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Annual Report 2011/12

Power integrated.

TOKYO

CEMEN

T COM

PAN

Y (LAN

KA) PLC | (A

nnual Report 2011/12

MissionTo actively participate in Sri Lanka’s construction industry effort towards achieving global standards by providing cement of high quality, better yield and affordability while meeting changing customer requirements to satisfaction.

ContentsCorporate Information 2, Performance Highlights 3, Operating Highlights 4, Corporate Profile 5, Chairman’s statement 8, Message from the President Nippon Coke & Engineering Co., Limited 10, Joint Managing Directors’ Message 11, Board of Directors 14, Profiles of the Directors 16, Annual Report of the Directors 17, Corporate Governance 22, Risk Management 25, Social Responsibility 28, Directors Responsibilities 34, Audit Committee Report 35, Report of the Remuneration Committee 36, Nomination Committee Report 37, Independent Auditor’s Report 38, Income Statement 39, Balance Sheet 40, Statement of Changes in Equity 42, Cash Flow Statement 43, Significant Accounting Policies 45, Notes to the Financial Statements 54, Shareholder & Investor Information 73, Graphical Review 76, Five Year Summary 78, Notice of Meeting 80

1Annual Report 2011/12 l

This year we are proud to announce our newest venture into the world of eco-friendly power generation with our 5MW Dendro Power Project with an investment of Rs. 1.5 billion. This new venture in Mahiyangana will operate parallel to our existing10 MW biomass power plant in Trincomalee.

Today as we continue to manage our very successful core business of cement manufacture, we are pleased to integrate these new ventures into our industry portfolio – operations which will generate employment at village level and empower rural communities, while developing the land in a sustainable manner.

Power integrated.

2 l TOKYO CEMENT COMPANY (LANKA) PLC

Corporate Information

Name of the CompanyTokyo Cement Company (Lanka) PLC

Company Registration No PQ 115 incorporated on 17th March 1982 and listed on 1st January 1984

Legal FormA public Quoted Company with Limited Liability

Board of DirectorsMr Edgar Gunatunga Chairman Non Executive Director

Mr S. R. GnanamJt Managing Director

Mr A. S. G. Gnanam Non Executive Director

Mr E. J. Gnanam Non Executive Director

Mr K. Yanagihara Jt Managing Director, Nominee Director ofof Nippon Coke & Engineering Company Limited, Japan

Mr S. V. Wanigasekera Nominee Director of Nippon Coke & Engineering Co Limited, Japan

Mr Tooru Tanimura Nominee Director of Nippon Coke & Engineering Co Limited, Japan

Mr R. Seevaratnam Non Executive Independent Director

Dr Harsha Cabral Non Executive Independent Director

Dr Indrajit Coomaraswamy Non Executive Independent Director

Company SecretarySeccom (Private) Limited, (Company Secretaries)Second Floor, 1E - 2/1, De Fonseka Place, Colombo 5.G: 2590 176, F: 2581 618, D: 2589 679E-Mail: [email protected]

Head Office469 - 1/1 Galle Road, Colombo 3.T. Phone: 2587 619 Fax 2500 897Web Site: www.tokyocement.lk

Subsidiary CompaniesFuji Cement Company (Lanka) Limited Tokyo Cement Colombo Terminal (Private) Limited

Tokyo Super Cement Company Lanka (Private) Limited Tokyo Cement Power (Lanka) Limited (initial stages)

Auditors BDO Partners, (Chartered Accountants)Chittampalam A. Gardiner Mawatha, Colombo 2.

Legal AdvisorsMurugesu & Neelakandan (Attorney at Law)

BankersCommercial Bank of Ceylon PLCSampath Bank PLCBank of Ceylon Citi Bank NA


Rs. Mn. Consolidated Company

2012 2011 2012 2011

PERFORMANCE

Turnover 22,927 16,495 8,533 6,636

Less: Cost of sales (19,044) (13,588) (6,718) (4,992)

Gross Profit 3,883 2,907 1,815 1,644

Profit Before tax 1,039 842 812 790

Profit After Tax 848 829 650 707

INFORMATION TO SHAREHOLDERS

Earning Per Share - Voting (Rs.) 3.20 2.96 2.14 2.40

Earning Per Share - Non Voting (Rs.) 3.20 2.96 2.14 2.40

Dividend Per Share - Voting (Rs.) 1.30 1.00 1.30 1.00

Dividend Per Share - Non Voting (Rs.) 1.30 1.00 1.30 1.00

Net Asset Value Per Share (Rs.) 20.61 18.81 16.44 15.31

Market Value Per Share - Voting (Rs.) 37.00 60.80 37.00 60.80

Market Value Per Share - Non Voting (Rs.) 27.00 44.00 27.00 44.00

KEY FINANCIAL INDICATORS

Return on Capital Employed (ROCE) 17.10% 18.41% 15.64% 17.64%

Interest Cover (Times) 3.38 2.73 6.07 5.21

Price Earning Ratio - Voting (Times) 11.56 20.54 17.29 25.33

Price Earning Ratio - Non Voting (Times) 8.44 14.86 12.62 18.33

Current Ratio 0.83 : 1 0.65 : 1 0.72 : 1 0.78 : 1

Quick Asset Ratio 0.49 : 1 0.39 : 1 0.43 : 1 0.60 : 1

Performance Highlights


Operating Highlights

Group Company

39%

23%

2.3%

11.4%

8%

98%

7%

29%

2.8%

8.2%

10.8%

12%

11%

For ease of reference, the operational highlights for the year under review are summarised below for both the Tokyo Cement Group and the Company. Detailed information is presented in the financial review of the Annual Report.

Earning Per share (Rs)

2012

2011

3.20

2.96

Net Cash Flow from Operating Activities (Rs Mn)2012

2011

1,843

946

Pre Tax Pro�t (Rs Mn)

2012

2011

1,039

842

Post Tax Pro�t (Rs Mn)

2012

2011

848

829

Pro�t Attributable to Equity Holders(Rs Mn)2012

2011

973

874

Return on Capital Employed (%)

2012

2011

17.1%

18.4%

Revenue (Rs Bn)

2012

2011

22.9

16.5

Earning Per share (Rs)

2012

2011

2.14

2.40

Net Cash Flow from Operating Activities (Rs Mn)2012

2011

787

898

Pre Tax Pro�t (Rs Mn)

2012

2011

812

790

Post Tax Pro�t (Rs Mn)

2012

2011

650

707


2012

2011

15.6%

17.6%

Revenue (Rs Bn)

2012

2011

8.5

6.6


Corporate Profile

In operation for three-decades, Tokyo Cement Company (Lanka) PLC is the largest manufacturer and supplier of cement in Sri Lanka. The cement industry is sometimes referred to as a barometer to gauge the country’s economic march to progress and prosperity. During the conflict, the industry faced numerous challenges to make and deliver cement to all corners of the island. Based on the island’s eastern coastline, Tokyo Cement, was equally challenged during the conflict, to ensure minimum disruptions to operations.

Tokyo Cement is one of Sri Lanka’s most valuable brands with an installed capacity of nearly two million tons of cement, over 600 employees and 14 billion rupees in assets.

Our stakeholders range from individual builders to commercial contractors and builders in the public and private sectors who rely on the quality inherent in all our products.

We aspire to provide consistent returns to our shareholders and to build on the reputation for excellence we have earned through the commitment and experience of the Tokyo Cement team.

The brainchild of three prominent industrialists, the company has laid the foundation for infrastructure and other large-scale projects of national and international significance.

A pioneer in cement manufacturing technology, Tokyo Cement lays claim to a number of industry firsts, including the setting–up of the country’s first automated cement factory.

As part of its efforts to pursue the Triple Bottom Line principle the company commissioned the first 10 megawatt biomass power plant in Trincomalee. The benefits of the 2 billion rupee initiative are twofold – it frees the company’s operations from reliance on thermal power generation via the national grid and acts as a source of eco friendly electricity.

Other pioneering feats include becoming the first local corporate to achieve the ISO 14001 Environment Management Systems certification, and the first cement manufacturer to achieve the ISO 9000 Quality Management Systems certification.

We have always worked on an ethos of pragmatic optimism, bringing our stakeholders into our plans and aligning them with the strategies that will take us ahead.

It is this philosophy that has helped us cement partnerships with our stakeholders for decades, gaining their commitment and loyalty in order for us to overcome adversity and move ahead.

The milieu of uncertainty and challenge in the past also spurred us to infuse initiatives and best practices that would effectively assist us to manage our cost efficiencies, increase productivity and institute systems and processes across our value chain, that would ultimately reflect on the bottom line.

We chartered an inspirational journey, remaining true to our values, ethics and principles but always keeping our end goal of being a proactive and positive contributor to the industry. Through that, we want to help build our country once more on a firm foundation.

The Tokyo Cement Group remained a strong partner in the government’s development drive, creating a strong partnership in the Hambantota port first phase, the Southern Highway, and the Upper Kotmale power plant. We helped build Sri Lanka’s longest bridge in Kinniya and the Manampitiya Bridge.

We are the only cement manufacturing company listed on the Colombo Bourse, having seen our pragmatic strategies add definite value to shareholder wealth. Our stock displayed consistency, while profitability remained on track.

This value drive is possible only with a team that remains true to our vision. We have a dynamic motivated team, for whom the challenges of the past have been learning experiences. They have garnered lessons from this knowledge and used it to tackle the challenges of the future.

We see immense opportunity for Sri Lanka, opportunities to which we have every intention to be a part of. We have already constructed the foundation for development, cementing partnerships that will undoubtedly be the trusses upon which we can build our company, while contributing positively to the growth of Sri Lanka.

The plans for the future have already been chartered and we remain extremely confident that we have the mettle, vision and commitment to take these plans forward.


MilestonesA tradition of excellence spanning over a quarter of a century has accrued a mass of industry firsts for Tokyo Cement, Sri Lanka’s first privately-owned cement manufacturing initiative.

We lead the field in receiving the SLS, ISO 9001 and ISO 14001 certifications and pioneered the country’s first automated cement factory.

We further introduced other ground breaking initiatives such as the manufacture of special high blaine quality cements; the use of the pipe conveyor system, the electronic rotary packer and the vertical roller press; and were the first to secure a captive power plant.

The company also initiated skill development seminars for masons, recognising the symbiosis between technology advancement and skill development as a part of our efforts to uplift the local industry as a whole.

HistoryIn 1982, a shared vision between enterprising individuals culminated in the establishment of Sri Lanka’s first privately-owned cement manufacturing company - Tokyo Cement Company (Lanka) PLC.

The partnership between Japan’s multi-national industrial conglomerate, Mitsui Mining Company, Japan and Sri Lanka’s St. Anthony’s Consolidated, a business group with interests in hardware and textiles, resulted in the manufacture of a local brand of cement adhering to international standards.

The late industrialist Deshamanya A Y S Gnanam, former Country Manager of Mitsui Company Limited Mr. Asano and Mr. Komath Subara, President of Mitsui Mining Company, Japan’s global titan in the coal and cement business, recognised the inherent potential of Trincomalee as a cement manufacturing hub.

The launch of a modern cement factory in this eastern port city marked the arrival of Tokyo Cement on the construction industry landscape. Over the years, Tokyo Cement has modernised and expanded the Trincomalee port jetty. We also set up Sri Lanka’s most state-of-art bagging plant in 2002.

We at Tokyo Cement are committed to support Sri Lankan master builders by delivering products of the highest quality which stand the rigours of time, and ensuring our customers enjoy a world class commodity at an affordable price.

Corporate Profile


Powerintegrated

Management discussion


Chairman’s statement

Currently 50% of the country’s requirement of cement is imported and the balance milled locally. I am pleased to report that your Group continues to be the leader in the local cement market.

Cement prices continue to be controlled by the regulator.

Ptofit before tax,Rs. 1.038 billion for the year

Revenue upRs. 6 billion

Dear Shareholder,

Three years have passed since the defeat of the Northern terrorist movement which waged war against the State for a period of 30 long years. Consequently, the country now enjoys a period of relative peace. Sri Lankans, filled with hope for the future began buying, building and investing more freely, boosting economic growth and business confidence.

To assess performance of the company it is imperative to look at the global and local operational environments under which it operated.

The Joint Managing Directors’ review will state in detail the group’s performance. However, as your Chairman, I too, would wish to comment in brief.

The US economy picked up but the growth was sluggish. Europe is facing a serious economic crisis and recovery is likely to be a protracted process. The “Spring uprising” in several Arab States has had a direct adverse impact on the Sri Lankan economy by exerting upward pressure on oil prices. In addition, sanctions on Iran have disturbed supplies from the country’s main source of oil. In addition, tea exports to Iran and Syria are in jeopardy for the same reason. Fortunately, worker remittances from that part of the world were not affected. Economies of China and India, two major economic powers, which are responsible for more than half the growth in the world economy, have slowed down.

Sri Lanka recorded a GDP growth of 8.3%. Main exports, apparel, tea and rubber, enjoyed both fairly high prices and encouraging export demand. Worker remittances of US$ 5 billion were an improvement of 25% over those of the previous year. Both interest rates and the exchange rate remained stable until the third quarter. Notwithstanding these positive aspects, the terms of trade and balance of payments mainly due to intermediate and capital goods imports, are matters for concern. Recently fiscal and monetary measures were brought into force to stabilise the country’s external account.

During the year in the building industry, the private sector was engaged mainly in housing, and housing schemes as well as some hotels and there were no major projects undertaken by the sector. On the other hand, the State continued with its ambitious mega projects, and the company, due to the quality of its products, enjoyed a substantial market share thereon. Currently 50 % of the country’s requirement of cement is imported and the balance milled locally. I am pleased to report that your group continues to be the leader in the local cement market. Cement prices continue to be controlled by the regulator. Global clinker prices, the main inputs in the manufacture, rose during the reviewed period but due to price control the Company was unable to immediately pass on cost increases to the end-customer. The move towards more flexible exchange rate management also exerted pressure

on costs at the end of the financial year. Notwithstanding these constraints, I am pleased to report that your Group reported a pretax profit of Rs. 1.039 billion as against the profit of Rs. 842 million the previous year. The low cost of energy generated by the company’s own plant, stringent cost controls, lowering of interest rates and increase in turnover contributed to the growth in profitability. The Company’s Biomass Plant generates cheap power for Company’s own use and the excess is sold to the national grid. The seven batching plants spread over the country continues to contribute positively to the Company’s operations. The new products, Tile Bond and Superflow, introduced couple of years back have commenced to show profits. The associate company, Tokyo Cement Colombo Terminal (Pvt) Ltd., engaged in bagging

During the year, in the building industry, the private sector was engaged mainly in housing and housing schemes as well as some hotels and there were no major projects undertaken by the sector. On the other hand, the State continued with its ambitious mega projects, and the company , due to the quality of its products, enjoyed a substantial market share thereon.


Edgar GunatungaChairman

56%

40%

38%

43%

imported cement, did not fare well due to inadequate supplies. Meaningful steps have now been put in place, and I am confident that the Company will turn to profitability during the current year.

I conclude by expressing my appreciation to the Joint Managing Directors and their management team for their outstanding performance and leadership skills exercised, to our staff for their exemplary efforts and dedication and to my colleagues on the Board for their guidance and assistance.

Thanking you

Edgar GunatungaChairman 16th June 2012

2012

2011

2010

2009

2008

1,923

440

1,083

2,408

1,925

Capital Investments (Rs Mn)


Message from the PresidentNippon Coke & Engineering Co., Limited

We expect the demand for cement will continue to grow in the financial year 2012/13, giving the Tokyo Cement Group more leeway to expand its presence in this competitive field.

Yoshichika NishioPresident

On behalf of the Japanese Joint Venture Partner, I would like to express our heartfelt appreciation to the shareholders of Tokyo Cement Company (Lanka) PLC for the confidence they have placed in the members of the Board of Directors.

I would like to extend my sincere thanks to the customers, dealers and staff of the Tokyo Cement Group for their continuous loyalty, exceptional consideration and support.

Demand for Tokyo Cement group products continued to grow helping the company report a healthy revenue, over the previous year. The company benefited from the economic growth and the construction demand which helped raise demand for cement. We also benefitted from a rapid boom in economic and construction activity in the north and east of Sri Lanka. The group’s consolidated profits also increased, due to growth of sales and reduction of financial cost.

We expect the demand for cement will continue to grow in the financial year 2012/13, giving the Tokyo Cement Group more leeway to expand its presence in this competitive field.

We are very pleased to hear that the A. Y. S. Gnanam Construction Training Academy is being built in the center of Sri Lanka, Dambulla, by Tokyo Cement Company (Lanka) PLC in memory of the deceased Mr. A. Y. S. Gnanam. This Academy is to train competent people for the construction industry in Sri Lanka. I hope this Academy will contribute not only to the construction industry but the whole economy of Sri Lanka. I believe that the group will contribute greatly to society and grow significantly.

I hope the fiscal year 2012/13 would be a prosperous year for the Tokyo Cement Group.

Yoshichika NishioPresidentNippon Coke & Engineering Co., Limited16th June 2012


Joint Managing Directors’ Message

Your company’s performance during the 2011/12 financial year, was commendable given the multiple challenges Tokyo Cement faced from a weaker rupee to the growing demands of the construction industry.

S R Gnanam Joint Managing Director

K YanagiharaJoint Managing Director

Dear Shareholders,

We welcome you to the 30th Annual General meeting of your company, one of the most profitable Sri Lankan-Japanese joint ventures.

As we mark 30-years of operations in 2012, Sri Lanka celebrates 60-years of diplomatic relations with Japan.

Your company’s performance during the 2011/12 financial year, was commendable given the multiple challenges Tokyo Cement faced from a weak rupee to the growing demands of the construction industry.

During the year under review, Sri Lanka enjoyed its second consecutive year of rapid economic growth since the end of conflict in 2009.

Sri Lanka has settled into a pace of stable economic growth in peaceful times, ready to face the global challenges of high oil prices, a Eurozone crisis and some turbulent times in the Middle East.

Macro outlookConsequently, Sri Lanka’s economy grew by 8.3 percent in 2011, the fastest expansion since independence from Britain in 1948. This growth bettered the 8.0 percent growth in 2010, the first full year of peace since the end of the conflict.

The industrial output, which accounts for under a third of GDP, grew by 9.6 percent. Within that, manufacturing grew by 8.1 percent, led by the export-oriented clothing industry. Construction and mining came in at double-digit growth, reflecting projects started since the conflict ended.

Services, the largest component of GDP, rose 8.8 percent. Hotel and restaurant activity was up by one-third, reflecting a 30.8 percent increase in tourist arrivals. Both transport and communications grew with the further integration of the northern and eastern provinces with the rest of the economy.

Agricultural output, however, was hit by adverse weather and heavy flooding in early 2011 and was down in the first half of the year, but it picked up in the second part of the year to show annual growth of 2.5 percent.

Construction industryThe construction industry, benefitted from the post-war economic boom, to expand by 9.3 percent in 2011, ably supported by a 12.0 percent increase in locally produced building materials. A large share of construction activity remained in the former war-zones of the north and east, where the government and the private sector are busy rebuilding or laying new infrastructure.

The once conflict affected areas are being transformed into modern townships with railroads, highways, water supply, irrigation, housing, hospitals, schools, administrative buildings and factories.

Overall, the government spent 6.2 percent of GDP or 407.5 billion rupees for infrastructure related activities, throughout the country, in 2011.

Some of the major projects completed in 2011 include: the first phase of the Southern Expressway, the Norochcholai coal power plant and the Hambantota Port.


The Upper Kotmale hydro power project is due to be completed in 2012. In addition, the second phase of the Norochcholai power plant, the Colombo South Harbour, the Hambantota port and the Southern Expressway are expected to begin in 2012.

Work on the first phase of the Mattala International Airport is due to be completed by end-2012, while work on the Colombo – Katunayake Expressway and Colombo Outer Circular Highway have already begun.

Therefore, given the rising demand for cement and the drain on national reserves due to imports, it would be of national interest to encourage domestic manufacture of cement.

Product developmentYour company plans to expand production of Ready-mix concrete products as well as the range of value added products, we currently retail on a small scale.

Our value added product segment includes Tokyo Superbond, a tile adhesive; Tokyo Super Plaster Mix; Tokyo Superbond Rapid Set tile adhesive; Tokyo Superflow Waterproofer; Tokyo Superflow Standard; and Tokyo Super Pre-mix concrete.

These products have been well received in the market and we are confident of expanding our market share in the coming months.

Your company continues to invest in research and development (R&D), to strengthen our core products and extend our value-added cement portfolio.

In 2012, we took our R&D activities a step further, by opening an independent cement

laboratory in Dambulla that offers testing facilities for construction firms, house builders and even competitors.

Tokyo Cement also continued to develop new cement related products and introduce international best practices to Sri Lanka’s construction industry in a bid to support industry development and provide better value for consumers. This process of introducing innovative building technologies and techniques, have gained in importance in Sri Lanka, due to rapid urbanisation and rise in demand for land. Currently there is an urgent need to re-examine town planning, space management and the efficient use of raw materials for construction purposes, in Sri Lanka. While the Tokyo Cement group looks for ways to develop new cement related products, the construction industry in Sri Lanka as a whole, still lags somewhat, in terms of modernisation.

Tokyo’s operationsYour company remained the largest dedicated cement manufacturer, despite the competition by many local and foreign cement brands.

We witnessed a strong demand for our cement during the year, largely stemming from government led, mammoth infrastructure activities in the country.

Total cement used in Sri Lanka, between January and December 2011, rose 21.6 percent, to 4.58 million metric tonnes, according to the Central Bank of Sri Lanka.

Local production of cement rose 13.6 percent, to 1.97 million metric tonnes, while cement imports increased by 28.4 percent, to 2.58 million metric tonnes.

Much of our demand came from government-related projects, where we supplied cement in bulk.

During the year under review, your company was involved in some of the country’s largest infrastructure projects including the Hambantota Port (first phase), the Southern Highway, the Upper Kotmale power plant, the Kinniya bridge and the Manampitiya bridge.

Given the superior quality of our products we are confident the government of Sri Lanka will continue to consider us a preferred partner for many other large scale, national infrastructure projects in the pipeline.

The ongoing construction boom in the leisure industry, also helped lift our cement sales in the year under review. Many local hotels are being refurbished or expanding operations, to ready themselves to greet a record 2.5 million tourists by 2016.

Sri Lanka is back on the radar as a tourist destination, and on the verge of a hotel building boom with both international hospitality groups and local players launching major projects.

Foreign hotel operators like Hong Kong-based Shangri-La, US based Starwood Hotels Sheraton brand, Swiss-based Mövenpick and Bangkok-based Six Senses are some of the major international brands that are exploring opportunities in Sri Lanka.

Joint Managing Directors’ Message

Your company plans to expand production of the value added product segment including Tokyo Superbond, a tile adhesive; Tokyo Super Plaster Mix; Tokyo Superbond Rapid Set tile adhesive; Tokyo Superflow Waterproofer; and Tokyo Superflow Standard.

Ptofit Attributable to Equity Holders of the parent Rs. 973.3 Million

Total Capital Investment during the year Rs. 1.9 Billion


Financial reviewYour company performed well during the year under review, which reflects the overall post-war bullish sentiment prevalent in the country.

Group revenues leapt 39 percent, to 22.93 billion rupees, during the financial year ended March 31, 2012, from 16.49 billion rupees reported during the same period a year earlier.

Gross profits gained 33.6 percent, to 3.90 billion rupees, in 2011/12 from 2.9 billion rupees a year earlier.

We managed to contain our financial costs to 435.5 million rupees in 2011/12, from 485.58 million rupees reported in the same period a year earlier. This was one of the many measures that contributed towards boosting our profit attributable to Equity holders of the parent by 11.3 percent to 973 million rupees during the year under review, from 874 million rupees in the 2010/11 financial year.

We import all our clinker requirements, which are ground and mixed at our plant in Trincomalee. With the rupee weakening and the increase in fuel prices, the cost of production increased, hurting our margins and increasing our operating expenses.

The maximum retail price of cement is controlled in Sri Lanka and prior approval of the Consumer Affairs Authority (CAA) is required for any price increases. However, there is always a time lag between submitting an application to the CAA for a price increase and the CAA granting such approvals. As a result, the company is forced to absorb cost increases until the price increase can be implemented.

Future outlookWe are expanding our drive to embrace green energy throughout the production process. Our vision is to find ways to trim our costs and also look for ways to reduce our reliance on fossil fuels.

Your company continues to successfully generate power through a biomass power plant at the Trincomalee factory. The biomass power plant at Trincomalee currently generates 10 MW of electricity, to power our cement plants. The excess capacity generated is sold to the national grid, supporting national energy requirements.

We are also exploring other areas of possible expansion into the biomass power segment, by using paddy husk and wood chips of the gliricidia tree.

Another 5 MW biomass dendro power plant is being installed in Mahiyangana, where the entire output is sold to the national grid.

We are constantly exploring ways to deploy environmentally friendly energy throughout our operations, to preserve the natural environment.

AppreciationsWe extend our sincere appreciation to our Chairman and the Board of Directors for their stewardship to steer the company during some very challenging times.

Our heartfelt thanks go out to our Tokyo Cement team, for their unstinted support to ensure the smooth running of the company. Their dedication has helped the company retain its dominant position in the local cement market.

We thank our extensive family of suppliers, dealers, customers and numerous business partners for their loyalty and confidence placed in our company throughout the years.

Finally, we acknowledge the support extended to us by numerous State institutions and local authorities that created a conducive environment to continue with our businesses.

S R Gnanam Joint Managing Director

K YanagiharaJoint Managing Director

16th June 2012Colombo


Board of Directors

Left to RightS. V. Wanigasekera , S. R. Gnanam , E. Gunatunga, R. Seevaratnam , Dr. I. Coomaraswamy


Left to RightDr. H. Cabral, A. S. G. Gnanam, Tooru Tanimura, W. C. Fernando, K. Yanagihara, E. J. Gnanam


Mr. E. Gunatunga Director - Appointed to the Board in June 1997 Chairman since February 2007. Joined Sampath Bank as Managing Director/Deputy Chairman in January 1991. Retired from position of Managing Director/Deputy Chairman in December 1996 and continued as a Director. Appointed Chairman on September 24th 1998. Counts 53 years banking experience, and serves on the boards of several public companies.

Mr. S. R. Gnanam Appointed to the Board in 1983. Over Twenty Five years working experience in Business Management, Strategic planning, Social and Economic Research. Chairman of South Asian Investment (Private) Ltd and Alexandra Industries (Ceylon) Ltd. CEO of Capital City Holdings (Pvt) Ltd., Capital City Development (Pvt) Ltd., Capital City Farms (Pvt) Limited, St. Anthony’s Consolidated (Private) Limited and St. Anthony’s Hardware (Pvt) Limited.

Mr. K. Yanagihara Appointed to the Board in November 1998. Graduated Minning Faculty of Akita University in 1967. Entered Mitsui Mining Co., Ltd. as a Mining Engineer in 1967. At Sunagawa Mining Colliery in Hokkaido. Assigned to Mining Engineer and Manager at Undergound Mine Colliery for seven years in Canada from 1972. Assigned to Manager at Open Pit Coal Mine for Seven years in Canada from 1981. Worked as Mining Engineer in Indonesia, Mongolia and Malaysia. Worked as a General Manager of Mitsui Mining Co., Ltd, in Tokyo. Professional Engineer (Mining).

Mr. A. S. G. Gnanam Appointed to the Board in August 1999. Attended Illinois Institute of Technology Graduated in Industrial & Mechanical Engineering in 1973. Chairman & Managing Director St. Anthony’s Industries Group

(Pvt) Ltd., Also Chairman of Rhino Roofing Products Ltd., CEO of many private and public liability companies.

Mr. E. J. GnanamAppointed to the Board in February 2007. Managing Director of South Asian Investments (Private) Limited, an investment company and also the Managing Director of Orion City Limited, Rhino Roofing Products Limited and also in the Board of Private, Public and listed companies. Has wide experience at leading corporate sector institutions in the garments trade, manufacturing and services.

Mr. R. Seevaratnam Appointed to the Board in May 2007. Fellow Member of The Institute of Chartered Accountants of Sri Lanka and England & Wales and holder of General Science Degree from the University of London. Former senior partner of KPMG Ford, Rhodes, Thornton & Company. Director of Haycarb PLC, Dipped Products PLC, Acme Printing & Packaging PLC, Acme Packaging Solutions (Pvt) Ltd., Tea Factories Small Holders PLC, Hatton National Bank PLC, Hayleys MGT Knitting Mills PLC, Hayleys Advantis Ltd. Shaw Wallace & Hedges PLC, and in many Public Limited Companies.

Dr. H. CabralDr. H. Cabral Appointed to the Board in March 2009. President’s Counsel, Ph.D. in Corporate Law (University of Canberra), Australia, Commissioner - Law Commission of Sri Lanka, Member (NCED-National Council for Economic Development), Legal Cluster, Member - Board of Studies - Council of Legal Education SL, Lecturer and Examiner - University of Wales, University of Colombo and Sri Lanka Law College, Vice-President - BRIPASL (Business Recovery and Insolvency Practitioners’ Association of SL), Member - Academic Board of Studies - Institute of Chartered Accountants of Sri Lanka.

Mr. S. V. Wanigasekera Appointed to the Board in 1983. Stanley Vincent Wanigasekera, B.Com (London), F.C.A. (UK), F.C.A. (Sri Lanka). Chairman of Central Finance Company PLC in the year 2006. Served as the Executive Chairman of Ceylon Tobacco Company PLC and was a Director of Hatton National Bank PLC, Richard Peiris & Company PLC, Associated Motorways PLC and Brown & Company PLC. Chairman of Central Industries PLC. He has over 53 years of finance and management experience in Sri Lanka.

Dr. Indrajit CoomaraswamyAppointed to the board in March 2011, Dr. Indrajit Coomaraswamy brings 30 years of experience in policy making and providing economic advisory services, on both macroeconomic and structural issues at National and Intergovernmental levels. He obtained his Bachelors and Masters in Economics from the Cambridge University of UK and subsequently obtained a Doctorate from the University of Sussex. His immediate involvement was as Director, Economic Affairs at the Commonwealth Secretariat. He has, previously, at various times, been involved in advising the Prime Minister and the Minister of Economic Reform, Science and Technology, Sri Lanka on negotiating with Bretton Woods Institutions and other major donors, the Central Bank of Sri Lanka and the Ministry of Finance & Planning on matters relating to macroeconomics and structural reforms

Mr. Tooru TanimuraAppointed to the Board in 2010. Graduated from the Tokyo Metropolitan University in 1981 with a Bachelor of Economics. Specialises in Corporate Planning, Administration, Finance and Accounting. Joined “Mitsui Mining Company Ltd” in 1981 as a Business Clerk and has served as Manager of the Business Development Department and Deputy General Manager of the Corporate Planning Department.

Profiles of the Directors


Annual Report of the Directors

Management Discussion OverviewThe following information details the operational environment of Tokyo Cement Company (Lanka) PLC and its f subsidiaries Fuji Cement Company (Lanka) Limited, Tokyo Super Cement Company Lanka (Private) Limited, Tokyo Cement Power (Lanka) Limited and Tokyo Cement Colombo Terminal (Private) Limited .

Global cement industryGlobal financial conditions deteriorated, particularly with intensified strains in the Euro area, reflecting the downgrading of sovereign ratings in many countries by international rating agencies and further escalating downside risks to global economic activity.

According to the latest forecasts by the OECD and IMF, the world economy, which grew at 5.2 percent in 2010, is estimated to have expanded only by 3.8 percent in 2011. However, there was some optimism in the cement industry.

Global demand for cement was estimated to have risen by 7 percent in 2011, following on from last year’s 9 percent increase. China continued to dominate global cement consumption, accounting for about 50 percent.

Sri Lankan cement industryPost-war reconstruction and floods, helped boost demand for cement in Sri Lanka in 2011. Although energy costs increased in 2011, the surge in private credit contributed towards higher demand for cement.

Total cement consumed in Sri Lanka, between January and December 2011, rose 21.6 percent, to 4.58 million metric tonnes, according to the Central Bank of Sri Lanka.

Local production rose 13.6 percent, to 1.97 million metric tonnes, while cement imports went up 28.4 percent to 2.58 million metric tonnes. Much of the demand came from the government’s large scale infrastructure projects for which we supplied cement in bulk.

Sri Lankan legal framework Cement is a price controlled product in Sri Lanka and is regulated by the CAA. Therefore, the company requires written approval from the CAA to increase cement prices.

Review of principal activities The company’s core activities are the manufacture of Ordinary Portland Cement, Portand Pozzolana Cement, Masonry Cement, tile adhesives, water proofing products, Pre-mix Concrete and Ready-mix Concrete.

TurnoverGroup revenues rose 39 percent to 22.93 billion rupees during the financial year ended March 31, 2012, from 16.49 billion rupees reported during the same period a year earlier. Company revenues rose to 8.53 Bn rupees during the year under review, from 6.63 Bn rupees in the previous year.

ProfitabilityGroup gross profits gained 33.6 percent, to 3.90 billion rupees in 2011/12, from 2.90 billion rupees a year earlier. Company gross profits increased to 1.81 billion rupees during the year under review, from 1.64 billion rupees in the previous year.

Profit attributable to equity holders increased by 11.4% to 973.3 million rupees during the year under review, from 874.0 million rupees over the 2010/11 financial year.

Earning per sharePlease refer page 56 note 07.

Property, plant and equipmentThe consolidated property, plant and equipment costs, at the year ended March 31, 2012 was 13.9 billion rupees, as against 13.4 billion rupees recorded at the end of the preceding year. The company’s property, plant and equipment were valued at 7.7 billion rupees, compared to 7.4 billion rupees a year earlier.

Details regarding the movement of assets are provided in the notes to the Financial Statements.

The group’s total capital expenditure for the year under review was 1.923 billion rupees, as against 440 million rupees in the previous year. A total of 1.291 billion rupees worth of group assets were disposed of during the year.

Current assetsThe total current assets of the group, as at March 31, 2012, were valued at 3.6 billion rupees, as against 2.8 billion rupees in the previous year. The total current assets of the company stood at 1.79 billion rupees during the year under review, compared to 1.82 billion rupees in the previous year.

Group gross operating profits gained 33.6 percent, to 3.90 billion rupees, company gross operating profits increased to 1.82 billion rupees and profit attributable to equity holders increased by 11.4% to 973.3 million rupees, during the year under review.


Debt Long-term borrowings of the group amounted to 1.67 billion rupees, as at March 31, 2012, as against 940 million rupees a year earlier. Our interest costs for 2011/12 was 436 million rupees, against 485 million rupees in 2010/11.

InvestmentsA total of 1.923 billion rupees was invested on property, plant, equipment and capital work in progress during the year. The total capital expenditure during the previous year was 440 million rupees. Short-term investments were made in Treasury Bills and Term Deposits.

Stated capitalThe company’s stated capital at the end of the year under review, was represented by 202.5 million ordinary voting shares and 101.25 million ordinary non-voting shares.

ReservesThe group’s total reserves totalled 3.9 billion rupees, as at March 31, 2012, compared with 3.2 billion rupees a year earlier. This includes 150 million rupees in capital reserves and 3.7 billion rupees in revenue reserves.

DonationsThe group donated 2.7million rupees among numerous charities during the year. In the previous year, group donations amounted to 5.7 million rupees.

TaxationThe Company is not liable for income tax at the Balance Sheet date due to the reason mentioned in the accounting policy number 2.4.2.2 from page 50 to 51 of the Financial Statements.

Deferred tax is provided using the liability method on temporary differences at the Balance Sheet date between the tax bases of assets and liabilities, and their carrying amounts for financial reporting purposes.

Deferred tax for tax holiday companiesFor group companies under BOI tax holidays, deferred tax during the tax holiday period has been recognised for temporary differences, when reversals of such differences extend beyond the tax exemption period, taking into account the requirements of SLAS 14 and The Institute of Chartered Accountants of Sri Lanka (ICASL) council’s ruling on deferred tax. Please refer accounting policy number 2.4.2.2.2 in page 51 and note 20 in page 63.

Shareholders informationInformation provided separately from page 73 to 77.

Post-balance sheet eventsPlease refer note 30 on page 72.

Employment policiesIn employment practices, the group continues to abide by its non-discriminatory policy on gender, race and religion.

The group respects each and every individual and career advancement opportunities are provided to all employees without exception.

The group is as committed as always to creating a zero -lost-workday work environment, with occupational health and safety being a primary imperative within our operations.

We had a total of 608 permanent employees and 71 casual workers on our payroll as

at March 31, 2012. They received a total remuneration package of 360 million rupees, which exceeds the remuneration payments of the previous year by 85 million rupees.

CustomersThe Directors consider the patronage extended by our customers as invaluable, titling them - the greatest source of strength and inspiration in the forward journey of the company.

The company continues to be committed to provide total satisfaction to our customer base by enhancing the quality of our products and services.

SuppliersThe group continues to thrive on the strong bonds with all its suppliers, based on trust and reliability.

Statutory paymentsThe Directors are satisfied that all statutory payments in respect of employees, have been complied with fully, to the best of their knowledge.

A total of 1.923 billion rupees was invested on property, plant, equipment and capital work in progress during the year.

The group continues to thrive on the strong bonds with all its suppliers, based on trust and reliability.



Environment protectionThe company, which was the first Sri Lankan company in the cement industry to obtain the ISO 14001 Environmental Management Certificate, continues its unequivocal commitment to environmental conservation and preservation, instituting best practices in the efficient use of natural resources, to ensure that future generations will have a planet that’s green, safe and healthy. During the year under review, we have been working on qualifying for the ISO 17025 standard, for our laboratories.

Research and Development (R&D)The company continued to invest in R&D this year as well.

Corporate governanceThe company considers sound governance measures and appropriate internal control as an integral facet of operations. The practices followed by the company are set out on page 22 to 26.

Going concernPreparation of financial statements have been done on the going concern basis, as confirmed in the Statement of Directors’ Responsibilities on page 34.

Retiring directorsTo re-elect Dr. Harsha Cabral who retire by rotation in terms of Article 113 of the Articles of Association; to re-elect as a Director, Mr. Edgar Gunatunga and being over the age of 70 years and who retires in terms of Articles of Association and pursuant to Section 211 of the Companies Act No. 7 of 2007 for which special notice of the following ordinary resolution has been given by a member for the purpose: That the age limit referred to in Section 210 of the Companies Act No. 7 of 2007 shall not apply to Mr. Edgar Gunatunga who is 80 years and that he be re-elected a Director of the Company.

Directors’ InterestsThe Directors’ Interests in the Company contracts appear on page 70 of the Financial Statements and have been declared at the meetings of the Directors.

Apart from the information disclosed, the Directors have no other direct or indirect interest in any contracts or proposed contracts pertaining to the business of the group.

Major shareholdingsThe twenty majority shareholders and the percentage held by each of them as at March 31, 2012 appear on page 75.

Annual general meetingThe Annual General Meeting will be held on 20th July, 2012 at 4.45 p.m. The notice of the Annual General Meeting appears on page 80.

AuditorsBDO Partners, Chartered Accountants, are the auditors of the company. They are recommended for re-election.

Group structureTokyo Cement Company (Lanka) PlcSubsidiaries percentage of holding• Fuji Cement Company (Lanka)

Limited. 100 percent owned• Tokyo Super Cement Company Lanka

(Private) Limited. 100 percent owned• Tokyo Cement Colombo Terminal

(Private) Limited. 56.85 percent owned

• Tokyo Cement Power (Lanka) Limited. 100 percent owned

Auditors’ reportThe Financial Statements for the year ended March 31, 2012 have been audited by BDO Partners and their report is given on page 38.

Significant accounting policiesThe Significant Accounting Policies adopted in the preparation of Financial Statements are given on page 45 to 53 of the Annual Report.

Board of Directors

Mr. Edgar Gunatunga Chairman

Mr. S.R. Gnanam Joint Managing Director

Mr. K. Yanagihara Joint Managing Director, Nominee Director of Nippon Coke & Engineering Company Limited, Japan

Mr. A.S.G. Gnanam Non-Executive Director

Mr. E.J. Gnanam Non-Executive Director

Mr. R. Seevaratnam Non-Executive Independent Director

Dr. Harsha Cabral Non-Executive Independent Director

Dr. Indrajit Coomaraswamy Non-Executive Independent Director

Mr. S.V. Wanigasekera Nominee Director of Nippon Coke & Engineering Company Limited, Japan

Mr. Tooru Tanimura Nominee Director of Nippon Coke & Engineering Company Limited, Japan


Directors’ responsibilities for financial statements The Directors are responsible for the preparation and presentation of Financial Statements of the company to reflect a true and fair view of the state of its affairs. The Statement of Directors’ Responsibilities for the Financial Statements is given on page 34 of this Annual Report.

Equitable treatment to shareholdersThe Directors at all times ensure that all shareholders are treated equitably.

Compliance with laws and regulationsTo the best of the knowledge and belief of the Directors, the group has not engaged in any activities violating the laws and regulations of the country.

Outstanding litigationsIn the opinion of the Directors and the company lawyers/legal counsel, litigations pending against the company will not have major impact to the Financial Statements.

Interest registerAs required by the Companies Act No. 07 of 2007 Interest Registers have been maintained by the company.

Financial statementsThe Financial Statement of the group and the company are given on page 39 to 72 of the Annual Report.

Directors’ remunerationDirectors’ remuneration in respect of the group and the company for the financial year ended March 31, 2012 is given in note 5 on page 54 of the Annual Report.

Related party transactionsDirectors have disclosed related party transactions in terms of the Sri Lanka accounting standards 30 (revised 2005) and such transactions are given in notes 28.1, 28.2, 28.3 on page 70 to 72 of the Annual Report.

Contingencies and commitments Information with regards to contingent liabilities and capital commitments as at March 31, 2012, are given in note 25 & 26 in page 66 of the Financial Statement.

Board committeesThe Board has appointed a number of committees, with specified terms of reference, to improve management effectiveness of the company. Accordingly the following committees have been constituted• Audit committee• Remuneration committee• Nomination committee

The reports of the committees are given on page 35 to 37 of the Annual Report.

Internal controls and risk management Details of internal controls and risk management are given in page 22 to 26 of the Annual Report.

Carbon credits from biomass power projectTokyo Cement 10 MW biomass power project is the first of its kind project in Sri Lanka that has been accepted by CDM apex body, United Nations Climate Secretariat and registered under UNFCCC Carbon Credit Program. The project is generating 40,000

tons of Certified Emission Reductions (CER) per year. From the date of CDM registration on 26th October 2009, the project has successfully earned Certified Emission Reductions by generating power from agricultural residues such as paddy husk, sawdust and gliricidia sticks.

Tokyo Cement Company has also registered this project under Voluntary Carbon Standard (VCS) and has successfully verified 30,496 Pre-CDM registration Voluntary Carbon Units (VCU) for the first year of power plant operation.

Despite strict monitoring and verification standards of UNFCCC, Tokyo Cement has started verifying emission reductions of second and third year of post CDM power plant operation and these Carbon Credits are to be issued to the market in 2012.

Director’s meetingsThe Board of Directors met eight times during the year under review.

DividendsYour Directors have recommended a tax free first and final dividend of 1.30 rupees, per share, amounting to 263 million rupees on issued stated capital of ordinary voting shares and 1.30 rupees per share amounting to rupees 132 million on issued stated capital of non-voting ordinary shares of the company for the financial year under review. The dividend warrant will be posted on or before 31st July, 2012 and the shares will be quoted ex-dividend with effect from 23rd July, 2012 as per the rules of Colombo Stock Exchange.


Your Directors have recommended a tax free first and final dividend of 1.30 rupees, per share, amounting to 263 million rupees on issued stated capital of ordinary voting shares and 1.30 rupees per share amounting to rupees 132 million on issued stated capital of non-voting ordinary shares of the company for the financial year under review.


Director’s ShareholdingDirector’s Shareholding - Ordinary Shares

S R Gnanam K Yanagihara Joint Managing Director Joint Managing Director

Seccom (Private) LimitedCompany Secretaries,

16th June 2012Colombo

Voting ordinary shares Non-voting ordinary shares

No of shares held as at March

31, 2012


31, 2011


31, 2012


31, 2011

Local Joint Venture Partner - St. Anthony’s Consolidated (Pvt) Ltd.

55,687,252 55,687,252 - -

Mr. Gnanam A. S. G. 11 11 - -

Mr. Gnanam S. R. - Joint Managing Director 11 11 - -

Mr. Gnanam E. J. 11 11 - -

Mr. Edgar Gunatunga - Chairman - - - -

Foreign Joint Venture Partner -

Nippon Coke & Engineering Co. Ltd. 55,687,432 55,687,432 - -

Nominee Directors of Foreign Collaborator

Mr. Wanigasekera S. V. 5,400 5,400 10,000 3,375

Mr. K. Yanagihara - Joint Managing Director - -

Mr. Tooru Tanimura - - - -

Independent Directors - - - -

Mr. Ranjeevan Seevaratnam - - - -

Dr. Harsha Cabral - - - -

Dr. Indrajit Coomaraswamy - - - -

Total 111,380,117 111,380,117 10,000 3,375

Total Shares in Issue 202,500,000 202,500,000 101,250,000 101,250,000


Corporate Governance

We are committed to working in an environment that goes beyond compliance. Being the only cement manufacturer to get a stock exchange listing in Sri Lanka, we maintain the highest standards in corporate governance, instituting best practices in all areas to ensure complete transparency and accountability.

We strictly comply with the principles and provisions of the Code of Best Practice on Corporate Governance published by the Institute of Chartered Accountants of Sri Lanka (ICASL).

Tokyo Cement’s Board of Directors consists of 10 members – 7 Directors are Non-Executive Directors of which 3 directors are Independent Directors.

The two major shareholders are represented by each of the two Joint Managing Directors. All Non-Executive Directors are professionals with vast experience in business and administration.

Board ProcessesThe Board of Directors formulates corporate goals and overall business strategy.

In addition, they provide direction in managing the business, reviewing performance and reporting to shareholders on the performance of the Company on a quarterly basis.

Each month, the Board meets to assess corporate and operational performance in the context of budgets and macro-economic market conditions.

Audit CommitteeThe Audit Committee comprises four Non-Executive Directors of which two are independent.

They examine the adequacy and effectiveness of internal controls and assess compliance with regulatory requirements.

This Committee meets the Joint Managing Directors, Group General Manager and Chief Financial Officer upon invitation. The report of the Audit Committee appears on page 35.

Audit Committee MembersR. Seevaratnam - ChairmanEdgar GunatungaS. V. WanigasekeraDr. Harsha Cabraal

Remuneration CommitteeThe Remuneration Committee comprises three Directors of which two are an Independent Non-Executive Director’s. The Committee is empowered to examine any matters relating to remuneration paid to executive members. Their terms of reference also encompass the Human Resources of the Company.

Remuneration Committee MembersDr. Harsh Cabral - ChairmanR. SeevaratnamS. R. Gnanam

Nomination CommitteeThe Nomination Committee comprises six directors of which three are an independent Non-Executive Directors. The Committee is responsible for recommend to board the process of selecting Chairman and Managing Director, Identify suitable person for appointment to the Board as Executive and Non-Executive Directors.

Nomination Committee MembersDr. Indrajit Coomaraswamy - ChairmanEdgar GunatungaS. R. GnanamK. YanagihiraR. SeevaratnamDr. Harsha Cabral

Internal Control And MonitoringInternal control and monitoring of operations is implemented regularly with selected sales depots being audited, in addition to the review of systems.

These reports are scrutinised and discussed by members of the Audit Committee and suitable action is taken where necessary, in consultation with senior management.

Members of the Audit Committee also examine monthly accounts submitted to the Board, while the Audit Committee reviews and ensures that internal controls are in compliance with various accounting standards.

Going ConcernThe Board is tasked with ensuring that the company is a ‘going concern’ and therefore adopts processes and features into its decision making and in the preparation of financial statements, to form a solid foundation of sufficient resources to continue operations into the foreseeable future.

TransparencyThe Board discloses full information, both financial and nonfinancial information within the bounds of commercial realities.

Being the only cement manufacturer listed on the Colombo Stock Exchange, it is committed to a responsible business philosophy. Publication of quarterly accounts and the release of the Annual Report and Audited Accounts are complied with within the stipulated time frame.

Investor RelationsThe Company continues to maintain good communication with all shareholders comprising both corporates and individuals.

The Board invites questions from shareholders during the General Meeting.


In addition, the Chairman and Executive Directors meet institutional investors and analysts to discuss the Company’s performance.

Share price sensitive information is not available to other shareholders and is not divulged during this meeting.

Rule No: Rule Compliance status

01 Board of DirectorsThe correct number of Non-Executive Directors, in accordance with Rule 7.10.1 (a)

Compliant

02 The correct number of Independent Non-Executive Directors, in accordance with Rule 7.10.2 (a) Compliant

03 Specified whether the Non-Executive Directors submitted a Declaration annually of his/her independence or non-independence to the Board of Directors - Rule 7.10.2 (b)

Compliant

04 Confirmed that the Board of Directors made an annual determination as to the independence or non-independence of each Non-Executive Director based on the Declaration mentioned above and other information available to the Board and states the names of Non-Executive Directors determined to be ‘Independent’ – Rule 7.10.3 (a)

Compliant

05 If the Director does not qualify as ‘Independent’, but if the Board taking into account all the circumstances is of the opinion that the Non-Executive Directors is ‘Independent”, the Board has specified, in the Annual Report, the qualification not met under Rule 7.10.4 of the CSE Listing Rules and the basis for determining the Director to be ‘Independent’ Rule 7.10.3 (b)

N/A

06 Published a brief resume in the Annual Report, of each Director of the Board, which includes information on the nature of his/her expertise - Rule 7.10.3 (c)

Compliant

07 Remuneration CommitteeThe correct number of Independent Non-Executive Directors in the Remuneration Committee, in accordance with Rule 7.10.5 (a)

Compliant

08 Specified whether a separate Remuneration Committee was formed or whether listed parent Company’s Remuneration Committee used - Rule 7.10.5 (a)

Compliant

09 Specified the names of Directors comprising the Remuneration Committee (where the parent company’s Remuneration Committee qualifies to function as the listed company’s Remuneration Committee, a statement in the Annual Report to this effect and disclosed thenames of the Directors) - Rule 7.10.5 (c)

Compliant

10 Disclosed the functions of the Remuneration Committee, in accordance with Rule 7.10.5 (b) Compliant

11 Specified whether the Chairman of the Committee is a Non-Executive Director Rule 7.10.5 (a) Compliant

12 The Annual Report contained a statement on the Remuneration policy - Rule 7.10.5 (c) Compliant

13 The Annual Report contained a statement on the Remuneration policy - Rule 7.10.5 (c) Compliant

14 Specified the aggregate remuneration paid to Executive and Non-Executive Directors in the Annual Report - [“Remuneration” should include cash and all non-cash benefits paid in consideration of employment with the Listed Entity (excluding statutory entitlements such as EPF and ETF)] - Rule 7.10.5 (c)

Compliant

Shareholder Value And ReturnsWe are firmly committed to constituting a Board of Directors who are eminent, erudite and well respected as we strongly believe that this adds value to the company, a fact that is reflected in the strong share value we have gained over the years. The Board also maintains an attractive dividend rate aligned

to the expectations of the shareholders as well as for capital formations of future expansion.


Rule No: Rule Compliance status

15 Audit CommitteeThe correct number of Independent Non-Executive Directors, in accordance with Rule 7.10.6 (a)

Compliant

16 Specified whether a separate Audit Committee formed or whether listed parent company’s Audit Committee used - Rule 7.10.6 (a)

Compliant

17 Specified the names of Directors comprising the Audit Committee (where the parent company’s Audit Committee qualifies to function as the listed company’s Audit Committee, a statement to this effect AND disclosed the names of the Directors) Rule 7.10.6 (c)

Compliant

18 Confirmed that the functions of the Committee has being in accordance with Rule 7.10.6 (b) Compliant

19 Specified whether the Chairman of the Committee is a Non-Executive Director Rule 7.10.6 (b) Compliant

20 Specified whether the Chairman or one member of Committee is a member of a recognised professional accounting body – Rule 7.10.6 (a)

Compliant

21 Specified whether the CEO and CFO attended Committee meetings, unless otherwise determined by the Audit Committee – Rule 7.10.6 (a)

Compliant

22 The Annual Report contained a report by the Audit Committee stating the manner of compliance in relation to the functions required of the Audit Committee and the determinations made by the Audit Committee – Rule 7.10.6 (c )

Compliant

23 Specified the basis for determining External Auditors as being Independent Rule 7.10.6 (c) Compliant

Corporate Governance


Risk Management

Risk is associates with any business, the Board of Directors is mindful of these risk factors and through the Management at various levels have put in place adequate monitoring and reporting systems to identify occurrence of such risks in advance and taken remedial steps to minimize the impact to the operation of the entity. Also, periodic reviews are carried out to ensure that the implemented systems are functioning effectively and possible impact, if any on the performance.

Major risks and mitigating responses are detailed below.

Type of Risk Potential Effect Mitigating Factor Actions Impact

Political and Economic Risk

• Political instability could reduce the economic growth of the country and, consequently may effect the demand for cement.

• Existing political stability• Expected economic growth• Peace in the island• Government economic policies

Low

Business Risk • Not being able to achieve the expected objectives.

• Corporate and strategy planning• Budgetary controls• Periodic budget reviews• Effective cost saving measures• Product diversification• Vertical integration

Low

Technological Risk

• Technological obsolescence could adversely affect company’s performance.

• Regular investment in upgrading technology• Training technical staff• In house/ overseas related training

Low

Legal and Regulatory Risk

• Non compliance with laws and regulations.

• Regular review of payment and tax compliance• Regular review of applicable environmental laws• Review of all short term and long term agreements prior of signing by

legal consultants• Review of quality requirements by quality assurance consultants

Low

Market / Industry Risk

• Not being able to achieve expected revenue.

• Changes in weather patterns.• Competition from cheap and

low quality products.

• Product diversification• Maintaining high quality standards• Strong relationship with dealer network• Take part in trade and business exhibition and promotional activities• Educate customers the quality aspects of cement• Advertisements and sales promotions• Maintaining buffer stocks

Low

Human Resource Risk

• Staff retention / supply of technical purposes.

• Local and overseas related training• Evaluations and promotions• Staff welfare activities• Building strong employer employee relationships

Low


Type of Risk Potential Effect Mitigating Factor Actions Impact

Finance and Liquidity Risk

• Increase in interest cost.• Raise adequate funds to

meet the payments.• Raise adequate bank

facilities.

• Maintaining long term interest rate agreements• Arranging adequate banking facilities• Strong relationship with the bank• Sound cash position• Internal / External audits are being carried out on regular basis where

any discrepancies in information reported would be identify and attended with immediate effect avoiding any financial downturn that would come as a surprise

Low

Credit Risk • Not being able to collect dues from customers.

• Strong customer evaluation procedure for credit approvals• Regular reviews of credit status• Regular reviews of credit worthiness

Low

Natural Disasters

• Inability to continue operations.

• Obtaining fire and property insurance covers• Obtaining business interruption covers• Disaster recovery procedure are in place

Low

Risk Management


People

Social Responsibility

invigorated



Our initial foray into green energy was focused on introducing cleaner fuels to our factories. The project also helps rural farming communities who supply our plant with paddy husk. We have also opened the A Y S Gnanam Construction Training Academy, to facilitate in house training for masons.

Corporate Social Responsibility is not a buzzword at Tokyo Cement. We have been looking after the communities we work alongside with, for nearly three decades. Working with scientists and environmentalists, we have been investing time and resources to preserve and nurture our ecology for the next generation.

As a public quoted company, listed on the Colombo Stock Exchange, we are committed to making a sustainable contribution to the growth and development of Sri Lanka by providing the expertise to build back better in a socially and environmentally responsible manner.

Our business is constructed on long term partnerships –partnerships that portray the physical positivity infused into infrastructure seen around the country and partnerships that we have cemented along our journey based on trust, commitment, loyalty and dedication.

Sustainability to us is about cementing these partnerships on a solid foundation that will eventually grow into a strong stable relationship with our stakeholders.

We are committed unconditionally to creat wealth for our shareholders and ensure that our business remains sustainable from the very roots of its operations.

Similarly, we assure our customers and team who drive our success that we are a business that is built for the long term and the impacts that our business have on them and their lives therefore must reflect positively, echoing that positivity to the community around us as well.

Construction IndustryLong considered anti-environment, the construction industry has often being accused of using the earth’s resources indiscriminately, with little attempt to preserve them.

However, with the industry gradually realising the impact it has on the environment, numerous innovations and technological initiatives have been introduced to re-route the industry towards being a more environmentally friendly one.

Not to be left unguarded, Tokyo Cement mooted a policy a few years back to align our processes, systems and operations into more environmentally sustainable manufacturing.

The policy shift, brought out numerous initiatives including technological and procedural improvements that would minimise the impact we have on the environment.

We work hard to tread the earth softly, to minimise our carbon footprint and position ourselves as an eco-friendly cement manufacturer.

In the process, we began introducing and strengthening sustainable best practices into our systems, processes and the way we work, from importation to product delivery.

Green EnergyOur initial foray into green energy was focused on introducing cleaner fuels to our factories.

In 2008, we invested 2.4 billion rupees to commission a 10 megawatt biomass plant in Trincomalee. The plant uses paddy husk and gliricidia as its energy source.

The materials, which were selected on the basis of availability and ability to generate 3,000 – 45,000 kilocalories per kilogram when dry, are obtained in Sri Lanka’s dry zone, particularly in the Eastern and North Central provinces. These areas feature an


Tree planting ceremony held in Trincomalee, Nalanda Maha Vidyalaya, on National Tree Planting Day.

abundance of rice mills and are ideal for growing gliricidia, the tree legume from which fuel wood is obtained.

The investment helped our three manufacturing facilities in Trincomalee to embrace green energy and be independent from the national grid.

This move saved us a lot on our energy bills. We also sell the excess power generated to the national grid. This adds, in a small way, to our revenue streams. Our contribution also helps power a section of the country’s energy requirements in an environmentally friendly manner.

This biomass power generation has a 360 degree overview on sustainability. It generates revenue, trims costs and reduces our carbon footprint.

The project also helps rural farming communities, that supply our plant with paddy husk, which is generally a waste product that is discarded and gliricidia, that grows in their villages.

While these communities now gain a sustainable income from meeting our biofuel needs, we are also engaged with these families to introduce better farming practices in gliricidia. We share ideas on how to grow and supplying seeds to the farmers to yield better results.

Sustainability to us is about cementing these partnerships on a solid foundation that will eventually grow into a strong stable relationship with our stakeholders.

Hydro Power (4,620 Gwh) Thermal Power (6,785 Gwh) Other (116 Gwh)

Source: Annual Report 2011 - Central Bank of Sri Lanka

Power Sector Perfomance (GWh)

2011


Community WelfareOur relationship with the community has been a long one where we have cemented partnerships on the ethos that education is key to the future.

We strongly believe that education is a sustainable driver for any individual and therefore, have brought under our umbrella four underprivileged schools in the Trincomalee and Kandy districts, that were recording poor attendance.

Having identified that most children are under-nourished due to poverty levels being high in these schools, we began supplying a nutritious well balanced mid-day lunch.

The food is cooked by groups of volunteer parents, while we liaise directly with the neighbourhood grocery store to supply provisions for the meals.

Within weeks, school authorities told us that attendance has improved, helping children to study better.

Cleaning the ocean bedWe have always been mindful of minimising, the impact our operations would have on the locations where we operate in. As a continuous project, we regularly help clean the sea bed at the Trincomalee jetty, given that our clinker unloading operations are worked on at this point.

Even though there is minimal clinker, which is essentially limestone and completely bio-degradable, falls into the sea at this point, we aim to keep the natural habitat clean.

Controlling dust and sound emissionsInstituting environmentally friendly systems and processes are crucial to our ultimate goal of producing eco friendly cement. We invested 65 million rupees to modify the cement hopper. This has brought in the desired results, minimising dust emissions during the unloading of clinker, ensuring a cleaner environment around our factory in Trincomalee. It has also created a healthier working environment for our team.

Patches of water have also been introduced at entry and exit points to minimise the transmission of cement dust through wheels of the vehicles that travel in and out of our facility. The water serves to eliminate the cement dust from the wheels.

We are mindful of the high decibel levels within the factory premises, which can be harmful to those working within.

New equipment has been installed to minimise sound emissions and to create a healthier workplace.

Employee welfareJust as we are extremely committed to ensuring that our manufacturing plants are a safe and healthy place of work for our team, we are most mindful that productivity and efficiencies too need to be aligned to meet our end goals.

We strongly believe that education is a sustainable driver for any individual and therefore, have brought under our umbrella four underprivileged schools in the Trincomalee and Kandy districts, that were recording poor attendance. We support Civil Engineering undergraduates at the University of Peradeniya by funding final year research projects.



While HR development and training takes place regularly, we also strive to make our team comfortable and contented in their work surroundings. We believe this will help a natural incline in productivity and efficiency levels.

We continue to upgrade accommodation facilities given to senior managers at the Trincomalee plant. A staff get together, few times a year, helps create a more united platform of family togetherness among the team.

Industry contributionWe are mindful of our responsibility of contributing towards the development of skills within the industry and we continue of training young people on all areas of construction, from masonry to concreting, to tiling to brickwork.

In batches of 25, we continued to upgrade skills of those from the Central, Northern and Eastern provinces.

This initiative has helped create employment avenues for young people in these areas.

The needs and success of the training programme has spurred us to launch inhouse training institute for masons, the A Y S Gnanam Construction Training Acadamy, which was opened in May 2012.

Civil engineering undergraduatesBeing an industry leader, Tokyo Cement looks for ways to forge like-minded alliances between academia and the company. These

collaborations also help guide the future of the Sri Lankan construction industry.

We support Civil Engineering undergraduates at the University of Peradeniya, by funding final year research projects and incorporating the construction industry’s R&D requirements into the department’s research programme.

We recognise the importance of enabling students to reach their full academic potential and the need for comprehensive research in enterprise development.

Our collaboration with the University of Peradeniya seeks to empower, enhance and develop the knowledge and skills of the engineering professionals of tomorrow.

Seminars for engineers, contractorsWorking with, and in, communities to support growth and development is a primary focus of CSR at Tokyo Cement.

The opening of the A Y S Gnanam Construction Training Academy at Dambulla, by Mr & Mrs A S G Gnanam, Mr. Edgar Gunatunga and Mr S R Gnanam

2012

2011

2010

2009

2008

33.87

26.95

23.39

28.66

26.08

Revenue Per Employee (Rs Mn)


As such, we lend considerable support to uplifting standards and empowering professionals in the local construction industry.

Tokyo Cement conducts quality assurance seminars for masons to advance technical know-how and skills, and holds annual meetings for engineers and contractors to promote a better understanding of industry trends and best practices.

These efforts are representative of our belief in uplifting and empowering local communities.

Book on Horton PlainsWe sponsored a book by award-winning environmentalist, Mr Rohan Pethiyagoda, titled ‘Horton Plains: Sri Lanka’s cloud-forest national park,’ on the flora and fauna of Horton Plains, to raise awareness about the conservation of nature among future generations.

The book will be donated to local school libraries so that future generations realise the wisdom of conserving natural parks. Through powerful photographs, the book depicts the beauty of nature for the appreciation of Horton Plains.

Annual dealer conventionWe use our Annual Dealer Conventions to recognise and reward our best performing dealers.

The Company has come forward to sponsor the book ‘Horton Plains’, which details the rich bio diversity and creates awareness about why this national park is held in so much regard by local and global experts.

The highly anticipated event celebrates and thanks the dealer community for its contribution to maintaining the company’s top ranked position in the cement manufacturing industry.

Our appreciation of their commitment and loyalty is reflected in this gala celebration, where gifts ranging from cruises, foreign trips and many other rewards, are presented to the cream of the dealer network.


We sponsored the book ‘Horton Plains: Sri Lanka’s cloud-forest national park’, which will be distributed among school libraries.

The company recognised contributions made by dealers in the year 2011 and rewarded best performing dealers at the Dealer Convention in April 2012.


Valueincreased

Financial information

Independent Auditor’s Report 38, Income Statement 39, Balance Sheet 40, Statement of Changes in Equity 42, Cash Flow Statement 43, Significant Accounting Policies 45, Notes to the Financial Statements 54,


Directors Responsibilities

The responsibilities of the Board of Directors in relation to the financial statements of the Company and Group are set out as follows, while the responsibility of the Auditors which differ, are set out in the Auditors’ Report.

According to the Companies Act No. 7 of 2007, the Directors are required to prepare financial statements for each year, giving an accurate and impartial view of the profit and loss of the Company and its subsidiaries as evidenced at the close of the financial year.

The Directors are of the view that in the course of preparing the said financial statements, appropriate accounting policies have been adhered to and maintained throughout. Material departures if any, have been disclosed and explained. The Directors also confirm that all applicable Accounting Standards have been followed, with judgements and estimates being deemed reasonable and prudent.

The Directors are also of the view that the Company has adequate assets and resources to continue a profitable operation in the future. Accordingly, the ‘going concern’ basis has been used in the preparation of the financial statements.

The Directors are responsible for the overall internal control systems of the Company, while acknowledging that there is no single system of internal control that could guarantee absolutely against mismanagement or fraud. The Directors confirm that the systems established are so designed as to safeguard the Company’s assets and that all transactions are properly authorized and recorded, thus ensuring that all material misstatements and irregularities are either prevented or detected speedily. The Directors are required to provide the Auditors with every opportunity to take whatever steps and undertake any inspections they consider appropriate for the purpose of enabling them to submit their audit report.

The Directors are responsible for ensuring that the Company maintains sufficient accounting records to be able to disclose with reasonable accuracy, the financial position of the Company and that of the Group, thus ensuring that the Company’s financial statements comply with the requirements of the Companies Act.

The Directors are of the view that they have discharged their responsibilities to the best of their ability as stated herein.

The Directors also confirm to the best of their knowledge, that all taxes, duties and levies payable by the Company and its subsidiaries, as well as all other well-known statutory dues that were due and payable by the Company and its subsidiaries as at the Balance Sheet date have been paid, or where relevant been provided for.

By Order of the Board ofTokyo Cement Company (Lanka) PLC

Seccom (Private) LimitedCompany Secretaries,16th June 2012


Audit Committee Report

The Company’s Audit Committee comprises of four Non-Executive Directors as part of good corporate governance practices. They are Mr. R. Seevaratnam, Mr. S. V. Wanigasekera, Mr. E. Gunatunga and Dr. Harsha Cabral. Two members of the committee are qualified Chartered Accountants.

The objective of the Audit Committee is to assist the Board of Directors of the Company in fulfilling its responsibilities for the financial reporting process, the system of internal control over financial reporting, the audit process and the Company’s process for monitoring compliance with laws, regulations and best practices.

The other members participating at the Audit Committee deliberations are Mr. S. R. Gnanam, Mr. K. Yanagihara (Joint Managing Directors), Mr. W. C. Fernando, Group General Manager, Mr. Nirantha Kuruwita, Chief Financial Officer and Mill Managers and Accountants by invitation.

The Audit Committee met 4 times during the year and the attendances are given below:

Name AttendanceMr. R. Seevaratnam, Chairman 4/4Mr. S. V. Wanigasekera 4/4Mr. E. Gunatunga 4/4Dr. Harsha Cabral 4/4

The Audit Committee meets regularly and the areas covered to review the internal audit reports include sales delivery, banking and receivables, project, production, physical verification, stores maintenance, empty bags usage (including damages), packing and weigh bridge operation.

The Board is also updated with decisions and recommendations made at the Audit Committee meetings.

The members of the Audit Committee reviewed the monthly accounts submitted to the Management.

Quarterly accounts and the Annual Report to the shareholders are also checked and reviewed by the Audit Committee, who recommends this adoption by the Board. The Committee reviewed the business processes in operation in order to evaluate the effectiveness of the internal controls that have been designed on provide reasonable assurance to the directors that assets are safeguarded and that the financial reporting system can be relied upon in preparation and presentation of the financial statement.

The Audit Committee also reviewed the nature and value of non audit work undertaken by the external auditors in order to ensure that it did not compromise their independence.

The Audit Committee recommends the reappointment of Messes BDO Partners for the financial year ending 31st March 2013 to the Board of Directors.

R. SeevaratnamChairman - Audit CommitteeColombo 16th June 2012


Report of the Remuneration Committee

The Remuneration Committee appointed by the Board of Directors comprises Two Non Executive Independent Director namely Mr R Seevaratnam, Dr Harsha Cabral, Mr S R Gnanam Joint Managing Director attend Committee meetings by invitation. The Minutes of the Remuneration Committee approved by the said committee are circulated and affirmed by the Board of Directors. The Remuneration Committee is responsible for setting the remuneration policy of the company and determining remuneration package of all Senior Managers and Directors. The Committee also discusses and advices the Senior Directors and Executive Officers on structuring of remuneration packages. The Committee has the authority to seek external independent professional advice on matters within its purview.

The Committee is not responsible for setting the level of remuneration of Non-Executive Directors, which is determined by the Board.

DR. Harsha CabralChairmanRemuneration Committee 16th June 2012


Nomination Committee Report

The Nomination Committee consists of the Non Executive Chairman Mr Edgar Gunatunga, Joint Managing Directors Mr S R Gnanam and Mr K Yanagihira and three Non Executive Independent Directors Mr R Seevaratnam, Dr Harsha Cabral and Dr Indrajit Coomaraswamy

The Role and Responsibilities of the Committee are :• To recommend to the Board the

process of selecting the Chairman and Managing Director.

• To identify suitable persons who could be considered for appointment to the Board as Executive and Non Executive Directors.

• Tomakerecommendationsonmatters referred to by the Board.

During the year under review, the Committee did not meet as there were no referrals and no new appointments to the Board of Directors.

Dr. Indrajith CoomaraswamyChairmanNomination Committee 16th June 2012


Accounting Standards, of the company and its subsidiaries dealt with thereby, so far as concerns the shareholders of the company.

Report on Other Legal and Regulatory RequirementsThese financial statements also comply with the requirements of Sections 151(2) and 153(2) to 153(7) of the Companies Act No. 07 of 2007.

CHARTERED ACCOUNTANTS16th June, 2012 ColomboSSR/cc

Independent Auditor’s Report to theShareholders of Tokyo Cement Company (Lanka) PLC

Report on the Financial StatementsWe have audited the accompanying financial statements of Tokyo Cement Company (Lanka) PLC, and consolidated financial statements of the company and its subsidiaries as at 31st March, 2012 which comprise the balance sheet as at 31st March, 2012, and the income statement, statement of changes in equity and cash flow statement for the year then ended, and a summary of significant accounting policies and other explanatory notes as set out on pages 39 to 72.

Management’s Responsibility for the Financial StatementsManagement is responsible for the preparation and fair presentation of these financial statements in accordance with Sri Lanka Accounting Standards. This responsibility includes: designing, implementing and maintaining internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances.

Scope of Audit and Basis of OpinionOur responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with Sri Lanka Auditing Standards. Those standards require that we plan and perform

the audit to obtain reasonable assurance whether the financial statements are free from material misstatement.

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

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

Opinion-CompanyIn our opinion, so far as appears from our examination, the Company maintained proper accounting records for the year ended 31st March, 2012 and the financial statements give a true and fair view of the Company’s state of affairs as at 31st March, 2012 and its profit and cash flows for the year then ended in accordance with Sri Lanka Accounting Standards.

Opinion-GroupIn our opinion, the consolidated financial statements give a true and fair view of the state of affairs as at 31st March, 2012 and its profit and cash flows for the year then ended in accordance with Sri Lanka


Income Statement

Group CompanyYear Ended 31st March 2012 2011 2012 2011 Notes Rs. Rs. Rs. Rs.

Turnover 22,927,176,489 16,494,867,334 8,533,037,198 6,636,109,528 Cost of Sales (19,044,272,750) (13,588,371,427) (6,718,176,108) (4,992,112,226)Gross Profit 3,882,903,739 2,906,495,907 1,814,861,090 1,643,997,302 Other Income 3 194,598,473 237,478,068 411,476,299 294,472,312 4,077,502,212 3,143,973,975 2,226,337,389 1,938,469,614 Distribution Expenses (1,894,882,724) (1,142,789,667) (829,469,273) (576,281,518)Administrative Expenses (708,495,742) (673,706,536) (424,729,251) (384,680,465)Finance Expenses 4 (435,507,538) (485,582,985) (160,066,763) (187,528,019)Profit Before Taxation 5 1,038,616,208 841,894,787 812,072,102 789,979,612

Income Tax Expense 6 (190,375,136) (12,687,580) (162,310,283) (82,617,157)Profit For The Year 848,241,072 829,207,207 649,761,819 707,362,455

Attributable to Equity Holders of the Parent 973,316,455 874,008,923 649,761,819 707,362,455 Minority Interest (125,075,383) (44,801,716) - -

Earning per Ordinary Share (Rupees per Share) - Voting 7 3.20 2.96 2.14 2.40 - Non Voting 7 3.20 2.96 2.14 2.40 Dividend Per Ordinary Share - Voting 8 1.30 1.00 1.30 1.00 - Non Voting 8 1.30 1.00 1.30 1.00

Figures in brackets indicate deductions. The Accounting Policies and Notes from pages 45 to 72 form an integral part of these financial statements. Colombo 16th June, 2012


Balance Sheet

Group CompanyAs at 31st March 2012 2011 2012 2011 Notes Rs. Rs. Rs. Rs.

ASSETS Non-Current Assets Property, Plant and Equipment 9 9,125,099,690 8,557,288,433 5,091,453,226 4,270,544,858 Capital Work-In-Progress 10 162,396,447 53,341,664 85,584,484 53,303,261 Goodwill 11 13,186,823 13,186,823 - - Investment 12 - - 1,730,150,026 1,730,150,016 Investment In Fixed Deposit - 3,000,000 - - Operating Lease Prepayment 13 60,777,776 65,119,046 - - Total Non Current Assets 9,361,460,736 8,691,935,966 6,907,187,736 6,053,998,135

Current Assets Inventories 14 1,482,956,694 1,122,366,999 729,317,477 419,638,892 Trade and Other Receivables 15 1,572,167,146 1,096,139,174 782,337,993 480,765,713 Operating Lease Prepayment 13 4,341,270 4,341,270 - - Tax Receivables 315,007,169 345,555,480 149,800,273 152,574,914 Amount Due from Related Parties 16 - - 88,082,641 726,045,800 Cash and Cash Equivalents 239,062,181 199,254,967 47,101,686 37,660,850 Total Current Assets 3,613,534,460 2,767,657,890 1,796,640,070 1,816,686,169 Total Assets 12,974,995,196 11,459,593,856 8,703,827,806 7,870,684,304


Group CompanyAs at 31st March 2012 2011 2012 2011 Notes Rs. Rs. Rs. Rs.

EQUITY AND LIABILITIESCapital and Reserves Stated Capital 17 2,366,750,000 2,366,750,000 2,366,750,000 2,366,750,000 Reserves 18 150,000,000 150,000,000 - - Retained Earnings 3,772,392,559 3,102,826,104 2,628,297,514 2,282,285,695 Equity Attributable to the Equity Holders of the Parent 6,289,142,559 5,619,576,104 4,995,047,514 4,649,035,695 Minority Interest (29,746,901) 95,328,482 - - 6,259,395,658 5,714,904,586 4,995,047,514 4,649,035,695 Non-Current Liabilities Interest Bearing Borrowings 19 1,667,675,776 939,937,323 728,541,662 566,604,001 Deferred Tax 20 644,703,656 496,336,201 457,744,464 301,210,459 Retirement Benefits Obligation 21 45,443,928 37,233,952 32,971,615 25,722,661 Deferred Revenue - 4,073,748 - - Lease Creditors 22 2,674,536 17,357,292 - - Total Non Current Liabilities 2,360,497,896 1,494,938,516 1,219,257,741 893,537,121 Current Liabilities

Trade and Other Payables 23 2,866,142,474 1,644,706,977 1,268,179,646 958,873,889 Amount Due to Related Parties 24 - - 559,048,778 555,688,197 Current Maturity Portion of Interest Bearing Borrowings 19 1,197,398,543 2,303,823,700 474,370,338 657,664,799 Lease Creditors 22 14,682,767 39,937,627 - 1,498,166 Deferred Revenue- Current Maturity Portion 1,198,161 - - - Bank Overdrafts 275,679,697 261,282,450 187,923,789 154,386,437 Total Current Liabilities 4,355,101,642 4,249,750,754 2,489,522,551 2,328,111,488 Total Equity and Liabilities 12,974,995,196 11,459,593,856 8,703,827,806 7,870,684,304

Figures in brackets indicate deductions. The Accounting Policies and Notes from pages 45 to 72 form an integral part of these financial statements.

These Financial Statements are in compliance with the requirements of the Companies Act No. 07 of 2007.

Mr. Nirantha KuruwitaChief Financial Officer (CFO)

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.

Mr. E. Gunatunga Mr. K. Yanagihara Chairman Jt. Managing Director Colombo 16th June, 2012


Statement of Changes in Equity

Attributable to Equity Shareholders Capital Redemption Stated Retained Reserve Fund Capital Earnings Total Minority Total Group Rs. Rs. Rs. Rs. Interest Equity

As at 1st April 2010 150,000,000 1,793,000,000 3,303,754,681 5,246,754,681 140,130,198 5,386,884,879 Profit for the Year - - 874,008,923 874,008,923 (44,801,716) 829,207,207 Capitalization of Reserves - 573,750,000 (573,750,000) - - - Dividend Paid - - (501,187,500) (501,187,500) - (501,187,500)As at 31st March, 2011 150,000,000 2,366,750,000 3,102,826,104 5,619,576,104 95,328,482 5,714,904,586 Profit for the Year - - 973,316,455 973,316,455 (125,075,383) 848,241,072Dividend Paid - - (303,750,000) (303,750,000) - (303,750,000)As at 31st March, 2012 150,000,000 2,366,750,000 3,772,392,559 6,289,142,559 (29,746,901) 6,259,395,658

Stated Retained Capital Earnings Total Company Rs. Rs. Rs.

As at 1st April 2010 1,793,000,000 2,649,860,740 4,442,860,740 Profit for the Year - 707,362,455 707,362,455 Dividend Paid - (501,187,500) (501,187,500)Capitalization of the Reserves 573,750,000 (573,750,000) - As at 31st March, 2011 2,366,750,000 2,282,285,695 4,649,035,695 Profit for the Year - 649,761,819 649,761,819 Dividend Paid - (303,750,000) (303,750,000)As at 31st March, 2012 2,366,750,000 2,628,297,514 4,995,047,514

Figures in brackets indicate deductions.

The Accounting Policies and Notes from pages 45 to 72 form an integral part of these financial statements.

Colombo 16th June, 2012


Cash Flow Statement

Group CompanyYear Ended 31st March 2012 2011 2012 2011 Notes Rs. Rs. Rs. Rs.

Cash Flow from Operating ActivitiesNet Profit before Taxation 1,038,616,208 841,894,787 812,072,102 789,979,612 Adjustments for :

Depreciation 963,458,976 972,666,995 512,439,297 520,420,839 Retirement Benefit Obligation 10,794,790 7,456,852 8,887,744 4,693,929 Profit on Disposal of Property, Plant and Equipment (20,233,927) (755,000) (9,464,285) (755,000)Loss on Disposal of Property, Plant and Equipment 14,975,840 - 14,975,840 - Interest Expense 428,856,259 468,301,454 160,026,153 186,137,777 Lease Interest 6,651,278 14,962,856 39,939 1,390,914 Amortization of Operating Lease 4,341,270 4,341,270 - - Interest Income (11,081,060) (624,476) (3,332,259) - Dividend Income - - (241,941,890) (136,889,108)Deffered Revenue (2,875,587) (2,875,587) - - Specific Provision for Bad and Doubtful Debts 556,632 6,137,730 - 6,137,730 ESC Write Off 7,203,297 - - - Write Off of Capital Work-in-Progress 38,403 3,583,662 - -

Operating Profit Before Working Capital Changes 2,441,302,379 2,315,090,543 1,253,702,641 1,371,116,693

(Increase)/Decrease in Inventory (360,589,695) (434,545,067) (309,678,585) (119,698,357)(Increase)/Decrease in Receivables (441,989,101) 210,808,775 (301,572,288) (7,501,078)Increase/(Decrease) in Payables 665,446,866 (575,317,059) 309,305,757 (115,334,449)Cash Generated from Operation 2,304,170,449 1,516,037,192 951,757,525 1,128,582,809

Interest Paid (428,856,259) (468,301,454) (160,026,153) (186,137,777)Taxation Paid (30,110,722) (101,770,852) (3,001,636) (43,805,157)Retirement Benefit Obligation Paid (2,584,815) (90,530) (1,638,790) - Net Cash Flow From / (Used in) Operating Activities 1,842,618,653 945,874,356 787,090,946 898,639,875

Cash Flow from / (Used in) Investing Activities Purchase of Property, Plant and Equipment Note A (1,803,960,985) (430,109,719) (1,606,038,417) (406,665,461)Dividend Received - - 241,941,890 136,889,108 Expenditure Incurred on Capital Work-In-Progress (118,737,116) (10,558,756) (41,925,162) (10,520,353)Interest Received 11,081,060 624,476 3,332,259 - Proceeds from Sale of Property, Plant and Equipment 287,592,779 7,655,000 276,823,135 755,000 Withdrawal /(Investment) in Fixed Deposit 3,000,000 - - - Investment in Subsidiary - - - (494,999,986)Net Cash From / (Used in) Investing Activities (1,621,024,262) (432,388,999) (1,125,866,295) (774,541,692)

Cash Flow from / (Used in) Financing Activities Repayment of Interest Bearing Loans and Borrowings (8,571,386,869) (5,989,945,098) (1,836,356,800) (971,501,800)Receipt of Interest Bearing Loans and Borrowings 8,725,540,668 5,489,986,746 1,815,000,000 1,050,000,000 Dividend Paid (303,750,000) (501,187,500) (303,750,000) (501,187,500)Lease Rental Paid (46,588,223) (63,683,696) (1,538,105) (17,618,668)Advances (to) / from Subsidiary (Net) - - 641,323,738 506,590,404 Net Cash From / (Used in) Financing Activities (196,184,424) (1,064,829,548) 314,678,833 66,282,436 Net Increase / (Decrease) in Cash and Cash Equivalents 25,409,967 (551,344,191) (24,096,516) 190,380,619 Cash and Cash Equivalents at Beginning Note B (62,027,483) 489,316,708 (116,725,587) (307,106,206)Cash and Cash Equivalents at End Note C (36,617,516) (62,027,483) (140,822,103) (116,725,587)

Figures in brackets indicate deductions.




Group Company 31st March, 31st March, 31st March, 31st March, 2012 2011 2012 2011 Rs. Rs. Rs. Rs.

NoteA Purchase of Property, Plant and Equipment Additions during the Year 1,803,960,985 424,121,171 1,606,038,417 396,361,485 Transferred from Capital Work-in-Progress 9,643,939 57,313,498 9,643,939 57,313,498 Total of Additions during the year 1,813,604,924 481,434,669 1,615,682,356 453,674,983 Less: Leasehold Assets Additions During the Year - (4,315,428) - - Less: Capital Work-in-Progress Balance as at As at1st April, 2011 in Relation to Assets Transferred (9,643,939) (47,009,522) (9,643,939) (47,009,522) 1,803,960,985 430,109,719 1,606,038,417 406,665,461

B Cash and Cash Equivalents at Beginning Bank Balances and Cash 199,254,967 910,934,352 37,660,850 40,693,180 Bank Overdraft (261,282,450) (421,617,644) (154,386,437) (347,799,386) (62,027,483) 489,316,708 (116,725,587) (307,106,206)

C Cash and Cash Equivalents at End Bank Balances and Cash 239,062,181 199,254,967 47,101,686 37,660,850 Bank Overdraft (275,679,697) (261,282,450) (187,923,789) (154,386,437) (36,617,516) (62,027,483) (140,822,103) (116,725,587)

Figures in brackets indicate deductions



Cash Flow Statement


1. CORPORATE INFORMATION

1.1 General

Tokyo Cement Company (Lanka) PLC is a Public limited liability Company incorporated and domiciled in Sri Lanka and listed on the Colombo Stock Exchange. The Registered Office and the principal place of business of the Company is located at No.469 - 1/1, Galle Road, Colombo 03. Factories are located at Cod-Bay China bay, Trincomalee, No 77B, New Nuge Road, Peliyagoda, Pahalakondadeniya, Katugastota, Aluthgama, Miriswatte, Itthapana, Anuradhapura, Colombo Port and Jaffna.

1.2 Principal Activities and Nature of Operations

During the year, the principal activities of the Company were Manufacturing and Selling of Cement and Ready Mixed Concrete to the local market.

1.3 Parent Enterprise

The parent undertaking is Tokyo Cement Company (Lanka) PLC, and ultimate parent of the Group is also Tokyo Cement Company (Lanka) PLC.

1.4 Date of Authorization for issue the financial statements

The financial statements for the year ended 31st March 2012 were authorized for issue in accordance with a resolution of the Board of Directors on 16th of June, 2012.

1.5 Responsibility for Financial Statements

The Responsibility of the Directors in relation to the Financial Statement is set out in “the Statement of Director’s Responsibility”.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

2.1 GENERAL ACCOUNTING POLICIES

2.1.1 Basis of Preparation

These financial statements presented in Sri Lanka Rupees have been prepared on an accrued basis under the historical cost convention basis in accordance with generally accepted accounting principles and the standards laid down by the Institute of Chartered Accountants of Sri Lanka.

2.1.2 Statement of Compliance

The Balance Sheet, Statement of Income, Changes in Equity and Cash Flows, together with Accounting Policies and Notes (“Financial Statements”) of the company and the Group as at 31st March, 2012 and for the year then ended have been prepared in compliance with the Sri Lanka Accounting Standards (SLAS) issued by the Institute of Chartered Accountants of Sri Lanka and the requirement of the Companies Act No. 7 of 2007.

The consolidated financial statements comprise the financial statements of the company and its subsidiaries as at 31st March 2012. The financial statements of the subsidiaries are prepared in compliance with the group’s accounting policies unless stated otherwise.

2.1.3 Going Concern

The directors have made an assessment of the Parent Company’s and its subsidiaries’ ability to continue as going concerns and they do not intend either to liquidate or to cease trading.

Tokyo Cement Colombo Terminal (Pvt) Ltd., Which is a subsidiary of the Group has a total liability position of Rs. 68,933,417/-. The impact on the situation is mitigated by converting short term bank facilities to a Term Loan where the bankers have considered favorably and obtaining financial comfort from its parent company.

2.1.4 Comparative Information

The accounting policies have been consistently applied by the company and are consistent with those of the previous year. The previous year’s figures and phrases have been rearranged wherever necessary to conform to the current year’s presentation.

2.1.5 Discontinuing Operations

A discontinuing operation is a clearly distinguishable component of the Company’s business that is abandoned or terminated pursuant to a single plan and which represents a separate major line of industry or geographical area of operations.

As at the balance sheet date, the company does not have any discontinuing operations.

Significant Accounting Policies


2.2 Consolidation

a) Subsidiaries

Subsidiaries are all entities over which the Group has the power directly or indirectly to govern the financial and operating policies generally accompanying a shareholding of more than one half of the voting rights. The existence and effect of potential voting rights that are currently exercisable or convertible are considered when assessing whether the Group controls another entity. Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are de-consolidated from date that control ceases.

The total profits and losses for the year of the company and of its subsidiaries included in consolidation and all assets and liabilities of the company and of its subsidiaries included in consolidation are shown in the consolidated income statement and balance sheet respectively.

The purchase method of accounting is used to account for the acquisition of subsidiaries by the Group. The cost of an acquisition is measured as the fair value of the assets given, equity instruments issued and liabilities incurred or assumed at the date of exchange, plus costs directly attributable to the acquisition. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date irrespective of the extent of any minority interest. The excess of the cost of acquisition is over the fair value of the group’s of the identifiable assets acquired is recorded as goodwill. If the cost of acquisition is less than the fair value of the net assets of the subsidiary acquired, the difference is recognized directly in the income statement.

2.1.6 Foreign Currency Transaction

All foreign exchange transactions are converted to Sri Lanka Rupees, which is the reporting currency, at the rates of exchange prevailing at the time the transactions were affected.

Monetary assets and liabilities denominated in foreign currencies are translated to Sri Lanka Rupee equivalents using year end spot foreign exchange rates, the resulting gains or losses are accounted in the income statement.

Non monetary assets and liabilities are translated using exchange rates that existed when the values were determined. The resulting gain or loss is accounted in the Income Statement.

2.1.7 Materiality and Aggregation

Each material class of similar items is presented separately in the financial statements. Items of a dissimilar nature or function are presented separately unless they are immaterial.

2.1.8 Significant Accounting Judgements, Estimates and Assumptions

a) Judgments

In the process of applying the accounting policies, management has made the following judgements, apart from those involving estimations, which has most significant effect on the amounts recognized in the financial statements.

b) Estimates and Assumptions

The preparation of the Company’s financial statements require management to make judgments, estimates and assumptions that affect the reported amounts of revenue, expenses, assets and liabilities and the disclosure of contingent liabilities at reporting date.

The key assumptions concerning the future and other key sources of estimation uncertainty at the balance sheet date, that have a significant risk of causing material adjustments to the carrying amounts of assets and liabilities within the next financial year, have been considered.

Name of the Subsidiary Nature of Business Control

Tokyo Super Cement Company Lanka (Pvt) Ltd Manufacturing & Selling of Cement 100%

Fuji Cement Company Manufacturing & (Lanka) Ltd Selling of Cement 100%

Tokyo Cement Power (Lanka) Ltd Still in Gestation Stage 100%

Tokyo Cement Colombo Import & Distribution Terminal (Pvt) Ltd of Cement 56.85%



Related party transactions, balances and unrealized profits or losses between group of companies are eliminated. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the Group.

b) Minority interests

The interest of the outside shareholders in net assets of the Group and proportion of the profit after taxation applicable to outside shareholders are stated separately in the Consolidated Balance Sheet and the Consolidated Income Statement under the heading minority interest.

c) Transactions Eliminated on Consolidation

All intra group balances, income and expenses and unrealized gains and losses and dividends resulting from Intra group transactions are eliminated in full. Subsidiaries are fully consolidated from the date of acquisition or incorporation, being the date on which the group obtains control and continue to be consolidated until the date that such control ceases.

d) Reporting Date

The financial statements of the subsidiaries are prepared for the same reporting period as the parent company, which is 12 months ending 31 March, using consistent accounting policies.

e) The Consolidated cash flow Statement includes the cash flows of the company and its subsidiaries.

2.3 ASSETS & BASES OF THEIR VALUATION

2.3.1 Property, Plant & Equipment

a) Cost

Property, plant and equipment are recorded at cost less accumulated depreciation and less any impairment in value.

b) Cost and Valuation

All items of property, plant and equipment are initially recorded at cost. Where items of property, plant and equipment are subsequently revalued, the entire class of such assets is revalued.

c) Depreciation

Provision for depreciation is calculated by using straight line method on the cost or valuation of all property, plant and equipment other than freehold land, in order to write off such amounts over the estimated useful lives of such assets.

Assets held under finance lease are depreciated over the shorter of the lease term or the useful lives of equivalent owned assets.

The principal annual rates used for this purpose, which are consistent with that of the preceding years, are;

Per annum %Factory Buildings 2.5Generator House 5.0Other Buildings 10.0Fuel Storage Tanks 5.0Plant and Machinery 5.0Power Plant 5.0Laboratory Equipment and Generators 10.0Office Equipment 12.5 / 25.0Factory and Other Equipment 15.0Recycling System 12.5Furniture and Fittings 12.5Vehicles 17.5 / 25.0Cement Silo 2.5Tug Boat 10.0Railway Platform 10.0Barges 10.0Computer and Other Electrical Equipment 12.5Packer House 5.0Landing Jetty 5.0Batching Plant 10.0Vessel 10 / 12.5Vessel Dry Docking 40.0Dry Docking – Special Survey 20.0Vessel Equipment 5.0Bio Mass Building 10.0Bio Mass Plant & Machinery 5.0


Depreciation of assets begins when it is available for use and ceases at the earlier of the date that the asset is classified as held for sale and the date that the asset is derecognized.

Vessel Dry Docking has exceptionally been depreciated from the date of completion of Dry Docking until the next Dry Docking due which is estimated as 2 ½ years.

As per the ruling obtained from the Urgent Issue Task Force (UITF) of the Institute of Chartered Accountants of Sri Lanka, the special survey dry docking expenses are amortized over five years.

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

d) Restoration Costs

Expenditure incurred on repairs or maintenance of property, plant and equipment in order to restore or maintain the future economic benefits expected from originally assessed standard of performance is recognized as an expense when incurred.

e) Derecognizing

An item of property, plant and equipment is derecognized upon disposal or when no future economic benefits are expected from its use or disposal. Any gain or loss arising on derecognizing of the asset is calculated as the difference between the net disposal proceeds and the carrying amount.

2.3.2 Leases a) Finance Leases – where the company is the lessee

Leases in terms of which the Group assumes that substantially of all the risks and rewards of ownership are classified as finance leases. Assets acquired by way of a finance lease are measured at an amount equal to the lower of their fair value or the present value of minimum lease payments at the inception less accumulated depreciation and accumulated impairment losses.

The corresponding principal amount payable to the lessor is shown as a liability. The finance charges allocated to future periods are separately disclosed in the notes.

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

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

Any excess of sales proceeds over the carrying amount of assets in respect of a sale and leaseback transaction that result in a finance lease, is deferred and amortized over the lease term.

b) Operating Leases

Leases where the lessor effectively retains substantially all the risks and rewards of an asset under the leased term, are classified as operating leases.

Lease payments (excluding cost of service such as insurance and maintenance) paid under operating leases are recognized as an expense in the income statement over the period of lease on a straight line basis.

2.3.3 Impairment of Assets

The company assesses at each reporting date whether there is an indication that an asset may be impaired. If such indication exists or when annual impairment testing for an asset is required the company makes an estimate of the asset’s recoverable amount. An asset’s recoverable amount is the higher of an asset’s or cash generating unit’s fair value less costs to sell and its value in use and determined for an individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets or group of assets. Where the carrying amount of an asset exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre tax discount rate that reflects current market assessment of the time value of money and the risk specific to the asset. These calculations are collaborated by valuation multiples, quoted share prices or other available fair value indicators.



Impairment losses of continuing operations are recognized in the income statement in those expense categories consistent with the function of the impaired asset, except for property previously revalued where the revaluation was taken to equity. In this case the impairment is also recognized in equity up to the amount of any previous revaluation.

For assets excluding goodwill, an assessment is made at each reporting date as to whether there is any indication that previously recognized impairment losses may no longer exist or may have decreased. If such indication exists, the company makes an estimate of recoverable amount. A previously recognized impairment loss is reversed only if there has been a change in the estimates used to determine the assets recoverable amount since the last impairment loss was recognized. If that is the case the carrying amount of the asset is increased to its recoverable amount.

That increased amount cannot “exceed” the carrying amount that would have been determined, net of depreciation had, had no impairment loss been recognized for the asset in prior years. Such reversal is recognized in the income statement unless the asset is carried at revalued amount, in which case the reversal is treated as a revaluation increase.

2.3.4 Goodwill

Goodwill represents the excess of the cost of an acquisition over the fair value of the Group’s share of the net identifiable assets of the acquired subsidiary at the date of acquisition.

Goodwill is reviewed for impairment annually or more frequently if events or changes in circumstances indicate that the carrying value may be impaired.

Impairment is determined for goodwill by assessing the recoverable amount of the cash generating unit (or Group of cash generating units) to which the goodwill relates. Where the recoverable amount of cash generating unit (or Group of cash generating units) is less than the carrying amount of cash generating unit (or Group of cash generating units) to which goodwill has been allocated, an impairment loss is recognized. Impairment losses relating to Goodwill cannot be reversed in future periods.

2.3.5 Capital Work-in-Progress

Capital work in progress is transferred to the respective asset accounts at the time of the first utilization of the asset.

2.3.6 Investments

Long Term Investment

Long term investments are classified as non current investments and are stated at cost less any impairment losses. The cost of the Investment includes acquisition charges such as brokerages, fee, duties and bank charges.

In the parent Company’s financial statement, investment in subsidiaries is carried at cost less impairment loss.

Provision for impairment is made in the Income Statement when in the opinion of the Directors there has been a decline other than temporary in the value of the investments determined on individual basis.

2.3.7 Inventories

Inventories are measured at the lower of cost and net realizable value, after making due allowances for obsolete and slow moving items. Net realizable value is price at which inventories can be sold in the ordinary course of business less the estimated cost of completion and estimated cost necessary to make the sale.

The cost incurred in bringing inventories to its present location and condition is accounted using the following cost formula.

Raw Material - At cost determined on first-in-first-out basis

Finished Goods - At the cost of direct materials, direct labour and appropriate proportion of fixed Production overheads at normal operating capacity.

Work In progress - At the cost of direct materials, direct labour and appropriate proportion of fixed Production overheads.

Packing Material - At cost determined on first-in first-out basis

Goods in Transit - At actual cost


2.3.8 Trade and Other Receivables

Trade and other receivables are recognized at the amounts they are estimated to realize net of provisions for impairment. Other receivables and dues from related parties are recognized at cost less provision for impairment. The amount of the provision is recognized in the income statement.

2.3.9 Cash and Cash Equivalents

Cash and cash equivalents are defined as cash in hand and demand deposits.

For the purpose of cash flow statement, cash & cash equivalent consists of cash in hand and deposits in banks net of outstanding bank overdrafts.

The cash flow statements are reported based on the indirect method.

2.4 LIABILITIES & PROVISIONS

2.4.1 Liabilities

Liabilities classified under current liabilities in the balance sheet are those expected to fall due within one year from the balance sheet date. Items classified as non-current liabilities are those expected to fall due at point of time after one year from the balance sheet date.

Trade and Other Payables

Trade creditors and other payables are stated at their book values.

2.4.2 Provisions, Contingent Assets and Contingent Liabilities

Provisions are recognized when the group has a present obligations (legal & constructive) as a result of a past event, where it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation.

All the contingent liabilities are disclosed as notes to the Financial Statements unless the outflow of resources is made contingent asset if exits are disclosed when inflow of economic benefit is probable.

2.4.2.1 Retirement Benefit Obligations

2.4.2.1.1 Defined Benefit Plans – Gratuity

Provision has been made for retirement gratuities, in conformity with SLAS 16 / Gratuity Act No.12 of 1983. The liability is not externally funded. The gratuity liabilities were based on actuarial valuation carried out. The actuarial gains and losses are charged or credited to the Income statement in the period is which they arise.

The retirement benefit obligation of the Company and its subsidiaries with more than 100 employees are based on the actuarial valuation carried out by Messrs. Actuarial & Management Consultants (Pvt) Ltd., Actuaries. The actuarial valuations involve making assumptions about discount rates and future salary increases. The complexity of the valuation, the underlying assumptions and its long term nature, a defined benefit obligation are highly sensitive to changes in these assumptions. All assumptions are reviewed at each reporting date. Details of the key assumptions used in the estimates are contained in Note 21 on page 64. The main assumptions used relate to mortality, disability rates and withdrawal rates. The assumptions regarding the discount rate and salary rate are of critical importance in determining the pace of providing for a final salary retirement scheme.

2.4.2.1.2 Defined Contribution Plans – Employees’ Provident Fund and Employees’ Trust Fund

Employees are eligible for Employees’ Provident Fund Contributions and Employees’ Trust Fund Contributions in line with respective statutes and regulations. The company contributes 12% and 3% of gross emoluments of employees to the Employees’ Provident Fund and to the Employees’ Trust Fund respectively

2.4.2.2 Taxation

2.4.2.2.1 Current Tax

The provision for Income Tax is based on the elements of income and expenditure as reported in the financial statements and computed in accordance with the provisions of the Inland Revenue Act No.10 of 2006 and the amendments thereto.



The company has entered into an agreement with Board of Investment of Sri Lanka Law No. 4 of 1978 under which the profit is exempt from Income Tax for a period of ten years of assessment from the date of the completion of the stipulated investment of Rs.500 Million which was fulfilled on 1st July, 2003 and as such the tax exemption period commenced on the said date.

Tokyo Super Cement Company Lanka (Pvt) Ltd a subsidiary of the company has entered into an agreement with Board of Investment of Sri Lanka Law No. 4 of 1978 under which the profit is exempt from Income Tax for a period of ten years of assessment reckoned from the date of commencement of business.

Fuji Cement Company (Lanka) Limited a subsidiary of the company, is liable for income tax under the Inland Revenue Act No. 10 of 2006 at the rate of 28%.

Tokyo Cement Colombo Terminal (Pvt) Ltd a subsidiary of the company is liable to pay income tax under the Inland Revenue Act No.10 of 2006.

2.4.2.2.2 Deferred Taxation

Deferred tax is provided using the liability method on temporary differences at the Balance Sheet date between the tax bases of assets and liabilities, and their carrying amounts for financial reporting purposes.

Deferred tax assets and liabilities recognized for all temporary differences. Deferred tax assets are recognized for all deductible temporary differences, carry-forward of unused tax credits and unused tax losses, to the extent that it is probable that taxable profit will be available against which the deductible temporary differences, and the carry-forward of unused tax credits and unused losses can be utilized.

The carrying amount of deferred tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred tax assets to be utilized. Unrecognized deferred tax assets are reassessed at each Balance Sheet date and are recognized to the extent that it has become probable that future taxable profit will allow the deferred tax asset to be recovered.

Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the year when the asset is realized or the liability is settled, based on tax rates and tax laws that have been enacted or substantively enacted at the Balance Sheet date.

Income tax relating to items recognized directly in equity is recognized in equity

Deferred tax asset and deferred tax liabilities are offset, if a legally enforceable right exists to set off current tax assets against current tax liabilities and the deferred taxes relate to the same taxable entity and the same taxation authority.

Deferred Tax for Tax Holiday Companies

Deffered tax during the tax holiday period for group companies under BOI tax holidays, has been recognized for temporary differences, where reversals of such differences extend beyond the tax exemption period, taking into account the requirements of SLAS 14 and The Institute of Chartered Accountants of Sri Lanka (ICASL) council’s ruling on deferred tax.

2.4.3 Commitment.

All material commitments as at the balance sheet date have been identified and disclosed in the notes to the financial statements.

2.5 INCOME STATEMENT

2.5.1 Revenue Recognition

a) Sale of Goods

Revenue is recognized to the extent that it is probable that the economic benefits will flow to the company and the revenue and associated costs incurred can be reliably measured. Revenue is measured at the fair value of the consideration received or receivable net of trade discounts and sales taxes. Revenue is recognized when the significant risks and rewards of ownership have been transferred to the buyer, recovery of the consideration is probable, the associated costs and possible return of goods can be estimated reliably.


b) Interest

Interest income is recognized as the interest accrued on the time basis (taking into account the effective yield on the asset) unless collectability is in doubt.

c) Dividend

Dividend income is recognized when the share holder’s right to receive payment has been established.

d) Others

Other income is recognized on an accrual basis.

e) Gains and Losses

Net gains and losses of a revenue nature on the disposal of property, plant and equipment and other non current assets including investments have been accounted for in the income statement having deducted from proceeds on disposal, the carrying amount of the assets and related property, plant and equipment amount remaining in revaluation reserve relating to that asset is transferred directly to accumulated profit/(loss).

2.5.2 Expenditure Recognition

2.5.2.1 Expenses are recognized in the income statement on the basis of a direct association between the cost incurred and the earning of specific items of income. All the expenditure incurred in the running of the business and in maintaining the property, plant and equipment in a state of efficiency has been charged to income in arriving at the profit for the year.

2.5.2.2 For the purpose of presentation of the income statement the directors are of the opinion that function of expenses method presents fairly the elements of the company’s and group’s performance and hence such presentation method is adopted.

2.5.2.3 Borrowing Costs

Borrowing costs are recognized as an expense in the period in which they are incurred, except to the extent where borrowing costs are directly attributable to the acquisition, construction or production of a qualifying assets which are assets that necessarily takes a substantial period of time to get ready for its intended purpose are added to the cost of those assets. Until such time as the assets are substantially ready for their intended use or sale.

Investment income earned on temporary investment of specific borrowings pending their expenditure on qualifying assets is deducted from the borrowing cost eligible for capitalization.

2.6 GENERAL

2.6.1 Events Occurring after the Balance Sheet Date

All material events occurring after the balance sheet date have been considered and where necessary adjustments to or disclosures have been made in the respective notes to the Financial Statements.

2.6.2 Related Party Transactions

Disclosures are made in respect of the transactions in which the company has the ability to control or exercise significant influence over the financial and operating decisions/policies of the other, irrespective of whether a price is charged.

2.6.3 Earning Per Share

Basic EPS is calculated by dividing the profit or loss attributable to ordinary share holders of the company by the number of voting or non voting ordinary shares.

2.6.4 Segment Reporting

A segment is a distinguishable component of the Group that is engaged either in providing related products or services within a particular economic environment (Geographical Segment), which is subject to risks and rewards that are different from those of other segments.

2.6.5 Comparative Figures

Where necessary, comparative figures have been reclassified to conform to the current year’s presentation.

2.6.6 Sri Lanka Accounting Standards effective from 01 January 2012

The Institute of Chartered Accountants of Sri Lanka has issued a new volume of Lanka Accounting Standards which became applicable for financial periods commencing on or after 1st January 2012.Accordingly, these Standards have not been applied in preparing these financial statements as they were not effective for the year ended 31st March 2012.

These Sri Lanka Accounting Standards comprise Accounting Standards prefixed both SLFRS (corresponding



to IFRS) and LKAS (corresponding to IAS). Application of Sri Lanka Accounting Standards prefixed SLFRS and LKAS for the first time shall be deemed to be an adoption of SLFRSs.

The Group has commenced reviewing its accounting policies and financial reporting in readiness for the transition. Set out below are the key areas where accounting policies will change and may have an impact on the financial statements of the Group. The Group is in the process of quantifying the impact on the financial statements arising from such changes in accounting policies.

SLFRS1 - First Time Adoption of Sri Lanka Accounting

Standards requires the Group to prepare and present opening new SLFRS financial statements at the date of transition to new SLFRS. The Group shall use the same accounting policies in its opening new SLFRS financial statements and throughout all comparable periods presented in its first new SLFRS financial statements.

LKAS1 - Presentation of Financial Statements requires an entity to present, in a statement of changes in equity, all owner changes in equity. All non owner changes in equity are required to be presented in one statement of comprehensive income or in two statements (a separate income statement and a statement of comprehensive income). Components of comprehensive income are not permitted to be presented in the statement of changes in equity. This standard also requires the Group to disclose information that enables users of its financial statements to evaluate the entity’s objectives, policies and processes for managing capital.

LKAS16 – Property Plant and Equipment requires a company to initially measure an item of property plant and equipment at cost, using the cash price equivalent at the recognition date. If payment is deferred beyond normal credit terms, the difference between the cash price equivalent and the total payment is recognized as interest over the period, unless such interest is capitalized in accordance with LKAS23 Borrowing Costs. It also requires that significant components of an asset be evaluated separately for depreciation.

LKAS32 – Financial Instruments: Presentation, LKAS39 –

Financial Instruments: Recognition and Measurement and SLFRS7 – Disclosures will result in changes to the current method of recognizing financial assets, financial liabilities

and equity instruments. These standards will require measurement of financial assets and financial liabilities at fair value at initial measurement. The subsequent measurement of financial assets classified as fair value through profit and loss and available for sale will be at fair value, with the gains and losses routed through the statements of comprehensive income and other comprehensive income respectively.

SLFRS3 – Business combinations will require the company to apply this standard to transactions and other events that meet the new definition of a business i.e. an integrated set of assets (inputs) and activities( processes) which are capable of being conducted and managed to provide a return, as opposed to a mere asset acquisition. The standard also requires to recognition and measurement of any non-controlling interest in the acquiree and re-measuring to fair value any previously held interests which could have an impact on the recognition of goodwill. Subsequent to the acquisition of control any acquisitions or disposals of non-controlling interest without loss of control will be accounted for as equity transactions and cannot be recognized as profit/loss on disposal of investments in the statement of financial performance.

KAS12 – Income Tax requires deferred tax to be provided in respect of temporary differences which will arise as a result of adjustments made to comply with the new SLAS.

LKAS18 – Revenue requires the company to measure

revenue at fair value of the consideration received or receivable. It also specifies recognition criteria for revenue, and the company/Group needs to apply such recognition criteria to the separately identifiable components of a single transaction in order to reflect the substance of the transaction.

The Institute of Chartered Accountants of Sri Lanka has resolved an amendment to Sri Lanka Accounting Standard 10, whereby the provision contained in paragraphs 30 and 31 of SLAS10 – Accounting Policies, Changes in Accounting Estimates and Errors, would not be applicable for financial statements prepared in respect of financial periods commencing before 1 January 2012 and hence the impact of this transition is not required to be disclosed in these financial statements.


Notes to the Financial Statements

Group Company

31st March, 31st March, 31st March, 31st March, 2012 2011 2012 2011 Rs. Rs. Rs. Rs. 3. OTHER INCOME

Interest Income 11,081,060 624,476 3,332,259 - Miscellaneous Income (Net) 158,198,435 153,146,125 156,737,865 150,254,426 Profit on Sale of Property, Plant and Equipment 20,233,927 755,000 9,464,285 755,000 Exchange Gain - 16,164,462 - 6,573,778 Amortization of Deferred Income - Lease back of Motor Vehicle 2,875,587 2,875,588 - - Dividend Received from Subsidiaries - - 241,941,890 136,889,108 Handling Charges 1,505,935 42,815,289 - - Hiring Income of Prime Movers 703,529 223,781 - - Packing Income - 20,873,347 - - 194,598,473 237,478,068 411,476,299 294,472,312

4. FINANCE EXPENSES Interest Cost on Borrowings 415,730,414 465,447,872 159,790,131 186,137,777 Interest Expenses on Overdraft 13,125,846 5,172,928 236,022 - Interest on Lease 6,651,278 14,962,185 40,610 1,390,242 435,507,538 485,582,985 160,066,763 187,528,019

5. NET PROFIT BEFORE TAXATIONA Profit Before Taxation

1,038,616,208 841,894,787 812,072,102 789,979,612

B Profit Before Taxation is Stated after Charging all Expenses Including the Following Depreciation On Property, Plant and Equipment 963,458,976 972,666,995 512,439,297 520,420,839 Directors Emoluments 16,617,922 15,244,000 16,617,922 15,244,000 Auditors Remuneration- Audit Services 3,917,779 3,556,725 1,960,756 1,600,000 Charity and Donations 2,676,089 5,710,272 2,109,182 5,323,790 Staff Cost Including all benefits 359,529,451 274,063,101 261,992,582 221,264,295 Defined Benefits Cost - Retirement Benefit Obligation 10,794,790 7,456,853 8,887,744 4,693,929 Defined Contribution Plan Cost - E.P.F. & E.T.F. 26,171,299 20,258,190 19,029,409 13,631,219 Amortization of Operating Lease 4,341,270 4,341,270 - - Research and Development Cost 885,259 3,923,020 881,521 3,945,069 Legal Expenses and Professional Fee 17,113,353 18,123,444 10,851,690 11,164,743 Repairs and Maintenance 521,968,413 447,807,810 416,242,070 356,634,103 Reimbursement of Vessel Operational Expenses 323,589,301 365,650,475 132,004,305 155,959,425 Sales Commission 508,059,361 273,150,052 204,967,714 158,568,160 NBT Expenses 312,957,260 435,160,676 146,168,671 154,895,049 Advertisements 71,156,816 48,039,109 54,363,792 33,387,918 Loss on Disposal of Property, Plant and Equipment 14,975,840 - 14,975,840 - Disallowed VAT 19,079,223 - 19,079,223 36,928,990 Specific Provision for Bad and Doubtful debts - 6,137,730 - 6,137,730 Bad Debts Written off 556,632 5,636,449 - -


Group Company

31st March, 31st March, 31st March, 31st March, 2012 2011 2012 2011 Rs. Rs. Rs. Rs.

6. INCOME TAX EXPENSECurrent Income Tax Provision 6 A 42,007,681 14,881,096 5,776,278 17,651,818 Deferred Taxation 6 B 148,367,455 (2,193,516) 156,534,005 64,965,339 190,375,136 12,687,580 162,310,283 82,617,157

6 A Income TaxReconciliation between Current Tax Expense/(Income) and the Product of Accounting ProfitAccounting Profit Before Taxation 1,038,616,208 841,894,787 812,072,102 789,979,612 Less : Income considered separately (194,598,473) (237,478,068) (411,476,299) (294,472,312)Profit From Trade or Business 844,017,735 604,416,719 400,595,803 495,507,300 Less: Exempt Profit (Note 2.4.2.2.) (1,045,618,418) (735,044,383) (400,595,803) (495,507,300)Liable Profit from trade or business (201,600,683) (130,627,664) - -Income considered separately 192,389,009 169,431,569 411,476,299 294,472,312 Exempt Other Income 6A.1 (23,109,514) (18,788,962) (251,406,175) (143,988,952)Liable Other Income 169,279,495 150,642,607 160,070,124 150,483,360 Accounting profit / (loss) chargeable to Income Taxes 169,279,495 150,642,607 160,070,124 150,483,360 Tax Rate for the Year 28% 35% 28% 35%Tax effect on chargeable profits 47,398,258 52,724,912 44,819,635 52,669,176Add : Tax effect of Disallowable Expenses in Determining Taxable Income/(Loss) 173,377,438 21,040,612 29,124,775 21,040,609Less : Tax effect of Allowable Expenses in Determining Taxable Income / (Loss) (165,348,746) (46,973,981) (68,168,132) (46,954,471) 55,426,950 26,791,543 5,776,278 26,755,314Tax effect on deduction under section 32 (13,420,444) (9,364,360) - (9,364,360)Tax @ 28% before adjustments on tax Credits 42,006,506 17,427,183 5,776,278 17,390,954Income Tax Provision for the year 42,006,506 17,427,183 5,776,278 17,390,954Social Responsibility Levy @ 1.5% - 261,408 - 260,864 42,006,506 17,688,591 5,776,278 17,651,818 Less /Add: Income tax under/(over provision) for Previous years 1,175 (2,807,495) - - Current Tax Charged to the Income statement 42,007,681 14,881,096 5,776,278 17,651,818 Tax loss carried forward to the Y/A 2012/2013 358,204,066 1,243,978,300 33,362,346 79,311,884

6 A.1 Dividend Income amounting Rs. 241,941,890/= included under Other Income has been treated as exempt under the Inland Revenue

Act, No. 10 of 2006, as amended which is received from the exempted businesses.

Profit on disposal of Property Plant and Equipment is exempted as capital allowance not claimed for the asset.


Group Company


6 B Deferred Tax Expenses Deferred tax expense arising from; - Accelerated depreciation for tax purposes on Freehold property 23,906,840 55,987,842 127,859,233 58,788,151 - Accelerated depreciation for tax purposes on Leasehold property 363,191 94,449 - - - Retirement benefit liabilities (2,178,605) (1,517,598) (2,029,707) (1,314,300) - Tax effect arising from tax losses 126,276,029 (56,758,209) 30,704,479 7,491,488 148,367,455 (2,193,516) 156,534,005 64,965,339

6 B.1 Deferred tax has been calculated at 28% that is expected to apply after the tax exemption period, assuming that tax rate will not be changed over the specified period.

7. EARNINGS PER ORDINARY SHARE Basic Earnings Per Share is calculated by dividing the net profit attributable to equity holders of the company by the weighted average

number of ordinary shares in issue (both voting and non-voting) during the year, as required by the Sri Lanka Accounting Standard No.34 (Revised 2005) on ‘Earning Per Share’.

Group Company


Profit Attributable to Equity Holders 973,316,455 874,008,923 649,761,819 707,362,455 Weighted Average Number of Ordinary Shares 303,750,000 295,312,500 303,750,000 295,312,500 Earnings per Ordinary Share 3.20 2.96 2.14 2.40

Weighted Average Number of Ordinary Shares - Voting 7.1.1 202,500,000 196,875,000 202,500,000 196,875,000 Weighted Average Number of

Ordinary Shares - Non Voting 7.1.2 101,250,000 98,437,500 101,250,000 98,437,500 303,750,000 295,312,500 303,750,000 295,312,500

7.1 Amount used as denominator7.1.1 Ordinary Shares - Voting Ordinary Shares at the beginning of the year 202,500,000 180,000,000 202,500,000 180,000,000

Effect of the Capitalization of Reserves 16,875,000 - 16,875,000 202,500,000 196,875,000 202,500,000 196,875,000

7.1.2 Ordinary Shares - Non Voting Ordinary Shares at the beginning of the year 101,250,000 90,000,000 101,250,000 90,000,000

Effect of the Capitalization of Reserves 8,437,500 - 8,437,500 101,250,000 98,437,500 101,250,000 98,437,500

7.2 Diluted Earnings Per Share There is no potentially dilutive ordinary share of the company and as a result the diluted earnings per share (EPS) is the same as basic

EPS shown above.

8. DIVIDEND PER SHARE Final Dividend - Voting 1.30 1.00 1.30 1.00 - Non Voting 1.30 1.00 1.30 1.00



9 A.

Gro

upPr

oper

ty, P

lant

and

Equ

ipm

ent

CO

ST/V

ALUA

TIO

N D

epre

ciat

ion

WD

V

Tr

ansfe

r to

Tr

ansfe

r to

As a

t

Fr

eeho

ld

As a

t A

s at

For t

he

On

Fr

eeho

ld

As at

As

at

As a

t It

em

01.04

.2011

A

dditi

ons

Disp

osals

C

ateg

ory

31.

03.2

012

01

.04.20

11

Year

D

ispos

als

Cat

egor

y 31

.03.20

12

31.0

3.20

12

31.03

.2011

Rs.

R

s.

Rs.

R

s.

Rs.

R

s.

Rs.

R

s.

Rs.

R

s.

Rs.

Rs.

Free

hold

Land

23

5,398

,854

5,86

3,174

-

-

2

41,2

62,0

28

-

-

-

-

-

241,

262,

028

235,3

98,85

4 Fa

ctor

y Bui

ldin

gs

1,00

6,481

,339

-

-

-

1,0

06,4

81,3

39

239,5

92,66

8 15

,430,0

23

-

-

255

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75

1,45

8,64

8 76

6,888

,671

Gene

rato

r Hou

se

22,55

8,795

-

-

-

2

2,55

8,79

5

15,78

7,724

1,

127,9

40

-

-

16,

915,

664

5,

643,

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ther

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gs

355,2

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-

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416

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16

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1 Fu

el St

orag

e Tan

ks

4,94

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4

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4,

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38

-

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4,3

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27

601,

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t and

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hine

ry

3,20

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er

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346,0

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4 11

4,409

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24

2,947

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28,99

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1 La

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tory

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pmen

t 25

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1

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2,309

2,

526,8

76

-

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16,

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15

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11

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52

Offi

ce Eq

uipm

ent

13,70

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086,8

30

-

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14,

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427

10

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56

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nera

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24,43

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9,73

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Recy

cling

Syste

m

785,8

95

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7

85,8

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Furn

iture

and

Fittin

gs

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hicle

s 69

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80,5

62

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32,77

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52

532

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25

0,23

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1 23

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Bulk

Cem

ent C

arrie

rs 12

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44

-

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12

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men

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s 45

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3 24

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-

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169

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Cem

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l 27

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7,363

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1

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3

9,53

8,70

7 14

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Tug

Boat

1,

628,4

08

7,31

1,819

-

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8

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1,

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08

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86

-

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3,43

3 -

Ra

ilway

Plat

form

7,

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15

-

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7,2

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15

7,26

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Ba

rges

11

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85

-

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00

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10,

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1,

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985

1,78

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Co

mpu

ter a

nd O

ther

Elec

troni

c Eq

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ent

51,11

2,702

20

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93

-

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71,

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33

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61

6,06

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Pack

er H

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30,76

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3,

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75

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36

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57

Land

ing

Jetty

66

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52

-

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36

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92

3,32

1,038

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0,160

Ba

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ng P

lant a

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Pu

mpe

r Tru

ck

253,7

20,54

7 13

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64

-

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267

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91

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23

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1

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4 Ve

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ass B

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o M

ass P

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achi

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2 36

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238,9

28,23

5 11

9,282

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358

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2,0

58,0

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33

2,140

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27

Bag

Stor

age W

are H

ouse

- Dam

bulla

-

52

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80

-

-

52,

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980

-

71

5,624

-

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7

15,6

24

52,

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356

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1,81

3,604

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1,28

8,035

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27,53

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1

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4,761

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52,33

6 1,

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9 27

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52

4,724

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56,8

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45

8,465

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00

Le

aseh

old

Land

25

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00

-

-

-

25,

815,

500

3,

576,9

09

420,0

52

-

-

3,9

96,9

61

21,8

18,5

39

22,23

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Le

aseh

old

Asse

ts-

Mot

or Ve

hicle

s 15

3,343

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-

2,76

6,500

(2

7,539

,600)

1

23,0

37,8

75

84,28

1,433

22

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88

2,76

6,500

(27

,259,6

52)

76,

641,

869

46

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69

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42

13

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40,46

9 1,

813,6

04,92

4 1,

290,8

02,02

0 -

13

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4,

849,8

52,03

6 96

3,458

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1,00

8,467

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- 4

,804

,843

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9,1

25,0

99,6

90

8,557

,288,4

33


Notes to the Financial Statements9

B. C

ompa

nyPr

oper

ty, P

lant

and

Equ

ipm

ent

CO

ST/V

ALUA

TIO

N D

epre

ciat

ion

WD

V

Tr

ansfe

r to

Ch

arge

s Di

spos

als

Tran

sfer t

o

A

s at

Free

hold

A

s at

As a

t Fo

r the

Fo

r the

Fr

eeho

ld

As at

As

at

As a

t It

em

01.04

.2011

A

dditi

ons

Disp

osals

C

ateg

ory

31.

03.2

012

01

.04.20

11

Year

Ye

ar

Cat

egor

y 3

1.03

.201

2

31.0

3.20

12

31.03

.2011

Rs.

R

s.

Rs.

R

s.

Rs.

R

s.

Rs.

R

s.

Rs.

R

s.

Rs.

Rs.

Free

hold

Land

20

7,385

,160

5,86

3,174

-

-

2

13,2

48,3

34

-

-

-

-

-

213,

248,

334

207,3

85,16

0 Fa

ctor

y Bui

ldin

gs

224,5

04,22

3 -

-

-

2

24,5

04,2

23

106,6

25,72

1 5,

612,6

06

-

-

112

,238

,327

11

2,26

5,89

6 11

7,878

,502

Gene

rato

r Hou

se

22,55

8,795

-

-

-

2

2,55

8,79

5

15,78

7,724

1,

127,9

40

-

-

16,

915,

664

5,

643,

131

6,77

1,071

O

ther

Bui

ldin

gs

343,8

96,08

5 26

,512,1

49

-

-

370

,408

,234

16

5,843

,063

31,71

9,023

-

-

1

97,5

62,0

86

172,

846,

148

178,0

53,02

2 Fu

el St

orag

e Tan

ks

4,94

0,759

-

-

-

4

,940

,759

3,

458,5

32

247,0

38

-

-

3,7

05,5

70

1,23

5,18

9 1,

482,2

27

Plan

t and

Mac

hine

ry

1,02

2,084

,506

10,88

7,182

-

-

1,0

32,9

71,6

88

653,7

93,33

9 51

,104,2

25

-

-

704

,897

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32

8,07

4,12

4 36

8,291

,167

Pow

er P

lant

210,2

67,85

2 -

-

-

2

10,2

67,8

52

137,5

55,02

5 10

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93

-

-

148

,068

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62

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72

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27

Fact

ory a

nd O

ther

E

quip

men

t 33

1,184

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106,0

50,51

7 -

-

4

37,2

35,2

23

221,3

39,61

0 27

,516,2

35

-

-

248

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18

8,37

9,37

8 10

9,845

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Labo

rato

ry Eq

uipm

ent

25,95

7,961

6,

116,2

40

-

-

32,

074,

201

14

,032,3

10

2,52

6,876

-

-

1

6,55

9,18

6

15,5

15,0

15

11,92

5,651

O

ffice

Equi

pmen

t 9,

202,4

30

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20

-

-

10,

137,

250

6,

705,8

81

387,8

06

-

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7,0

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87

3,04

3,56

3 2,

496,5

49

Gene

rato

rs 20

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55

-

-

-

20,

318,

455

8,

113,8

67

1,63

0,833

-

-

9

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10

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12

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88

Recy

cling

Syste

m

785,8

95

-

-

-

785

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78

5,895

-

-

-

7

85,8

95

-

-

Furn

iture

and

Fittin

gs

10,84

7,756

3,

049,4

12

-

-

13,

897,

168

6,

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99

1,00

3,094

-

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7

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6,

824,

375

4,77

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Ve

hicle

s 57

2,732

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71,99

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24

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32

24,85

2,100

6

45,4

96,9

74

397,2

31,14

2 63

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00

24,08

3,333

24

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00

461

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18

3,66

6,96

5 17

5,500

,932

Bulk

Cem

ent C

arrie

rs 12

,637,3

44

-

-

-

12,

637,

344

12

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44

-

-

-

12,

637,

344

-

-

Ce

men

t Silo

s 12

9,594

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9,63

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1

39,2

24,2

74

23,96

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3,

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36

-

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27,

782,

144

11

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2,13

0 10

5,634

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Tug

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00

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031,

100

-

-

Co

mpu

ter a

nd O

ther

E

lect

roni

c Equ

ipm

ent

28,17

1,766

7,

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39

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35,

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17

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20

2,15

9,562

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1

9,41

5,48

2

16,4

34,4

23

10,91

5,846

Pa

cker

Hou

se

24,27

8,628

48

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88

-

-

72,

399,

716

15

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95

2,85

7,492

-

-

1

8,63

8,58

7

53,7

61,1

29

8,49

7,533

La

ndin

g Je

tty

66,42

0,752

-

-

-

6

6,42

0,75

2

36,53

1,414

3,

321,0

38

-

-

39,

852,

452

26

,568

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29

,889,3

38

Batc

hing

Plan

t and

P

umpe

r Tru

ck

253,7

20,54

7 13

,380,3

64

-

-

267

,100

,911

91

,291,1

01

23,55

4,650

-

-

1

14,8

45,7

51

152,

255,

160

162,4

29,44

6 Ve

ssel

23

8,308

,400

-

238,3

08,40

0 -

-

23

8,308

,400

-

238,3

08,40

0 -

-

-

-

Ve

ssel

Dry

Doc

king

1,01

6,954

,016

- 1

,016,9

54,01

6 -

-

66

2,302

,017

72,31

7,307

73

4,619

,324

-

-

-

354,6

51,99

9 Bi

o M

ass B

uild

ing

207,4

72,12

2 11

,020,0

03

-

-

218

,492

,125

41

,892,3

17

20,88

7,839

-

-

6

2,78

0,15

6

155,

711,

969

165,5

79,80

5 Bi

o M

ass P

lant a

nd

Mac

hine

ry

2,37

9,381

,762

36,84

4,517

-

-

2,4

16,2

26,2

79

238,9

28,23

5 11

9,282

,911

-

-

358

,211

,146

2,0

58,0

15,1

33

2,140

,453,5

27

New

Vess

el

- 1

,250,2

86,80

0 -

-

1,2

50,2

86,8

00

-

65,11

9,099

-

-

6

5,11

9,09

9 1

,185

,167

,701

-

7,38

2,529

,691

1,61

5,682

,356

1,27

9,345

,748

24,85

2,100

7,7

43,7

18,3

99

3,13

5,153

,082

511,0

89,58

9 99

7,011

,057

24,85

2,100

2,

674,

083,

714

5,06

9,63

4,68

5 4,

247,3

76,60

9

Le

aseh

old

Land

25

,815,5

02

-

-

-

25,

815,

502

3,

576,9

09

420,0

52

-

-

3,9

96,9

61

21,8

18,5

41

22,23

8,593

Le

aseh

old

Asse

ts- M

otor

Vehi

cles

24,85

2,100

-

-

(2

4,852

,100)

-

23

,922,4

44

929,6

56

-

(24,8

52,10

0)

-

-

929,6

56

7,

433,1

97,29

3 1,

615,6

82,35

6 1,

279,3

45,74

8 -

7,7

69,5

33,9

01

3,162

,652,4

35

512,4

39,29

7 99

7,011

,057

- 2

,678

,080

,675

5,0

91,4

53,2

26

4,270

,544,8

58


9.C Value of Land and Ownership

Company Location Land Extent Number of Building Cost Land Cost Building Rs. Rs.

a. Tokyo Cement Company (Lanka) PLC Cod Bay, China Bay, Acres 44.00 5 1,001,915,081 - Trincomalle (Leasehold) Elpitiya Acres 7.50 2 101,101,240 17,906,600 Jaffna Acres 6.50 1 27,792,397 8,495,843 Colombo Perches 40.90 - - 180,982,714 Peliyagoda (Leasehold) Acres 1.90 4 26,254,277 25,815,502 Vavuniya Acres 7.00 - - 5,863,174

b. Tokyo Super Cement Company Lanka (Pvt) Ltd Cod Bay, China Bay, - 2 655,271,169 - Trincomalle (Leasehold) Dambulla Acres 5.00 2 85,378,803 14,675,000

c. Tokyo Cement Power (Lanka) Ltd Mahiyanganaya Acres 19.00 - - 13,338,695

10. CAPITAL WORK IN PROGRESS10.A Group

Description Balance Expenses Capitalized During Balance As at Incurred During the year As at 01.04.2011 During the the year Charged 31.03.2012 the year to the Income Statement Rs. Rs. Rs. Rs. Rs.

Rest Room 38,403 - - 38,403 -Gypsum Transporter System - 13,717,500 - - 13,717,500Clinker Silo Upgradation - 2,352,000 - - 2,352,000Bio-Mass derived silica Feeding System -TSCL - 339,000 - - 339,000Cement Store - Dambulla - 200,000 - - 200,000Bio Mass Power Plant Storage Yard 8,459,910 - 8,459,910 - -Mill Upgrading 38,732,073 - - - 38,732,073Field Survey 4,927,249 2,055,252 - - 6,982,501Lab Extension work 1,184,029 - 1,184,029 - -Outer Circular Highway - 1,466,893 - - 1,466,893Installation of Bio-Mass derived silica Storag System - 5,990,306 - - 5,990,306Packing Plant Upgrading - 4,489,796 - - 4,489,796Mill Upgrading-TSCL - 7,697,462 - - 7,697,462New Packing Plant - 1,100,000 - - 1,100,000Raw Material unloading System - 931,577 - - 931,577Bio-Mass derived silica Feeding system-TCCL - 4,448,646 - - 4,448,646ERP Implementation - 13,745,229 - - 13,745,229Mahiyangana Power Plant - 60,203,464 - - 60,203,464TOTAL 53,341,664 118,737,125 9,643,939 38,403 162,396,447


10.B Company

Description Balance Expenses Capitalized During Balance As at Incurred During the year As at 01.04.2011 During the the year Charged 31.03.2012 the year to the Income Statement Rs. Rs. Rs. Rs. Rs.

Bio Mass Power Plant Storage Yard 8,459,910 - 8,459,910 - -Mill Upgrading 38,732,073 - - - 38,732,073Field Survey 4,927,249 2,055,252 - - 6,982,501Lab Extension work 1,184,029 - 1,184,029 - -Outer Circular Highway - 1,466,893 - - 1,466,893Installation of Bio-Mass derived silica Storage & Extraction System - 5,990,306 - - 5,990,306Packing Plant Upgrading - 4,489,796 - - 4,489,796Mill Upgrading - TSCL - 7,697,462 - - 7,697,462New Packing Plant - 1,100,000 - - 1,100,000Raw Material unloading System - 931,577 - - 931,577ERP Implementation - 13,745,230 - - 13,745,230Bio-Mass derived silica Feeding System - 4,448,646 - - 4,448,646 53,303,261 41,925,162 9,643,939 - 85,584,484

11. GOODWILL

Incompliance with SLAS 25-Business Combinations upon acquiring controlling interest , the accounted Goodwill reflect the excess of the purchase price of shares in Tokyo Cement Colombo Terminal (Pvt.) Ltd, (Formerly known as Samudra Cement Company Lanka (Pvt) Ltd.) over the fair value of the proportionate share of the net assets of such company as at the date of acquisition. Unamortized balance of Goodwill as at 01st April 2005 as well as goodwill generated from further acquisition which was made on 31st December 2006 recorded as a permanent asset.

When assessing the impairment, the recoverable amount of the Cash Generating unit has been determined using the higher of Fair Value less Cost To Sell and the Value in Use. Since the Value in Use of the Cash Generating Unit is higher than the Fair Value less Cost to sell it has been considered as the recoverable amount where the value in use are based on the present value of the future cash flows of the forecasted business operations of the Tokyo Cement Colombo Terminal (Pvt.) Ltd for next five years using the key assumptions made considering past experience or if appropriate consistent with external source of information, and which is approved by the Board of Directors of the company .

Key assumptions used in Value in Use (VIU) calculationsDiscount Rate Discount rate is used at 13.5% per annum which is the rate for the bank facilities over the import demand loan as the cost of capital of the company.

Inflation and General Price The basis used to determine the value assigned to the budgeted cost inflation, is the inflation rate, based on projected economic conditions and assumed that General expenses will be increased at the rate of 10%. per annum.

Exchange RateRupee rate fluctuation against USD has been considered from Rs.129 to 134 throughout the period.



12. INVESTMENTS

Description Group Company


Investments In Subsidiaries - Unquoted - At Cost Fuji Cement Company (Lanka) Ltd. Ordinary Shares (9,000,000 Shares) - - 90,000,000 90,000,000 10% Convertible Preference Shares (6,000,000 Shares) - - 60,000,000 60,000,000 Tokyo Cement Colombo Terminal (Pvt.) Ltd. Ordinary Shares -(19,425,000 Shares) - - 235,050,010 235,050,010 Tokyo Super Cement Company Lanka (Pvt) Ltd. Ordinary Shares (48,388,380 Shares) - - 1,345,100,006 1,345,100,006 Tokyo Cement Power (Lanka) Ltd (10 Shares) - - 10 - - - 1,730,150,026 1,730,150,016

13. OPERATING LEASE PREPAYMENT At the beginning of the Year 69,460,316 73,801,586 - - Amortization during the Year (4,341,270) (4,341,270) - - 65,119,046 69,460,316 - - Less: Current Portion of Prepayment (4,341,270) (4,341,270) - - At the end of the Year 60,777,776 65,119,046 - -

14. INVENTORIES Raw Materials 455,395,229 396,286,303 340,482,693 135,965,141 Finished Goods - Manufactured 508,170,073 196,514,412 126,598,543 148,444,261 Packing Materials 368,381,298 43,852,657 160,594,079 34,112,955 Spares and Consumables 130,549,118 149,500,497 86,777,511 68,810,039 Grinding Media 20,460,976 34,367,888 14,864,651 32,306,496 Goods - in - Transit - 301,845,242 - - At the End of the Year 1,482,956,694 1,122,366,999 729,317,477 419,638,892

15. TRADE AND OTHER RECEIVABLES Trade Debtors 811,358,597 634,482,829 437,633,760 297,486,123 Less: Specific Provision for Bad and Doubtful Debts (6,137,730) (6,137,730) (6,137,730) (6,137,730) 805,220,867 628,345,099 431,496,030 291,348,393 Deposits, Advances and Pre-payments 90,088,684 99,654,337 41,350,960 43,224,838 Other Receivables 676,857,595 368,139,738 309,491,003 146,192,482 At the End of the Year 1,572,167,146 1,096,139,174 782,337,993 480,765,713

16. AMOUNT DUE FROM RELATED PARTIES Tokyo Cement Colombo Terminal (Pvt) Ltd. - - 5,840,494 6,129,191 Tokyo Super Cement Company Lanka (Pvt) Ltd. - - - 706,577,915 Tokyo Cement Power (Lanka) Ltd - - 82,242,147 13,338,694 - - 88,082,641 726,045,800


17. STATED CAPITAL

Group Company

At the At the At the At the Beginning End of Beginning End of Description of the year the Year of the year the Year 01.04.2011 31.03.2012 01.04.2011 31.03.2012 (Rs.) (Rs.) (Rs.) (Rs.)

Value of Ordinary Shares 2,366,750,000 2,366,750,000 2,366,750,000 2,366,750,000

In accordance with Section 58 of the Companies Act No.07 of 2007 which became effective from 3rd May, 2007, share capital and share premium have been classified as stated capital.

17.1 Movement in Number of Ordinary Shares

Group Company

At the At the At the At the Beginning End of Beginning End of Description of the year the Year of the year the Year 01.04.2011 31.03.2012 01.04.2011 31.03.2012

Ordinary Shares- Voting 202,500,000 202,500,000 202,500,000 202,500,000- Non-Voting 101,250,000 101,250,000 101,250,000 101,250,000 303,750,000 303,750,000 303,750,000 303,750,000

The above shares are quoted in the Colombo Stock Exchange. The non-voting shares rank pari pasu in respect of all rights with the ordinary voting shares of the Company except voting rights on resolutions passed at general meetings.

18. RESERVES

Group Company

Description 31st March, 31st March, 31st March, 31st March, 2012 2011 2012 2011 Rs. Rs. Rs. Rs.

Capital Redemption Reserve Fund 150,000,000 150,000,000 - - 150,000,000 150,000,000 - -



19. INTEREST BEARING BORROWINGS Group Company


At the Beginning of the Year 3,243,761,023 3,743,719,375 1,224,268,800 1,145,770,600Add: Loans Obtained/Exchange Loss during the Year 8,038,175,344 5,489,986,746 1,815,000,000 1,050,000,000 11,281,936,367 9,233,706,121 3,039,268,800 2,195,770,600Less: Settlements during the Year (8,416,862,048) (5,989,945,098) (1,836,356,800) (971,501,800)At the End of the Year 2,865,074,319 3,243,761,023 1,202,912,000 1,224,268,800

Repayable within One Year 1,197,398,543 2,303,823,700 474,370,338 657,664,799Repayable after One YearRepayable between one and Five Years 1,667,675,776 939,937,323 728,541,662 566,604,001Repayable after Five Years - - - - 2,865,074,319 3,243,761,023 1,202,912,000 1,224,268,800

Note : Current term and Long term portion of the borrowings over interest cost and Capital repayable has been apportioned between borrowings repayable within one year, repayable between one and five years and more than five years

20. DEFERRED TAX

Group Company


At the Beginning of the Year 496,336,201 498,529,717 301,210,459 236,245,120Charge to / (from) Income Statement (Note 6.B) 148,367,455 (2,193,516) 156,534,005 64,965,339At the End of the Year 644,703,656 496,336,201 457,744,464 301,210,459

20.1 Tax effect on Temporary Difference on Property, Plant and Equipment 848,175,141 934,035,958 466,976,516 339,117,283Tax effect on Temporary Difference on Leased Assets 609,480 (340,813) - -Tax effect on Temporary Difference on Retirement Benefit Obligations (6,675,640) (15,060,896) (9,232,052) (7,202,345) 842,108,981 918,634,249 457,744,464 331,914,938Less: Unused Tax Losses (197,405,325) (422,298,048) - (30,704,479)Probable Deferred Tax Liability 644,703,656 496,336,201 457,744,464 (301,210,459)

20.2 Deferred tax assets amounting to Rs.161,738,022/= for the group has not been recognized for the year, since the subsidiary companies do not expect these assets to reverse in the foreseeable future. The deferred tax asset in the subsidiary has arisen as a result of carried forward losses.


20.3 Deferred Tax for Tax Holiday CompaniesFor group companies under BOI tax holidays, deferred tax has been recognized for temporary differences, when reversals of such differences extend beyond the tax exemption period, taking into account the requirements of SLAS 14 and the ICASL council’s ruling on deferred tax.

21. RETIREMENT BENEFIT OBLIGATION

Group Company


At the Beginning of the Year 37,233,953 29,867,629 25,722,661 21,028,732Actuarial Gain or Loss 2,241,178 256,100 3,117,899 104,740Current Service Cost 4,457,877 4,202,108 2,940,352 2,276,028Interest Cost 4,095,735 2,998,645 2,829,493 2,313,161Provision for the Year 10,794,790 7,456,853 8,887,744 4,693,929 48,028,743 37,324,482 34,610,405 25,722,661

Payment Made During the Year (2,584,815) (90,530) (1,638,790) -At the End of the Year 45,443,928 37,233,952 32,971,615 25,722,661

The retirement benefit obligation of Tokyo Cement Company (Lanka) PLC and of its subsidiaries with more than 100 employees are based on the actuarial valuations carried out by Messrs. Actuarial and Management Consultants (Pvt) Ltd. The group has adopted the “Project Unit Credit Method” to determine the present value of the retiring benefit obligation as recommended by SLAS 16.

The principle assumptions used in determining the cost of employee benefits were;

2011/2012 2010/2011

a) Discount Rate 11% 11%b) Salary Increment 10% 10%c) Retirement Age 55 Years 55 Years

Assumptions regarding future mortality are based on a 67/70 mortality table issued by the Institute of Actuaries, London.

22 LEASE CREDITOR

Group Company


At the Beginning of the Year 65,282,359 123,390,255 1,538,105 19,156,773Add: Facility Obtained During the Year - 5,575,800 - - 65,282,359 128,966,055 1,538,105 19,156,773Less: Payments Made During the Year (46,588,224) (63,683,696) (1,538,105) (17,618,668)At the End of the Year 18,694,135 65,282,359 - 1,538,105



22 LEASE CREDITOR CONTD.

Group Company


Interest in Suspense BalanceAt the Beginning of the Year 7,987,440 21,570,924 39,939 1,430,852Add : Due to Facility Obtained During the Year - 1,378,701 - -Less : Charge to the Income Statement (6,650,608) (14,962,185) (39,939) (1,390,913)At the End of the Year 1,336,832 7,987,440 - 39,939

Net LiabilitiesNet liability to Lease Creditors 17,357,303 57,294,919 - 1,498,166

Less: Short Term Lease Liabilities 14,682,767 39,937,627 - 1,498,166Long Term Lease Liabilities 2,674,536 17,357,292 - -

Note: Current term and Long term portion of Finance lease obligation over finance charges and Capital repayable has been apportioned between finance lease repayable within one year and repayable between one and five years.

23. TRADE AND OTHER PAYABLES

Group Company


Bills Payable 1,441,735,825 743,582,507 721,605,226 500,160,000Expense Creditors 1,102,250,023 640,157,190 454,306,436 398,816,928Other Creditors 322,156,626 260,967,280 92,267,984 59,896,961 2,866,142,474 1,644,706,977 1,268,179,646 958,873,889

24. AMOUNT DUE TO RELATED PARTIESFuji Cement Company (Lanka) Ltd. - - 451,220,296 555,688,197Tokyo Super Cement Company Lanka (Pvt) Ltd. - - 107,828,482 - - - 559,048,778 555,688,197


25. CAPITAL AND OTHER COMMITMENTS25.1 Capital Commitments

The following capital commitments have been approved by the respective Board of Directors, but not provided for in the financial statements.a) Implementation of new Enterprise Resource Planning (ERP) System with the estimated cost of Rs.58.6 Mn. The total annual

maintenance cost is estimated at Rs.6.3 Mn.

b) The board authorized the capital investment of Rs.77 Mn for installation of Bio-Mass derived silica feeding system which will be met without recourse to borrowings Rs.4.4 Mn has been incurred so far.

c) Mill upgrading and Optimization of Tokyo Cement mill Circuit approximately for 49.5Mn

25.2 Other Commitmentsi) The company has entered in to an agreement to export Bio-Mass power with the Ceylon Electricity Board (CEB) for a period of

20 years subject to the terms and conditions.

ii) The company has entered in to an agreement with Ceylon Electricity Board (CEB) to purchase coal ash from Norochcholai Power Plant for a period of 5 years.

25.3 Subsidiary companiesa) Subsidiary company - Tokyo Cement Power (Lanka) Ltd Establishment of Dendro Power Plant under CEB medium voltage development plan amounting to Rs.1.5 Bn. Capital

expenditure as at 31st March 2012 is Rs.82.2 Mn.

26. CONTINGENT LIABILITIES AND CONTINGENT ASSETS26.1 Tokyo Cement Company (Lanka) PLC

(a) Value Added Tax assessment for the months ending November 2002, March 2003 and for the Y/A 2005/2006. The company has filed appeals against these assessments and these are currently pending with Tax Appeals Commission of the Department of Inland Revenue and Court of Appeal respectivly.

(b) The Department of Inland Revenue has not allowed Rs. 300 million donation made in the year of assessment 2002/03 to the Ministry of Shipping & Ports Development, as a qualifying payment relief and appeal has been preferred to the Court of Appeal on question of Law under Sec. 141(1) of the Inland Revenue Act. Lawyers have informed that the question of law is very much in favour of the company to overturn the Board of Review determination.

26.2 Subsidiary CompanyFuji Cement Company (Lanka) Limited(a) Value Added Tax assessments for the months ending November 2002,March 2003, December 2003 and March 2004 have

been issued by the Department of Inland Revenue and the company has filed appeals against the assessments and the Commissioner General of Inland Revenue has confirmed these assessments. The company has referred the matter to Board of Review of the Department of Inland Revenue and Court of Appeal respectively.

Representation Provided by the legal and tax experts and based information available, the contingent liabilities as at 31st March, 2012 may not have material impact.

(b) The Department of Customs has filed action against claiming of lower rate of duty in respect of the importation of goods in the ships owned and operated by the company and also computation of freight charges for the purpose of customs duty on clinker imports using own vessel.

A fair settlement is expected with company paying a short levy on the basis of determination made by the valuation department at the customs on a direction made by the Attorney -General’s Department.



26.3 Contingent AssetsThere were no material contingent assets for the Group existing as at the balance sheet date.

27. ASSETS PLEDGEDFollowing assets have been pledged as security for liabilities

Name of the Company

Nature of LiabilitiesThe Name of

Bank

Loan/FacilityGranted

Rs.

Balance Outstanding

as at 31.03.2012

Rs.

Balance Outstanding

as at 31.03.2011

Rs.

Repayment

Security Pledged

Tokyo Cement Colombo Terminal (Pvt) Ltd

a. Commercial Bank of Ceylon PLC

Commercial Papers Issued 100,000,000

-

8,304,000

Renewable quarterly

Corporate guarantee of Fuji Cement Company Lanka Ltd of Rs. 609 Mn and Mortgage Bond no. 1649 dated 6th August 2002, executed over stock-in-trade and book debts of the company for Rs. 110 Mn ranking equal and pari passu with the primary mortgage bond executed by the company in favor of Sampath Bank for Rs. 385 Mn.

Term Loan 450,000,000 150,000,000 300,000,000 Repayable in 36 equal monthly installment

Sublimit of trust receipt loan facility Rs. 750 Mn

b. Sampath Bank PLC.

Money Market Loans 200,000,000 - 105,000,000 On demand Loan agreement MML and hypothecation bond over stocks at Port Premises, Colombo and book debts of the company for Rs. 200 Mn

Term Loan 623,000,000 548,060,000 - Repayable in 48 equal monthly installment of Rs. 12,980,000

Loan agreement on term loan and corporate gurantee from Tokyo Cement Company (Lanka) PLC

c. Trust Receipts Loans

Hypothecation Bond for Rs.125 Mn over inventory at Port premises,Colombo and book debts and leasehold Land and Buildings

i Sampath Bank

PLC

825,000,000 - 744,718,521 On demand Primary mortgage bond over cement plant and machinery at Port premises - Colombo for Rs. 150 Mn. Secondary mortgage bond over cement plant and machinery at Port Premises - Colombo for Rs. 36 Mn.

ii Commercial Bank of Ceylon PLC

750,000,000

-

468,136,380

On demand

Corporate guarantee of Fuji Cement Company Lanka Ltd of Rs. 609 Mn and Mortgage Bond no. 1649 dated 6th August 2002, executed over stock-in-trade and book debts of the company for Rs. 110 Mn ranking equal and pari passu with the primary mortgage bond executed by the company in favour of Sampath Bank for Rs. 385 Mn and Documents relating to goods received, duly accepted by the company.

d. Hypothecation Loan

i. Bank of Ceylon, 450,000,000 114,769,001 - On demand Mortgage Bond over Inventory and book debts.


Name of the Company


Bank

Loan/FacilityGranted

Rs.

Balance Outstanding

as at 31.03.2012

Rs.

Balance Outstanding

as at 31.03.2011

Rs.

Repayment Security Pledged

Tokyo Cement Company (Lanka) PLC

a. Term Loans

i Commercial Bank of Ceylon PLC

700,000,000 - 21,776,800 Repayable in 18 equal monthly installments of Rs. 10,888,400/-

On Demand Loan Agreement.

300,000,000 - 112,500,000 Repayable in 34 equal monthly installments of Rs. 6,250,000/-


250,000,000 - 250,000,000 Repayable in 3 months Short term loan agreement for Rs. 500 Mn

ii Sampath Bank PLC.

750,000,000 - 499,992,000 Repayable in 35 equal monthly installments and a final installments of Rs. 20,810,000/-

The Loan Agreement & Corporate Guarantee of Tokyo Super Cement Company Lanka (Pvt) Ltd for Rs.750 Mn

300,000,000 41,662,000 300,000,000 Repayable in 35 equal monthly installments of Rs.8,334,000/- and final installment of Rs. 8,310,000/- after a grace period of 1 year from the date of disbursement

The Loan Agreement & Corporate Guarantee of Tokyo Super Cement Company Lanka (Pvt) Ltd for Rs.300 Mn

1,125,000,000 984,375,000 - In 48 equal monthly installments of Rs.23,437,500

An Undertaking to Mortgage over the Vessel “ID Symphony”(Tabernacle Star ii)

iii Bank of Ceylon, 40,000,000 36,874,999 40,000,000 Repayment will commence after 12 months from first disbursement of the loan, there after repayable in 48 equal monthly installments.


iv City Bank 690,000,000 140,000,000 - On demand Stock and Book debtors



27. ASSETS PLEDGED CONTD.

Name of the Company


Bank

Loan/Facility

GrantedRs.

Balance Outstanding

as at 31.03.2012

Rs.

Balance Outstanding

as at 31.03.2011

Rs.

Repayment Security Pledged

Tokyo Super Cement Company Lanka (Pvt) Ltd.

a. Term Loans

i DFCC Bank 850,000,000 163,333,318 393,333,322 Repayable in 60 equal monthly installments

(a) Primary mortgaged over proposed machinery and equipments

(b) Corporate Guarantee from Tokyo Cement Company (Lanka) PLC.

Short Term Loans

ii City Bank (US$ 7.5 Mn) 305,914,493 - Repayable with in 90 days from the date of grant

Unconditional Corporate Guarantee from Tokyo Cement Company (Lanka) PLC

iii Sampath Bank PLC

500,000,000

126,820,891

-

Repayable with in 90 days from the date of grant

(a) Short Term Import Loan Agreement for Rs.500 Mn

(b) Existing Hypothecation Bond for Rs.520 Mn over stock and book debts of the company

b. Trust Receipts Loans

I. Commercial Bank of Ceylon PLC

100,000,000

170,260,000

90,690,000

Repayable with in 90 days from the date of grant

(a) Corporate Guarantee of Tokyo Cement Company (Lanka) PLC for Rs.350 Mn

(b) Lien Over documents of Title to the goods under import

Fuji Cement Company (Lanka) Ltd

Term Loans

Sampath Bank

650,000,000 650,000,000 - Repayable in 60 equal monthly installments

(a) An undertaking to mortgage over the vessel “ Terbancle Prince”

(b) Corporate Guarantee of TCCL for Rs.650 Mn

Import Demand Loans

Sampath Bank

400,000,000

20,535,791

Each Loan to be paid within 90 days

(a) General Terms and Condition documents relating to IDL.

(b) Lien over documents of Title of the goods under import

(c) Corporate Guarantee of TCCL for Rs.800,000,000


28. RELATED PARTY TRANSACTIONS28.1 The Directors of the Company are also Directors of the following Companies.

Fuji Cement

Co (Lanka)

Ltd

Tokyo Super

Cement Co

Lanka (Pvt) Ltd

Tokyo Cement

Colombo Terminal (Pvt) Ltd

Nippon Coke & Engineering Company Ltd

(Nominee Directors)

St.Anthony’s Consolidated

(Pvt) Ltd

St.Anthony’s Hardware (Pvt) Ltd

Central Finance

PLC

South Asian Investments

(Pvt) Ltd

Rhino Roofing Products

Ltd

Orion City Ltd

Providence Network & Solutions (Pvt) Ltd

Mr. E. Gunatunga X X X - - - - - - - -

Mr. S.R. Gnanam X X X - X X - X X X -

Mr. K. Yanagihara X X X X - - - - - - -

Mr. S.V. Wanigasekera

X X - X - - X - - - -

Mr. A.S.G. Gnanam X X - - X X - X X X X

Mr. E.J. Gnanam X X X - X X - X X X -

Mr. R. Seevaratnam X X - - - - - - - - -

Mr. Tooru Tanimura - - - X - - - - - - -

Dr.Harsha Cabral X X - - - - - - - - -

Dr.I.Coomaraswamy X X - - - - - - - - -

“X” denotes the companies in which each of the persons mentioned was a Director. 28.1.1 Mr.W.C. Fernando,Group General Manager, is a Director of the Fuji Cement Co (Lanka) Ltd ,Tokyo Super Cement Co Lanka (Pvt) Ltd and Tokyo Cement Colombo

Terminal (Pvt) Ltd.

28.2 The Company has had following transactions entered during the year in the ordinary course of business with related entities at Commercial rates.

Group Company

2012 2011 2012 2011 (Rs.) (Rs.) (Rs.) (Rs.)

(a) St. Anthony’s Consolidated (Pvt) Ltdi. Sales Commission 430,087,260 268,193,563 202,610,135 154,667,520ii. Rent paid in respect of office premises 630,000 840,000 - -

(b) St. Anthony’s Hardware (Pvt) Ltdi. Purchase of Chemicals 34,156,231 31,800,198 34,156,231 31,800,198

(c) Tokyo Cement Colombo Terminal (Pvt) Ltdi Cement sales including Transport Charges 194,152,873 228,998,141 - 144,451,890ii. Handling Charges Paid 4,182,958 - - -iii Cement purchases including Transport Charges 203,887,378 - 203,887,378 117,360,965

(d) South Asian Investment (Pvt) Ltdi. Sales Commission paid 75,691,522 89,069,188 - -



28. RELATED PARTY TRANSACTIONS CONTD.28.2

Group Company

2012 2011 2012 2011 (Rs.) (Rs.) (Rs.) (Rs.)

(e) Rhino Roofing Products Ltdi. Sale of Cement 1,725,010,758 1,052,799,208 - -ii. Transport Charges - 30,910,911 - -

(f) Amounts Due From Related Companies (Note 16)i. Tokyo Cement Colombo Terminal (Pvt) Ltd. - - 5,840,494 6,129,191ii. Tokyo Super Cement Company Lanka (Pvt) Ltd. - - - 706,577,911iii. Tokyo Cement Power (Lanka) Ltd - - 82,242,147 13,338,694

(g) Amounts Due To Related Companies (Note 24)i. Fuji Cement Company (Lanka) Ltd. - - 451,220,296 555,688,198ii. Tokyo Super Cement Company (Pvt) Ltd. - - 107,828,482 -

(h) Central Finance PLCi. Finance Lease 14,419,358 57,677,624 - -

(i) Tokyo Super Cement Company Lanka (Pvt) Ltd.i. Investment In Stated Capital - - - 494,999,986ii. Fund Transfers from 777,348,179 - 448,760,271 1,120,709,000iii. Fund Transfers to 1,279,039,166 - 1,343,841,400 1,305,662,000iv. Sale of Bio-Mass Power 74,460,114 - 74,460,114 -v Purchase of Gypsum 84,718,906 - 63,402,291 -

(j) Fuji Cement Company (Lanka) Ltdi Cement purchases including Transport Charges 21,316,615 - - -ii. Cement sales including Transport Charges 29,402,885 - - -iii Fund Transfers from 865,628,556 - 574,051,000 -iv. Fund Transfers to 693,487,908 - 647,789,649 -v. Sale of Bio-Mass Power 30,729,254 - 36,174,947 -

(k) Tokyo Cement Power (Lanka )Ltdi. Investment In Stated Capital 10 - 10 -ii Fund Transfer to 68,332,297 - 68,332,297 -

(l) Providence Network & Solutions (Pvt) Ltd Expenses incurred on ERP Implimentaion project 13,745,229 - 13,745,229 -


28.3 Transaction with Key Management Personnel (KMP)(a) Loans to Directors No Loans were advanced to the Directors of the company.

(b) Key Management Personal Compensation Key Management Personal comprises Directors of the company and details of the compensation are given in Note 05 to the

Financial Statements.

(c) Remuneration and Allowances The Remuneration committee decides on the remuneration of Executive Directors and sets guidelines for the remuneration of

the management staff within the group.

(d) Purchase of Company’s Non-voting Shares The following interest recognized in acquisition of shares issued by the company to the Board.

Name of Director/KMP No of Shares Nature of Date of Acquisition Consideration Paid

S.V.Wanigasekera 10,000 Non-Voting Shares Tokyo Cement 7th of April 2011 Rs.476,438/= Company (Lanka) PLC

29. SUBSIDIARY COMPANIES

Company HoldingFuji Cement Company (Lanka) Ltd 100%Tokyo Super Cement Company Lanka (Pvt) Ltd 100%Tokyo Cement Power ( Lanka) Ltd 100%Tokyo Cement Colombo Terminal (Pvt) Ltd 56.85%

30. EVENTS OCCURRING AFTER THE BALANCE SHEET DATEThe directors have recommended the payment of a tax free first and final dividend Rs. 1.30 per share amounting to Rs. 263 million on issued stated capital of Ordinary Voting Shares and Rs. 1.30 per share amounting to Rs. 132 million on issued stated capital of Non Voting Ordinary Shares for the year ended 31st March, 2012, which requires the approval of the shareholders at the Annual General Meeting to be held on 20th July, 2012. In accordance with Sri Lanka Accounting Standards 12 (Revised 2005) “Events Occurring After Balance Sheet”. This proposed first and final dividend has not being recognized as a liability in the financial statements under review.

As required by section 56(2) of the Companies Act No. 07 of 2007, the Board of Directors have confirmed that the company satisfy the solvency test in accordance with Section 57 of the Company’s Act No. 7 of 2007 and will be obtaining the certificate from the auditors prior to declaring the first and final dividend of Rs. 1.30 per Ordinary Voting Shares and Rs. 1.30 per Ordinary Non Voting Shares for the financial year under review.

31. COMPARATIVE INFORMATIONComparative figures have been re-classified where necessary in line with the presentation requirements for the current year.



TOKYO CEMENT COMPANY (LANKA) PLCDISTRIBUTION OF ORDINARY VOTING SHARES AS AT 31 st March 2012

Category No of Share % Holding Holders Holdings

1 - 250 791 67,961 0.03% 251 - 500 339 142,555 0.07% 501 - 1,000 353 303,428 0.15% 1,001 - 2,000 443 651,062 0.32% 2,001 - 5,000 498 1,627,448 0.80% 5,001 - 10,000 218 1,546,361 0.76% 10,001 - 20,000 173 2,366,234 1.17% 20,001 - 30,000 83 1,999,262 0.99% 30,001 - 40,000 22 744,985 0.37% 40,001 - 50,000 33 1,466,162 0.72% 50,001 - 100,000 59 4,290,248 2.12% 100,001 - 1,000,000 57 13,368,208 6.60%1,000,001 - 99,999,999 18 173,926,086 85.89% TOTAL 3,087 202,500,000 100.00%

NON VOTING ORDINARY SHARESDISTRIBUTION OF ORDINARY NON VOTING SHARES AS AT 31 st March 2012

Category No of Share % Holding Holders Holdings

1 - 250 1,202 110,677 0.11% 251 - 500 513 207,875 0.21% 501 - 1,000 538 452,342 0.45% 1,001 - 2,000 496 744,609 0.74% 2,001 - 5,000 562 1,920,261 1.90% 5,001 - 10,000 295 2,251,975 2.22% 10,001 - 20,000 169 2,443,389 2.41% 20,001 - 30,000 83 2,092,595 2.07% 30,001 - 40,000 38 1,307,349 1.29% 40,001 - 50,000 31 1,436,556 1.42% 50,001 - 100,000 66 4,776,023 4.72% 100,001 - 1,000,000 79 24,607,092 24.30% 1,000,001 - 99,999,999 18 58,899,257 58.17% TOTAL 4,090 101,250,000 100.00%

Shareholder & Investor Information


Shareholder & Investors Information

Percentage of Public ShareholdingVOTING NON VOTING

No of Shares % Holding No of Shares % Holding

Nippon Coke Engineering Co Limited - Japan 55,687,432 - - -St Anthony’s Consolidated ( Pvt) Limited 55,687,252 - - -South Asian Investment (Pvt) Limited 32,977,050 - - -Capital City Holdings (Pvt) Limited 6,075,279 - - -St. Anthony’s Hardware (Pvt) Limited. 413,100 - - -

150,840,113 74.49% - -Public Shareholding 51,659,887 25.51% 101,250,000 100.00%

Total Shareholding 202,500,000 100.00% 101,250,000 100.00%

Directors Shareholding Voting Ordinary Shares Non Voting Ordinary Shares

No of No of No of No of Shares Held Shares Held Shares Held Shares Held As at 31/3/12 As at 31/3/11 As at 31/3/12 As at 31/3/11

Local Joint Venture Partner - St Anthony’s Consolidated (Private) Limited 55,687,252 55,687,252 - -

Gnanam A S G 11 11 - -Gnanam S R - Jt Managing Director/CEO 11 11 - -Gnanam E J 11 11 - -Edgar Gunatunga - Chairman - - - -

Foreign Joint Venture Partner - Nippon Coke Engineering Co Limited, Japan 55,687,432 55,687,432 - -

Nominee Directors of Foreign CollaboratorMr Wanigasekera S V 5,400 5,400 10,000 3,375Mr K. Yanagihira - Jt Managing Director - - - -Mr Tooru Tanimura - - - -

Independant DirectorsRanjeevan Seevaratnam - - - -Dr Harsha Cabral - - - -Dr Indrajit Coomaraswamy - - - -Total 111,380,117 111,380,117 10,000 3,375

Total Shares in Issue 202,500,000 202,500,000 101,250,000 101,250,000


Twenty Largest Shareholders as at 31st March 12 % 31st March 11 %

VotingNippon Coke & Engineering Co Limited 55,687,432 27.5 55,687,432 27.5St Anthony’s Consolidated (Private) Limited 55,687,252 27.5 55,687,252 27.5South Asian Investment (Pvt) Ltd 32,977,050 16.3 32,826,150 16.2Capital City Holdings (Private) Limited 6,075,279 3.0 6,075,279 3.0HSBC Intl Nom Ltd-Jpmcb-Forsta Ap-Fonden 3,976,900 1.9 - -

Late Mr Radhakrishnan M (former director) 2,493,045 1.2 2,493,045 1.2Employees Trust Fund Board 2,189,607 1.0 1,082,188 0.5Associated Electrical Corporation Ltd 1,856,800 0.9 1,327,300 0.7Sri Lanka Insurance Corporation Ltd - Life Fund 1,830,375 0.9 1,830,375 0.9Pershing Llc S/A Averbach Grauson & Co. 1,731,600 0.8 1,795,725 0.9 Hamish Winston Mcdonald Woodward 1,687,500 0.8 1,687,500 0.8HSBC Intl Nom Ltd-Ssbt- Russell Institutional Fund 1,520,000 0.7 - -HSBC Intl Nom Ltd-Ssbt-Russell Trust Company Commi 1,513,125 0.7 1,020,000 0.5Aviva NDB Insurance Plc A/C No 07 1,231,321 0.6 1,509,500 0.7National Savings Bank 1,213,200 0.6 1,114,100 0.6

Sri Lanka Insurance Corporation Ltd - General Fund 1,175,600 0.6 - -Gaasinather Gangaser Ponnampalam (Decd) 1,080,000 0.5 1,080,000 0.5Kenneth Rudy Kamon 693,400 0.3 843,400 0.4NDB Aviva Wealth Management Ltd S/A Hatton National Bank 648,900 0.3 583,200 0.3Union Assurance Plc/No - 01 A/C 582,525 0.3 - -TOTAL 175,850,911 86.4 166,642,446 81.5

Twenty Largest Shareholders as at 31st March 12 % 31st March 11 %

NON VotingEmployees Provident Fund 8,632,115 8.5 2,108,415 2.1Hinl-Jpmcb-Butterfield Trust ( Bermuda ) Limited 7,401,875 7.3 7,401,875 7.3Associated Electrical Corporation Ltd 7,178,200 7.0 5,116,700 5.1Ceylon Investment Plc A/C # 01 6,066,500 6.0 4,449,600 4.4Sri Lanka Insurance Corporation Ltd - Life Fund 4,003,600 4.0 4,003,600 4.0

Waldock Mackenzie Ltd/Hi-Line Trading (Pvt) Ltd 3,936,695 4.0 3,186,695 3.1HSBC Intl Nom Ltd-Jpmcb- J.P.Morgan Clearing Corp 2,625,375 2.6 8,657,901 8.6Union Assurance Plc/No - 01 A/C 2,416,500 2.4 2,016,500 2.0National Savings Bank 2,335,000 2.3 1,427,100 1.4DFCC Bank A/C 1 2,247,000 2.2 2,247,000 2.2

Employees Trust Fund Board 2,246,525 2.2 - -J.B. Cocoshell (Pvt) Ltd 2,166,400 2.1 - -Bank Of Ceylon - No 2 A/C 1,746,372 1.7 1,746,372 1.7Deutsche Bank Ag - National Equity Fund 1,401,000 1.4 - -Swiss Lloyd Limited 1,200,000 1.2 - -

Mas Capital (Private) Limited 1,144,500 1.3 - -HSBC Intl Nominees Ltd-Credit Suisse Ag Zurich 1,125,000 1.1 1,125,000 1.1Deutsche Bank Ag As Trustee For Namal Acuity Value 1,026,600 1.0 - -Abdulhusen Hassenally Rajkotwala 926,900 0.9 810,000 0.8Bank Of Ceylon A/C Ceybank Century Growth Fund 811,772 0.8 881,872 0.9TOTAL 60,637,929 60.0 45,178,630 44.4


Graphical Review

2012

2011

2010

2009

2008

1.77

1.44

1.19

1.31

1.24

Assets Turnover (Times)

2012

2011

2010

2009

2008

8,620

7,210

6,660

6,515

7,362

Capital Employed (Rs Mn)

2012

2011

2010

2009

2008

1,923

440

1,083

2,408

1,925

Capital Investments (Rs Mn)

1.30

1.00

1.65

3.00

4.00

Dividend Per Share - Voting (Rs)

*2012

*2011

*2010

2009

2008

*After Sub Division

2012

2011

2010

2009

2008

1.30

1.00

0.30

0.40

1.65

Dividend Per Share - Non Voting (Rs)

2012

2011

2010

2009

2008

17.10

18.41

22.22

14.32

16.09


2012

2011

2010

2009

2008

13.49

14.76

6.7

6.82

11.44

Return on Equity (%)

2012

2011

2010

2009

2008

12,975

11,459

13,492

11,342

12,409

Total Assets (Rs Mn)

PPE & CWIP (72%) Inventories (11%)

Trade & Other Receivables (12%) Other Assets (5%)

Composition Assets (%)

2011/12

Shareholders Equity (48%) Borrowings (22%) Trade & Other Payables (22%) Other Liabilities (8%)

Composition Liabilities (%)

2011/12


2012

2011

2010

2009

2008

848

829

351

358

573

Earning After Tax & Interest (Rs Mn)

3.20

2.96

1.37

1.28

2.05

Earning Per Share - Non Voting (Rs)

2012

2011

2010

2009

2008

2012

2011

2010

2009

2008

1,474

1,327

1,185

1,481

993

Earning Before Interest & Tax (Rs Mn)

*2012

*2011

*2010

2009

2008

*After Sub Division

3.20

2.96

1.37

12.84

20.51

Earning Per Share - Voting (Rs)

2012

2011

2010

2009

2008

0.46

0.57

0.69

0.64

0.64

Gearing Ratio (Times)

2012

2011

2010

2009

2008

22,927

16,495

14,738

17,652

14,029

Group Revenue (Rs Mn)

2012

2011

2010

2009

2008

20.61

18.81

19.95

50.01

47.70

Net Assets Per Share (Rs)

*After Sub Division

2012

2011

2010

2009

2008

3.38

2.73

1.42

1.78

2.38

Interest Cover (Times)

1 - 10,000 (2%) 10,001 - 100,000 (5%) 100,001 - 1,000,000 (7%) 1,000,001 - 99,999,999 (86%)

Distribution of Ordinary Non Voting Shares (%)

2011/12

1 - 10,000 (5%) 10,001 - 100,000 (12%) 100,001 - 1,000,000 (25%) 1,000,001 - 99,999,999 (58%)

Distribution of Ordinary Voting Shares (%)

2011/12


Five Year Summary

Rs. Mn. Year ended March 31 2011/2012 2010/2011 2009/2010 2008/2009 2007/2008

OPERATING RESULTSTurnover 22,927 16,495 14,738 17,652 14,029Gross profit 3,883 2,906 2,295 2,719 2,052Profit Before Taxation 1,039 842 347 647 541Taxation (190) (13) 4 (289) 32Profit After Taxation 848 829 351 358 573Minority Interest 125 45 18 (11) (19)Profit Attributable to Ordinary Shareholder 973 874 369 347 554

BALANCE SHEETAssetsNon Current Assets

Propery, Plant & Equipment 9,125 8,557 9,055 9,359 4,687Capital Work - in - Progress 163 53 93 397 3,699Goodwill 13 13 13 13 13Investment - - - 0.50 0.50Fixed Deposit - 3 3 3 3Operating Lease Prepayment 61 65 70 74 78Total Non Current Assets 9,362 8,691 9,234 9,847 8,481

Current AssetsInventories 1,483 1,122 688 1,388 1,212

Trade & Other Receivable 1,887 1,442 1,572 1,943 1,464

Operating Lease Prepayment 4 4 4 4 4

Cash & Cash Equivalent 239 199 911 311 181

Total Current Aessets 3,613 2,767 3,175 3,646 2,861

Total Assets 12,975 11,459 12,409 13,492 11,342

Equity & LiabilitiesCapital & ReservesStated Capital 2,367 2,367 1,793 1,793 1,793Reserves 150 150 150 150 150Retained Earnings 3,772 3,102 3,304 3,300 3,062Equity attributable to the Equity holders of the parent 6,289 5,619 5,247 5,243 5,005

Minority Interest (30) 95 140 158 147Total 6,259 5,714 5,387 5,401 5,152


Rs. Mn. Year ended March 31 2011/2012 2010/2011 2009/2010 2008/2009 2007/2008

Non Current LiabilitiesInterest Bearing Borrowing 1,667 940 1,387 868 1,272Deferred Tax 645 496 498 264 33Retirement Benefit Obligations 46 37 30 23 23Deferred Revenue - 4 7 10 -Lease Creditors 3 18 53 98 35Total Non Current Liabilities 2,361 1,495 1,975 1,263 1,363

Current LiabilitiesTrade & Other Liabilities 2,866 1,645 2,220 3,775 2,215Current Maturity of Loan Term Loans 1,197 2,304 2,357 2,569 2,240Lease Creditors 15 40 48 43 18Deferred Revenue - Current Maturity Portion 1 - - - -Bank Overdraft 276 261 422 441 354Total Current Liabilities 4,355 4,250 5,047 6,828 4,827Total Equity and Liabilities 12,975 11,459 12,409 13,492 11,342

INVESTOR INFORMATIONEarning Per Share - Voting Ordinary Share (Rs.) 3.20 2.96 1.37 12.84 20.51Earning Per Share - Non Voting Ordinary Share (Rs.) 3.20 2.96 1.37 1.28 2.05Dividend Per Share - Voting Ordinary Share (Rs.) 1.30 1.00 1.65 3.00 4.00Dividend Per Share - Non Voting Ordinary Share (Rs.) 1.30 1.00 1.65 0.30 0.40Return on Equity (%) (Profit after Tax) 13.49 14.76 6.70 6.82 11.44Interest Cover (Time) 3.38 2.73 1.42 1.78 2.38Market Price Per Share (Rs.) - Voting 37.00 60.80 28.00 125.00 251.25Market Price Per Share (Rs.) - Non Voting 27.00 44.00 18.25 9.25 15.50Price Earning Ratio (Times) - Voting 11.56 20.54 20.44 9.74 12.25Price Earning Ratio (Times) - Non Voting 8.44 14.86 13.32 7.23 7.56Assets Turnover Ratio (Times) 1.77 1.44 1.19 1.31 1.24Net Asset Per Share (Rs.) 20.61 18.81 19.95 50.01 47.70


NOTICE IS HEREBY GIVEN that the Thirtieth Annual General Meeting of the Shareholders of Tokyo Cement Company (Lanka) PLC will be held on Friday 20th July 2012 at 4.45 p.m at the Auditorium, Institute of Chartered Accountants of Sri Lanka, 30A, Malasekera Mawatha, Colombo 7. The business to be brought before the Meeting to transact will be :

AgendaNormal Business1. To receive and adopt the Report

of the Directors, the statement of Audited Accounts for the year ended 31st March 2012 and the Report of the Auditors thereon.

2. To declare a first and final dividend of

Rs 1.30 per Ordinary Share and Rs 1.30 per Non Voting Ordinary Share in respect of the Financial Year ending 31st March 2012 as recommended by the directors.

3. To authorize the Directors to fix the remuneration payable to the Auditors BDO Partners, (Chartered Accountants) or determining the manner in which such remuneration is to be given.

(An Auditor is deemed to be re-appointed at an Annual General Meeting of the Company under Article 176)

4. To authorize the Directors to determine contributions to charities

5. To re-elect Dr Harsha Cabral who retires by rotation in terms of Article 113 of the Articles of Association.

Special Business6. To re-elect as a director Mr Edgar

Gunatunga and being over the age of 70 years and who retires in terms of Articles of Association and pursuant to Section 211 of the Companies Act No 7 of 2007 for which special notice of the following ordinary resolution has been given by a member for the purpose

THAT the age limit referred to in Section 210 of the Companies Act No 7 of 2007 shall not apply to Mr Edgar Gunatunga who is 80 years and that he be re-elected a Director of the Company

7. To transact any other business of which due notice has been given.

By Order of the Board

TOKYO CEMENT COMPANY (LANKA) PLC Seccom (Private) LimitedCompany Secretaries20th June 2012

Notes

1. A member entitled to attend and vote at the above meeting is entitled to appoint a proxy to attend and vote instead of him.

2. A proxy need not be a member of the Company.

3. A form of proxy accompanies this notice .

4. The completed Form of Proxy should be deposited at the Registered Office of the Company, 469 - 1/1, Galle Road, Colombo 3 not later than 48 hours before the time appointed for the commencement of the Meeting.

5 Shareholders / proxies attending the Annual General Meeting, please produce your National Identity Card to the security personnel stationed at the entrance

Proposed ResolutionsOrdinary BusinessResolution 1- Adoption of AccountsThat the Directors’ Report and Accounts for the year ended 31 st March 2012 as audited and reported by the Company’s Auditors be and they are hereby received and adopted.

Resolution 2- Dividends“That a first and final dividend of - Rs 1.30 per Ordinary Share (Voting) and Rs 1.30 per Non Voting Ordinary Share in respect of the Financial Year ending 31 st March 2012 be paid out of the Company’s tax free dividends received as recommended by the Directors

Resolution 3 - RE- AuditorsDirectors are authorized to fix the remuneration payable to the Auditors BDO Partners, (Chartered Accountants) or determining the manner in which such remuneration is to be given.

Resolution 4- DonationsThat the directors are hereby authorised to make donations for good cause and as a corporate responsibility to the society.

Resolution 5- Re-election of DirectorsTHAT Dr. Harsha Cabral be and is hereby re-elected a Director of the Company.

Special BusinessResolution 6- Re-election of Directors Age Limit not to ApplyTHAT the age limit referred to in Section 210 of the Companies Act No 7 of 2007 shall not apply to Mr Edgar Gunatunga who is 80 years and that he be re-elected a Director of the Company

Notice of Meeting

MissionTo actively participate in Sri Lanka’s construction industry effort towards achieving global standards by providing cement of high quality, better yield and affordability while meeting changing customer requirements to satisfaction.

ContentsCorporate Information 2, Performance Highlights 3, Operating Highlights 4, Corporate Profile 5, Chairman’s statement 8, Message from the President Nippon Coke & Engineering Co., Limited 10, Joint Managing Directors’ Message 11, Board of Directors 14, Profiles of the Directors 16, Annual Report of the Directors 17, Corporate Governance 22, Risk Management 25, Social Responsibility 28, Directors Responsibilities 34, Audit Committee Report 35, Report of the Remuneration Committee 36, Nomination Committee Report 37, Independent Auditor’s Report 38, Income Statement 39, Balance Sheet 40, Statement of Changes in Equity 42, Cash Flow Statement 43, Significant Accounting Policies 45, Notes to the Financial Statements 54, Shareholder & Investor Information 73, Graphical Review 76, Five Year Summary 78, Notice of Meeting 80

Annual Report 2011/12

Power integrated.

TOKYO

CEMEN

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PAN

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nnual Report 2011/12