Chairman (or failing him, one of the Directors) as your Proxy, please insert the relevant details at (1) overleaf and initial against this entry.

4. Please indicate with an “X” in the space provided how your Proxy is to vote on each resolution. If no indication is given, the Proxy in his discretion will vote, as he thinks fit.

5. In the case of a Company/Corporation, the Proxy must be under its Common Seal which should be affixed and attested in the manner prescribed by its Articles of Association.

6. In the case of a proxy signed by an Attorney, the Power of Attorney must be deposited at the Registered Office for Registration, if such power of Attorney has not already been registered with the Company.

MALWATTE VALLEY PLANTATIONS PLC ANNUAL REPORT...

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