TEA SMALLHOLDER FACTORIES PLC No. 04, Leyden Bastian Road, Colombo 01.

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2 No. 04, Leyden Bastian Road, Colombo Jan-2018 STATEMENT OF PROFIT OR LOSS For the quarter ended For the nine months ended 31st December 31st December Note Change Change % % Revenue 660, , ,984,097 1,649, Cost of Sales (640,376) (535,869) 20 (1,881,169) (1,550,770) 21 Gross Profit 20,351 51,091 (60) 102,928 98,277 5 Other Operating Income 13,617 8, ,305 23, Administrative Expenses (15,353) (14,578) 5 (46,736) (45,430) 3 Management Fees (6,937) (9,175) (24) (24,894) (20,056) 24 Results From Operating Activities 11,678 35,377 (67) 72,603 56, Finance Cost (531) (373) 42 (1,736) (3,087) (44) Finance Income 1,864 1, ,982 2, Net Finance (Cost) / Income 1, ,246 (450) 822 Profit Before Tax 13,011 36,134 (64) 75,849 56, Tax Expense 5 (3,663) (10,245) (64) (21,300) (16,175) 32 Profit for the period 9,348 25,889 (64) 54,549 39, Rs. Rs. Rs. Rs. Earnings Per Share - Basic Dividend Per Share Figures in brackets indicate deductions. Tea Smallholder Factories PLC Interim Financial Statements 1

3 No. 04, Leyden Bastian Road, Colombo Jan-2018 STATEMENT OF COMPREHENSIVE INCOME Note For the quarter ended For the nine months ended 31st December 31st December Change Change % % Profit for the Period 9,348 25,889 (64) 54,549 39, Other Comprehensive Income Other comprehensive Income not to be reclassified to profit or loss in subsequent periods Tax on Other Comprehensive Income Total Other Comprehensive Income for the year, net of Tax Total Comprehensive Income for the Period, net of Tax 9,348 25,889 (64) 54,549 39, Figures in brackets indicate deductions. Tea Smallholder Factories PLC Interim Financial Statements 2

4 No. 04, Leyden Bastian Road, Colombo Jan-2018 STATEMENT OF FINANCIAL POSITION As at As at 31st December st March 2017 ASSETS Non-Current Assets Property, Plant and Equipment 766, , ,492 Lease Rentals Paid in Advance 2,591 2,677 2,655 Investment Property 176, , ,263 Intangible Assets 7,303 7,303 7,303 Other Non-Current Financial Assets 2,242 1, Other Non-Current Assets , , ,777 Current Assets Inventories 360, , ,443 Trade and Other Receivables 47,324 27,933 76,200 Other Current Assets 10,646 5,872 4,182 Short Term Investments 8,275 35, ,355 Cash in Hand and at Bank 33,247 3,008 1, , , ,297 Total Assets 1,415,048 1,307,416 1,405,074 EQUITY AND LIABILITIES Capital and Reserves Stated Capital 150, , ,000 Revaluation Reserve 403, , ,443 Revenue Reserves 472, , ,966 Total Equity 1,025, ,770 1,022,409 Non-Current Liabilities Deferred Tax Liabilities 175, , ,412 Retirement Benefit Obligations 42,857 41,366 42,255 Deferred Grants and Subsidies , , ,440 Current Liabilities Trade and Other Payables 148, , ,977 Amounts due to Related Parties 2,487 2,350 3,079 Bank Overdraft Income Tax Payable 15,650 2,930 8,747 Other Current Liabilities 2,546 2,519 4, , , ,225 Total Equity and Liabilities 1,415,048 1,307,416 1,405,074 Rs. Rs. Rs. Net Assets Per Share I certify that the financial statements comply with the requirements of the Companies Act No.7 of P. A. P. Perera Sector Financial Controller The Board of Directors is responsible for the preparation and presentation of these financial statements. S. C. Ratnayake J. G. A. Cooray Director Director Tea Smallholder Factories PLC Interim Financial Statements 3

5 CASH FLOW STATEMENT For the nine months ended 31st December CASH FLOWS FROM OPERATING ACTIVITIES Profit Before Tax 75,849 56,131 ADJUSTMENTS FOR : Finance Income (4,982) (2,637) Depreciation and Amortisation 45,117 45,198 Gratuity Charge and Related Cost 5,114 8,343 Amortisation of Grants (130) (140) Finance Cost 1,736 3,087 Profit on disposal of Fixed Assets (6,709) (343) Operating Profit before Working Capital changes 115, ,639 (Increase) / Decrease in Inventories (143,757) (127,614) (Increase) / Decrease in Trade and Other Receivables 27,576 28,904 (Increase) / Decrease in Other Current Assets (6,465) (1,122) (Increase) / Decrease in Other Non-Current Assets (474) 57 Increase / (Decrease) in Trade and Other Payables (2,629) 39,044 Increase / (Decrease) in Other Current Liabilities (1,877) (1,392) Cash Generated from Operations (11,631) 47,516 Finance Income Received 4,982 2,637 Finance Cost Paid (1,736) (3,087) Gratuity Paid (4,512) (4,508) Tax Paid (11,298) - Net Cash Flow from Operating Activities (24,195) 42,558 CASH FLOWS FROM INVESTING ACTIVITIES Purchase of Property, Plant and Equipment (34,497) (9,177) Proceeds from Sale of Property, Plant and Equipment 7, Net Cash Flow from / (used) in Investing Activities (27,212) (8,832) CASH FLOWS FROM FINANCING ACTIVITIES Dividend Paid (51,000) (15,000) Net Cash from / (used) in Financing Activities (51,000) (15,000) Net Increase / (Decrease) in Cash and Cash Equivalents (102,406) 18,726 Cash and Cash Equivalents at the beginning Note A 143,472 20,244 Cash and Cash Equivalents at the end Note B 41,066 38,970 NOTES A. Cash and Cash Equivalents at the beginning Cash and Bank Balances 1, Short Term Investments 142,355 20,104 Bank Overdraft - (227) 143,472 20,244 B. Cash and Cash Equivalents at the end Cash & Bank Balances 33,247 3,008 Short Term Investments 8,275 35,962 Bank Overdraft (456) - 41,066 38,970 (0) 0.17 Stated Revaluation General Accumulated Total Capital Reserve Reserve Profit As at 1st April , , , , ,814 Profit for the period ,956 39,956 Other comprehensive income Total comprehensive income ,956 39,956 First and final dividend paid / (15,000) (15,000) As at 31st December , , , , ,770 As at 1st April , , , ,966 1,022,409 Profit for the period ,549 54,549 Other comprehensive income Total comprehensive income ,549 54,549 First and final dividend paid / (51,000) (51,000) As at 31st December , , , ,515 1,025,958 Figures in brackets indicate deductions. STATEMENT OF CHANGES IN EQUITY Tea Smallholder Factories PLC Interim Financial Statements 4

6 OPERATING SEGMENT INFORMATION For the nine months ended 31st December Geographical Segment Galle Matara Ratnapura N'Eliya Total Segment Revenue Rs. Rs. Rs. Rs. Rs. Rs. Rs. Rs. Rs. Rs. Sale of Produce 1,011, ,537 85,981 78, , , , ,293 1,984,097 1,649,047 1,984,097 1,649,047 Segment Results Segment Revenue 1,011, ,537 85,981 78, , , , ,293 1,984,097 1,649,047 Revenue Expenditure (922,379) (771,049) (86,548) (84,096) (506,654) (386,286) (317,853) (259,117) (1,833,435) (1,500,548) Depreciation / Amortisation (22,835) (22,152) (2,423) (2,352) (11,959) (11,194) (6,299) (7,744) (43,516) (43,442) Gratuity Charge and Related Costs (1,670) (2,563) (982) (1,055) (1,122) (2,262) (445) (900) (4,218) (6,780) Segment Gross Profit / (Loss) 64,511 67,773 (3,972) (8,779) 7,528 8,751 34,862 30, ,928 98,277 Other Operating Income 41,305 23,790 Finance Income 4,982 2,637 Unallocated Expenses (48,472) (48,517) Management Fees (24,894) (20,056) Profit Before Tax 75,849 56,131 Segment Assets Allocated Assets Non - Current Assets Cost 499, ,645 74,652 60, , , , , , ,680 Depreciation / Amortisation (100,189) (82,465) (14,702) (13,555) (67,158) (50,271) (33,748) (27,686) (215,797) (173,977) Current Assets 221,141 40,901 9,720 5, ,253 12,188 66,699 5, ,813 63, , ,081 69,670 52, , , , ,731 1,179, ,470 Unallocated Assets Non - Current Assets Cost 217, ,300 Depreciation / Amortisation (20,520) (21,325) Current Assets 38, ,971 Total Assets 1,415,048 1,307,416 Segment Liabilities Allocated Liabilities Non Current Liabilities 12,221 11,857 4,262 4,956 9,448 8,886 4,427 4,618 30,357 30,317 Current Liabilities 72,114 24,448 4,702 3,430 26,243 (1,429) 26,124 5, ,183 32,097 84,335 36,305 8,964 8,386 35,691 7,457 30,551 10, ,540 62,414 Unallocated Liabilities Non Current Liabilities 188, ,092 Current Liabilities 40, , , ,233 Total Liabilities 389, ,646 - Segment Capital Expenditure Allocated Capital Expenditure 20,955 4, ,998 5,028 2,223-25,237 9,144 Unallocated Capital Expenditure 9, ,497 9,676 Figures in brackets indicate deductions. 5

7 OPERATING SEGMENT INFORMATION For the quarter ended 31st December Geographical Segment Galle Matara Ratnapura N'Eliya Total Segment Revenue Rs. Rs. Rs. Rs. Rs. Rs. Rs. Rs. Rs. Rs. Sale of Produce 320, ,597 28,074 27, , , , , , , , ,960 Segment Results Segment Revenue 320, ,597 28,074 27, , , , , , ,960 Revenue Expenditure (299,217) (261,956) (29,353) (28,543) (190,107) (135,888) (104,916) (93,495) (623,593) (519,882) Depreciation / Amortisation (7,687) (7,403) (811) (784) (3,995) (3,775) (2,103) (2,573) (14,596) (14,535) Gratuity Charge and Related Costs (633) (409) (823) (252) (582) (491) (149) (300) (2,187) (1,452) Segment Gross Profit / (Loss) 12,886 30,829 (2,913) (2,406) (426) 6,726 10,804 15,942 20,351 51,091 Other Operating Income 13,617 8,039 Finance Income 1,864 1,130 Unallocated Expenses (15,884) (14,951) Management Fees (6,937) (9,175) Profit Before Tax 13,011 36,134 Segment Capital Expenditure Allocated Capital Expenditure 9,751 2, , ,398 2,508 Unallocated Capital Expenditure ,398 2,879 Figures in brackets indicate deductions. 6

8 NOTES TO THE INTERIM FINANCIAL STATEMENTS 1 Corporate Information Tea Smallholder Factories PLC is a public limited company incorporated and domiciled in Sri Lanka listed on the Colombo Stock Exchange. 2 Approval of Financial Statements The interim condensed financial statements of the company for the nine months ended 31st December 2017 were authorised for issue by the Board of Directors on 17th January Basis of preparation The interim condensed financial statements of the company have been prepared in compliance with Sri Lanka Accounting Standard LKAS 34 - Interim Financial Reporting. These interim condensed financial statements should be read in conjunction with the annual financial statements for the year ended 31 March The interim condensed financial statements are presented in Sri Lankan Rupee and all values are rounded to the nearest thousand except when otherwise indicated. 4 Operating Segments An operating segment is a component of the company that engages in business activities from which it may earn revenues and incur expenses, including revenue and expenses that relate to transactions with any of the company s other components. The segments are determined based on the company's geographical spread of operations. All operating segments operating results are reviewed regularly by the CEO to make decisions about resources to be allocated to the segment and to assess its performance, and for which discrete financial information is available. Segment results that are reported to the CEO include items directly attributable to a segment as well as those that can be allocated on a reasonable basis. Unallocated items comprise mainly corporate assets (primarily the company s head office), head office expenses, and income tax liabilities. Segment capital expenditure is the total cost incurred during the period to acquire property, plant and equipment. 5 Tax Expenses For the nine months ended 31st December Current Income Tax Current Tax Charge 18,201 13,112 18,201 13,112 Deferred Income Tax Relating to origination and reversal of temporary differences 3,099 3,064 3,099 3,064 Total Tax Expense 21,300 16,175 7

9 6 Related Party Transactions For the nine months ended 31st December Transactions with Related Parties Parent company (Receiving) / rendering of services (1,298) (1,234) Companies under common control of the parent company Interest received / (interest paid) - - (Purchases) / sales of goods (8) (34) (Receiving) / rendering of services (39,326) (32,419) (Purchases) / sale of property, plant and equipment - - Rent (taken) / given (1,689) (1,656) (Guarantees taken) / guarantees given - - Companies which have significant influence (Receiving) / rendering of services (840) (809) Interest received / (interest paid) Transactions with Key Management Personnel of the Company The company has paid Rs million to their Directors as fees during the period ended 31st December 2017 (End December Rs. 2.7 million). Other than that there are no transactions, arrangements and agreements with close family members of Key Management Personnel or with companies controlled / jointly controlled / significantly influenced by Key Management Personnel and their close family members Terms and Conditions of Transactions with Related Parties Transaction with related parties are carried out in the ordinary course of business. Outstanding current account balances at the period end are unsecured, interest free and settlement occurs in cash. Management Fee The management fee to managing agents, John Keells Teas (Private) Limited was paid at contractual price. 7 Share Information 7.1 Public share holdings As at 31st December 2017 No. of Share No. of Share Holders % Holdings Holders % Holdings The shares held by the Public 1, , The number of shares held by the Board of Directors and the Chief Executive Officer are as follows: Names As at 31st December 2017 As at 30th September 2017 Mr. S. C. Ratnayake (Chairman) Nil Nil Mr. A. D. Gunewardene (Resigned with effect from 31st December 2017) Nil Nil Mr. J. R. F. Peiris (Resigned with effect from 31st December 2017) Nil Nil Mr. E. H. Wijenaike 10,000 10,000 Mr. R. E. Rambukwella Nil Nil Mr. A. S. Jayatilleke Nil Nil Mr. J. S. Ratwatte (Resigned with effect from 31st December 2017) 2,000 2,000 Mr. M. H. De Silva Nil Nil Mr. K. N. J. Balendra (Appointed with effect from 1st January 2018) Nil Nil Mr. J. G. A. Cooray (Appointed with effect from 1st January 2018) Nil Nil Mr. S. K. L. Obeyesekere (Appointed with effect from 1st January 2018) Nil Nil Mr. V. A. A. Perera (CEO) Nil Nil As at 30th September

10 7.3 Twenty largest shareholders of the company are as follows: As at 31st December 2017 As at 30th September 2017 Seq.No. Name No. of Shares % Holdings No. of Shares % Holdings 1 John Keells Holdings PLC 11,286, ,286, Akbar Brothers Limited 7,318, ,318, Central Finance Company PLC 6,854, ,854, CF Growth Fund Limited 1,933, ,933, Mr. K. D. S. R. Upasena 469, , Anverally & Sons (Private) Limited 392, , Seylan Bank Limited / Govindasamy Ramanan 103, , Mr. D. J. De Silva Wijeyeratne 98, , Mr. N. D. Kurukulasuriya 62, , Dr. D. S. A. Samaraweera 53, , Mrs. R. Z. Wickramanayake 44, , Dr. N. I. Wickramanayake 43, , Mr. C. S. N. Silvapulle 35, , Mr. C. N. Lawrence 24, , Mrs. Jacintha Aloysius 20, , Mrs. S. K. Leelananda 20, , Mr. H. A. S. Madanayake 20, , Mrs. Jeniffer Aloysius 20, , Mr. N. J. H. M. Cooray 20, , Mr. E. Gunatunga 20, , Total 28,839, ,842, Stated Capital is represented by number of shares in issue as given below: As at 31st December 2017 As at 30th September 2017 Ordinary Shares (in thousands) 30,000 30, Net Assets per share Net assets per share have been calculated, for all periods, based on the number of shares in issue as at 31st December Market Price per share For the quarter ended 31st December Highest Lowest Last Traded Dividend paid A first and final dividend of Rs per share for the financial year ended 31st March 2017 was paid on 14th June Capital Commitments The value of contractual commitments for acquisition of property, plant and equipment as at 31st December 2017 is Rs million. 10 Contingencies There is no contingent liability of the company as at 31st December Events After the Reporting Period There have been no events subsequent to the reporting date, which require disclosure in the interim condensed financial statements. 12 Values All values included in these financial statements are in Rupees '000s, unless otherwise stated. Rs. Rs. 9