Future Sustainable. TOUCHWOOD INVESTMENTS PLC ANNUAL REPORT 2011 - 12

TOUCHWOOD INVESTMENTS PLC
Future Sustainable.
www.touchwood.com
ANNUAL REPORT 2010/11
Touchwood Investments PLC

No. 28, Joseph’s Lane,
Colombo 4, Sri Lanka. TOUCHWOOD INVESTMENTS PLC
Tel: +94 117 444 888 ANNUAL REPORT 2011/12
Future Sustainable. Corporate Information
At Touchwood we are deeply committed to
a sustainable future - because we know Name of the Company : Touchwood Investments PLC
that we must. Our business involves the Legal Form : A Public Quoted Company with Limited Liability
Incorporated on June 7, 1999
environment and our impact on it more Registration No. PQ - 217
closely than most. This is why we have to Registered Office

: No. 28, Joseph’s Lane,
Colombo 4, Sri Lanka.
consider social, political and environmental

Tel: +94 117 444 888
Fax: +94 117 444 889
impacts in all our undertakings. Because Board of Directors : Mr. Roscoe A. Maloney (Chairman)
we believe that it is more socially, ethically Mr. S. P. Asitha Koralage (Deputy Chairman)
Mr. Channa Abeygunawardene (Chief Executive Officer)
and financially rewarding to be a truly Mrs. Swarna Maloney
Mr. L. L. Kulatunga
sustainable company. Mr. A. R. Pereira
Alternate Directors : Mr. Janath Olaboduwa

Mr. Prageeth Herath
Secretary : Corporate Advisory Services (Pvt) Ltd
Registrars : P W Corporate Secretarial (Pvt) Ltd
Auditors : KPMG (Chartered Accountants)
Lawyer : Mr. Janath Olaboduwa
Bankers : The Hongkong and Shanghai Banking Corporation Limited

Sampath Bank PLC
Bank of Ceylon
Hatton National Bank PLC
Tax Consultants : BDO Partners,

Chartered Accountants,
Charter House,
65/2, Sir Chittampalam Gardiner Mawatha,
Colombo 2.
We pioneered the business model for managed forestry investments in the Asia Pacific region. And
that singular expertise sets us apart. Over the past 13 years, our constant research and hands-on
involvement with field experts and leading educational institutions has enabled us to incorporate
patented cultivation programs with proprietary design technology that deliver an assortment of
unparalleled products and services. These scientific advancements and sustainable practices provide
our clients socially-responsible investments through the practice of managed forestry, growing trees
with a high commercial value while preserving old-growth forests.
1
2 TOUCHWOOD INVESTMENTS PLC ANNUAL REPORT 2011/12
CONTENTS
Financial Highlights 6 Report of the Directors 58
The Touchwood Plantations 8 Audit Committee Report 64
Chairman’s Statement 12 Directors’ Responsibility Statement
Deputy Chairman’s Statement 14 for Financial Reporting 65
Chief Executive Officer’s Statement 16 Chief Executive Officer’s & Head
Board of Directors 20 of Finance’s Responsibility Statement 66
Management Team 22 Independent Auditor’s Report 67
Management Discussion and Analysis 24 Income Statement 68
Sustainability Reporting 38 Balance Sheet 69
The GRI Index 40 Statement of Changes in Equity 70
Environmental Bottom Line 42 Cash Flow Statement 71
Economic Bottom Line 46 Notes to the Financial Statements 72
Social Bottom Line 48 Investor Information 105
Triple Bottom Line Performance 50 Notice of Meeting 107
Corporate Governance 52 Form of Proxy 109
Risk Management 56 Corporate Information Inner Back Cover
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OUR VISION
“To help stop the destruction of our rainforests”
Our natural forests are under relentless pressure. Touchwood’s role in
providing managed and sustainable alternatives contributes to saving old
growth forests from destruction. Our vision is a world where forest products
are obtained from sustainable managed Agro-forestry leaving our natural
forests just as nature intended them to be.
Join with Touchwood and help preserve our natural forests and forest
products for our children so they may also see and share our vision.
OUR MISSION
Our mission is to grow trees that are commercially viable and
environmentally sustainable, to make our clients wealthy and healthy,
creating an environment for our employees that promotes job satisfaction,
safe in the knowledge that we are saving the rainforests whilst acquiring
wealth. Touchwood is proud to be a true triple bottom line company,
profiting, protecting the environment and being socially responsible.
VALUES
We are proud of Touchwood and our achievements.
We recognise that our clients pay for our actions.
We ensure win win situations where all transactions are negotiated with the
result that all parties to the transaction are satisfied.
All stakeholders are given equal importance.
The culture of every employee and organisation is respected.
Diversity and objectivity of employment is maintained.
Integrity and honesty are valued even at the risk of a loss in profits.
We compete as a team.
What We Do
Touchwood is the pioneer of the agro-forestry investment industry in Sri

Lanka. We are a company that specialises in the cultivation of high value
exotic tropical timbers as an alternative and sustainable source of forest
products (Mahogany, Vanilla, Sandalwood, Teak and other cash crops).
Over a decade of inspired action and foresight, Touchwood Investments has grown in stature and global
presence, and has proudly shown the promise of a good harvest to all those who have placed their trust
in the credibility, integrity and capability of the Company.
The long term prospects of the Company are indeed promising. The Hancock Natural Resource Group, a
unit of John Hancock Financial Services, Boston, USA has predicted that “the main appeal of the sector
is its long-term profitability. Over the last 30 years, annualised returns on timber have averaged 15.2 per
cent compared with 13.2 per cent for the Standard & Poor’s 500 stock index”. The speculation therefore
is that agro-forestry is a strong investment tool with a greater return on investment. Analysts have
described agro-forestry as a sector that remains resilient in the face of economic meltdowns, because
of its sheer lack of correlation to the global commodity, stocks and bond markets.
Engaging as we do in this business, we draw on the innovation and expertise of global resource
personnel to fuel our growth momentum. We collaborate with stellar institutions across the world
to further our agro-forestry management practices and plans, and adopt the latest techniques and
technologies throughout our plantations while constantly engaging in research and development to
better our offering.
Those who invest with us are empowered with the choice to invest responsibly; it is an investment
option that goes beyond financial gain to ecological and environmental gain. The communities where
Touchwood operates appreciate the benefits of our commitment and we continue to invest in and
develop the skills of Touchwood people who work tirelessly to ensure that stakeholder expectations are
met.
As Sri Lanka’s premier Agro-Forestry Company, Touchwood for the fourth successive year emerged
as one of Sri Lanka’s most valuable brands by being ranked within Sri Lanka’s Top 100 Brand Index.
Compiled annually by Brand Finance (Lanka), a subsidiary of a global entity, Brand Finance PLC, the
Brand rankings for the Year 2010 were disclosed and presented in the April 2011 issue of Sri Lanka’s
pioneering Business Magazine, the Lanka Monthly Digest (LMD).
In essence, we are in the business of creating a brighter future for our investors, our future generations
and for mother Earth.
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What We Believe
The triple bottom line is intrinsic to our business model and is the core upon which our values
system is built.
We empower PEOPLE We protect our PLANET We ensure PROFIT to our

stakeholders.
We believe that all things in this world have an effect on another and our business is no
exception.
Our agro-forestry activities have positive effects on the environment and the water cycles of the
island and in a larger sense, contribute to the wellbeing of the global environment as a whole.
The profit we deliver to our stakeholders is one that we can truly be proud of, as it signifies a
partnership to develop our nation, our people and our children’s future.
“Our strong track record of performance on results delivery

supports our strategy for the future”
Financial Highlights
Group
For the year ended 31st March 2012 2011
Rs.’000 Rs.’000
Revenue 1,196,403 1,466,429

Profit before Taxation 132,437 368,023
Profit after Taxation 83,847 325,296
Net Financing Cost 17,903 12,088
Earnings per Share (Rs.) 1.47 5.05
As at 31st March
Shareholders’ Fund 3,017,149 2,921,604
Total Assets 6,884,184 5,884,699
Net Assets per Share (Rs.) 42.33 40.99

Two Year Financial Summary

Rs.’000 Rs.’000
Operating Results
Revenue 1,196,403 1,466,429
Financial Cost 17,903 12,088
Depreciation 19,821 11,917
Profit before Interest 150,340 380,111
Profit before Tax 132,437 368,023
Assets Employed
Property Plant & Equipment 800,386 711,218
Biological Assets 5,510,386 4,525,952
Current Assets - Liabilities 251,125 409,399
Shareholders’ Fund
Stated Capital 623,616 623,616
Retained Losses (401,596) (215,823)
Non Current Liabilities 3,761,136 2,890,362
Rs. Rs.
Net Assets per Share 42.33 40.99

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Company
Rs.’000 Rs.’000
Revenue 1,196,403 1,466,429

Profit before Taxation 173,792 399,728
Profit after Taxation 125,203 357,001
Net Financing Cost 16,062 12,088
Earnings per Share (Rs.) 1.76 5.28

As at 31st March
Shareholders’ Fund 3,054,464 2,938,284
Total Assets 6,846,976 5,901,823
Net Assets per Share (Rs.) 42.86 41.23
Five Year Financial Summary

For the year ended 31st March 2012 2011 2010 2009 2008
Rs.’000 Rs.’000 Rs.’000 Rs.’000 Rs.’000
Operating Results
Revenue 1,196,403 1,466,429 857,482 727,010 593,844
Financial Cost 16,062 12,088 20,640 9,538 6,154
Depreciation 19,767 11,917 7,030 4,354 3,729
Profit before Interest 189,854 411,816 361,666 264,443 290,742
Profit before Tax 173,792 399,728 341,026 254,905 284,587

Assets Employed
Property Plant & Equipment 690,094 633,979 558,364 289,055 377,384
Biological Assets 5,510,386 4,525,952 3,316,556 2,692,811 2,190,999
Current Assets - Liabilities 334,560 501,778 (3,415) 28,417 1,785

Shareholders’ Fund
Stated Capital 623,616 623,616 89,088 89,088 89,088
Retained Losses (364,281) (199,144) (194,813) (25,645) (11,724)
Non Current Liabilities 3,672,476 2,890,362 1,958,526 1,452,250 1,171,518

Rs. Rs. Rs. Rs. Rs.
Market Value per Share 15.50 23.50 104.75 50.50 90.25

Net Assets per Share 42.86 41.23 229.75 182.36 153.87
The Touchwood Plantations
Plantation Name Location Altitude Climate Species Planted Land Extent

Acres
Average annual temperature : 22 - 30 C
Ihalakanda Ratnapura 100 m - 125 m Mahogany 68
Annual rainfall : 4000 mm - 5000 mm
Munihinkanda Ratnapura 75 m -100 m Mahogany 47
Kalugalahena Ratnapura 75 m -100 m Mahogany 37
Foot Print Ratnapura 75 m -100 m Mahogany 84
Gomaragala Ratnapura 75 m -100 m Mahogany 67
St. Anthony's Ratnapura 100 m -125 m Mahogany 43
Liyangama Ratnapura 50 m - 75 m Mahogany & Vanilla 70
Hartley Mathugama 0 m - 50 m Mahogany 45
Average annual temperature: 25 - 30 C
Pelawatta Mathugama 50 m - 75 m Mahogany 33
Leelajan Mathugama 0 m - 50 m Mahogany 46
Kukuleganga Mathugama 50 m - 75 m Mahogany 40
Panthiya Mathugama 0 m - 50 m Mahogany 117
Mahogany, Vanilla
Seelani Matale 300 m 91
& Teak
Mahogany, Vanilla
North Matale Matale 300 m - 350 m 67
& Teak
Rusigama Matale 300 m - 350 m Mahogany 23
Mahogany, Vanilla
Kent Matale 300 m - 350 m 29
& Teak
Ambanganga Matale 300 m Mahogany & Vanilla 108
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Plantation Name Location Altitude Climate Species Planted Land Extent

Acres
Salagama Matale 300 m Mahogany & Vanilla 49
Pallethenna Matale 300 m Vanilla 10
Pamunuwa Matale 300 m Vanilla 23
Lower Ley Grow Badulla 500 m Sandalwood 26
Panketiya Badulla 250 m Sandalwood & Teak 48
Palugedara Badulla 1000 m Sandalwood 95
Annual rainfall : 2000mm - 2500mm
Kandaketiya Badulla 1000 m Sandalwood 47
Soranatota Badulla 1000 m Sandalwood 69
Meegahakiula Badulla 900 m Sandalwood 25
Aggalaulpatha Badulla 950 m Sandalwood 32
Kivulegedara Badulla 1000 m Sandalwood 51
Sandalwood,
Farm Grow Badulla 150 m 374
Coconut & Mango
Average annual temperature : 27 C
Sandalwood &
Burnside Kandy 1000 m 47
Vanilla
Average annual temperature : 25 C 30 C
Vanilla, Mahogany &
Cliveland Kandy 168 m 56
Rubber
Carson Polonnaruwa 110 m Coconut 600
Doramadalawa Anuradhapura 115 m Teak 49
Carson
This land is leased out by the company, under the Mahaveli Act of 1983. This act provides the ownership to the investor for a period of 33 1/2 years
Because we must.
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Management Reports
Our vision is of business and
communities thriving together in
a future that is environmentally
sustainable and socially just.
Chairman’s Statement
Conclusive evidence that A future of opportunities await

The financial year 2011/2012 has been one of great significance
agroforestry and agriculture for Touchwood. The year was wrought with great challenges and
are the means by which trepidation as the global economy brinked on further collapse. With
the Euro-zone debacle and ensuing political turmoil in the Middle
to enlarge the scope of East, 2011/2012 was a year in which fresh pressures mounted
sustainable business adds towards creating uncertainty in the global financial markets.
to the opportunities. Continued losses for investors were unfortunately a constant. Yet in
the face of these adversities, I see great prospects for Touchwood
and I am confident that 2011/2012 has placed your Company in the
nexus of a new phase of growth.
But it is not just the opportunities for agro-forestry investments that

excite me. Conclusive evidence that agro-forestry and agriculture
are the means by which to enlarge the scope of sustainable business
adds to the opportunities. Certainly, in the face of a global downturn,
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we have seen and most definitely benefited from the popularity of

sustainable investments such as ours. With agroforestry investments
gaining ground as conventional investment opportunities decline,
we will witness by far one of the most significant changes in the
dynamics of international business and finance. Global corporates
and international funds have turned to commodities such as Timber
in pegging their future returns and this trend will only continue to
grow, as more and more investors realize the potential gain from
an investment that has no correlation to the rest of the financial
markets. This lack of uncertainty will define the future of agro-
forestry investments in the years to come.
But out there lies an even greater opportunity. Global and national
food and nutrition security will face critical challenges in the
decades ahead. It is expected that global food demand will increase
by nearly 70% by 2050. This increased demand will be driven by
population growth, changing dietary demands of a more affluent
and increasingly urban population, and increased competition
for resources between foods, feed, fiber and biofuel feedstock
production. Prospects for achieving these increases in agricultural
output will be impaired by deteriorating soil quality, decreasing
availability of fresh water, and industrial farming’s high dependence
on fossil energy sources for mechanization, pesticides and fertilizers
(IAASTD, 2009). The agriculture sector will need to affordably nourish
nine billion people worldwide by 2050.
With this in mind the group has acquired 11,388 hectares of land in
Cambodia to set up a agricultural project to plant rubber and other
crops. The land has several harvestable trees providing a signifant
revenue.
Over the last three years we have moved from a mere agro-forestry
investment model to one that embraces agriculture for food
purposes. Our strategy of value addition and diversification has
enabled us to fully optimize our resources towards cash crops and
food production. As we gear to evolve our business to harness future
opportunities, I can surely assure you, our shareholders, that the
future holds great promise.
(Sgd.)
Roscoe A. Maloney
Chairman
15th August 2012

Deputy Chairman’s Statement
Challenging times those linked to financial markets. It has been demonstrated over a long
period of time that adding timber to a portfolio of investments has the
The year 2011/ 2012 was by far a year of discontent for the global
effect of improving overall risk-adjusted returns. This low correlation
economy. Despite previous forecasts that the world economy would
reflects the fact that the primary driver of returns -biological growth- is
signal recovery in 2011/2012, the world economy regressed and
unaffected by economic cycles.
recessionary pressured protracted. By mid 2011, growth forecasts for
the global economy were revised to more realistic figures and fears
Moreover, with pervasive deforestation leading to the destruction of
of an economic crisis loomed over Europe, as a sovereign debt crisis
over 1/5th of the world’s forests since 1950, new global legislation
challenged the Euro zone plummeting the world economy into a very
is in place to protect the forests that remain as they play a vital role
difficult phase characterized by significant downside risks and fragility.
in carbon sequestration and the ecosystem. This means that agro-
forestry will be the main source of timber in the future, a trend that is
The financial turmoil generated by the intensification of the fiscal
further accelerated by eco-conscious consumers who demand “green”
crisis in Europe spread to developing and high-income countries,
timber from sustainable managed sources.
causing problems on a wide scale. As the advanced economies reeled
from further shocks, the domino effect placed the rest of the world in
Thus, we remain confident of Touchwood’s ability to perform
vulnerability and challenged, in insulating themselves from exigent
exceptionally not only in the medium term but also in the long term
pressures. Growth in several major developing countries (Brazil,
especially as in 2011/2012, we were able to demonstrate the potential
India, and Russia) slowed as capital inflows slowed. As the global
of agro-forestry investment as a viable source of investment income to
economy lagged stock markets, bonds, commodities and all other
individuals and corporates.
traditional investments plummeted and became less viable means for
investment.
Value addition drives greater growth
In Sri Lanka, although the economy stayed well insulated from the We persisted with our strategy of value addition and diversification in
global onslaught, the economy remained less conducive for private 2011/2012. As in the previous year our adoption of a strategy of “seed
and corporate investment. The Colombo Stock Exchange witnessed to shelf” yielded high returns to the Company. The strategy of value-
a dramatic decline in the final two quarters of the financial year, addition together with backward and forward integration allowed
interest reductions in the banking system – a result of monetary policy Touchwood to maximize returns. Aside from the value of timber as
interventions by the Government of Sri Lanka – directly impacted the core asset, Touchwood was also able to garner returns from sale
investment returns delivering negligible returns to investors. of its produce through value addition. Thus, returns from aromatics,
essential oils, and value added timbers and by-products positively
Touchwood’s business proposition gains recognition contributed to the enlargement of revenue during the year.
In this scenario, Touchwood’s business proposition gained recognition

An integral component of our strategic plan is to optimize returns
as an investment opportunity that is unrelated to the inherent risks
across the value chain through value addition and down streaming.
of the global and local, economic and financial markets. Despite the
Thus, in 2011/2012 we witnessed the completion of a production
uncertainty that pervades the global economy, few commodities
facility for bamboo flooring products. We continued to optimize land
continue to demand high prices. Amongst these are precious metals,
use by effectively utilising available space in plantation undergrowths
gold, oil and our main interest timber.
to produce cash crops. All of these strategies for value addition served
to enlarge not only our scope of activities but also our revenues for the
With Touchwood’s investment proposition directly linked to timber and
year. Yet it is not only commercial performance that is perpetuated by
agro-forestry, the returns on investment far superseded the returns
this strategy of value addition. Indeed, we firmly believe that through
from the conventional financial instruments. Our business case
value-addition we can further optimize on opportunities to do business
for agro-forestry became all the more viable and attractive during
sustainably. Our flooring product, for example, is 100% biodegradable
the year. We essentially witnessed a growth in our agro-forestry
and therefore essentially a sustainable product. We are hopeful that
investment portfolio during the year, as investors who would otherwise
will inspire consumers to think green and opt for green flooring and
have invested in conventional stocks, bonds and mortgages turned to
building alternatives. As a renewable product, it also holds great
Touchwood as an alternative and more lucrative investment option.
promise in the international flooring market and therefore assists
Agro-forestry investments have generally outperformed stocks, bonds, towards economic value generation to the nation.
and commodities over the long run. One of the main reasons investors,
The specifics of the strategic initiatives undertaken in 2011/2012 will
especially large institutional investors, turn to timber, is the fact that
be further explored in the Management Discussion and Analysis on
the asset displays low to zero correlation with other assets, especially
page 24.
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With Touchwood’s investment Appreciations

I wish to take this opportunity to thank the Board of Directors, the
proposition directly linked to timber and Chairman, the CEO and the Executive Management as well as the
agro-forestry, the returns on investment entirety of the Touchwood family for their unstinted support, guidance
and overall governance to take Touchwood to greater heights.
far superseded the returns from Appreciation is also due to our customers and shareholders, all of you
gave us the strength and resolve to persevere in challenging times.
the conventional financial instruments. Let me assure you, that as we look to the future, the horizons are filled
with opportunity and we at Touchwood are fully expectant of the next
phase of growth.
(Sgd.)
Asitha Koralage
Deputy Chairman
15th August 2012

CEO’s Statement
Our shareholders will be pleased to A year of dedicated excellence

The financial year 2011/2012 has drawn to close with Touchwood
note that during the reporting period, registering excellence across its business function and performance.
Touchwood recorded growth that After years of dedication to the business, it is indeed, satisfying to
report that in the year under review, we were able to meet all our
exceeded our expectations. projections for the year from the perspective of product efficiencies,
value addition, sustainable business to of course bottom line
management. The business reconfigurations that we undertook over
the past few years, realized greater gains and we are confident that
we are on a path towards sustainable growth.
During the year, we continued to enlarge on our strategy of

diversification and value addition. We accelerated our efforts towards
this, in view of the opportunities that exist for agro-forestry and food
production, as global demand for food is billed to supersede supply
particularly in Asia, over the next few decades. We are cognizant
of the fact that if we put in place a comprehensive business plan
17
Our adoption of the set of standards, serves to further our focus on

sustainable business and reinforces our emphasis on the triple bottom-line
concept of people, plant and profit.
that enhances the scope of our current business strategy through suppliers and vendors. It is designed for independent third party
a complimentary mix of agricultural products, that we will be in a certification. SA8000 is based on the principles of international
position to optimize returns from our plantations whilst also tooling human rights norms as described in International Labour
agricultural communities in Sri Lanka with the know-how for Organisation conventions, the United Nations Convention on the
sustainable food production. Rights of the Child and the Universal Declaration of Human Rights.
It measures the performance of companies in eight key areas:
In the financial year 2011/2012, we improved upon strategic child labour, forced labour, health and safety, free association
initiatives instituted in the previous financial year to optimize and collective bargaining, discrimination, disciplinary practices,
resources through the achievement of greater productivity and working hours and compensation. SA8000 also provides for a
efficiency. These operational and strategic reconfigurations have, social accountability management system to demonstrate ongoing
I believe, already started to demonstrate returns. The Company’s conformance with the standard. Our adoption of the set of standards,
commendable operational and financial performance during the serves to further our focus on sustainable business and reinforces
financial year is attributable to this. Our shareholders will be pleased our emphasis on the triple bottom-line concept of people, plant and
to note that during the reporting period, Touchwood recorded growth profit.
that exceeded our expectations. Of course, our attention will be
focused on the challenge of maintaining this momentum of growth in From a standpoint of stability and strength, Touchwood continued
the years ahead. to fortify. For the third consecutive year Touchwood emerged as
one of Sri Lanka’s most valuable brands by being ranked within Sri
As a viable commercial enterprise, we continued to prove to our Lanka’s Top 100 Brand Index. Touchwood’s brand enhanced during
shareholders, customers and other stakeholders that Touchwood the year by a staggering 62% to emerge at the 66th rank – up four
is truly a sustainable business. We believe that commerce should notches from the previous year - with an overall brand value of
benefit beyond the bottom-line. In this belief, we continued to Rs. 250 million. The Top 100 Brand Index is compiled annually by
operate along the tenets of fairness, equality, ethics and governance, Brand Finance (Lanka), a subsidiary of a global entity, Brand Finance
inculcating this across the organisation. We have embedded Plc; it is an independent consulting company that values brands
practices that ensure the well being of the society, communities and following guidelines and methodologies adopted by its international
the environment. counterpart. Brand Finance espouses the importance of recognizing
and growing brand equity with an emphasis on par with that applied
TIPLC confirms to “International Labour” Standards (ILS). This to tangible assets of a business. In addition, the validity and viability
provides for our compliance to core ILO conventions which super of our business model was further substantiated with Touchwood
cedes Sri Lanka, National Labour Standards (NLS). receiving a validation by Poyry one of the world’s foremost agro-
forestry assessors subsequent to a comprehensive audit of our
Notably, in 2011/2012, Touchwood’s operations became SA8000
present and future competencies.
certified, as we adopted the international standard for social
accountability. Social Accountability 8000 (SA8000) has been Our plans to expand our plantation acreage persisted during the
developed by Social Accountability International (SAI), and is a financial year. Through land procurement we have set in motion the
voluntary, universal standard for companies interested in auditing planning and cultivation of a further 600 acres over the next two
and certifying labour practices in their facilities and those of their
CEO’s Statement
In the year under review, Touchwood relied 80% on organic material and
manure as fertilizer for its plantations.
years. In 2011/2012, we purchased mature plantations of Teak, across the value chain. Termed the “seed to shelf” strategy we
Mahogany and mixed crop plantations of Rubber and Cloves valued continue to explore avenues through which we can tap and explore
at Rs. 350 million to further mitigate risks. This has served to further value growth especially in light of the tremendous opportunities
consolidate company stock comprising of 375 acres of cultivated and demand for aromatics and essential oils in the global cosmetic
plantation. These initiatives will not only future proof our customers and food product markets. Our Sandalwood oil distillation plant
investments but accumulate substantial asset value. is capable of processing 500 Kg much of which will be exported
to international buyers in the aromatics markets of the world.
In striving to enhance the productivity of our plantations, I am The distillation plant has the capacity to process half a ton of
pleased to report that in 2011/2012 we enhanced productivity by Sandalwood heartwood, and therefore, we are yet to fully maximize
as much as 50% without exploiting land resources. The adoption returns. With the establishment of this plant Touchwood is placed as
of traditional Sri Lankan agricultural practices such as SALT (Slopy the pioneer in the export of value added and sustainable Sandalwood
Agriculture Land Technique), together with organic agro practices products from Sri Lanka. We also undertook Vanillin extraction during
have enabled us to be kind to mother earth, and assisted towards the year with process standards compliant to ISO 55651 (which
enriching soil as opposed to the bleaching effects of commercial, yielded A1 Grade Vanilla).
chemical based agro-techniques. Sri Lanka has historically had a
rich agricultural heritage. Our forefathers understood and worked During the previous financial year, Touchwood Investments in
with nature in complete harmony and balance. We now strive to re- collaboration with Touchwood Group entered in to the flooring
introduce those same agricultural practices to our plantations with a market with the commencement of work on our purpose built
view to increase the long-term fertility of the soil. In the year under flooring manufacturing plant in Sri Lanka. The 45,000 square
review, Touchwood relied 80% on organic material and manure foot state-of-the-art manufacturing plant is set out on 3 acres
as fertilizer for its plantations. We have continued to demonstrate in Minuwangoda. The plant was commissioned and orders were
our commitment towards the development of natural pest control secured surpassing expectations. Specializing in the manufacture
methods, and in 2011/2012, our innovative and biological pest of wooden flooring solutions predominantly Bamboo flooring, a
control methods assisted towards reducing Shoot Borer infestations product that has witnessed exponential growth in demand due to
by as much as 98%. We are currently engaged in obtaining a patent its eco-empathy, distinct appearance and other natural properties,
for our Shoot Borer control methodology and are hopeful that Touchwood foresees great demand potential for the product
we are nearing the end of this protracted process. Our research as a natural alternative to currently non-biodegradable flooring
and development facility established in collaboration with the Sri options available in the marketplace. Pre-processed bamboo from
Jayawardanapura University in the previous financial year would Touchwood Group plantations will be exported from Thailand to
be a core conduit for our efforts towards sustainable agricultural Sri Lanka where 90 percent of the value addition will take place
practice in the years ahead. The facility is a fully equipped tissue before being exported worldwide.
culture laboratory and will strive towards the development of more
efficient and environment friendly agricultural practices, to be We also see great potential for tourism in the future, particularly
adopted by Touchwood in the future. as Sri Lanka is witnessing a rebounding in tourism. But, what
particularly interests us is the potential to develop agro-tourism
During the year, Touchwood also actively pursued a strategy of as a viable component of our business model. With agro-tourism
diversification, with focus on backward and forward integration gaining ground, as more and more people show interest in learning
19
and experiencing agricultural livelihoods, the viability to offer a backed by independent professional Chartered Valuers, independent
comprehensive agro and eco tourism product that co-exists with our evaluators and external technical consultants. We remain confident
core operation seems feasible. Therefore, with a view to showcase that this is the most applicable valuation approach given the nature
the successes of our plantations and to cascade the learnings on of our business. The consistency with which we have adopted this
sustainable agricultural practices to the public at large, Touchwood methodology over the past eight financial years have ensured that
constructed a unique eco tourism property in the Farm Grow the values depicted in our financial statements are consistent from
plantation. This will act as the base for our tourism initiatives for the one period to another.
future and determine how we modulate the agro-tourism offer.
It is noteworthy to mention that we have given due prominence to
In 2011/2012 we continued to collaborate with noteworthy projects the development of Sandalwood plantations on a large scale. Over
and partners in pursuing our efforts towards community outreach. the past two years we have planted in excess of 70,000 trees as
Aside from this we continued to engage in a number of other buffer stock. This will yield tremendous returns in the future as a
projects and endeavours towards sustainability. You will be better viable export industry for the nation, and be a significant foreign
able to explore these in the Social Sustainability Report on page 48. exchange earner.
In looking to the future, Touchwood remains committed to the goal Annually, all of our trees are measured and classified against growth
of increasing its agro-plantation acreage to 15,000 acres over the parameters, conforming to yield patterns established by leading
next five years. In pursuant of the strategy of diversification, the technical experts on managed agro-forestry both in Sri Lanka as
plans to develop plantations of coconut and other cash crops to meet well as across the world.
the growing demand in the medium term. Land has already been
acquired for this purpose. As the Sri Lanka Accounting Standards LKAS 41 “Agriculture”
becomes operative for financial statements covering periods
I am confident that Touchwood will continue to perform beginning on or after 1st January 2012, we will be adopting the
commendably in the forthcoming financial year. By the year 2018 we same for the forthcoming financial year. Prior to the adoption of
expect the first Mahogany payout from the plantation in Ihalakanda, the provisions of the above standards, if and when it appears that
Ratnapura. Our growth expectations are in line with forecasts and some modifications are needed to the methodology, measurement,
I believe our drive to enhance the buffer stock will be key to future assumptions and practices applied in previous financial years under
wealth generation due in large to the accumulation of biological IAS 41 “Agriculture” , we intend to seek clarifications, advice and
assets. guidance from the Institute of Chartered Accountants of Sri Lanka
(the sole authority for the establishment of accounting standards in
As I conclude this statement, I must give credit to the Touchwood Sri Lanka) as well as other relevant regulatory bodies.
team that has always strived against the odds to deliver. The
communities within which we operate have taken us into their
homes and hearts; we remain committed to enhancing their quality
of life. Our customers and shareholders have believed in our ability
(Sgd.)
to make a difference and we are grateful for this sense of conviction.
Channa Abeygunawardene
My thanks also to the Chairman and Deputy Chairman for their
Chief Executive Officer
visionary leadership and of course the Management Team and to the
Touchwood family for delivering on all fronts. 15th August 2012
Our position on Biological Asset Valuation

As our shareholders are aware, our company’s biological assets have
been stated on fair value basis since the financial year 2004/2005
and we have continued to adopt this same principle in accordance
with the International Accounting Standard (IAS) 41 “Agriculture”
during the reporting period. As such, we have maintained the same
valuation model, methodology and the assumptions that have been
The Board of Directors
R A Maloney S P Asitha Koralage

Founder Chairman Deputy Chairman
Mr. Maloney, the Founder/Group Chairman of Touchwood, commenced With over 21 years of senior level work experience, Mr. Koralage
operations of Touchwood in 1999, owing to the increasing demand for possesses varied experience in the fields of Strategic and Business
timber and diminishing forest cover. Management. Mr. Koralage has been with Touchwood for 9 years and is
presently the Group Deputy Chairman.
He holds an MBA (Australia) with 27 years experience in business
management ranging from retail, wholesale, and manufacturing to The international exposure he gained through working in the UK,
plantations. Thailand, Hong Kong, Australia and Middle East has been instrumental in
conceptualising Touchwood’s global expansion.
Mr. Maloney is the Group Chairman/Managing Director of the other
Mr. Koralage holds an MBA (Australia) and is professionally qualified in
Companies in the Touchwood Group, which currently operates globally.
Information Technology and Business (UK). He is also a member of the
Institute of Management.
Channa Abeygunawardene Swarna Maloney

Chief Executive Officer Director
Mr. Abeygunawardene joined Touchwood in 2004 as the Business Mrs. Maloney was instrumental in conceptualising Touchwood in 1999.
Development Manager and was instrumental in developing the She has held various positions from Group Head of Finance, and Head
international SBUs. His involvement in Business Development, Sales of IT to current Group Operations Director. She holds a BSc. in Business
Management and Branch/Regional Management saw him promoted to Administration and has 17 years experience in Finance, IT and business
General Manager in late 2005. An Electronics Engineer by profession, he management both nationally and internationally.
is also a Microsoft Certified Engineer and a Member of the Institution of
Engineering and Technology (formerly IEE) of UK.
Mr. Abeygunawardene possesses over 17 years of Management

exposure in UK, Japan, Middle East and Thailand.
21
Aloysius Ralph Pereira L L Kulatunga

Independent Director Independent Director
Mr. Pereira joined the Royal Ceylon Air Force in 1954, and was trained as Mr. Kulatunga is a fellow of both the Institute of Chartered Accountants
an Aeronautical Engineer for three years at the Royal Air Force School of of Sri Lanka and the Chartered Institute of Management Accountants
Technical Training in the UK in 1955. He worked as a Engineer/Factory of the United Kingdom. He also holds an MBA from the Indian Institute
Manager at Tissa Industries. of Management, Ahmedabad, India with over 42 years post qualifying
experience.
He is a full member of the Australian & New Zealand Pulp & Paper
Institute’s Technical Association and is presently is a Consultant as a
Pulp and Paper Technologist.
Prageeth Herath Janath Olaboduwa

Alternate Director Alternate Director
Mr. Herath has over 16 years active planting and manufacturing An Attorney at Law by profession, Mr. Olaboduwa has experience over 21
exposure with expertise in tea and rubber. His experience includes senior years in the field of Law, as an Administrator as well as in the private bar,
management level involvement at leading plantation and manufacturing predominantly in the area of company law.
companies.
He has gained international exposure by participating in several summits
and serving as a legal executive on several United Nations Development
Programme projects.
Management Team
23
Left to Right
Nanthini Nanthakumar Somasiri Munasinghe Gayan Abeyveera

Business Coordinator Head of Finance Head of IT
Prageeth Herath Channa Abeygunawardene Maj. Gen. Athula Jayawardene (Rtd.)

Head of Plantations Chief Executive Officer Head of HR
(Alternate Director)
Jeffry Ebert S. P. Asitha Koralage
Janath Olaboduwa Head of Sales & Marketing Deputy Chairman
Manager Legal
(Alternate Director)
Management Discussion &

Analysis
We practice the viable solutions put forward for nations to be more
discerning in their approach to global warming and deforestation. We are
confident that not only do we lead by example but that we are an icon
of sustainable business practice that has sown the seeds of sustainable
practice to be followed for greater value creation in the future.
Vanilla
KEY FEATURES:
• Issuing a harvest certificate, which is legally binding and tradable
• Right of ownership of your vines with a deed of the land thereof
• A harvest Guarantee
• All plantations are fully insured
• An annual recurring income from 3rd year onwards for 10
consecutive years.
• 12 year investment term
No of No of Guaranteed Total Projected Harvest IRR

Perches Vines Harvest (Kg) Plantation Return (gross)
cost (Rs.)
40 250 1,900 825,000 2,955,062 16%

80 500 3,800 1,562,000 5,910,124 17%
160 1,000 7,600 2,970,000 11,820,248 18%
25
Sandalwood
KEY FEATURES:
• Right of ownership of your trees with a deed of the land thereof
• Issuing a harvest certificate, which is legally binding and
tradable
• A harvest guarantee (25Kg per tree)
• An 16 year product
No of Initial Down Annual Total Annual Total Conservative IRR

Sandalwood payment Installment Installments Plantation Projected
trees (Rs.) (Rs.) cost Harvest (Rs.)
50 805,200 80,520 1,207,800 2,013,000 25,000,000 21%

100 1,536,700 153,670 2,305,050 3,841,750 50,000,000 22%
200 2,928,200 292,820 4,392,300 7,320,500 100,000,000 22%
Mahogany
KEY FEATURES:
• Right of ownership of your trees with a deed of the land thereof
• Issuing a harvest certificate, which is legally binding and tradable
• A harvest guarantee
• An 18 year product
No of Initial Down Annual Total Annual Total Conservative IRR

trees payment Installment Installments Plantation Projected
(Rs.) (Rs.) cost Harvest (Rs.)
40 393,750 39,375 669,375 1,063,125 10,000,000 17%

80 743,750 74,375 1,264,375 2,008,125 20,000,000 17%
160 1,450,000 145,000 2,465,000 3,915,000 40,000,000 17%
Management Discussion & Analysis
Sri Lanka’s forest cover recedes The Department of Forestry’s last update of forest cover assessment
Little of Sri Lanka’s original forest cover remains following decades was conducted in 1999 through the utilization of LANDSAT TM
of conversion and degradation pressures. The remaining forests imageries acquired during 1996 and aerial photographs of 1999.
harbour much of Sri Lanka’s rich biodiversity. Forests in Sri Lanka The assessment uncovered the alarming rate of deforestation with
are officially classified into nine categories: Montane, sub-montane, forest cover as percent of land area declining from 44.2% in 1956
lowland rainforest, moist monsoon, dry monsoon, riverine dry, to 29.6% four decades later. The total forest cover according to this
mangroves, sparse forest, and forest plantations excluding rubber. assessment was about 1,942,229 ha or 29.6% of the land area.
Tropical rain forests are found in the wet zone, sub-montane forests
in the central highlands and dry monsoon forest in the dry zone . Source - Sri Lanka forestry outlook study by forest department,
In 1992 and 1996, dry monsoon forests covered the largest area government of Sri Lanka. Working paper No.APFSOS II/WP/2009/29,
making up >50% of the total forest cover, followed by sparse forests Asia - Pacific forestry sector outlook study II, FAO-Regional office for
(> 21%), moist monsoon forests (11% in both years) and lowland Asia and the Pacific.
rainforests (6% in both years).
The rise of Managed Agro-forestation as a viable solution
The forest cover in Sri Lanka declined drastically over the past Touchwood engages in a sustainable business wherein sustainability
century. Early inventories suggest that Sri Lanka’s closed canopy and the adoption of sustainable practices are an inclusive aspect of
forest cover declined from about 84 percent of the land area in 1881, our business proposition. Through managed forestry and agro-
to 44 percent in 1956 and to 27 percent in 1983 (Figure 5). Closed- forestation we look to reverse the trend of deforestation through
canopy forest cover declined further to 24% (1.58 million hectares) reforestation. We practice the viable solutions put forward for nations
in 1992 and 22.2% (1.47 million hectares) in 1996 (from Table 1). to be more discerning in their approach to global warming and
Bandaratillake and Fernando (2003) suggest a figure of 22.4% (1.46 deforestation. We are confident that not only do we lead by example
million hectares) in 1999.
Our intentions are propelled by a desire to go beyond the constraints of pure commercial intent to consciously impact the lives of
people and the future of our planet.
27
Sandalwood plantation - Farm Grow Estate, Girandurukotte Coconut plantation - Carson Estate, Welikanda
Touchwood engages in a sustainable business wherein sustainability and

the adoption of sustainable practices are an inclusive aspect of our business
proposition.
but that we are an icon of sustainable business practice that has Touchwood; agro-forestation = habitat control + future value is a
sown the seeds of sustainable practice to be followed for greater compelling proposition for the future sustenance of eco and financial
value creation in the future. assets despite economic downturns.
Touchwood is driven by a set of values and beliefs that shapes the Our forestry plantations secure because:
way we do business. Our intentions are propelled by a desire to go • The Company’s profit is anticipated at maturity therefore
beyond the constraints of pure commercial intent to consciously plantation maintenance is imperative.
impact the lives of people and the future of our planet. We are in
essence a triple bottom line company - People, Planet, and Profit. • Independent evaluations by agro-forestry experts and
We recognize that our clients desire an expected action and outcome international bio-diversity consultants ensure best practices in
and work actively to meet those expectations. As a company that is continuous monitoring and process improvements.
sensitive to issues that are paramount to the future sustenance of • Each plot and trees are uniquely numbered lending quick
Mother Earth, we respect and uphold diversity, integrity and honesty. identification and tied to an agreement via a deed transfer.
• The best of risk mitigation in practice: 100% tree buffer stock,

Sustainable Business Model
1:3 volume stock, scattered land use, patented agro-forestry
Touchwood as a company proposes a unique form of investment
techniques, maintenance of bio-diversity and product diversity.
that promises returns in the short, medium and long term. Future
Value is the core of the Touchwood business proposition. As an • Innovation and the best of R&D practice ensure quality and
Agro-forestation company, our investment portfolio comprises of timely delivery of harvest.
a range of valuable and rare timber resources managed for future
harvest. Simply put, Touchwood is in the business of growing trees Ours is a “bullet-proof’” business model because our eco-assets
to meet the future demand for timber, thus alleviating deforestation are neither correlated to the global or local economic trends, nor the
whilst growing our customers investments through value creation for variations in other asset classes such as stocks, bonds, real estate or
increased timber demand. the money market. As an independent asset class, timber and value
added spices and herbs define their own value in global markets.
Consumers are increasingly demanding timber from sustainable In the last 49 years timber has seen a lull in the market only three
sources. The proportion of timber harvested from old growth, times, thus performing with much less risk and greater returns than
natural forests will decline in favour of production from sustainable other investment tools.
managed resources in the future. Thus, the equation put forward by

The Plantation - Returns Process
Our business model is defined by five steps - acquisition of land, cultivation, crop maintenance,
harvest and distribution of returns – that pave the way for the enhancement of your investments
whilst simultaneously purifying mother Earth’s lungs.
Step 1 – Land Banking

At Touchwood we make a concerted effort to procure the most suitable land for plantation. With the assistance of forestry
management, horticultural and bio-diversity experts from across the world, we earmark, select and procure large extents of land that
are best suited for specific crops. As differing species optimise growth in differing climatic and soil conditions, our priority is to ensure
that we purchase lands that have enhanced fertility and bear the correct natural and biological environment for conducive growth of a
crop. Pre-determination of critical factors such as rainfall, soil type, land typology and climatic conditions and secondary factors such
as proximity to developed commercial infrastructure enable us to form a sound decision prior to purchase of lands. Upon purchase,
the land is further subdivided based on client requirements and plot sale.
Step 2 – Cultivation
Touchwood’s products are all rare and high value timbers protected by C.I.T.E.S. (Convention on International Trade in Endangered
Species of Wild Flora and Fauna). Our plantations grow unique products that are exotic and have a high marketability, most of
which are threatened and rare to their natural locations. As a result, our harvests yield above industry returns due to a scenario of
excess demand in the global timber market. Our agro portfolio consists of a wide variety of perennial crops, short-term cash crops,
indigenous plants and herbs to maximise synergies with our main crops and acts as investments that provide returns both in the
short, medium and long term. We endeavour to achieve sustainable production by optimising land use through integrated farming and
agro forestry technologies and through the implementation of appropriate, sustainable agricultural practices. We offer our customers
more than a Asset-backed investment, in effect we create an opportunity to collaborate towards the future well-being of our planet
Earth, by inspiring individuals and organisations to offset their carbon footprint through reforestation.
Step 3 – Sustainable Crop Maintenance

Maintenance of plantations is a priority at Touchwood. Our commitment to protect our plantations is driven by actions that transcend
the commercial aspects of agro forestation. Our passion for our plantations has resulted in Touchwood being recognised as the
standard in Asia for managed forestry maintenance practices. An experienced team of agro-scientists heads our technical team
and are supported by global resource specialists in agro-forestry, forest silviculture, forest management, horticulture and bio-
diversity who work hand in hand to achieve yields that are above predetermined norms. Global experts are currently engaged in a
series of Research and Development initiatives for Touchwood Investments, which includes an initiative to quantify the total carbon
sequestration of the Touchwood plantations as well as the development of a Geographic Information System (GIS) for Touchwood’s
forest plantations. We maintain working partnerships with credible and recognised institutions for agro-forestry in all our countries of
operation including The University of Minnesota (USA), Kasetsart University (Thailand), University of Melbourne (Australia), University of
Sri Jayawardhanapura and the University of Uwa Wellassa (Sri Lanka).
Touchwood’s own auditors monitor plantation health through a random sampling process with independent auditors evaluating
plantation health and quality yearly.
The technologies we adopt at our plantations are world-class. Specialised Research & Development and Forestry Management
divisions consistently source and test new agro-forestry methodologies and technologies prior to large-scale adoption. We encourage
our clients to visit our plantations periodically to view their plots and cultivation, to engage with our plantation teams and to enjoy the
satisfaction of being immersed in a natural habitat. For those who are unable to do so, we provide a specialised report per plot and a
full analysis of each tree conducted by our expert foresters.
29
Step 4 – Harvesting
Upon maturity of our plantations harvesting is carried out with utmost care with the intention of maximising the value of the final
product. Our harvesting and processing centres are equipped with both the technology as well as the know-how to ensure that the
final produce meets the exacting standards of the highest caliber demanded by the world market. Timber as well as cash crops and
value added produce are placed in the market for sale through Touchwood’s network of global offices. Touchwood ensures that all
produce placed for sale is sold at or above prevailing market prices. Clients have the option of selling the product independantly if the
price offered to them at harvest does not meet their expectations.
Step 5 - Distribution of Returns

Financial stability is the core of this model with initial plot sale and accrued income recognition acting as the foundation for the
long-term sustenance and commercial viability of the business whilst further economic gain is garnered through a combination of
manufacture and sale of finished and unfinished products as well as through value addition.
Touchwood’s global presence allows for marketability of produce globally with an earnings ability that exceeds ten times the outflow
at maturity. The 100 per cent buffer stock maintained by us allows for a doubled earnings capacity whilst the natural appreciation
of the main asset - both biological assets and the land - over time, enhances the future value proposition. Due to the nature of the
business, it lends itself conducive for Carbon Trading thus extending the earnings capability. Bio culture and cash crops create a
scenario for increased returns whilst the model also lends itself towards eco-tourism prospects.
Our Business Model
Acquisition and Cultivation Crop Maintenance Harvest Distribution of

Development of Land (Organic Fertilizing) Return
Global Footprint “letter” and “spirit” of the IAS 41 “Agriculture”. Touchwood adopts
Founded in 1999, Touchwood pioneered forestry investment in the Triple Bottom Line Reporting and is a Public Quoted Company, and is
Asia Pacific region. A decade of inspired action and foresight has therefore 100 per cent transparent across all functions and actions
yielded an array of sustainable forestry products as investment of the Company. We are the only agro-forestry company listed on the
opportunities to both the institutional and retail investor. With over Colombo Stock Exchange.
2,800 acres of private forestry plantations that are home to high
value, exotic tropical timbers, our client portfolio exceeds 25,000 Knowledge Share and external collaboration
investors globally and our operations span across 10 nations. Our experience in agro-forestry over the last decade has given us
Touchwoods’ Vanilla plantations entered its fourth year of posting the ability to garner exceptional support for future growth. In fact,
on target returns to investors, approximately six plus years into the collectively our investment advisory and management team has
cultivation process. Touchwood today epitomises the very best in more than eight decades of relevant experience and includes some
agro-forestry practice and is a sustainable business model that goes of the world’s foremost authorities in the area of agro-forestry
beyond commercial value to delivering returns to mother earth to including but not limited to:
offset global warming through sustainable re-forestation.
• The University of Minnesota (USA)
Internationally Benchmarked Process Management • Kasetsart University (Thailand)
The ISO 14000 series developed by the International Organisation • University of Melbourne (Australia)
for Standardisation (ISO) is a collection of voluntary standards that
• University of Sri Jayawardhanapura
assists organisations to achieve environmental and financial gains
through the implementation of effective environmental management. • University of Uwa Wellassa (Sri Lanka)
The standards provide both a model for streamlining environmental
Operating in over ten countries across the world, our network acts
management, and guidelines to ensure environmental issues are
as a catalyst for innovation and connecting with critical business
considered within decision-making practices. In Essence, ISO 14001
partners. Our operations and approved by the Forest Department of
is the standard for Environment Management Systems. Touchwoods’
Sri Lanka and the Board of Investment. We are the standard for agro-
operations conform to the ISO 14001 standards as well as to the ISO
forestry in the region.
9001 process standard for Quality Management. Our operations are
on par with global standards for forestry management and we adopt
global best practices across every aspect of our operations.
Innovation in business
Tissue Culture Project
Touchwood’s biological assets are stated on fair value basis from Under the guideline of Prof. Sandun Senarath of Sri Jayewardenepura
the year 2004/2005 to the current financial year 2011/2012, in University, we have developed a Tissue Culture Laboratory at the
accordance with the International Accounting Standard (IAS) 41 University premises to increase productivity levels and enhance the
“Agriculture”. We have obtained an independent professional opinion growth patterns of our plantations. We have deployed two scientists
from a reputed Chartered Valuer for the valuation of the biological for this purpose who are technically qualified to fulfill the objective.
assets of the Company and the assumptions employed by the
independent professional valuer are in complete harmony with the
Mahogany plantation, Gomaragala Teak plantation, Mihintale

31
A decade of inspired action and foresight has yielded an array of

sustainable forestry products as investment opportunities to both the
institutional and retail investor.
The first task given to the reserchers was to formulate and return.
developed protocols for Binkohomba, Sandalwood, Pineapple &
Banana, which would help our diversification strategy. At a time when there is increasing focus on global warming and
sustainability issues, timber holds many advantages over other
We are pleased to foot forward the progress made by the affiliated raw materials such as steel, brick and oil derivatives which require
tissue culture project of the University to the organization. The two substantial amounts of energy to manufacture and have lower
researches managed to develop protocols for pineapple, binkohomba insulation properties.
and banana and they are on a commercial level production.
Wood is a renewable and sustainable resource and is considered
The advantages of having tissue culture plants as our base of environmentally friendly. Unlike fossil fuels the carbon dioxide
planting material. from using wood is recycled by regenerating forests and does not
permanently remain in the atmosphere. Wood production requires
1. It can create a large number of clones from a single seed or
less energy than other materials such as steel. The United Nations
explants.
Food and Agricultural Organisation (FAO) has forecasted that world
2. It is easy to select desirable traits directly from the culture setup wood demand will increase from the 3506 million cubic metres
(in vitro), thereby decreasing the amount of space required for consumed in 1990 to over 5000 million cubic metres annually by the
field trials. year 2010 - an increase of 40% over 20 years. This represents an
annual increase equivalent to 78 million cubic metres per year.
3. The time required is much shortened, no need to wait for the
whole life cycle of seed development.
Investments into Agro-forestation has been viewed as a sound
4. It overcomes seasonal restrictions for seed germination. Portfolio Diversification Strategy as it broad-bases the portfolio risk,
given that agro-forestation investments carry only a moderate to
5. It helps to eliminate plant diseases through careful stock
low risk due to its independence from other financial market tools –
selection and sterile techniques.
stocks, bonds money markets , or real estate - and given its ability
6. It enables cold storage of large numbers of viable plants in a to offset inflation and currency devaluation. It possesses a unique
small space. ability to meet medium term investment horizons whilst providing
attractive returns due to a scenario of prudently managed risk and
Sandalwood nursery low volatility.
The experience has resulted to produce high quality planting
materials; the plantlets should be transferred to poly bags within 21 Furthermore, the continued global demand for timber places agro-
days of sand bed layout. The literature says transplant of plantlets forestation businesses such as Touchwood in an even stronger
has to be done within 4-6 weeks after laying seeds in the sand beds. position with scope for exponential growth. Agro-forestation has
been propelled by an increasing demand for timber as a direct result
We have found a system of removing lateral branches (which are of hyper-population growth that has manifested in almost all parts
not in food process) and by removing those laterals will not give of the world. Timber is an internationally traded commodity. It has
additional stress or hinder the growth of the plant. Further, this wide ranging traditional uses, and is now being extended to include
system will enhance the trunk formation of sandalwood plants. Our biomass for electricity generation and bio ethanol as a substitute
expectation is to shorten the commercial harvestable life span of for oil derived fuels, both from a non polluting source. These new
sandalwood by minimum of two to three years. markets are creating significant new demand for timber - demand
that is forecast to grow.
Sustained Returns
Demand for timber is expected to increase in response to both global Thus, managed forestry is a sound proposition for the future
population increases and growth in the global economy with an sustenance of eco and financial assets despite an economic
increase in timber consumption per capita. Supply will continue to be downturn. Forestry investments are a proven asset class for
under pressure as environmental constraints restrict harvesting and institutional and private investors. The combination of value in a
consumers increasingly demand timber from sustainable resources. naturally growing commodity and the underlying land provides
investors with a low risk asset creating long-term capital
Biological growth increases both the volume and value of the timber appreciation in a sustainable, environmentally beneficial medium.
- as trees increase in diameter they are utilised for more valuable Negative correlation to other assets and low volatility provides an
end products. This growth is predictable at the time of investment optimum route to diversify a portfolio and reduce risk.
and at constant timber prices provides the investor with an assured
Risk Management Governance and Compliance

Touchwood adopts a holistic approach to risk mitigation. Determining Touchwood and its Directors endorse the principles of good
the probable material effects of an uncertain environment on our Corporate Governance.
business goals, allows the Company to manage events that will
negatively impact the financial, physical, biological and human The Board of Directors in a consistent manner focuses on reviewing
capital of the organisation. Touchwood recognises risk management all procedures and policies in an effort to adopt and practice
as a key area that contributes towards safeguarding the interests of the most current tenets of governance across the entirety of the
our stakeholders, by stabilising our operations. organisation. This is drive by a desire to enhance controls, to
facilitate monitoring of performance and for the compliance and
We view effective Risk Management as a tool of good business establishment of lines of responsibility and accountability in every
strategy, and hence do not limit our scope only to compliance facet of the Company’s operations.
requirements. While well-defined policies are in place, the
Company constantly strives to update and improve controls and Touchwood seeks to comply with the governance principles
procedures. The risk management policies ensure the identification, advocated by the Institute of Chartered Accountants of Sri Lanka,
measurement, monitoring and controlling of risk. Our Board of whilst also instituting numerous self-governance initiatives.
Directors has overall responsibility to assess risks associated with
the Company and maps potential risks onto a “Risk Awareness” Products and Services
assessment which has proven to be an effective way to manage the Sandalwood (Santalum album)
Company’s risks. Sandalwood is one of the oldest known sources of perfume in the
world. Recorded use of the wood dates back to over 4,000 years.
Our Strategic Risk Management approach embraces the following With origins harking to China, India and Egypt, it is now also grown
with practices and process in place to mitigate: in other markets such as Philippines, Indonesia and Sri Lanka.
• Management Risk Historically, the wood was also prized by furniture makers and in
• Financial Risk India many of the temples were built from Sandalwood.
• Market Risk
Uses:
• Social Risk
The evergreen sandalwood tree grows to a height of up to 30 feet
• Regulatory Risk (8 meters). The syrupy, balsamic oil is extracted from the roughly
• Agricultural Risk chipped and powdered heartwood through steam distillation. With a
• Acts of God warm, woody odour, the essential oil is used as fixative in perfumes
• Insurance Risk and gives the lingering, classic base note to many expensive and
renowned brands of fragrances. Sandalwood also has sedative
• Country Risk
properties and is demanded for therapeutic uses such as for
• Reputation Risk the treatment of depression and tension. An expectorant and an
• Legal Risk anti-spasmodic, Sandalwood is used for treatment in traditional
Sandalwood nursary, Panketiya Sandalwood plantation, Palugedara

33
Chorus of Positive forecasts

“Timber has only had 3 down years in the past 47 years.....have beaten the stock market with less risk. The track record of early investors - and
a slew of recent academic research indicate that timber is a near perfect asset.”
- Smart Money Magazine
“Returns 5 times higher than equities or bonds”

- FT.com
“Forestry was the best performing asset class of 2007 delivering returns of 31.6%”
- IPD’s index
“Indeed as an asset class, timber - a renewable resource with a constant demand - stands out as a remarkably stable investment”
- Bloomberg Wealth Manager
“Average annual returns on timber....have outstripped those from leading global stock indices, property, oil and gold for the past decade.”
- The Economist Magazine
medicine. With diverse, uses the East Indian Sandalwood (as it is approximately 10-14 tonnes of heartwood are harvested.
less commonly known) fits into a plethora of end products from
soaps, incense, medicines, aromatic timber to oil. In the essential Mahogany (Swietenia Macrophylla)
oil trade, sandalwood oil trades as one of the most valuable natural Mahogany is considered the world’s most luxurious timber. It is listed
products. by CITES (Convention on International Trade in Endangered Species
of Wild Flora and Fauna) as an endangered species due to the rapid
Demand & Pricing: dwindling of mahogany in our forest cover.
Global demand for Sandalwood has always been on the rise and
has been propelled by a scenario of diminished supply. As a result, Uses:
Sandalwood timber and oil prices have risen significantly over the Mahogany is used for manufacturing of yachts, high-end furniture
years and the projected to continue rising owing greatly to the and interior constructions. Mahogany has a generally straight grain
banning of sandalwood exports by India. The price of Sandalwood and is usually free of voids and pockets. It has a reddish-brown
has increased significantly from US$ 4,000/tonne to US$ 115,000 in color, which darkens over time, and displays a beautiful reddish
the 17 years period from 1990 to 2009 (H S Ananda Padmanabha’s sheen when polished. It has excellent workability, and is very
International Market Report to TFS, Australia). Therefore, durable. These properties make it a favourable wood for crafting
Sandalwoods’ global price has increased at 22% per annum over the furniture.
past 20 years.
Demand & Pricing:
Annual Demand: The demand for mahogany has risen remarkably over the last 20
Sandalwood Oil years due to the timber’s resistance to extreme weather conditions
India > 40 Tonnes (both hot and cold). Maturity for the Mahogany timber is at the
International (current) > 30 Tonnes age of 15 years if fertilised and maintained. To obtain the optimal
value, trees are felled at 18 years, allowing for the timber to acquire
Present Production < 50 Tonnes
substantial graining and to be well seasoned. Touchwood uses
Projected global Demand > 80 Tonnes technology to obtain strong, straight and healthy trees ensuring that
at harvest, value is maximised.
Sandalwood Heartwood
Global > 6,000 Tonnes Mahogany in log form is not permitted for export due to a scenario
of insufficient supply of Mahogany in Sri Lanka and is expected to
Investment Benefit: continue till local demand can be fully satisfied with local produce.
Core benefits in investing in Sandalwood plantations are many. In the medium term, Touchwoods’ yield from Mahogany plantations
Optimal plantation practices will allow the harvest of as many as will satisfy local demand. The Company is also billed to be a major
400 trees per hectare with a rotation period between 12-16 years. exporter of Mahogany in dressed grooved plank form in the future.
Each tree yields up to 30-35 kilograms of saleable timber with Therefore, in the open market - both global and local - Touchwoods’
per kilo price averaging of Rs. 10,600 (USD 106). From a hectare harvests will obtain the highest price.
Vanilla (Vanilla planifolia) Why grow in Sri Lanka?

The main species harvested for vanillin is Vanilla planifolia. Vanilla Vanilla grows best under hot humid climate from sea level to
grows as a vine, climbing up an existing tree pole, or other support. It an elevation of 1500 m. Most of its production is done 10 to 20
can be grown in a wood (on trees), in a plantation (on trees or poles), degrees above and below the equator. The ideal growing conditions
or in a “shader”, in increasing orders of productivity. Its growth are moderate rainfall, 150-300 cm, evenly distributed through 10
environment is referred to as its terroir and includes not only the months of the year. The optimum temperatures for cultivation are
adjacent plants, but also the climate, geography and local geology. 15-30°C (~60-90°F) during the day and 15-20°C (~60-70°F) during
Left alone, it will grow as high as possible on the support, with few the night. Sri Lanka, as a tropical country is blessed with the perfect
flowers. Every year, we fold the higher parts of the plant downwards conditions for Vanilla plantation. As a nation that is renowned for its
so that the plant stays at heights accessible by a standing human. spices, the country holds equity to garner commendable prices in
This also greatly stimulates flowering. the international market for its commodity produce. We are confident
this will add value to vanilla’s marketability. With the availability of
Uses: ample expertise, unutilised manpower and land, the opportunity
Vanilla remains the single most popular flavouring agent in the to grow Sri Lanka’s vanilla plantations is immense. Moreover, the
culinary world. Also used extensively in cosmetics and perfumes, the support of the Government of Sri Lanka for the production of cash
global demand for Vanilla continues to exceed production. There are crops further improves the future outlook for Vanilla production.
three main commercial preparations of natural vanilla: whole pod,
powder, and extract. Investment Spectrum
Vanilla as an asset class provides investment opportunity to a broad
Demand & pricing: spectrum of potential investors from retail investors to corporate
The export potential for Vanilla is high, and coupled with increasing investors. It serves as a simple and regular income for those who
global prices for the commodity, the potential for high returns makes seek to augment their existing annual incomes, whilst also serving
it a conducive addition to the Touchwood product portfolio. By as a multiplier of income to those seeking to develop a regular
meeting international standards in plantation management, harvest expenditure for future use (such as for higher education purposes
techniques and in value addition, we are confident of enhancing our of children). Ideal for the investors who are either pensioners or on
returns from this crop. the verge of retirement, Vanilla as a cash crop investment will yield a
regular supplementary income.
Why Vanilla & Trees?
The dual growth of Vanilla and Timber maximizes the yield per Carson Estate – Welikanda
hectare. As such, we are able to optimise our resources effectively The investment model of Touchwood is based on developing Agro-
and to garner the highest return for our investors. Vanilla is forestry with the contribution of Investors. Having maintained this
harvested every nine months and therefore allows for an annual concept for over a decade the company felt that it’s cash outflow
return on yield. This enhances the returns to investors who will be for fixed overheads approximately Rs.10 million. The management
able to avail themselves of the annual return from the vanilla yield as after realizing that cash outflow of this magnitude could not be met
well a lump sum return. with only investments, specially when there are certain periods the
financial behavior pattern of the economy is so tight for investments.
Sandalwood plantation, Palugedara Coconut plantation - Carson Estate, Welikanda

35
When the management decided to diversify their agro-business we have given

a special consideration on planting non-traditional crops in the area, which give
high returns within shortest possible time, knowing well that it is a challenged
task with a high risk.
Having given due consideration to this scenario the management Cinnamon 47 Acres
of the company has decided to generate their own income for
Arriconut 45 Acres
sustainability. As a first step toward this goal we have done an
in-depth study of acquisition land for this purpose and found leasing Mango 25 Acres
land from Mahaweli authority. We thereafter made arrangements Pineapple 3.3 Acres
to acquire 600 acres from Jayawickramagama of Sinhapura block, Pepper 2.5 Acres
Mahaweli system B. Coffee 2 Acres
When the management decided to diversify their agro-business

we have given a special consideration on planting non-traditional
crops in the area, which give high returns within shortest possible
time, knowing well that it is a challenged task with a high risk.
Nevertheless we have confidence on our in-house expertise and
delivery ability of our staff. Therefore having taken into consideration
the agro-climatic condition of the area we have decided to cultivate
Sandalwood, Coconut & Mango as long-term sustainability and
pineapple, banana & Pepper as short and medium term investment
for the company. The anticipated annual net income from this project
is well over Rs.200 million.
The Progress Review

Land Clearing 238 Acres
Perimeter fence 08 Km
Elephant protection fence 06 Km
Drainage system 4.5 Km
Cultivated extent
Coconut 125 Acres
Because we care.
Sustainability Report
For a business to be sustainable
it needs to be economically viable
and business needs to take the lead
in demonstrating that sustainability
makes good business sense.
Touchwood has been an advocate of Aligning the creation of Future Value with Sustainability
Future Value is the core of the Touchwood business proposition.
the triple bottom line concept since However, what is unique is the fact that it goes beyond the
conventional norms of business to encapsulate a much larger focus.
its inception. Sustainability is intrinsic Sri Lanka as a bio diversity hot spot is an eco-system that needs to
to the nature of the business of be further nurtured.
Touchwood’s commercial operations. Nestled in the pristine waters of the Indian Ocean, Sri Lanka drops
off the tip of the Indian subcontinent, reminiscent of it’s popular
claim to be the Pearl of the Indian Ocean.
One of the smallest, but biologically diverse countries in Asia, Sri

About the Report Lanka is recognized as a Biodiversity hotspot of global and national
Principles and Reporting Guidelines: importance. Its varied climate and topographical conditions have
This sustainability report is Touchwood’s third consecutive year of given rise to a rich species diversity, believed to be the highest in
reporting in compliance with the Sustainability Reporting Framework Asia in terms of unit land area. Home to 15 national wildlife reserves,
proposed by Global Reporting Initiative (GRI). The Report strives to 7 UNESCO World Heritage Sites, nearly 500,000 acres of tea country,
comply with specific ‘Reporting principles’ and ‘Reporting Guidance’ 250 acres of botanical gardens, the island is also blessed with 103
as laid out by the G3 guidelines and indicator protocols for economic, rivers and streams and over 100 waterfalls radiating from the central
environment, human rights, labour, responsibility and societal hills, rushing down rocky precipices forming a number of roaring
performance. In the financial year under review, the Company will waterfalls of various shapes and heights, all ending up loosing the
be reporting against C level requirements of GRI G3 guidelines. The momentum at the Indian Ocean.
Company seeks to graduate to ‘B’ and B+ level of reporting over the
next 3 years. Much of the country’s species are endemic, a reflection of
the island’s separation from the Indian subcontinent since the
Report Boundary & Scope late Mesozoic period. This is especially relevant for mammals,
amphibians, reptiles and flowering plants. These species are
Effort has been made towards achieving completeness of the
distributed in a wide range of ecosystems which can be broadly
report with regard to the dimensions of scope and boundary for the
categorized into forest, grassland, aquatic, coastal, marine and
reporting period. This report covers the performance of the entity
cultivated. The diversity of ecosystems in the country has resulted in
Touchwood Investments PLC for the reporting period March 2011 to
a host of habitats, which contain high genetic diversity.
March 2012.
Biodiversity includes species diversity, genetic diversity and

Materiality
ecosystem diversity. Sri Lanka has been identified by the
Touchwood has been an advocate of the triple bottom line concept
environment activist group Conservation International (CI) as one of
since its inception. Sustainability is intrinsic to the nature of the
25 biodiversity hot spots in the world.
business of Touchwood’s commercial operations. Accordingly, this
report is an effort to present in a structured manner the company’s For developing nations, such as Sri Lanka, there are two broad
commitment to the Economic, Environment and Social wellbeing. approaches to dealing with climate change. In Sri Lanka both
mitigation and adaptation are feasible solutions given that we are
Touchwood identifies its key stakeholders based on the still at the elementary stage of industrial development from a global
impact of its operations on: perspective. The solution then seems to be a build future value
• Customers - investment protection and income generation through the adoption of better industrialization practices and through
• Community - forest cover, climate change, enhance the use of reforestation practices.
knowledgebase and poverty alleviation
• Government - forest cover, support government agriculture Touchwood pioneered managed agro-forestry investment in the Asia
policies Pacific region and specializes in growing high value native tropical
timbers as an alternative and sustainable source for forest products.
• Employees - job security and career growth
Through commitment to our vision, our stakeholders, to listening and
• Shareholders - return on investment
39
Touchwood pioneered managed agro-forestry investment in the Asia Pacific region and specializes in growing high value native
tropical timbers as an alternative and sustainable source for forest products.
learning, to improvement and advancement, we have demonstrated At Touchwood we firmly believe in the precept of sustainability for
our ability to make a difference by not just growing trees but through the well-being of future generations. Future Value is the core of
the creation of a business concept that goes beyond business to the the Touchwood business proposition. Our principle business lies in
creation of future value for our next generations. the conservation of the planets eco-systems through planned re-
forestation. By utilizing forestry as an investment tool, our business
Wealth creation for the nation is a priority for Touchwood. We engage proposition is to monetize forestry thereby instilling the concept of
in both the viable solutions put forward for nations to be more investment returns based in development of managed forestry cover.
discerning in their approach to global warming. We are confident For every tree harvested, our business model ensures the re-planting
that not only do we lead by example but that we are an icon of of up to 3 new trees.
sustainable business practice that has sown the seeds of sustainable
practice to be followed for greater value creation in the future. Touchwood believes in acting consciously towards the preservation
of natural rainforests through the propagation of agro-forestry.
By offering an investment option that goes beyond financial gain to Currently a reforestation has enabled Touchwood to not only create
ecological and environmental gain, we have empowered investors more opportunities for our investors who seek both long-term and
with a choice to invest responsibly. The communities in which medium-term investments, but also to assist in the preservation of
Touchwood operates appreciate the benefits of our commitment and natural rainforests. Essentially, we go beyond mere Corporate Social
we continue to invest in and develop the skills of Touchwood people Responsibility, we believe that what we do as a business is strategic
who work tirelessly to ensure that stakeholder expectations are met. to the future well-being of mother Earth.
What we do, in essence, is the creation of a brighter future – for our

investors, our future generations and a growing contribution for the
well being of our Mother Earth by integrating our business concept
to benefit a larger and more critical concern. Thus sustainability is
part and parcel of our business. It is integrated and a subset of what
we do. Through agro-forestry we create wealth for our stakeholders
and the environment, equitably.
GRI Index
Page No.
1. Strategy and Analysis
1.1 Statement from the Chairman, Deputy Chairman and CEO Chairman’s/Deputy Chairman’s and CEO’s 12 - 19
Statements
2. Organisational Profile
2.1 Name of the Organisation Corporate Information Inner back
cover
2.2 Primary Brands, Product and Services What We Do 4
Management Discussion and Analysis 24 - 35
2.3 Operational Structure of the Organisation Board of Directors & Management Team 20 - 23
2.4 Location of the Organisation Corporate Information Inner back
cover
2.5 Number of Plantations The Touchwood Plantations 8-9
2.6 Nature of Ownership and Legal Form Corporate Information Inner back
cover
2.7 Markets Served What We Do 4
2.8 Scale of the Organisation Financial Statements 68 - 104
2.9 Significant Changes during the Reporting Period CEO’s Statement/Financial Statements 16 - 19
68 - 104
3. Report Parameters
3.1 Reporting Period Year ended 31st March 2011 -
3.2 Date of the most recent previous report None -
3.3 Reporting Cycle 1st April to 31st March -
3.4 Contact point for more Information Corporate Information Inner back
cover
3.5 Report Scope and Boundaries Sustainability Report 38 - 51
3.6 Boundary of the Report Sustainability Report 38 - 51
3.7 Limitations on Scope Report covers only Sri Lankan Operations of -
TIPLC
3.8 Basis of Reporting Accounting Policies 72 - 81
3.11 Significant Changes None -
4. Governance, Commitments and Engagements
4.1 Governance Structure of the Organisation Corporate Governance 52 - 55
4.2 Chair of the Highest Governance Body Corporate Governance 52 - 55
4.3 Highest Governance Body Corporate Governance 52 - 55
4.4 Mechanisms for Employees/Shareholders to provide AGM/Corporate Governance 107
Recommendations/Direction to the Board 52 - 55
4.14 List of Stakeholder Groups Investor Information 105 - 106
4.15 Identification and Selection of Stakeholders Investor Information 105 - 106
41
Page No.
Performance Indicators
Economic Performance Indicators
EC1 Direct Economic Value Generated and Distributed Financial Statements 68 - 104
EC2 Financial Implications and Other Risks CEO’s Statement/Risk Management 16 - 19
56 - 57
Environmental Performance Indicators
EN3 Coverage of the Organizations Defined Benefit Plan Notes to the Financial Statements 72 - 104
Obligations
EN4 Significant Financial Assistance Received from Sustainability Report 38 - 51
Government
EN6 Policy, Practices and Proportion of Spending on Locally Sustainability Report 38 - 51
Based Suppliers
EC7 Procedures for Local Hiring Sustainability Report 38 - 51
EC8 Development and Impact of Infrastructure Sustainability Report 38 - 51
Environmental Performance Indicators
EN3 Direct Energy Consumption by Primary Energy Sustainability Report 38 - 51
EN5 Energy Saved due to Efficiency Improvements Sustainability Report 38 - 51
EN14 Strategies, Current Actions, and Future Plans for Managing Sustainability Report 38 - 51
Impacts on Biodiversity
EN26 Initiatives to Mitigate Environmental Impact Sustainability Report 38 - 51
Social Performance Indicators
LA1 Total Workforce by Employment Type Sustainability Report 50 - 51
LA2 Total number and rate of Turnover Sustainability Report 50 - 51
LA10 Average Hours of Training per Year per Employee Sustainability Report 50 - 51
LA11 Programmes for Skills Management and Lifelong Learning Sustainability Report 50 - 51
LA12 Percentage of employees receiving regular performance Sustainability Report 48 - 49
reviews
LA13 Breakdown of employees per category according to Sustainability Report 50 - 51
gender, age group
Society Performance Indicators
Community
SO1 Nature, Scope and Effectiveness of any Programs Sustainability Report 48 - 49
and Practices that assess and manage the Impacts of
Operations on Communities
SO7 Total number of Legal Actions for Anti competitive None -
Behavior, Anti Trust and Monopoly Practices
SO8 Monetary Value of Significant Fines and Total None -
42 TOUCHWOOD INVESTMENTS PLC
ENVIRONMENTAL
SUSTAINABILITY
The Role of Reforestation & Sustainable Forest The definition of

Management sustainable forest
Global warming and climate change is an undeniable phenomenon management (SFM) has
in present times, with only 6 per cent of the earth covered with gradually evolved from its original
rainforests today compared to 14 per cent in the past. Traditionally connotation of sustained timber
there has been a strong correlation between population growth and production to embrace concepts of
the level of timber consumption. FAO analysis indicates that “Every economic, environmental and social aspects.
woman, man and child consumes a fully grown tree per year”. With
a global population of over 7 billion and ever increasing, this is a Forest Management deals with the overall
serious threat to our environment. Global population is projected administrative, economic, legal, social, technical
to grow by approximately 24 per cent by 2030 to 8.3 billion, with and scientific aspects related to natural and
consumption of round wood forecast to increase by 35 per cent planted forests. It implies various degrees
between the years 2000 to 2030. Annually 36 million acres of forests of deliberate human intervention,
are destroyed with the highest levels of deforestation evidenced ranging from actions aimed at
in South America with 9.4 ,million acres lost per year. Research safeguarding and maintaining
indicates that 150 acres of forest are lost every minute globally. the forest ecosystem and its
However, alarmingly the fastest rates of deforestation occur in South functions, to favouring
East Asia, specific socially or
economically
valuable
species
or
Sustainable forest management will
ensure that the values derived from
the forest meet present-day needs
while at the same time ensuring
their continued availability
groups
and contribution to long- of
term development species for
the improved
needs production of goods
and services. Sustainable
forest management will
ensure that the values derived
from the forest meet present-day
needs while at the same time ensuring
their continued availability and contribution
to long-term development needs (Source: FAO.
43
1993. The Challenge of Sustainable Forest Management - what As opposed to agro-businesses that adopt a monoculture approach
future for the world’s forests?). to plantation (planting large expanses with a single crop to increase
efficiency and yield and adding high inputs of fertilizers, pesticides,
Whilst globally the Kyoto Protocol and the UN-REDD determine and herbicide), we at Touchwood we are ardent proponents of
and shape the debate on carbon sequestration, in Sri Lanka the agro-forestation. In other words, by planting an array of crops and
Government has been making and implement policies and programs allowing for a number of vegetation structures to coexist, we enable
that encourage sustainable use of forests. Sri Lanka’s Forest Policy, the formation of high-quality habitats that are critical for biodiversity
Forest Ordinance, Fauna and Flora Protection Ordinance, CITIES conservation.
(involves the trade of fauna and flora), Wildlife Policy are ones
more targeted towards protection of forests while the National Management Approach to Environmental Sustainability
Environment Act and National Environmental Regulations (1993) Environmental Management Systems
which calls for the Environmental Impact Assessment for larger
An Environmental Management System (EMS) serves as the
development projects and National Environment Policy 2003 in
framework for the Company’s sustainability efforts by integrating our
respect of over ranching. The Forestry Master Plan which was
daily operations to objectives of the EMS.
prepared in 1995 has made projections up to 2020 to
conserve and sustainable use forests. A recent initiative Our operations in Sri Lanka have been recognized as the
of the Government to have Strategic Environmental first Forestry Management Company in South Asia to achieve
Assessments for the country helps to conserve accreditation status for its plantations, by conforming to the ISO
forests and wildlife areas while giving the 14001: 2000 having being assessed and accredited by TUV of
green light for sustainable development Germany.
by zoning the land into appropriate
land uses.
Land Preservation
Touchwood consciously chooses land that has previously been
Yet, over the period 1990-
farmed, and which is considered low fertility. Through green farming
2005, Sri Lanka recorded one
methods, these lands are nurtured to levels of high fertility, thereby
of the highest deforestation rates of
recuperating dis-used land for viable agricultural use.
primary forests in the world with a loss
of more than 35 percent of its old-growth
Touchwood’s forestry operations are carried out to the strictest and
forest cover. Similarly, the total forest cover
most widely accepted forest management techniques. The practices
diminished by an estimated 18 percent during the
adopted by the Company ensure the prevention of soil erosion whilst
same period.
maximizing the nutrient contents through natural means.
Touchwood has assured that all of its practices comply
Our plantations strike a careful balance between natural species and
with the laws, principles and guidelines set by the Forest
introduced species, thereby ensuring that the soil is not exposed to
Stewardship Council. Touchwood is essentially in the business of
direct rainfall, thus preventing excessive soil erosion. The existing
Agro-forestation, a concept that is widely acclaimed as a means
treeline acts as a erosion barrier whereupon the washing away
to bio-diversity conservation. Whilst agro-forestation balances
of soil through harsh rainfall is minimized through the cushioning
the scale of commercial with sustainable ecological returns, at
effects of the existing foliage. Furthermore, the forest ground cover
Touchwood we take the initiative to ensure that our practices are
remains rich with decaying plant material which in turn increases
best in class, and therefore those that are geared for optimization
the water filtration capacity inducing a greater absorption of rain
of returns to both commercial and ecological interests. Sustainable
fall to the ground water, thereby recharging the water table. Excess
Forestry Management practices adopted by Touchwood ensure the
water is slowly released to the water streams originating from the
long-term viability of the forest cover in Sri Lanka, through the use
plantations forestry. This natural process ensures that soil erosion is
of new wood in productive and industrial use while safeguarding old
minimal and that the soil maintains its fertility through proper cycling
forestry growth.
of nutrients between the physical and biological environments of the
forest.
Touchwood’s core business concept primarily revolves around
environmental conservation with our vision being to “help stop
Moreover, ground cover vegetation increases the soil organic matter
the destruction of our precious rainforests”. We are acutely
content due to the decomposing biomass, and therefore protects and
aware and sensitive to the fact that there are a multitude of
enhances the soil fertility.
environmental concerns that demand our attention. To this effect
we are considerate of the need to create the best solutions through
Safeguarding Reservations & natural forests
a cohesive business concept that aligns corporate strategy with
Touchwood has adhered rigorously to the regulations for natural
environmental needs.
forests, water courses and buffer zones, natural forest and
vegetation cover have been preserved and maintained. Irrespective
ENVIRONMENTAL SUSTAINABILITY
Awarded the SA 8000 Certification SA 8000 Certification “ Sadun Aruna” Tree Planting Campaign at SSC
of the land use, land resources have been managed strictly • Inorganic fertilizers are applied in a controlled manner through its
according to environmental regulations and in order to minimise combination with organic compost.
erosion and soil loss, downstream impact and the impact on local
• Fertiliser leaching is fully controlled through the application of
communities. The Company at all times meet rules and regulations
correct dosages at the optimal times.
laid down by the various government institutions.
• Manual weeding is employed and serves to reduce air pollution
Rekindling national agricultural heritage • Drip irrigation through a micro irrigation system to ensure
Sri Lanka has an incredibly rich agricultural heritage including sufficient water use.
over 2500 varieties of rice as well as huge numbers of indigenous
species of fruits and vegetables. It has extensive ancient irrigation • The introduction of an integrated pest management system
systems with a colossal 42,000 tanks and traditional labour which encourages the use of bio-pesticides such as Neem.
practices and farming techniques that were once highly productive, • Use of straight fertilizers instead of mixtures so that nutrient
all of which are in danger of disappearing as the knowledge dies deficiencies can be directly targeted and the fertilizer used to
off. Touchwood is cognizant of the need to rekindle these practices optimal advantage.
as we too believe in the adage of “looking after the environment so
• Protection of water stream banks by the growth of wide bands of
that the environment will look after our produce and life in the long
vegetation
term”, a philosophy embraced by farmers of yester-year.
• Reduction of air pollution from plantation sites to a state of
Agro-technology best practices: almost zero pollution through the use of manual labour for
• Use of insect prevention netting technology patented by forestry operations
Touchwood.
• Plantations cleared on a need basis thus ensuring the natural
• Continuation of optimal soil fertilization techniques that are habitat is maintained as far as possible
applied based on the outcomes of soil tests
• Silviculture practices are adopted for pest and disease control.
• Scientific weed management to control root competition
Bishops House - Badulla St. Mary’s Church - Dehiwala Devram Vehera - Pannipitiya
45
Touchwood has assured that all of its practices comply with the laws, principles
and guidelines set by the Forest Stewardship Council. Touchwood is essentially in
the business of Agro-forestation, a concept that is widely acclaimed as a means
to bio-diversity conservation.
• Field Development efforts for Mahogany plantations include in Carbon Footprint comes from their household usage and transport
excess of 40 per cent cover crops thereby retaining soil moisture, requirements. The required mathematics of a carbon offset for a
individual therefore is:
• Field Development efforts for Sandalwood plantations which are
placed in the dry zone area necessitates ground cover through
Average carbon emission per person per year - 9700 Kg
cover crops to avoid erosion and control soil temperature.
Amount of CO2 absorbed by a single tree - 20.3 Kg
• Sloping Agricultural Land Techniques have been implemented
on 80% of the land area across newly established Sandalwood Required number of trees to offset carbon production - 478
fields.
Therefore, if a person planted 478 trees that are now mature, that
• Reverse slope platform have been cut on contour lines for person would be a carbon free individual.
planting Sandalwood. This helps prevent soil erosion and
leaching out of fertilizer. Touchwoods Environmental Bottomline currently stands at:
1. 2,854 acres planted in 42 plantations covering seven Districts
• Terracing and drainage systems utilizing material organic to the
plantation site have been constructed. 2. Approximately 20,300 tons of CO2 absorbed by approximately
1,000,000 trees
S.A.L.T - Slopy Agriculture Land Technique
• Terracing National Campaign to save the Sandalwood Tree
• Contour Planting A national campaign termed ‘Sandun Arana’ conceptualized by
Touchwood Investments and launched in partnership with the
• Reverse slope platforms
Ministry of Environment and Natural Resources in 2008 and
• Paving of all leader drains
continued to play a key role in the Company’s public enagement
process to-date. The project aimed to create greater awareness
Soil development & moisture conservation through Leguminous
towards the preservation of the Sandalwood tree. The project
cover crops
implementation focused on the donation of Sandalwood trees to
Weed management: complete weeding, patch weeding and line places of worship in Sri Lanka in a bid to create greater visibility for
weeding. the species in a sanctified setting thereby contributing towards the
re-introduction of the Sandalwood tree to the populance of Sri Lanka
Carbon “Balance Sheet” albeit reversing the trend of extinction.
Agro forestation remains one of the most effective means by which
to remove CO2 from the atmosphere. The average carbon Dioxide A total of 150,000 Sandalwood trees have been planted across
production per person in a developed country per year is 9.7 metric Sri Lanka as a direct outcome of the “Sandun Arana” project of
tones. The CO2 emissions from an individual, which is called the which 50,000 trees were planted during the year under review.
Slopy Agriculture Land Technique Contour planting Reverse slope platforms

ECONOMIC
SUSTAINABILITY
Touchwood Investments is committed to enhance its contribution to market. For
the domestic macro-economic activity through the export of value many years,
added agro products. Export of such high end products will no doubt these plants
yield an inflow of foreign exchange earnings into the economy. We have been used
have identified numerous produce, namely Vanilla, Sandalwood, as raw materials for
Mahogany and Teak which all pose the potential to be high foreign cosmetics, pharmaceuticals
exchange earners for Sri Lanka. Given the appreciating value of such and botanical pesticides.
exotic assets, the inelastic demand for high-end wood is deemed to
be significant. Moreover, the production of value added products also The demand for Sandalwood is
bears the potential to attract foreign investment into the country, strong. The use of Sandalwood in joss
especially given the rise in confidence, given an end to terrorism. sticks is intimately tied to Asian cultures and
We expect to see more investors turning to Sri Lanka in seeing the has been for thousands of years. It is a strong,
possibility of the revenue to be generated from the export of such stable market. The major Asian suppliers, India and
lucrative goods. Indonesia, have completely restricted Sandalwood
log exports because of dwindling stocks.
The flavoring, beauty, cosmetics and pharmaceutical industries China recently changed its policy enabling
consider aromatic plants such as Vanilla and Sandalwood as recommencement of importation
essential and exotic raw materials. Such plants target a niche of Sandalwood thus opening a
new and potent market for
the wood. Moreover, the
use of Sandalwood
Moreover, the production of value
added products also bears the
potential to attract foreign investment
into the country, especially given the
rise in confidence, given an end to
terrorism.
47
We expect to see more investors turning to Sri Lanka in seeing the possibility of the revenue to be
generated from the export of such lucrative goods.
oil in perfumes, oils, soaps and aromatherapy is well World consumption of tropical hardwoods has multiplied nearly 25
established and growing, owing to its exceptional fixative times in just the last four decades, to more than 100 billion board
quality and woody fragrance. feet per year. The demand for tropical hardwoods continues to grow
rapidly.
Annual world consumption of tropical hardwoods is now more than
250 million cubic meters, or over 100 billion board feet, per year. While supply is limited, the demand outlook for Teak is very positive.
Southeast Asia, until recently, has been the largest source of supply It has long been sought after in Asian, European and North American
for tropical hardwoods, but this geographic source will largely be countries. These markets are well established and are likely to
depleted within the next five years. All of the primary forests in India, grow, particularly as a result of population and economic growth in
Burma (Myanmar) and Bangladesh are consumed or destroyed. Ivory China and India. Demand for commercial plantation Teak is likely to
Coast’s forests are essentially non-existent. Nigeria’s forests have increase with the availability of a sustainable supply of quality Teak
from well-managed plantations.
been decimated as well.
Sandalwood Oil Extraction Plant - Panketiya Vanilla Processing Centre - Matale Twood Flooring - Timber Flooring Solutions
SOCIAL
SUSTAINABILITY
Livelihood sustenance and development plantations
Touchwood mobilizes communities in terms of direct and indirect and a
jobs though the operations of Touchwood. Apart from monetary hazard audit
compensation the Company has infused investment into eco- is conducted
friendly infrastructure development, forestry and associated periodically to ascertain
skills development, imparted agro-best practices and showcased possible safety issues, thus
livelihood sustenance programs for these communities in the hope creating a pre-emotive hazard
that through the imparting of skills and know-how, these individuals mitigation process .Employees are
can create a better livelihood sustenance for themselves and their recognized every month, quarter and
families. year, based on performance and rewarded.
As a policy and in an attempt to reward our
Workplace existing employees, preference is given to internal
recruitment, wherever possible, for new vacancies.
We are strongly committed to the creation of an invigorating
Thus, employees are assured of a career path
workplace. Our work day commences with an energy boosting
within the organization. The Management
session where employees are given the chance to contribute and
provides clear guidance and know-how
are acknowledged and appreciated. Health and safety is in line
for career development to employees
with ISO standards – all workers are given safety equipment in the
on an ongoing basis to ensure that
new skills are imparted and
personal development is
achieved.
Our work day commences with
an energy boosting session where
employees are given the chance to
contribute and are acknowledged and
appreciated.
A
number of
general as well
as specialized
training programmes
were organized for the staff
based on the business plan
and corporate objectives. Training
is in line with ISO standards and
involves pre- and post-training evaluation
of participants backed with Divisional Head’s
comments on improvement.
49
A donation was given for the “Bikes for Life” campaign, initiated by Mr. Kumar Sangakkara and managed by the Foundation for Goodness
Key performance objectives are set at the Community Development

beginning of each year and an objective- Our plantations are situated in rural areas where infrastructure is
oriented evaluation is carried out at minimal and the quality of life is poor. As we expand our presence
the end of the year, in an open in these areas, we have enmeshed ourselves with the communities
discussion with each employee. by assisting them with roadways, bridges and other infrastructure
All employees, including facilities, including assistance to upgrade nearby schools and places
plantation workers are entitled of religious worship. Our presence has also meant that direct and
to Profit Related Pay. Employees indirect employment opportunities are on the increase - and the
are also provided cross-functional resultant increase in income has had a cascading effect on the
opportunities through their appointment quality of life of the villagers and their children.
to special project teams which are
evaluated annually and rewarded accordingly. Touchwood drives an Island-wide programme to educate students
Surveys are carried out bi-annually to explore job including pre-schoolers on the importance of trees and the
satisfaction among our employees. The survey results importance of preserving our environment. This attitude building
are then backed with analysis and corrective measures programme instills a admiration for the environment amongst young
undertaken where required. minds and inculcates the good habit of environmental preservation
for future well being of our planet.
Team building is given focus on a weekly basis with a session
dedicated to the enhancement and maintenance of good
relationships among staff. The forum acts as an effective
mechanism for the creation of a one team attitude. Meanwhile more
serious conflict resolution is addressed at a weekly meeting where
disputes with peers is discussed in an open session that promotes
team spirit and respect for each other.
Donation for Thaldena Hospital Quarterly health scan will be held at estate levels under the Cattle releasing at Girandurukotte estate
patronage of Health Department
Triple Bottom Line Performance Indicators
Environmental Bottom Line

1. 2,854 acres planted in 42 plantations covering six districts
Kalutara Ratnapura Matale Anuradhapura
Kandy Badulla Polonnaruwa
2. Planted over 500,000 high value trees - absorbs approximately over 9,000 tonnes of CO2 per year.
3. Maintained bio diversity - preservation of other trees - further carbon absorption takes place
4. Environmental impacts
Compliance - ISO 14001

Aspect registers maintained, audited and improved annually 95%
Environmental Impact Assessment records maintained 95%
Water - all natural sources are protected 100%
Energy - 90% of our plantations utilize solar energy 90%
Bio diversity - maintained everywhere possible 40%
Soil protection - prevention of erosion through ground cover crops, bio diversity etc. 80%
Economic Bottom Line

11,103
10,800
10,500
Product
9,000
Distribution
8,500
1,466,429
1,196,403
593,844
727,010
857,482
Revenue Client
(Rs) Base
Sandalwood (26%) Vanilla (35%)
2008
2009
2010
2011
2012
2008
2009
2010
2011
2012
Mix Products (27%) Foreign Products (12%)
Price
Net Asset Earnings Earnings
153.87
182.36
229.75
per Share per Share

31.85
28.55
Ratio
41.23
42.86
15.34
6.83
5.28
1.76
2.83
1.77
4.45
8.81
(Rs) (Rs) (Rs)

2008
2009
2010
2011
2012
2008
2009
2010
2011
2012
2008
2009
2010
2011
2012
51
Social Bottom Line

“Sandun Arana” National Project
Launched under the guidance of Ministry of Environment & Natural Resources to plant and protect trees in places of religious significance,
schools and government entities
Sinhalese Sports Club A tree planting campaign was held at the Sinhalese Sports Club on the World Environmental
Day with the participation of the SSC committee and Touchwood Staff
Devram Vehera A tree planting campaign was held at the Sri Devram Maha Vehera Buddhist Monastary,
Depanama, Pannipitiya graced by Ven. Kolonnawe Sumangala thero.
St.Mary’s Church During the annual church festival a tree planting campaign was organised together with the
Rev. Fr. Mahendra and Touchwood Staff
Corporate Social Responsibility

The Foundation of Goodness
“Bikes for life”
A donation was given for the “Bikes for Life” campaign, initiated by Mr. Kumar Sangakkara and managed by the Foundation for Goodness as a
contribution to purchase 1500 bicycles for children living in the rural areas surrounding Kilinochchi, Mankulam and Mullativu.
Employee Staff
Gender Analysis Strength
2012 2012
Employee
Age Analysis
74
93
47
37
Directors (6%) Senior Management (6%)

18 - 30
31 - 40
41 - 50
51 Above
Male (83%)
Managers (23%) Senior Executive (17%)
Female (17%)
Executive (20%) Officers (2%)
Clerical Staff (8%)
Employee
Training Employee
125
82
44
Analysis Service Analysis

10
15
13
24
7
0-5 1-5 5-10

2008
2009
2010
2011
2012
Corporate Governance
The Directors endorse the principles of good Corporate Governance. Over the past year, the Board has focused on reviewing all procedures
and policies. The Directors are desirous of enhancing controls, facilitating monitoring of performance and compliance and establishing lines of
responsibility and accountability.
Detailed below are the corporate governance principles advocated by the Institute of Chartered Accountants of Sri Lanka, and the Company’s
compliance thereto.
Governance Principle Conformance
BOARD OF DIRECTORS AND BOARD COMMITTEES

Procedure for appointment of new Directors In view of the responsibilities of a Director and the contribution expected from him or her,
any appointments of new Directors are considered by the Board as a whole.
Holding of regular Board Meetings Board Meetings are held every month. The CEO reports on performance, while the financial
position is reported through comprehensive board papers.
The Board also calls for reports on any issues which it feels should be studied in depth,
whether in the micro or the macro environment.
Availability of formal schedule of matters The Board is responsible for;

specifically reserved for the decision • Deciding the vision and the strategy of the Company
making of the Board • Approving appointments of key senior officers
• Approving budgets and targets and monitoring performance against
these budgets and targets
• Reviewing risk management and enhancing controls where necessary
• Ensuring compliance with statutory and regulatory requirements
• Approving significant acquisitions
• Reviewing existing policies and procedures and improving on them where necessary
Obtaining of independent professional advice The Board seeks the independent professional advice of third parties. These include
the Company’s lawyers, auditors or tax consultants, and such advice is sought at the
Company’s expense.
Company Secretary The Company Secretaries are Corporate Advisory Services (Pvt) Ltd. Their advice and
support can be sought by any director. They are also the contact point for any shareholder.
The removal of the Company Secretaries is a matter for the whole Board.
Independent judgment Each Director is called upon to exercise independent judgment when participating in the
discussion and decision making, and to give the Company the benefit of their expertise
and experience.
Dedication of adequate time and effort At the monthly Board meetings adequate time is given so that all information provided can
be discussed and any Director can seek clarification or further information if desired.
Training for directors Formal training has not been considered necessary. However, the Board seeks to be aware
of potential risks and opportunities, both in the local and global environment.
53

CHAIRMAN AND CEO
Clear division of responsibilities A balance of power is established by having three separate directors to serve as Chairman,
Deputy Chairman and Chief Executive Officer.
Role of the Chairman The Chairman oversees the agenda of Board meetings, and the reports provided, to ensure
that decision making and critical analysis of performance is facilitated.
He also encourages all Directors to contribute at meetings, whilst providing effective
leadership
Role of the CEO The CEO oversees the operational functions of the Company and reports to the Board
on performance, risk analysis and mitigation measures and governance and compliance
issues.
Financial acumen There is a sufficient amount of financial acumen and knowledge available among the
Directors. The advice of the auditors and tax consultants is called for when required.
Balance of the Board / Independence of Directors The Board consist of 6 Directors of which 2 are independent Directors. These Independent
Directors Chair the Board Sub Committees.
Supply of quality information Reports on operational and financial performance are submitted regularly.
Availability of management information The Board is provided with any additional information it requests.
Re-election of Directors One third or nearest to one third of the Directors retire by rotation, and offer themselves
for re-election. The Board, having considered each Director’s performance, recommends to
the shareholders the re-election of a retiring Director.
Appraisal of Board performance The Directors believe that the Company’s performance and compliance levels reflect the
effectiveness of the Board.
Appraisal of CEO The CEO is held responsible for operational and financial performance, risk mitigation and
compliance. His performance is measured against these areas.
The profile of the CEO is found on page 20.
DIRECTOR’S REMUNERATION
Directors remuneration policy The Board has appointed a remuneration Committee which reviews the remuneration
paid/payable to the Executive Directors.
Disclosure of remuneration The Directors remuneration is disclosed on page 103.
RELATIONSHIP WITH SHAREHOLDERS

Constructive use of Shareholder meetings Notices of Shareholder meetings are dispatched to all Shareholders giving the prescribed
period of notice.
Should a Shareholder be unable to attend, such Shareholder has the opportunity to

convey his/her views through a proxy. As the Company provides two way proxy forms,
all Shareholders are able to communicate their wish on any decision which has been
submitted for their approval.
The Board encourages Shareholders to actively participate at all Shareholder meetings.
Each decision voted on separately Each agenda item is voted on separately, enabling every Shareholder to indicate his assent
or dissent on each item.
Procedures for voting Voting is on a show of hands, unless a poll is called for. The outcome of each decision is
then declared by the Chairman.
Should a poll be called for, the Auditors will be available to oversee the counting of the poll
votes, after which the Chairman will declare the result.
Corporate Governance
Availability of sub committee Board sub committees have been established.
Disclosure of major transactions While there have been no such transactions to date, should there be any, they will be
disclosed in accordance with the regulations.
Enhancing shareholder value The Board believes in enhancing shareholder value, and to this end is striving to optimise
use of the Company’s resources, reduce costs and increase profitability.
FINANCIAL REPORTING Interim Financial Statements are provided to all shareholders within the stipulated
timelines. The Annual Report contains comprehensive financial report. All these Financial
Statements are prepared in accordance with the Companies Act No 7 of 2007, the Listing
Rules of the Colombo Stock Exchange and Sri Lanka Accounting Standards.
Any price sensitive information is disclosed promptly.
Declaration by the Directors The Directors annual report on the affairs of the Company is found on page 58.
The Directors have disclosed any interests in contracts with companies of which they (or
their spouses) are Directors and /or significant Shareholders.
These disclosures have been tabled at Board Meetings and recorded in the Minutes.
Statement on responsibility for The statement by the Directors on their responsibility for the preparation
Financial Statements and presentation of financial statements is on page 65.
Going concern The Board is confident that the business is a going concern. This statement is also
included in the Directors report on page 58.
Summoning an EGM if assets fall below Such a situation has not arisen. However, should such a situation arise, the
half Shareholders funds statutory procedure will be complied with.
INTERNAL CONTROLS
Periodic review of controls Internal Audit Reports have been called for by the Audit Committee to enable them to
analyse existing controls and make recommendations to the Board on changes where
deemed necessary.
Reporting to the Shareholders on risks The Risk Management review is on pages 56 to 57.
AUDIT & AUDITORS

Audit committee The Audit Committee has called for Internal Audit Reports, in order to review existing
controls and risk mitigation.
Relationship with external auditors The Audit Committee also meets with the External
Auditors to review the audits and the objectivity and independence of the auditors.
The Audit Committee Report is on page 64.

55
CORPORATE GOVERNANCE PRACTICES

Compliance The Company complies with the requirements of the Listing Rules of the Colombo
Stock Exchange and the Companies Act No. 7 of 2007 and all other applicable laws and
regulations.
Self governance initiatives The Company has adopted the Voluntary Code on dealings by Directors, by the Company
CEOs and connected parties issued by the Colombo Stock Exchange.
Relationship with stakeholders The Company values its relationship with all stakeholders, including Shareholders,
financiers and regulators. The Board seeks to ensure timely and comprehensive
disclosures, optimising of performance and of compliance all of which they feel will serve
to enhance stakeholder confidence.
BOARD COMMITTEES
Audit Committee The Audit Committee comprises the followings:
Mr. L. L. Kulatunga Mr. Ralph Pereira
(Committee Chairman/Independent Director)
Mr. Channa Abeygunawardene (CEO/Director)
The Audit Committee meets quarterly to discuss Internal Audit Reports. The Committee
also reviews the bi - annual Financial Statements before they are dispatched to the
shareholders and regulators.
The Audit Committee reviews all reports of the External Auditors and meets with the
Auditors periodically to discuss these reports and any other issues.
Having met with the Internal and External Auditors, reviewed and discussed their
respective reports, the Audit Committee then makes recommendations to the Board which
ensures that the recommended corrective actions and controls are implemented and
monitored.
Remuneration Committee The Remuneration Committee is a sub committee of the Board and comprises of 3
members of whom two are non-executive Independent Directors. The members of the
Committee are
Mr. L. L. Kulatunga (Committee Chairman/Independent Director), Mr. Ralph Pereira
(Independent Director), Mr. Channa Abeygunawardene (CEO/Director). The Chairman and
members of the Committee are appointed by the board.
The remuneration committee determines the policy for the remuneration of the Company’s
Executive Directors and other key management personnel of the Company. The Committee
reviews and makes recommendation to the Board on the remuneration policy and strategy
of the Company and evaluates whether the remuneration are linked to the individual
performance. The committee also appraises whether such remuneration packages linked
to the individual performance are aligned with the company’s long term strategy and
contribute to the enhancement of the performance of the key management personnel.
The committee acts within the parameters set out by the terms of reference. The
proceedings of the committee meetings are reported to the Board by the Chairman of the
committee.
The details of the aggregate remuneration paid to the key management personnel are
disclosed on page 103.
Executive Committee The Executive Committee comprises the following;

Mr. Roscoe Maloney Mr. Asitha Koralage
Mr. Channa Abeygunawardene Mrs. Swarna Maloney
Mr. Somasiri Munasinghe
The Executive Committee has been delegated authority to oversee more routine
operational issues. This includes approving expenses over designated limits.
Risk Management
Associated risks assessment of biological assets Social change
Touchwood Investments PLC recognises risk management as Changing social conditions will have an impact on social change.
a key area that contributes towards safeguarding the interests Historical international market information suggests that the demand
of its stakeholders, by stabilising the operations of Touchwood has increased year on year while the supply has dropped due to
Investments PLC. The Company views effective Risk Management scarcity.
as a tool of good business strategy, and hence does not limit its
scope only to compliance requirements. While well-defined policies Regulatory risk
are in place, the Company constantly strives to update and improve Change in the Government’s policy on harvesting trees could have
controls and procedures. The risk management policies ensure the an impact on the Company’s business. However, the Company
identification, measurement, monitoring and controlling of risk. is approved by the Board of Investment for planting trees for
commercial harvesting at the end of the harvesting cycle. Foreign,
Management risk Local, Private & Public sector Investors have invested in the project
Plantation management on the strength of this BOI endorsement. Touchwood Investments
The Company is dependent on the expertise of its staff to ensure the PLC is the only plantation company that has obtained such
success of its plantations. Some of the best foresters in Sri Lanka approval in view of securing investor interest. Further, owing to the
are on the payroll of the Company or provide regular consultancy sustainable nature of the business, governments would encourage
services. The Company also obtains expert consultancy services of such projects the world over.
reputed international consultants from time to time.
Agricultural risk
Annual independent evaluations are carried out by industry experts Tree survival/growth levels
and academics. ISO audits are also carried out every year by foreign The Company’s nurseries hold plants of up to 4 years old to be used
audit consultants (TUV). Existing long term collaborations with at a time when an existing plant of up to the same age dies due to
universities and other institutions bring in state of the art technical any reason. The Company operates 3 major nurseries and each site
capabilities and management practices. is also equipped with mini nurseries.
Financial risk Touchwood maintains a 100% tree buffer with an additional volume
Price buffer to mitigate this risk further. As per the projected growth chart,
Movements in the Sri Lankan and US currencies affect our market unique action plans are prepared as a result of the independent
price. However we carry out a valuation exercise annually in order evaluation to maintain average growth levels annually.
to minimise the risk occurring at the end of the harvesting cycle.
Thus, investors will know the exact asset value without having to Scattered plantations
wait till harvest. A very high discount rate of 12.5% is accounted (on Touchwood has followed a strategy of geographically scattering the
real terms) in view of providing adequate security for future financial plantations. We are thereby enabled to compensate any loss, through
risk. An automatic hedge against currency devaluation and inflation the buffer from a different location to mitigate the risk factors given
is embedded in the product. The Company also has the luxury of below.
capitalising on the best prices by holding the stock or releasing it at
peak market conditions. Climate
The best climate for Mahogany in Sri Lanka is the wet zone. Tropical
Market risk line is the most preferred climate for this species. Mahogany is
Substitute products planted specifically bordering the Sinharaja Reserve, which is the
There is a trend in many industries for the original resource to gain best climate zone. Sandalwood on the other hand requires dry cool
greater value when a substitute is introduced, due to the scarcity weather; Balangoda to Badulla through Beragala are identified as
of the original. In our case, substitutes are most likely to be more the best climate. These areas of the country have been known for
harmful to the population and the environment than the original naturally grown Sandalwood for many years and are endorsed by
resource, resulting in the original gaining even greater recognition. industry experts, specifically for Touchwood.
Eventually, to balance the carbon cycle, the best source of renewable
energy to use would be timber (or fuel wood). Pests
Shoot borer is the only known threat for Mahogany plantations. This
does not kill the plant but restricts its growth if sufficient measures
57
are not taken to counter it. Measures have been taken to overcome Reputational risk
this by covering the plants with nets until they are strong enough Reputational risk may arise from loss of confidence placed in the
to tackle the problem on their own; this occurs mostly in the first organisation by the stakeholders. This can have an adverse effect
five years. The Company has also developed a patented netting on operations. In order to safeguard the Company from this risk and
technology and application of biological repellents for this purpose. maintain confidence, the Company ensures that statutory, regulatory
Sandalwood species is not known to be affected by pest attacks. and other compliance requirements are met.
Should any pest attack or diseases take place, the Company shall
take relevant preventive measures. The Company also employs a Compliance Officer to help achieve the
required level of regulatory compliance, which is monitored by the
Fire Legal Officer.
Occurrence of this event is negligible in the wet zone of the country
where Mahogany and Sandalwood are planted. The Company has Touchwood is focused on providing an excellent service to the
taken counter measures to overcome such event by: customers and contributing towards the economic development of
Sri Lanka from a Triple Bottom Line perspective, thus adhering to its
Spreading the plantations objective.
Introducing fire belts around the edges of the sites in order to
The Company’s regular interest in its Social Responsibilities also has
separate them from the adjoining lands, to ensure that the fire will
a positive impact on its reputation.
not cross over to the Company’s sites.
Maintaining a buffer tree stock of 100% and a volume stock of 200% Legal risk
for any emergencies. Legal risk arises due to the inability to enforce contractual
obligations, unexpected lawsuits against the Company or adverse
Lack of nutrition judgments that may cause material, unforeseen financial losses
The Company has in-house and external experts to monitor to the Company. The Company employs competent legal staff and
nutrients to improve soil conditions and provide required nutrition obtains services from external consultants, where necessary, to
supplements for the trees. minimise this risk.
Act of God Risk review and control

The Company’s sales agreements with its clients prevent it from The Board has overall responsibility to assess risks associated with
being responsible for risks such as cyclones, floods, earthquakes the Company. The Company identifies developing an organization
& lightning etc. However, the Management shall oblige the client wide “Risk Awareness” programme as an effective way to manage
should such an event take place from the 200% volume buffer. In the risks.
past 10 years, Touchwood has not recorded such events.
Insurance
All Plantations are comprehensively insured.
Report of the Directors

The Directors take pleasure in presenting their report together with The financial position is monitored against budgets. Comprehensive
the audited Financial Statements for the year ended 31st March, papers are presented on the financial position of the Company for
2012. the month under review and the year to date. Comparisons are
also made with the previous years’ figures and with the macro
Principal activities environment, to detect trends and the impact of outside influences.
The principal activities of the Company remain re-forestation, and
the maintenance and sale of such reforested areas to investors in Where necessary, decisions are taken by circular resolutions, to
the local and overseas market. expedite action.
Directorate Re-election of Directors

The Directors of the Company during the year under review are as To re-elect Mrs. Swarna Maloney who retires by rotation at the
follows: Annual General Meeting in terms of Article 91 of the Company’s
Articles of Association.
Roscoe Anthony Maloney
Rienzie Theobald Wijetilleke (from 2nd January 2012 to 09th July To re-elect as a Director, Mr. L L Kulatunga, who is 70 years of age
2012) and who vacates his office in terms of Section 210 of the Companies
Act No. 7 of 2007, and Mr. L L Kulatunga also retires by rotation at
Swamy Pandith Asitha Koralage
the Annual General Meeting, in terms of Article 91 of the Company’s
Channa Abeygunawardene Articles of Association.
Swarna Maloney
To re-elect as a Director, Mr. Aloysius Ralph Pereira, who is 74 years
Liyanage Laksaman Kulatunga of age, and who vacates his office in terms of Section 210, of the
Companies Act No. 7 of 2007.
Aloysius Ralph Pereira
Deepal Manik De Silva Wijeyaratne (from 23rd February 2012 to 14th To re-elect Mr. Michael Kenneth Simmons who has been appointed
July 2012) a Director during the year, in terms of Article 96 of the Company’s
Articles of Association.
Michael Kenneth Simmons (Appointed w.e.f. 06th August 2012)
Malcolm Scorer (Appointed w.e.f 06th August 2012) To re-elect Mr. Malcolm Scorer who has been appointed a Director
during the year, in terms of Article 96 of the Company’s Articles of
Alternate Directors Association.
Prageeth Bandara Herath (Alternate Director to Mr. S P A Koralage)
Directors’ Interest in shares
Janath Sohitha Olaboduwa (Alternate Director to Mr. Channa
Abeygunawardene) The Directors interests in shares as at 31st March, 2012 were as
follows:
Directors Meetings As at 31.03.2012 As at 31.03.2011
The Board meets every month. At each meeting, performance to R A Maloney 11,664,000 11,664,000
date is reviewed and compared with targets. Presentations are made
S J Maloney 6,409,600 6,409,600
covering all aspects of operations, including productivity. The Board
is constantly seeking to optimize resources and manage costs. S P A Koralage 496,000 496,000
C Abeygunawardene - -
L L Kulatunga - -
Aloysius Ralph Perera - -
Rienzie Theobald Wijetilleke -
Deepal Manik De Silva Wijeyaratne - -
59
Directors interests in contracts Financial Statements

In accordance with the provisions of the Companies Act No. 7 The Financial Statements are given on pages 68 to 104.
of 2007, the Directors have made declarations relating to their
interests. These have been entered into the Interest Register which Financial Results
is maintained by the Company. The financial results for the year ended 31st March 2012.
Directors remuneration 2012 2011

The Directors remuneration is disclosed on page 103. Rs.’000 s Rs. ‘000 s
Revenue 1,196,403 1,466,429

Board sub committees
Net Profit Before taxation 173,792 399,728
During the year under review, an Audit Committee was appointed
Less: taxation (48,590) (42,729)
by the Board. The Audit Committee approved an Audit Charter which
describes the role and the functions of the Committee. Net Profit after taxation 125,203 357,001
Review of business Audit Committee

With the unprecedented financial crisis of the recent past, the During the year under review, the Directors appointed an Audit
Company has found its business also affected. This impact has Committee. The Composition of the Committee is given at page 64.
coincided with the expansion programme which the Company had

The Audit Committee has approved an Audit Committee Charter,
recently commenced.
which lays out its role and its functions.
Details on the Company’s performance for the year under review can
The Committee has requested that Internal Audit reviews be carried
be found in the statements of the Chairperson, Deputy Chairman and
out of all processes and procedures, to ensure that adequate
the Chief Executive Officer (found on pages 12 to 19)
controls are in place to safeguards assets, eliminate waste, optimize
use of resources and maximize productivity.
Directors’ responsibility for financial reporting
The Directors are responsible for the preparing of Financial The Committee has also met with the External Auditors to discuss
Statements of the Company. The Directors believe that the Financial issues relating to the preparations and presentation of the Financial
Statements (appearing from page 68 to 104) have been prepared Statements, and any other issues of concern, which require the
in accordance with the requirements of the Sri Lanka Accounting Directors attention.
Standards, the Companies Act No. 7 of 2007 and continued Listing
Rules of the Colombo Stock Exchange, and that they reflect a true The Audit Committee Report can be found on page 64.
and fair view of the state of Companies affairs for the year under
review. Remuneration Committee
During the year under review, the Directors appointed a
Responsibility statements Remuneration Committee.
The Directors responsibility statement appears on page 65 The Chief
Executive Officer’s and Head of Finance responsibility statement The Remuneration Committee is a sub committee of the Board
appears on page 66. and comprises of 3 members of which two are non-executive
Independent Directors. The members of the Committee are
Going concern Mr. L L Kulatunga (Committee Chairman/Independent Director),
The Directors are of the view that the Company is in a position to Mr. Ralph Pereira (Independent Director), Mr. Channa
continue its operations in the foreseeable future. Accordingly, the Abeygunawardene. The Chairman and members of the Committee
Financial statements are prepared on the basis that the Company is are appointed by the Board.
a going concern.
Report of the Directors
The remuneration committee determines the policy for the Statutory Payments
remuneration of the Company’s Executive Directors and other key For the year under review, all known statutory payments have been
management personnel of the Company. The Committee reviews and made and all retirement gratuities have been provided for. Further, all
make recommendation to the board on the remuneration policy and management fees and payments to related parties for the year under
strategy of the Company and evaluates whether the remuneration review have been reflected in the accounts. Details are given in Note
are linked to the individual performance. The committee also No. 6 (Page 83).
appraises whether such remuneration packages linked to the
individual performance are aligned with the company’s long term Number of Employees
strategy and contribute to the enhancement of the performance of The number of employees as at 31st March 2012 was 251.
the key management personnel.
Stated Capital
The committee acts within the parameters set out by the terms of
The Stated Capital of the Company is Rs. 623,616,000/- made up of
reference. The proceedings of the committee meetings are reported
71,270,400 Ordinary Shares and 3,040 Preference Shares. (The total
to the Board by the Chairman of the committee.
paid up value of the Preference Shares is Rs. 30,400,000/-).
The details of the aggregate remuneration paid to the key

The shareholding structure is given on pages 105 to 106 together
management personnel are disclosed on page 103.
with the 20 largest shareholders.
Auditors During the year, the share price ranged from Rs. 12.80 to Rs. 33.20.
The Auditors, M/s. KPMG (Chartered Accountants) retire and offer As at the end of trading on 31st March 2012 the share price was
themselves for re-appointment. The Board recommends their re- Rs. 15.50/-.
appointment at a fee to be determined by the Board.
Compliance with laws and regulations
The Auditors have confirmed that they have had no interest in or
Following the revision of the continued Listing Rules of the Colombo
relationship with the Company other than that of Auditors. They have
Stock Exchange (CSE) in April 2009, the Company has submitted to
also confirmed that they are independent in accordance with the
the CSE the required Listing undertaking.
code of ethics of the Institute of Chartered Accountants of Sri Lanka.
The Company has not engaged in any activity that contravenes any
During the year under review, the Auditors were paid Rs. 1,525,000
applicable law or regulation.
as audit fees.
Equitable treatment of shareholders
Auditors Report
The Directors have made every endeavour to ensure the equitable
The Auditors report appears on page 67.
treatment of all shareholders, and are committed to maximizing
shareholder wealth.
Significant accounting policies
The significant accounting polices adopted when preparing the All Notices of shareholders’ Meetings are sent out in accordance
Financial Statements and any changes thereto (if applicable) are with the provision of the Company’s Articles of Association. Any
given on pages 72 to 81. shareholder unable to attend is still able to indicate his/her consent
or dissent on any decision, by completing and returning the two way
proxy provided with the Notice.
61
Notice of Meeting
The Notice of Meeting is found on page 107 If you are unable to be
present, please complete and return the Form of Proxy (page 109).
BY ORDER OF the Board of Directors

of Touchwood Investments PLC
(Sgd.)
L L Kulatunga
Director
(Sgd.)
Channa Abeygunawardene
(Sgd.)
Corporate Advisory Services (Private) Limited
Company Secretaries
15th August 2012

Colombo
Because it is rewarding.
Financial information
We need to fully understand the world
around us, as well as the needs of the
many thousands of people upon whom
we rely to contribute to a well-run
business.
Audit Committee Report
The Audit Committee Comprise of two Independent Non-executive The Committee has also met with the external Auditors and continue
Directors upto 22nd February 2012 and 3 Independent Non- the hold regular meeting with them, to discuss Accounting issues,
executive Directors from 23rd February 2012 and two other the Management Letter and Managements Responses and corrective
Directors. The Chairman of the Audit Committee is a Fellow Member action taken.
of the Institute of Chartered Accountants of Sri Lanka and the
Chartered Institute of Management Accountants of United Kingdom. The Committee recommends the payment of fees to the External
Auditors, and has given consideration of the independence of the
The Composition of the Audit Committee is as follows. External Auditors.
Mr. L L Kulatunga
The Audit Committee has recommended to the Board of Directors
Independent, Non-executive Director, Chairman
that Messrs KPMG (Chartered Accountants) be reappointed as
Mr. Ralph Pereira Auditors for the financial year ending March, 31st 2012.
Independent, Non-executive Director
The reappointment of Audit Firm and the determination of its fee
Mr. D M D S Wijerathne from 23rd February 2012
by the Board of Directors will be subject to the approval of the
Independent, Non-executive Director
shareholders at the Annual General Meeting to be held on September
Mr. Channa Abeyagunawardene, Director/CEO 28th, 2012.
Mr. Asitha Koralage, Deputy Chairman
The former Chairman, Mr. Rienzie Wijetilleke participated as an

observer from 2nd January 2012 to 14th July 2012
(Sgd.)
The Committee has held regular meetings during the year under L L Kulatunga
review to discharge its duties. Chairman - Audit Committee
The Committee has made in depth studies of internal audit reports, 15th August 2012
analysed the effectiveness of existing controls, systems and Colombo
procedures and made appropriate recommendations to the Board of
Directors, which have been duly complied with.
65
Directors’ Responsibility for Financial Reporting
The Company’s Financial Statements for the year ended 31st March, Compliance Report
2012 have been prepared and presented in conformity with the The Directors confirm that to the best of their knowledge, all
requirements of the Sri Lanka Accounting standards, the Listing statutory payments relation to employees and the government that
Rules of the Colombo Stock Exchange & the Companies Act No. 7 of were due in respect of the Company and its Subsidiaries an at the
2007. balance sheet date have been paid or where relevant, provided for.
These Financial Statements present a true and fair view of the

operations and the position of the Company for the year under (Sgd.)
review. Channa Abeygunawardene
The Directors have put in place systems and procedures which
enable adequate information to be captured, and which facilitate the
maintenance of accurate records. (Sgd.)
L L Kulatunga
Appropriate accounting policies have been adopted. Director
Internal controls, check and balances have been implemented.

(Sgd.)
The Directors believe that they have taken all reasonable steps
CORPORATE ADVISORY SERVICES (PVT) LTD
to safeguard the assets of the Company, to ensure the integrity,
Company Secretaries
accuracy and safeguarding of operational data, and to prevent, deter
and detect fraud. 15th August 2012
Colombo
M/s. KPMG (Chartered Accountants) the Auditors, have examined the
financial and other records of the Company. Their opinion is given on
page 67.
Chief Executive Officer’s & Head of Finance’s

Responsibility Statement
The Financial Statements are prepared in compliance with the Sri The Financial Statements were audited by KPMG (Chartered
Lanka Accounting Standards issued by the Institute of Chartered Accountants), the Company’s external auditors.
Accountants of Sri Lanka and the requirements of the Companies
Act No. 7 of 2007 and any other applicable statutes to the extent It is also declared and confirmed that the Company has complied
applicable to the Company. There are no departures from the with and ensured compliance by the auditor with the guidelines
prescribed accounting standards in their adoption. The accounting for the audit of listed companies where mandatory compliance is
policies used in the preparation of the Financial Statements are required, it is further confirmed that all the other guidelines have
appropriate and are consistently applied. been complied with.
The Board of Directors and the management of your Company

accept responsibility for the integrity and objectivity of these (Sgd. Illegibly)
Financial Statements. The estimates and judgments relating to the Channa Abeygunawardene
Financial Statements were made on a prudent and reasonable basis, Chief Executive Officer
in true and fair manner the form and substance of transactions and
reasonably present the Company’s state of affairs. To ensure this,
the Company has taken proper and sufficient care in installing a
(Sgd. Illegibly)
system of internal controls and accounting records, for safeguarding
S. Munasinghe
assets and for preventing and detecting frauds as well as other
Head of Finance
irregularities, which is reviewed, evaluated and updated on an
ongoing basis. Our internal auditors have conducted periodic audits
15th August 2012
to provide reasonable assurance that the established policies and
Colombo
procedures of the Company were consistently followed. However,
there are inherent limitations that should be recognized in weighing
the assurances provided by any system of internal controls and
accounting.
67
Independent Auditors’ Report
TO THE SHAREHOLDERS OF TOUCHWOOD INVESTMENTS PLC the limitation of information demonstrating that the growth patterns
corresponding to the relevant trees as given in note 14.6.1 has been
Report on the Financial Statements integrated in to the financial valuation, we were unable to verify the
We have audited the accompanying financial statements of Touchwood appropriateness of the above gain from fair valuation.
Investments PLC (the “Company”), the consolidated financial statements
of the Company and its subsidiaries as at 31 March 2012 which In our opinion, so far as appears from our examination, except for the
comprise the balance sheet as at 31 March 2012, and the income effect of such adjustments, if any, as might have been determined to be
statement, statement of changes in equity and cash flow statement for necessary had we been able to satisfy ourselves on the above matter,
the year then ended, and a summary of significant accounting policies the Company maintained proper accounting records for the year ended
and other explanatory notes as set on pages 68 to 104 of this annual 31 March 2012 and the financial statements give a true and fair view
report. of the Company’s state of affairs as at 31 March 2012 and its profit
and cash flows for the year then ended in accordance with Sri Lanka
Management’s Responsibility for the Financial Statements Accounting Standards.
Management is responsible for the preparation and fair presentation
of these financial statements in accordance with Sri Lanka Accounting Opinion - Group
Standards. This responsibility includes: designing, implementing As disclosed in Note 2.5 to these financial statements, the fair value
and maintaining internal control relevant to the preparation and of the biological assets are estimated using discounted cash flow
fair presentation of financial statements that are free from material method. Accordingly, the Sandalwood trees which were planted during
misstatement, whether due to fraud or error; selecting and applying 2010/2011 and valued at Rs.1.1 billion have been revalued at Rs.
appropriate accounting policies; and making accounting estimates that 1.3 billion as at 31 March 2012 and a gain of Rs. 200 million has
are reasonable in the circumstances. been recorded for the year ended 31 March 2012. However, due to
the limitation of information demonstrating that the growth patterns
Scope of Audit and Basis of Opinion corresponding to the relevant trees as given in note 14.6.1 has been
Our responsibility is to express an opinion on these financial statements integrated in to the financial valuation, we were unable to verify the
based on our audit. We conducted our audit in accordance with Sri appropriateness of the above gain from fair valuation.
Lanka Auditing Standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance whether the financial In our opinion, except for the effect of such adjustments, if any, as might
statements are free from material misstatement. have been determined to be necessary had we been able to satisfy
ourselves on the above matter, the consolidated financial statements
An audit includes examining, on a test basis, evidence supporting give a true and fair view of the state of affairs as at 31 March 2012 and
the amounts and disclosures in the financial statements. An audit the profit and cash flows for the year then ended, in accordance with Sri
also includes assessing the accounting policies used and significant Lanka Accounting Standards, of the Company and its subsidiaries dealt
estimates made by management, as well as evaluating the overall with thereby, so far as concerns the shareholders of the Company.
financial statement presentation.
Report on Other Legal and Regulatory Requirements
Except as discussed in following opinion paragraph, we have obtained all These financial statements also comply with the requirements of
the information and explanations which to the best of our knowledge and Sections 153(2) to 153(7) of the Companies Act No. 07 of 2007.
belief were necessary for the purposes of our audit. We therefore believe
that our audit provides a reasonable basis for our opinion.
Opinion - Company
As disclosed in Note 2.5 to these financial statements, the fair value CHARTERED ACCOUNTANTS
of the biological assets are estimated using discounted cash flow
method. Accordingly, the Sandalwood trees which were planted during Colombo
2010/2011 and valued at Rs.1.1 billion have been revalued at Rs. 15 August 2012.
1.3 billion as at 31 March 2012 and a gain of Rs. 200 million has
been recorded for the year ended 31 March 2012. However, due to
Income Statement
Group Company
For the year ended 31st March 2012 2011 2012 2011
Note Rs. Rs. Rs. Rs.
Revenue 3
1,196,403,047 1,466,429,265 1,196,403,047 1,466,429,265
Direct Expenses (104,073,597) (74,675,144) (104,073,597) (74,675,144)
Gross Profit
1,092,329,450 1,391,754,121 1,092,329,450 1,391,754,121
Other Income 4 43,539,463 81,415,157 61,978,130 88,415,157
Selling Expenses (98,312,095) (63,580,438) (98,306,094) (63,580,438)
Administration Expenses (172,564,529) (166,446,670) (151,524,213) (141,863,718)
Other Expenses 5 (714,652,742) (863,030,854) (714,622,817) (862,908,633)
Profit from Operating Activities 6

150,339,547 380,111,316 189,854,456 411,816,489
Finance Expenses 7 (17,902,558) (12,088,157) (16,062,064) (12,088,157)
Profit before Taxation
132,436,989 368,023,159 173,792,392 399,728,332
Income Tax Expenses 8 (48,589,810) (42,727,364) (48,589,810) (42,727,364)
Profit for the year

83,847,179 325,295,795 125,202,582 357,000,968
Attributable to: Owners of the Company 104,567,216 341,105,180 125,202,582 357,000,968

Minority Interest (20,720,037) (15,809,385) - -

83,847,179 325,295,795 125,202,582 357,000,968
Earnings Per Share 9.1 1.47 5.05 1.76 5.28

Diluted Earning Per Share 9.1 1.47 5.05 1.76 5.28
Dividend Per Share 9.2 0.10 - 0.10 -
The Notes form an integral part of these Financial Statements.
Figures in brackets indicate deductions.

69
Balance Sheet
Group Company
As at 31st March 2012 2011 2012 2011
Note Rs. Rs. Rs. Rs.
ASSETS
Non Current Assets
Property, Plant and Equipment 10 800,386,249 711,217,972 690,094,214 633,979,312
Investments 11 3,000,000 - 22,700,000 19,700,000
Leasehold Right Over Bare Land 12 29,920,451 17,650,902 6,962,504 -
Mature Trees 13 162,237,439 147,237,439 162,237,439 147,237,439
Biological Assets 14 5,510,385,663 4,525,951,667 5,510,385,663 4,525,951,667
Total Non Current Assets 6,505,929,802 5,402,057,980 6,392,379,820 5,326,868,418
Current Assets
Inventories 15 9,053,257 9,109,164 8,196,114 9,109,164
Trade and Other Receivables 16 114,410,080 66,135,854 91,963,813 63,135,852
Amounts Due From Related Parties 17 28,389,394 14,531,764 144,661,867 111,127,005
Other Short Term Investments 18 11,791,860 20,000,000 11,791,860 20,000,000
Cash and Cash Equivalents 19 214,609,817 372,863,845 197,982,426 371,582,255
Total Current Assets 378,254,408 482,640,627 454,596,080 574,954,276
Total Assets 6,884,184,210 5,884,698,607 6,846,975,900 5,901,822,694
EQUITY AND LIABILITIES
Capital and Reserves
Stated Capital 20 623,616,000 623,616,000 623,616,000 623,616,000
Revaluation Reserve 21 477,450,830 479,346,332 477,450,830 479,346,332
Capital Reserve 22 2,233,868,483 1,968,070,728 2,233,868,483 1,968,070,728
Preference Share Redemption Reserve 23 83,809,778 66,394,383 83,809,778 66,394,383
Retained Losses (401,596,233) (215,823,259) (364,281,165) (199,143,557)
Equity Attributable to Owners 3,017,148,858 2,921,604,184 3,054,463,926 2,938,283,886
Minority interest (21,229,420) (509,385) - -
Total Equity 2,995,919,438 2,921,094,799 3,054,463,926 2,938,283,886
Non Current Liabilities
Preference Share Capital 24 27,945,728 27,936,728 27,945,728 27,936,728
Provision for Purchase Back Guarantee 25 3,147,075,884 2,501,462,361 3,147,075,884 2,501,462,361
Debentures 26 47,731,546 40,900,383 47,731,546 40,900,383
Employee Benefits 27 6,938,926 5,883,433 6,938,926 5,883,433
Deferred Taxation 28 250,796,536 216,893,100 250,796,536 216,893,100
Deferred Revenue on Annual Maintenance 29 118,869,242 47,345,299 118,869,242 47,345,299
Accumulated Preference Dividends Payable 30 2,518,619 2,214,619 2,518,619 2,214,619
Reservation & Establishment Fee Advances 31 41,472,407 25,095,193 41,472,407 25,095,193
Interest Bearing Borrowings 33 117,786,789 22,631,238 29,126,790 22,631,238
Total Non Current Liabilities 3,761,135,677 2,890,362,354 3,672,475,678 2,890,362,354
Current Liabilities
Interest Bearing Borrowings 33 18,793,427 7,198,732 14,101,528 7,198,732
Amounts Due to Related Parties 32 9,094,708 19,148,404 9,094,708 19,148,404
Income Tax Payable 10,729,583 10,430,572 10,729,583 10,430,572
Director’s Loan 1,015,002 - - -
Trade and Other Payables 34 82,885,360 36,463,746 81,499,462 36,398,746
Bank Overdrafts 19 4,611,015 - 4,611,015 -
Total Current Liabilities 127,129,095 73,241,454 120,036,296 73,176,454
Total Equity and Liabilities 6,884,184,210 5,884,698,607 6,846,975,900 5,901,822,694
Net Assets Per Share 42.33 40.99 42.86 41.23
It is certified that these Financial Statements have been prepared and presented in compliance with the requirements of the Companies Act No. 7 of 2007.
(Sgd.)
Mr. S. Munasinghe
Head of Finance
The Board of Directors is responsible for the preparation and presentation of these Financial Statements.
Approved and signed for and on behalf of the Board;
(Sgd.) (Sgd.)
Mr. S. P. A. Koralage Mr. Channa Abeygunawardene
Director / Deputy Chairman Director / Chief Executive Officer
15th August 2012

Colombo
Statement of Changes in Equity
Equity Attributuble to owners of the Company

Group Stated Revaluation Capital Pref. Share Retained Total Minority Total
Capital Reserve Reserve Redemption Losses Interest Equity
Reserve
Rs. Rs. Rs. Rs. Rs. Rs. Rs. Rs.
Balance as at 01st April 2010 89,088,000 479,346,332 1,621,569,800 51,564,502 (194,813,715) 2,046,754,919 - 2,046,754,919
Adjustment due to acquisition of Subsidiaries - - - - (783,915) (783,915) 15,300,000 14,516,085
Right Issue 534,528,000 - - - - 534,528,000 - 534,528,000
Profit for the year - - - - 341,105,180 341,105,180 (15,809,385) 325,295,795
Transfers - - 346,500,928 14,829,881 (361,330,809) - - -
Balance as at 31st March 2011 623,616,000 479,346,332 1,968,070,728 66,394,383 (215,823,259) 2,921,604,184 (509,385) 2,921,094,799
Profit for the year - - - - 104,567,216 104,567,216 (20,720,036) 83,847,180
Dividend - - - - (7,127,040) (7,127,040) - (7,127,040)
Adjustment to RR - (1,895,502) - - - (1,895,502) - (1,895,502)
Transfers - - 265,797,755 17,415,395 (283,213,150) - - -
Balance as at 31st March 2012 623,616,000 477,450,830 2,233,868,483 83,809,778 (401,596,233) 3,017,148,858 (21,229,420) 2,995,919,438
Company Stated Revaluation Capital Pref. Share Retained Total

Capital Reserve Reserve Redemption Losses Equity
Reserve
Rs. Rs. Rs. Rs. Rs. Rs.
Balance as at 01st April 2010 89,088,000 479,346,332 1,621,569,800 51,564,502 (194,813,715) 2,046,754,919
Right Issue 534,528,000 - - - -
534,528,000
Profit for the year - - - - 357,000,967 357,000,967
Transfers - - 346,500,928 14,829,881 (361,330,809) -
Balance as at 31st March 2011 623,616,000 479,346,332 1,968,070,728 66,394,383 (199,143,557) 2,938,283,886
Profit for the year - - - - 125,202,582 125,202,582
Adjustment to RR - (1,895,502) - - - (1,895,502)
Dividend - - - - (7,127,040)
(7,127,040)
Transfers - - 265,797,755 17,415,395 (283,213,150) -
Balance as at 31st March 2012 623,616,000 477,450,830 2,233,868,483 83,809,778 (364,281,165) 3,054,463,926

Figures in brackets indicate deductions.

71
Cash Flow Statement
Group Company
Rs. Rs. Rs. Rs.
CASH FLOW FROM OPERATING ACTIVITIES
Profit before Income Tax Expense 132,436,989 368,023,159 173,792,392 399,728,332
Adjustment for;
Gain arising from changes in fair value (926,211,695) (1,209,395,812) (926,211,695) (1,209,395,811)
Depreciation 21,323,421 12,608,239 20,007,444 11,916,860
Gain on Disposal of Property, Plant and Equipment (3,415,139) (3,404,962) (3,415,139) (3,404,962)
Profit on Sale of Shares (7,626,586) - (7,626,586) -
Interest Income (28,868,969) (36,317,208) (47,335,636) (43,278,758)
Interest Cost 17,598,558 11,165,274 15,758,064 11,165,274
Provision for Purchase Back Guarantee 660,413,940 862,894,883 660,413,940 862,894,883
Transfer from Deferred Income (4,203,437) (2,276,532) (4,203,437) (2,276,532)
Provision for Retiring Gratuity 1,725,516 3,748,478 1,725,516 3,748,478
Transferred from Reservation and Establishment Advance (148,467,259) (179,503,190) (148,467,259) (179,503,190)
Preference Dividends 304,000 304,000 304,000 304,000
Mature Tree - (39,864,428) - (39,864,428)
Provision for Shares 19,880,018 - 19,880,018 -
Provision for Loss on Vanilla Process Beans 1,827,000 - 1,827,000 -
Provision for Land Loss 2,122,623 - 2,122,623 -
Impairment of RP balances 1,156,643 - 1,156,643 -
Operating Loss before Working Capital Changes (260,004,377) (212,018,099) (240,272,112) (187,965,854)
(Increase) / Decrease in Inventories 55,907 (3,769,483) 913,050 (3,769,483)
Increase in Trade and Other Receivables (48,274,229) (46,560,104) (28,611,748) (43,560,104)
Increase in Amounts due from Related Companies (15,014,273) (13,622,414) (33,534,862) (7,154,125)
Increase / (Decrease) in Amounts due to Related Companies (10,053,696) 2,571,683 (10,053,696) 2,571,683
Increase in Trade and other Payables 46,421,614 17,460,113 45,100,716 17,395,113
Cash used in Operations (286,869,054) (255,938,304) (266,458,652) (222,482,770)
Gratuity Paid (670,023) (619,141) (670,023) (619,141)
Vanila Return Paid (14,711,022) (13,126,381) (14,711,023) (13,126,381)
Interest Paid (10,723,768) (5,333,101) (8,683,274) (5,333,101)
Tax Paid (14,387,363) (173,963) (14,387,363) (173,963)
Advanced Received on Reservation and Establishment Fee 164,844,473 171,960,982 164,844,472 171,960,980
Rental Received in Advanced on Annual Maintenance 75,727,380 25,009,439 75,727,380 25,009,439
Net Cash used in Operating Activities (86,789,377) (78,220,469) (64,338,483) (44,764,937)
CASH FLOW FROM INVESTING ACTIVITIES
Acquisition of Property, Plant and Equipment (137,838,971) (116,467,199) (88,205,265) (39,613,734)
Proceeds from Disposal of Property, Plant and Equipment 3,545,000 7,041,713 3,545,000 7,041,713
Funds Raised from Rights Issue - 534,528,000 - 534,528,000
Investment in Shares & other Investments (13,000,000) (20,000,000) (13,000,000) (20,000,000)
Proceeds from Disposal of Shares 5,954,708 - 5,954,708 -
Investment in Subsidiaries - - - (14,700,000)
Interest Received 22,139,793 26,428,759 27,561,291 32,838,171
Investment in Trees (32,222,300) - (32,222,300) -
Net Cash generated from / (used in) Investing Activities (151,421,770) 431,531,273 (96,366,566) 500,094,150
CASH FLOW FROM FINANCING ACTIVITIES
Proceeds from Issue of Share Capital - 15,300,000 - -
Calls received for Preference Shares 9,000 17,000 9,000 17,000
Loans Taken during the Year 96,851,898 - 4,000,000 -
Loans Paid during the Year - (5,219,782) - (5,219,782)
(Redemption of Debentures) / Proceeds Received for Debentures (40,000) (55,000) (40,000) (55,000)
Lease Rentals Paid (14,347,755) (7,831,803) (14,347,755) (7,831,803)
Dividend Paid during the Year (7,127,040) - (7,127,040) -
Loan Granted During the year - - - (88,000,000)
Net Cash generated from / (used in) Financing Activities 75,346,103 2,210,415 (17,505,795) (101,089,585)
Net Increase / (Decrease) in Cash and Cash Equivalents (162,865,044) 355,521,219 (178,210,844) 354,239,628
Cash and Cash Equivalents at the Beginning of the Year (Note 19) 372,863,846 17,342,627 371,582,255 17,342,627
Cash and Cash Equivalents at the End of the Year (Note 19) 209,998,802 372,863,846 193,371,411 371,582,255

The figures in bracket indicated deductions
Notes to the Financial Statements
1 REPORTING ENTITY & BASIS FOR PREPARATION 1.6.2 Basis of Measurement

1.1 Domicile and Legal Form The Consolidated Financial Statements are prepared in
Touchwood Investments PLC is a quoted public limited accordance with historical cost convention other than for
liability company incorporated and domiciled in Sri Lanka lands those have been re-valued as explained in the Note 10
under the Companies Act No. 17 of 1982, re registered and biological assets together with mature trees those have
under the Companies Act No. 07 of 2007, and registered been stated at fair value, as explained in the Note 14 and 13
under Section 16 of Board of Investment Act No 04 of 1978. to the Consolidated Financial Statements respectively.
The registered office of the Company is located at No.28,
No adjustments have been made for inflationary factors in
Joseph’s Lane, Colombo 04, Sri Lanka.
the accounts.
1.2 Date of Incorporation and Commencement of
Commercial Operations 1.6.3 Functional and Presentation Currency
The Company was incorporated on 07 June 1999 as The Consolidated Financial Statements are presented in Sri
a private limited liability Company and commenced its Lankan Rupees, which is the Company’s functional currency.
commercial operations on the same date. All financial information presented in Sri Lankan Rupee has
been rounded to the nearest rupee.
1.3 Principal Activities and Nature of Operations
1.6.4 Use of Estimates & Judgments
The principal activity of the Company is to plant and manage
private Agro-forestry and sell such plants as an investment The preparation of the Consolidated Financial Statements
to local and foreign investors. in conformity with SLASs requires management to make
judgments, estimates and assumptions that affect the
application of accounting policies and the reported amounts
1.4 Parent Entity and Ultimate Parent Entity
of assets, liabilities, income and expenses. Actual results
In the opinion of Directors, the Company’s immediate
may differ from these estimates.
and ultimate parent undertaking and controlling party is
Touchwood Limited, which is incorporated in Hong Kong.
Estimates and underlying assumptions are reviewed on
an ongoing basis. Revisions to accounting estimates are
1.5 Number of Employees recognized in the period in which the estimates are revised
The Number of Employees at the end of the year was 251. and in any future periods affected.
(222 - 2011).
Information about critical judgments in applying
1.6 Basis of Preperation accounting policies that have the most significant effects
1.6.1 Statement of Compliance on the amounts recognised in the Consolidated Financial
The Consolidated Financial Statements of the Company Statements and information about assumptions and
comprising the Balance Sheet, Income Statement, estimation uncertainties that have a significant risk of
Statement of Changes in Equity, Cash Flow Statement resulting in a material adjustment in future periods are
together with significant Accounting Policies and Notes included in the respective notes.
(“the Consolidated Financial Statements”) are prepared in
accordance with Sri Lanka Accounting Standards (SLASs) 1.6.5 Materiality and Aggregation
laid down by the Institute of Chartered Accountants of Sri Each material class of similar items is presented separately
Lanka except for the Biological assets of the Company in the Consolidated Financial Statements. Items of dissimilar
which is measured and recognized in accordance with nature or function are presented separately unless they are
International Accounting Standards 41, “Agriculture”, which immaterial.
is applicable for agricultural activities. These Consolidated
Financial Statements have also been prepared and 1.6.6 Going Concern
presented in accordance with the requirements of the The Board is satisfied that the Company has adequate
Companies Act No. 07 of 2007. resources to continue its operations in the foreseeable
future. Therefore, continue to adopt the going-concern basis
The Consolidated Financial Statements were authorized for in preparing these Consolidated Financial Statements.
issue by the Directors on 15th August 2012.
73
1.6.7 Directors’ Responsibility for the Consolidated indirectly, by the group are presented in the consolidated
Financial Statements Balance Sheet within equity, separately from the equity
The Board of Directors is responsible for the preparation and attributable to equity holders of the group. Minority Interests
fair presentation of these Consolidated Financial Statements in the profit or loss of the Group are presented separately in
in accordance with Sri Lanka Accounting Standards and as the consolidated Income Statement.
per the provisions of the Companies Act No. 07 of 2007.
This responsibility includes: designing, implementing and 1.6.8.3 Financial Year
maintaining internal control relevant to the preparation and The Consolidated Financial Statements incorporating
fair presentation of Consolidated Financial Statements that all subsidiaries in the group are prepared to a common
are free from material misstatement, whether due to fraud financial year ending March 31. In the case where the
or error; selecting and applying appropriate accounting reporting dates are different from the group reporting dates,
policies; and making accounting estimates that are adjustments are made for any significant transactions or
reasonable in the circumstances. events up to 31 March.
The Board of Directors acknowledges this responsibility 1.6.8.4 Goodwill acquired in a Business Combination
as set out in the page no. 58, “Report of the Board of
Goodwill acquired in a business combination is initially
Directors”.
measured at cost being the excess of the cost of the
business combination over the group’s interest in the
1.6.8 Basis of Consolidation net fair value of the identifiable assets, liabilities and
The Consolidated Financial Statements include the contingent liabilities. Following initial recognition, goodwill
Consolidated Financial Statements of the company, its is measured at cost less any accumulated impairment
subsidiaries and other companies over which it has control. losses. Goodwill is reviewed for impairment, annually or
The group’s Consolidated Financial Statements comprise of more frequently if events or changes in circumstances
the Consolidated Financial Statements of the company and indicate that the carrying value may be impaired. For the
the group which have been prepared in compliance with the purpose of impairment testing, goodwill acquired in a
group’s accounting policies unless otherwise stated. business combination is, from the acquisition date, allocated
to groups of cash-generating units that are expected to
1.6.8.1 Acquisitions and divestments benefit from the synergies of the combination. Impairment
Acquisitions of subsidiaries are accounted for using the is determined by assessing the recoverable amount of the
purchase method of accounting. The results of subsidiaries, cash-generating unit to which the goodwill relates. Where
joint ventures and associates acquired or incorporated the recoverable amount of the cash generating unit is less
during the year have been included from the date of than the carrying amount, an impairment loss is recognized.
acquisition, or incorporation while results of subsidiaries, The impairment loss is allocated first to reduce the carrying
joint ventures and associates disposed have been included amount of any goodwill allocated to the unit and then to the
up to the date of disposal. other assets pro-rata to the carrying amount of each asset
in the unit.
1.6.8.2 Subsidiaries
Subsidiaries are those entities controlled by the Group. Where goodwill forms part of a cash-generating unit and
Control exists when the Company has the power, directly part of the operation within that unit is disposed of, the
or indirectly, to govern the financial and operating policies goodwill associated with the operation disposed of is
of an enterprise so as to obtain benefits from its activities. included in the carrying amount of the operation when
The Consolidated Financial Statements of subsidiaries are determining the gain or loss on disposal of the operation.
included in the Consolidated Financial Statements from
the date that control commences until the date that control 1.6.8.5 Transaction Eliminated on Consolidation
ceases. Intra-group balances and transactions and any unrealized
gains arising from intra-group transactions, are eliminated
Followings are the Subsidiaries coming under the Group, in preparing the Consolidated Financial Statements.
Unrealized gains arising from transactions with associates
• Twood Flooring (Pvt) Limited - Timber Flooring Solutions
are eliminated to the extent of the Group’s interest in
• Farm Grow (Pvt) Limited - Planting Sandalwood Trees the enterprise, against the investment in the associate.
Unrealized losses are eliminated in the same way as
Minority Interest in the net assets not owned, directly or unrealized gains.
1.6.9 Events After the Balance Sheet Date 2.1.1 Current Taxes
All the material events after the Balance Sheet date have Current Tax is the expected tax payable/recoverable on the
been considered and appropriate adjustments/ disclosures taxable income (if any) for the year, using tax rates enacted
have been made in Note no. 36 to the Consolidated or substantially enacted at the Balance Sheet date and any
Financial Statements, where necessary. adjustments to tax payable/receivable in respect of previous
years. Current tax payable also includes any tax liability
1.6.10 Comparative Information arising from the declaration of dividends.
Where necessary, certain comparative amounts have been
The provision for Income Tax is based on the profit for the
reclassified to conform to the current year’s presentation.
financial year adjusted for tax purposes in accordance with
the Inland Revenue Act No. 10 of 2006 and subsequent
1.6.11 New Accounting Standards Issued But Not Effective
amendments thereto.
as At Balance Sheet Date
The Institute of Chartered Accountants of Sri Lanka has
2.1.2 Deferred Tax
issued a new volume of Sri Lanka Accounting Standards
Deferred tax is recognized in respect of temporary
which will become effective for financial periods beginning
differences between the carrying amounts of assets and
on or after 1st January 2012. Acccordingly, these standards
liabilities for financial reporting purposes and the amounts
have not been applied preparing these Financial Statements
used for taxation purposes. Deferred tax is measured at
as they were not effective for the year ended 31st March
the tax rates that are expected to be applied to temporary
2012.
differences when they reverse, based on the laws that have
been enacted or substantively enacted by the reporting date.
These Sri Lanka Accounting Standards comprise Accounting
Standards prefixed both SLFRS (corresponding to IFRS)
Deferred tax assets and liabilities are offset if there is a
and LKAS (corresponding to IAS). Application of Sri Lanka
legally enforceable right to offset current tax liabilities and
Accounting Standards prefixed SLFRS and LKAS for the first
assets, and they relate to income taxes levied by the same
time shall be deemed to be an adoption of SLFRSs.
tax authority on the same taxable entity, or on different tax
entities, but they intend to settle current tax liabilities and
The Company is currently in the process of evaluating the
assets on a net basis or their tax assets and liabilities will be
potential effects of these Standards on its Consolidated
realized simultaneously.
Financial Statements and the impact on the adoption of
these Standards have not been quantified as at Balance
A deferred tax asset is recognized for unused tax losses,
Sheet date.
tax credits and deductible temporary differences, to the
extent that it is probable that future taxable profits will be
The Company continues to adopt International Accounting
available against which they can be utilized. Deferred tax
Standards 41, agriculture as in the prior years due to the
assets are reviewed at each reporting date and are reduced
absence of an equivalent Sri Lanka Accounting Standard.
to the extent that it is no longer probable that the related tax
The application of this standard is detailed in note 2.5.
benefit will be realized.
2 SIGNIFICANT ACCOUNTING POLICIES
The net increase in the carrying amount of deferred tax
The accounting policies set out below have been applied liability net of deferred tax asset is recognized as deferred
consistently to all periods presented in these Consolidated tax expense and conversely any net decrease is recognized
Financial Statements. The Accounting Policies of the as reversal to deferred tax expense, in the income
Company have been consistantly applied by group entities statement.
where applicable and diviation if any have been disclosed
accordingly.
2.1.3 Withholding Tax on Dividends
Dividend distributed out of taxable profit of the local
2.1 Income Tax Expense
companies attracts a 10% deduction at source and is not
Income tax expense comprises current and deferred tax. available for set off against the tax liability of the Company.
Current Tax and Deferred Tax is recognised in the Income Withholding tax that arises from the distribution of dividends
Statement except the items recognised directly in the by the Company is recognized at the same time as the
Statement of Changes in Equity. liability to pay the related dividend is recognized.
75
2.1.4 Economic Service Charge (ESC) cash and those which are expected to realize in cash, during
As per the provisions of Economic Service Charge Act No. the normal operating cycle of the Company’s business, or
13 of 2006 amendments thereto, ESC is payable on the within one year from the Balance Sheet date. Assets other
liable turnover at specified rates. 1% for Annual Maintains than current assets are those, which the Company intends
Fee and 0.25% for Establishment Income under Section to hold beyond a period of one year from the Balance Sheet
two of the above mentioned act .ESC is deductible from the date.
income tax liability. Any unclaimed amount can be carried
forward and set off against the income tax payable in the 2.4 Property, Plant and Equipment
four subsequent years as per the relevant provision in the 2.4.1 Free hold Assets
Act.
The Property, Plant & Equipment are measured at cost
less accumulated depreciation and any accumulated
2.2 Foreign Currency Transactions impairment, loss except land those have been mesured at
All foreign Currency transactions are converted into Sri fair value.
Lankan Rupees at the rates of exchange prevailing at the
time the transactions are affected. 2.4.1.1 Recognition and measurement
Items of property, plant and equipment are measured
Monitory assets and liabilities denominated in foreign
at cost / revaluation less accumulated depreciation and
currencies are translated into Sri Lankan Rupees at a rate
accumulated impairment losses.
of exchange prevailing at the Balance Sheet date while
non monitory assets and liabilities denominated in foreign
Cost includes expenditure that is directly attributable to the
currencies which are stated at historical cost are converted
acquisition of the asset. The cost of self-constructed assets
to Sri Lankan Rupees at the rates prevailing at the dates
includes the cost of materials and direct labor, any other
transactions are affected.
costs directly attributable to bringing the assets to a working
condition for their intended use, the costs of dismantling
Exchange differences arising there from are dealt within the
and removing the items and restoring the site on which
Income Statement.
they are located and capitalized borrowing costs. Purchased
software that is integral to the functionality of the related
2.3 Research and Development equipment is capitalized as part of that equipment.
Expenditure on research activities, undertaken with the
prospect of gaining new scientific or technical knowledge When parts of an item of property, plant and equipment
and understanding, is recognized in profit or loss as have different useful lives, they are accounted for as
incurred. separate items (major components) of property, plant and
equipment.
Development activities involve a plan or design for the
production of new or substantially improved products and An item of property, plant and equipment is de-recognized
processes. Development expenditure is capitalized only if upon disposal or when no future economic benefits are
development costs can be measured reliably, the product expected from its use or disposal. The gain or loss on
or process is technically and commercially feasible, future disposal of an item of property, plant and equipment is
economic benefits are probable, and the Group intends to determined by comparing the proceeds from disposal with
and has sufficient resources to complete development and the carrying amount of the property, plant and equipment,
to use or sell the asset. The expenditure capitalized includes and is recognized net within other income/other expenses in
the cost of materials, direct labour, overhead costs that are profit or loss.
directly attributable to preparing the asset for its intended
use, and capitalized borrowing costs. Other development When revalued assets are sold, any related amount included
expenditure is recognized in profit or loss as incurred. in the revaluation reserve is transferred to retained earnings.
Capitalized development expenditure is measured at cost 2.4.1.2 Subsequent Expenditure

less accumulated amortization and accumulated impairment
Subsequent expenditure is included in the assets’ carrying
losses.
amount or recognized as a separate asset, as appropriate,
only when it is probable that future economic benefits
ASSETS AND BASES OF THEIR VALUATION associated with the item will flow to the Company and the
Assets classified as current assets in the Balance Sheet are cost of the item can be measured reliably. All other repairs
and maintenance are charged to the Income Statement is shown as liability / obligation. The lease rentals are
during the financial period in which they are incurred. treated as consisting of capital and interest elements. The
capital element in the rental that is applied to reduce the
2.4.1.3 Permanent Land Development Costs outstanding obligation and interest element is charged
Permanent land development costs are those costs incurred against profit, in proportion to the reducing capital element
in making major infrastructure development and building outstanding.
new access roads on lands.
The cost of improvements to or on leased property is
Permanent impairment to land development costs are capitalized, disclosed as improvements to leasehold
charged to the Income Statement in full or reduced to property and depreciated over the unexpired period of the
the net carrying amounts of such asset in the year of lease, or the estimated useful lives of the improvements,
occurrence after ascertaining the loss. whichever is shorter.
The cost of land development is being charged over the Assets acquired by the way of finance lease are measured
estimated useful life of 15 years. at an amount equal to the lower of their fair value of
minimum lease payments at the inception less accumulated
depreciation and accumulated impairment losses.
2.4.1.4 Revaluation of Lands
The Company revalues its lands at least once in every
2.4.3 Depreciation
three years which is measured at its fair value at the date
Depreciation is based on the cost of an asset less its
of revaluation less any subsequent impairment losses. On
residual value. Significant components of individual assets
revaluation of land, any increase in the revaluation amount
are assessed and if a component has a useful life that is
is credited to the revaluation reserve in shareholder’s equity
different from the remainder of that asset, that component
unless it off sets a previous decrease in value of the same
is depreciated separately.
asset that was recognized in the Income Statement. A
decrease in value is recognized in the Income Statement
Depreciation is recognised in profit or loss on a straight-line
where it exceeds the increase previously recognized in the
basis over the estimated useful lives of each component
revaluation reserve.
of an item of property, plant and equipment. Leased assets
are depreciated over the shorter of the lease term and their
Upon disposal, any related revaluation reserve is transferred
useful lives unless it is reasonably certain that the Group
from the revaluation reserve to retained earnings and is not
will\ obtain ownership by the end of the lease term. Lands
taken into account in arriving at the gain or loss on disposal.
are not depreciated.
2.4.1.5 Restoration Costs
The estimated useful lives for the current and comparative
Expenditure incurred on repairs or maintenance of Property, years are as follows:
Plant and Equipment in order to restore or maintain the No. of Years Rate
future economic benefits expected from originally assessed
standard of performance, is recognized as an expense when Buildings 20 5%
incurred. Plant & Machinery 5 20%
Motor Vehicles 4 25%
2.4.2 Leasehold Assets
Furniture & Fittings 5 20%
Assets obtained under finance lease, which effectively
Leasehold Lands 30 3%
transfers substantial risks and benefits incidental to
ownership of the leased assets, are treated as if they have Land Improvements 15 6.6%
been purchased outright and are capitalized at their cash
price. The Company provides depreciation from the date the
assets are available for use whereas depreciation of an
Assets held under finance lease are depreciated over the
shorter of the lease period or the useful lives of equivalent
owned assets, unless ownership is not transferred at the
end of the lease period.
The principal / capital elements payable to the Lessor

77
asset ceases at the earlier of the date that the asset is maturity will be used to settle Purchase Back Guarantees,
classified as held for sale and the date that the asset is de- which is more fully explained in the respective Accounting
recognized, at the above mentioned rates on a straight line Policies.]
basis over the period appropriate to the estimated useful
lives of the different types of assets or in an earlier date Bearer biological assets’ (Vanilla Vines) life span to maturity
where any circumstance indicate such assessment requires. is 4 years from the date of planting. Vanilla vines are grown
in up country mid zone and the Company is expecting
Depreciation methods, useful lives and residual values are to carry out a proper fertilizing program in order to get
reviewed at each reporting date and adjusted if appropriate. the expected harvest. As per the standard specifications,
agricultural produce (Vanilla) can be harvested for another
2.5 Biological Assets and Agricultural Produce 10 years from the date of maturity.
In the absence of Sri Lanka Accounting Standards,
International Accounting Standards 41, Agriculture has been [Realizable value of the agricultural produce (Vanilla) at the
used for the valuation of biological assets. time of harvest will be used to settle the Purchase Back
guarantees which are, more fully explained in the respective
The biological assets are stated at its fair value less Accounting Policies.]
estimated point of sale cost, with any resultant gain or loss
recognized in the Income Statement. Point of sale costs 2.5.2 Valuation of Biological Assets
include all costs that would be necessary to sell the assets, Fair Value of Biological assets is determined based on a
excluding costs necessary to get the assets to market. valuation carried out by a qualified valuer when determining
the fair value of biological assets, the number of trees in
The biological assets are classified as Consumables and plantations are physically verified together with their height
Bearer biological assets. Consumable biological assets and girth. The basis used by the valuer is as follows;
are those that are to be harvested as agricultural produce
or sold as biological assets. Bearer biological assets are 2.5.2.1 Fair Value of Consumable Biological Assets
those other than consumable biological assets. Bearer Value per immature tree is determined by considering the
biological assets are not agricultural produce but, rather, are growth pattern of the tree, age and the current market price
self-regenerating. Mahogany, Teak and Sandalwood trees of a mature tree.
are considered as Consumable biological assets and Vanilla
vines are considered as Bearer biological assets. Value of Mature Mahogany Tree
Market value of a mature Mahogany tree is determined by
2.5.1 Nature of activities considering the average market price of a mature tree as
Life span of Mahogany Trees to maturity is expected to be per the standard specification as at the Balance Sheet date,
18 years from the date of planting. Mahogany plants are net of selling cost.
grown in the wet zone, the Company is expecting to carry
out proper fertilising program in order to get the expected Value of Mature Teak Tree
return.
Market value of a mature Teak tree is determined by
considering the average market price of a mature tree as
Life span of Teak Trees to maturity is expected to be 18
per the standard specification as at the Balance Sheet date,
years from the date of planting. Teak plants are grown in the
net of selling cost.
mid zone and the Company is expecting to carry out proper
fertilising program in order to get the expected return.
Value of Mature Sandalwood Tree
Life span of Sandalwood Trees to maturity is expected to Market price of Sandalwood heart wood is determined by
be 16 years from the date of planting. Sandalwood plants considering the Tamil Nadu Auction Price of a mature tree,
are grown in the dry zone and the Company is expecting since there is no local market for Sandalwood, as per the
to carry out a proper fertilising program in order to get the standard specification as at the Balance Sheet date, net of
expected return. selling cost.
[The agricultural produce (timber and heart wood) is to

be harvested only at maturity. Realizable value of the
agricultural produce (timber and heart wood) at the time of
Growth Patterns of Trees 2.5.4.2 Valuation of other Short Term Investments.

The height and girth of trees are measured and compared All quoted investments are carried in the Balance Sheet at
with accepted standard growth specifications in determining market value on a portfolio basis. The unquoted investments
the actual growth patterns for the respective age groups. are carried at cost and provision is made for any impairment
losses.
2.5.2.2 Fair Value of Bearer Biological Assets
Value per immature vanilla vine is determined by 2.5.4.3 Valuation of Long Term Investments
considering the average yield expected from the Weighted All quoted investments are carried in the Balance Sheet at
Average Cost of Capital and the market price of 1 kg of cost and provision is made for any permanent diminution in
vanilla. value.
Market value of 1 kg of Vanilla 2.5.5 Inventories

Market Value of 1 kg of vanilla is determined considering the Inventories are measured at the lower of cost and net
average market price of a 1 kg of vanilla as per the standard realizable value. The cost of inventories is based on the
specification as at the balance sheet date, net of selling first-in first-out principle, and includes expenditure incurred
cost. in acquiring the inventories, production or conversion
costs and other costs incurred in bringing them to their
Expected Harvest existing location and condition. In the case of manufactured
This refers to the harvest pattern corresponding to the inventories and work in progress, cost includes an
relevant age. The Company is expecting to harvest Vanilla appropriate share of production overheads based on normal
Pods for a period of 10 years from the year of maturity. operating capacity.
Respective assumptions are disclosed under Note 14.6.1 to Net realizable value is the estimated selling price in the
these Consolidated Financial Statements. ordinary course of business, less the estimated costs of
completion and selling expenses.
2.5.3 Mature Trees
The mature trees considered as part of unplanned forestry Input Material
in the plantations, which includes commercial exotic timber At actual cost on weighted average basis.
species such as Teak, Jack, Halmilla, etc. are ready for
harvest. Nurseries
At the cost of direct materials, direct labour, and an
These trees are valued once in a three years time (3 Years) appropriate proportion of directly attributable overheads less
to ensure that the book values match the current market provision for overgrown plants.
values.
2.5.6 Impairment of Non-Financial Assets
2.5.4 Investments The carrying amounts of the Company’s non-financial
Investments in shares where the Company’s holding is assets, other than mature trees, biological assets,
less than 20% and where the Company does not exercise inventories and deferred tax assets are reviewed at each
significant influence and/or control over the financial and reporting date to determine whether there is any indication
operating decisions/ policies, are accounted for on the basis of impairment. If any such indication exists, then the
stated in 2.5.4.1 The income from these investments is asset’s recoverable amount is estimated. An impairment
recognized only to the extent of dividend received. loss is recognized if the carrying amount of an asset or its
related cash-generating unit (CGU) exceeds its estimated
2.5.4.1 Classification recoverable amount.
All investments held for yield or capital appreciation
are classified as long term investments. All the other The Company’s corporate assets do not generate separate
investments are classified as current investments. cash inflows and are utilized by more than one CGU.
Corporate assets are allocated to CGUs on a reasonable and
consistent basis and tested for impairment as part of the
testing of the CGU to which the corporate asset is allocated.
79
Impairment losses are recognized in profit or loss. Lanka Accounting Standard No. 36 on Provisions, Contingent
Impairment losses recognized in respect of CGUs are Liabilities and Contingent Assets.
allocated first to reduce the carrying amount of any goodwill
allocated to the CGU (group of CGUs), and then to reduce the 2.5.9 Borrowings
carrying amounts of the other assets in the CGU (group of Borrowings include borrowings from financial institutions.
CGUs) on a pro rata basis. They are brought to account at the gross value of the
outstanding balance. The cost of borrowings is recognized
Impairment losses recognized in prior periods are assessed as an expense in the period in which they are incurred.
at each reporting date for any indications that the loss
has decreased or no longer exists. An impairment loss is 2.5.10 Employee Benefits
reversed if there has been a change in the estimates used
2.5.10.1 Defined Benefit Plan – Retirement Benefit Obligations
to determine the recoverable amount. An impairment loss is
A defined benefit plan is a post employment benefit
reversed only to the extent that the asset’s carrying amount
plan other than a defined contribution plan. The liability
does not exceed the carrying amount that would have been
recognized in the balance sheet in respect of defined benefit
determined, net of depreciation, if no impairment loss had
plan is the present value of the defined benefit obligation
been recognized.
at the balance sheet date. Benefits falling due more than
12 months after the balance sheet date are discounted to
2.5.7 Trade and Other Receivables.
present value. The defined benefit obligation is calculated
Trade and other receivables are stated at the amounts they
annually by independent actuaries using Projected Unit
are estimated to be realized net of provisions for bad and
Credit Method (PUC) as recommended by SLAS – 16
doubtful debts. Provision for bad and doubtful debts for
(Revised 2006), “Employees benefits”. The assumptions
trade receivables is established when there is evidence that
based on which the results of the actuarial valuation
the Company will not be able to collect all amounts due
was determined, are disclosed in Note 27 to the financial
according to the original terms of receivables.
statements.
2.5.8 Cash and Cash Equivalents The Retirement Benefit Obligation is based on the actuarial
Cash and Cash Equivalents are defined as cash in hand, valuation carried out by the M/s. Actuarial & Management
demand deposits and short-term highly liquid investments Consultants (Pvt) Ltd., Chartered Valuer.
readily convertible to known amounts of cash and subject to
insignificant risk of changes in value. However under the Payment of Gratuity Act No.12 of 1983,
the liability to an employee arises only on completion of five
Cash and cash equivalents comprise cash balances and call years of continued service.
deposits with original maturities of three months or less.
The liability is not externally funded.
Bank overdrafts that are repayable on demand and form
an integral part of the Company’s cash management are 2.5.10.1.1 Defined Contribution Plans
included as a component of cash and cash equivalents for
Contributions to defined contribution plans, Employees
the purpose of the statement of cash flows.
Provident Fund & Employees Trust Fund are recognized as
an expense in the income statement as incurred.
LIABILITIES AND PROVISIONS
Liabilities classified as current liabilities on the Balance 2.5.10.1.2 Employees’ Provident Fund (EPF)
Sheet are those which fall due for payment on demand or
The Company and employees contribute 12% and 8%
within one year from the Balance Sheet date.
respectively on the salary of each employee to the above
mentioned funds.
Non current liabilities are those balances that fall due for
payment after one year from the Balance Sheet date.
2.5.10.3 Employees’ Trust Fund (ETF)
All known liabilities have been accounted for in preparing The Company contributes 3% of the salary of each
these Consolidated Financial Statements. Provisions and employee to the Employees’ Trust Fund.
liabilities are recognized when the Company has a legal
or constructive obligation as a result of past events and it 2.5.11 Provision for Purchase back Guarantee
is probable that an outflow of economic benefits will be Provision for Purchase back guarantee is created for the
required to settle the obligation in accordance with Sri guarantees given to purchase back the harvest at an agreed
time and price.
The liability is measured based on the present value of the are recognized as a deduction from equity, net of any tax
cost expected to be required to settle the obligation. effects.
Further as per the agreement entered into with customers, Preference Share Capital
the value of purchase back guarantee will be reduced Preference share capital is classified as a financial liability
to 50% or 33 1/3 % of the initial agreed amount, if the if it is redeemable on a specific date or at the option of the
payment of maintenance fee defaulted for more than 3 shareholders, or if dividend payments are not discretionary.
years. Dividends thereon are recognized in the income statement
as accrued.
Where volume back guarantees are provided considered as
contingent liability and those trees are not considered as INCOME STATEMENT
Biological assets accordingly.
2.5.17 Revenue and Income Recognition
2.5.12 Reservation and Installment Fee Advances Income generated from the operation of the business
Reservation and Installment fee Advances include payments consists of followings;
for special projects and from other investments once all the • Plantation Establishment fee income.
payments due are fully paid. The reservation & Installment • Maintenance Income.
fee account consists payments accounted for investments
• Gain arising from changes in fair value of biological
that are not completed. Special project installments are
assets.
recognized as the income once the risk and rewards are
transferring to the clients.
The revenue from the above sources is recognized on the
following basis;
2.5.13 Debentures
Debenture notes with tenure of 18 years were issued in Plantation Establishment Fee Income
August 2005. On maturity the notes will be redeemed along At the receipt of total package fee and issuance of
with the interest. Accordingly the interest has been accrued investment certificate.
and accounted for in the Income Statement annually.
Maintenance Income
Debenture can be redeemed at any time at the issue price. Tree Packages: - Initial receipt of total maintenance fee
relevant to the package is recorded as deferred revenue and
2.5.14 Deferred Revenue on Annual Maintenance recognized as revenue on annual basis.
Deferred Revenue includes the prepayments paid on annual Other than tree packages: - Maintenance income is
installments due on investments. This deferred revenue is recognized on cash basis.
recognized as revenue in the Income Statement over the
tenure of the client’s contract on the anniversary of the
Gain arising from changes in fair value of biological
contract.
assets.
Gains or losses arising on initial recognition of biological
2.5.15 Trade and Other Payables
assets and agricultural produce at fair value less estimated
Trade and other payables are stated at their costs.
point of sale costs are recognized in profit or loss.
2.5.15.1 Value Added Tax Gains or losses arising on change in fair value due to
As per the provisions of Value Added Tax Act No. 14 of 2002, subsequent measurements are recognized in profit or loss
and amendments thereto, VAT is payable on Annual Maintain in the period in which they arise.
Fee income at a rate of 12%.
2.5.18 Other Income
2.5.16 Stated Capital
All other income is recognized on an accrual basis.
Ordinary shares
Ordinary shares are classified as equity. Incremental 2.5.19 Expenditure Recognition
costs directly attributable to the issue of ordinary shares All expenditure incurred in running of the business and in
maintaining the Property, Plant and Equipment in a state
of efficiency is charged to revenue in arriving at the profit /
(loss) for the year.
81
For the purpose of presentation of Income Statement, 2.5.22 Cash Flow Statement
the Directors are of the opinion that function of The Cash Flow Statement has been prepared using the
expenses method present fairly the elements of the “Indirect Method” of preparing Cash Flows in accordance
enterprises performance, hence such presentation with the Sri Lanka Accounting Standard 9 “Cash Flow
method is adopted. Statements”. Cash and cash equivalents comprise short
term, highly liquid investments that are readily convertible to
Borrowing costs are recognized as an expense in the known amounts of cash and are subject to an insignificant
period in which they are incurred and charged to the risk of changes in value. The cash and cash equivalent
Income Statement. include cash in hand and balances with banks.
2.5.20 Finance Income and Finance Costs Interest paid is classified as operating cash flow.
Finance income comprises interest income on funds
invested; dividend income and gains on the disposal of Interest received and dividends received are classified as
investments are recognized in profit or loss. Interest investing cash flows.
income is recognized as it accrues in profit or loss,
using the effective interest method. Dividend income Dividends paid are classified as financing cash flows.
is recognized in profit or loss on the date that the
Company’s right to receive payment is established, 2.5.23 Earnings per Share
which in the case of quoted securities is normally the The Company presents basic and diluted earnings per
ex-dividend date. share data for its ordinary shares. Basic earnings per share
is calculated by dividing the profit or loss attributable to
Finance costs comprise interest expense on borrowings, ordinary shareholders of the Company by the weighted
dividends on preference shares classified as liabilities average number of ordinary shares outstanding during the
and impairment losses recognized on financial assets year. Diluted earnings per share is determined by adjusting
(other than trade receivables), are recognized in profit the profit or loss attributable to ordinary shareholders
or loss. and the weighted average number of ordinary shares
outstanding, for the effects of all dilutive potential ordinary
Borrowing costs that are not directly attributable to the shares.
acquisition, construction or production of a qualifying
asset are recognized in profit or loss using the effective 2.5.24 Commitments and Contingencies
interest rate method. All discernible risks are accounted for in determining the
amount of all known liabilities. Contingent liabilities are
Foreign currency gains and losses are reported on possible obligations whose existence will be confirmed only
a net basis as either finance income or finance cost by uncertain future events or present obligations where the
depending on whether foreign currency movements are transfer of economic benefit is not probable or cannot be
in a net gain or net loss position. reliably measured. Contingent liabilities are not recognized
in the Balance Sheet but are disclosed unless they are
2.5.21 Segmental Reporting remote.
A segment is a distinguishable component of the
Company that is engaged in either providing products 2.5.25 Financial Risk Management Strategies
or services (business segment) or in providing products The Company is exposed to financial risk arising from
or services within a particular economic environment changes in Mahogany, Teak, Sandalwood timber and Vanilla
(geographical segment), which is subject to different prices. However the Company, based on past trend in
risk and rewards that are different from those of other Mahogany, Teak, Sandalwood and Vanilla prices, does not
segments. However, there are no distinguishable anticipate that the prices will decline significantly in the
components to be identified as segments for the foreseeable future and therefore has not entered into any
Company. other contracts to manage the risk of decline in Mahogany,
Teak, Sandalwood and Vanilla prices. The Company reviews
its outlook for Mahogany, Teak, Sandalwood and Vanilla
prices regularly in considering the need for active financial
risk management.
Group Company
Rs. Rs. Rs. Rs.
3. REVENUE
Plantation Establishment and Maintenance Income
Local - Plantation Establishment 148,467,259 155,485,353 148,467,259 155,485,353
- Annual Fee 78,177,278 100,094,396 78,177,278 100,094,396
Foreign 18,054,925 882,089 18,054,925 882,089
Commission from Agarwood Sales - Foreign 25,491,890 275,182 25,491,890 275,182
Commission from Agarwood Sales - Local - 296,433 - 296,433
Gain Arising from Changes in Fair Value of
Biological Assets (Note 3.1) 926,211,695 1,209,395,812 926,211,695 1,209,395,812
1,196,403,047 1,466,429,265 1,196,403,047 1,466,429,265
3.1 Gain/(Loss) Arising from Changes in Fair Value of Biological Assets

This amount relates to gain arising from changes in the fair value of biological assets, by adoption of IAS-41- ‘Agriculture’. This gain is
totally unrealized as at the Balance Sheet date.
Group Company
Rs. Rs. Rs. Rs.
Mahogany 287,469,708 (23,328,441) 287,469,708 (23,328,441)

Vanilla 78,365,400 34,034,000 78,365,400 34,034,000
Sandalwood 330,092,888 1,188,879,134 330,092,888 1,188,879,134
Teak 230,283,699 9,811,119 230,283,699 9,811,119
926,211,695 1,209,395,812 926,211,695 1,209,395,812
4. OTHER INCOME
Interest income on Short Term Deposits 28,847,248 36,297,983 28,847,248 36,297,983
Interst income on Short Term Loans - - 18,466,667 7,000,000
Interest income on Loans 21,721 19,225 21,721 19,225
Profit on Disposal of vehicles 3,415,139 3,404,962 3,415,139 3,404,962
Foreign Currency Exchange Gain/(Loss) - 2 - 2
Surplus on Mature Tree Valuation - 39,864,428 - 39,864,428
Profit from Sale of Shares 7,626,586 - 7,626,586 -
Sundry Income 3,628,769 1,828,557 3,600,769 1,828,557
43,539,463 81,415,157 61,978,130 88,415,157
5. OTHER EXPENSES
Provision for Purchase Back Guarantee (Note 25) 660,324,546 862,894,883 660,324,546 862,894,883
Other Operating Expenses 54,328,196 135,971 54,298,271 13,750
714,652,742 863,030,854 714,622,817 862,908,633
83
Group Company
Rs. Rs. Rs. Rs.
6. OPERATING PROFIT BEFORE FINANCE COST

Is stated after charging all expenses including the followings;
Auditor’s Remuneration - On Statutory Audit 1,685,000 1,085,000 1,525,000 1,035,000
- Audit Related - 50,000 - 50,000
- ISO Audit Expenses 137,713 1,121,317 137,713 1,121,317
Directors’ Emoluments 31,410,797 19,140,000 31,410,797 19,140,000
Legal Fees 691,266 1,071,293 686,266 3,302,254
Depreciation and Amortisation 21,323,421 12,608,239 20,007,443 11,916,860
Marketing Incentives 27,014,888 15,247,675 27,014,888 15,247,675
Personnel Cost Includes
Defined Contribution Plan - Gratuity Provision/(Reversal) 1,725,516 3,748,478 1,725,516 3,748,478
Defined Benefit Plan - EPF 7,047,293 5,542,389 6,763,933 5,542,389
- ETF 1,810,717 1,318,580 1,768,093 1,318,580
Staff related Cost (Salaries, Wages and etc.) 94,634,138 70,023,396 93,305,782 70,023,396
Bonus 3,652,853 2,162,787 3,652,853 2,162,787
7. FINANCE COST
Debenture Interest 6,874,790 5,956,666 6,874,790 5,956,666
Loan interest 2,439,482 997,743 600,000 997,743
Lease Interest 6,275,031 3,906,865 6,275,031 3,906,865
Preference Share Dividend 304,000 304,000 304,000 304,000
Over Draft Interest 2,009,255 922,883 2,008,243 922,883
17,902,558 12,088,157 16,062,064 12,088,157
8. INCOME TAX EXPENSES

8.1 Current Taxes
The Company in terms of Section 16 (1) of the Inland Revenue Act No.10 of 2006, “Specified Profits” from cultivation, would be exempt
from income tax for a period of 5 years from 01 April 2006. The Corporate tax applicable to profits other than “ Specified Profits” would
be at 28%.
As per Inland Revenue (Amendment) Act No 22 of 2011, such profit would be liable to Income Tax at the rate of 10% commencing from
the year of assessment of 01 April 2011. However During the year Company did not make any taxable profit from “Specified Business -
Cultivation”
Twood Flooring (Pvt) Limited

The Company in terms of Section 17 (A) of the Inland Revenue Act No. 10 of 2006 as ammended by Act No. 22 of 2011, “Profits and
Income from any new undertaking engaged any prescribed activities”, would be exempt from income tax for a period of 5 years from
1st April 2007.
Group Company
2012 2011 2012 2011
Rs. Rs. Rs. Rs.
Income Tax on Profits for the year (Note 8.2) 13,253,978 14,655,655 13,253,978 14,655,655
Under/(Over) provisions of Income Tax in prior years 719,692 (11,844,943) 719,692 (11,844,943)
Deemed Dividend Tax - 105,368 - 105,368
Dividend Tax 712,704 - 712,704 -
Deferred Tax Recognised During the Year (Note 28) 33,903,436 39,811,284 33,903,436 39,811,284
48,589,810 42,727,364 48,589,810 42,727,364
8. TAXATION (Contd.)
8.2 Reconciliation between Accounting Profit to Income Tax
Group Company
Rs. Rs. Rs. Rs.
Accounting Profit Before Taxation 132,436,989 368,023,159 173,792,392 399,728,331
Consolidation adjustments 41,355,403 31,705,172 - -
Adjusted/Accounting Profit Before Taxation 173,792,392 399,728,331 173,792,392 399,728,331
Aggregate Disallowable Items 730,903,959 903,875,549 730,903,959 903,875,549
Aggregate allowable Items (999,954,016) (1,304,841,562) (999,954,016) (1,304,841,562)
Adjusted Profit from the Business (95,257,665) (1,237,683) (95,257,665) (1,237,683)
Taxable Income from Other Sources 47,335,636 43,317,208 47,335,636 43,317,208

Total Taxable Income 47,335,636 43,317,208 47,335,636 43,317,208
Tax on Other Income 28% (2010/2011@ 33.33%) 13,253,978 14,439,069 13,253,978 14,439,069
Social Responsibility Levy (1.5% on Income Tax) - 216,586 - 216,586
Income Tax on Profits for the year 13,253,978 14,655,655 13,253,978 14,655,655
8.3 Deferred Tax

Provision has been made for deferred taxation under the liability method in respect of temporary differences arising from carrying
amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purpose as described in Note 28.
Difference arising from the deferred tax liability has been recognised in the Financial Statement during the year.
8.4 Economic Service Charge

During the year the Company has paid Rs.1,091,274/- (Rs.656,492/- in 2011) as Economic Service Charge and this amount can be
set off against the Income Tax Liability had it been paid to the Department of Inland Revenue and balance can be carried forward for a
period of 4 years.
9. EARNINGS AND DIVIDEND PER SHARE

9.1 Earnings per Share
Basic Earnings per Share
The calculation of Basic Earnings per Share is based on the profit for the year attributable to the ordinary shareholders divided by
weighted average number of ordinary shares outsanding during the year and calculated as follows;
Group Company
Profit Attributable to Owners of the Company (Rs.) 104,567,216 341,105,180 125,202,582 357,000,967
Weighted Average Number of Ordinary Shares 71,270,400 67,574,849 71,270,400 67,574,849
Basic Earning per Share (Rs.) 1.47 5.05 1.76 5.28
Diluted Earnings per Share

There were no potential dilutive ordinary shares outstanding at any time during the year ended 31 March 2012. Therefore, Diluted
Earnings per Share is same as Basic Earnings per Share reported above.
9.2 Dividend per Share

Group Company
Interim Dividends Paid (Rs.) 7,127,040 - 7,127,040 -
Number of Ordinary Shares 71,270,400 71,270,400 71,270,400 71,270,400
Dividend per Share (Rs) 0.10 - 0.10 -
85
10. PROPERTY, PLANT AND EQUIPMENT - GROUP

Cost/Revaluation Balance Additions Disposals/Transfers Balance
as at During the During the as at
01.04.2011 Year Year 31.03.2012
Rs. Rs. Rs. Rs.
Freehold Assets
Land 592,479,902 50,924,926 (13,636,397) 629,768,431
Buildings 6,951,778 55,889,809 - 62,841,587
Motor Vehicles 7,460,305 21,832,080 (23,788,720) 5,503,665
Machinery and Equipments 65,815,970 6,392,424 (198,720) 72,009,674
Furniture & Fittings 7,323,275 1,180,836 - 8,504,111
680,031,230 136,220,075 (37,623,837) 778,627,468
Leasehold Assets -
Motor Vehicles 34,710,780 27,471,000 (14,139,130) 48,042,650
34,710,780 27,471,000 (14,139,130) 48,042,650
Intangible Assets
Software - ERP 3,409,183 180,200 - 3,589,383
Total 718,151,193 163,871,275 (51,762,967) 830,259,501
Accumulative Depreciation Balance as at Charge for the Disposals/Transfers Balance as at

01.04.2011 Year During the Year 31.03.2012
Rs. Rs. Rs. Rs.
Freehold Assets
Buildings 1,234,019 398,074 - 1,632,092
Motor Vehicles 2,256,377 3,061,352 (3,642,076) 1,675,653
Furniture & Fittings 5,030,044 699,694 - 5,729,738
29,830,001 9,004,818 (3,764,357) 35,070,462
Leasehold Assets
Motor Vehicles 6,896,362 10,098,747 (5,449,886) 11,545,223
6,896,362 10,098,747 (5,449,886) 11,545,223
Intangible Assets
Software - ERP 407,234 717,933 - 1,125,167
Total 37,133,597 19,821,498 (9,214,243) 47,740,852
Balance Additions Transfers Balance

01.04.2011 Year Year 31.03.2012
Rs. Rs. Rs. Rs.
Work in Progress 30,200,377 42,617,453 (54,950,230) 17,867,600
Carrying Value 711,217,973 - - 800,386,249

10. PROPERTY, PLANT AND EQUIPMENT - COMPANY

Cost/Revaluation Balance Additions Disposals/Transfers Balance
01.04.2011 Year Year 31.03.2012
Rs. Rs. Rs. Rs.
Freehold Assets
Land 572,479,902 50,924,926 (13,636,397) 609,768,431
Buildings 6,198,941 1,425,390 - 7,624,331
Motor Vehicles 7,460,305 21,832,080 (23,788,720) 5,503,665
627,754,928 81,062,558 (37,623,837) 671,193,649
Leasehold Assets
Motor Vehicles 34,710,780 27,471,000 (14,139,130) 48,042,650
34,710,780 27,471,000 (14,139,130) 48,042,650
Intangible Assets
Software - ERP 3,409,183 180,200 - 3,589,383
Total 665,874,891 108,713,758 (51,762,967) 722,825,682
Accumulative Depreciation Balance Charge Disposals/Transfers Balance

as at for the During the as at
01.04.2011 Year Year 31.03.2012
Rs. Rs. Rs. Rs.
Freehold Assets
Buildings 1,196,377 343,932 - 1,540,308
Motor Vehicles 2,256,377 3,061,352 (3,642,076) 1,675,653
29,792,359 8,950,676 (3,764,357) 34,978,679
Leasehold Assets
Motor Vehicles 6,896,362 10,098,747 (5,449,886) 11,545,223
6,896,362 10,098,747 (5,449,886) 11,545,223
Intangible Assets
Software - ERP 407,234 717,933 - 1,125,167
Total 37,095,955 19,767,356 (9,214,243) 47,649,068
Balance Additions Transfers Balance

01.04.2011 Year Year 31.03.2012
Rs. Rs. Rs. Rs.
Work in Progress 5,200,376 10,617,454 (900,230) 14,917,600
Carrying Value 633,979,312 - - 690,094,214
10.1 The Lands owned by the Company were revalued during the period of 01 March to 31 March 2010. The Land and the revalued values
are detailed in note no 10.3 to the financial statements.
10.2 Based on the assessment of potential impairment carried out internally for property, plant and equipment by the Board of Directors as at
31 March 2012, no provision was required to be made in the financial statements.
87
10.3 Details of the Estates hold by Company are given below;

Estate Name No of Acres Cost / Revaluation Revalued Value Capital Expenditure incurred Cost/Revalued Amount
2009 / 10 after 1 April 2010 as at 31 March 2012
Ihalakanda 68.86 13,772,000 20,658,000 - 20,658,000

Gomaragala 68.16 20,448,000 27,264,000 - 27,264,000
Munihinkandha 47.00 9,400,000 14,100,000 - 14,100,000
Panthiya 118.00 35,400,000 59,000,000 - 59,000,000
Kalugalahena 34.89 6,105,750 10,467,000 - 10,467,000
Footprint 43.78 8,756,000 13,134,000 - 13,134,000
Kuttikanda 34.28 6,856,000 10,284,000 10,284,000
Atakalandadawatahena 40.23 10,057,500 16,092,000 16,092,000
St Anthony’s 43.26 10,815,000 21,630,000 - 21,630,000
Kent I 29.54 7,385,000 10,339,000 - 10,339,000
Kent II 64.00 19,200,000 25,600,000 25,600,000
Kent III 11.19 3,357,000 4,476,000 4,476,000
Rusigama 23.50 4,700,000 7,050,000 113,600 7,163,600
Palawatta 33.33 9,999,000 16,665,000 - 16,665,000
Mahalewkanda 15.65 2,738,750 6,260,000 1,790,525 8,050,525
Lakhsmi 17.66 3,090,500 7,064,000 - 6,976,861
Leelajan 46.42 6,963,000 23,210,000 - 23,210,000
Lower Lye Grove 26.00 2,600,000 7,800,000 - 7,800,000
Liyangama 69.93 10,489,000 27,972,000 - 27,972,000
Hartley 45.31 6,796,500 22,655,000 - 22,655,000
Ambangaga 108.13 32,739,000 54,065,000 25,500 54,090,500
Pankatiya 48.24 7,236,000 19,296,000 - 19,296,000
Salagama 26.00 9,424,000 10,639,200 10,639,200
Lognager 03 15.80 2,500,000 6,347,200 - 6,347,200
Palugedara 91.84 8,411,488 27,551,100 118,750 27,669,850
Kandaketiya 46.32 4,656,000 13,994,079 4,245,875 18,239,954
Kekalagastenna/
Soranatota 58.54 4,091,910 21,403,335 110,425 21,513,760
Udalinda Walalanda 25.31 5,934,910 7,591,800 1,806,515 9,398,315
Burnside/Diganakele 50.00 8,403,322 21,403,300 21,287,587
Makulugolla Yaya 31.50 5,000,000 9,465,000 5,446,875
Aggalaulpatha 36.14 5,648,000 11,489,902 1,820,820 13,310,722
North Matale 26.00 3,962,500 7,824,986 116,514 7,941,500
Land acquired after

01 April 2010
Pallatanna 11.00 1,764,726 - 313,799 2,078,525
Kiulagedara 15.08 2,100,000 - 1,432,762 3,532,762
Pamunuwa 25.03 8,750,000 - 846,250 9,596,250
Clive land 56.00 25,000,000 - 842,444 25,842,444
609,768,431
Date of Revaluation - During the period 01 March 2010 to 31 March 2010.
The Key assumptions made by the valuer are as follows;

a. The land value per acre of the estates revalued, ranges from Rs.100,000/- to Rs.300,000/-
b. The land values are determined based on the locality, demand, supply and other factors applicable
c. These lands are used for agriculture purposes.
Independent Valuer- Mr. R S Wijesuriya; Incorporate Valuer.

10. PROPERTY, PLANT AND EQUIPMENT (Contd.)

10.4 There were no capitalized borrowing costs related to the acquisition of property, plant & equipment during the year. (2010/11- nill)
10.5 There were no items of property, plant & equipments retired from the active use as at 31 March 2012.
10.6 There were no temporary idle items of property, plant & equipments as at 31 March 2012.
Group Company
As at 31st March 2012 2011 2012 2011
Rs. Rs. Rs. Rs.
11. INVESTMENTS
Investments in Subsidiary Companies (Note 11.1) - - 19,700,000 19,700,000
Other Investmets 3,000,000 - 3,000,000 -
3,000,000 - 22,700,000 19,700,000
11.1 Investments in Subsidiary Companies

Company
No. of Shares % Holding 2012 2011
Rs. Rs.
Farm Grow (Pvt) Ltd 500,000 100% 5,000,000 5,000,000

Twood Flooring (Pvt) Ltd 1,470,000 49% 14,700,000 14,700,000
19,700,000 19,700,000
11.1.1 The Financial Statements of above companies were not consolidated in previous financial years in accordance with section 153 (6A)
of the Companies Act No. 07 of 2007 since there is no real value to the shareholders of the Company due to the insignificant accounts
involved. However, this basis has been reassessed by the Directors of the Company and determined to prepare the consolidated
Financial Statements of the Group from the financial year ending 31st March 2012, which effects retrospectively.
12. LEASEHOLD RIGHT OVER BEAR LAND - GROUP

Cost Balance Additions Transfers Balance
01.04.2011 Year Year 31.03.2012
Rs. Rs. Rs. Rs.
Leasehold Right to Bare Land 19,063,555 13,771,473 - 32,835,028

19,063,555 13,771,473 - 32,835,028
Accumulated Amortisation Balance Charge Transfers Balance

01.04.2011 Year Year 31.03.2012
Rs. Rs. Rs. Rs.
Leasehold Right to Bare Land 1,412,652 1,501,922 2,914,574

1,412,652 1,501,922 - 2,914,574
17,650,903 12,269,551 - 29,920,454
89
12. LEASEHOLD RIGHT OVER BEAR LAND - COMPANY

Cost Balance Additions Transfers Balance
01.04.2011 Year Year 31.03.2012
Rs. Rs. Rs. Rs.
Leasehold Right to Bare Land - 7,202,591 - 7,202,591

- 7,202,591 - 7,202,591
Accumulated Amortisation Balance Charge Transfers Balance

01.04.2011 Year Year 31.03.2012
Rs. Rs. Rs. Rs.
Leasehold Right to Bare Land - 240,087 - 240,087

- 240,087 - 240,087
- 6,962,504 - 6,962,504
12.1 During the year Company obtained Doramadalawa estate under a lease agreement for re-forestation of land from the forest
conservation department. The lease value of the land is Rs.40,000,000 which comprises teak plantation as well. Above land is valued
by Mr. B.L Ariyatillake, independent Chartered Valuer on 28th May 2012 and based on the valuaion report, teak plantation is valued at
Rs.33,222,300/- and land valued at Rs.6,777,700/-. Capital expenditure of Rs.424,893/- has been incurred with regard to this land by
the company during the year.
13. MATURE TREES

Group Compay
2012 2011 2012 2011
Rs. Rs. Rs. Rs.
Balance at the beginning of the year 147,237,439 107,373,011 147,237,439 107,373,011

Addition during the year 15,000,000 - 15,000,000 -
Fair Valuation Surplus during the year - 39,864,428 - 39,864,428
Balance at the end of the year 162,237,439 147,237,439 162,237,439 147,237,439
13.1 The mature trees considered as part of unplanned forestry in Ratnapura, Kaluthara and Mathale Districts having commercial exotic
timber species such as Teak, Albizia, Jack, Halmilla, etc are ready for harvest, have been valued by Mr.L.B.Ariyathilake Independent
Chartered Valuer on 24 June 2011. The resultant surpluses on valuation amount to Rs.39,864,428/- and this amount had been
transferred to Profit and Loss Statement for the year ended 31 March 2011.
During the year company has acquired a Land called Clive land with mature trees and mature trees in the land have been valued at
Rs.15,000,000 by Mr.L.B.Ariyathilake Independent Chartered Valuer on 24 May 2012.
The key assumptions used for valuation of mature forestry trees are as follows;
a. Based on the price list of State Timber Corporation and price timber logs & sawn timber in the popular furniture manufacturing
areas of Sri Lanka.
b. When considering the market price of the estimated out put of standing timber an average value of market prices were taken after
deducting 10% of price for cost of harvesting and transportation.
c. The volume of timber is calculated on the General Volume Table (Species Classes i to vi) from the State Timber Corporation Metric
Volume and Conversion Table.
Group Company
2012 2011 2012 2011
Rs. Rs. Rs. Rs.
14. BIOLOGICAL ASSETS

Consumable Biological Assets (Mahogany) Note 14.2 2,666,716,774 2,354,247,066 2,666,716,774 2,354,247,066
Bearer Biological Assets (Vanilla) Note 14.3 321,244,400 242,879,000 321,244,400 242,879,000
Consumable Biological Assets (Sandalwood) Note 14.4 2,202,251,908 1,872,159,020 2,202,251,908 1,872,159,020
Consumable Biological Assets (Teak) Note 14.5 320,172,581 56,666,581 320,172,581 56,666,581
5,510,385,663 4,525,951,667 5,510,385,663 4,525,951,667
14.1 Biological Assets Movement

Balance as at Additions Fair Value Balance
01 April 2011 during the year Gain as at
at Cost 31 March 2012
Mahogany 2,354,247,066 25,000,000 287,469,708 2,666,716,773

Vanilla 242,879,000 - 78,365,400 321,244,400
Sandalwood 1,872,159,020 - 330,092,888 2,202,251,908
Teak 56,666,581 33,222,300 230,283,699 320,172,581
4,525,951,667 58,222,300 926,211,695 5,510,385,662
14.2 Consumable Biological Assets (Mahogany)

Carrying amount at the beginning of the year 2,354,247,066 2,377,575,507
Gain/(Loss) arising from changes in fair value less estimated
Point of sales cost attributable to-
Physical Change 170,402,862 253,674,863
Price Change 279,611,955 (277,003,304)
Discount Rate Change (137,545,109) -
Carrying amount at the end of the year 2,666,716,774 2,354,247,066
14.2.1 Planted-year wise analysis of Consumable Biological Assets (Mahogany)

Planted No. of Trees Planted No. of Trees
Year Planted Year Planted
1997 1,028 2004 31,048

1998 409 2005 39,684
1999 525 2006 38,921
2000 961 2007 33,885
2001 2,705 2008 24,276
2002 8,627 2009 14,736
2003 20,040 2010 6,194
2011 1,107
Total 224,146
(Last planted year 2009)
91
14. BIOLOGICAL ASSETS (Contd.)

14.3 Bearer Biological Assets (Vanilla)
2012 2011
Rs. Rs.
Carrying amount at the beginning of the year 242,879,000 208,845,000

Gain arising from changes in fair value less estimated Point of sales cost attributable to-
Physical Change 11,128,200 34,034,000
Price Change 67,237,200 -
Carrying amount at the end of the year 321,244,400 242,879,000
14.3.1 Planted-year wise analysis of Bearer Biological Assets (Vanilla)

Planted No. of Vine Planted No. of Vine
2004 7,011 2008 2,992

2005 7,331 2009 3,337
2006 24,696 2010 19,197
2007 - 2011 4,250
2012 5,894
Total 74,708
As at 31st March 2012 2011

Rs. Rs.
14.4 Consumable Biological Assets (Sandalwood)

Carrying amount at the beginning of the year 1,872,159,020 683,279,886
Gain/(Loss) arising from changes in fair value less estimated Point of sales cost attributable to-
Physical Change 305,880,224 1,188,879,134
Carrying amount at the end of the year 2,202,251,908 1,872,159,020
14.4.1 Planted-year wise analysis of Consumable Biological Assets (Sandalwood)

2004 57 2008 3,510

2005 997 2009 5,960
2006 2,211 2010 14,787
2007 3,783 2011 62,952
Total 94,257

14.5 Consumable Biological Assets (Teak)

2012 2011
Rs. Rs.
Carrying amount at the beginning of the year 56,666,581 46,855,463

Gain/(Loss) arising from changes in fair value less estimated Point of sales cost attributable to-
Physical Change 230,994,286 9,811,119
Carrying amount at the end of the year 320,172,581 56,666,582
14.5.1 Planted-year wise analysis of Bearer Biological Assets (Teak)

1997 6 2004 1,658
1998 53 2005 1,096
1999 304 2006 1,153
2000 904 2007 1,140
2001 2,114 2008 818
2002 3,072 2009 455
2003 2,531 2010 147
2011 18
Total 15,469
14.6 The above biological Assets of the Company were valued by Mr. B. L. Ariyatillake, independent Chartered Valuer. Based on the Valuation
Report dated 28th May 2012, the immature mahogany plantations are valued at Rs.2,666,716,773/- (Rs.2,424,269,857/- in 2011),
immature Vanilla vines are valued at Rs.321,244,400/- (Rs.242,879,000/- in 2011), the immature Sandalwood plantations are valued at
Rs 2,202,251,908/- (Rs 1,872,159,020/- in 2011) and the immature Teak plantations are valued at Rs 320,172,581/- (Rs 56,668,581/-
in 2011) which is sated under note 14 to these Financial Statements.
14.6.1 Significant Assumptions Made by the Valuer

In assessing the fair value, the key assumptions made by the Valuer are as follows;
(A) Consumable Biological Assets (Mahogany)

Market value of a Tree
Mahogany price is mainly obtained from International Market price of Mahogany Timber, State Timber Corporation and the Local Market
in determining the value of mature tree. Cost of sawing and other outgoings have been deducted to obtain the net value of sawn timber
per mature tree. Value of a mature mahogany tree is assumed to be Rs.50,000/- (Rs. 45,000/- in 2011) for the purpose of valuation as
at the Balance sheet date.
Determination of growth patterns

In determining the growth patterns, the following assumptions have been made.
a) Time period for maturity is 18 years
b) An average mature tree would contain 0.9 (0.9 - in 2011) cubic meters of timber
c) Fully mature tree is expected to have an average height of 64 feet.
d) Growth pattern corresponding to relevant height is based on published international growth patterns (Source: silviculture of
Mahogany 1998 J.E Mayhew and A.C Newton) adjusted to suit the local conditions.
93
Discount Rate
Discount Rate of 13% (12.5% in 2011) is used as the rate of return on the capital. This rate is based on the current accepted rates of
returns expected by investors and general rates used by the valuers.
Maintenance Cost
The on going cost of growing the trees has been deducted in determining the cash flow and on consistant in real terms.
(B) Bearer Biological Assets (Vanilla)

Market value of a Vine
The Company has obtained the membership of the Kandy Vanilla Growers’ Association (KVGA) on 08th November 2009. The market
price is mainly obtained from the Kandy Vanilla Growers’ Association and Export Agricultural Department. One Kilogram of Vanilla is
assumed to be Rs.1,280/- (Rs.1,000/- in 2011) as at the balance sheet date.
Determination of expected harvest patterns

In determining the expected harvest patterns, the following assumptions have been made
a) Time period to obtain harvest is 4th year from date of planting
b) A mature vanilla vine would give a total harvest of 15Kg during its maturity.
c) Value per immature vanilla vine is determined by considering expected harvest pattern of vine.
Discount Rate
Rate of return on capital is assumed to be 20%. (20% in 2011)
(C) Consumable Biological Assets (Sandalwood)

Sandalwood price is mainly obtained from the International Market price of tamilnadu auction prices in determining the value of mature
tree. The estimated cost of sawing and other outgoings have been deducted to obtain the net value of sawn timber per mature tree.
Value of a mature Sandalwood tree is assumed to be Rs.5,400/- per 1 kg (5000/- in 2011), for the purpose of valuation as at the
Balance sheet date.

a) Time period for maturity estimated at 16 years
b) An average mature tree would contain 25 kg of heartwood
c) Growth pattern corresponding to relevant height is based on published international growth patterns (Source : Sandalwood
consultant Dr. Anantha Padmanabha) adjusted to suit the local conditions.
d) Fully mature tree expected to have average girth (Root Collar) of 70 cm.
returns expected by investors and general rates used by the valuer.
Maintenance Cost
(D) Consumable Biological Assets (Teak)

Teak price is mainly obtained from International Market price of Teak Timber, State Timber Corporation and the Local Market in
determining the value of mature tree. Cost of sawing and other outgoings have been deducted to obtain the net value of sawn timber
per mature tree. Value of a mature Teak tree is assumed to be Rs.65,000/- (Rs.56,000/- in 2011)for the purpose of valuation as at the
Balance sheet date.

a) Time period for maturity estimated at 18 years
b) A average mature tree would contain 0.7 cubic meters of timber
c) Fully mature tree is expected to have an average height of 70 feet.
d) Growth pattern corresponding to relevant height is based on published international growth patterns (Source : Thai Orchid
Laboratory) adjusted to suit the local conditions.
Discount Rate
returns expected by investors and general rates used by the valuer.
Maintenance Cost
Sensitivity Analysis - Mahogany, Sandalwood and Teak

Discounting Changes in Impact to
Rate Discounting Rate Net Assets Profit
15.50% 1.5% 1,825,112,379 (1,104,148,965)

14.00% 1.0% 2,458,039,655 (471,221,689)
13.50% +0.5% 2,778,061,062 (151,200,282)
13.00% 0% 3,054,463,926 125,202,582
12.50% -0.5% 3,348,271,927 419,010,583
12.00% -1.0% 3,660,696,950 731,435,606
11.50% -1.5% 3,993,042,976 1,063,781,632
The sensitivity analysis explains the sensitivity of the Mahogany, Sandalwood and Teak fair value to the discounting factor. However the
discounting rate of 13% has been used for the mahogany, Sandalwood and Teak biological asset valuation during the year.
14.7 The Mahogany trees included in the biological assets valuation are only those trees, which the company maintain in order to meet the
obligation arising from the purchase back guarantee agreement it has with the client. This included the trees in client’s plots as well as
company stock. Trees on which there is no purchase back guarantee is shown under Note 25.1.
95
Group Company
As at 31st March 2012 2011 2012 2011
Rs. Rs. Rs. Rs.
15. INVENTORIES
Sandalwood - Nurseries 1,774,943 807,460 1,774,943 807,460
Sandalwood - Stock - 100,000 - 100,000
Jatropha - Nurseries 4,291,797 4,245,387 4,291,797 4,245,387
Vanilla Process Bean Stock 1,218,000 3,045,000 1,218,000 3,045,000
Plantation Stock 911,318 911,317 911,318 911,317
Stationery Stock 56 - 56 -
Raw Material 857,143 - - -
9,053,257 9,109,164 8,196,114 9,109,164
16. TRADE AND OTHER RECEIVABLES

Prepayments & Advances 67,108,398 26,322,607 47,662,131 26,322,606
Loans Against Preference Shares 2,769,689 2,737,670 2,769,689 2,737,670
Project Costs 13,178,234 13,785,669 13,178,234 13,785,668
Staff Loan (Note 16.1) 676,980 267,951 676,980 267,951
VAT Receivable 2,774,504 - 2,774,504 -
ESC Receivable 1,091,274 1,053,098 1,091,274 1,053,098
WHT Receivable 2,824,511 3,629,674 2,824,511 3,629,674
Other Receivable (Note 16.2) 23,986,490 18,339,185 20,986,490 15,339,185
114,410,080 66,135,854 91,963,813 63,135,852
16.1 Staff Loans

Balance at the beginning of the year 267,951 28,185 267,951 28,185
Loans granted during the year 2,139,487 456,772 2,139,487 456,772
2,407,438 484,957 2,407,438 484,957
Loans settled during the year (1,730,458) (217,006) (1,730,458) (217,006)
Balance at the end of the year 676,980 267,951 676,980 267,951
16.2 Other Receivables

Interest Receivable 1,307,678 3,440,587 1,307,678 3,440,587
Salary Advances 95,512 136,011 95,512 136,011
Deferred Revenue expenses against Sales Reservation 13,161,557 3,715,762 13,161,557 3,715,762
Sundry Advance 4,857,397 5,260,779 4,857,397 5,260,779
Receivables from PPE Disposals 130,000 2,670,000 130,000 2,670,000
Corporate Credit Card 1,434,346 116,046 1,434,346 116,046
Bank Guarantee 3,000,000 3,000,000 - -
23,986,490 18,339,185 20,986,490 15,339,185
Group Company
As at 31st March 2012 2011 2012 2011
Rs. Rs. Rs. Rs.
17. AMOUNTS DUE FROM RELATED PARTIES

Touchwood Ltd 28,320,944 13,323,171 18,832,154 -
Touchwood (Pvt) Ltd - 1,141,643 - 1,141,643
Farm Grow (Pvt) Ltd - - 15,676,782 14,841,392
Twood Flooring (Pvt) Ltd - - 110,084,481 95,077,020
Green Forestry Ventures (Pvt) Ltd 68,450 66,950 68,450 66,950
28,389,394 14,531,764 144,661,867 111,127,005
18. OTHER SHORT TERM INVESTMENTS

Balance at the beginning of the year 20,000,000 - 20,000,000 -
Investments made during the year 10,000,000 20,000,000 10,000,000 20,000,000
Reinvestment of the Profit made during the year 7,626,586 - 7,626,586 -
37,626,586 20,000,000 37,626,586 20,000,000
Profit obtained in Cash (5,954,708) - (5,954,708) -
31,671,878 20,000,000 31,671,878 20,000,000
Less: Provision for falling of Market Value of Shares (19,880,018) - (19,880,018) -
18.1 This represents the investment made in the share market. The reason for the diminution of the balance as at 31st March 2012 is due to
envisaged impairment of this asset.
19 CASH AND CASH EQUIVALENTS

Favourable Balances
Cash in Hand 808,271 617,826 688,271 617,826
Cash at Bank 27,122,415 21,137,418 10,615,024 19,855,828
Short Term Deposits 186,679,131 351,108,601 186,679,131 351,108,601
214,609,817 372,863,845 197,982,426 371,582,255
Unfavourable Balance
Bank Overdrafts (4,611,015) - (4,611,015) -
Cash and Cash Equivalents for the purpose of
Cash Flow Statement 209,998,802 372,863,846 193,371,411 371,582,255
20 STATED CAPITAL
71,270,400 Ordinary Shares (71,270,400 - 2011) 623,616,000 623,616,000 623,616,000 623,616,000
The holders of ordrnary shares are entitled to receive dividends as declared from time to time and are entitled to one vote per share at
meetings of the company. All shares rank equally with regard to the company’s residual assets.
97
21. REVALUATION RESERVE

The revaluation reserve comprises of the gain arisen from revaluing lands. This reserve is realised upon the disposal of the revalued
lands.
22. CAPITAL RESERVE

Rs.265,797,755/- (Rs.346,500,928/- 2011) has been transferred to a Capital Reserve during the year. This reserve comprises unrealized
gains arising from the fair value of the biological assets net of purchase back guarantee. This is not used for distribution of profits until it
is realized in cash.
23. PREFERENCE SHARE REDEMPTION RESERVE

Profits have been retained in order to utilize for redemption of preference shares at an agreed premium.
24. PREFERENCE SHARE CAPITAL

Group Company
2012 2011 2012 2011
Rs. Rs. Rs. Rs.
Called up amount at the beginning of the year 30,400,000 30,400,000 30,400,000 30,400,000
(3,040 Non- Voting, Redeemable, Cumulative Preference Shares)
Calls in arrears (Note 24.1) (2,454,272) (2,463,272) (2,454,272) (2,463,272)
Balance at year end (3,040 Non- Voting, Redeemable,
Cumulative Preference Shares) 27,945,728 27,936,728 27,945,728 27,936,728
The preference shares were issued on 3rd July 2003, at a redemption premium of Rs 196,500/-, which is payable together with 1%
annual dividend. These Preference Shares will be redeemed at the end of the 18th year from the date of allotment.
24.1 Call In Arrears

2012 2011 2012 2011
Rs. Rs. Rs. Rs.

Received during the year (9,000) (17,000) (9,000) (17,000)
Security
The Company has planted one Mahogany tree for each Preference Share issued and sold. (Trees were planted in Rusigama Estate)
Group Company
As at 31st March 2012 2011 2012 2011
Rs. Rs. Rs. Rs.
25. PROVISION FOR PURCHASE BACK GUARANTEE

Provision at the beginning of the year 2,501,462,361 1,651,693,859 2,501,462,361 1,651,693,859
Provision made during the year 660,324,546 862,894,883 660,324,546 862,894,883
Payment of Vanilla return (14,711,023) (13,126,381) (14,711,023) (13,126,381)
Provision at the end of the year 3,147,075,884 2,501,462,361 3,147,075,884 2,501,462,361
25.1 No cash back guarantees has been offered in respect of 351 (374- 2011) tree sale agreements. However volume guarantees have been
given are disclosed below.
Current Year Year todate

Product No of No of Volume gurentee No of No of Volume gurentee
Contracts Trees/Vines Given(Cu.m3/kg) Contracts Trees/Vines Given (Cu.m3/kg)
Mahogany 1 20 18 120 2,349 2,114

Vanilla 72 32,625 247,000 174 61,928 461,450
Sandalwood 278 4,922 123,050 1,371 26,561 664,025
Sandalwood & Vanilla - - - 11 1,125/ 4,500 28,125/27,540
Total 351 37,567 370,068 1,676 30,035/66,428 694,264/ 488,900
25.2 As per the purchase back guarantee agreements, the Company has the right to terminate the contract and pay only 50% of the initial
agreed guarantee until 2002/03 and 33.33% there after, if 3 or more instalments are in arrears. Therefore the above provision has been
made based on performing purchase back guarantee agreements.
25.3 The above provision for purchase back guarantee has been arrived after discounting following actual guaranties (payable at maturity)
given after considering the expected maintenance income receivable, using a cost of capital relevant to each contracts varying from
18% to 34%. (IRR)
Total Purchase Back Guarantees Given 2012

Rs.
Mahogany 20,996,700,000
Sandalwood 1,307,600,000
Vanilla 1,147,242,815
Total Guarantee Given 23,451,542,815
The Purchase Back Guarantee given has been discounted and made the provision in the Financial Statements as the note no. 25.
99
26. DEBENTURES
Group Company
2012 2011 2012 2011
Rs. Rs. Rs. Rs.
Redeemed During the year (40,000) (55,000) (40,000) (55,000)
13,550,000 13,590,000 13,550,000 13,590,000
Accrued Interest 34,181,546 27,310,382 34,181,546 27,310,382
47,731,546 40,900,382 47,731,546 40,900,382
The Company has issued 2,744, secured, Redeemable, unlisted Cumulative Debentures. These debentures are redeemable on or after
18 years from the allotted date at an interest rate of 17% per annum. The interest on Debentures will be paid after maturity of 18 years.
The issue opened on 17th March 2003 and will be closed on the day the issue is fully subscribed.
Security
The company has planted one Mahogany tree for each debenture issued and sold. (Trees were planted in Panthiya Estate) These trees
have been valued at its fair value of bialogical assets.
Group Company
As at 31st March 2012 2011 2012 2011
Rs. Rs. Rs. Rs.
27. EMPLOYEE BENEFITS

Balance at the beginning of the Year 5,883,433 2,754,096 5,883,433 2,754,096
Provision made during the Year 1,725,516 3,748,478 1,725,516 3,748,478
Payments made during the Year (670,023) (619,141) (670,023) (619,141)
Balance at the end of the Year 6,938,926 5,883,433 6,938,926 5,883,433
An Actuarial Valuation of the retirement benefit obligation was carried out as at 31st March 2012 by Actuarial & Management
Consultants (Pvt) Ltd.
The Valuation method used by the actuaries to value the benefit is the ‘Projected Unit Credit Method’, the method recommended by the
Sri Lanka Accounting Standard No.16 (Revised 2006),’Employee Benefits’
27.1 Expenses recognised in Profit or Loss

2012 2011
Rs. Rs.
Interest Cost 588,343 -

Current Service Costs 1,265,648 3,748,478
Net Actuarial (Gain)/Loss recognised immediately (128,475) -
Amount Recognised in the Income Statement 1,725,516 3,748,478
27.2 The Key Assumptions used by the actuary include the following
27.2.1 Financial Assumptions
Rate of Interest 11.0% (Per Annum)
Rate of Increase of Salaries Executives 10.0% (Per Annum)
Non Executives 10.0% (Per Annum)
27.2.2 Demographic Assumptions
In addition to the above financial assumptions, demographic assumptions such as mortality, withdrawal, disability and retirement age
were considered for the actual valuation. A 67/70 mortality table issued by Institute of Actuaries, London was used to estimate the
gratuity liability of the company.
Retirements-Age Male/Female 55
The Company will continue as a going concern.
Group Company
As at 31st March 2012 2011 2012 2011
Rs. Rs. Rs. Rs.
28 DEFERRED TAXATION
Recognised during the year (Note 8.1) 33,903,436 39,811,284 33,903,436 39,811,284
28.1 Recognised Deferred Tax Assets & Liabilities

eferred Tax assets and liabilities are attributable to the following originations of temporary differences;
D
Taxbale/ (Deductible) Temporary Differences:
Biological Assets 5,510,385,662 4,525,951,667
Mature Trees 162,237,439 147,237,439
Property, Plant & Equipments (10,642,931) 3,087,683
Purchase Back Guarantee (3,147,075,885) (2,501,462,361)
Retirement Benefit Obligation (6,938,926) (5,883,433)
2,507,965,359 2,168,930,995
Applicable Tax Rate 10% 10%
Net Deferred Tax Liabilities 250,796,536 216,893,100
Future Applicable Tax Rate

As per the tax consultants’ opinion, profit derived by the Company from its normal course of business may be considered as profits
derived from “Agriculture” and would be liable for income tax at the rate of 10% commencing from the year of assessment 01 April
2011.
Accordingly, tax rate of 10% has been considered as future enacted tax rate for the purpose of deferred taxation.
29. DEFERRED REVENUE ON ANNUAL MAINTANANCE CHARGES

Annual Maintenance
Payment received in advance during the year 75,727,380 25,009,439 75,727,380 25,009,439
Less: Amortised during the year (4,203,437) (2,276,532) (4,203,437) (2,276,532)
30. ACCUMULATED PREFERENCE DIVIDENDS PAYABLE

Appropriated during the year 304,000 304,000 304,000 304,000
31. RESERVATION & ESTABLISHMENT FEE ADVANCE

Advance received during the year 197,743,251 171,960,980 197,743,251 171,960,980
Transferred to revenue during the year (181,366,037) (179,503,190) (181,366,037) (179,503,190)
32. AMOUNTS DUE TO RELATED PARTIES

Touchwood Ltd. - 11,424,046 - 11,424,046
Touchwood Asia Co. Ltd 9,094,708 7,724,358 9,094,708 7,724,358
9,094,708 19,148,404 9,094,708 19,148,404
101
Group Company
As at 31st March 2012 2011 2012 2011
Rs. Rs. Rs. Rs.
33. INTEREST BEARING BORROWINGS

Payable after one year
Long Term Loans (33.1) 88,159,999 - - -
Finance Lease Liability (33.3) 29,126,780 22,631,238 29,126,790 22,631,238
117,786,789 22,631,238 29,126,790 22,631,238
Payable within one year
Short Term Loans (33.2) 8,691,899 - 4,000,000 -
Finance Lease Liability (33.3) 10,101,528 7,198,732 10,101,528 7,198,732
18,793,427 7,198,732 14,101,528 7,198,732
33.1 Long Term Loans

Balance at the beginning of the Year - 1,500,000 - 1,500,000
Loans obtained during the year 88,159,999 - - -
Payments made durring the year - (1,500,000) - (1,500,000)
Balance at the end of the year 88,159,999 - - -
Payable within one year - - - -
Payale after one year 88,159,999 - - -
33.2 Short Term Loans

Balance at the beginning of the Year - 3,719,782 - 3,719,782
Loans obtained during the year 8,691,899 - 4,000,000 -
Payments made during the year - (3,719,782) - (3,719,782)
Payable within one year 8,691,899 - 4,000,000 -
33.3 Finance Lease Liability

Leases obtained during the year 27,963,488 42,189,408 27,463,488 42,189,408
Payments made during the year (14,347,755) (7,831,803) (14,347,755) (7,831,803)
55,040,411 41,424,678 54,540,411 41,424,678
Interest in suspense (15,312,093) (11,594,708) (15,312,093) (11,594,708)
39,728,318 29,829,970 39,228,318 29,829,970
Lease rental payable within one year 10,101,528 7,198,732 10,101,528 7,198,732
Lease rental payable after one year 29,126,790 22,631,238 29,126,790 22,631,238
34 TRADE AND OTHER PAYABLES

Salaries and Incentives Payable 5,689,688 5,086,289 5,556,771 5,086,289
Creditors & Accrued Expenses 56,753,606 10,427,717 55,500,625 10,362,717
Other payable 20,442,066 20,949,740 20,442,066 20,949,740
82,885,360 36,463,747 81,499,462 36,398,746
35. RELATED PARTY DISCLOSURES

35.1 Related Party Transactions
The Company carries out transactions in the ordinary course of its business with parties who are defined as related parties in Sri Lanka
Accounting Standard 30 “Related Party Disclosures (Revised 2005)”, the details of which are reported below. The pricing applicable to
such transaction is based on the assessment of the risk and pricing model of the Company and is comparable with what is applied to
transactions between the Company and its unrelated Customers.
Name of the Company Nature of Name of Common Nature of transactions Amount

Relationship Directors Received/
(Charged) Rs.
Group
Twood Flooring (Pvt) Limited with:
Touchwood Limited Parent Mr. R A Maloney Capital Received (5,400,000)
Mrs. J G S Maloney Consultancy Fee Paid (6,082,423)
Payment made on behalf of TL 5,372,848
Convertion of Director’s Loan 3,000,000
Other Payments (87,000)
TIL Product Sales Commission 17,156,028
Return Paid on Agarwood Product 37,552,767
Payments made on behalf of TL 29,715,199
Touchwood (Pvt) Limited Affiliate Mr. R A Maloney Payments made on behalf of TW (Pvt) Ltd 15,000
Mrs. J G S Maloney Written Off of the Balance (1,156,643)
Mr. S P A Koralage
Twood Floring (Pvt) Limited Subsidiary Mr. R A Maloney Loan 20,000,000
Mrs. J G S Maloney Payments made on behalf of TWF (Pvt) Ltd 26,540,794
Mr. S P A Koralage Interest on Loan 18,466,667
Cash Receipts (50,000,000)
Touchwood Asia Limited Affiliate Mr. R A Maloney Technical fees (1,370,350)
Mrs. J G S Maloney
Mr. S P A Koralage
Farm Grow (Private) Subsidiary Mr. S P A Koralage Expense on Buldings 517,900
Limited
Mr. Channa Expenditure over Land 299,990
Abeygunawardana Audit Fee 17,500
Green Forestry Ventures Affiliate Mr. Channa Sale of Trees 37,383,720
(Pvt) Limited Abeygunawardene
Payments made on behalf of GFV 1,500
This note should be read in conjunction with Note 17 and 32.

103
35.2 Compensation to Key Management Personnel

According to Sri Lanka Accounting Standards 30 (Revised 2005) “Related Party Disclosures”, Key Management Personnel are those
having authority and responsibility for planning, directing and controling activities of entity. Accordingly, the Board of Directors (including
Executive and Non-Executive Directors) have been classified as Key Management Personnel of the Company. Emoluments paid to Key
Management Personnel have been disclosed in Note 6.
This Note should be read in conjuction with Note 17 - Amounts due from Related Companies.
Key Management Personnel Compensation

Company
Short term Long term Total Short term Long term Total
benefits benefits benefits benefits
Salary 31,410,797 - 31,410,797 20,622,045 - 20,622,045

Incentive 5,621,518 - 5,621,518 4,284,637 - 4,284,637
Group
Short term Long term Total Short term Long term Total
benefits benefits benefits benefits
Salary 31,410,797 - 31,410,797 20,622,045 - 20,622,045

Incentive 5,621,518 - 5,621,518 4,284,637 - 4,284,637
Interest on Loan given 1,000,000 - 1,000,000 - - -
• Rs.7,515,000 payments have been made by Mrs. J. G. S. Maloney on behalf of Twood Flooring (Pvt) Ltd and Rs.6,500,000 of which
has been settled by the Company during the year.
• Company has not incurred any amount as Termination benefits or Post Employment benefits on account of the key managerial
personnel during the year.
• Company has not provided loans, advances or other credit facilities in the names of key managerial personnel as at 31.03.2012.
• During the year Rs. 29,016,887 was refunded by Mrs. J. G. S. Maloney in respect of the trees acquired in 2009/10
35.3 There are no related party transactions those require specified disclosure in accordance with section 07 of the continuing listing
requirements of Colombo Stock Exchange.
36. COMMITMENTS AND CONTINGENCIES

SLAASMB Case
The Judgment to CA (Writ) 323/2007 filed against SLAASMB (Sri Lanka Accounting and Auditing Standard Monitoring Board) was
delivered in favor of the petitioner, Touchwood Investments PLC on the 25 of January 2010. SLAASMB has filed for leave to appeal
the Judgment given by the Court of Appeal in the Supreme Court on the 08 of March 2010 (SC SPL Leave to Appeal No 42/10) Appeal
No.42/10.
This case is pending as an appeal matter was heard before the Supreme Court on the 21 May 2012 and postponed until 06 November
2012 for arguments.
Case No: CA/WRIT/322/2007 (Touchwood Investments PLC Vs. Security and Exchange Commission of Sri Lanka)
In the Court of Appeal on 19 April 2007, the Court granted an Order, staying the operation of the directives of the SEC dated 09 March
2007. The Stay Order prevailing in the case No.CA (Writ) 323/2007 which was given against SEC has been extended by the Supreme
Court untill determination of the Appeal case No.SC/Appeal/100/2011.
Reserve Price for Agarwood Sales

Company promotes Agar wood Tree and has agreed a minimum reserve price of Rs.36 mn (Thai Bath 9.9 mn) on behalf of Touchwood
Ltd.
Volume Guarantee
Details of volume back guarantee given as at the Balance Sheet date are disclosed in Note No. 25.1 of the Financial Statements.
36.1 Litgation and Claims

There are no material litigations or claims that could have a material impact on the financial position of the company, or which would
lead to a disclosure in the Financial Statements.
37. EVENTS OCCURRING AFTER THE BALANCE SHEET DATE

No circumstances have arisen since the balance sheet date which would require adjustments to, or disclosure in the financial
statements.
105
Investor Information
SHARE DISTRIBUTION
SHAREHOLDING AS AT 31ST MARCH 2012
From To No of Holders No of Shares %
1 1,000 3,203 1,625,252 2.28

1,001 10,000 2,748 10,587,996 14.85
10,001 100,000 705 19,036,543 26.71
100,001 1,000,000 57 15,782,377 22.15
Over 1,000,000 05 24,238,232 34.01
6,718 71,270,400 100.00
CATEGORIES OF SHAREHOLDERS
Local Individuals 6,472 53,510,598 75.08
Local Institutions 204 10,571,470 14.84
Foreign Individuals 34 1,335,740 1.87
Foreign Institutions 8 5,852,592 8.21
6,718 71,270,400 100.00
DIRECTORS SHAREHOLDING AS AT 31ST MARCH 2012

No. of Shares %
Mr. R T Wijetilleke Nil Nil

Mr. R A Maloney 11,664,000 16.36%
Mrs. G S Jamburegoda 6,409,600 8.99%
Mr. S P A Koralage 496,000 0.70%
Mr. C Abeygunawardene Nil Nil
Mr. L L Kulatunga Nil Nil
Mr. P B Herath(Alternate director to Mr.S P A Koralage) Nil Nil
Mr. J S Olaboduwa(Alternate director to Mr.C Abeygunawardene) Nil Nil
Mr. A R Perera Nil Nil
Mr. D M De Silva Wijeyeratne Nil Nil
SHARE PRICES FOR THE YEAR

As at As at
31/03/2012 31/03/2011
Market price per share

Highest during the year Rs.33.20 (26.05.11) Rs.141.25
Lowest during the year Rs.12.80 (15.02.12) Rs. 21.50
As at end of the year Rs.15.50 Rs. 23.50
PUBLIC HOLDING
The percentage of shares held by the public 73.94%
Investor Information
20 Largest Shareholders
20 MAJOR SHAREHOLDERS OF THE COMPANY AS AT 31ST MARCH 2012

NAME NO OF SHARES (%)
1 Mr. R A Maloney 11,664,000 16.366

2 Mrs. S G Jamburegoda 6,409,600 8.993
3 Touchwood Limited 2,528,000 3.547
4 Seylan Bank PLC /Mr. Jayantha Dewage 1,847,132 2.592
5 HSBC International Nominees Ltd-SSBT-Deustche Bank AG Singapore A/C 01 1,789,500 2.511
6 Pan Asia Banking Corporation PLC /Mr. S Gobinath 876,000 1.229
7 Pan Asia Banking Corporation PLC /Nuwara Eliya Property Developers (Pvt) Ltd 755,180 1.06
8 Seylan Bank PLC /Capital Trust Holdings (Pvt) Ltd 688,085 0.965
9 Mellon Bank N A-Acadian Frontier Markets Equity Fund 644,000 0.904
10 Mrs. U R Wijayarathne 625,000 0.877
11 Amina Investments Limited 600,000 0.842
12 Mr. S S Abhayawickrama 562,200 0.789
13 Mr. S P A Koralage 496,000 0.696
14 Pan Asia Banking Corporation PLC. /Mr.Ravindra Erle Rambukwelle 470,000 0.659
15 Dr. A S Abeygunawardena 443,400 0.622
16 Multiform Chemicals Limited 420,000 0.589
17 Mr. K M R P B Kasturisinghe 400,900 0.563
18 Merchant Bank of Sri Lanka Limited/ Union Investments Ltd 400,000 0.561
19 Mr. L M S H Alnaqib 375,000 0.526
20 Mr. M S M Ali 354,500 0.497
32,348,497 45.388
Others 38,921,903 54.612
Total 71,270,400 100
107
Notice of Meeting
NOTICE IS HEREBY GIVEN that the Thirteenth Annual General Meeting 5. To re-elect Mr. Michael Kenneth Simmons who has been
of the Company will be held on Friday 28th September, 2012 at 9.30 appointed a Director during the year, in terms of Article 96 of the
a.m. at The Eagle, Water’s Edge, Ethul Kotte, Battaramulla for the Company’s Articles of Association.
following purposes.
6. To re-elect Mr. Malcolm Scorer who has been appointed a
1. To receive and consider the Report of the Directors and Director during the year, in terms of Article 96 of the Company’s
Statement of Accounts for the year ended 31st March 2012 with Articles of Association.
the Report of the Auditors thereon.
7. To re-appoint as auditors M/s, KPMG (Chartered Accountants) at
2. To re-elect Mrs. Swarna Maloney who retires by rotation at the a remuneration to be fixed by the Directors.
Annual General Meeting in terms of Article 91 of the Company’s
Articles of Association. BY ORDER OF THE BOARD
3. To re-appoint as a Director, Mr. L L Kulatunga, who is 70 years
of age and who vacates his office in terms of Section 210 of the
Companies Act No. 7 of 2007, and Mr. L L Kulatunga also retires
by rotation at the Annual General Meeting, in terms of Article 91
(Sgd.)
of the Company’s Articles of Association.
CORPORATE ADVISORY SERVICES (PVT) LTD
SECRETARIES
Notice is hereby given of the undernoted Ordinary Resolution
in relation to Mr. L L Kulatunga’s re-appointment to be passed
15th August 2012
in compliance with Section 211 of the Companies Act No. 7 of
2007.
“RESOLVED THAT Mr. L L Kulatunga who is 70 years of age be

and is hereby re-appointed a Director of the Company and it is
hereby declared as provided for in Section 211 of the Companies
Act No. 07 of 2007, that the age limit of 70 years referred to in
Section 210 of the said Companies Act shall not apply to the
said Mr. L L Kulathunga.”
4. To re-appoint as a Director, Mr. Aloysius Ralph Pereira, who is 74

years of age, and who vacates his office in terms of Section 210,
of the Companies Act No. 7 of 2007.
“RESOLVED THAT Mr. Aloysius Ralph Pereira who is 74 years of

age be and is hereby re-appointed a Director of the Company
and it is hereby declared as provided for in Section 211 of the
Companies Act No. 07 of 2007, that the age limit of 70 years
referred to in Section 210 of the said Companies Act shall not
apply to the said Mr. Aloysius Ralph Pereira.”
Notes
TOUCHWOOD INVESTMENTS PLC ANNUAL REPORT 2011/12 109
Form of Proxy
I/We ………………………………………………………………………………………………………………………………………
of…………………………………………………………………………………being a member/members of the above named Company
hereby appoint ……………………………………………………… of ………………………………………………….. whom failing
Roscoe Anthony Maloney of Colombo or failing him

Swarna Maloney of Colombo or failing her
Swamy Pandith Asitha Koralage of Colombo or failing him
Channa Abeygunawardene of Colombo or failing him
Liyanage Laksaman Kulatunga of Colombo or failing him
Aloysius Ralph Pereira of Colombo or failing him
Michael Kenneth Simmons of Colombo or failing him
Malcolm Scorer of Colombo or failing him
Mr./Mrs./Miss. ……………………………………………………………………………………………………………………………
of…………………………………………………………………………………………………………………... as my/our proxy to
represent me/us and vote on my/our behalf at the 13th Annual General Meeting of the Company to be held on Friday 28th September 2012,
at 9.30 a.m. and at any adjournment thereof and at every poll which may be taken in consequence of the aforesaid Meeting.
FOR AGAINST
1. To receive and consider the Report of the Directors and Statement of Accounts for the year ended
31st March 2012 with the Report of the Auditors thereon.
2. To re-elect Mrs. Swarna Maloney who retires by rotation at the Annual General Meeting in terms of
Article 91 of the Company’s Articles of Association.
3. To pass the Ordinary Resolution set out in the Notice of Meeting to re-appoint Mr. L L Kulatunga, who is
70 years of age, as a Director of the Company, and to re-elect Mr. L L Kulatunga who also retires by rotation
in terms of Article 91 of the Company’s Articles of Association.
4. To pass the Ordinary Resolution set out in the Notice of Meeting to re-appoint of Mr. Aloysius Ralph Pereira,
who is 74 years of age, as a Director of the Company.
5. To re-elect Mr. Michael Kenneth Simmons who has been appointed a Director during the year in terms of
Article 96 of the Company’s Articles of Association.
6. To re-elect Mr. Malcolm Scorer who has been appointed a Director during the year in terms of Article 96
of the Company’s Articles of Association.
7. To re-appoint as auditors M/s, KPMG (Chartered Accountants) at a remuneration to be fixed by the Directors.
Signed this ……………… day of ……………………..………….2012. ……………………………………..

Signature
NOTE:
1) A proxy need not be a member of the Company.
2) If you wish your proxy to speak at the meeting you should insert the words”and to speak” immediately before the words “and vote” in the
place indicated with an (*) and initial such insertion.
3) Instructions for completion appear on the reverse thereof
Form of Proxy
INSTRUCTION FOR COMPLETION OF FORM OF PROXY

1 Kindly complete the Form of Proxy by filling in legibly your full name and address, and your instructions as to voting, by signing in the space
provided and filling in the date of signature.
2. Please indicate with an “X” in the cages provided how your proxy is to vote on the Resolution. If no indication is given or if there is any doubt
as to how the Proxy should vote by reason of the manner in which the instructions are carried out, the proxy in his/her discretion may vote
as he/she thinks fit
3. The completed Form of Proxy should be deposited at the Registered Office of the Company at No. 28, Joseph Lane, Colombo 4, not less than
48 hours before the time appointed for holding the meeting.
4. If the Form of Proxy is signed by an attorney, the relative power of attorney should accompany the completed form of proxy for registration, if
such power of attorney has not already been registered with the Company.
Note
If the shareholder is a Company or body Corporate, Section 138 of the Companies Act No. 7 of 2007 applies to corporate shareholders of
Touchwood Investments PLC.
5. Please furnish the following information:
Shareholder Proxy holder

NIC No./ Passport No.
Nationality
Share Certificate No.
No. of Shares:
Future Sustainable. Corporate Information
At Touchwood we are deeply committed to
a sustainable future - because we know Name of the Company : Touchwood Investments PLC
that we must. Our business involves the Legal Form : A Public Quoted Company with Limited Liability
Incorporated on June 7, 1999
environment and our impact on it more Registration No. PQ - 217
closely than most. This is why we have to Registered Office

: No. 28, Joseph’s Lane,
Colombo 4, Sri Lanka.
consider social, political and environmental

Tel: +94 117 444 888
Fax: +94 117 444 889
impacts in all our undertakings. Because Board of Directors : Mr. Roscoe A. Maloney (Chairman)
we believe that it is more socially, ethically Mr. S. P. Asitha Koralage (Deputy Chairman)
Mr. Channa Abeygunawardene (Chief Executive Officer)
and financially rewarding to be a truly Mrs. Swarna Maloney
Mr. L. L. Kulatunga
sustainable company. Mr. A. R. Pereira
Alternate Directors : Mr. Janath Olaboduwa

Mr. Prageeth Herath
Secretary : Corporate Advisory Services (Pvt) Ltd
Registrars : P W Corporate Secretarial (Pvt) Ltd
Auditors : KPMG (Chartered Accountants)
Lawyer : Mr. Janath Olaboduwa
Bankers : The Hongkong and Shanghai Banking Corporation Limited

Sampath Bank PLC
Bank of Ceylon
Hatton National Bank PLC
Tax Consultants : BDO Partners,

Chartered Accountants,
Charter House,
65/2, Sir Chittampalam Gardiner Mawatha,
Colombo 2.
We pioneered the business model for managed forestry investments in the Asia Pacific region. And
that singular expertise sets us apart. Over the past 13 years, our constant research and hands-on
involvement with field experts and leading educational institutions has enabled us to incorporate
patented cultivation programs with proprietary design technology that deliver an assortment of
unparalleled products and services. These scientific advancements and sustainable practices provide
our clients socially-responsible investments through the practice of managed forestry, growing trees
with a high commercial value while preserving old-growth forests.
Future Sustainable.
www.touchwood.com
ANNUAL REPORT 2010/11

No. 28, Joseph’s Lane,
Colombo 4, Sri Lanka. TOUCHWOOD INVESTMENTS PLC
Tel: +94 117 444 888 ANNUAL REPORT 2011/12

Future Sustainable. TOUCHWOOD INVESTMENTS PLC ANNUAL REPORT 2011 - 12

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Future Sustainable. TOUCHWOOD INVESTMENTS PLC ANNUAL REPORT 2011 - 12

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TOUCHWOOD INVESTMENTS PLC

ANNUAL REPORT 2010/11

Touchwood Investments PLC

closely than most. This is why we have to Registered Office

Alternate Directors : Mr. Janath Olaboduwa

Secretary : Corporate Advisory Services (Pvt) Ltd

Registrars : P W Corporate Secretarial (Pvt) Ltd

Auditors : KPMG (Chartered Accountants)

Lawyer : Mr. Janath Olaboduwa

Bankers : The Hongkong and Shanghai Banking Corporation Limited

Tax Consultants : BDO Partners,

We recognise that our clients pay for our actions.

All stakeholders are given equal importance.

The culture of every employee and organisation is respected.

Diversity and objectivity of employment is maintained.

Touchwood is the pioneer of the agro-forestry investment industry in Sri

We empower PEOPLE We protect our PLANET We ensure PROFIT to our

“Our strong track record of performance on results delivery

Revenue 1,196,403 1,466,429

Two Year Financial Summary

Net Assets per Share 42.33 40.99

Revenue 1,196,403 1,466,429

Five Year Financial Summary

Market Value per Share 15.50 23.50 104.75 50.50 90.25

The Touchwood Plantations

Plantation Name Location Altitude Climate Species Planted Land Extent

Plantation Name Location Altitude Climate Species Planted Land Extent

Conclusive evidence that A future of opportunities await

But it is not just the opportunities for agro-forestry investments that

we have seen and most definitely benefited from the popularity of

15th August 2012

Deputy Chairman’s Statement

In this scenario, Touchwood’s business proposition gained recognition

With Touchwood’s investment Appreciations

15th August 2012

Our shareholders will be pleased to A year of dedicated excellence

During the year, we continued to enlarge on our strategy of

Our adoption of the set of standards, serves to further our focus on

Our position on Biological Asset Valuation

The Board of Directors

R A Maloney S P Asitha Koralage

Channa Abeygunawardene Swarna Maloney

Mr. Abeygunawardene possesses over 17 years of Management

Aloysius Ralph Pereira L L Kulatunga

Prageeth Herath Janath Olaboduwa

Nanthini Nanthakumar Somasiri Munasinghe Gayan Abeyveera

Prageeth Herath Channa Abeygunawardene Maj. Gen. Athula Jayawardene (Rtd.)

Management Discussion &

No of No of Guaranteed Total Projected Harvest IRR

40 250 1,900 825,000 2,955,062 16%

No of Initial Down Annual Total Annual Total Conservative IRR

50 805,200 80,520 1,207,800 2,013,000 25,000,000 21%

No of Initial Down Annual Total Annual Total Conservative IRR

40 393,750 39,375 669,375 1,063,125 10,000,000 17%

Management Discussion & Analysis

Touchwood engages in a sustainable business wherein sustainability and

• The best of risk mitigation in practice: 100% tree buffer stock,

Management Discussion & Analysis

Step 1 – Land Banking

Step 3 – Sustainable Crop Maintenance

Step 5 - Distribution of Returns

Our Business Model

Acquisition and Cultivation Crop Maintenance Harvest Distribution of