Watawala Plantations 2011.2012 PDF

TOUGH TIMES DONT LAST...
A N N U A L
R E P O R T
TOUGH COMPANIES DO!
annual report 2011 | 2012
Our Vision
We will take a path no one has walked before and many will want to follow
OUR PATH
Fully utilize the technological advancements and land resources in an eco friendly manner To respect and understand the community in which we do business Celebrate the diversity and the power of our people
OUR CORE VALUES

We will Ensure that our business is always customer focussed and we continuously strive to meet their demands with the highest level of service. Be committed to offer the highest quality products at all times to our customers globally. Recognize and motivate our employees who are the live wire of the organization to achieve their fullest potential and provide equal opportunities regardless of gender, religion, race or colour to excel in their work. Value transparency and honest in everything we do. Contribute positively to the long term sustainability and development of the external community and the environment we operate in. Be innovative and strive for continuous improvement in whatever we do. Recognize that our shareholders are of utmost importance to us and ensure best possible returns to them.
Watawala Plantations PLC
CONTENTS
MANAGEMENT REPORTS
Financial Highlights. 06 Chairmans Review. 08 Managing Directors Review. 14 Board of Directors. 22 Executive Committee. 25 Management Team. 25
MANAGEMENT DISCUSSION AND ANALYSIS

Our People. 30 Financial Review. 36 Financial Calendar. 45
CORPORATE GOVERNANCE
Corporate Governance. 48 Remuneration Committee Report. 60 Audit Committee Report. 61 Risk Management. 63
SUSTAINABILITY REPORT
Sustainability Report. 70 GRI Content Index. 90
FINANCIAL INFORMATION
Annual Report of the Board of Directors on the Affairs of the Company. 100 Managing Directors and Chief Financial Officers Responsibility Statement. 103 Statement of Directors Responsibility. 104 Report of the Auditors. 105 Balance Sheet. 106 Income Statement. 107 Statement of Changes in Equity. 108 Cash Flow Statement. 109 Accounting Policies & Notes to the Financial Statements. 110
SUPPLEMENTARY INFORMATION
Value Added Statement. 142 Sources and Utilisation of Income. 143 Estate Hectarage Statement. 144 Crops & Yields. 145 Historical Financial Information 10- Years summary. 146 Shareholders & Investors Information. 150 Glossary. 152 Notice of Meeting. 154 Form of Proxy. 155
IMPROVING INFRASTRUCTURE
MANAGEMENT REPORTS
Financial Highlights - Year at a Glance Chairmans Review Group Managing Directors Review Board of Directors Group Executive Committee Management Team
Watawala Plantations PLC Management Reports
Financial Highlights 2011/12

In Rs. Millions 2011/2012 2010/2011 YoY - %
Future Trends
The Sri Lankan plantation sector is paramount to the economy with a contribution of 18% to the national export revenue. However in 2011 the major commercial crops tea, rubber and coconut showed a sluggish performance. The tea industry was under severe pressure due to European crisis and Middle East political conflicts. The future of Ceylon tea comes with the challenge of productivity and facing competition that will likely to be imposed by China, Kenya and north east India with low cost production. We at Watawala
4,664 683 612 527 532 900 -2.8% -63.9% -0.2% -0.3% -2.2% -45.2%
Operations
Revenue Gross Profit Operating Profit Profit before Tax Net Profit for the year EBITDA 4,532 246 610 525 521 493
Balance Sheet
Non Current Assets Current Assets Equity Non Current Liabilities Current Liabilities 4,337 1,308 2,830 1,662 1,153 4,327 896 2,511 1,590 1,122 0.2% 46.9% 12.7% 4.5% 2.8%
Per Share data

Earning per Share (Rs.) Dividend per Share (Rs.) Dividend Cover (Times) 2.20 0.35 6.29 2.25 0.85 6.43 -2.2% -58.8% -2.2%
Shareholders Interest
Stated Capital Shareholders Funds Shareholders Funds per Share (Rs) Return on Shareholders Funds (%) 310 2,830 11.96 18% 310 2,511 10.61 21% 0.0% 12.7% 12.7% -13.2%
Leverage
Interest cost Interest Cover (Times) Non Current Borrowings Current Borrowings Borrowings as a % of Equity 85 7.1 211 546 27% 85 7.2 305 437 30% -1% -31% 25% -9%
plantations have set our vision on taking a path which no other would have walked in and contemporaneously looking forward to re-shape the future of the company grasping fruitful opportunities lying ahead to remain as the best plantation company while diversifying and building up on our key strengths people and ultimately safe guarding the planet.
Segmental Revenue
Company at a glance 2011/12
Chairmans Review
Your Companys outlook on the potential of the Oil Palm crop is buoyant. The crops productivity vis a vis other competing cooking oils, such as Coconut, Corn and Soya Bean, is significantly higher. Furthermore, harvesting is considerably less labour intensive compared to...
Global Economy
The world economy faced several significant challenges during the year, due to higher oil prices, a down turn in the Euro zone and an escalation of the geo political tensions in the Middle East. As per IMFs latest estimates, world output is likely to grow by 3.25% in 2012 compared to a 3.8% growth in 2011, whilst output in the Euro area is forecast to decline by 0.5% in 2012 compared with a 1.6% increase in 2011. The strains felt by the Euro economies began to intensify in the last quarter of 2011 and the area is forecasted to be in mild recession in 2012, thus indicating that the demand from one of Sri Lankas key export destinations would continue to remain inhibited. Economic activity in the United States is seen as improving although factors such as a high rate of unemployment and other downside risks indicate that recovery remains fragile. The economic meltdown is mostly forecasted to affect the Euro Zone but would have significant impact on developing nations due to their dependence on trade and capital and credit inflows from the Euro. According to IMF data, Asian regional growth has already started to slow due to weaker export demand and 2012 is likely to be a difficult year , although domestic factors such as tighter macroeconomic policy stances have also played a role, especially in India and China. Asia is one of the worlds most trade-dependent regions, exporting everything from commodities such as metals and rice to sophisticated electronic products and cars; and external demand will hence play a crucial role in determining Asias performance as a whole.
Domestic Economy
Sri Lankas economy sustained its post war growth momentum, surpassing last years record high to grow by 8.3% in 2011. This was amidst several political and economic challenges on the world stage. Low interest rates and low inflation-at 4.9% during the year also provided a growth facilitating environment. Per Capita income increased to US Dollars 2,836 from previous years 2,400, whilst a further decline in the unemployment rate, to reach the lowest level of 4.3% was another positive indicator. The downturn in Euro economies, higher energy prices, and the geo political turbulence in the Middle Eastern region adversely impacted Sri Lanka during the year, whilst an escalation in energy prices and a surge in imports placed significant strain on Sri Lankas Balance of Payments.
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World oil prices are expected to remain high in 2012 and hence likely to continue to strain Sri Lankas Balance of Payments. Estimate for Sri Lankas GDP growth in 2012 has been revised downward to 7.2% from an earlier projected 8%. The possibility of a spread of global geo political hostilities is also a factor which could impact Sri Lankas exports in 2012-2013. Inflation is projected to remain in single digit levels this year despite the expected rise in commodity, fuel and energy prices and the impact of the rupee depreciation in 2012. The Rupee depreciated at a sharper than expected rate during the first three months of 2012 resulting in market volatilities and adversely impacting importers. Although the near term impact has been one of market volatility and uncertainty, we are of the view that these recent adjustment measures adopted by the government to address the widening current account deficit and the decline in external reserves such as the tightening of monetary and credit policy, and abolishment of the rupee trading band to allow the exchange rate to adjust more flexibly should place the economy on a more sustainable track in the medium to long term. Sri Lankas agricultural sector grew marginally by 1.5% in 2011 compared with a growth of 7% in 2010. This was due to severe crop damage resulting in adverse weather conditions during the first half of the year; but the sector made a remarkable recovery during the second half of the year. The Tea sub sector declined marginally whilst Rubber and Coconut both expanded during the year. In the External Sector, the growth of Exports which was at 22.7 % was far outpaced by the growth of Imports which was at 50.7% leading to an unprecedented rise in the Trade Deficit in 2011. Sri Lankas high growth level has taken the country to a higher growth trajectory and placed it amongst Middle Income countries. As rightly suggested by the Central Bank, improving demand for exports through diversification of markets and products, strengthening foreign inflows and Foreign Direct Investments (FDIs) through appropriate policies and a macroeconomic
environment, and improving labour productivity and addressing structural rigidities in the labour market would play a key role in overcoming some of the challenges that Sri Lanka faces in maintaining its high growth. Moreover, curtailing fuel expenses by promoting energy efficient production technologies, increasing the use of renewable energy sources and energy conservation are other factors which are crucial to sustaining the level of high growth.
Tea
Several economic, social and ecological factors pose many challenges to hinder the growth and sustainability of However, a the tea industry worldwide today. recognition of the critical need and
urgency to address these issues seem alarmingly low. Amongst the issues that challenge the industry is one of over supply as demand has failed to keep pace with production increases. World production over the last three decades has doubled. It is also noteworthy that almost 56 percent of all tea produced worldwide is consumed locally. Global tea production reached 3,447.57 Mn. Kgs. in 2011 . While tea is produced in more than 35 countries, only a handful - China, India, Sri Lanka and Kenya account for almost three-quarters of production. China and India are today the worlds top tea producing as well as consuming nations and as noted by the United Nations Food and Agriculture Organisation (FAO), with tea consumption in these two countries rising by 5.6%, the global tea industry is being driven by these two giants. China heads the list of producers contributing 33% of world production with an annual production of 1.4 million tonnes whilst India is expected to produce around 1.1 Mn. Tonnes in 2011/12. Sri Lankas tea production in 2011 fell by 0.19% to 328.37 Mn. Kgs. from 329 Mn. kgs. in 2010. Sri Lanka now occupies fourth place in terms of production volumes but remains the second largest exporter with Kenya being the first. However, Sri Lankas importance in the world tea trade has declined considerably since 1970, with share of world trade dropping from 40% in 1970 to
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27.9% in 2000 and to 21.6% in 2011. Furthermore, its production volume increase of 7.5% in the last 11 year period is far below those of its competitors in Asia and Africa which stand at 21% in India and 60% in Kenya. The continuing downturn in the Euro economies will continue to inhibit demand for tea imports into the region. The turbulence in the Middle East could continue impact demand for Sri Lankas Low Grown teas in particular. In addition, FAOs projections that British, who are the worlds largest consumer of tea per capita would reduce their consumption by 15% compared with 15 years ago also exacerbates the threat of reduced demand in the world for tea.
which are at present the highest consumers of Palm Oil such as India and China are not its key producers and hence largely dependent on imports. Your companys outlook on the potential of the Oil Palm crop is buoyant. The crops productivity vis a vis other competing cooking oils, such as Coconut, Corn and Soya Bean, is significantly higher. Furthermore, harvesting is considerably less labour intensive compared to Tea and Rubber. These supply side factors combined with an increasing demand for the products value as a cooking oil, and as a raw material input in soaps, detergents, cosmetics and pharmaceuticals as well as a source for biofuel, underscore the viability and the immense potential for expansion of this crop stream. Around 80% of the global palm oil output at present is used by the food sector, but its use in the above non food areas is increasing and would contribute to a higher demand and prices worldwide in the next few years.
Rubber
Asia continued to be the worlds largest supplier of natural rubber in 2011 with its share increasing to 93% out of a total world production of 10.9 Mn. Tonnes in 2011. Indonesia, Thailand and Malayasia continued to hold the top three producer slots respectively accounting for 69% of total world production. According to the February 2012 Report of the Association of Natural Rubber Producing Countries, the Natural Rubber market benefitted from seasonal shortages of supply and a marginal fall in the commoditys stock in China, and a rise in prices is being further supported by the rise in crude oil prices, the depreciation of Japanese Yen and an appreciation of the currencies of some of the natural rubber exporting countries . Thus, the current environment of short supply with expected increase in demand augures well for natural rubber prices in the year ahead.
Our Performance
Your Companys Profits After Tax declined by 2.17% to Rs. 520 Mn. compared with Rs. 532 Mn. in the previous year and this was mainly due to a downturn in the tea sector. Profitability of the rubber and oil palm sectors however, helped to more than offset the loss in the tea sub sector.
Tea
The Tea sector made a loss Rs. 500 Mn compared to a loss of 25 Mn. the previous year, and this was a result of certain demand as well as supply side factors. Profitability reduced due to a lower National Sales Average, and a 27% wage increase that came into effect on 1st April 2011 which significantly impacted costs of production (COP).
Oil Palm
According to Global Industry Analysts, world trade in Palm Oil has seen a sharp increase over the last two decades and the world market for Palm Oil is expected to increase to 100 Mn. Tonnes by 2015. World production volumes have been on the rise over the past few years as a result of increases in extent of land cultivated, as well as higher yields resulting from increased investments in research and development. Moreover, the countries
Rubber
The rubber sector recorded a profit of Rs. 60 Mn compared with a significant profit of Rs. 139 Mn. achieved during the previous year. This decline in profits was mainly due to a fall in the National Sales Average (NSA), by around 10% over the previous year; a decline
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in output, as well an increase in COP due to a wage increase.
estate has reduced from 2.6% to 1.9% , and of a one million population who live on estates only 400,000 are engaged in estate employment. A difficulty in attracting the best managerial talent also challenges the industry. A shortage of labour is also a factor which hinders growth of the rubber sector, and the social disparity vis a vis other sectors has been found to be a factor that has made this sector relatively less attractive. Another that the Plantations sector as a whole faces is the vulnerability to world market conditions that is characteristic of primary commodities. Business cycles in major importing countries, developments in the markets of competing products such as for example Soya Bean oil in the case of Oil Palm and Synthetic rubber vis a vis Natural Rubber; and exogenous factors such as wars and climatic changes impact commodity markets. Whilst we highlight the need for collective action to address some of these issues and look at innovative ways to address some of the exogenous factors, we will also continue to develop strategies and invest in measures that improve the efficiency of production factors such as land and labour which are within our control. This year the Oil Palm crop became the main stay of your company - the pioneers of this crop in Sri Lanka. Crop diversification has proven to be a valuable measure for regional plantation companies to improve profitability when exogenous factors have impacted profitability of the traditional crops. Thus, it is also important that the government encourages practices such crop diversification; and where traditional crops cannot be cultivated- diversification into areas such as forestry cultivation in order to maximize plantation land productivity and facilitate sustainability.
Oil Palm
The Oil Palm sector achieved excellent results during the year and was the largest contributor to the sector, with the highest ever after tax profit of Rs. 373 Mn., compared to Rs. 195 Mn. in 2010/11. A 28% increase in crop output as a result of improved agricultural practices, an increase in the extent cultivated and a higher NSA, were factors which contributed to this sharp increase in profits.
Issues and Strategies

The tea sector accounts for 70% of your Companys revenue and its rich asset base abounds with potential, for your Company, the sector and the economy. challenge the However a multitude of issues currently burden the competitiveness of the industry and sustainability of the industry for all its stakeholders. Most significant amongst them has been an increased costs of production. This has mainly been due to the successive wage increases mandated by the government over the past seven years which have followed a regressive model. The wage increase in 2011 resulted in a Rs. 220Mn. increase on the Gratuity provision by the company and increased costs of production by Rs.100Mn. and was particularly regressive as it contained no productivity component. We hope that a model for wage increases that incorporates productivity mind and has the sustainability of the industry in mind will replace the current biennial ad hoc ones. A long term strategy formulated with the involvement of all stakeholders and mediated by the government is now paramount and urgent. Another factor that hinders the growth of the tea sector is a reduction in the supply of labour at levels of middle management as well as at a level of crop plucking. The number of tea workers per family living on an
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Acknowledgement
I wish to express my sincere appreciation to our Shareholders, the Managing Agents and Employees of Watawala Plantations PLC, for their loyalty and utmost co-operation. I also wish to express my gratitude to our Buyers, our Brokers and Suppliers for their unstinted support and to my colleagues on the Board for their able guidance and direction.
G. Sathasivam Chairman 17/05/2012
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Managing Directors Review

...in the land extent as well as an increase in land/crop productivity. An output of 2,858 Ha. by your company amounted to a productivity level in the region of 3,156 Kgs. of Oil per Ha; And this was a very commendable achievement surpassing last years yield by 32.2%
experience that the company possesses.
30%
Sri Lankas Plantation sector faced a challenging year due to a downturn in tea . Adverse weather conditions during the first half of the year resulted in a decline in crop output whilst a 27% wage increase during the year impacted costs of production. The impact of these supply side factors were exacerbated by a reduced demand from some of Sri Lankas key export markets the Middle East, due to political turmoil in the region; and the Euro zone due to an economic downturn that
Palm oil prod:
The Plantation Sector in Sri Lanka

The Plantation sector, albeit reducing in significance over the past three decades, still remains an important sector in Sri Lankas socio-economic fabric, contributing 3.4% to the countrys GDP . Tea was Sri Lankas largest export until it was replaced by garments in 1986, and as early as 1950, plantation crops accounted for about 70% of the countrys agricultural output, declining to 51% in 1986 and to 25% by the late 80s. The importance and the potential of the sector in Sri Lanka is also underscored by the large asset base of both land and human, for which the Plantation sector is the custodian. The total land extent utilized by this sector in 2011 was in the region of 800,000 hectares, whilst the number of direct and indirect employment opportunities generated stands at about 1.5 million. These reflect the potential of the sector to be a key contributor to achieving some of Sri Lankas key economic objectives such as food security, employment generation, environmental conservation and bridging of the geographic disparities in income distribution in the country. Thus, despite the down turn during the year, your company remains buoyant on the potential of its plantations, and because of the expertise and the
intensified during the latter half of the year.
Company Performance
Your Company achieved a Profit After Tax of Rs. 520 Mn. during the year which was a decline of 2.17%, compared with a Profit After Tax of Rs. 532 Mn. the previous year. The profit made during the year includes the net income of Rs. 387 Mn. earned on the disposal of the fully owned subsidiary, Watawala Marketing Ltd. The balance of Rs. 133 Mn. is the profits from the companys normal operations. The profitability of the Rubber and Oil Palm sectors helped to more than offset the loss in the Tea sub sector, and Oil Palm became the main stay of your Company during the year under review.
Tea
Your Companys tea crop production of 9.4 kg. mn during the year reduced marginally by 4.4 % over the previous year. The key contributor to this was the reduction in the intake of bought leaf. Our own leaf production increased by a marginal 0.34% despite a climatic change that led to a prolonged drought during the early part of the year; worker agitation for higher
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wages and the lagged impact of the work disruption that took place in mid and late 2011. Tea land productivity remained almost constant with a yield of 1,345 Kg. per Ha being the highest reported in the last seven years. The Net Sales Average (NSA) received by the Company also declined by 6.8 % in the reporting period, and this was despite your companys continuing focus on quality. The company continued to invest in best practices, advanced scientific methodologies and technology to boost profitability in the tea sector. Some of the measures include, soil management practices such as recycling of pruning and other farm waste for compost, company and field specific fertilizer programmes, Shear Harvesting and partial mechanized pruning. Most of these are measures which will yield benefits with a time lag of two to three years, and hence reflect the long term perspective we adopt, and the focus on investing in the sustainability of our business. The Waltrim tea factory, your Companys show piece and one of the most modern tea factories in the country, continued to perform exceptionally well. The most salient feature during the year was the improvement it achieved in performance rankings- to 4th position, from 13th position the previous season. Securing 88 Top Prices at the Colombo auctions, during the reporting period, reflected the uniqueness of Waltrims quality assurance practices. Your companys majority of the estates in the Hatton/ Watawala region were placed within the top 10 rankings in the Western/ Medium Grown tea category. Kenilworth secured the 5th position in overall rankings and the highest average in John Keells catalogue, Carolina secured 3rd highest average, whilst Strathdon was ranked the 5th highest in the same catalogue. Additionally, Kenilworth secured the highest number of top prices of 98 in the Medium Grown category, Carolina and Strathdon achieved the 2nd highest and the 3rd highest number of top prices of, 25 and 20 respectively, in the same category.
Rubber
9.3%
Yield
decreased by 4%, to
Despite the industrys impressive progress over the last few years, the Sri Lankan rubber industry, continues to be challenged by a multitude of issues. A decline in the extent cultivated, low land productivity, high costs of production, a shortage of labour; low labour productivity due to factors such as the age of workers; inadequacy of resources; wide social disparity vis a vis other industries, and factors beyond our control such as erratic weather patterns. Some of the above mentioned issues adversely impacted your Companys as well, and made it difficult for us to sustain the positive trend recorded elsewhere in the country. Your Companys Crop production, reach 0.64 mn. kg compared to a crop of 0.67 mn. kg. recorded in the previous period. This amounted to an decrease of 26,049 kg in terms of volume. The land productivity improved during the year with the company reporting a yield of 705 Kg per Ha., 9.3% above last years yield but still below the yields of other regional plantation companies. This productivity level was achieved despite the fact that a significant extent of rubber trees are due for uprooting in the next few years. The company also lost over 4,000 rubber trees during the mini cyclone during the 3rd quarter of the financial year. The extent of unproductive rubber uprooted this year amounted to around 185 Ha. Recognising the need for substantial improvements to land and crop productivity your company is making a concerted effort to address this issue, such as via the adoption of site specific agricultural technologies that would ensure consistent and enhanced output despite erratic weather patterns that have an increasing tendency to disrupt field agricultural practices. The NSA received by your company during the year was on par with domestic and international prices, but below what the company achieved during the previous year. However,
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skillful
handling of processing and manufacturing
years. The infusion of innovative and effective agricultural and processing technologies, acquired from global pioneers in the oil palm business, would strengthen our operations and yield dividends in the years to come. Your company who pioneered the oil palm processing facility in Sri Lanka, looks to build on its current market leadership position and to expand the crop to harness the vast potential in the industry. WPL also envisages playing an active role in supporting the ambitious plans of the Ministry of Plantation Industries, to expand Sri Lankas land extend under Oil Palm from its current levels of 6,000 ha. to 25,000 ha.
technologies by the company, enabled the prices to remain remunerative to its natural rubber business. The short-term outlook for the natural rubber
market has been weakened by significant economic uncertainty and risks regards the United States and Euro economies, however the long term outlook is one of profitability for the business.
Oil Palm
this was a very commendable achievement surpassing last years yield by 32.2%. We intend further enhancing productivity to 3,500kg/ ha, in the near future.
Palm Oil - seen as a humble source of edible oil, and heavily criticized for being unhealthy and un-fit for at a pace few human consumption merely a few years ago has transformed markets and its image wouldve foreseen, and is today substantiated to be one of the most nutritious edible oils in the world. Furthermore, Palm oil is also the least expensive in the vegetable oil market whilst its value also extends beyond the use as a cooking oil, as one of the few sources of Bio-diesel a renewable substitute for Petroleum driven diesel. This is in addition to the demand for Palm Oil as a raw material for soaps, detergents, Pharmaceuticals and Nutraceutical products. During the year under review, your Companys Palm oil production rose significantly by 30% to 6.5 Mn Kgs of CPO from 5 Mn. Kg in the previous year. This is attributable to an increase in the land extent as well as an increase in land/crop productivity. An output of 2,858 Ha. by your Company amounted to a productivity level in the region of 3,156 Kg. of Oil per Ha; and this was a very commendable achievement surpassing last years yield by 32.2%. We intend further enhancing productivity to 3,500kg/ha, in the near future. The company also achieved a commendable NSA,
Capital Investments
During the year under review, the Company implemented a modernization programme of its Nakiyadeniya Palm Oil Refinery with a total investment of Rs 20.3 Mn. and new machinery for the Refinery constituted Rs. 17.8 Mn. of that investment. The quality of the output from the refinery has improved since, enabling the marketing of a better quality product.
Tea-Hatton/ Watawala
The company made two investments during the year to increase the manufacturing capacities at two of its tea factories. One was an investment of Rs 62.3 Mn in the Carolina Tea Factory to increase production from 16,000 kg to 24,000 kgs of green leaf per day. The other was an investment of approx 17.8 Mn in the Companys Dickoya estate, to increase the capacity from 15,000kg to about 20,000Kg of green leaf. The companys capital investments during the year amounted to Rs. 573 Mn. and this includes re planting, factory modernization, buildings and vehicles amongst others. A more detailed report on capital investment will appear elsewhere in this report.
Accolades
We are pleased to have been honored for the best presented accounts in South Asia, in the Agriculture Sector, by the South Asian Federation of Accountants (SAFA) in the year 2010, at a function held in Dhaka.
which saw an increase of 2.81% over the previous
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The year was one in which your Companys diversification helped it to benefit from a boom in the Oil Palm sector to offset the cyclical bust in Tea and achieve a considerable profit.
SAFA is an organization founded by the Institutes of Chartered Accountants in India, Pakistan, Sri Lanka, Bangladesh and Nepal and a few other accounting bodies. WPL also won the Gold Award for the 4th successive year for the Best Annual Report in the Plantation sector category awarded by the Institute of Chartered Accountants of Sri Lanka.
Directors now intend using the funds raised from this transaction to develop the companys core business of Tea and Palm Oil. A decision made by the Directors to fund the gratuity provision has already resulted in an unencumbered deposit of Rs. 46 Mn.
Energy Management
The escalation of world oil prices in the year under review has further emphasized the need for energy conservation and made more urgent the search for alternate sources of energy. It is also a key focus area for us as we see our costs of production increasing due to higher energy prices. The company has identified the opportunity to reduce its energy costs by twenty percent via the adoption of certain systems and substitute sources of energy. Some of these initiatives carried out during the year include the conversion of all fossil fuel powered tea dryers to firewood ones; and the launch of an initiative to replace firewood with the environmentally friendly briquettes made out of refuse tea which is now being implemented in the Lindula factories. An initiative planned for next year include the implementation of the ISO 50001 standards on energy management .
Lonach Dairy Farm

The dairy business, launched on Lonach Estate, as part of the Groups diversification strategy now has a herd strength of 150 animals, and the milk production capacity stands at 1,100 liters per day. The cattle waste from the farm, continued to provide raw material for the manufacture of compost, a very valuable source of fertiliser material, to re-develop the degraded soil and to partially replace the chemical fertilisers used on our plantations. A Bio Gas generation system that is able to generate 140 units of electricity per day, and produce organic slurry at a rate of 20,000liters per day, developed on the farm are now being used by your Companys estates.
Issues and future Strategies

Rising costs of input, combined with rising costs of labour due to ad hoc wage increases that have failed to consider the financial viability of the industry, remain issues of critical concern to all stakeholders of the industry. These factors, when combined with price volatility and market fluctuations which are characteristic of all primary commodities; pose significant challenges to the plantations business. Your company will look at innovative ways in which it can reduce the vulnerability of these primary commodities to global market conditions. The year was one in which your Companys diversification helped it to benefit from a boom in the Oil Palm sector to offset the cyclical bust in Tea and achieve a considerable profit. The effects of climate change is making harvests
Subsidiaries
The Board of Directors at an Extra Ordinary General Meeting held on the 29th of February 2012 obtained the approval of shareholders to divest its subsidiary Watawala Marketing Ltd. The decision was taken as a measure to address the difficult period that the company underwent during the year, as a result of the downturn in the tea sector. Rising interest costs and the negative margins in the tea sector did not permit the company to secure additional borrowings. The
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less predictable than ever and hence,
developing
behavior in all our dealings will continue to be priorities and a part of your companys ethos. The international certifications we have obtained and will continue to seek for our many processes and locations are a reflection of our commitment to these values. These certifications are an outcome of stringent audits and evaluations by globally reputed independent third parties, and are hence endorsements that benefit all stakeholders of our company. The certifications obtained by Watawala Plantations are as follows, Fair Trade certification by seven of our tea gardens, The Ethical Tea Partnership certification of twelve tea factories, and the Food Safety standard certification - ISO 22000 by seven of our tea factories. HACCP certification which is another on Food safety has been obtained by seven of our factories; whilst CQUi Certification has been obtained by Kenilworth factory.
technologies to offset some of the harvest losses that result from these erratic weather patterns would also be a priority for WPL. Your company will continue to expand its business using the wealth of expertise and experience it possesses. We would seek avenues to increase profitability via diversification both concentric as well as conglomerate diversification; whilst investing of plantations. in harnessing the potential of our asset rich core business
Sustainable Growth
The Companys sustainability framework continues to cover Productivity and Innovation, Care of the environment, Investing in People and Returning to the community.
Sustainable Development, albeit a concept much heard of , is an essential value that enlightens us that a business cannot sustain its success in isolation and of the need for a business entity to integrate its economic objectives with those of the environment and society at large. For instance, at your Company the development of higher yielding crops is intertwined with measures to sustain the environment. The Companys sustainability framework continues to cover Productivity and Innovation, Care of the environment, Investing in People and Returning to the community. Our initiatives thus carried out during the year, for the upliftment of communities and the environment, are presented comprehensively in this report under the section on Sustainability, which I am happy to note is presented this year, in accordance with the prescribed framework of the Global Reporting Initiatives (GRI) and reports on our social, environmental and economic performance using to the GRI indicators. Commitment to quality, employee health and safety, environmental responsibility and care, and ethical
Appreciation
I would like to express my sincere appreciation to the corporate and estate management teams, and to all our Associates for their hard work, dedication and commitment without which your company could not have thrived during a challenging year. I would also like to express my gratitude to the Board of Directors for the confidence placed in me and for their unstinted guidance and support and to our shareholders, customers, business associates and all other stakeholders for their inspiration, and support.
V Govindasamy Managing Director 17/05/2012
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Landmarks
Birth of WPL on 18 June 1992 under Companies Act No. 17 of 1982 following the government decision to privatize the management of 22 RPCs
New dawning with a payoff to years of consecutive losses
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Poor attendance, low productivity and limited agricultural activity affected the financial results
Strategic joint venture with Tata Tea Ltd of India
92
Estate Management Services (Pvt) Ltd took over the management following an offer for sale.
01/02
Reached a turnover of Rs. 2bn for the first time in history
96
Created new benchmark blending traditions with technology
03/04
99
00
20
Repeated losses on cards
93/95
Successfully overcame the economic downturn whichwhich adversely affected Asian region
98
Recorded highest ever turnover of Rs. 1.86 bn and highest ever tea production of 12 mn kg.
Won Taiki Akimoto 5S award which is globally renowned as a technique for setting benchmark quality standards
02/03
Gold award for the best annual report in the plantation sector by ICASL Recognized as an authorized supplier to the Ethical Tea Partnership Tea sourcing and supply chain to Tata Tea and Tetley Group. Awarded the Silver at the Annual Report competition held by the ICASL.
08/09
05/06 04/05
11/12 10/11
Gold Award for the Annual Report of the Plantation Sector 2009/10 by ICASL third time in a row Won National Quality Merit Award, by Sri Lanka Standard Institute in the medium scale manufacturing company
07/08 06/07
09/10
Collaboration with Tata Tetly in the UK to spread the art of pure Ceylon tea across the globe
Achieved Business Super brand status Diversified in to Dairy Farming
Gold award for the best annual report in the plantation sector by ICASL for the second time Gold Award for Business Excellence in the Agriculture and Plantations Sector
Won the Gold Award for the Best Presented Accounts for 2010 in Agriculture sector by South Asian Federation of Accountants (SAFA) held in Dhaka, Bangladesh Bagged the Gold award for Annual report in plantation sector 2010/11 by CA Sri Lanka for the 4th consecutive year Won National level awards presented by National Agro Business Council & Ceylon Chamber of Industries 21
First Runner -up in the best annual reports awards competition held by ICASL 2005/06
Board of Directors
Name & Address Mr.G.Sathasivam No. 94/1, Lauries Road, Colombo 04. Alternate Director Mr.S.G. Sathasivam Mr.R.K.Krishnakumar Tata Global Beverage Group Bombay House 24,Homi Mody Street Fort Mumbai 400001 India 74 Age 65 Qualifications/Business Experience Forty Six years experience in Pharmaceutical Industry Directorships & Other Positions
Director Sunshine Holdings PLC Estate Management Services (Pvt) Ltd Initiated & spearheaded joint venture Watawala Marketing Ltd with Tata Group SBL Ltd Sunshine Energy Ltd Manages the pharmaceutical Sunshine Travels & Tours Ltd business. Holds a Masters Degree from the Presidency College University of Madras Nearly 41 years experience in the management at Tata Group Trustee of Several Tata Trusts Vice Chairman Tata Global Beverages Ltd-India Indian Hotels Co. Ltd-India Director Estate Management Services (Pvt) Ltd Tata Sons Ltd-India Group Managing Director Sunshine Holdings PLC Chairman Watawala Tea-Australia Pty Ltd-Australia Managing Director Sunshine Packaging (Pvt) Ltd Estate Management Services (Pvt) Ltd Watawala Marketing Ltd Director TAL Lanka Hotels PLC Tata Communication Lanka Ltd Secretaries & Financial Services (Pvt) Ltd Sunshine Tea (Pvt) Ltd Sunshine Travels & Tours Ltd Healthguard Pharmacy Ltd Sunshine Energy Ltd Consultative Committees Ceylon Tea Traders Association Ceylon Planters Association- Executive and Finance Committee Ceylon Planters Association-General Committee President-Indo Lanka Chamber of Commerce and Industry President-Sri Lanka Chamber of Pharmaceutical Industry
Mr. V. Govindasamy No.12, Sir Marcus Fernando Mawatha, Apt 6/1, Premier Pacific 2001 Apartments, Colombo 07.
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Bachelor of Electrical Engineering University of Hartford, USA. Master of Business Administration University of Hartford, USA. Fellow Member of the Institute of Certified Professional Managers of Sri Lanka
22
Name & Address Mr.P.T.Siganporia Tata Global Beverage Group 1,Bishop Lefroy Road Kolkata- 700020 India
Age 61
Qualifications/Business Experience Holds a Bachelors Degree from Loyola College-Madras Holds a Postgraduate Diploma in Business Marketing from XLRIJamshedpur
Directorships & Other Positions Chairman Mount Everest Mineral Water Ltd-India Managing Director Tata Global Beverages Ltd-India Director Tetly GB Limited-India Estate Management Services (Pvt) Ltd Watawala Marketing Ltd Tata Coffee Ltd-India
Dr.D.V.Seevaratnam No11, Sangamitta Avenue, off Dharmapala Mawatha, Mt.Lavinia.
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Doctor of Science (Honoris Causa) Wayamba University -Sri Lanka Fellow member of Australian Institute of Management Fellow member of National Institute of Plantation Management Over 36 years of experience in Plantations Sector
Director Tea Research Board of Sri Lanka Plantation Human Development Trust Chairman Ceylon Planters Provident Society Consultative Committee on Estates and Advisory (Tea Research Institute) Member of the Board of Governors - National Institute of Plantation Management - Coconut Research Institute Member Standing Committee on Agriculture, Veterinary,Medicine & Animal Sciences Sciences of the University Grant Commission Consultative Committee on Research (Tea Research Institute) CARE International Advisory Board A Representative of the Medical Wants Committee
23
Name & Address Mr.D.S.Ratnasingham No.248/218 Lotus Grove, Hill Street, Dehiwela,
Age 56
Qualifications/Business Experience Holds a Science degree from University of Madras Began his career at Harrisons & Crossfield Export division in 1978.
Directorships & Other Positions Director Watawala Marketing Ltd Gorden Frazer & Co. Ltd Bosenquet & Skrine Ltd
Joined Kahawatta Plantations in1992 Managing Director Sunshine Tea (Pvt) Ltd and moved to Watawala Plantations in 1996, Over 30 years experience in Export & Plantation Industries Mr.K.Venkataramanan Tata Global Beverage Group Kirloskar Business Park Block C-2nd Floor Near Columbia Asia Hospital Hebbal Bangalore-560024 India Mr.A.N.Fernando No. 10/2, Gower Street, Havelock Town, Colombo 05. 51 Fellow Member of the Institue of Chartered Accountants of India Over 21 years experience in the field of Finance Director Watawala Marketing Ltd
Vice President-Finance Tata Global Beverages Ltd
Holds a MBA from IMD (Lausanne) Fellow Member of the Institute of Chartered Accountants of Sri Lanka
Former Senior Partner KPMG Ford Rhodes Thorntonand Co, Chartered Accountants Committee Member Council of the Institute of Chartered Accountants, Sri Lanka The Employers Federation Fair Trading Commission Central Cultural Fund
Mr.B.A.Hulangamuwa No. 70/2, Hulangamuwa Road, Matale.
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Holds a MBA from University of Colombo Fellow Member of the Institute of Chartered Accountants of Sri Lanka
Director Sunshine Holdings PLC Sunshine Tea (Pvt) Ltd Secretaries & Financial Services (Pvt) Ltd Sunshine Travels & Tours Ltd Healthguard Pharmacy Ltd Sunshine Energy Ltd SBL Ltd
Company Secretaries Secretaries and Financial Services (Pvt) Ltd Jt. Secretary - Ms. Samanthi Haddegoda (LLB, Attorney-at-Law)
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Profile of the Executive Committee

V Govindasamy - Managing Director (Page 22) D V Seevaratnam - Director/CEO (Page 23) D S Ratnasingham - Director (Page 24) Lalith Cooray - Chief Financial Officer
A Fellow of the Institute of Chartered Accountants of Sri Lanka and a Fellow of the Institute of Certified Management Accountants Sri Lanka. Counts almost 30 years of post qualifying experience in Sri Lanka and overseas.
Management Team
Corporate Management Team Rexy R Perera Ms. Badra Jayadeva Gamini Wanasekara Manager Internal Audit Manager Exports & Sales Manager Purchasing
Estate Management Team Watawala Region Kenilworth Carolina Wigton Lonach Shannon Dinesh A S J Perera Alex C Samuel - Actg. Senior Manager - Group Manager
Ronnie Almeida - General Manager - Plantations

A Fellow Member of the National Institute of Plantation Management with a Diploma in Plantation Management and counts over 41 years experience in the industry. Served as the Asian representative in the Standards Committee of the Fairtrade Labeling Organization of Germany.
K D Prasanjith Wetthewe - Manager A Jayaram Shameera Rathnayake - Manager - Manager
Binesh Pananwala - Deputy General Manager, Plantations

Counts 20 years of experience in planting, joined JEDB and continued with WPPLC, holds a MBA from Manipal ( Sikkim) University.
Hatton Region Vellai Oya Dickoya Abbotsleigh Strathdon Madura H Medagamage Gershon P Thevathason Robin Winter P Udeni Wanigatunge - Actg. Senior Manager - Actg. Senior Manager - Senior Manager - Senior Manager
Yajith de Silva - General Manager South

Counts 31 years experience in the plantation sector, holds a Degree in Plantation Management from Wayamba University of Sri Lanka and a Diploma on Human Rights and Peace studies from the Colombo University. Former regional Director of the PHDT.
Lindula Region Henfold Waltrim Tangakelle Agrakande Ouvahkelle Lippakelle Chaminda Oliver
(Resigned w.e.f 28/04/2012)
Ajantha Nugawela - General Manager - HR & Administration

Ajantha counts over 21 years of experience in Management and Human Resources/ Administration both in Sri Lanka and overseas and holds an MBA from the University of Delaware, USA. He also has a Degree in Textile Technology from the University of Moratuwa with many years of experience in the apparel industry.
- Manager - Senior Manager - Manager - Manager
M S A Akber Kapila Sumanarathne Channa D Ikiriwatte
Harsha P T Hulangamuwa - Manager A P Premachandra - Actg. Manager
B V Sinthaka Ruwan - Deputy General Manager - Finance

Sinthaka joined as the Finance Manager in 2008. He holds a BSc Special Degree in Finance and an Associate Member of the Institute of Chartered Accountants of Sri Lanka. He has over 12 years of experience in a vide spectrum of organizations.
Udugama Region Nakiyadeniya Rubber N P Chamika Naranapitiya - Actg.Senior Manager Nakiyadeniya Oil Palm Ruwan Gunaratne Talangaha Homadola Palm Oil Mill Dhanushka Daswatte Gamini N Ratnayake H Milton Wijepala - Actg. Manager - Manager - Senior Manager - General Manager
N. Vige Bede Johnpillai - General Manager Marketing

Has over 39 years of experience in the Tea Plantations in Sri Lanka working on plantations in the Uva and Western Regions. Viji also served overseas as free-lance consultant to Gtz.
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Executive
Committee
V Govindasamy
Managing Director
Dr D V Seevaratnam
Director/CEO
D S Ratnasingham
Director
Lalith Cooray
Chief Financial Officer
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Ronnie Almeida
General Manager - Plantations (Hatton/Watawala)
Binesh Pananwala
Deputy General Manager - Plantations (Lindula)
Yajith de Silva
General Manager South
Ajantha Nugawela
General Manager - HR & Administration
B V Sinthaka Ruwan
Deputy General Manager - Finance
(appointed to Ex-Com w.e.f. 13/02/2012)
N. Vige Bede Johnpillai

General Manager Marketing
(appointed to Ex-Com w.e.f. 15/04/2012)
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MANUFACTURING BRIQUETTES OUT OF REFUSE TEA

PROTECTING THE ENVIRONMENT BY REDUCING THE FELLING OF TREES
MANAGEMENT DISCUSSION & ANALYSIS

Watawala Our People Financial Review Financial Calendar
Watawala Plantations PLC Management Discussion & Analysis
Our People
Our people are our key asset. We make good people brilliant and brilliant people even better.
Associates with the CEO on the International Womens Day 2011 In Colombo
Our peoples competencies of talent and dedication have been a mainstay in our success and have helped to make Watawala Plantations one of the best Plantation Companies in Sri Lanka. We always believe in creating a better future for our employees. We value each one of them and we make every effort to engage with them. Those on our plantations referred to as coolies during the colonial era are now being treated as Associates. These Associates are the reason for what we are today and one of our main objectives is to uplift the quality of their lives by catering to their needs.
Conducting training programs on areas such as Leadership is one of the integral parts in developing our employees competencies. Such programs are conducted in association with many local and foreign NGOs such as Care Foundation, Berendina and WUSC. We make sure that we create action plans after surveying the feedback of every employee followed by the training. And through our climate surveys, we respond meaningfully and efficiently, work to create an environment where our employees feel valued and confident.
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Knowledge Inventory
To survive in this volatile industry, having adequate paper qualifications is a must. We have clearly defined the career path of the executives starting from the trainee level to Chief Executive Level. Our company Knowledge Inventory - 2011/2012 strongly persuades and encourages our team to follow professional courses. Reimbursement of course fees in full on successful completion of these courses embarked upon is introduced as a motivating factor.
Human Resources
Staff Strength 2011/2012 Senior Management Head Office Executives Estate Managers & Executives Head Office Staff and other Officers Estate Staff and other officers Sub Total Associates Total Employees Turnover per Employee Rs.000 Profit per Employee Rs.000 Assets per Employee Rs.000 8 26 63 21 632 750 11,418 12,168 372.74 33.91 464.17 2010/2011 17 27 93 37 698 872 11,744 12,616 488.13 32.48 354.56 2009/2010 10 54 54 88 668 874 12,167 13,041 430.31 32.48 354.56 2008/2009 10 69 53 79 655 866 12,357 13,223 309.25 6.04 291.84 2007/2008 10 55 53 86 654 858 13,403 14,261 302.48 28.36 256.01
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Age Analysis Of The Employees Estate Head Office Managers & Executives Executives 5 4 8 9 26 3 7 18 34 1 63 Head Office Staff & others 3 6 7 5 21 Estate Staff & others 84 204 147 165 32 632
Age Group Above 55 45-54 35-44 25-34 Below 24 Total
Senior Mgt. 4 2 2 8
Associates 865 2,769 3,362 3,464 958 11,418
Total 2012 964 2,992 3,544 3,677 991 12,168
Total 2011 1,222 3,361 3,442 3,478 1,113 12,616
Service Analysis Of The Employees Head Office Staff & others 1 9 11 21
Age Group Above 20 16-20 11-15 06 -10 Below 05 Total
Estate Senior Head Office Managers & Mgt. Executives Executives 2 1 5 8 1 2 1 7 15 26 3 1 18 41 63
Estate Staff & others 165 60 84 96 227 632
Associates 3,402 982 2,001 2,009 3,024 11,418
Total 2012 3,568 1,051 2,086 2,140 3,323 12,168
Total 2011 3,688 1,131 2,062 1,973 3,762 12,616
Knowledge Hub
Our knowledge Hub has the capability to innovate and create new concepts and ideas. The major functions also include transferring the concepts to sites of application and to transmit knowledge to other people through training and development. We have strong internal knowledge assets and we also seek consultancy services externally to acquire and use new knowledge.
Knowledge Integration Hub at Watawala Plantations Plc.
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Performance Management
We strongly believe that the success of delivering good results in the company depends on having the right people at right place. Our performance management process adopted by the management ensures that the performance driven culture is inculcated at each level of the company. To strengthen their competencies, we facilitate and monitor their performance and process, then reward them based on their performance.
Performance management approach determined would result in: Agreement and commitment - On goals, on internal / external customer needs Alignment -All levels of functions in the organization, teams and individuals in the teams Accountability and responsibility - Clear Team and individual measurable goals Adjustment -quick cascading response within a fast changing business environment & changes taking place in the industry
Performance Management Model - the Process
Review Processes and Performances

We consistently measure the performance and provide ongoing feedback to employees on their progress towards reaching their goals. The monitoring takes place as follows in the company. Regional Plantation Review Meetings Conducted by the respective head of the region monthly Monthly Review Meetings Conducted by the CEO Group Review Meetings Conducted by the Chairman Review by the Audit Committee Review of Financial statements by the Board of Directors
Rewards and Recognition

Our performance based pay system and our new initiative the Employee Recognition Scheme (ERS) reinforce and reward the most important outcomes employees create for our business. In ERS Individuals and teams are selected for their exceptional performance and we acknowledge their contribution to the companys mission in areas such as: Significant Contribution towards Business Growth Process or Productivity Improvement CSR / Safety / Health / Environment Exceptional work beyond line of duty Innovation
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Industrial Relations
Our companys practices enhance the capacity of workers and management to improve communication and labor relations in the plantation sector. One such project is in collaboration with World University Service of Canada (WUSC) which brings together workers and management to discuss ongoing issues and understand the interdependency between increased productivity and improved working conditions. The project has assisted estate management, estate staff, trade union leaders, and workers to increase their knowledge on Labor Law Non-Violent Communication and Negotiation Positive Thinking Stress Management Team Building
Gender Equality
We raise awareness on the importance of gender equality and address key issues in collaboration with male and female estate residents, workers, staff, and management. The project with WUSC aims to recognize womens contribution to the plantation sector by encouraging leadership of women in decision-making roles, promoting womens participation and reducing
Our practices are also adapted to the conventions and recommendations of ILO (International Labor Organization) and are also in line with the Labor Standards of Sri Lanka that can be outlined as social security, industrial safety etc.
Our Harvesting Associate Krishnaveni (1st From Right) at the Association for Womens Rights In Development (AWID) Conference In Istanbul, Turkey In April 2012
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gender based violence.The main areas of focus include: Assisting Neighborhood Womens Groups (NWGs) as support system for Women Addressing gender based Violence Supporting Alcohol Harm Reduction Improving Womens Health
Through the CDF the Management and Associates meet at monthly intervals and put their heads together to solve day today issues that occur in the estate. Unlike in the otherwise considered conventional way of problem solving, here each and every person is given an opportunity to take part in the process of solving matters by which they take pride not only by contributing for decision making, but also are being given due recognition. Apart from that there are a few other benefits that the community enjoys as a result of being able to attract the operations and services of government and other service providers, transparency of welfare activities on the estate, channeling all the welfare and operations by NGOs if any through the CDF so that overlapping of activities would not occur, discussion of productivity parameters, estate village integration and training on various aspects.
The key goal of this is to support women to take up leadership positions on the estate based community and organizations.
Employer-Employee Relationship
The Community Development Forum (CDF) is yet another of our innovations in the empowerment of our associates. These we have established in 3 of our estates and due to its success we are in the process of extending this initiative in a further 3 of our estates.
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Financial Review
The Company had a tough year with the biennial wage increase mandated for estate associates coupled with a falling Net Sales Average of tea. Driven by the demonstrated resilience to strive towards success the company managed to sail through the rough sea with tight cost controls and...
inaugurated infrastructure
massive network
development to anchor
projects the
on
upcoming
business ventures. The foreign direct investments to the country showed

During the year the shareholders equity aggregates up to 50% of the total asset base of the company.
positive momentum with major ventures into tourism and service sector. Throughout the year the country has been able to maintain economic growth at 8.3% on average to be considered as a top economic gainer in the region by Wall Street Journal. However towards the second half with widened gap in BOP the government allowed free float of Rupee which resulted in hiking local inflation and cost of production. The prime lending rates pushed to double digits followed by the high demand for borrowings during the first 2 quarters. The high demand and inadequate production of energy has been pressing the country towards an energy crisis. The invention of sustainable energy source has become the need of the hour for the survival of Sri Lankan economy.
%
Global outlook
The world economy showed aftershock symptoms of 2008 global economic crisis with the Euro zone calamity which hindered the financial health of member countries. The never ending Middle East uprisings culminated with the Libyan and Syrian power conflicts as well as the economic sanctions posed on Iran fuelled the amassing uncertainty. Furthermore environmental catastrophes all around the globe such as earthquakes and Tsunami waves which devastated a part of Japan. All these and more, made the outlook for businesses further challenging and ambiguous during the year under consideration.
Sri Lankan economy

The financial year started with loosened monetary and fiscal policy decisions which facilitated funding at lower cost for constructions and other capital investments. With brighter post war prospects the government
Agro sector
The Agro sector had mixed results during the year following the Euro zone and Gulf crises and changes in world climatic conditions. However towards the second half with rupee depreciation the export of agro produce showed positive momentum.
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Tea sector has been severely affected by the mandatory biennal wage increase and the lost in gulf market due to Libian and Syrian conflicts. Further strong competition from Kenya, India and China being low cost tea producers has posed threat on dwindling margins.
to displace the traditional position held by coconut.
Watawala
The Group had a tough year with the biennial wage increase mandated for estate associates coupled with a falling net sales average of tea. Driven by the demonstrated resilience to strive towards success the Group managed to sail through the rough sea with tight cost controls and enhanced productivity. Despite the effect of wage increase the tea segment showed an increase in production when the sector as a whole showed a negative movement. This has been mainly due to maintaining high plucking averages and improved factory production. The exposure to rubber has been less during the year due to lower extent cultivated. Palm oil has been the Star segment in Watawala portfolio with healthy margins and great potential for the future. The revenue and profits generated per employee has been Rs.372,000 and Rs.33,904 respectively.
As an industry tea has secured 1% contribution to GDP in 2011 mainly through rise in development of value added tea. The annual tea production has been 328mn Kg, however the yields have slightly come down compared to 2010. Rubber sector showed positive outlook compared to tea with increase in demand for natural rubber followed by increase in crude oil prices which is used for manufacturing synthetic rubber. The sector contributed 0.2% to the GDP during the year with blessings of favorable weather conditions which lead to encouraged replanting and cultivation. The rubber prices which hit the all-time high of Rs.600 previous year settled at Rs.400 during the current year. Palm Oil sector has yet again showed its seamless potential being the second most consumed edible oil in the world market. During the year local palm oil extent has increased with four of the regional plantation companies investing on oil palm cultivation. Currently the local palm oil production has reached 15,000metric tons per annum however every year 160,000 MT of oil imported to the country costing Rs.14bn. the government expects to enhance palm oil cultivation as a commercial crop to save the foreign exchange spent on the commodity thereby this subsector is expected
37
Segmental performance Revenue

The Company recorded revenue of Rs.4.5bn during the financial year 2011/12 from tea, rubber, palm oil and export segments. This has been a drop of 3% from the previous year in comparison.
Rubber segment has given 6% contribution to the revenue with a 14% drop from previous year following the fall in NSA by 9% compared to 2010/11. European debt concerns which lead to cut down in automobile production has resulted in lowering the demand for natural rubber during the year.
Tea segment contributed to 70% of the total revenue where it has dropped by 11% from the previous year. The slight drop in the production quantities and drop in NSA has caused the reduction in revenue. However the company has been able to secure NSA above market average of the relevant elevations at Colombo Tea Auction during majority of the months. Further it could be observed that Watawala has maintained the tea sales trend in line with the market throughout the year.
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Palm Oil segment boosted its contribution with 20.2% slice of revenue which is an increase of 31% from last year being the only segment with a positive movement from 2010/11. Increase in production by 28% with better agricultural practices, improved processing facilities at Nakiadeniya Mill and better prices achieved has caused this positive outcome.
Profit before tax (PBT)

Tea segment ended up with a loss of Rs.501mn as a consequence of additional cost tied to the wage hike. This has been 20 times increase in the loss from the previous year which recorded loss of Rs.25mn.
Profitability
The Company completed a year with mixed results following heavy cost and squeezed margins. The wage increase had been the headline for the year in the plantation sector which had a net impact of 27% over the pay in previous year. On a quarterly basis the revenue and profitability showed an analogous trend except for Quarter 4, and only Q3 and Q4 showing positive net results.
Rubber segment recorded a profit before tax of Rs.60mn which has been a drop of 57% from the previous year. This was as a result of lower prices in the market and
39
the drop in rubber exposure during the year with more emphasis given on palm oil segment. Palm oil segment being the premier gainer of the year was able to achieve Rs.373mn profit before tax. This was an increase of 90% from the prior year. Extending the palm oil cultivation land , better agricultural practices and improved mill facilities followed by better prices in the market triggered the improved profitability. Palm oil has contributed 71% of the total profits made by the Company during the year. Export segment had a sluggish outlook throughout the year with adverse impact posed due to the crisis in Euro zone and uncertainty in gulf region. The segment showed a drop of almost 100% in profitability with a marginal loss reported during the year.
Earnings per share (EPS)

During the financial year the Group has generated Rs.1.74 profit for each unit of shares. (Total Ordinary shares: 236.67mn). This has been a drop of 36% compared to the previous year. Moreover the cash generated from operations per share was Rs.2.67 for the year where the same has been Rs.3.64 in 2010/11.
Return on equity (ROE)

The Group generated a return on equity of 15% for the financial year which has been 10% drop from the prior year. Decline in the profits and increase in total equity impelled the dip in ROE.
Price earnings ratio (PER)

The financial year ended 31/03/2012 recorded a PER of 5.74 for Watawala share. During the previous year this has been 9.21. The year closed with a market price of Rs.10 per share of the company traded on Colombo Stocks Exchange. (Rs.24.50 as at 31/03/2011)
Return on assets (ROA)

The Group has been able to generate a return of 7% using the total asset base during the financial year. This has been a drop of 4% compared to the previous year due to lower profitability.
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Finance expenses
The Groups finance expenditure during the year has been 26% on the operating profit. During the previous year the same has been 12%. Despite the marginal drop in the finance cost (though the interest rates have increased during the latter part of the year), the lower profitability has caused the interest cover to decline by 53% to 3.92 from 8.43 recorded in 2010/11.
Administrative expenditure
The administrative expenditure of the Group for the year has been Rs.211mn which was an 38% drop from the previous year which recorded Rs.342mn.
Management fee
The Management fee is paid to Messrs Estate Management Services (Private) Ltd (EMSPL) in
Taxation
Group income tax for the FY 2011/12 amounted to Rs.0.64mn liable as for the provisions of the Inland Revenue Act No.10 of 2006. From the periods starting April 2011 the agricultural undertakings are taxed at 10% and other activities at 28%. Over provision of the deferred tax amounting to Rs.4.1mn also included in the tax liability for the year.
accordance with the agreement entered between The Ministry of Plantation Industries, SLSPC/JEDB & Watawala Plantations PLC. The basis for the calculation of the Management fees has been 10% of the Earnings before Interest, Tax, Depreciation and Amortization (EBITDA). Total management fees payable for the financial year 2011/12 is Rs.49.3mn in comparison to Rs.90.3mn paid in the preceding year.
Equity
The shareholders equity ratio reflects the movement of shareholders funds invested in the company along with the asset base. During the year the shareholders equity aggregates up to 50% of the total asset base of the company.
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Market value added (MVA)

MVA is an indication of the value addition ability of a Company to the shareholders funds invested. MVA is arrived at by subtracting the shareholder funds from the market value of shares. During the financial year 2011/12 the market value addition has deteriorated by Rs.465mn following the drop in market price of share to Rs.10 from Rs.24.5 recorded the year before. This has been 114% drop in MVA from Rs.3.3bn recorded in 2010/11.
Enterprise multiple (EM)

Enterprise Multiple is arrived at by dividing the Enterprise value by EBITDA of the Company where it could be used to compare value across companies. During the year EM has dropped to 6.2 times in comparison to 7.34 times marked in 2010/11. This was as a result of lower earnings and lower market price of shares traded.
Dividends Enterprise value (EV)

Enterprise value is considered as potential takeover price of company hence it is derived from the market capitalization. During the year EV of the company has dropped substantially to Rs.3.05bn from Rs.6.6bn recorded in 2010/11. This was as a consequence of drop in market price of a share by 59%. The Board of Directors have recommended a first and final dividend of Rs.0.35 per share amounting to Rs. 82.8mn out of the profit arising from the financial year 2011/12 (FY 2010/11 Rs. 201mn), which is to be approved by the shareholders at the Annual General Meeting to be held on 6 July 2012. The Cumulative Average Dividend Payout (DPO) of the company from 1996 to financial year 2011/12 is approximately 18%.
Borrowings
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Total borrowings of the Company stood at Rs.757mn. Long term borrowings have declined to Rs.211mn from Rs.305mn in 2010/11 however the short term borrowing have increased by Rs.100 over the period. Debt Ratio (Debt to Assets) of the Company increased to 32% during the year from lowest ever 13% recorded prior year. This has been as a result of drop in market capitalization following low share price. Debt to equity ratio further declined due to repayment of long term borrowings. At the year end the ratio touched the lowest ever of 7% which indicates strong equity base of the Company.
Capital expenditure
During the year the Company has spent Rs.573mn on capital expenditure which includes massive replanting phase of palm oil amounting to Rs.225mn and Tea factory developments of Rs.106mn. Total capital expenditure incurred has been 13% of the Revenue generated for the year.
Asset base
The asset base of the Company at the end of FY 2011/12 stood at Rs.5.6bn with non-current assets of 77% and 23% of current assets.
Cash flow
Financial year 2011/12 ended with a positive net cash inflow of Rs.312mn compared to negative Rs.132mn in last year. The Groups operating cash flow generated for the year was Rs.630mn which has been a decline of 26% compared to Rs.856mn inflow of previous year. The main reason has been the additional cash flown out with the wage increase. The net cash generated by investing activities was Rs.169mn against the outflow of Rs.694mn recorded in 2010/11.Group has paid out Rs.308mn net cash on financing activities compared to Rs.124mn paid in previous year. The dividend payment of Rs.201mn has been the main reason for this increase. At the end of the year Group is at a positive cash position of Rs.67mn as against the negative Rs.245mn recorded in 2010/11.
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Free cash flow (FCF)

The free cash flow is the net cash generated by a company after providing funds for enhancement of the asset base by way of capital expenditure. For the financial year 2011/12 the FCF for the Group is negative Rs.122mn in comparison to net outflow of Rs.70mn in the previous year. In spite of the decline in capital expenditure by 24% the FCF has got weakened during the period. This has been due to the drop in cash generated from the operations as a consequence of the wage impact.
pressure due to European crisis and Middle East political conflicts. The future of Ceylon tea comes with the challenge of productivity and facing competition that will likely to be imposed by China, Kenya and north east India with low cost of production. The rubber market is expected to pick up as the Asian manufacturers of automobile will increase demand for natural rubber such as China and India. However the margins will be thinner compared to US and EU markets. The future of local plantation sector will be reshaped with increased importance of growing oil palm as a commercial crop. Currently only 4 RPCs have invested on Oil palm however in time to come this sector is expected to replace the traditional coconut sector with government sustenance. Further the government is looking forward to selfsufficiency in Milk requirement of the country where the investments in to Dairy production is expected to incline. Above all the challenges, inventing a sustainable energy source has become critical and will be of equal importance to all the sectors in the economy. With crude oil prices swelling across finding substitute energy sources and investing in to mini hydro projects are becoming increasingly important. We at Watawala plantations have set our vision on taking a path which no other would have walked in and contemporaneously looking forward to re-shape the future of the company grasping fruitful opportunities lying ahead to remain as the best plantation company while diversifying and building up on our key strengths people and ultimately safe guarding the planet.
Working capital
During the year the working capital cycle has speeded up by 33% with improved inventory and cash flow management. The average cycle is recorded as 20days in comparison to 33 days in the previous year. Group has been able to reduce the days tied in inventory to 44 which is a 25% improvement from 59 days in comparison. 31/Mar/12 Total current assets Less: Total current liabilities Working capital Current ratio (times) 1,312,040 1,153,964 158,076 1.14 31/Mar/11 1,326,548 1,198,267 128,281 1.11
Followed by the improvement in WC cycle, Group recorded a current ratio of 1.14 times during the year in comparison to 1.11 times in 2010/11.
In to the future
The Sri Lankan plantation sector is paramount to the economy with a contribution of 18% to the national export revenue. However in 2011 the major commercial crops tea, rubber and coconut showed sluggish performance. The tea industry was under severe
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Financial Calendar
1st Quarter - 05 August 2010 2nd Quarter - 25 October 2010 3rd Quarter - 24 January 2011 4th Quarter - 31 May 2011
10/11
1st Quarter - 01 August 2011 2nd Quarter - 20 October 2011 3rd Quarter - 26 January 2012 4th Quarter - 29 May 2012
11/12
Interim Financial Reports
Interim Financial Reports
2002/2003 - Annual Report Published on 13th May,2003 and 10th AGM on 04th June,2003 2003/2004 - Annual Report Published on 13th May,2004 and 11th AGM on 04th June,2004 2004/2005 - Annual Report Published on 12th May,2005 and 12th AGM on 03rd June,2005 2005/2006 - Annual Report Published on 19th May,2006 and 13th AGM on 12th June,2006 2006/2007 - Annual Report Published on 30th May,2007 and 14th AGM on 22nd June,2007 2007/2008 - Annual Report Published on 14th June 2008 and 15th AGM on 07th July,2008 2008/2009 - Annual Report Published on 15th June,2009 and 16th AGM on 14th July,2009 2009/2010 - Annual Report Published on 11th June,2010 and 17th AGM on 07th July,2010 2010/2011 - Annual Report Published on 16th June,2011 and 18th AGM on 08th July,2011 2011/2012 - Annual Report Published on 12th June,2012 and 19th AGM on 06th July,2012
Annual General Meetings
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MECHANIZATION MACHINE PRUNING
IMPROVE EFFICIENCY & REDUCE COST
CORPORATE GOVERNANCE
Corporate Governance Remuneration Committee Report Audit Committee Report Risk Management
Watawala Plantations PLC Corporate Governance
Corporate Governance
Chairmans Statement
Well-defined and enforced corporate governance system provides a structure that works for the benefit of everyone concerned by ensuring that the enterprise adheres to an accepted ethical standards and best practices as well as to formal laws. In recent years, corporate governance has received increased attention in the corporate world. Watawala Plantations PLC perceives good governance and is conscious of the responsibilities placed on the Board of Directors. The presence of three board members from the Indian Business Conglomerate, The Tata Group has further enhanced the emphasis paid on its importance. Our compliance with the Code of Best Practices of Corporate Governance is reported in the next few pages for the readers to obtain a comprehensive view of the Governance System in the Company.
G. Sathasivam Chairman
Watawala Plantations PLC upholds good governance practices whilst striving to achieve sustainable growth and being fully compliant with the relevant laws and regulations. The ultimate responsibility rests with the Board of Directors who monitors the progress through committees appointed by the Board. Values and Business Ethics which adds on to the process makes a conscious effort to continually improve the governance framework. The Company adopts the Code of Best Practices, issued by the Institute of Chartered Accountants of Sri Lanka, Listing Rules of the Colombo Stock Exchange and also complies with the Countrys Legislative and Regulatory requirements.
Our Ownership
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Corporate Governance Structure
Code of best practice of Corporate Governance

The Code of Best Practice of Corporate Governance, published jointly by the Institute of Chartered Accountants of Sri Lanka and the Securities and Exchange Commission of Sri Lanka has been a key guideline to the company in the area of Corporate Governance. In moving forward the Company has also instituted certain practices among employees which would enhance good practices within the Company. The code of Best practice of Corporate Governance speaks of two key areas in Corporate Governance. 1. 2. The Company Shareholders
Directors Directors Remuneration Relations with Shareholders Accountability and Audit
1) Directors
1A. The Board
The Companys Board of Directors consists of professionals in different fields such as Plantation Management, Export, Marketing and Finance. Three of the Board Members have been nominated by Tata Global Beverages Ltd. who has a wide exposure in to varied spheres of business and have access to the management of their international network. The Board consists of a mix of executive and non executive members. Six out of the nine directors are nonexecutive directors. The qualifications and the expertise of the Directors are noted in page 22 to 24 of this report. The Board meets once a quarter to discuss and review the performance of the past quarter and the
The Company :
The Companys commitment with respect to the Code of Best Practices of Corporate Governance is summarised below under the following aspects.
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future performance. The Executive Committee (ExCom) of the Company which consists of the Executive Directors, the Chief Financial Officer, area plantation heads, Senior Managers and the Head of Human Resource Management assist the Board in making certain decisions. Mr. A.N. Fernando was appointed to the Board on the 17th May 2012 and attended the final Board Meeting for the year under review. Mr. G. Sathasivam
Chairman 4 out of 4 Meetings Managing Director 4 out of 4 Meetings Director/Chief Executive Officer 4 out of 4 Meetings Director 4 out of 4 Meetings Director 2 out of 4 Meetings Director 2 out of 4 Meetings Director 2 out of 4 Meetings Director(Appointed w.e.f. 17th May 2012) 1 out of 4 Meetings Director 4 out of 4 Meetings
is an Executive Director of the Company is also a member of the Ex-Com. He counts over 15 years of experience in the Company. The details of the directors are given in page 22 to 24 of this report. Effective Managing Director and succession plan: The Companys Ex-Com assists in the decision making process. The second level of Ex-Com which is now known as the Regional Ex-Com has been developed which have proven to be a good provider of information from the regions. This process assists the Managing Director in his
Mr. V. Govindasamy Dr. D.V. Seevaratnam

decision making process A succession planning role was introduced to cover the more important roles in the company. The relevant training is being provided to those especially in the areas of Management of Human Resources. Secure Integrity of Information, Internal Control and Risk Management This is delegated through the Audit Committee to the senior management of the company. The functions and the responsibilities of the Audit Committee is described in pages 61 & 62 of this report. The Audit Committee periodically reviews the reports of the internal auditor, financial statements of the company. The companys risk assessment is also reviewed by the members of the Audit Committee. Compliance with Laws and Regulations The Board of Directors is committed to comply with all laws, rules and regulations, ethical standards. The company has complied a detailed check list to ascertain the compliance with laws and regulations of which a summary is appended on page 56 to 59 of this report. Ensuring that all Stakeholders Interest are in Corporate Decisions The companys Board of Directors considers soft skills and
Mr. D.S. Ratnasingham Mr. R.K.Krishnakumar

Mr. P . T. Siganporia Mr. K. Venkataramanan Mr. A. N. Fernando Mr. B. A. Hulangamuwa
(i) Responsibilities of the Board.

Sound Business Strategy : The Companys Board of Directors reviews new business strategies, especially at times when the commodity prices reach a lower levels. Ex-Com discuss in depth these new strategies and the methods of implementation prior to recommending same to the Board of Directors for discussion. The Five Year Strategic Plan and the Annual Budget are discussed in great detail at the Executive Committee prior to submitting to the Board for approval. This enables the Board to take rapid decisions. Managing Director : The Managing Director who
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stakeholders requirements as important in taking corporate decisions. Diversification into Exports, Dairy Farming etc. has been carried out to have sustainable profits and to enhance the stake holder value. The Company has also embarked on several cost reduction methods which are highlighted in the Sector Separators of this Annual Report. Values and standards of the Company are set with emphasis on adopting appropriate accounting policies and complying with financial regulations. The accounting policies are reviewed regularly and the Audit Committee keeps abreast with the new pronouncements of accounting standards and financial regulations. The Company has been adopting Sri Lanka Accounting Standards (SLAS) throughout the years which is also certified by the Auditors PriceWaterhouseCoopers. The Company is also now geared to migrate to International Financial Reporting Standard (IFRS) in the current period. Fulfilling other Board Functions as relevant to the Organization Board makes every endeavor to fulfill their obligation to the stakeholders.
Financial Services (Private) Ltd who acts as Secretaries to the Board and make their presence at every board meeting. The Company Secretaries advises the board on all regulatory matters pertaining to Colombo Stock Exchange, Securities & Exchange Commission. The Secretaries also record minutes which are tabled for approval at the next meeting for effective follow-up on decisions taken.
(iv) Independent Judgment of Directors

The Directors use their independent judgments in making decisions. Six of the nine Directors are non-executive and two are independent.
(v) Directors dedication of time and effort

In addition to the attendance and participation at the Board Meetings, the Board Members make their time available for consultation if and whenever it becomes necessary. All Board papers are sent to the Members of the Board well in advance and all queries raised by them are answered before or even after the meetings.
(vi) Training for Directors

The Executive Directors participated in several study tours of Plantations outside Sri Lanka.
(ii) Need to act in accordance with the relevant laws and seek Independent Professional Advice.
Board ensures compliance with the applicable laws wherever required obtains professional advise from outside parties. The Companys legal consultants are F. J. & G De Saram. The company also obtains advice on other issues such as taxation, product development and technology development from local and overseas consultants, wherever necessary. Any Director may obtain independent professional advice that may be required in discharging his responsibilities effectively, at Companys expense.
2A. Chariman and Chief Executive Officer

The Chairman is a non-executive member of the Board. The Chief Executive Officer is responsible for the management of the plantations and the financial responsibility is with the Chief Finanacial Officer, both of whom report to the Managing Director thus enabling the Board to have a clear segregation of duties between the Chairman and Managing Director.
3A. Chairmans Role

The Chairman conducts all board meetings and the Managing Director presents all detail operating results to the board along with other Executive Directors and the Chief Financial Officer. The board comprises of nine directors of whom six are non-executive. Three of the non-executive directors are
(iii) Company Secretary

The Company Secretaries are Secretaries and
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nominees of TATA Global Beverages Ltd., India who adds expertise knowledge to the board. The Chairman encourages participation of all directors in decision making. The Financial Performance is presented by the Managing Director and all Capital Expenditure forwarded for approval of the Board is supported by a Feasibility Study with a Return on Investment working.
6A. Supply of Information to The Board

The board meets quarterly, if required more frequently. The board is supplied with all information including the following. Quarterly financial statements reviewed and recommended by the Audit Committee. Minutes of the previous board meeting and followup action. Proceedings of the review meetings Recommendation of capital expenditure and its justifications. Next quarters projected performance and how the year would end. Any other matters of importance. Annual Business Plan A full presentation is made to the Board by the Managing Director on the performance of the Company during the period under review.
4A. Financial Acumen

The board consists of three Chartered Accountants i.e. Mr. K Venketramanan FCA of Tata Global Beverages Limited , Mr. B.A. Hulangamuwa FCA, MBA and Mr. A.N. Fernando FCA, MBA. The company also has in its employment two Chartered Accounts and Passed Finalist of CIMA, all serving in the Finance Department.
5A. Board Balance

Of the nine members of the board, the following directors have executive powers of the companys affairs. Mr. V. Govindasamy Dr. D.V. Seevaratnam Mr. D.S. Ratnasingham - Executive Director - Executive Director - Executive Director
7A Appointments to The Board

The Board decides on the appointment of new Directors on the recomendation made by the remuneration committee. In finding suitable candidates the Board assesses its composition to ascertain whether the combined knowledge and experience of the board could meet the strategic demands facing the company. New appointments are made only after the above assessments are completed. One new appointment was made though after the end of the Financial Year, this Director attended the last Board Meeting applicable to the Financial Year. Details of the current Board of Directors are depicted on page 22 to 24 of this report.
Following are non-executive directors of the company. Mr. G. Sathasivam Mr. R.K.Krishnakumar Mr. P .T.Siganporia Mr. K. Venkataramanan - Non-Executive - Non-Executive - Non-Executive - Non-Executive non-independent Director non-independent Director non-independent Director independent Director Mr. B. A. Hulangamuwa - Non-Executive non-independent Director Mr. A.N. Fernando - Non-Executive independent Director Of the above non-executive directors Mr. R.K. Krishnakumar, Mr. P . T. Siganporia and Mr. K. Venkataramanan are nominees from the TATA Group of India.
8A. Re-Election
At the first Annual General Meeting of the Company, all the Directors, with the exception of the Managing Director and the appointed directors shall retire from office and every subsequent year, one third of the directors except the Managing Director shall retire from office at every annual general meeting as required by the Companys Articles of Association. A retiring Director is eligible for re-appointment.
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9A. Appraisal of Board Performance

The Board of Directors evaluates their past performance as against the strategies adopted which is generally done at every Board Meeting. In the light of this evaluation and considering the future and the challenges that need to be met the Board considers the following areas in evaluating its performance. The past performance. Reviewing and formulating a sound business strategy. Ensuring that the CEO and the Management Teams capability in achieving the said standards. Securing an effective information, control and audit systems. Prevention or minimizing risks. Ensuring compliance with legal/ethical standards.
the Board takes into consideration the levels of Remuneration met by similar companies. Executive Directors who draw their remuneration from this company are also entitled to a performance related incentive. They are given specific targets at the commencement of the year and their remuneration is decided at the year-end after their performances have been appraised. The Company does not have a Share option Scheme nor a Pension scheme. The report of the Remuneration Committee is on page 60 of this report. Directors do not have a Terminal Fee other than normal gratuity accruing to Executive Directors only. Mr. B.A. Hulangamuwa and Mr. A.N. Fernando draw a nominal fee and the other Non Executive Directors do not get any remuneration from the company. Remuneration of the Management Staff is also approved by the Board in total. The Directors remuneration is disclosed in Note no 22 of the Financial Statement and the Management Staff remuneration is described on page 138 of this report under Reward and Recognition.
10A Appraisal of Chief Executive Officer (CEO)

The CEO is responsible for the management of the plantations and the financial responsibility is with the Chief Financial Officer, both of whom report to the Managing Director. The performance of the Managing Director as one person who is responsible for the whole organization is evaluated by the Board on his meeting the companys short and medium term targets and his capability of meeting the future targets. He submits a detail performance of the company to the Chairman for this purpose.
2B. Level and Makeup of Remuneration

The Executive Directors who draw salaries from the company are remunerated in keeping with the market rates and are also entitled to defined incentive schemes.
3B. Disclusure of Remuneration

The remuneration of the Executive Directors and the key managers are shown on page 138 of this report.
11A. Disclosure of Information In Respect of Directors

A detailed profile in respect of the Directors is disclosed in page no 22 to 24 of this report. Related party transactions are showed on page 137 & 138 of this report.
C. Shareholder Relations
The Company Secretary ensures that adequate notice is given to all shareholders as required by the Companies Articles of Association of its Annual General Meeting and presents them with an Annual Report at the time of such notice. Active participation of its shareholders is welcome where all relevant questions are answered by the Board of Directors. The Board Members representing Tata Global Beverages Ltd. treats this as a
B. Directors Remuneration IB. Remuneration Procedure.

The remuneration committee determines the remuneration of the Managing Director and other Executive Directors. In deciding this remuneration
very important occasion who make it a point to attend every year. The Chairman of the Audit Committee, the CFO and other Managers of divisions make themselves
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physically present at this meeting. The adoption of the Audited Financial Statements forms a part of the Agenda. The Company also maintains a website for information of the shareholders and other parties addressed as www.zestatea.com
Management discussion and analysis is presented on pages 30 to 44 of this report.
Directors report on going concern is given on page 100 to 102 of this report.
Risk Assessment on pages 63 to 67. Sustainability Report on pages 70 to 97. Audit Committee Report 61.
1C. Major Transactions and Price Sensitive Information

There were no Major Transactions during the year as specified by Sec. 185 of the Companies Act No. 7 of 2007.
2D. Internal Control

The Board is overall responsible in establishing a good system of internal control in the company and delegated much of it to the Audit Committee. This committee in turn reviews all management accounts, directs the Internal Audit Team to carry out checks on areas of verification other than their normal checks. The Audit Committee reviews all Internal Audit Reports which are circulated to them quarterly and discusses the salient features at the Audit Committee Meeting with the Internal Auditor the CFO and the Finance Manager. At the end of the second quarter a limited review is carried out by the external auditors M/s PriceWaterhouseCoopers and their reports are discussed in length at the Audit Committee Meetings. The year end Management Letter submitted by the External Auditor is also discussed at the final Audit Committee Meeting during the Financial year.
D. Accountability and Audit 1D. Financial Reporting

In the preparation of the annual and quarterly financial statements, the company complies to the requirements of the Companies Act No. 07 of 2007. Sri Lanka Accounting Standards. Listing rules of the Colombo Stock Exchange.
The table below depicts the dates the quarterly accounts were published within the prescribed time of the listing rules. 1st Quarter 2nd Quarter 3rd Quarter 4th Quarter 01 August 2011 20 October 2011 26 January 2012 29 May 2012
3D. Audit Committee

The Audit Committee of the company consists of three Non-executive Directors : Mr. B.A. Hulangamuwa, Mr. K. Venkataramanan and Mr. A.N. Fernando. Mr. Hulangamuwa is a Fellow Member of the Institute of Chartered Accountants of Sri Lanka and Mr. Venkataramanan who is a Vice President of Tata Global Beverages Ltd. of India is a Fellow Member of the Insitute of Chartered Accountsnts of India.Mr. A. N. Fernando who joined the Audit Committee in May this year is also a Fellow Member of the Institute of Chartered Accountants of Sri Lanka. The Audit Committee views at different intervals the
This Annual Report covers the following areas in detail. The Chairmans Review along with the Managing Directors report gives a full overview of the company. Directors Report is presented on pages 100 to 102 of this report. Statement of Directors Responsibilities as given by the Company Secretaries is on page 104. Auditors report is appended on page 105 of this report.
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independence of the External Auditors. The External Auditors on the other hand discusses with the Management before taking up any other assignment in the company and would take over such assignments if it relates to work involving Assurance. The Audit Committee functions on clear guidelines given to them by the Board of Directors. Reviews the accounts whether they are prepared in accordance with the Sri Lanka Accounting Standards and in accordance with the Companies Act. Asses Controls by reviewing Internal Audit Reports. Make recommendations to the Board on the re appointing of the External Auditors. Recommends quarterly and annual accounts to the Board for adoption. Reviews Risk Assessments and its mitigation process. The Report of the Audit Committee is on page 61 & 62 of this report.
statements with the necessary explanatory notes as required by the Rules of the Colombo Stock Exchange and the Securities and Exchange Commission of Sri Lanka to all stakeholders. Any other financial and non-financial information, which is price sensitive or warrants the shareholders and stakeholders attention and consideration, is promptly disclosed to the Colombo Stock Exchange.
Shareholders
The Company through company Secretary, Secretarial & Financial Services maintains an active dialog with the shareholders, potential investors, investment banks etc. The Shareholders are encouraged to attend Annual General Meetings and clarify doubts with the Board of Directors. The Annual Report of the Company is circulate among all the shareholders giving them the stipulated number of days as recommended in the companys articles of association ahead of the AGM for the Investors to study the companied performance prior to attending the meeting.
4D. Code of Business Conduct and Ethics

Although there is no inhouse written code of conduct of the Directors, they are conscious of the duties required of them. Where ever there are transactions with connected companies such transactions are disclosed under the related party transactions. The Company is compliant with the Code of Best Practice on Corporate Governance jointly issued by the Securities and Exchange Commission of Sri Lanka and the Institute of Chartered Accountants of Sri Lanka. The company has published the best businesses practices and ethics in the form of an employee hand book and have distributed to all the employees of the organization. This covers a wide area of activity including policies and business ethics of the company. These policies are regularly reviewed and updated by the Human Resource Division of the organization.
5D. Corporate Governance Disclosures

The Company has been publishing quarterly financial
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Finance compliance -2011/12 Payment of taxes/remittances

Item 01 Description Income Tax (self assessment and final payment) Social Responsibility Levy (SRL) Frequency Quarterly/Annually Due date Q1-15th Aug / Q2 -15th Dec / Q3-15th Feb (Final-30th September) Q1-15th Aug / Q2 -15th Dec / Q3-15th Feb 30 th October 20th of the following month Q1-20th Jul/ Q2-20th Oct/ Q3- 20th Jan/ Q4- 20th Apr. Q1-20th Jul/ Q2-20th Oct/ Q3- 20th Jan/ Q4- 20th Apr. 15th of the following month 30th of the following Month 30th of the following Month 30th of the following Month 15th July/Oct/Jan/Apr Within 30 days of discontinuation of service. Compliance status Complied
02 03 04 05 06 07 08 09 10 11 12
Quarterly/Annually
Complied Complied Complied Complied Complied Complied Complied Complied Complied Complied Complied
Deemed Dividend Tax (D D T) Annually Value added Tax Economic Service Charge (ESC) Nation Building Tax (NBT)Pay As You Earn (PAYE) Employees Provident Fund Employees Trust Fund Estate Staff Provident Society Contributions (ESPS) Stamp Duty Terminal Gratuity Monthly Quarterly Monthly Monthly Monthly Monthly Monthly Quarterly As and when required
Filing return
Item 01 02 03 04 05 Description Income Tax Value added Tax (VAT) Economic Service Charge (ESC) Nation Building Tax (NBT) Pay As You Earn (PAYE) Frequency Annually Quarterly Quarterly Quarterly Annually Due date 30th November of the following year 20th of the following month 20th of the following month 20th of the following month Annually 30th April Compliance status Complied Complied Complied Complied Complied
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Operational Compliance
Description Tea Controllers Act

Renewal of Registration of registered tea Manufacturers
Act/ Ordinance
Compliance / Non compliance
Tea Controllers Act No. 51 of 1957
Complied where applicable
Sri Lanka Tea Board Law

Disposal of Refuse Tea Collection of Bough leaf and payment Submission of Monthly production data TC 5 form Sri Lanka Tea Board Law 14 of 1957 Sri Lanka Tea Board Law 14 of 1957 Complied. Complied where applicable Complied where applicable
Municipality Laws
Payment of assessment tax to Municipality and Urban Councils Complied where applicable
Factories Ordinance
Provision for safety and welfare of workers in factories Ordinance 45 of 1942 Ordinance 22 of 1946 Act 54 of 1961 Act 17 of 1965 Act 29 of 1971 Registration and licensing of factories and approval for factory building Health Safety Health Safety and Welfare ( special provisions) Notification and Investigation of accidents and industrial diseases Employment of workers Hours and Holidays Factory Ord.Chapter 144 Complied where applicable Complied where applicable Complied where applicable Complied where applicable Complied. Complied where applicable Complied where applicable Complied where applicable Complied where applicable Complied where applicable Complied where applicable
Employment related laws

Payment of EPF / ETF Payment of Gratuity as per the law Salaries Other benefits EPF Act No 15 of 1958 Compliance to the Collective agrement Complied Complied Complied Complied
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Levels of Compliance with the CSEs Listing Rules Section 07 - Rules on Corporate Governance are given in the following table.
Rule No. 7.10.1 Subject Non-Executive Directors Independent Directors Independent Directors Applicable Requirement At least one third of the total number of Directors should be Non-Executive Directors Two or one-third of Non- Executive Directors, whichever is higher should be independent Each Non-Executive Director should submit a declaration of independence / non-independence in the prescribed format Name of independent Directors should be disclosed in the Annual Report The basis for the Board to determine a director is independent, if criteria specified for independence is not met A brief resume of each director should be included in the Annual Report and should include the Directors areas of expertise Forthwith provide a brief resume of new Directors appointed to the Board with details specified in 7.10.3 (d) to the CSE A listed company shall have a Remuneration Committee Compliance Status Complied Details Six out of Nine Directors are Non-Executive Directors Two Non-Executive Director are independent Non- Executive Directors have submitted these declaration Please refer page 52
7.10.2 (a) 7.10.2 (b)
Complied
Complied
7.10.3 (a) 7.10.3 (b) 7.10.3 (c)
Disclosure relating to Directors Disclosure relating to Directors Disclosure relating to Directors Disclosure relating to Directors Remuneration Committee
Complied
Complied
Given in page 52 under the heading of Board balance Please refer page 22 & 23
Complied
7.10.3 (d) 7.10.5
Complied
Brief resumes have been provided to the Colombo Stock Exchange Remuneration Committee comprises of Mr. G. Sathasivam and Mr. P . Siganporia (NonExecutive Directors) As above
Complied
7.10.5 (a) 7.10.5 (b) 7.10.5 (c)
Composition of Remuneration Committee Remuneration Committee Functions
Shall comprise Non-Executive directors a majority of whom will be independent Shall recommend the remuneration of the Chief Executive Officer and the Executive Directors
Complied
Complied
As above
The Annual Report should set out Disclosure in Name of Directors comprising the the Annual Remuneration Committee. Report relating to Remuneration Committee Statement of Remuneration Policy. Aggregated remuneration paid to Executive and Non-Executive Directos.
Complied
Please refer page 60
Complied Complied
Please refer page 60 Please refer page 133
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Rule No. 7.10.6
Subject
Applicable Requirement
Compliance Status Complied
Details please refer Report of the Audit Committee on pages 49 to 55 Audit Committee consists of 2 independent NonExecutive Directors Chairman of the Committee is an independent NonExecutive Director Chief Executive Officer and Chief Financial Officer attend meetings by invitation All members of the Audit Committee are Chartered Accountants The terms of reference of the Audit Committee have been ratified by the Board Please refer page 54
Audit Committee The Company shall have an Audit Committee Composition of Audit Committee Shall comprise of Non-Executive Directors, majority of whom will be independent Non-Executive Directors shall be appointed as the Chairman of the Committee Chief Executive Officer and Chief Financial Officer should attend Audit Committee Meetings The Chairman of the Audit Committee or one member should be a member of a professional Accounting body
7.10.6 (a)
Complied
Complied
Complied
Complied
7.10.6 (b)
Audit Committee Should be as outlined in the section 7.10 functions of the listing rules
Complied
7.10.6 (c)
Disclosure in the a. Names of the Directors comprising the Audit Committee Annual Report relating to Audit Committee b. The Audit Committee shall make a determination of the independence of the Auditors and disclose the basis for such determination. c. The Annual Report shall contain a Report of the Audit Committee setting out of the manner of compliance with their functions.
Complied
Complied
Please refer Audit Committee Report on pages 61 & 62 Please refer Audit Committee Report on pages 61 & 62
Complied
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Report of the Remuneration Committee

The Remuneration Committee appointed by the Board comprises two non executive Directors namely G. Sathasivam and P . Siganporia. Directors attend Committee meetings by invitation. Secretaries and Financial Services (Private) Limited acts as the Secretaries for the Remuneration Committee. The Minutes of the Remuneration Committee and a summary of papers approved by the said committee are circulated and affirmed by the Board of Directors. As per the Charter, the Remuneration Committee is responsible for setting the remuneration policy of the company and determining remuneration package of all Senior Managers and Directors. The Committee also discusses and advices the senior Directors and Executive Officer on structuring of remuneration packages for corporate management. This enables the G.Sathasivam, Chairman- Remuneration Committee 17/05/ 2012 Company to attract, retain and motivate high caliber individuals with the skills and abilities required to lead the organization. The committee recommends the appointment of Directors to the Board. The Committee has the authority to seek external independent professional advice on matters within its purview.
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Report of the Audit Committee

The Audit Committee was established in 2004. The Committee consists entirely of three Non Executive Directors who are senior Chartered Accountants and the Committee is chaired by Mr. K. Venkataramanan. Secretaries and Financial Services (Pvt) Ltd, the Company Secretaries functions as the Secretaries to the Audit Committee. The Managing Director and Chief Executive Officer attend meetings by invitation. The Charter for the Audit Committee is in line with the international best practices frame work. The Audit Committee reviews the charter quarterly and updates to reflect the views that the members of the audit committee express in the independent discharge of their duties. As specified in rule 7. 10. 06 of the listing rules of the Colombo Stock Exchange, the board is of the opinion that the members of the Audit Committee are independent. Mr. A.N. Fernando, a non Executive, Independatent Director was appointed to the committee w.e.f 17 May 2012. the Chief Financial Officer on the adequacy and effectiveness of internal control systems. That review the statutory accounts and publish financial statements, assess compliance with regulatory requirements, considered the contents of Internal Audit Reports and recommend the appointment and remuneration of the external auditors. The Report of the Audit Committee to the Board of Directors of Watawala Plantations PLC Watawala Plantations PLC management is responsible for its internal control and financial reporting including the preparation of consolidated financial statements. Independent Auditors are responsible for auditing the annual consolidated financial statements in accordance with generally accepted auditing standards and ensuring that the financial statements are truly and fairly present the results of operations and financial position of the Company. The independent auditors are also responsible for issuing a report on those financial statements. The Audit Committee monitors and oversee these processes. The Audit Committee annually recommends to the Board for its approval an independent accounting firm to be appointed as the Companys independent auditors. To fulfil its obligations the Audit Committee carried out the following activities. - Reviewed and discussed with the Companys management and the independent auditors, the consolidated financial statements for the accounting year ended 31 March 2012. - Reviewed managements representations that the consolidated financial statements are prepared in accordance with generally accepted accounting principals truly and fairly present the results of operations and financial position of the Company. - Recommended that the Board select PriceWaterhouse Coopers, Chartered Accountants as independent auditors to audit and report on the annual consolidated financial statements of the company and forward copies of the Annual Report to the Colombo Stock Exchange prior to the Annual General Meeting.
Meetings
The Audit Committee met four times during the year. Attendances by the Committee members at each of these meetings are as follows. The Head of Internal Audit also attended as and when required by the Committee. Mr. K. Venkataramanan - Chairman Attended 4 of 4 meetings Mr. B. A. Hulangamuwa - Director Attended 4 of 4 meetings
The Audit Committee and its Responsibilities

The main objective of the Audit Committee is to ensure that the Company complies with applicable financial standards and laws and execute the responsibilities given in the Audit Committee Charter. It sets out high standards of corporate disclosure, corporate responsibility, integrity and accountability to the shareholders. The Audit Committee obtained representations from
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Reviewed the procedures for identifying business risks and management of the impact on the group.
Conclusion
The Committee is of the view that adequate controls and procedures are in place to provide reasonable assurance that the Companys assets are safeguarded and the financial position of the Company is well monitored. The Audit Committee concurs that the adoption of the going concern premise in the preparation of the Financial Statement is appropriate. The Audit Committee recommends to the Board of Directors that the financial statements as submitted be approved.
- Reviewed the policies, procedures and internal controls for detecting and preventing fraud. - Reviewed the operational effectiveness and internal controls of the policies, systems and procedures. - Reviewed, and discussed with the Management, the annual and the quarterly financial statements prior to their release, including the extent of compliance with the Sri Lanka Accounting Standards and the Com panies Act, No.7 of 2007. - Reviewed the procedures established by
Management for compliance with the requirements of regulatory bodies. Chief Financial Officer submitted to the Audit Committee on a quarterly basis, a report on the extent to which the Company was in compliance with mandatory statutory requirements.
On behalf of the Audit Committee;
K.Venkataramanan
B. A. Hulangamuwa
17/05/2012
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Risk Management
The Company operates in an evolving environment which exposes it to different types of risks especially being in the Agricultural Sector which is very sensitive to weather patterns. An effective Risk Management system is an Important Area of Business Management which would attempt to prevent many events which would otherwise have adverse effects on the business. At Watawala Plantations Plc with the guidance of the Audit Committee the Management has identified the several areas of activity in assessing and mitigation of risks. The main areas of business of Watawala Group are appended below.

Cultivation and Manufacture of Tea Cultivation and Manufacture of Rubber Cultivation and Manufacture of Crude Palm Oil Export of bulk and value added tea Extraction of Olein from Crude Palm Oil Dairy Farming
Economic Risk
Risk Category
Changes due to Global Recession or change in International Markets
Risk Rating
Moderate
Risk Assessment
Profits.
Risk Mitigating Strategies

market the teas in different global markets. Every attempt is being made to spread the companys dependence on a range of products rather than a few.
Would lead to loss in Spread the risk by attempting to
Adverse Action by foreign governments such as sanctions on Iran
Moderate
Would lead to loss of Continues attempt in finding new profits markets
Major
natural
or
Man
Low
Such as destruction of a Adequate Insurance Cover on factory which would lead to Capital items, loss of profits etc. Revenue and Capital loss
made disasters
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Market and Market Prices

Risk Category TEA
Upcountry main fall in tea Colombo tea is and our a High Since 69% of the recorded Spread the risk by investing in turnover in the current other crops such as Palm Oil, year is from tea, would the Dairy Farming Attempt to obtain be Fair Trade, Ethical Tea Partnership etc impact on the companys international standards such as performance heavy. business
Risk Rating
Risk Assessment
prices at the auction may
have an adverse effect on Companys performance.
Change in demand pattern due to competition from other beverages such as coffee etc. RUBBER A drop in Rubber prices in the international market.
Low
This would affect long- Move with the market trends and term fall in sales which develop different beverages of tea would have a bearing on such as flavored tea, ice tea, green the profitability. tea etc.
Low
The Company owns a very Reduce overheads by reduction low extent of rubber. some in tapping and transfering the of the rubber area has now workforce to other areas such as been planted with oil palm oil palm and tea.
OIL PALM Fall in market prices of crude palm oil. High Since the year under Crude Palm Oil which was once review the highest profit exported to India under the Indo of the company has been Lanka FTA. At present Palm Oil achieved in the Palm Oil is being sold locally as it fetches segment, small impact a better price now. The export may have a major bearing markets are still available. on the profitability. Further, the Company has now
The chart below depicts taken steps to refine Crude Palm how a 5%, 10%, and a Oil and sell Palm Oleine 15% drop in Palm Oil prices would impact the final profitability.
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Market and Market Prices

Risk Category
Inconsistent and extreme weather pattern
Risk Rating
Moderate
Risk Assessment
T E A / RUBBER / OIL PALM

Loss of production/lower Shade establishment by planting quality end products. shade drought application retention, prevent trees, improving water retention systems, resistance to folio planting cultivars, water to
burial of pruning and compost support application
excessive
transpiration
during dry spell are some of the risk mitigating activities. On excessive wet days rain covers are used on rubber trees. Fall in product quality and quality claims Moderate Fall and in loss market of price -Closer supervision process of and resulting in lower turnover manufacturing buyers plucking rounds. -Regular advice from brokers, customers etc. -Embracing quality assurance confidence
systems such as ISO and HACCP .
Over production due to rush crop situation on a sliding market.
Moderate
This
would
erode
the -Manage rush crop with a clear
companys
profitability plan in mind. -Control bought leaf if any and
due to drop in Net Sale Average (NSA) and with a
larger quantity of made tea -Arrange with other factories to transfer excess leaf. in hand Soil erosion and low Moderate Loosing soil fertility and - Soil erosion could be reduced by lower crops obtained at deep draining, and SALT (Sloping higher cost. Agriculture Land Technology). -Low yielding fields could go in for replanting or correction of agricultural practices where yields could be increased.
yielding fields.
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Human Resources
Risk Category
Migration of others areas works to
Risk Rating Risk Assessment

Moderate

efficiency with

Migration of skilled, semiskilled Recognize and unskilled workers to the reward, mechanization of certain non plantation sector would activities such as pruning, holing, effect Labour disruptions and Moderate productivity of the plucking etc. in to a collective organization. Work stoppages and trade Entering outside interferences union action could result in a agreement with the trade unions loss of production, overgrowing ,also the company maintains a of tea bushes, untapped rubber good rapport with trade unions. trees, unplucked palm oil bunches which could reduce production and even slowdown on out put. Migration industries. Inability to attract and retain skilled staff at Middle and Senior Management Level. Low/ Moderate of Managers Low and executives to other Disruption of the smooth flow Need to have a good succession of activities which has an plan. Regular training sessions and motivation programmes impact on the performance of would have an impact on the staff the company turnover. Possibility of the High Have a development path for all Performing Executives to employees. schems. move to companies within the Performance based remuneration same industry, migrate.
Finance and Liquidity

The plantation sector Moderate The company to may go in be Efficient cash management and to building up of reserves would be a available from the Sri Lanka Tea Board and the Plantations Trust Fund with regard to borrowings at nominal interest rates at a time of need. High Interest rates levied by lending institutions Moderate High interest levied by banks Attempt to negotiate the would erode the profitability of best interest rate with (i) Own the company. The graph below credibility (ii) Using the reputation depicts the Interest Spread of the Foreign Partners (iii) With offered to the company. the assistance of Govt Agencies. rests on several external uncontrollable factors such as erratic weather patterns etc. Liquidity problems are bound to arise under these circumstances. compelled
additional borrowings or draw crucial area. Assistance was made up of reserves.
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Information Technology
Risk Category
Non availability of the latest Information Technology
Risk Rating
low
Risk Assessment
The company on

Management a new is now

presently The a operates fully implementing software
computerized
accounting package developed on Dot Net
and MIS system. Since this platform providing better security software is over 13 years and faster response. old it would have an impact on performance. The staff in estates and head office are quite conversant with the present system thus the security has become a concern. Since operates and any the in Company a fully down low Loss of information would The Company makes two daily lead to delays in decision backups which are stored outside making and result in the office premises. Weekly and monthly backups are taken and stored in the bank wallet financial losses.
computerized environment break would cause a loss of data which would disrupt the flow of information
Other Risks
Compliance with laws and other statutory obligations and risks arising from litigation low Law suits against the Statutory obligations are regularly reported to the Audit company may lead to loss reviewed by the Head of Finance of reputation and penalties and being imposed Committee. The company also has its legal consultants in FJ & G De Saram Credit Risks low Company is exposed to Tea / Rubber Sold via brokers a large amount of credit where one week is given for given out in sale of tea, settlement on the selling brokers rubber, retail marketing assurance. and exports.
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EASY ACCESS TO WATER
IMPROVE THE QUALITY OF LIFE OF OUR ASSOCIATES AND THEIR FAMILIES
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SUSTAINABILITY REPORT
The mutual dependence and reciprocal interest which man has upon man, and all the parts of a civilized community upon each other, create that great chain of connection which holds it together. -Thomas Paine
Watawala Plantations PLC Sustainability Report
Sustainability Report
The Global Reporting framework enables the evaluation of the contribution that an enterprise makes towards its communities and the environment. For Watawala Plantations, it has provided a structured framework to report on its social and environmental initiatives during the year under review and to see how these initiatives integrate into our long term strategy. Our bottom line objectives have extended beyond Profits to include People, and Planet. Sustaining profits we believe require the integration of social equity and environmental responsibility to economic growth. Thus, the initiatives carried out this year by our company have been structured under the Economic, Environmental and Social categories as illustrated in diagram below. Sustainability underscores the importance of taking a longer-term perspective about our business, and about the consequences of todays activities and of global cooperation amongst countries to reach viable solutions.
You must be the change you wish to see in the world-Mahatma Gandhi
Message from the CEO

WE WILL REMEMBER THIS SEASON FOR THE FAR-REACHING SUSTAINABILITY ACHIEVEMENTS WHICH WE MADE DURING THE YEAR
We are living in a time of unprecedented change. The global risk landscape for agriculture and plantation crops is constantly shifting as climate, economic, social and ecological factors dynamically interact with each other. What distinguishes one company from the next is its ability to adapt to the systemic risk that arises from the interaction of these environmental, social and governance changes. Our sustainability efforts therefore become paramount for the continuation of responsible corporate citizenship that began in our earliest days as a Company. We have strived to identify and respond to risks, we believe are relevant to our industry and we consistently communicate the message of risk management to our stake holders, being mindful that our Company can only be as healthy as the people and communities we strive to serve. This report documents the actions we took in response to these challenges. The impact of climate change brought to focus the importance of the process of not only allocating and using water as a resource in a sustainable and efficient manner but more importantly in developing and improving our resources through improved water retention techniques and the harvesting of rain water that would enable us to tide through times of traditional drought when water scarcity becomes a serious issue to contend with. This is so not only where our crops are concerned but more importantly in serving the needs of our people. Hence our focus has been to reduce ground temperatures as far as possible, improve the permeability and water retention capacity of our soils, and improve recharge structures so as to reduce or eliminate the surface flow of water direct to the ravines and rivers. The reduction brought about in the use of fossil fuels and agro chemicals has caused us to be more environmental
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friendly.
So has the establishment of Short Rotation
communication system has brought about yet another paradigm shift that came to be strengthened by the introduction of the Community Development Forum in empowering our associates. Our belief that the success of an organization depends on the value created through the implementation of HR policies, systems and processes brought to surface many HR Strategies that were introduced throughout the organization. These covered Man power planning, Recruitment and Selection, Performance Management, Employee Reward Management, Training and Development and Employee Relations and Industrial Relations. In doing so, we have not lost sight of ultimately achieving our corporate objectives of being a LOW COST HIGH QUALITY producer, thus satisfying the needs of stakeholders, which necessarily includes all of its employees as well. In addressing our future challenges resulting from worker shortages we have as detailed in this report taken steps to improve productivity and reduce absenteeism through the process of Lean Management, increasing mechanization and automation of activities as far as practical, motivation of our associates, increased social welfare activities and the training and empowering of the associates. We know that sustainability relates to our people and the planet at every level of our company and that the long term economic prosperity of our company is important. Therefore, sustainability is valued and implemented across the board. I would personally like to thank and extend my gratitude to the sustainability management teams for driving and monitoring our sustainability strategy and the sustainability issue owners for implementing our plans. I also acknowledge the WPL associates at all levels for their enthusiastic support of our initiatives. We will remember this season for the far-reaching sustainability achievements which we made during the year. Driven by our talented and passionate associates, we will continue turning challenges into opportunities in the year ahead.
Coppice Plantations in our efforts to be self-sufficient in our solid fuel requirement without the elimination of trees. Our journey from good to great brought to focus our People, Planet and Processes. Getting the right people to the correct position and having the best for our greatest opportunities has been our quest. Our workers earlier referred to as coolies, then laborers came to be recognized as our Associates. Through our performance management system we were able to strengthen the culture of the Management by objectives throughout the organization. Appraisal of all our Executives and Staff have and continue to be the order of the day whereby measurable objectives, significant performance dimensions, management and supervisory performance dimensions, performance and training and development for personal growth are discussed, evaluated and implemented. Product and process development came to be more and more customer oriented and from being just a supplier and marketer of crude oil we did move to producing and marketing refined oil. Our pursuit of excellence brought us to adopt business practices that go even beyond the best practices with constant innovation. We have continued with Fairtrade certification on seven of our plantations by which people come to identify our teas as meeting international environmental, labour and development standards. We continueed with ISO 22000 Food Safety Management Systems. This assures our valuable customers of the proper management of food safety risks across the food supply chain and will continue to do so till all gardens fall in line. Continuing to have our gardens as members of the Ethical Tea Partnership gives confidence to the tea consumers of the world that the tea in their cup has been produced in an environmentally and socially sustainable way. ETP collaborates with a range of organizations to achieve these objectives. Productivity Enhancement Teams, Small group activities and Quality Circles come very much into play in all these certification processes and the many awards we have achieved and detailed in this report is a manifestation of all these efforts. Our Human Capital has been our driving force and we are engaged in creating a culture that respects, accepts and recognizes employee contribution to the success of the organization. The introduction of the two way
Dr. Dan Seevaratnam Director / Chief Executive Officer 17/05/2012

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Organisational Profile
Watawala Plantations PLC was incorporated in June 1992. We are a public quoted Company with limited liability registered under the Companies Act No 17 of 1982 and re-registered under the Companies Act No 7 of 2007, and are quoted on the Colombo Stock Exchange. The company headquarters are located at 60 Dharmapala Mawatha, Colombo 3. The Company operates in Hatton, Watawala, Lindula and Udugama regions in Sri Lanka while we export our
products to countries such as Poland, United Kingdom, Australia and India. Our main areas of production are tea, rubber and oil palm. Our extensive geographical reach also serves as an indication of the scale of our Company. We employ 12,027 fulltime employees and an additional 141 associates on contract basis, whose efforts are reflected in our financial statements as presented on pages 106 to 139 of our Annual Report.
The operational structure of Watawala Plantations PLC is presented below
Accolades
During the year under review WPL won the Gold Award in the Plantation sector at the annual report competition organized by the Institute of Chartered Accountants of Sri Lanka and this was the fourth successive year the Company has been the winner of the gold award, reflecting the companys commitment to transparency, accountability and highest standards and practices in accounting. We have also been ranked No 14 on the STING Corporate Accountability Index which aims to increase awareness on strategic CSR and facilitate benchmarking for same amongst the larger corporate entities in Sri Lanka. This index is based on a detailed analysis and measurement by the independent third party, of the corporates strategic CSR.
Report Profile
This is Watawala Plantations PLCs first attempt at a GRI based report, and covers the period 1st April 2011 to 31st March 2012. The company is reporting against the GRI- G3 guidelines, at C level. With this
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report, the Company plans to embark upon an annual sustainability monitoring and reporting cycle. While our Annual Report for the year ending 31st March 2011 included a sustainability supplement, this report provided a brief overview of our practices with an emphasis on community investment, and was not a structured report based on the GRI Guidelines. Being a key player in the agriculture industry, Watawala Plantations has significant impacts on the environment in which it operates while in turn being intrinsically dependent on favourable environmental conditions, not least of which are climate conditions, for the survival and growth of its business. Further, with its close interconnection with rural communities and extensive workforce living and working on its plantations, employee and estate community welfare is also a key material aspect to be considered by the company. It is for this reason that report content in this first structured Sustainability Report of Watawala Plantations covers employee wellbeing including health and safety, development, gender equity and empowerment, child labour, and community investment and welfare, as well as energy management, waste management, and water conservation, together with practices in relation to biodiversity and agricultural land productivity. The boundary of this first GRI based Sustainability Report of Watawala Plantations is limited to all operations of the Company across Sri Lanka, including 19 estates and the Company Headquarters in Colombo. Operations arising from joint ventures, subsidiaries, leased facilities or operations that are outsourced are not included within the boundary of this report. A significant change from our previous report applied in the current report is the structuring of our reporting efforts in line with the GRI Guidelines. The present scope and boundary of this report as well as measurement methods applied in data monitoring, are herein established in our sustainability reporting for the first time. There are no re-statements of information provided in any previous reports.
Any questions on this Sustainability Report or its content can be directed to:
Mr.Ajantha Nugawala General Manager HR & Administration No 60, Dharmapala Mawatha, Colombo 03 ajanthanthan@zesta.lk / Tel - 07773457967
Governance and Stakeholder Engagement

Our company has given high priority to a strong framework of corporate governance. For further information on how its governed, please refer to the page no 48. Watawala Plantations recognizes the following groups as being key stakeholders of the Company, and engaged with these groups accordingly: Shareholders, employees, customers, brokers,
suppliers, banks, Inland Revenue Department, Labour Department, Employers Federation of Ceylon, trade unions, and industry experts These stakeholder groups in particular are engaged by the company in order to: Ensure the sustainability of the business Create value to the shareholders and employees of the Company Maintain a harmonious relationship Adhere & comply with legitimate standards Demonstrate governance professionalism and corporate
Sustainability Performance
Economic
The Tea plantations business in the country faced many challenges during the year under review, and the envisaged loss prompted the forecast of a loss at the beginning of the financial year. However, your company was able overcome the forecast loss to achieve a pretax
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profit of Rs.520Mn. compared with a profit of Rs.532Mn. during the previous year. Improved productivity, driven by the effective and efficient utilization of resources was a key factor that enabled us to make this profit despite unfavorable market conditions that prevailed during the year. As per the plantation collective agreement, the wage revisions which take place every 2 years have been amongst the most significant challenges to the plantations industry. A wage increase that took place during the year under review impacted your Companys bottom line by Rs.320Mn. Once again improved productivity and our strategy of crop diversification
adopted several years ago yielded dividends in enabling the company to offset this loss to end the year with a profit of Rs.133Mn. The total value generated by the Company for the year 2011/12 is Rs.3.7Bn, compared to Rs.3.1Bn, in the previous year. The summary of value addition for the period is given below. The total value addition has increased by 21% over the previous year of which the largest share of 73% has been distributed among our employees. We were able to re-invest 14% of the value addition amounting to Rs.544Mn. The re-investment will facilitate the future expansion and growth of the company, and contribute to its sustainability.
Summary of value addition for the period is given below.

Group 2011/2012 To Employees To Providers of funds To Government To providers of capital To Expansion and growth 75% 2% 5% 6% 12% 100%
(Pleas refer page 142 for detailed analysis)
Company 2010/2011 65% 3% 6% 2% 24% 100% 2011/2012 73% 2% 5% 5% 16% 100% 2010/2011 68% 3% 5% 2% 22% 100%
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Gratuity is one of the companys key liabilities, an obligation towards employees for their service rendered for the company. At the end of this financial year, liability that arose from the gratuity was around Rs.873Mn. The forecast amount within a couple of years would be Rs.1Bn. Henceforth, in order to minimize the potential impact of gratuity payment on the financial performance of the Company, especially with regard to the cash flow movements, the Company has made an initiative to maintain a separate investment which will secure the EPF/ ETF Contributions Contributions (In Rs.) EPF (12%) ETF (3%) ESPS Gratuity
gratuity payment for employees. The initial investment made was Rs.46Mn. Company intends funding the gratuity provision at a future date to ensure the payment of employee claims and thus ultimately add to the value generated by the company. The generated income will be re-invested for future gratuity payments. An extra ordinary resolution has been passed to invest more funds and the proceeds earned during the year from the sale of Watawala Marketing Ltd. would be invested.
2011/12 146,846,375 38,661,551 8,851,797 93,653,000
2010/11 125,347,711 33,234,750 8,474,785 60,826,000
Production
Company Volumes (kg) National Volumes (kg) Increase/ decrease Company Volumes -1.0% 4.0% -3.4% 0.3% Increase/ decrease National Volumes -8.0% -8.2% -2.9% -5.0%
2012/11 High Grown Medium Grown Low Grown 3,811,330 1,790,032 246,211 5,847,573
2010/11 3,850,453 1,721,894 254,960 5,827,307
2012/11 72,146,812 50,241,640 190,074,959 312,463,411
2010/11 78,376,740 54,753,937 195,655,528 328,786,205
Our Tea production recorded a better performance in comparison to the national tea production. During the concerned financial year, national crop volume declined from 328,786, 205 kg to 312,463,411 kg by accounting for a 4.96% decrease in National Tea Volume. Whereas our own tea crop production of 5,847,573 kg in the reporting period was 0.3% higher than the previous years crop production of 5,827,307
Kg. The agricultural processes we have adopted made a considerable contribution to this growth. National volumes of high grown tea declined by 7.95% and we were able to minimize the decrease in crop to 1%. Our Medium grown tea volumes increased by 3.96% compared with National Medium grown tea volumes which decreased by 8.25 %.
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Our People
A vital contributor to the success we have achieved is the strength, determination, commitment and dynamism of our 12,000 people whom we consider our associates. The plantation industry is both unique and complex because it employs a large workforce living their entire lives within the estate on which they work. The plantation thus also becomes home to their families. For WPL the people it indirectly impacts and strives to uplift hence includes over 50,000, which encompasses women, men, the young and the old and infants and children.
Addressing Gaps
The company also took steps to address a gap identified in the employer employee relations on its Dickoya, Wigton, Kenilworth, Lonach, Abbotsleigh and Strathdon estates. A gap in communication was found to be a key cause of increasing labour unrest, as associates needs were not adequately communicated and heard. The Company took the simple step of appointing a mediator who facilitated much improved communication, and thereby improved relations, which in turn impacted positively on productivity.
Employment and Labour Relations

Total workforce by employment type Full time employees Part time employees Outsourced Total employees Total workforce by employment contract Permanent employees Fixed term/Contract employees Outsourced Total employees Region Hatton Watawala Lindula Udugama Western Region Total Watawala Plantations PLC 12,168 0 0 12,168 Watawala Plantations PLC 12,027 141 0 12,168 No of Employees 3,389 2,251 3,946 2,531 53 12,168
Communication between employees and management is further facilitated by the unions operating throughout the Company. Employee interests are also governed by a collective bargaining agreement reached by the Employers Federation of Ceylon acting on behalf of the employers and the major trade unions on behalf of its employees. This covers approximately 90% of the Watawala Plantations workforce to include all categories of associates including monthly paid and daily paid categories.
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Occupational Health and Safety

The working conditions for our associates were improved during the year, by replacing the bamboo baskets which being used by our tea plucking associates, with plastic ones. The plastic baskets are ergonomically designed and much lighter in weight, and being strapped on to the back of the plucker instead of the neck, have greatly eased the discomfort and the burden faced by the pluckers who work their way up the steep slopes of a tea plantation carrying over 20 kgs of plucked leaves. In addition, finger guards were provided to the associates to prevent soreness of fingers that occurs when plucking tea leaves. Watawala Plantations PLC is proud to report that during the year under review, we did not experience any major injuries, occupational diseases, lost days, or work related fatalities in any of our operations island wide. Employee absenteeism during the year under review was also 16.34%.
Health and Medical Camps

Health and wellbeing for communities which have limited access to medical assistance has been a priority area for WPL and last year too saw the continuation of these programmes with the valuable support of a few non-profit organisations. We continued to conduct medical camps for our employees, their families and the neighborhoods on our estates. Being a member of a conglomerate that is a key player in Sri Lankas Healthcare market has been an encouragement and an incentive for our active involvement in health related community initiatives. The medical camps provide consultation and free medicine, knowledge sharing and screening for Diabetes, Hypertension, Asthma, Cholesterol, Blood sugar and Blood pressure. Eye camps organized in collaboration with the Berendina Foundation was a significant Health related community initiative during the year. We have undertaken the sponsorship of 200 patients for cataract surgeries in support of the national programme to prevent and
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control avoidable blindness under the
Vision 2020
programme of the Ministry of Health. Cataract is a priority area under the national Health care programme. During the year under review, we were able to conduct eyes camps in the district of Nuwara Eliya. The Company provided intraocular lenses, accessories, and the required drugs and other consumables, with the support of our sister company Swiss Biogenics. The camp in Nuwara eliya attended to 89 individuals with vision problems out of whom 59 were recommended for cataract surgery. The surgeries were conducted by Dr. Kala Sivayoganathan at General Hospital, Nuwara Eliya. The Company also helped provide nourishment to pregnant mothers as well as Diabetic patients; in collaboration with our sister company SBL Ltd 7,500 free Glucerna, Formance milk sachets were distributed amongst would be mothers as well as Diabetic patients living on our estates. Additionally, we also distributed baby care items in association with the Sri Lanka Red Cross Society amongst pregnant mothers on our Companys Shannon estate. Amongst the other health related initiatives during the year were programs to increase awareness on prevention of HIV /AIDS and Dengue. Similarly an awareness program on the proper management of serpent bites was conducted in partnership with the Wild Life Conservation Society of Sri Lanka. Given the high vulnerability of estate populations in some of the regions to snake bites, the program has been found to be very useful in these areas which have a high rate of vulnerability to venomous snake bites. The topics covered by the program included the identification of snakes- which is important as misidentification is often found to be a cause of death of a bite victim, and the what not to in the immediate care of a victim.
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Commitment To Fairtrade
Fair trade is based on the belief that trade should not be about the narrow confines of how much wealth but also about how that wealth is generated as well as distributed. I.e.: does it respect human rights and environmental sustainability and does it contribute to helping people out of poverty. The Fairtrade certification enables people to identify products that meet agreed environmental, labour and developmental standards. The certification is awarded by FLO international and a certification body FLO-CERT after an independent auditing of producers to verify that agreed standards are met. Seven of our Groups plantations are Fairtrade certified, reflecting our efforts to extend the focus beyond profits.
Providing thermo flasks using the joint body funds of fair Trade
Empowering Women
Women play a significant role in the Plantation Sector and the economy of Sri Lanka. In the plantation sector, the contribution made by women to harvesting operations of Tea, accounts for more than 70% whilst they contribute to all other agronomic practices as well. However, due to socio economic factors the opportunities they have on the Plantations to voice their opinion and be heard and have a say in decision making in the sphere of work as well as their personal lives has been very limited. In line with the companys policy of gender equity as well the Millennium Development goals, our estates have begun many Women Empowerment programs. A programme conducted by the Udagama region has facilitated women to form groups of 5 to 10 in which they could share their thoughts and difficulties and find practical solutions. In order to address some of the financial issues they have, a nominal sum decided by them is collected each month and this money collected is used to assist the members when a need arises. In addition group members also engage in income generation projects and expenditure reduction programs.
The position of field level supervisor (Kangani) has been restricted to males and remains so today. As we shared in our last Annual Report, WPL made a decision in 2010 to promote women to level of supervisor. We set ourselves a target, of having 100 female Kanganies by the year 2015. Towards this end, is a need for capacity building of women. Thus WPL in collaboration with WUSC (World University of Canada) organized a two day residential program for 25 selected women. The program was conducted by the Sri Lanka Institute of Developments Hatton branch and trained these women on leadership and communication skills.
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Our overall stance towards gender equity and diversity, as well as towards the development of women, can be seen through the breakdown of our workforce by gender Male Breakdown of total workforce % 5790 47% Female 6531 53%
During the year under review, we have utilized 804 hours to conduct training programmes for the employees at all levels in the Company. Employees of all levels were able to participate in a programme on self-development organized at all the regional locations of our company. Similarly, in the Udugama region some of our junior level employees were given the opportunity to improve their level of English competency with classes conducted on a regular basis. Other training porgrammes include workshops on EPF related issues, Agricultural policies, 5S and table etiquette and economical fine dining. Having in-house resource personnel to conduct few of the training programmes within our estates is an added advantage. In order to further improve productivity on our Oil palm plantations, a team of 4 from our Udugama region was sent on a training programme to AAR and IJM Plantations in Malaysia during the year to enable them to improve their skills in nursery practices, integrated pest management and mechanical harvesting.
The Udugama team during the Malaysian Visit
Category
Percentage of training provided, by employee category
Corporate Managers Managers Executives Non Executives Associates
8.41% 22.78% 25.69% 20.18% 22.94%
Note: Approximate figures have been presented above
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Accreditations
Seven of our estates, namely Kenilworth, Carolina, Shannon, Dickoya, Abbotsleigh, Waltrim and Homadola are ISO 22000 certified. ISO 22000 is awarded by Sri Lankas standards Institution upon inspection, verification, testing and evaluation of food/ product safety along with entire production chain, from harvesting of leaf to dispatch of finished teas. This certification embodies the principles of HACCP and ISO 9001:2000 quality management systems and gives the company a distinctive competitive advantage to further strengthen its position in the industry.
Social Impact
Developing Livelihoods Integrating The Economic Social & The Environment With Organic Vegetable Gardens
The women empowerment teams on our Abbotsleigh estate initiated a project amongst its estate women to grow vegetables using organic methods. This project is a classic example of one which has integrated all three aspects of People, Profit & Planet. The income generated help empower the women and their families whilst the organic methods of farming are environmentally friendly. Watawala plantations helped by providing the initial funding for these women as well as the expertise such as on regards selection of crops etc. The women are able to sell their healthy produce on the estates. A Singithi Pola organized on Homadola estate, during the year also encouraged the sale of the produce by children, not only to enable them to earn an income but also to provide them to think in lines of self-reliance for their futures. The produce they sold included vegetables and fruits as well as poultry farms.
Ethical Tea Partnership

All our tea gardens except for one- Talangaha have gained membership in the Ethical Tea Partnership (ETP) an endorsement that the tea we produce has been manufactured in a socially just and environmentally sustainable manner.
Social Compliance
Watawala Plantations is proud of its track record in compliance. We have not faced any monetary-fines or non-monetary sanctions for non-compliances with laws and regulations in general, nor of laws and regulations concerning the provision and use of our products and services, during the year under review. We have also not been complicit in any incidents of corruption during the reporting period.
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Fresh Water Fish Release

We continued our project to develop inland fisheries which was launched during the previous year. More than 2000 Fresh Water Fish fingerlings were released to a Lake in the Panmure Division of Strathdon Estate and to a lake on Shannon estate in Korangumaley Division. Live Stock and Estate Infrastructure Development Minister Hon. Arumugam Thondaman, and official of the PHDT graced this occasion. These lakes are now home to different species of fresh water fish which include Thilapia, Red Cats and red Thilapia. The project has proved to be a success by facilitating additional incomes for villagers who can engage in fishing, as well as by enhancing nutrition to employee families and children in our creches. For instance, the harvesting of more than 5000 prawns in the Udugama region during the year under review benefitted its community considerably.
Infrastructure Investment
Building Houses On Homadola Estate
During the year the company partnered with Padem a nonprofit organization from France to help build 20 houses for our plantation workers. We provided the land and the required timber for the construction. Each house valued at Rs.1 million comprises all basic facilities including an in-house bathroom.
Community Involvement
Renovation Of The Nakiyadeniya Temple

The management and associates on the Nakiyadeniya Rubber Estate contributed a sum of Rs.120, 000 to renovate the historic Nakiyadeniya Temple that was in a dilapidated condition. Recognizing the right of every child to food, shelter, clothing and education, and the need for assistance to help their families provide these basic needs, WP over the years have continued to initiate a range of social upliftment projects. Some of the initiatives during the year under reported are presented below. During the year, the company adopted a novel approach to help the communities with greater focus, and involvement by the company. Identified under the concept Happy Family, the project was pioneered in the Udugama region. It involves the evaluation of households that make up a community, on a set
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of criteria. The criteria include aspects such as, if all children are enrolled at and attend school; has good housekeeping practices such as waste disposal; and if both parents are gainfully employed and has a savings plan and a peaceful home front. Thus, by incorporating aspects such as housekeeping and childrens mental wellbeing this comprehensive set of criteria not only assesses the economic aspects but takes a holistic approach extending the companys own criteria in its approach to business. The households are continuously monitored thereafter. It is most rewarding to us at WP that the families chosen as the best families in the governments Divi Neguma programme happened to be the families from Our Happy Family project. This project has also contributed to enhanced relationship with our estate associates.
the year under review, a center funded by Member of Parliament Hon Nishantha Muttuhettigama was opened on our Homadola estate in the Galle district. Our company provided the land and funded for the roofing in this project.
Continuing to Empower The Differently Abled an X-Mas Sale by The Vocational Training Centre
The Vocational Training Centre run by WP , on its Kenilworth estate in Ginigathena had a Christmas sale organized by the estate managers, of items produced by them at the Sri Lanka Exhibition and Convention Centre in Colombo during 14th to 23rd of December 2011.
Scholarships for Deserving Students

In keeping with our focus on education as a priority area of support, WPL continued to award scholarships to children of employees of all categories obtaining a higher education or even completing school education is dream of most parents and children; but often an unrealized dream for some due to the lack of economic means. Your company thus took on the task of helping many over a decade ago and has benefitted more than 165 students over that period. During the year we granted 26 scholarships to GCE Advanced Level students and 13 scholarships to undergraduates to pursue a higher education in local universities. Additionally the company also provided financial and in kind support such as books and stationary to address the issues of school drop outs in the lower grades.
Opening a New Community Center Homadola Estate

Community Centers and Associations play a valuable role by facilitating interaction and fellowship amongst associates in a recreational setting, and in promoting cultural and personal welfare for communities. During
The differently abled inviduals who are the members of this center were brought to Colombo for the first time and were able to sell their greeting cards, envelopes, eco-friendly paper bags, tea pouches, Christmas decorations and paintings at the sale. And the income generated was distributed amongst these individuals.
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The center was one of WPLs larger community initiatives launched in 2001. It provides a hitherto marginalized group of individuals who are also additionally burdened by economic deprivation, an opportunity to develop their talents, earn an income and enjoy recreational facilities; and most fundamentally, a safe place to spend the day with routine and structure. The benefits it renders to caregivers, by offering them relief as the center take responsibility for their care of these during the day, and, by alleviating their feelings of isolation and despondency that arise due to social isolation and the lack of pscho-social support have been invaluable.
Fostering Creativity Amongst Children

The company organized many events during the year to provide an opportunity for the children on our estates to display their talents, and these included performances as well as exhibitions of Arts & Crafts. Furthermore, Universal Childrens day was also celebrated on all of our estates.
Providing Nutrition to Children

The companys Udugama region in collaboration with the governments Divisional Secretariat, began a project to provide a milk glass for every creche child. The project as the slogan indicates provides a glass of milk daily, to every child in the Child Development centers, with the aim of preventing malnutrition amongst these children. The milk provided is purchased from the cattle farms that are located on our estates thus providing an additional income benefit to the communities. Watawala Plantations ensures to uphold the rights of the children living in our communities. There have been no incidents of child labour reported within our operations during the year under review.
Our Planet
We do not inherit the earth from our ancestors, we borrow it from our children. ~Native American Proverb
Impacts of Climate Change

Clean air, clean water and bio-diversity are constantly threatened by increasing populations, and spreading industrialization. However with improving awareness of the dire consequences, it is evident that stakeholders will
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increasingly demand accountability on environmental impacts. For us at WP the natural environment is our key resource, and being custodian to 12,000Ha of land, and other natural resources such as lakes and waterfalls, we are aware of the tremendous responsibility with which we must act towards the environment. Moreover, being an agricultural enterprise environmental factors such as annual rainfall and its distribution, temperature levels, increase in the ambient Co2 concentration, and solar radiation are key factors that determine tea yields, and hence, our performance. These factors are thus monitored by the company with necessary contingency measures taken to keep production at optimal levels. Climate change once considered a threat for the distant future is now impacting our earth. The beginning of last year saw tea as well as other agricultural output decline across the country due to drought conditions. Similarly too much rainfall can also impact tea. The optimum rainfall for tea cultivation varies from about 223 mm per month in the upcountry region to about 417 mm per month in the other regions. Implications of Climate Change on Tea cultivation: Disruption to weather patterns can reduce overall cultivation which in turn impacts the companys financial performance, A change in rainfall patterns in Sri Lanka as well as other rubber growing countries induces fluctuations in rubber latex pricing. Changing weather patterns in Natural Rubber producing difficult. Global warming also drives the demand for cooling mechanisms and hence higher energy requirements, which impact prices of fossil fuels and in turn indirectly impact the world market prices of rubber. Some of the contingency measures and efforts weve taken to minimize the adverse impacts of climate change and other environmental factors include infilling, use of drought and heat tolerant cultivars, soil and soil moisture conservation, soil improvement, intercropping, crop diversification, planting and regions make supply forecasting
managing of shade trees, and increased scrutiny in selection of lands for re planting. Additionally, burial of pruning with the inclusion of compost, cleaning drains, shade establishment, re-supplying tea and forking are also carried out regularly to mitigate impacts. As a considerable period of time is required to bring about changes to a crop system such as Tea; these are long term strategies which the company carries out despite constraints of affordability limited labour availability. The fact that we continued with these investments despite last year being a downswing year for our tea sector, underscores our optimistic outlook on the future of the tea industry, as well as the long term perspective we have on our business. The importance of the tea sector to the socio-economic fabric of our country is another factor which encourages our long term view and the triple bottom line focus we have adopted.
Energy
The need for conservation of energy and sources of renewable energy in the world has been made more urgent today than ever. The need is that much greater and immediate for countries such as Sri Lanka whose high dependence on oil imports continues to burden the Balance of Payments. Renewable energy is also of critical importance due to the favorable impact on the environment vis-a-vis the detrimental effect of greenhouse gas emissions from other forms of energy. Our Direct Energy Consumption as at 31st March 2012 is presented below Fuel Petrol Diesel Furnace Oil Litres 59,815 2,094,033 208,847 Energy Consumption (Gj) 2,082 81,053 8719
In addition, Watawala Plantations utilizes direct energy sourced from 2,682kg of LP Gas, as well as energy generated from 1,759,266 tons of Biofuel. The Company also monitors its energy consumed through the running of personal vehicles, which amounts to 111 Gj sourced from petrol, and 559Gj sourced from diesel.
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Indirect energy consumed by the Company during the year under review, through the use of electricity is presented below Energy kWh Electricity Consumption 2,713,758 9,769 Consumption (Gj)
100 m3 of bio gas per day which could generate 140 kWH electricity per day.
Your companys efforts to explore and produce alternate sources of renewable energy is one that integrates the triple bottom line focus, by generating profits for the company whilst contributing to the environment and the nations progress. Our hydro power generating schemes and the renewable fuel wood plantations are efforts which have begun to make a contribution. WPs first hydro power plant commissioned during the year under review, now adds 1.6 Mega Watts of power to the national grid; whilst two more plants expected to come on board during the next financial year. For a third world country like Sri Lanka, Biomass is one of the most viable and appropriate sources of renewable energy. Our palm oil mill has invested in a bio gas project which will generate electricity using its mill effluent. The energy thus generated will help to reduce the organizations carbon footprint and its reliance on Diesel -fired generators.
Bio gas project in Lonach estate
Tree Planting Campaign

He who plants a tree, Plants a hope. ~Lucy Larcom. In 2011, we planted more than 1.1 million tree saplings on an extent of 460 Hectares within our estates under a tree planting campaign. Moreover, we invested approximately Rs.38 million in the planting of Caliandra, Rs.12 million in Eucalyptus and Rs.4 million in grass planting. We will continue to increase the extent of Calliandra a short rotation crop and Eucalyptus as a high value timber.
Bio gas project in Udugama
Similarly our bio gas project in the Lonach Dairy Farm produces bio gas and organic manure using cow waste. Even though we are in the initial phase of this project, this initiative has helped us to eliminate methane emission thereby reducing GHG emission. The natural fertilizer is used in the fields. Installation of a bio gas generator is in progress since the farm generates about
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Briquetting a Win Win Solution Integrating Planet and Profits

The best investment on earth is earth. -Louis J. Glickman The use of firewood for factory heaters, for the processing of tea has increased over the past few years as the use of fossil fuels are becoming increasingly uneconomical. Almost 99% of Sri Lankas tea factories have discontinued the use of fossil fuel heaters, replacing them with firewood fired ones over the past few years, thus leading to a rising demand for firewood and hence for the felling of trees, and a resulting rise in price of firewood. Prompted by the escalating costs of firewood and our continuous search for ways to reduce our Carbon footprint, WPL began to introduce briquettes as a substitute for firewood in our Waltrim and Tangakelle factories in the Lindula Region. Briquettes are eco logs made of refuse tea, are Carbon neutral and virtually smoke free whilst costing less than the alternatives of wood or charcoal. Thus, by developing this environmentally friendly technology, we have added to, two of our three bottom lines Profits and Planet. Briquettes also offer additional benefits to the environment as a mechanism for disposal of residue; hence reducing overall garbage and encouraging waste management. Currently we are producing 500-600 kgs of briquettes per day but we are planning to expand the production up to 8000kg per day during the next financial year. Waste generated by Watawala Plantations during the year under review is presented below Total weight of waste by type Hazardous Waste Non-Hazardous Waste (Treated Decanted Water, Decanted Cake, Empty fruit bunch fiber) 0 tons 22,043,670 tons
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Making our Bungalow Gardens Fruitful

WPL continued with its campaign begun in 2009, of planting fruit trees in the gardens of its estate bungalows. 330 fruit plants were planted in the gardens of our estate bungalows and the varieties of plants included Sweet orange, Mandarin, Malaysian Guava, Pomegranate, Pears, Chinese Guava and Cherimoya. The harvest from the first round of planting is expected this year.
Water Management
Its predicted that a third of the worlds population would be facing water scarcity by 2025 unless current trends alter. Whilst the demand for fresh water will continue to increase at a rapid pace as the world population increases, the availability of fresh water is dwindling in the world. Approximately 1 billion people across the world today lack access to safe drinking water and 2.6 billion do not have access to adequate sanitation. Dwindling water resources is also closely linked to food crises in many parts of the world. Decreased access to a safe stable water supply in Asia could also have a profound impact on security throughout the region since reduced access to fresh water leads to impaired food production, the loss of livelihood security , large scale migration within and across borders it is said could have a profound effect on security and stability throughout the region. Although Sri Lanka is not faced with an immediate crisis due to dwindling fresh water sources; with only less than 25% of water from rivers withdrawn for human purposes, the effective management and conservation of these resources is important to avoid crisis in the future. Measures to preserve and sustain must be in progress now. Being an agriculturally based company, the importance of water cannot be overstated in our corporate agenda. And being in plantation agriculture where our estates are also home to a large population, water sustainability also becomes a priority due the basic human consumption and sanitation needs.
Some of Our Best Practices

Has taken all necessary steps to improve its stand of both high and low shade that not only serves to reduce ground temperatures but provides valuable raw material for mulching and reduces the velocity of heavy rainfall at the point of impact. Resorted to deep draining a process that enables maximizing of the harvesting of rain water amongst other agronomical benefits Forking and burying of pruning material to improve soil permeability and other agronomical benefits
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Mulching and planting of cover crops especially on bare land to improve soil water retention capability Developing water reservations and catchment areas and the conservation of forestry by planting of trees Calliandra and Bamboo Species under the guidance of the Mahaveli Authority Establishing continuous Vettiver hedge rows on the upper lip of roads and drains to reduce the out flow of water
Our plantations are also home to many fresh water sources of lakes and natural springs. The Company over the years has adopted many water conservation projects and measures to protect these sources from contamination. The protection of these water bodies, whilst being important in preserving the wildlife, habitat and the diversity of the eco system in these areas, also add to the aesthetic appeal of our locations. Some of the measures weve undertaken to ensure sustainability include water retention techniques and the harvesting of rain water. These measures would help us meet some of our needs during times when water becomes scarce. Preserving, retaining and revitalizing inherent ground moisture levels enable us to grow our crops sans irrigation. Moreover, the preservation of ground moisture also plays a vital role in regularizing the flow of water in our streams, water ways and springs, to prevent them from drying out, especially during periods of arid weather Our estates have been able to maintain ground moisture levels by reducing ground temperatures as far as possible by thatching, mulching and draining, improving the permeability and water retention capacity of our soils, and by improving recharge structures so as to reduce or eliminate the surface flow of water direct to the ravines and rivers. Improvements to estate water supply schemes have enabled the allocation and use of water in a more organized and efficient manner benefits of which are mostly evident at times of scarcity during drought conditions.
Measures were also taken to prevent water borne diseases such as diarrhea and hookworm associated with poor drinking water and inadequate sanitation. Water schemes that supplied water safe for drinking were implemented during the year to facilitate better health and wellbeing and quality of life for our communities. With the growing uncertainties associated with global climate change and its long term impacts, our search for effective solutions to sustain water and to mitigate the impacts on water will continue to be a priority. We are also mindful of the fact that ongoing climate change could pose challenges and bring up situations which we have not encountered before; requiring new strategies and innovative solutions from us. WPL will continue to be an enterprise that values its inter dependence with the environment and its people and thus consider our raison d etre as uplifting the lives of all our stakeholders, whilst expanding our definition of who our stakeholders are. We will continue to find opportunities to leave this planet the way we wouldve liked to have discovered it for the first time.
Environmental Compliance
Watawala Plantations PLC is proud to report that we continue to maintain the utmost standards in respect to the environment in which we operate. We have not faced any monetary fines or non-monetary sanctions for non-compliance with environmental laws or regulations during the year under review.
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GRI Content Index

Application Level
Profile Disclosures
1. Strategy and Analysis
Profile Disclosure 1.1 1.2 Description Statement from the most senior decision-maker of the organization. Description of key impacts, risks, and opportunities. Reported Page 70 63
2. Organizational Profile
2.1 2.2 2.3 2.4 2.5 Name of the organization. Primary brands, products, and/or services. Operational structure of the organization, including main divisions, operating companies, subsidiaries, and joint ventures. Location of organizations headquarters. Number of countries where the organization operates, and names of countries with either major operations or that are specifically relevant to the sustainability issues covered in the report. Nature of ownership and legal form. Markets served (including geographic breakdown, sectors served, and types of customers/beneficiaries). Scale of the reporting organization. Significant changes during the reporting period regarding size, structure, or ownership. Awards received in the reporting period. 72 72 72 72 72 72 72 72 None 72
2.6 2.7 2.8 2.9 2.10
3. Report Parameters
3.1 3.2 3.3 3.4 3.5 3.6 3.7 3.8 Reporting period (e.g., fiscal/calendar year) for information provided. Date of most recent previous report (if any). Reporting cycle (annual, biennial, etc.) Contact point for questions regarding the report or its contents. Process for defining report content. Boundary of the report (e.g., countries, divisions, subsidiaries, leased facilities, joint ventures, suppliers). State any specific limitations on the scope or boundary of the report. Basis for reporting on joint ventures, subsidiaries, leased facilities, outsourced operations, and other entities that can significantly affect comparability from period to period and/or between organizations. Data measurement techniques and the bases of calculations, including assumptions and techniques underlying estimations applied to the compilation of the Indicators and other information in the report. Explain any decisions not to apply, or to substantially diverge from, the GRI Indicator Protocols. Explanation of the effect of any re-statements of information provided in earlier reports, and the reasons for such re-statement (e.g.,mergers/acquisitions, change of base years/periods, nature of business, measurement methods). Significant changes from previous reporting periods in the scope, boundary, or measurement methods applied in the report. Table identifying the location of the Standard Disclosures in the report. Policy and current practice with regard to seeking external assurance for the report. 72 73 73 73 73 73 73 73
3.9
73
3.10
73 73 90
3.11 3.12 3.13

90
Profile Disclosure
Description
Reported
Page
4. Governance, Commitments, and Engagement

4.1 Governance structure of the organization, including committees under the highest governance body responsible for specific tasks, such as setting strategy or organizational oversight. Indicate whether the Chair of the highest governance body is also an executive officer. For organizations that have a unitary board structure, state the number of members of the highest governance body that are independent and/or non-executive members. Mechanisms for shareholders and employees to provide recommendations or direction to the highest governance body. Linkage between compensation for members of the highest governance body, senior managers, and executives (including departure arrangements), and the organizations performance (including social and environmental performance). Processes in place for the highest governance body to ensure conflicts of interest are avoided. Process for determining the qualifications and expertise of the members of the highest governance body for guiding the organizations strategy on economic, environmental, and social topics. Internally developed statements of mission or values, codes of conduct, and principles relevant to economic, environmental, and social performance and the status of their implementation. Procedures of the highest governance body for overseeing the organizations identification and management of economic, environmental, and social performance, including relevant risks and opportunities, and adherence or compliance with internationally agreed standards, codes of conduct, and principles. Processes for evaluating the highest governance bodys own performance, particularly with respect to economic, environmental, and social performance. Explanation of whether and how the precautionary approach or principle is addressed by the organization. Externally developed economic, environmental, and social charters, principles, or other initiatives to which the organization subscribes or endorses. Memberships in associations (such as industry associations) and/or national/ international advocacy organizations in which the organization: * Has positions in governance bodies; * Participates in projects or committees; * Provides substantive funding beyond routine membership dues; or * Views membership as strategic. List of stakeholder groups engaged by the organization. Basis for identification and selection of stakeholders with whom to engage. Approaches to stakeholder engagement, including frequency of engagement by type and by stakeholder group. Key topics and concerns that have been raised through stakeholder engagement, and how the organization has responded to those key topics and concerns, including through its reporting.
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48 51 51 53
4.2 4.3
4.4 4.5
4.6 4.7
4.8
4.9
4.10 4.11 4.12 4.13
85
4.14 4.15 4.16 4.17
73 73
Economic
Economic performance
Performance Indicator EC1 Description Direct economic value generated and distributed, including revenues, operating costs, employee compensation, donations and other community investments, retained earnings, and payments to capital providers and governments. Financial implications and other risks and opportunities for the organizations activities due to climate change. Coverage of the organizations defined benefit plan obligations. Significant financial assistance received from government. 75 Reported Page 142
EC2 EC3 EC4
Market presence
EC5 EC6 EC7 Range of ratios of standard entry level wage compared to local minimum wage at significant locations of operation. Policy, practices, and proportion of spending on locally-based suppliers at significant locations of operation. Procedures for local hiring and proportion of senior management hired from the local community at significant locations of operation.
Indirect economic impacts

EC8 EC9 Development and impact of infrastructure investments and services provided primarily for public benefit through commercial, in-kind, or pro bono engagement. Understanding and describing significant indirect economic impacts, including the extent of impacts. 82
Environmental
Materials
EN1 EN2 Materials used by weight or volume. Percentage of materials used that are recycled input materials.
Energy
EN3 EN4 EN5 EN6 EN7 Direct energy consumption by primary energy source. Indirect energy consumption by primary source. Energy saved due to conservation and efficiency improvements. Initiatives to provide energy-efficient or renewable energy based products and services, and reductions in energy requirements as a result of these initiatives. Initiatives to reduce indirect energy consumption and reductions achieved. 86 85 86
Water
EN8 EN9 EN10 Total water withdrawal by source. Water sources significantly affected by withdrawal of water. Percentage and total volume of water recycled and reused.
Biodiversity
EN11 EN12 Location and size of land owned, leased, managed in, or adjacent to, protected areas and areas of high biodiversity value outside protected areas. Description of significant impacts of activities, products, and services on biodiversity in protected areas and areas of high biodiversity value outside protected areas.
92
Performance Indicator EN13 EN14 EN15
Description Habitats protected or restored. Strategies, current actions, and future plans for managing impacts on biodiversity. Number of IUCN Red List species and national conservation list species with habitats in areas affected by operations, by level of extinction risk. Total direct and indirect greenhouse gas emissions by weight. Other relevant indirect greenhouse gas emissions by weight. Initiatives to reduce greenhouse gas emissions and reductions achieved. Emissions of ozone-depleting substances by weight. NOx, SOx, and other significant air emissions by type and weight. Total water discharge by quality and destination. Total weight of waste by type and disposal method. Total number and volume of significant spills. Weight of transported, imported, exported, or treated waste deemed hazardous under the terms of the Basel Convention Annex I, II, III, and VIII, and percentage of transported waste shipped internationally. Identity, size, protected status, and biodiversity value of water bodies and related habitats significantly affected by the reporting organizations discharges of water and runoff. Initiatives to mitigate environmental impacts of products and services, and extent of impact mitigation. Percentage of products sold and their packaging materials that are reclaimed by category.
Reported
Page
Emissions, effluents and waste

EN16 EN17 EN18 EN19 EN20 EN21 EN22 EN23 EN24
87
EN25
Products and services

EN26 EN27
Compliance
EN28 Monetary value of significant fines and total number of non-monetary sanctions for non-compliance with environmental laws and regulations. 89
Transport
EN29 Significant environmental impacts of transporting products and other goods and materials used for the organizations operations, and transporting members of the workforce.
Overall
EN30 Total environmental protection expenditures and investments by type.
Social: Labor Practices and Decent Work

Employment
LA1 LA2 LA3 Total workforce by employment type, employment contract, and region. Total number and rate of employee turnover by age group, gender, and region. Benefits provided to full-time employees that are not provided to temporary or parttime employees, by major operations. 76
93
Labor/management relations
Performance Indicator LA4 LA5 Description Percentage of employees covered by collective bargaining agreements. Minimum notice period(s) regarding significant operational changes, including whether it is specified in collective agreements. Reported Page 76
Occupational health and safety

LA6 Percentage of total workforce represented in formal joint management-worker health and safety committees that help monitor and advise on occupational health and safety programs. Rates of injury, occupational diseases, lost days, and absenteeism, and number of work-related fatalities by region. Education, training, counseling, prevention, and risk-control programs in place to assist workforce members, their families, or community members regarding serious diseases. Health and safety topics covered in formal agreements with trade unions. 77 77
LA7 LA8
LA9
Training and education

LA10 LA11 LA12 Average hours of training per year per employee by employee category. Programs for skills management and lifelong learning that support the continued employability of employees and assist them in managing career endings. Percentage of employees receiving regular performance and career development reviews. 80
Diversity and equal opportunity

LA13 Composition of governance bodies and breakdown of employees per category according to gender, age group, minority group membership, and other indicators of diversity. Ratio of basic salary of men to women by employee category. 80
LA14
Social: Human Rights

Diversity and equal opportunity
HR1 HR2 HR3 Percentage and total number of significant investment agreements that include human rights clauses or that have undergone human rights screening. Percentage of significant suppliers and contractors that have undergone screening on human rights and actions taken. Total hours of employee training on policies and procedures concerning aspects of human rights that are relevant to operations, including the percentage of employees trained.
Non-discrimination
HR4 Total number of incidents of discrimination and actions taken.
Freedom of association and collective bargaining

HR5 Operations identified in which the right to exercise freedom of association and collective bargaining may be at significant risk, and actions taken to support these rights.
Child labor
HR6 Operations identified as having significant risk for incidents of child labor, and measures taken to contribute to the elimination of child labor. 84
94
Forced and compulsory labor

Performance Indicator HR7 Description Operations identified as having significant risk for incidents of forced or compulsory labor, and measures to contribute to the elimination of forced or compulsory labor. Reported Page
Security practices
HR8 Percentage of security personnel trained in the organizations policies or procedures concerning aspects of human rights that are relevant to operations.
Indigenous rights
HR9 Total number of incidents of violations involving rights of indigenous people and actions taken.
Social: Society
Community
SO1 Nature, scope, and effectiveness of any programs and practices that assess and manage the impacts of operations on communities, including entering, operating, and exiting.
Corruption
SO2 SO3 SO4 Percentage and total number of business units analyzed for risks related to corruption. Percentage of employees trained in organizations anti-corruption policies and procedures. Actions taken in response to incidents of corruption. 81
Public policy
SO5 SO6 Public policy positions and participation in public policy development and lobbying. Total value of financial and in-kind contributions to political parties, politicians, and related institutions by country.
Anti-competitive behavior
SO7 Total number of legal actions for anti-competitive behavior, anti-trust, and monopoly practices and their outcomes.
Compliance
SO8 Monetary value of significant fines and total number of non-monetary sanctions for non-compliance with laws and regulations. 81
95
Social: Product Responsibility

Performance Indicator Description Reported Page
Customer health and safety

PR1 Life cycle stages in which health and safety impacts of products and services are assessed for improvement, and percentage of significant products and services categories subject to such procedures. Total number of incidents of non-compliance with regulations and voluntary codes concerning health and safety impacts of products and services during their life cycle, by type of outcomes. None
PR2
None
Product and service labelling

PR3 PR4 PR5 Type of product and service information required by procedures, and percentage of significant products and services subject to such information requirements. Total number of incidents of non-compliance with regulations and voluntary codes concerning product and service information and labeling, by type of outcomes. Practices related to customer satisfaction, including results of surveys measuring customer satisfaction. Programs for adherence to laws, standards, and voluntary codes related to marketing communications, including advertising, promotion, and sponsorship. Total number of incidents of non-compliance with regulations and voluntary codes concerning marketing communications, including advertising, promotion, and sponsorship by type of outcomes. None None None
Marketing communications
PR6 PR7 None None
Customer privacy
PR8 Total number of substantiated complaints regarding breaches of customer privacy and losses of customer data. None
Compliance
PR9 Monetary value of significant fines for non-compliance with laws and regulations concerning the provision and use of products and services. Fully Reported Partially Reported 81
Not Reported
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www.stingconsultants.com
Strategic Initiatives Group (Pvt) Ltd

25/13, Cyril de Silva Mawatha, Pepiliyana Road, Nugegoda Tel. No. 4941670 Fax: 4209074 Company Registration No: PV 9875
THIRD PARTY CHECKED STATEMENT The 2012 Sustainability Report of Watawala Plantations PLC has undergone a third-party level check by STING Consultants, against the requirements of the GRI G3 Guidelines, at C Level. The Self-Declared C level of this Report is hereby confirmed to be accurate. The aim of this statement is to confirm to readers the extent to which the GRI G3 Guidelines have been applied in the preparation of this Report. This does not represent in any way, an opinion on the value or quality of the Report and its content, or of the sustainability performance of the reporting organization.
Tiara Anthonisz Head of Strategic Corporate Responsibility STING Consultants 1st June 2012
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IMPROVING PRODUCTIVITY
THROUGH MECHANISATION
FINANCIAL INFORMATION
Annual Report of the Board of Directors on the Affairs of the Company Managing Directors and Chief Financial Officers Responsibility Statement Statement of Directors Responsibility Report of the Auditors Balance Sheet Income Statement Statement of Changes in Equity Cash Flow Statement Accounting Policies & Notes to the Financial Statements
Watawala Plantations PLC Financial Information
Annual Report of the Board of Directors on the Affairs of the Company

The details set out provide the pertinent information required by the Companies Act No.07 of 2007, listing rules of the Colombo Stock Exchange and are guided by recommended best accounting practices. are detailed below.
Directors Interest in transactions

The Directors of the Group made the general disclosures provided for in Section 192 (2) of the Companies Act No.07 of 2007. Note 31 to the financial statements has dealt with related party disclosures and include details of their interests in transactions.
Principal Activities, Business Review, Future Developments

The principal activities of the Company and its subsidiary during the year under review were cultivation, manufacturing and sale of Tea, Rubber, Palm Oil and direct exports of bulk and value added tea.
Directors Interest in Shares

G.Sathasivam R.K.Krishnakumar V.Govindasamy D.V.Seevaratnam P .T.Siganporia D.S.Ratnasingham K.Venkataramanan B.A.Hulangamuwa as at 31/03/12 - - - 23,000 - 5,000 - - as at 31/03/11 3000 5000 -
Review of Operations
The Chairmans and the Managing Directors reviews described briefly the Groups activities during the year under review. The financial results for the year are set out in the income statement. The Directors, to the best of their knowledge and belief, confirm that the Group has not engaged in any activities that contravene laws and regulations.
Directors Emoluments
Directors emoluments, in respect of the Company and the Group for the financial year 2011/2012 are Rs. 19,700,000 (2010/2011: Rs. 16,234,000) and Rs. 19,700,000 (2010/2011: Rs. 33,358,000) respectively, as given in Note 22 to the financial statements on page 133.
Financial Statements
The financial statements of the Company and its subsidiary are stated on page no. 106 to 139 in the Annual Report.
Auditors Report
The auditors report on the financial statements is stated on page no. 105 in the Annual report.
Corporate Donations
During the year 2011/2012 the Group has not made any donations.(2010/2011: Rs. 5,000,000)
Accounting Policies
The accounting policies adopted by the Company and its subsidiary in the preparation of financial statements are stated on pages 110 to 116. There were no changes in the accounting policies adopted from previous financial year other than the ones that are disclosed.
Directorate
Names of the Directors who held office during the financial year are given below and their brief profiles are appeared on pages 22 to 24 of the Annual report.
Interest Register
In compliance with the Companies Act No. 07 of 2007, the Company and its subsidiary maintained the Interest Registers. Particulars of entries in the interest register
Executive Directors
V.Govindasamy D.S.Ratnasingham D.V.Seevaratnam
100
Non-Executive Directors
R.K.Krishnakumar G.Sathasivam P .T.Siganporia K.Venkataramanan B.A.Hulangamuwa A.N.Fernando Special notice is given of the intention to propose an ordinary resolution for re-appointment of Mr.R.K.Krishnakumar,who attained the age of seventy four years notwithstanding the age limit of 70 years stipulated by section 210 of the Companies Act No. 07 of 2007. Mr. D.V. Seevaratnam retires by rotation and being eligible offers himself for re-election. Mr. K. Venkataramanan retires by rotation and being eligible offers himself for re-election.
Results of Operations
The Groups profit for the year amounted to Rs. 412,585,000.(2010/2011: Rs.642,472,000) while the Company recorded a net profit of Rs.520,839,000 (2010/2011:Rs.532,400,000). The Consolidated Income Statement along with the Companys Income Statement for the year are given on page 107. Details of transfer to / from reserves in respect of the Group and the company are shown in the Statement of Changes in Equity on page 108.
Capital Expenditure
The total capital expenditure on purchase and construction of property, plant & equipment and expenditure incured on immature plantations by the Company and the Group amounted to Rs. 573,292,000 (2010/2011: Company-Rs. 715,159,000 and GroupRs.742,657,000). The movement in property, plant & equipment is set out in note no 5 to the financial statements page on 117 and 120.
Auditors
Messes. PriceWaterhouseCoopers,(PWC) Chartered Accountants are deemed to be re-appointed as auditors in terms of Section 158 of the Companies Act No. 07 of 2007. The audit fees paid to PWC during the year under review by the Company and the Group amounted to Rs.1,696,000. (2010/2011: Rs.1,200,000) and Rs.1,962,000 (2010/2011 Rs.1,600,000) respectively. Further the Group has paid Rs.200,000 (2010/2011: Rs.138,000) for reimbusement of expenses. As far as the Directors are aware, the Auditors do not have any relationship (other than that of an auditor) with the Company or of its subsidiary other than those disclosed above. The auditors also do not have any interests in the Company or of its subsidiary.
Stated Capital and Reserves

The stated capital of the Company as at 31 March 2012 is Rs. 310,000,000/- comprising of 236,666,670 ordinary shares. and 1 Golden share. There were no changes in the stated capital during the year from previous financial year. The capital and reserves of the Group and the Company as at 31 March 2012 amounts to Rs 2,832,104,000/and Rs. 2,830,286,000 (2010/2011 - Group Rs. 2,620,686,000/- and Company Rs.2,510,614,000)
Share Information
Information relating to earnings, dividends per share and share trading is stated in the Financial Statements on the pages 128, 142 and 143.
Turnover
The revenue of the Group for 2011/2012 was Rs.4,535,486,000 (2010/2011: Rs. 6,158,246,000) while the Companys revenue was Rs.4,532,269,000 (2010/2011:Rs. 4,663,744,000). An analysis of income is given note 19 to the financial statements.
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Key Indications
Per Share Earnings Dividends Net Assets Market Value Highest Lowest Closing Company 2011/2012 2.20 0.35 11.96 Date 02/01/2012 15/02/2012 31/03/2012 Company 2010/2011 2.25 0.85 10.60 2011/2012 14.50 8.80 10.00 Group 2011/2012 1.74 11.97 Date 27/01/2011 31/03/2011 31/03/2011 Group 2010/2011 2.71 11.07 2010/2011 34.70 24.50 24.50
Events Occurring after the Balance Sheet Date

No events have occurred after the balance sheet date, wich would require adjustments to or disclosure in the financial statements.
Going Concern
The Directors, after making necessary inquiries and reviews, including reviews of the Groups budget for the ensuing year, capital expenditure requirements, future prospects and risk, cash flows and borrowings facilities, have a reasonable expectation that the Company and the Group have adequate resources to continue in operational existence for the foreseeable future. Therefore the going concern basis is adopted in the preparation of the financial statements.
Shareholders
It is the Groups policy to endeavor to ensure equitable treatment of its shareholders.
Dividends
The Directors have recommended Rs. 0.35 per share as first and final dividends to the shareholders for the financial year ended 31 March 2012.
Annual General Meeting

The Annual General Meeting will be held at the Park Premier Banquet Hall at Excel World, No.338, T.B.Jaya Mawatha, Colombo 10, on Friday 06th July 2012 at 10.00am. The Notice of the Annual General Meeting appears on page 154. For and on behalf of the Board
Statutory Payments
The Directors to the best of their knowledge and belief are satisfied that all statutory payments in relation to employees and the Government Institutions have been made up to date.
Corporate Governance/ Internal Control

Adoption of good governance practices has become an essential requirement in todays corporate culture. The practices carried out by the Group are explained in the Corporate Governance statement on pages 48 to 59.
V.Govindasamy Managing Director
D.V. Seevaratnam Director/CEO
Secretaries and Financial Services (Pvt) Ltd Secretaries 17/05/2012
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Manging Directors and Chief Financial Officers Responsibility Statement

The Financial Statements of the Watawala Plantations PLC are prepared in compliance with the Sri Lanka Accounting Standards issued by the Institute of Chartered Accountants of Sri Lanka, Companies Act, No 07 of 2007, Sri Lanka Accounting and Auditing Standards Act No.15 of 1995, and the Listing Rules of the Colombo Stock Exchange. The Accounting Policies used in the preparation of the financial statements are appropriate and are consistently applied by the Company. There are no departures from the prescribed Accounting Standards in their adoption. Comparative information is reclassified wherever necessary to comply with the current presentation. The significant accounting policies and estimates that involve a high degree of judgment and complexity were discussed with our External Auditors and the Audit Committee. The Board of Directors and Chief Financial Officer of the Company accept responsibility for the integrity and objectivity of these financial statements. The estimates and judgments relating to the financial statements were made on a prudent and reasonable basis, in order that the financial statements give a true and fair view of the state of affairs, the forms and substance of transactions and that the Companys state of affairs is reasonably presented. To ensure this, the Company has taken proper and sufficient care in installing a system of internal control and accounting records, for safeguarding assets and for preventing and detecting frauds as well as other irregularities, which is reviewed, evaluated and updated on an ongoing basis. Our internal auditors V. Govindasamy N.A.L.Cooray Chief Financial Officer have conducted periodic audits to provide reasonable assurance that the established policies and procedures of the Company were consistently followed. However, there are inherent limitations that should be recognized in weighing the assurance provided by any system of internal controls and accounting. The financial statements of the company were audited by Messrs PriceWaterhouseCoopers, Chartered Accountants and their report is given on page 101 of the Annual Report. The Audit Committee of the company meets periodically with the internal audit team and the external auditors to review their audit plans, assess the manner in which these auditors are performing their responsibilities and to discuss their reports on, internal controls and financial reporting issues. To ensure complete independence, the external auditors and the internal auditor have full and free access to the members of the Audit Committee to discuss any matters of substance. We confirm that the Company have complied with all applicable laws and regulations and guidelines and that there are no material litigations that are pending against the Company.
Managing Director 17/05/2012
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Statement of Directors Reponsibility

The following statement, which should be read in conjunction with the Auditors Statement of their responsibilities set out in their report, is made with a view to distinguish the respective responsibilities of the Directors and of the Auditors, in relation to the financial statements. The Directors are required by the Companies Act No. 07 of 2007, to prepare financial statements for each financial year, which give 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 for the financial year. The Directors are required to prepare these financial statements on going concern basis, unless it is not appropriate. Since the Directors are satisfied that the Company has resources to continue in business for the foreseeable future, the financial statements continue to be prepared on the said basis. The Directors consider that in preparing the financial statements on pages 102 to 131 the Company used appropriate accounting policies, consistently applied and supported by reasonable and prudent judgments and estimated that all accounting standards, which they consider to be applicable, are followed. V. Govindasamy Managing Director D.V. Seevaratnam Director/CEO The Directors are responsible for ensuring that the Company keeps accounting records, which will disclose with reasonable accuracy the financial position of the Company and which will enable them to ensure that financial statements comply with the Companies Act. No. 07 of 2007. The Directors are generally responsible for taking such steps that are reasonably for them to safeguard the assets of the Company and to prevent and detect fraud and other irregularities. The Directors are confident that they discharged their responsibility as set out in this statement. They also confirm that to the best of their knowledge all statutory payments payable by the Company as at the Balance Sheet date, are paid or where relevant, provided for. By Order of the Board
17/05/2012
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Independent Auditors Report
Balance sheet
In Rs.000s As at 31st March Notes ASSETS Non-current assets Leasehold right to bare land of JEDB / SLSPC estates Immovable estate assets on finance lease(other than bare land) Fixed assets other than immature / mature plantations Immature / mature plantations Investment in gratuity fund Investments in subsidiaries Total non-current assets Current assets Inventories Trade and other receivables Cash and cash equivalents Total current assets Total assets EQUITY AND LIABILITIES Equity attributable to equity holders of the Company Stated capital General reserve Retained earnings Total equity Non-current liabilities Borrowings Finance lease obtained from JEDB / SLSPC Retirement benefit obligations Deferred income and capital grants Net deferred tax liability Total non-current liabilities Current liabilities Borrowings Finance lease obtained from JEDB / SLSPC Trade and other payables Current tax liabilities Total current liabilities Total liabilities Total equity and liabilities Group 2012 2011 Company 2012 2011
3 4 5 6 7
233,648 194,474 1,710,115 2,155,042 42,641 4,335,920 516,085 325,724 470,231 1,312,040 5,647,960
240,683 212,121 1,769,768 1,867,121 4,089,693 797,068 488,783 40,697 1,326,548 5,416,241
233,648 194,474 1,710,115 2,155,042 42,641 852 4,336,772 516,085 343,808 447,716 1,307,609 5,644,381
240,683 212,121 1,651,504 1,867,121 355,852 4,327,281 568,427 312,649 15,061 896,137 5,223,418
8 9 10
11 12
310,000 150,000 2,372,104 2,832,104 210,727 360,253 815,849 244,935 30,128 1,661,892 546,145 5,310 588,677 13,832 1,153,964 2,815,856 5,647,960
310,000 150,000 2,160,686 2,620,686 304,730 365,560 643,872 255,798 27,129 1,597,089 437,029 5,313 742,121 14,003 1,198,466 2,795,555 5,416,241
310,000 150,000 2,370,286 2,830,286 210,727 360,253 815,849 244,935 30,275 1,662,039 546,145 5,310 587,631 12,970 1,152,056 2,814,095 5,644,381
310,000 150,000 2,050,614 2,510,614 304,730 365,560 638,008 255,798 26,161 1,590,257 437,029 5,313 667,235 12,970 1,122,547 2,712,804 5,223,418
13 14 15 16 17
13 14 18
I certify that these financial statements have been prepared 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. These financial statements were authorised for issue by Board of Directors on 17th May 2012.
Managing Director Date: 17th May 2012
Director/CEO
The notes on pages 110 to 139 form an integral part of these financial statements.
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Income statement
In Rs.000s For the year ended 31st March Notes Revenue Cost of sales Gross profit Other operating income Administrative expenses Distribution expenses Management fees Operating profit Net finance expenses Profit before tax Income tax expenses Profit for the year from continuing operations Discontinued operations Profit from discontinued operations Profit for the year Attributable to: Equity holders of the Company Non-controlling interest Profit for the year Earnings per share (Rs) 26 25 21 22 24 19 20 19 Group 2012 4,535,486 (4,285,990) 249,496 344,218 (211,331) (49,331) 333,052 (85,468) 247,584 (4,755) 242,829 2011 6,158,246 (4,958,450) 1,199,796 124,369 (342,364) (167,142) (90,033) 724,626 (85,984) 638,642 3,830 642,472 Company 2012 4,532,269 (4,285,990) 246,279 616,708 (203,235) (49,331) 610,421 (85,468) 524,953 (4,114) 520,839 2011
4,663,744 (3,980,740) 683,004 239,309 (220,759) (90,033) 611,521 (84,951) 526,570 5,830 532,400
32
169,756 412,585
642,472
520,839
532,400
412,585 412,585 1.74
642,472 642,472 2.71
520,839 520,839 2.20
532,400 532,400 2.25
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Statement of changes in equity - Group

In Rs.000s Balance as at 1st April 2010 Net profit for the year Dividends paid for the year ended 31st March 2010 De - consolidation of Watawala Agro Limited Balance at 31st March 2011 Balance as at 1st April 2011 Net profit for the year Dividends paid for the year ended 31st March 2011 Balance at 31st March 2012 Stated capital 310,000 310,000 310,000 310,000 General reserve 150,000 150,000 150,000 150,000 Retained earnings 1,584,167 642,472 (65,083) (870) 2,160,686 2,160,686 412,585 (201,167) 2,372,104 Total 2,044,167 642,472 (65,083) (870) 2,620,686 2,620,686 412,585 (201,167) 2,832,104
Statement of changes in equity - Company

In Rs.000s Balance as at 1st April 2010 Net profit for the year Dividends paid for the year ended 31st March 2010 Balance at 31st March 2011 Balance at 1st April 2011 Net profit for the year Dividends paid for the year ended 31st March 2011 Balance at 31st March 2012 Stated capital 310,000 310,000 310,000 310,000 General reserve 150,000 150,000 150,000 150,000 Retained earnings 1,583,297 532,400 (65,083) 2,050,614 2,050,614 520,839 (201,167) 2,370,286 Total 2,043,297 532,400 (65,083) 2,510,614 2,510,614 520,839 (201,167) 2,830,286
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Cash flow statement

In Rs.000s For the year ended 31st March Notes Cash flows from operating activities Cash generated from operations Interest paid Tax paid Retirement benefit obligations paid Interest received Net cash generated from operating activities 15 24 30 24 630,936 (86,492) (93,653) 1,024 451,815 856,487 (86,317) (23,511) (60,826) 333 686,166 565,362 (86,492) (93,653) 1,024 386,241 981,602 (85,227) (23,511) (60,114) 276 813,026 Group 2012 2011 Company 2012 2011
Investing activities Grants received Field development expenditure Purchase of property, plant and equipment Proceeds from sale of property, plant and equipment Proceeds from disposal of subsidiary Dividend received Investment in gratuity fund Investment in subsidiaries Net cash flows from/(used in) investing activities 7 20 ( c ) 20 16 6 5 (350,484) (222,808) 43,422 741,595 (42,641) 169,084 38,554 (317,363) (425,294) 9,348 (694,755) (350,484) (222,808) 43,422 741,595 68,693 (42,641) 237,777 38,554 (317,363) (397,796) 186,275 (355,852) (846,182)
Financing activities Dividends paid Proceeds from bank borrowings Repayment of bank borrowings Repayment of lease principal Net cash flows from /(used in) financing activities 27 13 13 13 & 14 (201,167) 186,909 (276,214) (18,308) (308,780) (65,083) 626,920 (671,755) (14,007) (123,925) (201,167) 186,909 (276,212) (18,308) (308,778) (65,083) 626,924 (671,755) (14,007) (123,921)
Net increase/(decrease) in cash and cash equivalents
312,119
(132,514)
315,240
(157,077)
Movement in cash and cash equivalents At the beginning of year Increase/(decrease) At end of year 10 (244,907) 312,119 67,212 (112,393) (132,514) (244,907) (270,543) 315,240 44,697 (113,466) (157,077) (270,543)
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Notes to the Consolidated financial statements

1. General information
(a) Company Watawala Plantations PLC (the Company) is a public limited liability Company, listed on the Colombo Stock Exchange, incorporated and domiciled in Sri Lanka. The registered office of the Company is located at No 60, Dharmapala Mawatha, Colombo 3. The principal activities of the Company during the year continued to be cultivation, manufacture and sale of tea, rubber and palm oil, direct exports of bulk and value added tea and sale of purified palm oil. The staff strength of the Company as at 31 March 2012 is 12,168. 2.03 Aproval of financial statements by Directors The financial statements were authorised for issue by the Board of Directors in accordance with the resolution of the Directors on 17 March 2012.
2.04 Basis of Consolidation Subsidiaries are all entities over which the Group has the power to govern the financial and operating policies generally accompanying a shareholding of more than one half of the voting rights. The existence and effect of potential voting rights that are currently exercisable or convertible are considered when assessing whether the Group controls another entity. Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are deconsolidated from the date that control ceases. Intercompany transactions, balances and unrealised gains on transactions between group companies are eliminated. Unrealised losses are also eliminated but considered an impairment indicator of the asset transferred. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the Group.
(b) Group financial statements The Group financial statements of Watawala Plantations PLC as at the year ended 31 March 2012 comprise the Company and its fully-owned subsidiary Watawala TeaAustralia Pty Ltd which continues to promote branded tea business in Australia. The staff strength of the Group as at 31 March 2012 is 12,169.
2. Summary of significant accounting policies

The principal accounting policies applied in the preparation of these consolidated financial statements are set out below. These policies have been consistently applied to all the years presented, unless otherwise stated.
2.05 Foreign currency translation (a) Functional and presentation currency Items included in the financial statements of each of the Groups entities are measured using the currency of the primary economic environment in which the entity operates (the functional currency). The financial statements are presented in Sri Lanka Rupees (LKR), which is the Companys functional and the Groups presentation currency. Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the income statement. Monetary assets and liabilities balances are translated at year end exchange rate. Foreign exchange gains and losses that relate to borrowings and cash and cash equivalents are presented in the income statement within finance income or cost. The financial statements of foreign entities within the Group whose functional currency is different to presen-
2.01 Basis of preparation The financial statements are prepared in accordance with Sri Lanka Accounting Standards on the historical cost basis of accounting. 2.02 Statement of compliance The preparation of Group financial statements in conformity with Sri Lanka Accounting Standards requires the use of estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the report of amounts of revenue and expenses during the reporting period. The resulting accounting estimates will, by definition, rarely equal the related actual results. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amount of assets and liabilities within next financial year are given in note 2.25.
(b) Transactions and balances
(C) Foreign operations
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tation currency (LKR) are translated to Sri lankan Rupees as follows: Assets and liabilities - translated at the middle rate of exchange at the date of balance sheet. Income and expenses - translated at the spot rate or the average exchange rate applicable for the year. All resulting foreign exchange differences are recognised in the income statement.
2.06.05 Assets / liabilities classified as held for transfer Assets and liabilities (primarily non-current assets) that are expected to be recovered principally than through continuing use are classified as held for transfer. These are measured at the fair value less cost to transfer.
2.06.06 Discontinued operations A discontinued operation is a component of the Groups business that represents a separate major line of business that has been disposed off or held for sale. Classification as discontinued operations occurs upon disposal or when the operation meets the criteria to be classified as held for sale.
2.06 Property, plant and equipment 2.06.01 Recognition and measurement Property,plant and equipment are recognised if it is probable that future economic benefits accociated with the assets will flow to the Group and the cost of the asset can be measured reliably. All property, plant and equipment are measured at cost less accumulated depreciation and accumulated impairment loss. The cost includes expenditure that is directly attributable to the acquition of assets. The self-constructed assets includes the cost of materials, direct labour and any other costs directly attributable to bringing the asset to a working condition for its intended use, and the costs of dismantling and removing the items and restoring the site on which they are located. Group applies cost model to property, plant and equipment.
2.06.07 Mature and immature plantations The cost directly attributable to re-planting and new planting are classified as immature plantations up to the time of harvesting the crop. General charges incurred on the re-plantation and new plantations are apportioned based on the labour days spent on respective replanting and new planting and capitalised on immature areas. The remaining portion of the general charges are 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 lives using the depreciation rates given in the policy no.2.06.10.
2.06.02 Subsequent costs Repairs and maintenance are charged to the income statement during the financial period in which they are incurred. The cost of major renovations is included in the carrying amount of the asset when it is probable that future economic benefits in excess of the originally assessed standard of performance of the existing asset will flow to the Group. Major renovations are depreciated over the remaining useful life of the related asset. The cost of improvements to or on leasehold property, is capitalised, and depreciated over the unexpired period of the lease or the estimated useful lives of the improvements, which ever is shorter.
2.06.08 Infilling cost Where infilling results in an increase in the economic life of a relevant field beyond its previously assessed standard of performance, the costs are capitalised in accordance with Sri Lanka Accounting Standard, No. 32 Plantations, and depreciated over the remaining useful life at rates applicable to mature plantations. Infilling costs that are not capitalised are charged to the income statement in the year in which they are incurred.
2.06.03 Biological assets Livestock is measured at their fair value less estimated point-of-sale costs. The fair value of livestock is determined based on market prices of livestock of similar age, breed and genetic merit.
2.06.09 Derecognition Gains and losses on disposals are determined by comparing proceeds with carrying amount and are included in operating profit.
2.06.10 Depreciation Depreciation is calculated on the straight-line method to write off the cost of each asset to their residual values over their estimated useful lives. Assets held under finance lease are amortised over the shorter of the lease term and their useful lives, in equal amounts. Depreciation of an asset begins when it is available for use and ceases at the earlier of the date that the asset is classfied as held for sale and the date that the asset is discontinued.
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2.06.04 Capital work-in-progress Capital work-in-progress is stated at cost. These are expenses of a capital nature directly incurred in the construction of buildings, major plant and machinery and system development, awaiting capitalisation. Capital work-in-progress would be transferred to the relevant asset when it is available for use. Capital work-in-progress is stated at cost less any accumulated impairment losses.
The economic useful lives of assets are estimated below for depreciation/amortisation purposes. Freehold Leasehold assets assets Years Years - 53 - 30 - 30 40 25 13 15 8 4 6 10 5 20 40 3 - 33 20 20 10 33 - 5 20 40 10 30 20 20 -
as part of the asset in accordance with the Sri Lanka Accounting Standards. Capitalisation of borrowing cost seases when substantially all the activities necessary to prepare the qualifying asset for its intended use are completed.
Bare land Improvements to land Vested other assets Buildings Plant and machinery Equipment Computer Equipment Computer software Furniture and fittings Motor vehicles
2.09 Investment In the parent Companys financial statements, investments in subsidiaries are carried at cost under the parent Company accounting policy for long-term investments. Provision for fall in value is made when in the openion of the Directors there has been a decline other than temporary in the value of the investment. 2.10 Accounting for leases Leases in which a significant portion of the risks and rewards of ownership are retained by the lessor are classified as operating leases. Payments made under operating leases (net of any incentives received from the lessor) are charged to the income statement on a straight-line basis over the period of the lease. The Group leases certain property, plant and equipment. Leases of property, plant and equipment where the Group has substantially all the risks and rewards of ownership are classified as finance leases. Finance leases are capitalised at the commencement of the lease at lower of the fair value of the leased property and the present value of the minimum lease payments. Each lease payment is allocated between the liability and finance charges so as to achieve a constant rate on the finance balance outstanding. The corresponding rental obligations, net of finance charges, are included in other long-term payables. The interest element of the finance cost is charged to the income statement over the lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period. The property, plant and equipment acquired under finance leases is depreciated over the shorter of the useful life of the asset and the lease term. 2.11 Capital grants Grants relating to the purchase of property, plant and equipment are included in non current liabilities as deferred income and are credited to the income statement on a straight line basis over the expected lives of the related assets.
Sanitation, water and electricity Roads and bridges Fences and security lights Mini hydro power Mature plantation -Tea -Rubber -Palm oil -Caliandra -Coconut
2.07 Impairment of assets Assets that have an indefinite useful life are not subject to amortisation and are tested annually for impairment. Assets that are subject to amortisation are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the assets carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an assets fair value less costs to sell and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (cash generating units). 2.08 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 acquition, construction or production of a qualifying asset that takes a substantial period of time to get ready for its inteded use or sale is capitalised
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2.12 Inventories Inventories other than produce stock and nurseries are stated at lower of cost and net realisable value. Net realisable value is the price at which inventories can be sold in the ordinary course of business. The Group has valued unsold produce stock
2.16 Liabilities and provisions Liabilities classified as current liabilities in the balance sheet are those which fall due for payment on demand or within one year from the reporting date. Non-current liabilities that fall due for payment later than one year from the reporting date. Provisions are recognised when the Group has a present legal or constructive obligation as a result of past events, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation, and a reliable estimate of the amount of the obligation can be measured reliably. All known liabilities and provisions have been accounted for in preparing the financial statements. Trade payables are recognised initially at cost.
(tea,rubber,palm oil) at since realised prices. The balance unsold stock remained as at the balance sheet date valued at an estimated selling prices based on most recent selling prices available subsequent to the year end. Nurseries are valued at the cost of direct materials, direct labour and an appropriate proportion of other directly attributable overheads or the net realisable value whichever is lower. 2.13 Trade receivables Trade receivables are carried at anticipated realisable value. A provision for impairment of trade receivables is established when there is objective evidence that the Group will not be able to collect all amounts due according to the original terms of the receivables. Significant financial difficulties of the debtor, probability that the debtor will enter bankruptcy or financial reorganisation and default payments are considered indicators that the trade receivable is impaired. The carrying amount of the asset is reduced through the use of an allowance account, and the amount of the loss is recognised in the income statement within distribution cost. When a trade receivable is uncollectible, it is written off against the allowance account for trade receivable. Subsequent recoveries of amounts previously writtenoff are credited against distribution cost in the income statement. 2.14 Cash and cash equivalents For the purposes of the cash flow statement, cash and cash equivalents comprise cash in hand, deposits held at call with banks, net of bank overdrafts. In the balance sheet, bank overdrafts are included in borrowings under current liabilities. 2.15 Stated Capital Ordinary shares are classified as stated capital. The details are given in note 11.
2.17 Employee retirement benefits 2.17.01 Defined contribution plans Defined contribution plan is a post employment plan under which an entity pays fixed contribution into a separate entity and will have no legal or constructive obligation to pay a further amount. Obligations for contributions to defined contribution plans are recognised as an expense in the income statement as and when they are due. a) Employees Providend Fund Estate Staff Provident Society Ceylon Planters Provident Fund All employees of the Group are members of the Employees Provident Fund or the Estate Staff Provident Society or Ceylon Planters Provident Fund to which the Group contributes 12% of the salary of each employee. (b) Employees Trust Fund The Group contributes 3% of the salary of each employee. 2.17.02 Defined benefit plan - retiring gratuity Defined benefit plans define an amount of benefit that an employee will receive on retirement, usually dependent on one or more factors such as age, years of service and compensation. The Group has adopted the benefit plan as required under the Payment of Gratuity Act No. 12 of 1983 for all
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2.17.02 Defined benefit plan - retiring gratuity (Cont.) eligible employees. The benefit plan is patially funded. Provision for gratuity is made by the Group taking account of the recommendation of an independent qualified actuaries firm, Messrs Actuarial & Management Consultants (Private) Limited. The liability recognized in the balance sheet in respect of defined benefit plans is the present value of the defined benefit obligation at the balance sheet date together with adjustments for unrecognized past service cost. The defined benefit obligation is calculated annually by the Company using the projected unit credit method prescribed in Sri Lanka Accounting Standard 16; Employee Benefits. The present value of the defined benefit obligation is determined by discounting the estimated future cash flows using the interest rates of Government bonds that are denominated in the currency in which the benefits will be paid, and that have terms to maturity approximating to the terms of the related pension liability. Gains and losses arising from experience adjustments and changes in actuarial assumptions are charged or credited to income statement in the period in which they arise. Past service costs are recognized immediately in income statement, unless the changes to the plan are conditional on the employees remaining in service for a specific period of time (the vesting period). In this case, the past service costs are amortised on a straight-line basis over the vesting period. Under the Payment of Gratuity Act No.12 of 1983, the liability to an employee arises only on completion of 5 years of continued service. 2.17.03 Gratuity investment fund The Board of Directors has decided to fund the gratutity liability proportionately based on the Groups performance each year. 2.18 Income tax The tax expense for the period comprises current and deferred tax. Tax is recognised in the income statement, except to the extent that it relates to items recognised in other comprehensive income or directly in equity. In this case the tax is also recognised in other comprehensive income or directly in equity, respectively.
2.18.01 Current income tax The current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted by end of the reporting period in the countries where the Company and subsidiaries operate and generate taxable income. Management periodically evaluates positions taken in tax returns with respect to situations in which applicable tax regulation is subject to interpretation. It establishes provisions where appropriate on the basis of amounts expected to be paid to the tax authorities. 2.18.02 Deferred tax Deferred income tax is recognised, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the consolidated financial statements. However, the deferred income tax is not accounted for if it arises from initial recognition of an asset or liability in a transaction other than a business combination that at the time of the transaction affects neither accounting nor taxable profit or loss. Deferred income tax is determined using tax rates (and laws) that have been enacted or substantially enacted by the end of reporting period and are expected to apply when the related deferred income tax asset is realised or the deferred income tax liability is settled. Deferred income tax assets are recognised only to the extent that it is probable that future taxable profit will be available against which the temporary differences can be utilised. Deferred income tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets against current tax liabilities and when the deferred income taxes assets and liabilities relate to income taxes levied by the same taxation authority on either the taxable entity or different taxable entities where there is an intention to settle the balances on a net basis.
2.19 Revenue recognition The Group has adopted following policies and methods to determine the point in time at which the entity transfers the significant risks and rewards of ownership of goods and to determine the stage of completion of the service.
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2.19.01 Perennial crops Revenue and profit or losses on perennial crops are recognised in the year of harvesting. Revenue comprises the invoiced value of sales, net of brokerage, public sale expenses, and other levies related to turnover. a) Sale of tea at auction As per the Tea By-Laws & Conditions issued by the Ceylon Tea Traders Association (Section 17) the highest bidder(buyer) is accepted and a sale shall be completed at the fall of the hammer. The sale is valued at the price and quantity agreed upon and raising the Sale Note. b) Sale of rubber at auction As per the Rubber By-Laws & Conditions issued by the Colombo Rubber Traders Association the highest bidder(buyer) is accepted and a sale shall be completed at the fall of the hammer. The sale is valued at the price and quantity agreed upon and raising the Sale Note. c) Sale of palm oil The revenue is recognised when the cash is received and the oil is ready for delivery to the buyer. Usaully, buyer arranges the transport while acknowledging the quantity. 2.19.02 Other income Other income is recognised on an accruel basis.
2.20 Segment information The segmental information has been prepared in accordance with the management approach, which requires presentation of the segments on the basis of the internal reports about components of the entity which are regularly reviewed by the chief operating decision maker in order to allocate resources to a segment and to assess its performance. The Group comprises the following major business segments. Tea Rubber Palm oil Exports
Measurement of segment assets,liabilities ,segment revenue and results is based on the accounting policies set out above. Segment expenses are expenses that are directly attributed to a segment or a relevant portion of expenses that can be allocated on a reasonable basis as determined by the management. Inter-segment pricing is determined on an arms length basis based on fair market prices. Considering the activities of the operations, segment information based on geographical segments does not arise. The segments information is given in the note 19 to the financial statements.
2.19.03 Profit/loss from disposal of property,plant and equipment Profit/loss from sale of property,plant and equipment is recognised in the period in which the sale occures and the delivery order is issued. 2.19.04 Income on harvesting of matured trees (as part of reforestation program) Income is recognised when the cash is received and the delivery order is issued. 2.19.05 Interest income Interest income is recognised on an accruel basis.
2.21 Commitments and contingencies Contingencies are possible assets or obligations that arise from a past event and would be confirmed only on the occurrence or non-occurrence of uncertain future events, which are beyond the control of Group. Contingent liabilities are not recognised, instead, disclose the existence of contingent liability,unless the possibility of payment is remote, as set out in note 28 and 29. 2.22 Events after the reporting period Events after the reporting period are events, favourable and unfavourable, that occur between the end of the reporting period and the date when the financial statements are authorised for issue as given in note 33. 2.23 Dividends If the dividends are declared after the reporting period but before the financial statements are authorised for
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2.19.06 Dividend income Dividend income is recognised in the income statement on an accruel basis when the Groups right to receive the dividend is established.
issue, the dividends are not recognised as a liability at the end of the reporting period. The provision for dividends is recognised at the time the dividend recommended and declared by the Board of Directors is aproved by the Shareholders. The details of dividends are detailed in note 27. 2.24 Comparatives Where necessary, comparative figures have been adjusted to conform with changes in presentation in the current year. 2.25 Critical accounting estimates and judgements a) Income taxes The Group is subject to income taxes in numerous jurisdictions. Significant judgement is required in determining the worldwide provision for income taxes. There are many transactions and calculations for which the ultimate tax determination is uncertain. The group recognises liabilities for anticipated tax audit issues based on estimates of whether additional taxes will be due. Where the final tax outcome of these matters is different from the amounts that were initially recorded, such differences will impact the current and deferred income tax assets and liabilities in the period in which such determination is made.
b)Pension benefits - gratuity The present value of the pension obligations depends on a number of factors that are determined on an actuarial basis using a number of assumptions. The assumptions used in determining the net cost (income) for pensions include the discount rate. Any changes in these assumptions will impact the carrying amount of pension obligations.
The Group determines the appropriate discount rate at the end of each year. This is the interest rate that should be used to determine the present value of estimated future cash outflows expected to be required to settle the pension obligations. In determining the appropriate discount rate, the group considers the interest rates of high-quality corporate bonds that are denominated in the currency in which the benefits will be paid, and that have terms to maturity approximating the terms of the related pension liability.
Other key assumptions for pension obligations are based in part on current market conditions.
3. Leasehold right to bare land of JEDB/SLSPC estates

In Rs.000s Group 2012 Revaluation as at 18 June 1992 Cost At the 31st March Accumulated amortization At the 31st March Amortization for the year At the 31st March Carrying value As at 31st March 233,648 240,683 233,648 240,683 132,157 7,035 139,192 125,122 7,035 132,157 132,157 7,035 139,192 125,122 7,035 132,157 372,840 372,840 372,840 372,840 372,840 2011 372,840 Company 2012 372,840 2011 372,840
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The leases of JEDB/SLSPC estates handed over to the Company for a period of 53 years have all been executed. The leasehold rights to the land on all these estates have been taken into the books of the Company as at 18 June 1992 immediately after formation of the Company in terms of
a ruling obtained from the Urgent Issues Task Force (UITF) of the Institute of Chartered Accountants of Sri Lanka. The bare land has been recorded at the value established for each land by valuation specialist, D R Wickramasinghe, just prior to the formation of the Company.
4. Immovable estate assets on finance lease (other than bare land) - Group and Company
In Rs. 000s
Other Roads Improvements vested Mature and Water to land assets plantations bridges supply Buildings Minihydro power plant Machinery
Total
Revaluation as at 18 June 1992
3,340
3,305
406,633
484
3,838
93,279
1,540
32,506
544,925
Cost as at 31st March 2011
3,340
3,305
406,633
484
3,838
93,279
1,540
32,506
544,925
Cost as at 31st March 2012
3,340
3,305
406,633
484
3,838
93,279
1,540
32,506
544,925
Accumulated amortization As 31st March 2010 Amortisation for the year (Note 22) At the 31st March 2011 Amortisation for the year (Note 22) At the 31st March 2012 1,973 111 2,084 111 2,195 801 44 845 44 889 208,455 13,541 221,996 13,541 235,537 212 11 223 11 234 3,394 186 3,580 186 3,766 66,276 3,754 70,030 3,754 73,784 1,540 1,540 1,540 32,506 32,506 32,506 315,157 17,647 332,804 17,647 350,451
Carrying value As at 31st March 2011 1,256 2,460 184,637 261 258 23,249 212,121
As at 31st March 2012
1,145
2,416
171,096
250
72
19,495
194,474
a.
Assets in these estates under finance leases have been taken into books of the Company retrospectively retroactive from 18 June 1992. For this purpose, the Board of Directors of the Company decided at its meeting held on 8 March 1995 that those assets would be taken at their book value as they appeared in the books of the JEDB / SLSPC, on the day immediately preceding the date of formation of the Company.
b.
Estate leases shown under immature plantation (revalued as at 18 June 1992) have been transferred to mature plantations as at the balance sheet date. Investment by the Company on mature and immature plantations is shown separately under mature / immature plantations in note 06 to the financial statements.
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5. Fixed assets other than immature / mature plantations - Group

In Rs. 000s
Buildings Capital Plant Furniture work in Motor and and Biological progress vehicles machinery Equipment Computer fittings assets
Others
Total
Cost At 31st March 2010 Additions Transfers Disposals At 31st March 2011 Additions Transfers Disposal of subsidiary Disposals At 31st March 2012 775,591 650,388 63,531 (345) 713,574 62,017 37,665 293,532 7,116 18,557 (38,925) 55,873 (7,389) 26,686 (41,026) (7,783) (23,899) 136,191 11,415 (46,616) 801,918 240,567 (188) 129,371 141,272 13,769 188 (275) 154,954 5,136 5,813 5,813 5,602 (10,606) 33,718 (6,096) 40,424 3,476 345 44,245 79 11,212 114,894 2,091,305 10,843 (2,700) 6,778 24,306 7,507 425,294 (10,364) 261,733 (38,925) (138,049) (60,495) 20,037 146,707 2,530,499
44,781 342,016 1,042,297
19,355 139,200 2,506,235
(5,855) (56,663)
18,558 265,423 1,122,859
Accumulated depreciation At 31st March 2010 Charge for the year (Note 22) Disposals At 31st March 2011 Charge for the year (Note 22) Disposals Disposal of subsidiary At 31st March 2012 Carrying value As at 31st March 2011 As at 31st March 2012 643,768 688,058 44,781 160,214 18,558 87,136 711,616 732,579 57,273 36,063 4,739 8,542 16,221 5,729 19,355 111,801 1,769,768 20,037 113,413 1,710,115 87,533 - (25,878) (11,200) - 178,287 (4,245) (3,269) 390,280 (3,807) 100,128 2,873 (1,509) 27,989 33,294 (30,123) (19,785) 820,384 69,806 17,727 (5,272) 33,563 330,681 67,113 (275) 97,681 6,254 1,074 1,799 28,024 1,474 27,399 5,895 (5,547) 736,467 133,825 - 181,802 53,927 15,879 - 138,544 48,530 275,840 54,841 86,866 11,090 1,074 25,102 2,922 24,813 2,586 605,092 136,922
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05. Fixed assets other than immature / mature plantations - Company

In Rs. 000s
Capital work in Buildings progress Plant Furniture Motor and and Biological vehicles machinery Equipment Computer fittings assets
Others
Total
Cost At 31st March 2010 Additions Transfers to Watawala Marketing Limited Disposals At 31st March 2011 Additions Transfers to additions Disposals At 31st March 2012 769,760 644,963 65,815 (3,035) 707,743 62,017 37,665 293,532 1,260 32,878 799,539 240,567 (46,621) 993,485 129,371 (7,783) 127,208 11,415 34,506 140,845 9,015 (27,513) (275) 122,072 5,136 5,813 5,813 5,602 40,424 2,121 (8,118) 34,427 79 11,212 114,894 2,083,074 10,843 (2,700) 6,778 (6,096) 29,484 7,507 397,796 - (57,697) 18,557 (38,925) (46,616) 18,557 245,628 1,115,073 (3,155) 26,686 38,925 265,558 (142,984) (6,130) 261,733 (38,925) (60,495) 20,037 151,885 2,494,069
19,355 144,378 2,331,756
Accumulated depreciation At 31st March 2010 Charge for the year (Note 22) Transfers to Watawala Marketing Limited Disposals At 31st March 2011 Charge for the year (Note 22) Disposals At 31st March 2012 Carrying value As at 31st March 2011 638,543 38,925 115,165 18,557 87,550 671,667 730,387 36,637 35,519 4,739 8,542 9,494 8,099 19,355 116,979 1,651,504 20,037 118,591 1,710,115 86,927 53,410 15,878 - 138,544 35,212 275,840 51,255 86,761 7,282 1,074 25,102 1,732 24,813 2,586 604,470 115,019 (88) 69,200 17,727 - (20,208) (3,155) 33,563 (25,878) - 158,078 - 150,393 (5,277) 321,818 67,113 (4,245) 384,686 91,689 2,873 26,407 33,294 (8,333) (275) 85,435 6,254 1,074 1,799 (1,901) 24,933 1,474 27,399 5,895 (35,807) (3,430) 680,252 133,825 (30,123) 783,954
As at 31st March 2012 682,833
(a) The assets shown above include assets vested in the Company by Gazette notification on the date of formation of the Company (18 June 1992) and all the investments made in the fixed assets by the Company since its formation. The assets taken over by way of estate leases have been set out in Note 4.
(b) Cost of fully depreciated assets as at 31 March 2012 amounts to Rs. 350,798,702 (2011 - Rs 192,854,383). (c) Depreciation expense of Rs 109,868,000 (2011 - Rs 92,430,000) has been charged in cost of goods sold and Rs 23,957,285 (2011 - Rs 22,589,000) in administrative expenses.
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6. Immature / mature plantations - Group and Company

In Rs.000s Notes Immature Mature Total plantations plantations Cost At 31st March 2010 Additions Transfers At 31st March 2011 Additions Transfers At 31st March 2012 Accumulated depreciation At 31st March 20110 Charged for the year At 31st March 2011 Charged for the year At 31st March 2012 Carrying value As at 31st March 2011 As at 31st March 2012 794,367 836,776 1,072,754 1,318,266 1,867,121 2,155,042 22 22 (251,774) (53,955) (305,729) (62,563) (368,292) (251,774) (53,955) (305,729) (62,563) (368,292) 653,894 317,363 (176,890) 794,367 350,484 (308,075) 836,776 1,201,593 176,890 1,378,483 308,075 1,686,558 1,855,487 317,363 2,172,850 350,484 2,523,334
(a) Investments in immature/mature plantations since the formation of the Company and Group have been classified as shown above. (b) Borrowing costs amounting to Rs 26,012,919 (2011 - Rs 24,296,680) incurred on borrowings obtained to meet
expenses relating to field development expenditure has been capitalised as part of immature plantations using a capitalisation rate of 10.32% (2011 - 10.3%). (c) The transfer of immature plantations to mature plantations commences at the time the plantation is ready for commercial harvesting.
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7. Investments in subsidiaries
Investments wholly consist of 100% controlling interests of Watawala Tea-Australia Pty Limited. The Company disposed the investment made in Watawala Marketing Limited to In Rs.000s Estate Management Services (Private) Limited as at 29 February 2012. Consequently the control was ceased as of 29 February 2012. Group 2012 At 1st April Investment made during the year - Watawala Marketing Limited - Watawala Tea-Australia Pty Limited Sale of Subsidiary - Watawala Marketing Limited At 31st March (355,000) 852 355,852 355,000 852 2011 Company 2012 355,852 2011 -
8. Inventories
In Rs.000s As at 31st March Growing crop nurseries Harvested crop Raw materials, spares and consumables Group 2012 50,105 365,506 100,474 516,085 2011 36,943 454,396 305,729 797,068 Company 2012 50,105 365,506 100,474 516,085 2011 36,943 454,396 77,088 568,427
9. Trade and other receivables

In Rs.000s As at 31st March Notes Trade receivables Amount due from related companies Employee advances Advance paid to suppliers Taxes recoverable-net Deposits and pre-payments Other receivables (a) 31 (i),(iv) 129,891 6,072 37,148 29,396 96,785 6,025 20,407 325,724 (a) Taxes receivable includes Advance Company Tax of Rs 48,692,103 (2011 - Rs 48,692,103), Value Added Tax of Rs 627,910 (2011 - Rs 3,204,283) and Economic Service Charge of Rs 37,256,664 (2011 - Rs 24,552,187). 252,590 4,960 40,271 41,094 87,684 9,717 52,467 488,783 78,088 75,959 37,148 29,396 96,785 6,025 20,407 343,808 92,565 4,016 40,271 41,094 87,684 9,717 37,302 312,649 Group 2012 2011 Company 2012 2011
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10. Cash and cash equivalents

In Rs.000s As at 31st March Cash at bank Cash in hand Group 2012 469,431 800 470,231 2011 39,166 1,531 40,697 Company 2012 446,916 800 447,716 2011 14,393 668 15,061
For the purposes of the cash flow statement, the year end cash and cash equivalents comprise the following: In Rs.000s As at 31st March Notes Bank overdrafts Cash and bank balance 13 (403,019) 470,231 67,212 (285,604) 40,697 (244,907) (403,019) 447,716 44,697 (285,604) 15,061 (270,543) Group 2012 2011 Company 2012 2011
11. Stated capital

In Rs.000s As at 31st March Issued and fully paid 236,666,667 ordinary shares and 1 golden share 310,000 310,000 310,000 310,000 Group 2012 2011 Company 2012 2011
The Golden Shareholder The Golden Share is currently held by the Secretary to the Treasury and should be owned either directly by the Government of Sri Lanka or by a 100% Government owned public company. In addition to the rights of the normal ordinary shareholder, the Golden Shareholder has the following rights: (a) The concurrence of the Golden Shareholder will be required for the Company to sublease any of the estate land leased / to be leased to the Company by the Janatha Estate Development Board / Sri Lanka State Plantation Corporation. (b) The concurrence of the Golden Shareholder will be required to amend any clause in the Articles of Association of the Company which grant specific rights to the Golden Shareholder. (c) The Golden Shareholder, or his nominee will have the right to examine the books and accounts of the Company at any time with two weeks written notice. (d) The Company will be required to submit a detailed quarterly accounts report to the Golden Shareholder in a specified format within 60 days of the end of each quarter. Additional information relating to the Company in a specified format must be submitted to the Golden Shareholder within 90 days of the end of the each fiscal year. (e) The Golden Shareholder can request the Board of Directors of the Company to meet with him / his Nominee, once every quarter to discuss issues related to the Companys operation of interest to the Government.
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12. General reserve

In Rs.000s As at 31st March At the beginning of the year At the end of the year Group 2012 150,000 150,000 2011 150,000 150,000 Company 2012 150,000 150,000 2011 150,000 150,000
13. Borrowings
In Rs.000s As at 31st March Notes Repayable within one year Term loans Other assets obtained on leases Money market loans Bank overdrafts 13.5 13.1 13.6 96,089 2,037 45,000 403,019 546,145 Repayable after one year Term loans Other assets obtained on leases Total borrowings 13.1 13.6 206,131 4,596 210,727 756,872 294,536 10,194 304,730 741,759 206,131 4,596 210,727 756,872 294,536 10,194 304,730 741,759 100,763 5,662 45,000 285,604 437,029 96,089 2,037 45,000 403,019 546,145 100,763 5,662 45,000 285,604 437,029 Group 2012 2011 Company 2012 2011
Total borrowings as at 31 March 2012 can be analysed as follows : In Rs.000s Term loans Money market loans Other assets obtained on leases Bank overdrafts As at 31st March 2012 As at 31st March 2011 Less than one year 96,089 45,000 2,037 403,019 546,145 437,029 1-2 years 92,076 2,255 94,331 86,264 2-5 years 114,055 2,341 116,397 151,517 More than 5 years 66,949 Total 302,220 45,000 6,633 403,019 756,872 741,759
Short term loans are secured on leasehold rights on specific estates.
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13. Borrowings
13.1 Term loans - Group and Company
In Rs.000s Nature of liability Outstanding liability Outstanding liability Security Repayable Repayable Balance Repayable Repayable Balance within after as at within after as at one year one year 31/03/2012 one year one year 31/03/2011 66,507 124,695 191,202 71,474 191,203 262,677 Leasehold rights on specified estates and machinerypurchased under Environmental Friendly Scheme. 8,333 16,667 25,000 9,289 25,000 34,289 Machinery purchased under Environmental Friendly Scheme and leasehold rights on specified estates. ICICI Bank Limited (Note 13.1.3) Public Bank Berhad (Note 13.1.4) Total 96,089 206,131 302,220 100,763 294,536 395,299 1,249 6,435 7,684 20,000 58,334 78,334 20,000 78,333 98,333 Unsecured.
Commercial Bank of Ceylon PLC (Note 13.1.1)
Hatton National Bank PLC (Note 13.1.2)
Short term loans are secured on leasehold rights on specific estates 13.1.1 Term loans - Commercial Bank of Ceylon PLC Purpose : For field development activities from commercial banks under ADB re-finance scheme:
In Rs.000s Year Loan Original Interest number amount rate % p.a. 1996 1997 2000 2000 2001 Sub total 37321 56134 & 62148 68675 77841 88285 60,052 25,067 46,663 180,976 11.5 11.5 11.5 6,005 2,507 4,666 16,146 6,005 3,760 10,500 20,716 12,010 6,267 15,166 36,862 6,005 2,507 4,666 18,097 12,010 6,267 15,166 36,862 19,510 29,684 11.5 11.5 2011 / 2012 2010 / 2011 Repayable Repayable Balance Repayable Repayable Balance within after as at within after as at one year one year 31/03/2012 one year one year 31/03/2011 2,968 451 3,419 1,951 2,968 3,419 Repayment terms
1,951 40 equal quarterly instalments commencing from June 2002 6,387 40 equal quarterly instalments commencing from June 2003 18,015 40 equal quarterly instalments commencing from May 2004 8,774 40 equal quarterly instalments commencing from September 2004 19,832 40 equal quarterly instalments commencing from September 2004 54,959
Purpose : For processing development, vehicles and equipment from commercial banks under ADB re-finance scheme:
In Rs.000s Year Loan Original Interest number amount rate % p.a. 1996 2006 2007 2008 Sub total 35531 369491& 369487 375394& 375396 501241 1,181 118,391 9.74 148 13,558 701 54,833 849 68,391 148 15,397 849 68,391 48,479 9.74 6,606 29,193 35,799 6,606 35,799 18,391 50,340 11.5 9.74 2011 / 2012 2010 / 2011 Repayable Repayable Balance Repayable Repayable Balance within after as at within after as at one year one year 31/03/2012 one year one year 31/03/2011 6,804 24,939 31,743 1,839 6,804 31,743 Repayment terms
1,839 40 equal quarterly instalments commencing from June 2002 38,547 96 equal monthly instalments commencing from October 2008 42,405 96 equal monthly instalments commencing from June 2009 997 96 equal quarterly instalments commencing from January 2010 83,788
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13.1.1 Term loans - Commercial Bank of Ceylon PLC (Contd.) Purpose : For environmental friendly activities from commercial banks under ADB re-finance scheme:
In Rs.000s Year Loan Original Interest number amount rate % p.a. 110221 145300 & 116166 2007 2007 Sub total 377746 413120 16,800 10,400 57,754 6.5 6.5 4,200 2,592 6,792 1,050 1,760 2,810 5,250 4,352 9,602 4,200 2,592 7,969 5,250 4,352 9,602 5,350 16,874 8.5 8.5 2011 / 2012 2010 / 2011
Repayable Repayable Balance Repayable Repayable Balance Repayment within after as at within after as at terms one year one year 31/03/2012 one year one year 31/03/2011 167 1,010 167 96 equal quarterly instalments commencing from July 2003 1,010 96 equal quarterly instalments commencing from September 2003 9,450 48 equal quarterly instalments commencing from June 2009 6,944 48 equal quarterly instalments commencing from November 2009 17,571
2001 2001
Purpose : To fund working capital requirements of 12 Tea factories from Commercial Bank under Tea Relief Package
In Rs.000s Year Loan Original number amount Interest rate % p.a. AWPLR minus 6% Sub total 148,874 30,011 66,507 46,336 124,695 76,347 191,202 30,011 71,474 76,348 191,203 106,359 262,677 2011 / 2012 2010 / 2011 Repayable Repayable Balance Repayable Repayable Balance within after as at within after as at one year one year 31/03/2012 one year one year 31/03/2011 30,011 46,336 76,347 30,011 76,348 Repayment terms
2009
148,874
106,359 59 equal quarterly instalments commencing from November2009
Total (Note no. 13.1.1)
13.1.2 Term loans - Hatton National Bank PLC Purpose : For environment friendly activities from Hatton National Bank PLC:
In Rs.000s Year Loan Original Interest number amount rate % p.a. 2001 2008 LD 13540 50,000 60,200 6.5 8,333 8,333 16,667 16,667 25,000 25,000 8,333 9,289 25,000 25,000 10,200 8.5 2011 / 2012 2010 / 2011 Repayable Repayable Balance Repayable Repayable Balance within after as at within after as at one year one year 31/03/2012 one year one year 31/03/2011 956 -
Repayment terms
956 96 equal monthly instalments commencing from January 2004 33,333 72 equal monthly instalments commencing from March 2009 34,289
Total (Note 13.1.2)
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13. Borrowings
13.1.3 Term loans - ICICI Bank Limited Purpose - For purchase of fixed assets in factories
In Rs.000s Year Loan Original number amount 2011 / 2012 2010 / 2011 Repayable Repayable Balance Repayable Repayable Balance within after as at within after as at one year one year 31/03/2012 one year one year 31/03/2011 10,000 29,167 39,167 10,000 39,167
Interest rate % p.a. SLIBOR + 5% 1 year
Repayment terms
2011
180
50,000
49,167 60 equal monthly instalments commencing from March 2011
2011
181
50,000
SLIBOR + 5% 2 to 5 years
10,000
29,167
39,167
10,000
39,167
49,167 60 equal monthly instalments commencing from March 2011
Total(Note 13.1.3) 100,000
20,000
58,334
78,334
20,000
78,334
98,334
13.1.4 Term loans - Public Bank Berhad Purpose - For purchase of vehicle
In Rs.000s Year Loan number Original amount Interest rate % p.a. 11% 11% 2011 / 2012 2010 / 2011 Repayment terms
Repayable Repayable Balance Repayable Repayable Balance within after as at within after as at one year one year 31/03/2012 one year one year 31/03/2011 939 311 1,249 4,835 1,599 6,435 5,774 1,910 7,684 -
2012 2012
5,850 1,935 7,785
- 60 equal monthly instalments commencing from March 2012 - 60 equal monthly instalments commencing from March 2012 -
Total(Note 13.1.4)
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13.1.5 Overdraft - Grop and Company
In Rs.000s As at 31st March Hatton National Bank PLC Standard Chartered Bank Sampath Bank PLC Commercial Bank of Ceylon PLC Peoples Bank PLC Hongkong and Shanghai Banking Corporation Citi Bank, N.A. ICICI Bank Ltd MCB Bank Ltd Nations Trust Bank PLC Total
Outstanding liability 2012 74,394 38,568 26,962 406 131,430 131,259 403,019 2011 89,796 9,078 11,778 1,282 4,107 70,830 97,901 832 285,604 Security Movable assets, stock in trade and an assignment of book debts. Unsecured. Stocks and receivables. Leasehold rights on specific estates. Leasehold rights on specific estates. Leasehold rights on specific estates. Secondary mortgage of stocks and debtors. Commercial paper guarantee agreement executed under the company seal. Unsecured. Unsecured. Unsecured.
13.1.6 Obligation on other assets obtained on lease In Rs.000s As at 31st March Hatton National Bank PLC Finance lease liabilities - minimum lease payments Finance charge allocated to future periods Present value of finance lease liabilities Peoples Leasing Limited Finance lease liabilities - minimum lease payments Finance charge allocated to future periods Present value of finance lease liabilities Nations Trust Bank PLC Finance lease liabilities - minimum lease payments Finance charge allocated to future periods Present value of finance lease liabilities Total 2,037 4,596 6,633 1,163 (31) 1,132 15,856 1,562 (434) 1,128 2,735 (286) 2,449 4,297 (720) 3,577 17,191 (2,843) 14,348 1,045 (136) 909 2,265 (118) 2,147 3,310 (254) 3,056 389 (13) 376 Current Non-current Total 2012 2011
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14. Finance lease obtained from SLSPC and JEDB - Group and Company
In Rs.000s 2012 Current Gross liability Less: Interest in suspense Net liability to lesser Non-current as at 31 March 2012 can be analysed as follows: Total Net liability At 31st March 2012 At 31st March 2011 The annual lease series of payments payable by the Company with effect from 18 June 1996 in respect of these estates is Rs 20.32 million (basic lease series of payments) plus an amount to reflect inflation during the previous year determined by multiplying Rs 20.32 million by gross domestic product (GDP) deflator of the preceding year. However as per the agreement entered into with the Ministry of Plantations the application of GDP deflator has been suspended for five years commencing from 18 June 2003, resulting in a fixed lease payment of Rs 29.04 million. In September 2010, as per the cabinet decision the regional plantation companies were requested to revert back to the original method of calculating lease rentals by applying the GDP deflator of the preceding 360,253 365,560 5,310 5,520 15,930 17,940 339,013 342,100 1- 2 years 2 - 5 years More than 5 years 20,320 (15,010) 5,310 Non-current 650,240 (289,987) 360,253 2011 Current 20,320 (15,007) 5,313 Non-current 670,560 (305,000) 365,560
year. The gross liability to the lessor represents the total basic lease series payable by the Company for the remaining term of the lease. The net liability to the lessor is the present value of annual basic lease series of payments over the remaining tenure of the lease. The discount rate used is 6% p.a. The interest in suspense is the total amount of interest payable during the remaining tenure of the lease at 6% p.a. on the net liability to the lesser on 18 June each year. The basic lease series of payments paid each year (in equal quarterly instalments in advance) has been debited to the gross liability and the appropriate interest amount for the year is charged to finance costs by crediting the interest in suspense account.
15. Retirement benefit obligations

The amounts recognised in the balance sheet are determined as follows: In Rs.000s As at 31st March Present value of obligation Liability in the balance sheet Group 2012 815,849 815,849 2011 643,872 643,872 Company 2012 815,849 815,849 2011 638,008 638,008
The movement in the defined benefit obligation over the year is as follows: In Rs.000s As at 31st March At 1 April Current service cost Interest cost Actuarial loss /(gain) Transfer to Watawala Marketing Ltd Benefits paid At 31st March 2012 643,872 53,276 70,181 148,037 (5,864) (93,653) 815,849 Group 2011 643,388 41,949 78,122 (58,761) (60,826) 643,872 2012 638,008 53,276 70,181 148,037 (93,653) 815,849 Company 2011 643,388 41,342 77,207 (58,754) (5,061) (60,114) 638,008
128
The amounts recognised in the income statement are as follows: In Rs.000s As at 31st March Current service cost Interest cost Transfer to Watawala Marketing Ltd Actuarial loss / (gains) Total included in the staff cost (Note 23) Group 2012 53,276 70,181 148,037 271,494 2011 41,949 78,122 (58,761) 61,310 Company 2012 53,276 70,181 148,037 271,494 2011 41,342 77,207 (5,061) (58,754) 54,734
The key assumptions used by Messrs. Actuarial and Management Consultant (Private) Limited include the following: Year 2011/12 Year 2010/11 (a) Rate of interest (net of tax) 11 % p.a. 11 % p.a. (b) Rate of salary increase - tea estate workers (every two years) - rubber estate workers (every two years) - oil palm factory workers (every two years) - estate staff (every three years - estate management and head office staff(every year) 20% 20% 20% 20% 7.5% 60years 19% 19% 19% 20% 7.5% 60years
(c) Retirement age (d) The Group will continue in business as a going concern.
16. Deferred income and capital grants

In Rs.000s As at 31st March Capital grants At the beginning of the year Received during the year Less: Amortised during the year (Note 22) At the end of the year Funds have been received from the Plantation Human Development Trust (PHDT) and Ministry of Estate Infrastructure for workers welfare facilities including reroofing of line rooms, latrines, water supply, sanitation, etc. Grants received from the Ministry of Estate Infrastructure for 255,798 255,798 (10,863) 244,935 228,732 38,554 267,286 (11,488) 255,798 255,798 255,798 (10,863) 244,935 228,732 38,554 267,286 (11,488) 255,798 Group 2012 2011 Company 2012 2011
construction of creches, farm roads and community centres, are also included above. The amounts spent have been capitalised under the relevant fixed assets category. The capital grants are amortised on a straight-line basis over the useful life of the respective asset.
129
17. Deferred income tax

In Rs.000s As at 31st March Beginning of the year Charge for the year At the end of the year Deferred tax is calculated on temporary differences between carrying value of fixed assets and tax written down value of such assets as analysed by each taxable activity. Deferred income tax - Group In Rs.000s Deferred tax asset Tangible fixed assets Immature / mature plantation Retirement benefit obligations Capital grants Tax losses carried forward Liability / (asset) at 31st March Deferred income tax - Company In Rs.000s Deferred tax asset Tangible fixed assets Immature / mature plantation Retirement benefit obligations Capital grants Tax losses carried forward Liability / (asset) at 31st March 127,900 68,582 131,184 327,666 2012 Deferred tax liability (68,073) (289,868) (357,941) Net deferred tax liability (68,073) (289,868) 127,900 68,582 131,184 (30,275) Deferred tax asset 94,399 71,623 58,480 224,502 2011 Deferred tax liability (40,016) (210,647) (250,663) Net deferred tax liability (40,016) (210,647) 94,399 71,623 58,480 (26,161) 147 127,900 68,582 131,184 327,813 2012 Deferred tax liability (68,073) (289,868) (357,941) Net deferred tax liability (67,926) (289,868) 127,900 68,582 131,184 (30,128) Deferred tax asset 95,103 71,623 58,480 225,206 2011 Deferred tax liability (41,688) (210,647) (252,335) Net deferred tax liability (41,688) (210,647) 95,103 71,623 58,480 (27,129) Group 2012 27,129 2,999 30,128 2011 27,129 27,129 Company 2012 26,161 4,114 30,275 2011 26,161 26,161
The reconciliation of timing differences related to carrying amounts of assets and liabilities of the balance sheet is as follows.
Deferred tax assets and liabilities shall be measured based on the the tax rates that have been enacted or substantially enacted by the end of the reporting period. Accordingly, the Group has used following tax rates in assessing the deferred tax asset/liability for the current financial year. (a) Agricultural undertakings - 10% (b) Exports - 12% (c) Other - 28%
130
18. Trade and other payables

In Rs.000s As at 31st March Trade payables Employee related creditors Provisions and accruals Other payables Amount due to related companies 31 (l) (iii) Notes Group 2012 206,580 128,161 136,145 43,402 74,389 588,677 2011 282,696 124,102 173,185 94,158 67,980 742,121 Company 2012 205,534 128,161 136,145 43,402 74,389 587,631 2011 260,507 124,102 173,185 42,949 66,492 667,235
Accrued expenses and other payables mainly comprise of lease rent payable to Ministry of Plantations on SLSPC/ JEDB lease amounting to Rs 54,840,833 (2011-Rs 36,950,441).
19. Segmental analysis by principal activities-

The analysis by the principal activities, is as follows: In Rs.000s For the year ended 31st March Revenue Tea Rubber Palm oil Exports FMCG Total 3,183,034 288,228 919,096 145,128 4,535,486 3,558,239 334,721 701,679 176,125 1,387,482 6,158,246 3,179,817 288,228 919,096 145,128 4,532,269 3,569,495 334,721 701,679 57,849 4,663,744 Group 2012 2011 Company 2012 2011
Gross profit/(loss) Tea Rubber Palm oil Exports FMCG Total (354,711) 81,786 520,356 2,065 249,496 189,218 173,680 276,956 60,866 499,076 1,199,796 (354,711) 81,786 520,356 (1,152) 246,279 199,050 173,680 308,082 2,192 683,004
131
19. Segmental analysis by principal activities - Group

In Rs.000s For the year ended 31st March Revenue Inter segment revenue 3,179,817 (104,030) 288,228 919,096 252,375 Tea Rubber Palm Oil Export Unallocated Total 2012 4,639,516 (104,030) 2011 6,199,205 (40,959)
Segment revenue
Gross profit / (loss)
3,075,787
(354,711)
288,228
81,786
919,096
520,356
252,375
2,065
4,535,486
249,496
6,158,246
1,199,796
Operating profit
Inter segment profit Net finance (cost) / income
(446,248)
(54,341)
66,434
(6,242)
398,170
(24,885)
1,473
-
593,226
(394,081) -
613,055
(394,081) (85,468)
724,626
(85,984)
Profit / (loss) before tax

Tax Profit-Watawala Marketing Ltd
(500,589)
-
60,192
-
373,285
-
1,473
(641) -
199,145
(4,114) -
133,506
(4,755) 283,834
638,636
3,830 -
Net profit / (loss)

Segment assets Segment liabilities
(500,589)
3,308,124 2,360,635 275,791 101,115 4,894
60,192
307,959 97,902 8,126 13,753 1,337
373,285
1,443,011 244,964 235,896 63,051 804
832
75,878 1,261 -
195,031
512,988 112,357 53,479 34,855 -
412,585
5,647,960 2,815,858 573,292 214,035 7,035
642,466
5,416,241 2,795,555 742,657 208,524 7,035
Other segment items

Capital expenditure Depreciation Amortisation
19. Segmental analysis by principal activities - Company

In Rs.000s For the year ended 31st March Tea Rubber Palm Oil Export Unallocated Total 2012 2011
Revenue
Gross profit / (loss)
3,179,817
(354,711)
288,228
81,786
919,096
520,356
145,128
(1,152)
4,532,269
246,279
4,663,744
683,004
Operating profit
Finance costs
(446,248)
(54,341)
66,434
(6,242)
398,170
(24,886)
(1,162)
-
593,227
-
610,421
(85,468)
611,521
(84,951)
Profit / (loss) before tax

Tax
(500,589)
-
60,192
-
373,284
-
(1,162)
-
593,227
(4,114)
524,953
(4,114)
526,570
5,830
Net profit / (loss)

Segment assets Segment liabilities
(500,589)
3,308,124 2,359,920 275,791 101,115 4,894
60,192
307,959 97,902 8,126 13,753 1,337
373,284
1,443,011 244,964 235,896 63,051 804
(1,162)
75,878 1,261 -
589,113
509,409 111,311 53,479 34,855 -
520,839
5,644,381 2,814,097 573,292 214,035 7,035
532,400
5,223,418 2,712,804 715,159 186,621 7,035
Other segment items

Capital expenditure Depreciation Amortisation
20. Other operating income

In Rs.000s For the year ended 31st March Profit on sale of property, plant and equipment Amortisation of capital grants Harvesting of matured trees Hydro power income Gain on disposal of intangible assets Profit from disposal of subsidiary Dividend income Net sundry income 20. 1 (a) (b)
Group 2012
13,050 10,864 106,284 18,241 72,356 110,442 12,981
2011
5,687 11,488 45,742 31,970 1,090 28,392
Company 2012
13,050 10,864 106,284 18,241 386,595 68,693 12,981
2011
4,042 11,488 45,742 31,970 72,356 45,820 27,891
344,218
132
124,369
616,708
239,309
(a) Tree income has been recognised as per Urgent Issues Task Force (UITF) ruling No. 14, Accounting for Sale Proceeds of Perennial Plantation Trees, dated 31 December 2001.
(b) Hydro power income include income from Mark Hydro (Private) Limited - Rs 3,159,799 (2011 - Rs 6,553,766), Unit Energy Lanka (Private) Limited - Rs 9,287,770 (2011 - Rs 14,754,562) , Upper Agaraoya Hydro Power Limited - Rs 5,793,433 (2011 - 10,61,805).
20.1 Profit from disposal of subsidiary

In Rs.000s For the year ended 31st March
Group 2012 741,595 (631,153) 110,442 2011 -
Company 2012 741,595 (355,000) 386,595 2011 -
Consideration received Carrying value of assets/ investments sold ( Note 32 and Note 7 )
21. Management fees

Management fee is payable as per the understanding with the Ministry of Plantation Industries and in agreement with the managing agent Messrs Estate Management Services (Private) Limited. The management fee is calculated on EBITDA (Earnings before interest, tax, depreciation and land amortization). The rate applicable for the current year is 10% of EBITDA, Rs 49,331,477 (2011 - 10% of EBITDA, Rs 90,033,000).
22. Operating profit

The following items have been charged / (credited) in arriving at operating profit:
Notes
Group 2012 2011
Company 2012 2011
Auditors remuneration - Audit - Non audit Amortisation - leasehold right to bare land Depreciation - Immovable leased assets - Fixed assets (other than immature / mature plantations) - Mature plantations Directors emoluments Workers profit share bonus Profit on sale of property, plant and equipment Staff costs Amortisation of grants received 20 23 16 13,050 2,744,397 (10,863) 5,687 2,173,009 (11,488) 13,050 2,744,397 (10,863) 4,042 2,124,301 (11,488) 5 6 133,825 62,563 19,700 6,393 136,922 53,955 33,358 22,000 133,825 62,563 19,700 6,393 115,019 53,955 16,234 20,000 4 17,647 17,647 17,647 17,647 3 7,035 7,035 7,035 7,035 1,962 200 1,600 138 1,696 200 1,200 138
133
23. Staff costs

Notes
Group 2012 2,259,184 213,719 2011 1,917,660 194,039 61,310 2,173,009 12,616
Company 2012 2,259,184 213,719 271,494 2,744,397 12,168 2011 1,884,757 184,810 54,734 2,124,301 12,616
Wages and salaries Defined contribution plan Defined benefit plan Average number of persons employed during the year Full time 15
271,494 2,744,397 12,169
24. Net finance costs

Group 2012 84,154 (26,013) 58,141 2011 83,413 (24,297) 59,113 23,932 3,272 (333) 85,984
Company 2012 84,154 (26,013) 58,141 23,731 4,620 (1,024) 85,468 2011 82,320 (24,297) 58,023 23,932 3,272 (276) 84,951
Loans and overdraft interest Interest capitalised
Interest portion on JEDB/SLSPC lease series of payments Interest portion on other finance lease series of payments Interest income
23,731 4,620 (1,024) 85,468
Interest amounting to Rs 26,012,919 (2011 - Rs24, 296, 680) on loans and bank overdrafts relating to field development activities has been capitalised using a capitalisation rate of 10.3 % p.a. (2011 - 10.3 % p.a.).
25. Tax
Group 2012 641 4,114 4,755 2011 13,837 (44,796) 27,129 (3,830)
Company 2012 4,114 4,114 2011 12,805 (44,796) 26,161 (5,830)
Current tax Reversal of tax over provision in prior years Deferred tax
Tax is calculated using tax rates enacted for the year of assessment. The profits from agricultural activities are taxed at 10%, profit from export is taxed at 12% and profits from other activities are taxed at 28%.
134
Reconciliation between current tax expenses and the accounting profit.

Notes
Group 2012 247,584 523,848 (902,422) (130,990) (130,990) (130,990) 1,745 2011 638,642 391,179 (671,803) 358,018 (299,866) 58,152 (19,700) 38,452 13,837 27,129 (44,796) (3,830)
Company 2012 524,953 523,490 (1,179,557) (131,114) (131,114) (131,114) 4,114 4,114 2011 526,570 312,345 (660,822) 178,093 (121,807) 56,286 (19,700) 36,586 12,805 26,161 (44,796) (5,830)
Accounting profit before tax Aggregate disallowed items Aggregate allowed expenses Taxable profit / (loss) Exempted profit from agricultural produce Taxable profit / (loss) before utilisation of carry forward tax losses Tax losses brought forward and utilised Taxable profit / (loss) Taxable income at effective rates Deferred tax - charge Reversal of tax over provision in prior years 17
4,114 (1,104) 4,755
The advance company tax carried forward as at the balance sheet date amounted to Rs 48,692,103 (2011 - Rs 48,692,103). The unutilised tax loss carried forward as at the balance sheet date amounted to Rs. 384,485,877 (2011 - Rs 273,371,839).
26. Earnings per share

Basic earnings per share is calculated by dividing the net profit attributable to shareholders by the weighted average number of ordinary shares in issue during the year.
In 000s For the year ended 31st March
Group 2012 412,585 236,667 1.74 2011 642,472 236,667 2.71
Company 2012 520,839 236,667 2.20 2011 532,400 236,667 2.25
Net profit attributable to shareholders (thousands) Weighted average number of ordinary shares in issue (thousands) Basic earnings per share (Rs)
27. Dividends
In 000s For the year ended 31st March
Company 2012 82,833 236,667 0.35 2011 201,167 236,667 0.85
First and final proposed dividend (Rs.) Number of ordinary shares Dividend per share (Rs.) Proposed The Board of Directors proposed a first and final dividend of 35 cents per share based on the profits of the Company for year ended 31 March 2012, to be approved by the shareholders at the Annual General Meeting to be held on 6th July 2012.
Paid The Company paid a final dividend of 85 cents per share amounting Rs 201,166,668 for the year ended 31 March 2011.
135
28 Commitments
a) Financial commitments The future minimum lease payments for the financial leases as at the end of the reporting period is disclosed in note 13 ( c ). b) Other commitments The Group entered into an agreement with Ismart Business Solutions Pvt Ltd., India to develop an accounting software(an ERP). The maximum amount committed under this is Rs. 17,250,000, payable upon successful completion of the ERP implimentation. b) Capital commitments Capital expenditure approved by the Board of Directors is as follows.
Group 2012 573,292 573,292 2011 742,657 742,657
Company 2012 573,292 573,292 2011 715,159 715,159
Approved and contracted for Approved and not contracted for Total
There were no other capital commitments as at 31st March 2012. The budgeted capital expenditure but not committed by the Group/Company for the financial year 2012/13 is Rs. 349,290,279.
29 Contingent liability
Bank guarantees amounting to Rs. 3,571,000 was issued in favour of the Sri Lanka Customs to facilitate the Company to import machinery on duty free basis. As at the balance sheet date the Company is in compliance with the terms and conditions of the imports. The Group confirms that there is no case (including the LT cases) filed against the Group which is not disclosed which would have been a material impact on the financial position of the Group.
30. Cash generated from operation

Reconciliation of profit before tax to cash generated from operations.
Notes
Net profit before taxation front continuing operations Adjusted for: Depreciation Profit on sale of property, plant and equipment Amortisation of leasehold right Amortisation of capital grants Transfer of net assets to Watawala Marketing Ltd Dividend income Interest received Interest expense Changes in working capital - Inventories - Trade and other receivables - Trade and other payables Provision for retirement benefit obligations Profit from disposal of subsidiary Cash generated from operations
Group 2012 2011 247,584 638,642 214,035 (13,050) 7,035 (10,864) (1,024) 86,492 52,342 (32,049) (80,617) 271,494 (110,442) 630,936 208,524 (5,687) 7,035 (11,488) (333) 86,317 (256,485) (24,172) 152,824 61,310 856,487
Company 2012 2011 524,953 526,570 214,035 (13,050) 7,035 (10,864) (68,693) (1,024) 86,492 52,342 (31,159) (79,604) 271,494 (386,595) 565,362 186,621 (4,042) 7,035 (11,488) (72,356) (276) 85,227 (27,844) 158,463 78,958 54,734 981,602
4,5 and 6 3 16
24 24
15 20 ( c )
136
31. Related party transactions

The Group is controlled by Estate Management Services (Private) Limited which owns 53.75% of ordinary shares. (2011 - 53.75%) of the Companys shares. The remaining ordinary shares are widely held. The ultimate parent company of the Group is Sunshine Holdings Limited.Directors interest in contracts. (a) Messrs R K Krishna Kumar and P T Siganporia who are directors of the Company are also directors of Tata Global Beverage Limited and Tetley GB. (b) Messrs G Sathasivam, R K Krishna Kumar, V Govindasamy and P T Siganporia who are directors of the Company are also directors of Estate Management Services (Private) Limited, the Managing Agent of the Company. (c) Mr G Sathasivam who is a director of the Company is a shareholder of Sunshine Tea (Private) Limited. (d) Messrs D S Ratnasingham and B A Hulangamuwa who are directors of the Company are also directors of Sunshine Tea (Private) Limited. (e) Messrs G Sathasivam, V Govindasamy and B A Hulangamuwa who are directors of the Company are also directors of Sunshine Holdings Limited.
In Rs.000s 31st March
(f)
Messrs V Govindasamy and B A Hulangamuwa who are directors of the Company are also directors of Secretaries and Financial Services (Private) Limited.
(g) Messrs G Sathasivam, B A Hulangamuwa and V Govindasamy who are directors of the Company are also directors of Sunshine Travels and Tours Limited. (h) Messrs V Govindasamy and B A Hulangamuwa who are directors of the Company are also directors of HealthGuard Pharmacy Limited. (i) Messrs G Sathasivam and V Govindasamy who are directors of the Company are also directors of SBL Limited. Messrs G Sathasivam and V Govindasamy who are directors of the Company are also directors of Sunshine Packaging (Private) Limited.
(j)
(k) Messrs P T Siganporia and K Venkataramanan who are directors of the Company are also directors of Watawala Marketing Limited. (l) Messrs G Sathasivam, V Govindasamy and D S Ratnasingham who are directors of the Company are also directors of Watawala Marketing Limited.
Group 2012 2,581 22,728 81 977 1,610 297 4,552 58,699 17,493 6,169 5,924 1,416 455 253 4,282 2011 2,828 55,092 43 155 93,003 52,926 8,604 4,337 1,200 450 29,128 Company 2012 2,581 22,728 81 977 76,964 1,610 297 4,552 104,030 58,699 17,493 6,169 5,924 1,416 455 253 4,282 104,030 2011 2,828 55,092 43 155 41,959 93,003 20,576 8,604 3,649 1,200 450 -
(i) Sales of goods and services

Sunshine Tea (Private) Limited The Tetley Group Secretaries and Financial Service (Private) Limited Sunshine Packaging (Private) Limited SBL Limited Watawala Marketing Limited Sunshine Power (Private) Limited Sunshine Holdings PLC Sunshine Travels and Tours Limited Watawala Tea Australia (Pty) Limited
(ii) Purchase of goods and services

Estate Management Services (Private) Limited Sunshine Tea (Private) Limited Secretaries and Financial Services (Private) Limited Sunshine Travels and Tours Limited Health Guard Limited SBL Limited Sunshine Packaging (Private) Limited Sunshine Holdings PLC Watawala Marketing Limited (iii) Outstanding balances arising from purchase of goods and services Amounts due to related companies Estate Management Services (Private) Limited Sunshine Travels and Tours Limited Watawala Marketing Limited
4,502 69,887
66,492 54 1,434
4,502 69,887
66,492 -
74,389
67,980
74,389
66,492
137
31. Related party transactions ( contd)

In Rs.000s 31st March (iv) Amounts due from related companies The Tetley Group SBL Limited Sunshine Packaging (Private) Limited Watawala Marketing Limited Watawala Tea Australia (Pty) Limited 6,072 6,072 4,016 450 494 4,960 6,072 69,887 75,959 4,016 4,016 31 March 2012 2011 31 March 2012 2011
Transactions with related parties have been carried out on normal commercial terms. The Directors have disclosed the nature of their interests in contracts and proposed contracts with the Group at meetings of the directors.
(v) Key management compensation Key management includes the Executive Committee of the Group & Company. The compensation paid or payable to key management for employee services is as follows: In Rs.000s For the year ended 31st March Salaries and other short term employee benefits Group 2012 35,439 2011 46,982 Company 2012 35,439 2011 29,858
32. Discontinued operations

The Company disposed Watawala Marketing Limited on 29 February 2012 as described in Note 7. a) Financial performance of Watawala Marketing Limited for the period ended 29 February 2012 is shown below.
11 months ended 29 February 2012
In Rs.000s
Revenue Cost of sales Gross profit Other income Distribution expenses Administrative expenses Operating profit Management fees Profit before tax Tax Profit from discontinued operations
1,483,444 (911,258) 572,186 5,099 (165,513) (197,096) 214,676 (1,018) 213,658 (43,902) 169,756
138
b)
Carrying value of assets and liabilities de - recognised at the sale date is as follows. In Rs.000s Total non-current assets Total current assets Total non-current liabilities Total current liabilities Net assets disposed As at 29 February 2012 238,776 545,902 (10,947) (142,578) 631,153
33 Post balance sheet events

There have been no events subsequent to the balance sheet date, which would have any material effect on the Group, other than the following. The Board of Directors has declared a first and final dividend of 35 cents per share for the financial year ended 31st March 2012 as detailed in note 27 to the financial statements. As required by section 56 (2) of the Companies Act No. 07 of 2007, the Board of Directors has confirmed that the Group satisfies the solvancy test in accordance with section 57 of the Companies Act No. 07 of 2007, and has obtained a certificate from the auditors prior to declaring the dividend.
34. Risk management

The Group activities expose it to variety of financial risks, market risk (including currency risk and interest rate risk), credit risk and liquidity risk. The Group overall risk management programme focuses on the unpredictability of financial markets and seek to minimise potential adverse effects on the Groups financial performance. Risk management is carried out by the management under the policies approved by the Board of Directors. Management identifies, evaluate and mitigate financial risks in close corporation with the Groups operating units.
139
QUALITY ASSURANCE
THROUGH PEOPLE, PROCESS AND PRODUCT
SUPPLEMENTARY INFORMATION
Value Added Statement Sources and Utilisation of Income Estate Hectarage Statement Crops & Yields Historical Financial Information 10- Years summary Shareholders & Investors Information Glossary Notice of Meeting Form of Proxy
Watawala Plantations PLC Supplementary Information
Value Added Statement

Group 2011/2012 Rs.000 Revenue Other income Cost of materials and services obtained Value Addition Value allocated to: To Employees
Salaries,wages and other benefits
Company 2010/2011 Rs.000 6,158,246 124,369 6,282,615 (2,946,823) 3,335,792 2011/2012 Rs.000 4,532,269 616,708 5,148,977 (1,386,297) 3,762,680 2010/2011 Rs.000 4,663,744 239,309 4,903,653 (1,779,699) 3,123,354
4,535,486 344,218 4,879,704 (1,226,393) 3,653,311
2,744,399
75%
2,173,009
65%
2,744,399
73%
2,129,362
68%
To Providers of funds Interest to money lenders To Government JEDB/SLSPC Lease rental Value Added Tax Nation Bulding Tax Business Turnover Tax Social Responsibity Levy Stamp Duty Income Tax 55,990 104,455 26,075 21 249 186,790 To providers of capital Dividend paid to shareholders To Expansion and growth Profit retained Depreciation & ammotization Deferred Taxation 211,418 221,070 2,999 435,487 12% 3,653,311 100% 577,389 215,559 27,129 820,077 3,335,792 24% 100% 319,672 221,070 4,114 544,856 3,762,680 14% 100% 467,317 193,656 26,161 687,134 3,123,354 22% 100% 201,167 6% 65,083 2% 201,167 6% 65,083 2% 5% 50,958 64,947 59,285 463 174 1,975 13,837 191,639 6% 55,990 104,455 26,075 21 249 186,790 5% 50,958 64,947 25,965 174 1,975 12,805 156,824 5% 85,468 2% 85,984 3% 85,468 2% 84,951 3%
142
Sources and Utilisation of Income

Group 2011/2012 Rs.000 % Group 2010/2011 Rs.000 % Group 2009/2010 Rs.000 % Group 2008/2009 Rs.000 % Group 2007/2008 Rs.000 %
Sources of income Tea Rubber Palm Oil Exports FMCG Other income Total 3,075,787 288,228 919,096 252,375 344,218 4,879,704 65 6 19 3 0 7 100 3,558,239 334,721 701,679 176,125 1,387,482 124,369 6,282,615 57 5 11 3 22 2 100 3,259,463 180,618 736,059 299,385 1,154,247 136,842 5,766,614 57 2,158,489 3 13 5 20 2 153,714 310,763 548,687 950,323 46,050 52 4 7 13 23 1 100 2,311,460 204,385 127,883 893,614 776,262 84,563 4,398,167 52 5 3 20 18 2 100
100 4,168,026
Utilisation of income To Employees Salaries,wages and other benefits To Providers of funds Interest paid to money lenders To Supplies & service Providers To Providers of capital Dividend paid to shareholders To Government Lease Rent,VAT,NBT,BTT,SRL To Expansion & growth Retained Profits,depreciation 435,487 9 820,077 14 571,494 10 221,859 6 528,215 12 186,790 4 191,639 3 190,189 3 52,259 1 89,041 2 201,167 4 65,083 1 59,167 1 35,500 1 85,468 1,226,393 2 25 85,984 2,946,823 1 46 79,669 2,827,483 1 71,057 2 49 84,234 2,022,336 2 46 2,744,399 56 2,173,009 35 2,097,779 37 1,703,016 41 1,638,841 37
49 2,060,668
Total
4,879,704
100 6,282, 615
100
5,766,614
100 4,168,026
100
4,398,167
100
143
Estate Hectarage Statement

TEA Kenilworth Carolina Wigton Lonach Shannon WATAWALA REGION Abbotsleigh Dickoya Vellai Oya Strathdon HATTON REGION Agrakande Henfold Lippakelle Ouvahkelle Tangakelle Waltrim LINDULA REGION Homadola Talangaha UDUGAMA REGION TOTAL TEA RUBBER Homadola Nakiadeniya Rubber Talangaha Nakiadeniya Oil Palm TOTAL RUBBER OIL PALM Nakiadeniya Oil Palm Talangaha Nakiadeniya Rubber Homadola TOTAL OIL PALM COMPANY TOTAL Total Cultivated Area (Ha) 455.11 466.93 525.87 248.75 224.44 1,921.10 362.25 512.62 570.15 494.96 1,939.98 206.25 484.05 216.00 198.87 313.78 486.33 1,905.28 108.91 92.45 201.36 5,967.72 307.19 569.19 119.38 57.47 1,053.23 899.95 424.80 1,005.04 528.07 2,857.86 9,878.81 Other Area Area (Ha) 147.00 425.49 141.71 171.23 37.60 923.03 65.21 116.97 269.85 151.41 603.44 22.50 55.95 71.50 40.88 54.01 91.92 336.76 423.11 423.11 2,286.34 126.57 62.79 16.00 205.36 68.00 1.50 69.50 2,561.20 Total Area Area (Ha) 602.11 892.42 667.58 419.98 262.04 2,844.13 427.46 629.59 840.00 646.37 2,543.42 228.75 540.00 287.50 239.75 367.79 578.25 2,242.04 532.02 92.45 624.47 8,254.06 307.19 695.76 182.17 73.47 1,258.59 967.95 424.80 1,006.54 528.07 2,927.36 12,440.01
144
Crops & Yields

PRODUCTION (KG000) REGION TEA Watawala Hatton Lindula Udugama TEA RUBBER OIL PALM 2,245 2,364 2,189 2,076 2,156 1,654 2,127 2,047 2,058 2,435 2,603 1,755 2,498 2,948 2,751 1,934 2,284 2,700 2,543 1,830 9,357 1,119 4,156 2,656 3,451 3,532 2,444 12,083 1,401 4,540 2011/ 2010/ 2009/ 2008/ 2007/ 2006/ 2005/ 2004/ 2012 2011 2010 2009 2008 2007 2006 2005 2003/ 2004 2002/ 2003 15 Months 2001/ 2002 2000/ 2001
3,875 3,872 3,577 2,388 2,513 2,359 963
3,012 2,837 2,773 3,007 2,931 2,174 2,250 1,981 2,447 2,606 723 1,104 1,189 1,581 1,654 7,597 9,162 9,238 854 1,001 7,563 874
886 1,081
9,394 9,830 9,087 648 674 658
7,986 8,347 766 884
8,851 10,131 1,027 4,644 978 4,557
6,584 5,080 6,164 6,162 5,671
7,330 6,244
YIELD PER HECTARAGE (KG) REGION TEA Watawala Hatton Lindula Udugama 1,262 1,209 1,152 1,158 1,152 1,062 1,372 1,346 1,201 1,470 1,487 1,397 1,445 1,330 1,546 1,611 1,638 1,623 1,625 2011/ 2010/ 2009/ 2008/ 2007/ 2006/ 2005/ 2004/ 2012 2011 2010 2009 2008 2007 2006 2005 2003/ 2004 2002/ 2003
15 Months 2001/ 2002 2000/ 2001
1,595 1,579 1,544 1,830
2,088 2,118 2,195 2,384
1,365 1,342 1,378 1,245 1,235
1,343 1,396 1,295 1,235 1,267 1,258 1,382 1,332 1,799 1,782 1,752 1,486 1,674 1,341 1,457 1,439
TEA RUBBER OIL PALM
1,345 1,344 1,304 1,228 1,243 1,192 1,413 1,392 753 645 604 671 755 671 779 652
1,395 816 2,321
1,626 783 2,609
1,583 852 2,755
2,128 923 3,044
3,156 2,391 2,973 2,908 2,734 2,781
2,814 2,512
145
Historical financial information

2002/03 In Rs.000s INCOME STATEMENT Revenue Gross profit Other Operating income Administrative expenses Distribution expenses Management fees Operating profit Net finance cost Amortisation of negative goodwill Profit /(loss) before Tax Tax expense Profit /(loss) for the year Profit from discontinued operations Attributable to: Equity holders of the Company Minority interests Profit /(loss) for the year BALANCE SHEET Non Current Assets Leasedhold right to bare land of JEDB/SLPC estates Immovable estate assets on finance lease Tangible fixed assets Immature-mature plantations Investment in Gratuity Fund Investments Total Non Current Assets Current Assets Inventories Trade and other receivables Cash and cash equivalents Total Current Assets Total Assets Capital and reseves Stated capital General reserve Negative goodwill Investment reserve Retained earnings Total equity attributable to equity holders of the company Minority interests
146
2003/04
2004/05
2005/06
2006/07
1,999,337 190,113 36,538 (67,800) (43,768) (42,311) 72,772 (106,619) 7,870 (25,977) (25,977)
2,229,238 287,258 28,992 (68,119) (66,967) (50,365) 130,799 (98,549) 7,870 40,120 40,120
2,719,781 414,948 45,287 (78,910) (59,253) (65,152) 256,920 (98,010) 7,870 166,780 (4,973) 161,807
2,855,036 464,467 55,101 (86,465) (71,702) (60,702) 300,699 (89,819) 218,893 (14,315) 204,578
3,169,788 502,376 76,946 (92,054) (105,281) (50,960) 330,826 (83,092) 247,734 (26,034) 221,700
(25,977) (25,977)
40,120 40,120
161,807 161,807
204,578 204,578
221,700 221,700
296,961 362,541 551,833 814,691 6,200 2,032,226
289,926 342,727 567,670 846,693 2,047,016
282,891 322,913 606,811 883,679 2,096,294
267,756 296,958 656,823 884,880 205,820 2,312,237
260,928 277,534 722,453 990,204 203,416 2,454,535
190,555 226,473 7,141 424,169 2,456,395
175,324 241,478 3,045 419,847 2,466,863
226,546 293,021 60,001 579,568 2,675,862
260,926 340,306 66,148 667,380 2,979,617
292,917 336,986 75,356 705,259 3,159,794
310,000 150,000 116,087 118,930 695,017 -
310,000 150,000 108,217 159,050 727,267 -
310,000 150,000 100,347 279,441 839,788 -
310,000 150,000 92,477 147,926 483,876 1,184,279 -
310,000 150,000 146,030 768,470 1,374,500 -
Ten Years summary

2007/08 Group 4,313,604 811,320 84,563 (128,637) (148,084) (75,427) 543,735 (87,902) 455,833 (51,879) 403,954 2007/08 Company 4,313,604 811,320 86,121 (127,854) (148,084) (75,427) 545,671 (87,902) 457,769 (51,879) 405,890 2008/09 Group 4,124,503 487,193 43,523 (138,479) (201,360) (35,112) 155,765 (71,057) 84,708 (10,000) 74,708 2008/09 Company 4,121,976 489,495 45,223 (137,225) (200,981) (35,112) 161,400 (71,415) 89,985 (10,000) 79,985 2009/10 Group 5,615,167 851,239 130,603 (164,099) (231,657) (75,798) 510,288 (79,669) 430,619 (4,000) 426,619 2009/10 Company 5,611,731 860,887 132,303 (178,687) (231,375) (75,798) 507,330 (79,711) 427,619 (4,000) 423,619 2010/11 Group 6,158,246 1,199,796 124,369 (342,364) (167,142) (90,033) 724,626 (85,984) 638,642 3,830 642,472 2010/11 Company 4,663,744 683,004 239,309 (220,759) (90,033) 611,521 (84,951) 526,570 5,830 532,400 2011/12 Group 4,535,486 249,496 344,218 (211,331) (49,331) 333,052 (85,468) 247,584 (4,755) 242,829 169,756 404,438 484 403,954 76,026 1,318 74,708 429,900 3,281 426,619 642,468 642,472 532,400 412,585 412,585 2011/12 Company 4,532,269 246,279 616,708 (203,235) (49,331) 610,421 (85,468) 524,953 (4,114) 520,839 520,839 520,839
261,788 265,062 885,477 1,168,364 2,580,691
261,788 265,062 879,626 1,168,364 10,781 2,585,621
254,753 247,415 1,068,101 1,376,476 2,946,745
254,753 247,415 1,062,527 1,376,476 16,125 2,957,296
247,718 229,768 1,486,213 1,603,713 3,567,412
247,718 229,768 1,478,604 1,603,713 3,559,803
240,683 212,121 1,769,768 1,867,121 4,089,693
240,683 212,121 1,651,504 1,867,121 355,852 4,327,281
233,648 194,474 1,710,115 2,155,042 42,641 4,335,920
233,648 194,474 1,710,115 2,155,042 42,641 852 4,336,772
540,488 439,337 90,434 1,070,259 3,650,950
534,023 441,303 86,134 1,061,460 3,647,081
351,370 525,966 73,615 950,951 3,897,696
342,092 530,740 67,920 940,752 3,898,048
540,583 464,611 53,442 1,058,636 4,626,048
540,583 471,112 52,369 1,064,064 4,623,867
797,068 488,783 40,697 1,326,548 5,416,241
568,427 312,649 15,061 896,137 5,223,418
516,085 325,724 470,231 1,312,040 5,647,960
516,085 343,808 447,716 1,307,609 5,644,381
310,000 150,000 1,137,408 1,597,408 3,110
310,000 150,000 1,138,860 1,598,860
310,000 150,000 1,154,267 1,614,267 3,571
310,000 150,000 1,159,678 1,619,678 -
310,000 150,000 1,584,167 2,044,167 290
310,000 150,000 1,583,297 2,043,297 -
310,000 150,000 2,160,686 2,620,686 -
310,000 150,000 2,050,614 2,510,614 -
310,000 150,000 2,372,104 2,832,104 -
310,000 150,000 2,370,286 2,830,286 147
Historical financial information

2002/03 In Rs.'000s Non-current liablilites Long term borrowings Obligations under finance lease obtained from SLPC/JEDB Retirement benefit obligation Deferred income and capital grants Net Deferred tax liability Total Non-current liablilites Current liablilites Short-term borrowings Obligations under finance lease obtained from SLPC/JEDB Trade and other payables Current tax payable Total Current liablilites Total Liabilities Total Equity & Liabilities CASH FLOWS Cash generated/(used in) from/to operations Net cash inflow/(outflow) from operating activities Net cash inflow/(outflow) from investing activities Net cash inflow/(outflow) from financing activities Increase/(decrease) in cash and cash equivalents OPERATING RATIOS Annual turnover growth % Profit Growth % Turnover per employee (Rs.000) FINANCIAL RATIOS Return on equity % Current ratio (Times) Debt equity ratio (Times) Interest cover (Times) Total assets to current liabilities % INVESTOR RATIOS Annualised earning per share (Rs.) Price earning share (Times) Dividend per share (Rs.) Dividend cover (Times) Market Capitalization (Rs.000) Net assets value per share (Rs.) (1.10) (7.50) 195,250 29.37 1.69 4.73 0.75 2.26 189,333 30.73 6.84 2.67 1.00 6.84 431,917 35.48 8.64 4.60 1.25 6.91 940,751 50.04 9.37 5.66 1.50 6.24 1,254,298 58.08 (3.74) 0.63 1.07 0.76 27 5.52 0.67 0.99 1.40 25 19.27 0.77 0.81 2.70 28 17.26 0.88 0.49 3.44 25 16.13 1.04 0.41 3.98 22 21 (311) 122 11 254 154 22 303 189 5 26 201 11 8 225 211,949 106,434 (162,273) 100,063 44,224 260,223 134,335 (112,812) 60,001 81,524 407,552 270,835 (128,869) (162,652) (20,686) 404,188 271,821 (162,743) (78,980) 30,098 418,681 297,699 (217,720) (59,530) 20,449 410,788 259,991 670,779 1,761,378 2,456,395 368,769 4,040 249,562 622,371 1,739,596 2,466,863 399,899 4,200 344,277 748,376 1,836,074 2,675,862 362,906 4,360 388,022 755,288 1,795,338 2,979,617 343,866 4,542 325,722 6,995 681,125 1,785,294 3,159,794 335,236 408,608 237,690 109,065 1,090,599 357,474 398,730 243,342 117,679 1,117,225 286,791 394,530 278,233 128,144 1,087,698 225,056 390,170 288,034 136,790 1,040,050 221,371 385,628 357,538 139,632 1,104,169 2003/04 2004/05 2005/06 2006/07
148
Ten Years summary

2007/08 Group 303,168 380,896 420,624 156,618 10,000 1,271,306 2007/08 Company 303,168 380,896 420,624 156,618 10,000 1,271,306 2008/09 Group 246,811 375,983 439,939 177,421 20,000 1,260,154 2008/09 Company 246,811 375,983 439,939 177,421 20,000 1,260,154 2009/10 Group 412,824 370,870 643,388 228,732 1,655,814 2009/10 Company 412,824 370,870 643,388 228,732 1,655,814 2010/11 Group 304,730 365,560 643,872 255,798 27,129 1,597,089 2010/11 Company 304,730 365,560 638,008 255,798 26,161 1,590,257 2011/12 Group 210,727 360,253 815,849 244,935 30,128 1,661,892 2011/12 Company 210,727 360,253 815,849 244,935 30,275 1,662,039
287,444 4,720 453,985 32,977 779,126 2,050,432 3,650,950
287,444 4,720 451,774 32,977 776,915 2,048,221 3,647,081
503,704 4,910 466,621 44,469 1,019,704 2,279,858 3,897,696
503,704 4,910 465,133 44,469 1,018,216 2,278,370 3,898,048
262,895 5,113 589,297 68,472 925,777 2,581,591 4,626,048
262,895 5,113 588,277 68,471 924,756 2,580,570 4,623,867
436,830 5,313 742,121 14,003 1,198,466 2,795,555 5,416,241
436,830 5,313 667,235 12,970 1,122,547 2,712,804 5,223,418
546,145 5,310 588,677 13,832 1,153,964 2,815,856 5,647,960
546,145 5,310 587,631 12,970 1,152,056 2,814,095 5,644,381
529,981 404,297 (364,299) (44,107) (4,109)
534,205 408,521 (372,823) (44,107) (8,409)
520,845 375,135 (512,966) (20,451) (158,282)
526,931 380,863 (520,091) (20,451) (159,679)
891,758 752,710 (727,659) 120,393 145,444
893,936 754,846 (725,173) 120,393 150,066
861,544 685,774 (694,367) (123,921) (132,514)
981,602 813,771 (846,927) (123,921) (157,077)
630,936 451,815 169,084 (308,780) 312,119
565,362 386,241 237,777 (308,780) 315,240
36 82 302
36 82 302
(4) (82) 309
(4) (80) 309
36 471 431
36 430 430
10 51 472
(17) 26 358
(26) (62) 372
(3) (2) 371
25.20 1.37 0.37 6.19 21
25.40 1.37 0.37 6.21 21
4.60 0.93 0.46 2.19 26
4.90 0.92 0.46 2.26 26
4.79 1.14 0.33 6.40 20
4.82 1.15 0.33 6.36 20
24.52 1.11 0.70 8.43 5
21.21 0.80 0.72 7.14 5
14.57 1.14 0.59 3.90 4.89
18.40 1.14 0.59 7.19 4.90
17.07 5.04 2.50 6.83 2,035,333 67.50
17.15 5.01 2.50 6.86 2,035,333 67.56
3.21 18.53 1,384,500 68.35
3.38 17.31 1,384,500 68.44
1.80 9.76 2.75 6.55 4,165,333 86.38
1.79 9.83 2.75 6.51 4,165,333 86.34
2.72 0.92 5,916,675 110.73
2.25 1.11 5,916,675 106.08
1.74 5.74 0.35 4.98 2,366,670 11.97
2.20 4.54 0.35 6.29 2,366,670 11.96
149
Shareholders & investors information

Stock Exchange Listing The issued shares of Watawala Plantations PLC are listed with the Colombo Stock Exchange (CSE) in Sri Lanka. The Audited Consolidated Income Statements for the year ended 31st March 2012 and the Audited Consolidated Balance Sheets at that date have been submitted to the Colombo Stock Exchange within three months of the Balance Sheet date. Sharholders information Total No of Shareholders as at 31st March 2012 :17,957 (as at 31st March 2011-18,240) Total No of Shares : 236,666,671 Public share holding The Percentage of shares held by the public : 27.29% (2011 - 26.10%)
Distribution of shareholding
Residents No of Shares held 1-1,000 1,001-5,000 5,001-10,000 10,001-50,000 50,001-1,000,000 Over 1,000,000 Total No. of Share holders No. of Shares 4,485,419 16,676,009 2,563,811 3,556,622 8,564,390 No. of Share holders 8 12 9 8 2 2 41 Non-Residents No. of Shares 4,500 38,200 71,000 306,700 137,000 8,962,930 9,520,330 No. of Share holders 8,720 8,662 344 175 48 8 Total No. of Shares 4,489,919 16,714,209 2,634,811 3,863,322 8,701,390
% 1.90 7.05 1.08 1.50 3.62
% 0.04 0.07 0.05 0.04 0.01 0.01 0.22
% 0.00 0.02 0.03 0.13 0.06 3.79 4.02
% 48.56 48.24 1.92 0.97 0.27
% 1.90 7.06 1.11 1.63 3.68 84.62
8,712 48.52 8,650 48.17 335 167 46 6 1.87 0.93 0.26
0.03 191,300,090 80.83
0.04 200,263,020
17,916 99.77 227,146,341 95.98
17,957 100.00 236,666,671 100.00
Categories of shareholders
Residents No of Shares held 1-1,000 1,001-5,000 5,001-10,000 10,001-50,000 50,001-1,000,000 Over 1,000,000 Total No. of Share holders 36 60 30 30 25 7 188 No. of Shares 20,638 185,920 224,840 762,622 5,874,000 No. of Share holders Non-Residents No. of Shares 4,469,281 2,409,971 3,100,700 2,827,390 1,324,950 No. of Share holders 8,720 8,662 344 175 48 8 Total No. of Shares 4,489,919 16,714,209 2,634,811 3,863,322 8,701,390
% 0.20 0.33 0.17 0.17 0.14
% 0.01 0.08 0.10 0.32 2.48 87.04
% 1.89 6.98 1.02 1.31 1.19 0.56
% 48.56 48.24 1.92 0.97 0.27
% 1.90 7.06 1.11 1.63 3.68 84.62
8,684 48.36 314 145 23 1 1.75 0.81 0.13 0.01
8,602 47.90 16,528,289
0.04 198,938,070 84.06 1.05 206,006,090
0.04 200,263,020
17,769 98.95 30,660,581 12.96
17,957 100.00 236,666,671 100.00
Share trading information from 1st April to 31st March

2012 Highest during the year Lowest during the year As at 31st March No. of Transactions No. of Shares Traded Value of Shares Traded (Rs)
150
2011 34.70 (27.01.2011) 24.90 ( 31.03.2011) 24.50 6,918 11,922,400 367,775,240
14.50 (02.01.2012) 8.80 ( 15.02.2012) 10.00 1,454 1,322,270 14,150,296
Twenty (20) largest shareholders as at

31st March 2012 Name Estate Management Services (Pvt) Ltd Mouldex Limited Bank of Ceylon A/C Ceybank Unit Trust Aureos South Asia Fund LLC HSBC International Nominees LTD-SSBT-Deustche Bank K.C.Vignarajah Vyjayanthi & Company Limited S.N.M.Semasinghe National Savings Bank Bank of Ceylon A/C Ceybank No.1 Account M.I.Abdul Hameed Lexinton Holdings (Pvt) Ltd Mrs. S.Vignaraj Cocoshell Activated Carbon Company Ltd Confifi Investments (Pvt) Ltd Confifi Management Services (Pvt) Ltd Anverally and sons (Pvt) Ltd Mr.P .L.A. Waniganayake Merchant Bank of Sri Lanka Limited Perera and Sons (Bakers) Limited ACL Plastics Ltd Sub Total Others 205,463,209 31,203,462 No of Shares held 127,216,340 44,855,100 17,903,700 6,962,930 2,000,000 1,324,950 1,000,000 545,100 419,500 350,100 350,000 323,600 319,489 293,600 293,000 293,000 257,100 255,700 250,000 250,000 % of the holding 53.75 18.95 7.56 2.94 0.85 0.56 0.42 0.23 0.18 0.15 0.15 0.14 0.13 0.12 0.12 0.12 0.11 0.11 0.11 0.11 86.82 13.18 31st March 2011 No of Shares held 127,216,340 44,820,700 17,846,400 6,962,930 2,000,000 1,174,500 1,000,000 595,500 242,400 350,100 350,000 323,600 250,000 293,600 293,000 293,000 247,100 250,000 250,000 200,000 204,959,170 31,707,501 % of the holding 53.75 18.94 7.54 2.94 0.85 0.50 0.42 0.25 0.10 0.15 0.15 0.14 0.11 0.12 0.12 0.12 0.10 0.11 0.11 0.08 86.60 13.40
Grand Total
236,666,671
100.00
236,666,671
100.00
Share trading information- last five years

2011/12 Highest during the year Lowest during the year As at 31st March No. of shares 14.50 8.80 10.00 236,666,671 2010/11 34.70 24.90 24.90 236,666,671 2009/10 192.00 53.25 176.00 23,666,668 2008/09 88.50 42.50 58.50 23,666,668 2007/08 107.00 45.00 86.00 23,666,668 2006/07 65.00 30.50 53.00 23,666,668
Market capitalization (Bn)

Year 2011/2012 2010/2011 2009/2010 2008/2009 2007/2008 2006/2007 Rs. Bn. 2.37 5.89 4.17 1.38 2.04 1.25
151
Glossary
ACCOUNTING POLICIES The specific principles, bases, conventions, rules, and practices adopted by an enterprise in preparing and presenting Financial Statements. ACCRUAL BASIS Recording revenues & expenses in the period in which they are earned or incurred regardless of whether cash is received or disbursed in that period. GSA The Gross Sales Average. This is the average sales price obtained (over a period of time, for a kilo of produce) before any deductions such as Brokerage, etc. NSA The Net Sales Average. This is the average sale price obtained (over a period of time) after deducting Brokerage fees, etc. COP The Cost of Productions. This generally refers to the cost of producing per kilo of produce (Tea /Rubber / Palm Oil) AMORTISATION The systematic allocation of the depreciable amount of an intangible asset over its useful life. EBITDA Earning before interest, tax, depreciation and amortization. VALUE ADDITIONS The quantum of wealth generated by the activities of the company and its application. EARNING PER SHARE EPS Profit attributable to ordinary shareholders divided by the number of ordinary shares in ranking for dividend. ENTERPRISE VALUE EV Market Capitalization plus Debt, Minority Interest & Preferred shares minus total Cash & Cash equivalents. ENTERPRISE MULTIPLE EM Enterprise Value (EV) divided by Earnings before Interest Tax Depreciation & Amortization (EBITDA) MARKET VALUE ADDED MVA Shareholder funds divided by the market value of shares PRICE EARNINGS RATIO - PE Market Price of a share divided by earnings per share. MARKET CAPITALIZATION Number of Shares issues multiplied by the market value of each share at the year end. NET ASSETS Sum of fixed Assets and Current Assets less total liabilities. NET ASSETS PER SHARE Net Assets at he end of the period divided by the number of Ordinary Shares in issues. RETURN ON EQUITY Attributable profits divided by average shareholders funds. INTEREST COVER Profit before tax plus interest charges divided by interest charges, including interest capitalized. DIVIDEND COVER Profit attributable to shareholders divided by gross dividend. DIVIDENT PAYOUT Profit paid out to share holders as dividends as a percentage of profits made during the year. RELATED PARTIES Parties who could control or significantly influence the financial and operating policies of the Company. CONTINGENT LIABILITIES Conditions or situations at the balance sheet date, the financial effects of which are to be determined by future events, which may or may not occur. WORKING CAPITAL Current assets exclusive of liquid funds and interestbearing financial receivables less operating liabilities and non-interest-bearing provisions.
152
TOTAL BORROWINGS Total borrowings consist of interest-bearing liabilities, fair-value derivatives, accrued interest expenses and prepaid interest income, and trade receivables with recourse. NET BORROWINGS Total borrowings less liquid funds. CASH EQUIVALENTS Liquid investments with original maturities of three months or less. CURRENT RATIO Current Assets divided by current liabilities DEBT TO EQUITY RATIO Borrowing divided by equity GERAING RATIO Interest bearing Capital divided by total Capital (interest bearing an non interest bearing) TURNOVER PER EMPLOYEE Consolidated turnover of the company for the year divided by the number of employees employed at the year end. EXTENT IN BEARING The extent of land. From which crop is being harvested. Also see Immature Plantation CROP The total produce harvested during a financial year FIELD An unit extent of land. Estates are divided into fields in order to facilitate management. IMMATURE PLANTATIONS The extent of plantation that is under-development and is not being harvested.
MATURE PLANTATIONS The extent of plantation from which crop is being harvested. Also see Extent in Bearing. IN FILLING A method of field development whereby planting of individual plants is done in order to increase the yield of a given field, whilst allowing the field to be harvested. REPLANTING A method of field development where an entire unit of land is taken out of bearing and developed by way of uprooting the existing trees/bushes and replanting with new trees/bushes. VP TEA The average crop per unit extent of land over a given period of time (usually Kgs. per hectare per year) Yield (YPH) The average crop per unit extent of land over a given period of time (usually Kgs. Per hectare per year) TASL Tea Association of Sri Lanka ISO International Standards Organization HACCP Hazard 5S A Japanese management technique on the organization of the workplace. 5s stands for Seiri (Sorting), Seiton (Organizing), Seiso (Cleaning), Seiketso (Standardization), Shitsuke (Sustenance). Analysis Critical Control Point System. Internationally accepted food safety standard.
153
Notice of Meeting
NOTICE is hereby given that the nineteenth (19th) Annual General Meeting of Watawala Plantations PLC will be held at the Park Premier Banquet Hall at Excel World, No 338, T.B.Jaya Mawatha, Colombo 10 on Friday 06th July 2012 at 10.00 a.m. and the business to be brought before the meeting will be: 1. To consider and adopt the Annual Report of the Board of Directors and the Statement of Accounts for the Financial year ended 31st March 2012 with the Auditors Report thereon. 2. To re-appoint Mr. R.K. Krishnakumar, who retires having attained the age of seventy four years and the Company has received a special notice to pass the under noted ordinary resolution in compliance with section 211 of the Companies Act No.07 of 2007 in relation to his appointment. Colombo 17/05/2012 We shall be obliged if the Shareholders/ proxies attending the Annual General Meeting, produce their National Identity card to the Security Personnel stationed at the entrance By order of the Board Secretaries & Financial Services (Pvt) Ltd., Secretaries, Watawala Plantations PLC., 9. To authorize the Directors to determine contributions to Charities.
Ordinary Resolution
That Mr. R.K. Krishnakumar a retiring Director who has attained the age of seventy four years be and is hereby re-appointed a Director of the Company and it is hereby declared that the age limit of seventy years referred to in Section 210 of the Companies Act No.07 of 2007 shall not apply to the appointment of the said Director 3. To re-appoint Mr.A.N.Fernando as per article 28 (2) of the Articles of Association, who has been appointed by the Board, since the last Annual General Meeting, a Director. 4. To re-elect Mr. P . T. Siganporia who retires by rotation at the Annual General Meeting, a Director 5. To re-elect Mr. B. A. Hulangamuwa who retires by rotation at the Annual General Meeting, a Director 6. To re-elect Mr. G. Sathasivam who retires by rotation at the Annual General Meeting, a Director 7. To declare a Dividend of Rs.0.35 per share as recommended by the Directors. 8. To re-appoint Messrs. PricewaterhouseCoopers as Auditors and authorize the Directors to determine their remuneration
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Form of Proxy
I/We ...................................................... of ....................................................... being a member /members of Watawala Plantations PLC, hereby appoint :
.......................................................of . .......................................................or failing him, Mr. G.Sathasivam (Chairman of the Company) of Colombo, or failing him, one of the Directors of the Company as my/our proxy to vote as indicated hereunder for me/us and on/ my behalf at the 19th Annual General Meeting of the Company to be held on 6 July 2012 at 10.00 a.m. and every poll which may be taken in consequence of aforesaid meeting and any adjournment thereof: i) ii) iii) iv) v) vi) vii) viii) ix) To consider and adopt the Annual Report of the Board of Directors and the Statement of the Accounts for the financial year ended 31st March 2012 with the Report of the Auditors thereon. To re-appoint Mr.R.K.Krishnakumar who retires having attained the age of seventy four years, a Director by passing the Ordinary Resolution set out in the notice. To re-appoint Mr. A. N. Fernando who was appointed during the year, a Director. To re-elect Mr.P . T. Siganporia who retires by rotation at the Annual General Meeting, a Director. To re-elect Mr.B. A. Hulangamuwa who retires by rotation at the Annual General Meeting, a Director. To re-elect Mr.G. Sathasivam who retires by rotation at the Annual General Meeting, a Director. To declare a Dividend of Rs.0.35 per share as recommended by the Directors. To re-appoint Messrs. Pricewaterhouse Coopers as Auditors and authorize the Directors to determine their remuneration. To authorize the Directors to determine contributions to Charities. ....................................... Signature of Shareholder For Against
Dated . day of . 2012 i) ii) A proxy need not to be a member of the Company Instructions regarding completion appear overleaf
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Instructions as to Completion of the form of Proxy

1. to be valid, the completed form of proxy should be deposited at the Registered Office of the Company at No. 60, Dharmapala Mawatha, Colombo 03, not less than 48 hours before the time of the meeting 2. In perfecting the form of proxy, please ensure that all the details are legible 3. If you wish to appoint a person other than the Chairman of the Company (or failing him, one of the Directors of the Company) as you proxy, please insert the relevant details. 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 Associations 6. In the case of a proxy signed by the Attorney, the Power of Attorney must be deposited at the Registered Office for registration
156
Corporate Information
Name of the Company Watawala Plantations PLC Legal form A public Company with limited liability Registered under Companies Act No 17 of 1982 and re-registered under the Companies Act No. 07 of 2007 and quoted on the Colombo Stock Exchange. Date of incorporation 18 June 1992 Registration No PQ 65 Accounting Year 31 March Directors G Sathasivam - Chairman S G Sathasivam (Alternate to G Sathasivam) R K Krishnakumar V Govindasamy-Managing Director P T Siganporia D V Seevaratnam-Chief Executive Officer D S Ratnasingham K Venkataramanan A N Fernando B A Hulangamuwa Secretaries - Jt Samanthi Haddegoda Secretaries & Financial Services Pvt Ltd 60, Dharmapala Mawatha Colombo 03 Auditors PriceWaterhouseCoopers (Chartered Accountants) PO Box 918,100 Braybrooke Place Colombo 02 FJ & G de Saram (Attorneys-at-Law) No 216, de Saram Place Colombo 10 Registered Office 60, Dharmapala Mawatha Colombo 03 Sri Lanka Tel: +94 114 702 400 Fax: +94 114 716 365 E-mail: watawala@zesta.lk Website: www.zestatea.com Lawyers D N Thurairajah & Co (Attorneys-at-Law) No 50/6A, Sripa Road Off Thimbirigasyaya Colombo 05 Managing Agents Estate Management Services (Pvt) Ltd 60, Dharmapala Mawatha Colombo 03 Bankers Hatton National Bank PLC Commercial Bank of Ceylon PLC Sampath Bank Ltd Peoples Bank Ltd MCB Bank Ltd Bank of Ceylon ICICI Bank Citi Bank N A Nations Trust Bank The Hongkong & Shanghai Banking Corporation
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Wata wa la Pla nta tions PLC

60 Dharmapala Mawatha, Colombo 03

Watawala Plantations 2011.2012 PDF

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TOUGH TIMES DONT LAST...

TOUGH COMPANIES DO!

annual report 2011 | 2012

OUR CORE VALUES

Watawala Plantations PLC

MANAGEMENT DISCUSSION AND ANALYSIS

annual report 2011 | 2012

Watawala Plantations PLC Management Reports

Financial Highlights 2011/12

Per Share data

annual report 2011 | 2012

Company at a glance 2011/12

Watawala Plantations PLC Management Reports

Watawala Plantations PLC Management Reports

annual report 2011 | 2012

Watawala Plantations PLC Management Reports

in output, as well an increase in COP due to a wage increase.

Issues and Strategies

annual report 2011 | 2012

G. Sathasivam Chairman 17/05/2012

Watawala Plantations PLC Management Reports

Managing Directors Review

Palm oil prod:

The Plantation Sector in Sri Lanka

intensified during the latter half of the year.

annual report 2011 | 2012

Watawala Plantations PLC Management Reports

annual report 2011 | 2012

handling of processing and manufacturing

which saw an increase of 2.81% over the previous

Watawala Plantations PLC Management Reports

Lonach Dairy Farm

Issues and future Strategies

annual report 2011 | 2012

less predictable than ever and hence,

V Govindasamy Managing Director 17/05/2012

New dawning with a payoff to years of consecutive losses

Strategic joint venture with Tata Tea Ltd of India

Reached a turnover of Rs. 2bn for the first time in history

Created new benchmark blending traditions with technology

Repeated losses on cards

Achieved Business Super brand status Diversified in to Dairy Farming

Watawala Plantations PLC Management Reports

annual report 2011 | 2012

Dr.D.V.Seevaratnam No11, Sangamitta Avenue, off Dharmapala Mawatha, Mt.Lavinia.

Watawala Plantations PLC Management Reports

Vice President-Finance Tata Global Beverages Ltd

Mr.B.A.Hulangamuwa No. 70/2, Hulangamuwa Road, Matale.

annual report 2011 | 2012

Profile of the Executive Committee

Ronnie Almeida - General Manager - Plantations

K D Prasanjith Wetthewe - Manager A Jayaram Shameera Rathnayake - Manager - Manager

Binesh Pananwala - Deputy General Manager, Plantations

Yajith de Silva - General Manager South

Ajantha Nugawela - General Manager - HR & Administration

- Manager - Senior Manager - Manager - Manager

M S A Akber Kapila Sumanarathne Channa D Ikiriwatte

Harsha P T Hulangamuwa - Manager A P Premachandra - Actg. Manager

B V Sinthaka Ruwan - Deputy General Manager - Finance

N. Vige Bede Johnpillai - General Manager Marketing

Watawala Plantations PLC Management Reports

annual report 2011 | 2012