TAL LANKA HOTELS PLCTAL Lanka Hotels PLC is a limited liability company incorporated in Sri Lanka and listed in the Colombo Stock Exchange. The Registered office and principal place

TAL LANKA HOTELS PLCCompany Registration No. PQ 183

Annual Report 2017 / 2018

CONTENTS

Page

Notice of Meeting 02

Corporate Information 03

Review of the Board of Directors 04

Annual Report of the Board of Directors 06

Report on Corporate Governance 10

Statement of the Directors' Responsibilities 16

Independent Auditor's Report 17

Statement of Profit or Loss and Other Comprehensive Income 20

Statement of Financial Position 21

Statement of Changes in Equity 22

Statement of 23

Summary of significant Accounting Policies 24

Notes to the Financial Statements 37

Shareholder Information 58

Six Years Financial Summary & Key Indicators 62

Community Initiatives 63

Form of Proxy 65

Attendance Slip 67

Cash Flow

N th To re-elect as a Director, Mr. U. Narain who retires otice is hereby given that the Thirty Eighth (38 )

by rotation in terms of Article 86 of the Articles of Annual General Meeting of TAL Lanka Hotels PLC will Association of the Company and being eligible, be held on Tuesday 31st July 2018 at 10.30 a.m. at has offered himself for re-election.Taj Samudra Hotel, No. 25, Galle Face Centre Road,

Colombo 03, (at “On Golden Pond”), for the following To re-elect as a Director, Mr. Giridhar Sanjeevi

purposes:who was appointed to the Board of Directors on

15th June 2018, who retires at the end of the AGM To receive and consider the Annual Report of the in terms of Article 93 of the Article of Association of Board of Directors together with the Financial the company and being eligible has offered Statements of the Company for the year ended

st himself for re-election.31 March 2018 and the Report of the Auditor's

thereon. To propose the resolution set out below, as an

ordinary resolution:To propose the following resolution as an ordinary

resolution for the reappointment of Dr.G. “IT IS HEREBY RESOLVED THAT M/s SJMS Sundaram who has reached the age of seventy Associates be and are hereby re-appointed as the nine (79) years. auditors of the Company to hold office from the

conclusion of this meeting until the conclusion of “IT IS HEREBY RESOLVED that the age limit

the next Annual General Meeting to audit the referred to in section 211 of the Companies Act

financial statements of the Company and the No.07 of 2007 shall not apply to Dr. G. Sundaram

Directors of the Company be and are hereby who has reached the age of seventy nine (79)

authorized to fix their remuneration as the auditors years prior to this Annual General Meeting and

of the Company, for the aforesaid period”.that he be reappointed as a Director of the

Company.

To propose the following resolution as an ordinary Any member entitled to attend and vote is entitled

resolution for the reappointment of Mr. Tilak De to appoint a proxy in his stead.

Zoysa who has reached the age of seventy one A form of proxy accompanies this notice. A proxy (71) years.need not be a shareholder.

“IT IS HEREBY RESOLVED that the age limit Instruments appointing proxies must be lodged referred to in section 211 of the Companies Act with the Company not less than 48 hours before No.07 of 2007 shall not apply to Mr. Ti lak De the meeting.

Zoysa who has reached the age of seventy one

(71) years prior to this Annual General Meeting

and that he be reappointed as a Director of the

Company.

To re-elect as a Director, Mr. R.K. Chaudhary who

retires by rotation in terms of Article 86 of the

Articles of Association of the Company and being

eligible, has offered himself for re-election.

To re-elect as a Director, Mr. N. I. R. De Mel who

retires by rotation in terms of Article 86 of the

Articles of Association of the Company and being

eligible, has offered himself for re-election.

6.

7.

1.

8.

2.

Note:-

3. a)

b)

c)

4.By Order of the Board,CORPORATE SERVICES (PRIVATE) LIMITEDSecretariesTAL LANKA HOTELS PLCColombo,

5. on this 18th day of June, 2018.

NOTICE OF MEETING

TAL LANKA HOTELS PLC

02 TAL LANKA HOTELS PLC ANNUAL REPORT 2017 - 2018

NAME OF THE COMPANY

BOARD OF DIRECTORS

COMPANY SECRETARY

REGISTRARS

AUDITORS Messrs

BANKERS

LAWYERS

REGISTERED OFFICE

HOTEL MANAGER

TAL LANKA HOTELS PLC - PQ 183

Mr. G. Sanjeevi - Chairman (appointed with effect from 15th June 2018)

Mr. R. Sarna - Chairman (resigned with effect from 30th September 2017)

Mr. B.K. Chaudhary

Mr. R. De Mel

Mr. R. K. Chaudhary

Mr. T. De Zoysa

Dr. G. Sundaram

Mr. V. Govindasamy

Mr. P. Verma

Mr. U Narain

Mr. C. Subramanian (appointed with effect from 5th May 2017)

Mr. S. Singh (appointed with effect from 5th May 2017)

Corporate Services (Private) Limited

Business Intelligence (Private) Limited

SJMS Associates

Hatton National Bank

24, Sir Baron Jayathilaka Mawatha, Colombo 01.

(Account closed w.e.f. 17.07.2017)

Standard Chartered Bank

37, York Street, Colombo 01. (Account opened w.e.f. 06.06.2017)

Messrs F J & G De Saram

TAL Hotels and Resorts Ltd,

A listed company with limited liabilitythIncorporated in Sri Lanka on 14 June 1980

Chartered Accountants

11, Castle Lane, Colombo 04.

Nations Trust Bank

No. 242, Union Place, Colombo 02.

Commercial Bank

No. 240, Panchikawatta Road, Colombo 10.

25, Galle Face Centre Road, Colombo 03.

Phone: 0094 112446622

Website: www.tajhotels.com

2001, Central Plaza,

18, Harbour Road,

Wanchai, Hong Kong.

216, De Saram Place, Colombo 10.

No. 08, Tickell Road, Colombo 08.

City Office, Colombo 01.

Hongkong & Shanghai Banking Corporation Limited.

216, De Saram Place, Colombo 10.


CORPORATE INFORMATION

03TAL LANKA HOTELS PLC ANNUAL REPORT 2017 - 2018

REVIEW OF THE BOARD OF DIRECTORS

On behalf of the Board of Directors, I am pleased to midmarket segment, a welcome addition to a market

present the Annual Report of TAL Lanka Hotels PLC previously dominated by five star and five-star deluxe

for the financial year ended March 31, 2018. hotels. These hotels have been quickly absorbed in

the market given their popularity with the price

conscious travelers; however, they have added ECONOMIC OUTLOOKpressure on the existing five-star hotels, thereby

restricting the latter's ability to increase rates. The Sri Lanka's complex political environment and the constant depreciation of the Sri Lankan Rupee has impact of natural disasters, such as floods in May and adversely affected the average rate due to which prolonged drought across the country, made 2017 a market wide average rates depict a decline or only challenging year for Sri Lanka. As a result, Sri marginal increases in US Dollars terms. The Sri Lanka's macroeconomic performance - GDP slowed Lankan Rupee continues to experience downward down. In fact, the growth rate declined to a 16-year volatility vis-à-vis the US Dollar, averaging at low of 3.1 percent in 2017.approximately LKR 157/US$ in 2017 and this trend is

expected to continue over the next five years, given The government with the help of World Bank is the substantial trade deficit and inflation differential carrying out fiscal reforms, improving public financial with the United States. Inflation, as measured by the management, increasing public and private Colombo consumer price index (CCPI), has investments, addressing infrastructure constraints averaged 4.5% in the past five years. (Source – and improving competitiveness. The launch of its HVS).Vision 2025 on September 4, 2017 was designed to

strengthen democracy and reconciliation, inclusive

and equitable growth and ensure good governance.

(Source – World Bank)

The Company's gross revenues decreased by 2%

from LKR 2,830 million in the previous year to LKR

2,775 million in the current year. The gross margin

decreased by LKR 64 million as compared to Hotels in Colombo recorded an average occupancy previous year.of 65% in 2017/18 with an ADR of USD 131. Business

is under pressure because of both occupancy and The Profit Before Tax for the year was LKR 128 ADR due to certain factors such as low growth in million in the current year as compared to LKR 108 tourist arrival, new inventory in Colombo and floods million in the previous year. The Company's Finance followed by dengue in May / June 2017.and Other Charges decreased by LKR 42 million due

to decrease in Foreign Exchange Loss by LKR 30 Sri Lankan tourist arrivals witnessed only 3.2 % million as compared to the previous year.growth in the entire year at 2.1 million tourists in 2017

which was a record despite the low growth rate.

Tourism revenue also increased by a similar

percentage to US$ 3.63 billion. The Government is

however hopeful of achieving the 2.5 million tourist At the end of current financial year, the company was

arrivals target in 2018. (Source – STR and SLTDA) in the final stage of completing the renovation work

on the second floor of the Taj Samudra Hotel. The

The city has witnessed room night supply growth company has also planned to undertake

over the past three years in the budget and improvement works to upgrade the property in the

COMPANY PERFORMANCE

INDUSTRY PERFORMANCE

CAPITAL DEPLOYMENT



REVIEW OF THE BOARD OF DIRECTORS (Contd)

coming financial year and to increase the market The overall expansion plans for both roads / express

share of the hotel. highways and international airport along with the

expected commercial demand to drive business for

the branded hotels, given the increased interest in

modernization of the city, the construction of the Port

City project, expansion of existing corporates and The outlook remains favorable, provided the development of new projects in the country will help government is committed to the reform agenda of to grow the economic. (Source – SLTDA)improving competitiveness, governance and public

financial management. Growth is projected to

rebound in 2018 from a low base and continue to be

around 4.5 percent in the medium term, driven by

private consumption and investment. Inflation will On behalf of the Board of Directors, I wish to express stabilize at mid- single digit level as the impact of our appreciation of the continued support and co-natural disasters wears off, although the upward operation of the Ministry of Tourism, Ceylon Tourist trend in oil prices may exert some upward pressure. Board, the Financial Institutions and other The external sector will continue to benefit from the stakeholders. I also want to thank the shareholders GSP+ preferential access to the European Union and for their continued support.tourism receipts, despite the deceleration of

remittances. External buffers are expected to In conclusion, on behalf of the Board of Directors, I improve, with emphasis on purchasing foreign extend my sincere thanks to the members of the staff, exchange, maintaining a more market-determined at all levels, for their dedicated service and exchange rate, and increased FDI. The overall fiscal contribution to the company.deficit is projected to fall in the medium term,

supported by the ongoing implementation of revenue

measures. Growth should continue to translate into

poverty reduction and improvement in living Vish Govindasamy

standards. (Source – World Bank).

FUTURE OUTLOOK

APPRECIATION

DirectorDate: 18th June, 2018



1.

Formation

2.

Principal and other activities

3.

Financial statements

4.

Independent Auditor's report

5.

Changes in accounting policies

6.

Review of business

7.

Dividend

8.

Reserves

9.

Substantial shareholdings

10.

The directors present herewith the audited financial statements of TAL Lanka Hotels PLC for the year ended

31 March 2018.

TAL Lanka Hotels PLC is a limited liability company incorporated in Sri Lanka and listed in the Colombo

Stock Exchange. The Registered office and principal place of business is situated at No. 25, Galle Face

Centre Road, Colombo 03.

TAL Hotels & Resorts Ltd, which holds 58.14% of the shares, is the parent company of TAL Lanka Hotels

PLC.

The principal activity of the Company is the hospitality trade and the Company owns the Taj Samudra Hotel.

The Company also manages Airport Garden Hotel from which it earns Management Fees.

The financial statements which include the statement of profit or loss and other comprehensive income,

statement of financial position, statement of cash flow, statement of changes in equity, and the notes to the

financial statements of the Company for the year ended 31 March 2018 are set out on pages 20 to 57

The independent auditor's report is set out on pages 17 to 19.

The accounting policies adopted in the preparation of the financial statements are given on pages 24 to 36.

There were no changes in the accounting policies adopted in the previous year for the Company.

The statement of financial position of the Company as at 31 March 2018 is set out on page 21. An

assessment of the financial performance of the Company is set out in the statement of profit or loss and other

comprehensive income on page 20.

No dividends have been declared during the year under review.

Total reserves and their composition are set out in the statement of changes in equity on page 22 of the

Company's financial statements.

TAL Hotels & Resorts Limited holds 58.14 percent of the stated capital of the Company.



Annual Report of the Board of Directors of the Company for the year ended 31 March 2018


Please refer Note 8 of the financial statements.

No

No

The details of the main shareholders of the Company and the percentages held by each of them are given

below:

TAL 58.14 81,181,580

IHOCO BV 24.62 34,375,640

As at 31 March 2018 the public holds 17.24 percent of the issued Share Capital of the Company.

The following Directors held office during the year under review:

Mr. R. Sarna - Chairman (resigned with effect from 30th September 2017)

Mr. B.K. Chaudhary

Mr. R. De Mel

Mr. R. K. Chaudhary

Mr. T. De Zoysa

Dr. G. Sundaram

Mr. V. Govindasamy

Mr. P. Verma

Mr. U Narain

Mr. C. Subramanian (appointed with effect from 5th May 2017)

Mr. S. Singh (appointed with effect from 5th May 2017)

Particulars of entries made in the interests register of the Company during the year under review are as

follows:

Directors' interest in contracts and proposed contracts with the Company

The Director's interest in the contracts of the Company is disclosed under Note 33 to the financial

statements.

Directors' interests in shares of the Company

None of the Directors hold any shares in the Company.

Remuneration and other benefits of directors

Particulars relating to authorization to disclose, make use of or act on company information.

entries were made under this heading in the Interests Register.

Particulars of indemnity given, or insurance effected to directors or employees under section

218 of the Companies Act No. 7 of 2007.

entries were made under this heading in the Interests Register.

The remuneration payable by the Company to the independent auditors of the Company as audit fees is Rs

1,201,031/- (2017 - Rs 1,091,847 /-).

Name of shareholder Holding percentage No. of shares

Hotels & Resorts Limited

Directors

11.

Interests Register

12.

(a)

(b)

(c)

(d)

(e)

Amounts payable to the firm holding office as auditor of the Company as audit fees

13.

Annual Report of the Board of Directors of the Company for the year ended 31 March 2018 (Contd)



Amounts payable to the firm holding office as auditor of the Company for non-audit services

Fees paid by the company to the independent auditors' of the company for the work done on transfer pricing

is disclosed under note 08 to the financial statements as non audit fees.

Auditor's relationship or any interest with the Company

The Directors are satisfied that, based on written representations made by the independent Auditors to the

Board, the Auditors did not have any relationship or any interest with the Company and / or other companies

in the group of companies to which TAL Lanka Hotels PLC belongs, that would impair their independence.

The Directors place great emphasis on instituting and maintaining leading edge, internationally accepted

Corporate Governance practices and principles with respect to the management and operations of the group

of companies to which TAL Lanka Hotels PLC belongs, in order to develop and nurture long-term

relationships with our key stakeholders.

The extent to which the Company has complied with the Corporate Governance Rules set out in the Listing

Rules of the Colombo Stock Exchange has been set out in pages 10 to 15 of this Annual Report.

Statutory payments

The Directors confirm that to the best of their knowledge all taxes, duties, levies and all statutory payments by

the Company and all contributions, levies and taxes payable on behalf of and in respect of the employees of

the Company as at Balance Sheet date have been paid, or where relevant provided for.

Environmental protection

The Company is sensitive to the needs of the environment and makes every endeavor to comply with the

relevant environmental laws, regulations and best practices applicable in the country.

Donations

No donations have been made by the Company during the year.

Going concern

The Directors have reviewed the Company's business plans and are satisfied that the Company has

adequate resources to continue as a going concern for the foreseeable future. As such the financial

statements have been prepared on that basis.

Future developments

The Company plans to continue with the renovation/ development programs and is committed to enhance

the image and positioning of the hotel in the market especially in view of growing economy and tourist arrivals

in the country.

Post balance sheet events

No material events that require adjustments to the financial statements have taken place, subsequent to the

date of the Balance Sheet other than those disclosed, if any, in Note 29 to the financial statements.

14.

15.

Corporate governance

16.

17.

18.

19.

20.

21.

22.

08

Annual Report of the Board of Directors of the Company for the year ended 31 March 2018 (Contd)

TAL LANKA HOTELS PLC ANNUAL REPORT 2017 - 2018


Annual Report of the Board of Directors of the Company for the Year Ended31 March 2018 (Contd)

Auditors

23.

V. Govindasamy T. De ZoysaDirector Director

18th June, 2018

The accounts have been audited by the external Auditors of the Company, Messer's SJMS Associates,

Chartered Accountants.

Corporate Services (Private) LimitedSecretariesColombo



CORPORATE INFORMATION Report on Corporate Governance

Board composition architecture focused on creating value for the entire

stakeholder ecosystem, a recalibration of operations The Board consists of 11 directors - 6 non executive and financial strategy as well as redesigning human non independent directors, 4 non executive resources policy and practices for Taj's 26,000 independent directors and 1 executive non associates worldwide. independent director. Independence of the directors

has been determined in accordance with CSE Listing Mr. Sarna has had an international upbringing. He

Rules and all 4 independent non executive directors moved to Canada as a young adult and completed

have submitted signed confirmations of their his Diploma in Hospitality Administration from

independence. Ottawa.

Mr. R.K. Sarna Mr. Sarna resigned from TAL Lanka Hotel PLCNon-Executive Non-Independent Director

Mr. Rakesh Sarna joined The Indian Hotels Company Mr. G. SanjeeviLimited as Managing Director and Chief Executive Non-Executive Non-independent Director

Officer on 1st September 2014. Mr. Sarna brings over Mr. Giridhar Sanjeevi is a Chartered Accountant (An three and a half decades of experience across All India Ranker) and an MBA from IIM Ahmedabad various leadership roles with Hyatt Hotels (class of 1987). In a career spanning 30 years, he has Corporation. He was the Group President - Americas built a broadbased career, both finance and with a portfolio of 146 Full Service hotels, 233 Select commercial, - across multiple businesses - consumer Service hotels and 15 Vacation Ownership facilities businesses, financial services, retail and pharma - across North America, the Caribbean and Latin and across multiple geographies - Asia and Europe. America with around 40,000 employees. In this role, He joined The Indian Hotels Company Limited from Mr. Sarna was responsible for the development and Merck & Co, the American Pharma company, where management of all owned, managed and franchised he was the CFO for South Asia and the Business hotels across all Hyatt brands. Head for Pakistan, Bangladesh, Sri Lanka and

Previously, he served as Chief Operating Officer- Nepal. He started his career in ITC Ltd, where he did

International from June 2007 until his appointment as a variety of roles across businesses in India and the

Group President- Americas in October 2012. During Middle East. Subsequently, he was with IL&FS as an

this time, he was responsible for the development Investment Banker and head of M&A.

and management of all owned, managed and In addition, he was also the Head of the operations at franchised hotels across all Hyatt brands and for Eastern India. Mr. Giridhar spent several years with overseeing the Divisional Offices in Hong Kong for Diageo Plc – he was their Global Business Asia Pacific; in Zurich for Europe, Africa & Middle Development Director at London, covering M&A and East; in Dubai for South West Asia and in Mexico City Strategy. Earlier, he was the Finance Director at for Latin America. In addition, during this time, Mr. Singapore for large parts of Asia. Mr. Giridhar has Sarna was also responsible for co- authoring the significant experience in business and financial brand attributes of Andaz (Hyatt's boutique brand) transformation. At Wockhardt, where he was the and leading the launch of this new brand. Global CFO, such transformation efforts led to a very

At Taj Hotels Palaces Resorts Safaris, Mr. Sarna has visible 18x jump in share price. He has also built

led the company in a new vision centered on Tajness experience in Retail through stints in Shoppers Stop

– the holistic brand and operations philosophy that and Aditya Birla Group, where he was the CFO.

binds all the 101 hotels of the Taj, inspired by the He has won several awards including Most Influential nobility of heritage and traditions of India. Under this CFOs of India award from CIMA in 2015 & 2016; CFO vision, he has implemented restructuring of brand

on

30th September 2017.



CORPORATE INFORMATION Report on Corporate Governance (Contd)

for the Year for Excellence in Finance in Managing a responsible for the operations and performance of 32

Turnaround given out by IMA (2013). He loves to

build High Performance teams and has led global

Finance Director development programs at Merck &

Co for high potential talent. Deeply passionate about

Authentic Leadership and committed to Doing Well

by Doing Good. He is associated with some NGOs

and has been on the advisory board of Unltd India,

Beyond Sight Foundation.

Mr. Giridhar Sanjeevi was appointed to the Board

Mr. B.K ChaudharyNon- Executive Non-Independent Director

Mr. Binod K. Chaudhary, a Nepali businessman,

industrialist and philanthropist is the Chairman of CG

Corp Global, a multi- dimensional conglomerate,

headquarter in Nepal, consisting 122 companies and

76 brands under 16 different business verticals that

cover over 5 continents. Experiencing a rapid global

expansion under the esteemed leadership and

vision, he is featured as the first Nepali billionaire as

listed by Forbes. With over 10,000 employee CG

Corp Global is diversified from stainless steel,

departmental arcade, trade, food, electronics, poly

fiber, finance and power to insurance, realty,

education, cement, Ayurveda, biotech, telecom and

of course, hospitality establishing linkages across

verticals.

Mr. P. VermaNon- Executive Non-Independent Director

Mr. Prabhat Verma is a Hotel Management graduate

from IHMCTAN, Kolkata and joined the Taj Group in

the year 1990 as a Management Trainee. He has

since held key positions in India and UK. In India, he

has been General Manager of hotels including Taj

Malabar, Cochin and Taj Coromandel, Chennai.

He headed the UK operations between 2007 to 2013

as General Manager- Crowne Plaza, St. James'

Court and 51 Buckingham Gate, London. On his

return to India in 2013, he was promoted to the role of

Chief Operating Officer of The Gateway Hotels of the

IHCL. As COO Gateway Hotels, Mr. Verma was

hotels of the SBU in India and Sri Lanka.

Subsequently in 2015 Mr. Verma was promoted to

the position of Sr. Vice President Operations, South

which included 41 Taj Hotels in South India, South

East Asia and UK.

In April 2018, Mr. Verma's portfolio was further

expanded and he has now been designated as

Executive Vice President Operations - South India, as International & Ancillary Businesses of Jiva Spa, Taj Director and Chairman on 15th June 2018.Salons, Chambers and Khazana.

Mr. Verma has won numerous industry accolades

including Young General Manager of the Year 5 Star

Deluxe category by FHRAI in 2005 and the

International Cooperation Award between the UK

and India in 2012 by Asian Voice.

Mr. U. NarainNon- Executive Non-Independent Director

Mr. Uday Narain has a varied and diverse experience

of more than 20 years in the Tata Group and

especially in the Taj, since joining the Tata

Administrative Service in June 1995. He has spent 17

years with the Taj across functions including Projects,

Development, General Management and

Operations. Mr. Narain started out in Projects and

worked on the Taj Exotica in Goa, the Taj in Jodhpur

and the Taj Flight Kitchen in Delhi. Thereafter he was

responsible for the growth and development of the

Taj in the Middle East, Indian Ocean Rim and North

and West India.

He then spent three years as the Chief Operating

Officer for Ginger Hotels, during the initial growth

phase of the company, when the company grew from

one operational hotel to fourteen operational hotels.

From there, he moved to New York, where he was

responsible for Development and Projects for Taj in

The Americas.

Thereafter, he spent two years with Tata Realty &

Infrastructure Ltd (TRIL) where he was Vice

President - Real Estate & Hospitality, responsible for

development in the Real Estate vertical, program




management of hospitality projects, and overseeing Mr. T. De ZoysaNon- Executive Independent Directorthe operations of assets, that included a mall and an

office building. In his assignment as Vice President - A well-known figure in the Sri Lankan business Strategy for The Indian Hotels Company Limited, he community, Tilak de Zoysa, FCMI (UK) FPRI (SL), worked on putting together a three-year Strategic Honorary Consul for Croatia and Global Ambassador Initiative Plan for the organization. for HelpAge International was conferred the title of

“Deshabandu” by His Excellency the President of Sri He is currently designated as the Chief Operating Lanka in recognition of his services to the country and Officer of TAL Hotels & Resorts Limited responsible was the recipient of “The Order of the Rising Sun, for asset management of the existing hotels in the Gold Rays with Neck Ribbon” conferred by His company and for exploring opportunities for the Majesty the Emperor of Japan. Recipient of the LMD growth of the company.lifetime achievers' Award 2017.

Mr. Narain graduated in Economics from St. In addition to being the Chairman of the Supervisory

Stephen's College, University of Delhi and then Board (AMW) and Advisor to the Al-Futtaim Group of

completed his Post Graduate Diploma in Companies in Sri Lanka, he Chairs Carson

Management from the Indian Institute of Cumberbatch PLC, Associated CEAT (Pvt) Ltd.,

Management in Kolkata.Amaya Hotels and Resorts USA (Radisson), Jetwing

Zinc Journey Lanka (Pvt) Ltd., Trinity Steel (Pvt) Ltd., Mr. R. De MelNon- Executive Independent Director CG Corp Global Sri Lanka, Dutch Lanka Trailer

Manufacturers (TATA Group), HelpAge Sri Lanka and Mr. Russell De Mel is a professional accountant with

The Colombo YMBA.over 20 years' experience in Development Banking

including Project Financing, SME Financing and He is also the Vice Chairman of CEAT Kelani

Merchant Banking and around 9 years of experience Holdings (Pvt) Ltd., Orient Insurance Ltd. and serves

in Commercial and Investment Banking. He is a on the boards of several listed and private companies

Fellow of the Chartered Institute of Management which include TAL Hotels and Resorts Ltd, Nawaloka

Accountants of UK (FCMA), Chartered Global Hospitals PLC, Associated Electrical Corporation

Management Accountant (CGMA) and Fellow of the Ltd., INOAC Polymer Lanka (Pvt) Ltd., Cinnovation

Certified Management Accountants of Sri Lanka INC., GVR Lanka (Pvt) Ltd and Varun Beverages

(FCMA). Lanka (Pvt) Ltd (Pepsi).

Mr. Tilak de Zoysa is a past Chairman of the Ceylon Mr. Russell De Mel has served in the National Chamber of Commerce, the National Chamber of Development Bank (NDB) and Group as the Director/ Commerce of Sri Lanka, HelpAge International (UK) CEO and the Group CEO from March 2010 to August and served as a Member of the Monetary Board of Sri 2013. Prior to that he has held the positions of Vice Lanka (2003-2009).President –Group Risk Management and Vice

President of Corporate Banking Group of NDB.Dr. G. SundaramNon- Executive Independent Director

Mr. Russell De Mel has also served on the Boards of

over 25 listed and non-listed companies, over a Dr. G. Sundaram has served in India as one of its

period of 25 years , covering a wide range of sectors , most distinguished civil servants. During his

both within and outside NDB Group and within and illustrious career, which spanned nearly thirty-five

outside Sri Lanka. He currently serves on the Boards years, he has served in various capacities, carving a

of Nations Trust Bank PLC and Sunshine Tea Pvt Ltd niche for himself. Being an exponent in International

as well. trade with special reference to the EEC, he was one

of the persons who promoted relations between India

and the EEC (now EU).




After obtaining a Masters Degree in Economics from diversified conglomerate listed in the Colombo Stock

the prestigious University of Madras, India in 1958, Exchange, Sri Lanka.

Dr. G. Sundaram taught Economics in the well-Prior to moving to the Holdings company, he joined in known Madras Christian College from 1959 - 1960. In 1997 as the CEO, Watawala Plantations PLC (CSE: India, the Civil Services attracts the brightest and it WATA), a diversified Plantation Management was natural that Dr. G. Sundaram set his focus on the company set up via a JV with Tata's, having mature prestigious career. He was selected to the premier agri assets across Palm Oil, Tea and Rubber with a federal Civil Service viz, the Indian Administrative total extent under management in excess of 12,000 Service in 1962.HA and a large workforce in excess of 11,000 people.

He joined the Ministry of Commerce, Government of He holds a Bachelor of Science in Electrical India and specialized in export promotion, inter- Engineering and a MBA from the University of Governmental relations in relation to Trade Hartford, USA. Before moving back to Sri Lanka, he Agreements and also negotiated some of them held several leadership roles in both Finance and (1971-1976).Management, specializing in the Educational

On his return, his several positions included, joint Institutions.Secretary, Ministry of Defence, Government of India,

At WATA, he was instrumental in turning around the Chairman, Gujarat Pollution Control Board, Sales

distressed Plantation Company and was credited to Tax Commissioner and the Ministry of Environment

having successfully navigated the plantation of the Government of India (1982 - 1990). He was the

company through volatile times to become the first one in India in 1986 to suggest introduction of

highest capitalized Regional Plantation Company in VAT on the EEC pattern. It has since become a

the Colombo Stock Exchange ( CSE ). Further, his reality as a major financial reform in India (now known

vision saw the company move away from being a as GST).

mono crop to a diversified crop portfolio in Palm Oil He was Secretary to the Government of India during

and Rubber. Today, in Sri Lanka, WATA is not only the 1993 - 1996, which was the highest rank in the official

largest producer of Ceylon Black tea but is also the hierarchy. After having been Secretary in the Cabinet

largest producer of Crude Palm Oil (CPO ).Secretariat and the Ministry of Civil Supplies,

Consumer Affairs and Public Distribution System, he Mr. Vish's crowning achievement was in 1998 when was Secretary, Ministry of Tourism. He retired on he drove his company towards downstream 31.10.1996 at the then retirement age of 58. exposure by successfully entering the branded tea

segment in Sri Lanka. Today, with approximately 3 mil He had attended many international conferences kg's in sales, it enjoys Market Leadership position.during his outstanding career. As Additional

Secretary, Commerce, Government of India, he was His new avatar as the Group Managing Director of the official leader to the ESCAP Conference. the holding company, since 2009, saw him

successfully transform a tightly held family run He was on the Board of many companies. Even at company into a respected diversified holdings present, he serves on the Board of the Taj Group of company and more importantly, leverage the TATA Hotels. He is an adviser to various consumer groups relationship to expand the Group's footprint for and social service organizations.market expansion.

Mr. V. GovindasamyMr. Vish's international experience coupled with his Non- Executive Independent Directorinnate managerial capability and innovative qualities

Mr. Vish Govindasamy is the Group Managing has enabled him to play key leadership roles in the Director of Sunshine Holdings PLC (CSE: SUN), a Private Sector in Sri Lanka and has further cemented


his recognition as a dynamic leader in the corporate Thereafter, his loyalty and outstanding dedication to

world. the growth and development of the group led him to

reach stellar heights in a career spanning more than Mr. R. K. Chaudhary

a quarter of a century.Non- Executive Non-Independent Director

He is no stranger to our beautiful isle as he was Mr. Rahul Chaudhary, the Managing Director of CG

stationed in Bentota during the opening of the Corp Global, a multi-dimensional conglomerate with

spectacular hotel in Bentota -Vivanta by Taj. His over 122 companies and 76 brands under 16

services have been rendered to many Taj properties different business verticals, covering over 5

from Taj Palace Hotel - New Delhi, Vivanta by Taj- continents. Rahul Chaudhary heads CG Hospitality

Fisherman's Cove - Chennai, Taj Lake Palace- Holding ,the hospitality arms of CG Corp Global and

Udaipur to name a few. During his tenure, he has CG Capital Partners. CG Hospitality Holdings is

earned a reputation for being a Hotelier par partners with and owns some of the most iconic

excellence.assets globally with some of the leading hospitality

brands over two decades such as Taj, Alila, Jetwing, He holds a Bachelor of Arts degree from the Punjab Radisson, The Farm, Summit, CHC, The Zinc and University and Bachelor of Hotel Management and The Fern. Catering Technology from Institute of Hotel

Management and Catering Technology, Chennai.Mr. C. SubramanianNon- Executive Non-Independent Director

As Area Director – Sri Lanka, Maldives and Malaysia,

Sarabjeet Singh overlooks the three properties in Sri Mr. Chandrasekaran Subramanian, Chief Finance Lanka – Taj Samudra Colombo, The Gateway Hotel Officer of CG Corp Global with over more than 35 Airport Garden and Vivanta by Taj Bentota, two years of experience in diversified sector delivering properties in the Maldives - Taj Exotica Resort and responsible growth and genuine results. He has Spa and Vivanta by Taj Coral Reef, Maldives and Taj completed his CA from ICAI, Bachelor in commerce Rebak Island, Langkawi, Malaysia with a total (Madras University) and Company secretary( employee base of more than 1700.inter)from ICSI. Past experience as a Regional

Director Finance & Business Support for South West Mr. Singh was appointed to the Board as Executive

Asia with Intercontinental Hotel Group (IHG) which Non-Independent Director on 5th May 2017 and to

have more than 60,000 room inventory in over 4,100 the Boards of TAL Maldives Resorts Private Limited

hotels across 100 countries over a period of 13 years and TAL Hotels and Resorts Limited as Director on

.Implemented captive BPO for Worldwide hotel 28th June 2017.

operations of IHG out of India in the capacity of Vice

President India business service center.

Mr. Sarabjeet SinghExecutive Non-Independent Director

With over 30 years of experience in the TAJ Group,

Sarabjeet Singh is a doyen in the hotel industry. His

expertise and knowledge in the field is

immeasurable. Arriving in Colombo after a long stint

at the Taj Krishna in Hyderabad, he brings with him

the skills of a veteran in the Taj Group's international

hotel portfolio as well as luxury properties.

He started his career as a Hotel Management

Trainee at the Taj Mahal Palace & Tower, Mumbai.

Remuneration Committee

The Remuneration Committee consists of Mr. Vish

Govindasamy and Mr. Tilak De Zoysa who are

independent, non executive Directors. No

remuneration (either in cash or non cash) has been

paid to any non executive independent or non

independent Director during the year under review

other than as disclosed in Note 33.2 to the Financial

Statements which reflect an aggregate of Rs.

710,350 paid to directors as Sitting Fees in respect of

Audit Committee meetings and board meetings.






Audit Committee The fees payable to the external auditor as audit fees

and the fees payable to the external auditors for non-The Audit Committee comprises of three non – audit services provided by them during the year executive independent Directors. The Committee is under review has been set out in Items 13 and 14 of chaired by Mr. Vish Govindasamy. The other two the Annual Report of the Board of Directors. Further Committee members comprise of Mr. Tilak De Zoysa to the review of the non-audit services provided by and Mr. Russell De Mel. Mr. Sarabjeet Singh, Area the external auditors of the Company, it was Director Sri Lanka, Maldives and Malaysia / General determined by the Audit Committee that the Manager and Mr. Soumitra Ray, Area Financial independence of the external auditor as the auditors Controller Sri Lanka and Maldives / Financial of the company had not been compromised.Controller attend the Audit Committee meetings by

invitation. Ralated Party Transactions Committee

The Chairman of the Audit Committee is Mr. Vish Related Party Transactions Committee consists of

Govindasamy, acclaimed for his professional Mr. Vish Govindasamy and Mr. Tilak De Zoysa who

knowledge and expertise in corporate finance. are independent, non executive Directors.

Role of Audit Committee Internal Audits

The Committee has been formed with specific terms The Committee reviewed the accounting system and

of reference as described in the Corporate the scope and coverage of the internal audit process

Governance Rules of the Colombo Stock Exchange. to assess effectiveness of financial controls that have

been designed to provide reasonable assurance to Meetings the Directors that assets are safeguarded and that

the financial reporting system can be relied upon in The Committee met four times during the year under preparation and presentation of Financial review to discuss the matters within its purview.Statements. The Internal Audit function is being

Tasks of the Audit Committee conducted by a leading audit firm. Follow-up

reviews are scheduled to ascertain that audit The Committee reviewed the financial reporting

recommendations are being acted upon.system adopted by the company in preparation,

presentation and the adequacy of disclosures in the Conclusion

annual / quarterly financial statements to ensure The Audit Committee is satisfied that the Company's reliability of the process, consistency of the accounting policies and operational controls provide accounting policies and methods adopted and their reasonable assurance that the affairs of the compliance with the Sri Lanka Accounting Company are managed in accordance with its Standards. The Committee also reviewed the policies and that the company's assets are Company's compliance with financial reporting adequately safeguarded.requirements, information requirements of the

Companies Act and other relevant financial reporting

related regulations and requirements. The

Committee also reviewed the adequacy of the

internal controls and risk management and assessed

the independence and performance of the external

auditors. The Committee recommended the financial

statements to the Board for its approval and

issuance.


V GovindasamyChairmanAudit Committee18th June, 2018


Statement of the Directors' Responsibilities in relation to the Financial Statements

The responsibilities of the Directors, in relation to the financial statements of the Company differ from the

responsibilities of the Auditors, which are set out in the Report of the Auditors in pages 17 to 19.

As per the provisions of the Companies Act, No. 07 of 2007 the Directors are required to prepare financial

statements for each financial year giving a true and fair view of the state of affairs of the Company as at the end of

the financial year and of the results of its operations for the financial year.

The Directors consider that, in preparing these financial statements set out in pages 20 to 57 appropriate

accounting policies have been selected and applied in a consistent manner and supported by reasonable and

prudent judgment, and that all applicable accounting standards, as relevant, have been followed.

The Directors are also confident that the Company has adequate resources to continue in operation and have

applied the going concern basis in preparing these financial statements. Further, the Directors have a

responsibility to ensure that the Company maintains sufficient accounting records to disclose with reasonable

accuracy, the financial position of the Company and to ensure that the financial statements presented comply

with the requirements of the Companies Act, No. 07 of 2007.

The Directors are also responsible for taking reasonable steps to safeguard the assets of the Company and in

this regard to give proper consideration to the establishment of appropriate internal control systems to prevent

and detect fraud and other irregularities.

The Directors are confident that they have discharged their responsibilities as set out in this statement. The

Directors also confirm that to the best of their knowledge, all statutory payments payable by the Company as

at the Balance sheet date have been paid where relevant provided for.

BY ORDER OF THE BOARD

Director,

Corporate Services (Private) Limited,Secretaries,Colombo.18th June, 2018


INDEPENDENT AUDITOR'S REPORT

TO THE SHAREHOLDERS OF TAL LANKA HOTELS PLC


Report on the Audit of the Financial Statements

Opinion

We have audited the financial statements of Tal Lanka Hotels PLC (“the Company”), which comprise the statement of financial position as at 31 March 2018, and the statement of profit or loss and other comprehensive income, statement of changes in equity and statement of cash flows for the year then ended, and notes to the financial statements, including a summary of significant accounting policies.

In our opinion, the accompanying financial statements give a true and fair view of the financial position of the Company as at 31 March 2018, and of its financial performance and its cash flows for the year then ended in accordance with Sri Lanka Accounting Standards.

Basis for opinion

We conducted our audit in accordance with Sri Lanka Auditing Standards (SLAuSs). Our responsibilities under those standards are further described in the Auditor's Responsibilities for the Audit of the Financial Statements section of our report. We are independent of the Company in accordance with the Code of Ethics issued by CA Sri Lanka (Code of Ethics), and we have fulfilled our other ethical responsibilities in accordance with the Code of Ethics. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Key audit matters

Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial statements of the current period. These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.

Recognition of deferred tax assets

As at 31 March 2018, the following items were recorded in the financial statements: LKR 212 million in respect of deferred tax assets, including LKR 190 million related to deferred tax assets on the carried forward tax losses.

A deferred tax asset is recognised for the carry forward of unused tax losses to the extent that it is probable that future taxable profit will be available against which the unused tax losses and unused tax credits can be utilised.

The recognition of deferred tax assets involves judgement, as it is based on specific considerations, such as the future profitability of the business, local tax law and availability of temporary differences, such as an excess of capital allowances over depreciation or tax losses.

During the current and the previous year the company has, following a period of realising tax losses, begun to demonstrate tax profits indicating that deferred tax assets can be recovered.

The materiality of the deferred tax asset, combined with the significant uncertainties in the recognition and subsequent assessment of the recoverability of deferred tax assets resulted in this being a key audit matter.

The disclosures relating to taxation are included in note 9 and 26 to the financial statements.


SJMS AssociatesChartered AccountantsNo. 11, Castle LaneColombo 04Sri Lanka

Tel: +94 11 2580409, 5444400Fax: +94 11 2582452www.deloitte.com

How our audit addressed the key audit matter

We involved our tax specialists to assist us in assessing appropriateness of the management's judgments and estimates used in the calculation of deferred tax and conducting a critical review of the assumptions used by management.

In assessing the amount of the deferred tax asset to be recognized in the company's statement of financial position, we compared the assumptions used in respect of calculation of future taxable income to the company's long-term forecasts and relevant tax laws.

We agreed tax rates used to enacted or substantially enacted tax rates and recalculated the deferred tax.

We also assessed the adequacy of the Company's disclosures in respect of deferred taxes.

Other information

Management is responsible for the other information. The other information comprises the information included in the annual report, but does not include the financial statements and our auditor's report thereon. The annual report is expected to be made available to use after the date of this auditor's report.

Our opinion on the financial statements does not cover the other information included in the annual report and we will not, express any form of assurance conclusion thereon.

In connection with our audit of the financial statements, our responsibility is to read the other information identified above and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit, or otherwise appears to be materially misstated.

When we read the annual report, if we conclude that there is a material misstatement there in, we are required to communicate the matter to those charged with governance.

Responsibilities of management and those charged with governance for the financial statements

Management is responsible for the preparation of financial statements that give a true and fair view in accordance with Sri Lanka Accounting Standards, and for such an internal control, as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the financial statements, management is responsible for assessing the Company's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the management either intends to liquidate the Company or to cease operations, or has no realistic alternative but to do so.

Those charged with governance are responsible for overseeing the Company's financial reporting process.

Auditor's responsibilities for the audit of the financial statements

Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with SLAuSs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.

As part of an audit in accordance with SLAuSs, we exercise professional judgement and maintain professional skepticism throughout the audit. We also:


TO THE SHAREHOLDERS OF TAL LANKA HOTELS PLC (CONTD)



Ÿ Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud that is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.

Ÿ Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control.

Ÿ Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.

Ÿ Conclude on the appropriateness of the management's use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Company's ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor's report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor's report. However, future events or conditions may cause the Company to cease to continue as a going concern.

Ÿ Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation.

We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.

We also provide those charged with governance with a statement that we have complied with ethical requirements in accordance with the Code of Ethics regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.

From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor's report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.

REPORT ON OTHER LEGAL AND REGULATORY REQUIREMENTS

As required by Section 163 (2) of the Companies Act No. 07 of 2007, we have obtained all the information and explanations that were required for the audit and, as it far as appears from our examination, proper accounting records have been kept by the Company.

CA Sri Lanka membership number of the engagement partner responsible for signing this independent auditor's report is 3991.

SJMS ASSOCIATESChartered AccountantsColombo25 April, 2018


TO THE SHAREHOLDERS OF TAL LANKA HOTELS PLC (CONTD)



Notes Year ended 31 March

5

6

7

8

9

10


STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME(All amounts are shown in Sri Lankan Rupees)

2017

The accounting policies and notes 1 to 34 form an integral part of these financial statements. from

Revenue

Direct cost

Gross profit

Other income

Marketing expenses

Administrative expenses

Finance and other charges

Profit before tax

Income tax expense

Profit for the year

Other comprehensive income / (expense), net of income taxItem that will not be reclassified subsequently to profit or loss:

Gain on revaluation of building, net of tax

Re-measurement losses on defined benefit plans, net of tax

Items that may be reclassified subsequently to profit or loss:Net change in fair value on available for sale of financial assets, net of tax

Other comprehensive income / (expense) for the year,net of tax

Total comprehensive income for the year

Earnings per share - basic

2018

2,774,614,586

2,059,147,373

34,884,953

102,711,290

338,606,269

180,798,104

)

)

)

)

)

)

)

)

( )

715,467,213

( )

( )

(

-

(25,469,201

(25,469,201

(490,910

(490,910

(25,960,111

)

128,236,503

(33,361,525)

94,874,978

68,914,867

0.68

)

)

)

)

)

2,830,443,380

2,050,959,345

24,822,634

123,936,024

349,446,159

222,794,656

)

)

)

)

)

)

)

)

)

)

)

)

( )

779,484,035

( )

( )

(

796,938,176

(10,117,772

786,820,404

1,168,585

1,168,585

787,988,989

)

108,129,830

(4,414,146)

103,715,684

891,704,673

0.74

)


As at 31 March


STATEMENT OF FINANCIAL POSITION(All amounts are shown in Sri Lankan Rupees)

Total liabilities

Total equity and liabilities

Soumitra Ray - Area Financial Controller Sri Lanka, Maldives andFinancial Controller, Taj Samudra, Colombo

I certify that these financial statements have been prepared in compliance with the requirements of the Companies Act No. 07 of 2007.

Borrowings 24

Date: 25 April, 2018 Date: 25 April, 2018

As at 31 March

The Board of Directors is responsible for the preparation and presentation of these financial statements.Approved on behalf of the Board of Directors by the following on .25 April 2018

Notes

15

11

12

16

Non-current assets

Property, plant and equipment

Intangible assets

Current assets

Inventories

Trade and other receivables

ASSETS

Amounts receivable from related parties

Total assets

EQUITY AND LIABILITIES

Capital and reserves

Stated capital

Revaluation reserve

Available for sale reserve

Non-current liabilitiesBorrowings

Retirement benefit obligation

Current liabilities

Trade and other payables

Amounts payable to related parties

17

21

22

24

25

27

28

Leasehold property - Right to use of land 13

Deposits, prepayments and advances

Cash and cash equivalents

19

20

Total equity

Deferred tax liability 26

Accumulated losses

2018

The accounting policies and notes from 1 to 34 form an integral part of these financial statements.

DirectorTilak De Zoysa - - DirectorV Govindasamy

2017

Current tax receivable

356,313,475

808,165,796

5,220,663,456

3,847,128,188 14,468,232

4,699,054,118

84,310,891

179,414,109

118,753,546

4,846,342

5,220,663,456

1,396,374,941

2,023,604,090

4,977,478

1,590,896,621

1,971,331,661

310,984,133

2,441,165,999

140,868,188

817,839,363

93,178,258

138,864,870

521,609,338

261,681,494

, (983,790,510)

2,779,497,457

20,994,868

19,618,335 Other financial assets 14

18

404,008,935

893,580,902

5,346,111,472

3,,906,457,542 14,359,625

4,799,131,304

73,081,976

210,836,286

118,099,730

1,566,824

5,346,111,472

1,396,374,941

2,126,820,433

5,468,387

1,721,659,856

2,080,279,438

348,439,546

2,372,251,132

141,132,421

831,030,315

77,863,942

161,013,473

546,980,168

240,519,852

, (1,156,412,629)

2,973,860,340

22,617,667

19,556,191 -Investment in fixed deposits 27,727,631

23



STATEMENT OF CHANGES IN EQUITY(All amounts are shown in Sri Lankan Rupees)

Balance as at 01 April 2016 1,396,374,941

Statedcapital

1,421,324,340

Revaluationreserve

(1,341,452,624)

Accumulatedlosses

1,480,546,459

Total

4,299,802

Available-for-salereserve

Total comprehensive income / (expense)for the year

- - 94,874,978 94,874,978 -Profit for the year

- - (10,117,772) (8,949,187) 1,168,585Other comprehensive income / (expense)

- 796,938,176 93,597,912) 891,704,673

- (91,442,083) 91,442,083 - -Transfer of Depreciation, net ofdeferred tax

1,396,374,941 2,126,820,433 (1,156,412,629) 2,372,251,132Balance as at 31 March 2017


- - (25,469,201) (25,960,111) (490,910)Other comprehensive expense

- - 69,405,777 68,914,867

- (103,216,343) 103,216,343 - -Transfer of Depreciation, net ofdeferred tax

1,396,374,941 2,023,604,090 (983,790,510) 2,441,165,9994,977,478Balance as at 31 March 2018


1,168,585

5,468,387

- - 103,715,684 103,715,684 -Profit for the year

- 796,938,176 - 796,938,176 -Revaluation gain during the year net ofdeferred tax

(490,910)


Year ended 31 March


CASH FLOW STATEMENT (All amounts are shown in Sri Lankan Rupees)

Provision for defined benefit plans

(Increase)/ decrease in inventories

Write off of property, plant & equipment

Impairment of trade receivablesImpairment of inventoriesInterest income

Unrealised exchange loss on loansOperating profit before working capital changes

(Increase)/ decrease in trade and other receivables

(Increase)/ decrease in amounts receivable from related companies

(Increase)/ decrease in deposits, prepayments and advances

Increase/ (decrease) in trade and other payables

Increase/ (decrease) in amounts payable to related companies

Cash generated from operations

Taxes paid

Retirement benefits paid

Net cash flows generated from operating activities

Cash flow from investing activities Net proceeds from disposal of property, plant and equipment

Purchase of property, plant and equipment

Net cash used in investing activities

Cash flow from financing activities Borrowings obtained

Repayment of borrowings

Payment of lease liability

Interest paid

Net cash flows financing activitiesused in

Net increase/ (decrease) in cash and cash equivalents

Cash and cash equivalents at the beginning of the year

Cash and cash equivalents at the end of the year

Cash and cash equivalents at the end of the year

Cash and cash equivalents (Note 20)

Interest received

Acquisition of intangible assets

Investment (in)/ withdrawal from fixed deposits

(Increase)/ decrease in plan asset

Cash flow from operating activities

Profit before tax

Gain on disposal of property, plant and equipment

Depreciation on property, plant and equipment

Adjustments for

Amortisation of leasehold property

2018 2017

Interest expense


Amortisation of intangible asset

(15,314,316)

728,448,088

(11,864,468)

(14,257,934)

(16,583,863)

(352,684,761)

-

22,210,473

2,333,285 635,553

(439,867)

44,966,167

29,088,892 (3,279,518)

(37,455,413)(264,233)

662,044,834

631,203,037

3,266,321

(327,830,384)

(300,666,879)

184,229,000 (405,653,862)

(2,000,000)

(129,259,899)

(22,148,603)

161,013,473

138,864,870

138,864,870

138,864,870

128,236,503

(3,266,321)

387,159,737

13,190,952

129,259,899

439,867

4,161,707

(4,270,314)

27,727,631

(27,314,198)

9,431,120

772,543,037

(7,282,884)

(10,901,837)

(18,619,841)

(607,014,968)

1,119,686

18,839,453

1,578,210 479,428

(3,352,296)

71,855,722

(38,437,570) (399,811)

29,727,05641,744,545

807,325,493

777,803,815

5,111,126

(160,579,704)

(160,955,075)

- (463,674,652)

(2,000,000)

(141,340,316)

9,833,771

151,179,702

161,013,473

161,013,473

161,013,473

108,129,830

(5,111,100)

421,991,832

13,190,952

141,340,316

2,316,788

2,481,004

(6,722,463)

(1,080,822)

-



1 General

1.1 Corporate information

1.2 Parent company

The company's parent company is TAL Hotels & Resorts Limited, Hong Kong (formerly known as Taj Asia

Limited).

1.3 Principal activities and nature of operations

TAL Lanka Hotels PLC is engaged in the hospitality trade. The company owns the Taj Samudra Hotel

located in Colombo.

1.4 Date of authorization for issue

The financial statements were authorised for issue by the Board of Directors on 25th April 2018.

2 Basis of preparation and statement of compliance

The financial statements of the company (statement of financial position, statement of comprehensive

income, statement of changes in equity, statement of cash flows together with accounting policies and

notes) are prepared in accordance with Sri Lanka Accounting Standards (LKASs and SLFRSs) as issued

by The Institute of Chartered Accountants of Sri Lanka and in compliance with the requirements of the

Companies Act No.07 of 2007.

TAL Lanka Hotels PLC (formerly known as Taj Lanka Hotels PLC) is a limited liability company

incorporated in Sri Lanka and listed on the Colombo Stock Exchange. The registered office and principal

place of business is situated at No. 25, Galle Face Centre Road, Colombo 03.

2.1 Statement of compliance

2.2 Basis of measurement

The financial statements have been prepared on a historical cost basis, except for the following line items

in the statement of financial position.

- 'Available for sale' investments are measured at fair value.

- Defined benefit plans are measured at the present value based on actuarial valuation.

- Buildings and motor vehicles under property plant and equipment have been measured at revalued

amounts.

2.3 Going concern

When preparing the financial statements the Directors have assessed the ability of the Company to

continue as a going concern. The Directors have a reasonable expectation that the Company has

adequate resources to continue in operational existence for the foreseeable future. The Company does

not foresee a need for liquidation or cessation of trading, taking into account all available information

about the future. Accordingly, the Directors continue to adopt the going concern basis in preparing the

financial statements.


Summary of significant accounting policies for the year ended 31 March 2018 (Contd.)


2.4 Comparative Information

The accounting policies have been consistently applied by the company with those of the previous

financial year in accordance with LKAS 01 - presentation of financial statements.

2.5 Materiality & aggregation

2.6 Functional and presentation currency

2.7 New accounting standards issued but not effective

2.7.1 Sri Lanka Accounting Standard (SLFRS 9) – Financial Instruments:

Classification and measurement

2.7.2 Sri Lanka Accounting Standard (SLFRS 15) – Revenue from Contracts with

Customers

2.7.3 Sri Lanka Accounting Standard (SLFRS 16) - Leases

In compliance with LKAS 01 on presentation of financial statements, each material class of similar items

is presented separately in the financial statements. Items of dissimilar nature or functions too are

presented separately, if they are material.

The financial statements are presented in Sri Lankan Rupees, which is the group’s functional currency

and presentation currency. All financial information presented in Sri Lanka Rupees is rounded to the

nearest rupee unless otherwise stated.

The Institute of Chartered Accountants of Sri Lanka has issued the following new Sri Lanka Accounting

Standards that have an effective date in the future and have not yet been applied in preparing the

financial statements for the year ended 31 March 2018.

This standard applies to classification and measurement of financial assets and liabilities as defined in

LKAS 39. This standard is effective for financial periods beginning on or after 01 January 2018.The

Company plans to assess the potential impact on its Financial Statements resulting from the application

of LKAS 39 in the financial year 2018/ 2019.

SLFRS 15 establishes a comprehensive framework for determining whether, how much and when

revenue is recognised. It replaces existing revenue recognition guidance, including Sri Lanka

Accounting Standard (LKAS 18) - Revenue, Sri Lanka Accounting Standard (LKAS 11) - Construction

Contracts and IFRIC 13 - Customer Loyalty Programmes. This standard is effective for the annual

periods beginning on or after 01 January 2018. The Company plans to assess the potential impact on its

Financial Statements resulting from the application of SLFRS 15 in the financial year 2018/ 2019.

This standard sets outs the principles for the recognition, measurement, presentation and disclosure of

leases and provides a single lessee accounting model requiring lessees to recognise assets and

liabilities for all leases other than short term leases (lease term is 12 months or less) and leases for which

the underlying asset has a low value although accounting for lessors remains substantially similar to the

current practice. This standard is effective for the annual periods beginning on or after 01 January 2019.

The Company plans to assess the potential impact on its Financial Statements resulting from the

application of SLFRS 16 in the financial year 2018/ 2019.




2.7.4 Improvements and other amendments to SLFRS/ LKAS

3 Summary of significant accounting policies

The principal accounting policies applied in the preparation of these financial statements are set out

below. These policies have been consistently applied to all the years presented, unless otherwise stated.

3.1 Revenue recognition

3.1.1 Revenue from operations

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

Company and the revenue and associated costs incurred or to be incurred can be reliably measured.

Revenue is measured at the fair value of the consideration received or receivable net of trade discounts

and sales taxes. The following specific criteria are used for the purpose of revenue recognition:

- Room revenue is recognized on the rooms occupied on a daily basis.

- Rental income is recognized on a straight line basis over the term of the lease.

- Food and beverage revenue is accounted for at the time of the sale.

3.1.2 Interest income

Interest income is recognised on an accrual basis using the Effective Interest Rate (EIR) method.

3.1.3 Dividend income

Dividend income from investments is recognised in the period in which the company’s right to receive

payment has been established, and is included in “other income”.

3.1.4 Other income

Other income is recognised on an accrual basis.

3.1.5 Management fee

Management fees is recognised on an accrual basis in accordance with the substance of the relevant

agreement.

3.2 Expenditure recognition

Expenses are recognized in the profit or loss statement on the basis of a direct association between the

cost incurred and the earning of specific items of income. All expenditure incurred in running the business

and in maintaining property, plant and equipment in a state of efficiency has been charged to the profit or

loss statement.

For the purpose of presentation of the profit or loss statement, the “function of expenses” method has

been adopted, on the basis that it presents fairly the elements of the Company's performance.

3.3 Direct cost

Direct cost consists of the cost of consumption of food and beverages, payroll costs, management fees

and other directly identifiable attributable costs.

Amendments to existing accounting standards effective from financial period beginning on or after 1st

January 2017 as published by the Institute of Chartered Accountants of Sri Lanka did not have any

material impact on the financial statements of the Company.




3.4 Income taxes

Current and deferred taxes are recognised in profit or loss, except when they relate to items that are

recognised in other comprehensive income or directly in equity, in which case, the current and deferred

tax are also recognised in other comprehensive income or directly in equity respectively.

3.4.1 Current taxes

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 its subsequent amendments.

3.4.2 Deferred taxes

Deferred tax is recognised using the balance sheet 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 are recognised for all deductible temporary differences, carry-forward of unused tax

credit 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 tax

losses can be utilised.

The carrying amount of deferred tax assets is reviewed at the end of each reporting period 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 asset to be utilised. Unrecognised deferred tax assets are reassessed at the end of each

reporting period and are recognised to the extent that it has become probable that future profit will allow

the deferred tax asset to be recovered.

Deferred tax assets and liabilities are measured at tax rates that are expected to apply to the year when

the asset is realised or the liability is settled, based on the tax rates and tax laws that have been enacted

or substantively enacted at the end of each reporting period.

Deferred tax assets and deferred tax liabilities are offset, only when 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.

3.5 Earnings Per Share (EPS)

The company presents basic Earnings Per Share (EPS) based on profit or loss attributable to the

ordinary shareholders. Basic EPS is calculated by dividing the profit or loss attributable to ordinary

shareholders by the weighted average number of ordinary shares outstanding during the period.

3.6 Property, plant and equipment

3.6.1 Basis of recognition

3.6.2 Subsequent Measurement

All property, plant and equipment are initially recorded at cost. Cost includes expenditure that is directly

attributable to the acquisition of the asset. The cost of self constructed assets includes the cost of

materials and direct labour and any other costs directly attributable to bringing the assets to a working

condition for their intended use.

Subsequent costs are included in the asset's carrying amount or recognised as a separate asset, as

appropriate, only when it is probable that future economic benefits associated with the item will flow to the




Company and the cost of the item can be measured reliably. All other repairs and maintenance are

charged to the profit or loss during the financial period in which those are incurred.

Buildings and motor vehicles are subsequently shown in the statement of financial position at market

value, based on valuations done by external independent valuers, being the fair value at the date of

revaluation, less any subsequent accumulated depreciation and subsequent accumulated impairment

losses. Revaluations are performed with sufficient regularity such that the carrying amounts do not differ

materially from those that would be determined using fair value at the end of reporting date every 5 years.

Increases in the carrying amount arising on revaluation of property, plant and equipment are credited to

other comprehensive income and accumulated in equity, except to the extent that it reverses a

revaluation decrease for the same asset previously recognised in profit or loss, in which case the

increase is credited to profit or loss to the extent of the decrease previously charged. A decrease in the

carrying amount arising on the revaluation is charged to profit or loss to the extent that the loss exceeds

the balance, if any, held in the revaluation reserve relating to a previous revaluation of that asset. Each

year the difference between depreciation based on the revalued carrying amount of the asset and

depreciation based on the asset's original cost is transferred from revaluation reserve to retained

earnings/ accumulated losses.

All other classes of assets included under property, plant and equipment are stated at cost less

accumulated depreciation and accumulated impairment losses, if any.

An asset's carrying amount is written down immediately to its recoverable amount if the asset's carrying

amount is greater than its estimated recoverable amount.

Property, plant and equipment is de-recognised on disposal or when no future economic benefits are

expected from their use. Gains and losses on disposal of property, plant and equipment are determined

by comparing proceeds with the carrying amount and are included in profit or loss. On disposal of

revalued assets, the revaluation amounts are transferred to accumulated losses.

3.6.3 Depreciation

Depreciation is charged to profit or loss so as to write off the cost or valuation of assets, over their

estimated useful lives, using the straight-line method. The estimated useful lives, residual values and

depreciation method are reviewed at each year end, with the effect of any changes in such estimates

accounted for prospectively.

The estimated useful lives of depreciable assets are as follows :

3.6.4 De-recognition

3.6.5 Capital work-in-progress

Assets Years

Landscaping 93 years from 1987

Buildings 3 - 40

Hotel equipment 1 - 10

Plant, machinery and equipment 1 - 10

Hotel furniture and fittings 1 - 10

Office furniture and equipment 5 - 10

Motor vehicle 4

Capital work in progress represents all amounts paid on work undertaken, and still in an unfinished state

as at the end of the year.




3.7 Intangible assets

3.7.2 Subsequent expenditure

Subsequent expenditure on software assets is capitalised only when it increases the future economic

benefits embodied in the specific asset to which it relates. All other expenditure is expensed as incurred.

3.7.3 Amortisation

Amortisation is recognised in Profit or Loss on a straight-line basis over the estimated useful life of the

software, from the date that it is available for use since this most closely reflects the expected pattern of

consumption of the future economic benefits embodied in the asset. The estimated useful life of software

is five years.

Amortisation methods, useful lives and residual values are reviewed at each financial year-end and

adjusted if appropriate.

3.7.4 De-recognition

An Intangible Asset is de-recognised on disposal or when no future economic benefits are expected from

it. The gain or loss arising from de-recognition of such Intangible Assets is included in Profit or Loss when

the item is derecognised.

3.8 Impairment of non financial assets

Assets that have an indefinite useful life are not subject to amortisation and are tested annually for

impairment. Assets that are subject to amortisation are reviewed for impairment whenever events or

changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss

is recognised for the amount by which the asset’s carrying amount exceeds its recoverable amount. The

recoverable amount is the higher of an asset’s fair value less costs to sell and value in use. 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 assessments of the time value of money and the risks specific

to the asset for which the estimates of future cash flows have not been adjusted.

If the recoverable amount of an asset is estimated to be less than its carrying amount, the carrying

amount of the asset is reduced to its recoverable amount. An impairment loss is recognized immediately

in profit or loss, unless the relevant asset is carried at a revalued amount, in which case the impairment

loss is treated as a revaluation decrease.

Where an impairment loss subsequently reverses, carrying amount of the asset is increased to the

revised estimate of its recoverable amount, so that the increased carrying amount does not exceed the

carrying amount that would have been determined had no impairment loss been recognized for the asset

in prior years. A reversal of an impairment loss is recognized immediately in profit or loss, unless the

3.7.1 Basis of recognition

An Intangible Asset is recognised if it is probable that future economic benefits that are attributable to the

asset will flow to the Company and the cost of the asset can be measured reliably. Software acquired by

the Company is stated at cost less accumulated amortisation and accumulated impairment losses.

Expenditure on internally developed software is recognised as an asset when the Company is able to

demonstrate its intention and ability to complete the development and use the software in a manner that

will generate future economic benefits and can reliably measure the costs to complete the development.

The capitalised costs of internally developed software include all costs directly attributable to developing

the software and capitalised borrowing costs, and are amortised over its useful life. Internally developed

software is stated at capitalised cost less accumulated amortisation and impairment.




relevant asset is carried at a revalued amount, where reversal of the impairment loss is treated as a

revaluation increase.

3.11.1 Initial recognition

3.11.2 Initial measurement

3.11.3 Subsequent measurement

3.9 Leasehold property - right to use of land

Leasehold property comprises of land use rights which is stated at valuation. The leasehold property is

amortized on a straight line basis over the lease term. The amortization of the lease is made over the

remaining lease period of the land. The amount amortized is shown under amortization of leasehold

property.

3.10 Inventories

Inventories are stated at the lower of cost or net realisable value. Net realizable value is the estimated

selling price in the ordinary course of business less the estimated costs of completion and estimated

costs necessary to make the sale. The types of inventories include food and beverages, other

consumables and engineering supplies. Cost is determined by the weighted average method. The cost

of the inventory comprises of the cost incurred in bringing inventories to its present location and

condition.

3.11 Financial assets – recognition and measurement

All financial assets are initially recognized on the trade date, i.e., the date that the company becomes a

party to the contractual provisions of the instrument. This includes ’regular way trades’: purchases or

sales of financial assets that require delivery of assets within the time-frame generally established by

regulation or convention in the market place.

The classification of financial instruments at initial recognition depends on their purpose and

characteristics and the management’s intention in acquiring them. All financial instruments are

measured initially at their fair value including transaction costs, except in the case of financial assets

and financial liabilities recorded at fair value through profit or loss.

The company subsequently measures non-derivative financial assets categorising them in to the

categories of financial assets at fair value through profit or loss, held-to maturity investments, loans and

receivables and available-for-sale financial assets.

i. Financial assets at Fair Value Through Profit or Loss (FVTPL)

A financial asset is recognised at fair value through profit or loss, if it is classified as held for trading

or is designated as such upon initial recognition. Financial assets are classified as held for trading if

they are acquired for the purpose of trading in the near term. Financial assets at fair value through

profit or loss are measured at fair value, and any changes therein, are recognised in the profit or loss

statement.

ii. Held-to-maturity financial investments

Held-to-maturity financial investments are non–derivative financial assets with fixed or determinable

payments and fixed maturities, which the company has the intention and ability to hold to maturity.

Subsequent to initial measurement, held to maturity financial investments are measured at

amortised cost using the Effective Interest Rate (EIR), less impairment.




iii. Loans and receivables

Loans and receivables include non– derivative financial assets with fixed or determinable payments

that are not quoted in an active market, other than:

- Those that the company intends to sell immediately or in the near term and those that the Company,

upon initial recognition, designates as at fair value through profit or loss

- Those that the company, upon initial recognition, designates as available for sale

After initial measurement, loans and receivables are subsequently measured at amortised cost using

the EIR method less allowance for impairment. Amortised cost is calculated by taking into account any

discount or premium on acquisition and fees and costs that are an integral part of the EIR. The

amortisation is included in ‘interest income’ in the profit or loss statement. The losses arising from

impairment are recognised in the profit or loss statement in ‘impairment gain/ (loss) on loans and

receivables’.

iv. Available-for-sale financial investments

Available-for-sale investments include investments made in Lanka Island Resorts Limited. Available

for sale are those which are neither classified as held for trading nor designated at fair value through

profit or loss. The company has not designated any loans or receivables as available-for-sale.

After initial measurement, available-for-sale financial investments are measured at fair value.

Unrealised gains and losses are recognised directly in equity (other comprehensive income) in the

“available-for-sale reserve”. When the investment is disposed of, the cumulative gain or loss

previously recognized in equity is recognised in the profit or loss statement.

A financial asset (or, where applicable a part of a financial asset or part of a group of similar financial

assets) is de-recognised when:

- The rights to receive cash flows from the asset have expired.

- The company has transferred its rights to receive cash flows from the asset or has assumed an

obligation to pay the received cash flows in full without material delay to a third party under a

‘pass–through’ arrangement and either:

* The company has transferred substantially all the risks and rewards of the asset or

* The company has neither transferred nor retained substantially all the risks and rewards of the

asset, but has transferred control of the asset.

When the company has transferred its rights to receive cash flows from an asset or has entered into a

pass–through arrangement, and has neither transferred nor retained substantially all of the risks and

rewards of the asset nor transferred control of the asset, the asset is recognised to the extent of the

company’s continuing involvement in the asset. In that case, the company also recognises man

associated liability. The transferred asset and the associated liability are measured on a basis that

reflects the rights and obligations that the company has retained. Continuing involvement that takes the

form of a guarantee over the transferred asset is measured at the lower of the original carrying amount

of the asset and the maximum amount of consideration that the company could be required to repay.

- Those for which the company may not recover substantially all of its initial investment, other than

because of credit deterioration

3.11.4 De-recognition of financial assets




3.11.5 Identification, measurement and assessment of impairment

3.12 Cash and cash equivalents

3.13 Stated capital

3.14.2 De-recognition of financial liabilities

A financial liability is de-recognised when the obligation under the liability is discharged or cancelled or expires. Where an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as a de-recognition of the original liability and the recognition of a new liability. The difference between the carrying value of the original financial liability and the consideration paid is recognised in profit or loss.

At each reporting date the company assesses whether there is objective evidence that financial assets not carried at fair value through profit or loss are impaired. A financial asset or a group of financial assets is impaired when objective evidence demonstrates that a loss event has occurred after the initial recognition of the asset(s), and that the loss event has an impact on the future cash flows of the asset(s) that can be estimated reliably.

Cash and bank balances are defined as cash-in-hand and balances with banks. For the purpose of cash flow statement, cash and cash equivalents consist of cash in hand and deposits in banks net of outstanding bank overdrafts. Investments with short maturities i.e. three months or less from the date of acquisition are also treated as cash equivalents.

Ordinary shares are classified as equity. Dividends on ordinary shares are recognised in equity in the period in which they are approved.

3.14 Financial liabilities

3.14.1 Initial recognition and measurement

The company classifies financial liabilities in to financial liabilities at Fair Value through Profit or Loss (FVTPL) or other financial liabilities in accordance with the substance of the contractual arrangement and the definitions of financial liabilities.

The company recognizes financial liabilities in the statement of financial position when the company becomes a party to the contractual provisions of the financial liability.

i. Financial liability at FVTPL

Financial liabilities at FVTPL include financial liabilities held-for-trading or designated as such upon initial recognition. Subsequent to initial recognition, financial liabilities at FVTPL are measured at fair value, and changes there in recognized in profit or loss.

Upon initial recognition, transaction cost are directly attributable to the acquisition are recognized in profit or loss as incurred. The criteria for designation of financial liabilities at FVTPL upon initial recognition are the same as those of financial assets at FVTPL.

ii. Other financial liabilities

Other financial liabilities including deposits, debt issued by the Company and the other borrowed funds are initially measured at fair value less transaction cost that are directly attributable to the acquisition and subsequently measured at amortised cost using the EIR method. Amortised cost is calculated by taking into account any discount or premium on the issue and costs that are an integral part of the EIR.




3.14.3 Borrowings

Borrowings are classified as current liabilities unless the Company has an unconditional right to defer

settlement of the liability for at least 12 months after the reporting date.

Borrowing costs

Borrowing costs directly attributable to the acquisition, construction or production of a qualifying asset

that normally takes a substantial period of time to get ready for their intended use or sale, are added to

the cost of those assets, until such time the assets are substantially ready for their intended use or sale.

Income earned from temporarily investing specific borrowings pending their expenditure on a qualifying

asset is deducted from the borrowing costs eligible to be added to the carrying amount. All other

borrowing costs are recognized in profit or loss in the year in which they are incurred.

3.15 Employee retirement benefits

3.15.2 Defined benefit plan – gratuity

The Company has a Group Gratuity Cash Accumulation Policy with Life Insurance Corporation (Lanka)

Limited to cover its employee’s gratuity liability. The Defined Benefit Plans are administrated by LIC

(Lanka) covering its employees. When an employee retires or exits from the company, LIC (Lanka) Ltd

will pay his/ her Gratuity to the employee on the date of payment of gratuity/exit. Gratuity of the

employee is guaranteed for the past service of the employee subject to the available fund balance with

them as contributed by the company. One of the salient features of the policy is that in the event of any

unfortunate death of an employee during his/her employment with the company, LIC (Lanka) will pay

the applicable gratuity for the pending years of service of the employee with the company from its own

fund against a payment of a nominal premium by considering the future balance period of service of the

employee.

The Defined Benefit Obligation recognized in the statement of financial position represents the present

value of the Defined Benefit Obligation as reduced by the fair value of plan assets. However, under the

Payment of Gratuity Act No. 12 of 1983, the liability to an employee arises only on completion of five

years of continued service. Liabilities are computed on the basis of half a month's salary for each year of

completed service. The company’s obligations under the said Act is determined based on an actuarial

valuation using the projected unit credit method carried out by a professional actuary.

The company recognizes all actuarial gains and losses arising from defined benefit plans immediately in

the other comprehensive income.

3.15.1 Short term and other long term employee benefits

A liability is recognized for benefits accruing to employees in respect of wages and salaries, annual

leave and sick leave in the period the related service is rendered at the undiscounted amounts of the

benefits expected to be paid in exchange for that service.

Liabilities recognized in respect of short-term employee benefits are measured at the undiscounted

amounts of the benefits to be paid in exchange for the related services.

Liabilities recognized in respect of other long-term employee benefits are measured at the present

value of the estimated future cash outflows expected to be made by the company in respect of services

provided by the employees up to the reporting date.




3.15.3 Defined contribution plan - Employees' Provident Fund and Employees' Trust

Fund

A defined contribution plan is a post-employment benefit plan under which an entity pays fixed

contributions into a separate entity and will have no legal or constructive obligation to pay further

amounts. Obligations for contributions to defined contribution plans are recognised as an employee

benefit expense in the statement of comprehensive income as in the periods during which services are

rendered by employees.

All employees of the Company are members of the Employees' Provident Fund and the Employees'

Trust Fund, to which the Company contributes 12% and 3% respectively of such employees' basic or

consolidated wage or salary.

3.16 Provisions

Provisions are recognised when the company has a present obligation (legal or constructive) as a result

of a past event, and 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. The

expense relating to any provision is presented in the statement of comprehensive income net of any

reimbursement.

3.17 Foreign currency transactions and balances

Foreign currency transactions are translated into the functional currency using the exchange rates

prevailing at the dates of such transactions. Foreign exchange gains and losses resulting from the

settlement of such transactions and from the translation at year-end exchange rates of monetary assets

and liabilities denominated in foreign currencies are recognised in the profit or loss.

3.18 Segmental information

A segment is a distinguishable component engaged in providing services and that is subject to risks and

returns that are different to those of other segments. The company does not have distinguishable

components to be identified as a segment as all operations are treated as one segment.

3.19 Cash flow statement

The cash flow statement has been prepared using the indirect method, as stipulated in LKAS 7-

statement of cash flows. Cash and cash equivalents comprise of cash in hand, cash at bank and bank

overdrafts.

3.20 Commitments and contingencies

All discernible risks are accounted for in determining the amount of all known liabilities. Contingent

liabilities are possible obligations whose existence will be confirmed only by uncertain future events or

present obligations where the transfer of economic benefit is not probable or cannot be reliably

measured. Contingent liabilities are not recognised in the statement of financial position, but are

disclosed.

4 Significant accounting judgments, estimates and assumptions

The preparation of financial statements requires the application of certain critical accounting

assumptions relating to the future. Further, it requires the management of the company to make

judgments, estimates and assumptions that affect the reported amounts of income, expenses, assets

and liabilities, and the disclosure of contingent liabilities, at the end of the reporting period. However,

uncertainty about these assumptions and estimates could result in outcomes that require a material




adjustment to the carrying amount of the asset or liability in future periods. Hence, actual experience

and results may differ from these judgments and estimates.

In the process of applying the company’s accounting policies, management has made the following

judgments, estimates and assumptions which have the most significant effect on the amounts

recognized in the financial statements.

The estimates and the underlying assumptions are reviewed on an on going basis. Revisions to

accounting estimates are recognised in the period in which the estimate is revised and future periods

affected.

4.1 Going concern

In preparing the consolidated financial statements, the directors have made an assessment of the

ability of the constituents of the group to continue as going concern in the foreseeable future, and they

do not foresee a need for liquidation or cessation of trading, taking into account all available information

about the future. Therefore, the financial statements continue to be prepared on the going concern

basis.

4.2 Deferred tax assets

Deferred tax assets are recognised for all deductible temporary differences, unused tax losses and tax

credits to the extent it is probable that taxable profits will be available against which these credits/losses

can be utilised. Significant management judgments are required to determine the amount of deferred

tax assets that can be recognised, based on the likely timing and level of future taxable profits together

with future tax planning strategies.

4.3 Fair value of property, plant and equipment

The fair value of buildings are determined based on the valuations carried out by independent valuers.

When current market prices of assets of similar nature are available, such evidence is taken into

account in determining the fair values of such assets.

4.4 Useful life-time of the property, plant and equipment

The company reviews the residual values, useful lives and methods of depreciation of assets as at each

reporting date. Judgment of the management is exercised in the estimation of these values, rates,

methods and hence they are subject to uncertainty.

4.5 Impairment losses on property, plant and equipment and intangible assets

The company assesses at each reporting date whether there is an indication of objective evidence of

impairment of assets. If any such indication exists, the group makes an estimate of the asset’s

recoverable amount. This requires the estimation of the value in use of such individual assets.

Estimating the value in use requires management to make an estimate of the expected future cash

flows from the asset or the cash-generating unit, which requires management judgment on expected

future cash flows, and discount rates to be used in determining the value in use.

4.6 Defined benefit plans

The cost of defined benefit plans and other post-employment benefit plans are determined using

actuarial valuations. Actuarial valuation involves making various assumptions, determining discount

rates, expected rates of return on assets, future salary increases and mortality rates. Due to the

complexity of the valuation, the underlying assumptions and their long-term nature, such estimates are




subject to significant uncertainty. All assumptions are reviewed at each reporting date.

In determining the appropriate discount rate, the management considers the interest rates of Sri Lanka

Government Bonds. The mortality rate is based on publicly available mortality tables. Future salary

increases is based on expected future inflation rates and expected future salary increase rate of the

company.




5 Revenue

Revenue (net of applicable taxes) is derived from the provision of the following services :

Accommodation

Food & Beverage

Banquet other income

Shop rentals

Laundry income

Telephone income

Others

6 Other income

Management fees from Airport Garden Hotel

Gain on disposal of property, plant and equipment

Other income from scrap sales

7 Finance and other charges

Interest expenses on bank borrowings

Exchange loss

Loans and receivablesInterest income

Other

For the year ended 31 March

2018

1,530,247,006

1,137,727,721

47,247,414

30,215,761

4,987,110

464,120

23,725,454

2,774,614,586

129,259,899

51,538,205

180,798,104

Notes to the Financial Statements (All amounts are shown in Sri Lankan Rupees)

2017

Available for sale financial assetsDividend income from Lanka Island Resorts Limited

Write back of payables

16,726,429

34,884,953

3,266,321

1,943,163

439,867

1,267,902

11,241,271

14,290,037

24,822,634

5,111,100

1,435,250

3,352,296

633,951

-

141,340,316

81,454,340

222,794,656

1,655,401,474

1,044,670,436

43,491,098

48,456,374

7,028,929

1,056,818

30,338,251

2,830,443,380



Notes to the Financial Statements (Contd.)(All amounts are shown in Sri Lankan Rupees)

Defined contribution plan cost

Defined plan cost (Note 8.2)benefit

8.1 Staff costs

Salary cost

8 Profit before tax

Profit before tax for the year is stated after chargingall expenses including the following :

Directors' sitting fees

Staff costs (Note 8.1)

Management fee

Legal fees

Depreciation on property, plant and equipment

Amortisation of leasehold property

Repairs and maintenance of property, plant and equipment

Auditors' remuneration - Audit

Write off of trade receivables

In respect of the current year

9 Income tax

680,097,352

20,559,758

44,302,556

744,959,666

2018

15,880,733

15,880,733


2017

-

-

9.1 Income tax recognized in profit or loss

Current tax

In respect of the current year

17,480,792

17,480,792

Deferred tax

33,361,525 Total income tax expense recognised in the current year

Amortisation of intangible assets

Auditors' remuneration - Non Audit (2016/2017)

Auditors' remuneration - Non Audit (2015/2016)

Allowance for impairment of trade receivables

710,350

744,959,666

387,159,737

167,791,223

1,513,480

13,190,952

99,741,255

1,201,031

2,333,285

4,161,707

229,500

573,750

-

501,042

674,980,053

421,991,834

178,841,389

369,338

13,190,952

119,699,273

1,091,847

-

2,481,004

-

-

1,578,210

Expected return on plan assets

Interest cost

8.2 Defined benefit plan cost

Current service cost 7,152,757

15,057,716

(1,650,715)

20,559,758

6,866,350

11,973,103

-

18,839,453

616,390,987

18,839,453

39,749,613

674,980,053

Amount recognized in profit or loss statement

4,414,146

4,414,146

4,414,146




Profit before tax

Income tax expense calculated at 12% (2017: 12%)

Tax effect of income that is exempt from taxation

Tax effect of tax losses and tax credit utilized in the current year

Tax effect of previously unrecognised and unused tax lossesand deductible temporary differences now recognised asdeferred tax assets

Effect of deferred tax balances due to change in income tax rate12% to 14% (Effective from 01 April 2018)

Income tax expense recognized in profit or loss

Statutory tax rate applied

128,236,503

15,388,380

(544,107)

(8,371,052)

36,857,235

33,361,525

12% and 14%

2018

Current tax

None

9.3 Income tax recognised in other comprehensive income

Arising on income and expenses recognised in othercomprehensive income:

Building revaluations

Profit attributable to shareholders

Weighted average number of shares in issue during the year

10 Earnings per share - Basic

Basic earnings per share is calculated by dividing the profit attributable to the shareholders by the weightedaverage number of ordinary shares in issue during the year.

Basic earning per share

-

-


94,874,978

139,637,494

0.68

12%

2017

2,240,845

(6,751,199)

Tax effect of expenses that are not deductible in determiningtaxable profit

Deferred tax

Net change in fair value on available for sale of financial assets 553,053

Total income tax recognised in other comprehensive income 3,680,850

The income tax expense for the year can be reconciled to the accounting profit as follows:

Effect of tax liability or credit (qualifying payment) recognizedpreviously reversed in the current year (6,043,940)

Tax effect on interest income 585,363

12,975,580

(689,406)

(24,631,654)

-

4,414,146

8,094,057

(16,602,779)

25,268,348

-

108,129,835

Remeasurement of employee benefit obligation 3,127,797

-

108,673,387

-

109,757,434

1,084,047

103,715,684

139,637,494

0.74


Bu

ild

ing

sP

lan

t &

Ho

tel

Ho

tel

Off

ice

Mo

tor

Cap

ital

mach

inery

eq

uip

men

tfu

rnit

ure

&fu

rnit

ure

&veh

icle

wo

rk in

Lan

dscap

ing

fitt

ing

seq

uip

men

tp

rog

ress

11 P

rop

erty

, p

lan

t an

d e

qu

ipm

ent

TA

L L

AN

KA

HO

TE

LS

PL

C

Not

es t

o th

e F

inan

cial

Sta

tem

ents

(C

ontd

.)(A

ll a

mou

nts

are

show

n in

Sri

Lan

kan

Rup

ees)

As

at

31

Ma

rch

20

18

Co

st/

va

lua

tio

n

Accu

mu

late

d d

ep

recia

tio

n

Ca

rry

ing

va

lue

6,4

99

,73

4

8

,98

2,5

86

(2

,48

2,8

52

)

7,5

42

,50

4

13

,00

0,0

00

(5

,45

7,4

96

)

2,7

54

,17

5,5

67

2,9

55,1

45,8

83

(2

00

,97

0,3

16

)

34

3,8

08

,85

7

1

,05

0,2

15

,22

8

(7

06

,40

6,3

71

)

20

0,4

50

,36

7

5

21

,07

2,3

54

(3

20

,62

1,9

87

)

26

9,0

83

,73

5

1

,04

8,7

02

,74

1

(7

79

,61

9,0

06

)

35

,43

9,2

25

9

6,7

99

,59

4

(6

1,3

60

,36

9)

23

0,1

28

,19

8

23

0,1

28

,19

8

Ye

ar

En

de

d 3

1 M

arc

h 2

01

8

Op

en

ing

ne

t b

oo

k v

alu

e

Ad

ditio

ns

Dis

po

sa

ls

Ca

rry

ing

va

lue

6,5

96

,32

2

6,4

99

,73

4

- C

ost

(96

,58

8)

- A

ccum

ula

ted d

epre

cia

tion

Depre

cia

tion c

harg

e for

the y

ear

-

-

-

2,9

35

,55

8,0

00

2,7

54

,17

5,5

67

(2

00

,97

0,3

16

)

-

-

1

9,5

87

,88

3

31

6,2

72

,98

9

34

3,8

08

,85

7

(5

8,0

51

,26

5)

-

-

85,1

34,1

33

20

9,1

32

,28

0

20

0,4

50

,36

7

(4

0,0

66

,33

4)

(6

,08

4,7

94

)

6

,07

9,5

02

3

1,0

34

,71

3

34

4,1

61

,75

0

26

9,0

83

,73

5

(7

9,6

41

,18

4)

(8

,47

6,3

37

)

8

,47

6,3

37

4

,56

3,1

69

33

,57

7,5

35

35

,43

9,2

25

(5

,08

4,0

54

)

(7

,99

6,2

33

)

7,9

96

,23

3

5,6

71

,74

4

10

,79

2,5

00

7,5

42

,50

4

(3

,24

9,9

96

)

- -

-

50

,36

6,1

66

23

0,1

28

,19

8

18

1,8

44

,03

2

Ye

ar

En

de

d 3

1 M

arc

h 2

01

7

Op

en

ing

ne

t b

oo

k v

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e

Ad

ditio

ns

Tra

nsfe

r fr

om

ca

pita

l w

ork

in

pro

gre

ss

Ca

rry

ing

va

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6,6

92

,91

0 -

6,5

96

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2

- A

ccu

mu

late

d d

ep

recia

tio

n

Depre

cia

tion c

harg

e for

the y

ear

-

(9

6,5

88

)

-

2,2

24

,79

9,9

38 -

2,9

35

,55

8,0

00 -

(20

2,3

61

,12

6)

7

,50

7,6

25

29

9,7

20

,90

9

3

6,5

04

,20

7

31

6,2

72

,98

9

8

20

,00

0

(6

2,1

63

,63

7)

4

2,2

11,5

10

22

4,3

55

,64

5

1

,84

3,3

60

20

9,1

32

,28

0

3

,03

1,3

73

(3

9,8

14

,21

0)

2

2,7

47

,48

5

43

7,5

30

,83

7

1

2,3

92

,43

0

34

4,1

61

,75

0

7

24

,39

7

(11

0,0

27

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4)

4

,26

5,5

77

30

,95

8,9

20

4

,07

7,6

00

33

,57

7,5

35 -

(5

,32

1,7

03

)

3

,86

2,7

18

-

-

10

,79

2,5

00

1

6,6

34

,37

6 -

1

3,0

00

,00

0

43

,48

3,3

39

(5

4,8

17

,59

7)

50

,36

6,1

66

6

6,9

84

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9

As

at

31

Ma

rch

20

17

Co

st/

va

lua

tio

n

Accu

mu

late

d d

ep

recia

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n

Ca

rry

ing

va

lue

6,5

96

,32

2

8

,98

2,5

86

(2

,38

6,2

64

)

10

,79

2,5

00

13

,00

0,0

00

(2

,20

7,5

00

)

2,9

35

,55

8,0

00

2

,93

5,5

58

,00

0 -

31

6,2

72

,98

9

96

4,6

28

,09

5

(6

48

,35

5,1

06

)

20

9,1

32

,28

0

4

95

,76

7,4

35

(2

86

,63

5,1

55

)

34

4,1

61

,75

0

1

,05

2,6

15

,90

9

(7

08

,45

4,1

59

)

33

,57

7,5

35

9

7,8

50

,08

3

(6

4,2

72

,54

8)

50

,36

6,1

66

50

,36

6,1

66

Tra

nsfe

r fr

om

ca

pita

l w

ork

in

pro

gre

ss

-

-

4

53

,00

0

35

5,0

00

-

1,2

74

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0

-

(2,0

82

,00

0)

- C

ost

-

-

(82

0,0

00

)

(3,0

31

,37

3)

(7

24

,39

7)

-

(1

6,6

34

,40

2)

Re

no

va

tio

n w

rite

-off

-

-

-

-

-

-

-

(1

,11

9,6

86

)

Dis

po

sa

ls

Tra

nsfe

r to

in

tan

gib

le a

sse

ts

--

-

-

-

-

-

(4

,16

4,6

79

)

-

Revalu

ation s

urp

lus d

uring the y

ear

9

05

,611

,56

3

-

-

-

-

(2

,20

7,4

74

)

To

tal

-

3,8

47

,12

8,1

88

5

,92

4,0

46

,58

4

(2

,07

6,9

18

,39

6)

--

-

-

-

-

-

3,9

06,4

57,5

42 -

3,8

47

,12

8,1

88

(3

87

,15

9,7

36

)

(2

2,5

57

,36

4)

2

2,5

52

,07

2

3

27

,83

5,6

74

3,2

67

,54

2,4

98 -

3,9

06

,45

7,5

42

2

1,2

10

,14

6

(4

21

,99

1,8

32

)

1

60

,57

9,7

04

3,9

06

,45

7,5

42

5

,61

8,7

68

,27

4

(1

,71

2,3

10

,73

2)

(2

1,2

10

,17

2)

(1

,11

9,6

86

)

(4

,16

4,6

79

)

-

9

05

,611

,56

3


TA

L L

AN

KA

HO

TE

LS

PL

C

Not

es t

o th

e F

inan

cial

Sta

tem

ents

(C

ontd

.)(A

ll a

mou

nts

are

show

n in

Sri

Lan

kan

Rup

ees)

Pro

pert

y, p

lant and e

quip

ment w

as

reva

lued o

n 3

1 M

arc

h 2

017 b

y M

r. P

B K

alu

gala

gedara

an in

dependent

pro

fess

ional v

alu

er

. T

he v

alu

atio

n w

as

base

d o

n t

he

depre

ciate

d repla

cem

ent c

ost

of t

hese

ass

ets

.

If p

ropert

y, p

lant a

nd e

quip

ment w

ere

sta

ted o

n th

e h

isto

rica

l cost

basi

s, th

eir n

et b

ook

am

ounts

would

be a

s fo

llow

s :

11.2

11.1

Va

lua

tio

n o

f p

rop

erty

, p

lan

t a

nd

eq

uip

men

t

Bu

ild

ing

sP

lan

t &

Ho

tel

Ho

tel

Off

ice

Mo

tor

ma

ch

ine

rye

qu

ipm

en

tfu

rnit

ure

&fu

rnit

ure

&v

eh

icle

La

nd

sc

ap

ing

fitt

ing

se

qu

ipm

en

t

To

tal

Co

st

As

at

31

Ma

rch

20

18

Accu

mu

late

d D

ep

recia

tio

n

Ca

rry

ing

va

lue

9,0

47,9

14

(2,5

48

,18

0)

6,4

99,7

34

2,1

41,3

80,3

33

(99

0,4

84

,88

3)

1,1

50,8

95,4

50

921,9

97,0

66

(57

8,1

88

,20

9)

343,8

08,8

57

527,1

68,5

73

(32

6,7

18

,20

6)

200,4

50,3

67

1,0

48,7

02,7

41

(77

9,6

19

,00

6)

269,0

83,7

35

96,7

99,5

94

(61

,36

0,3

69

)

35,4

39,2

25

13,0

00,0

00

(5,4

57

,49

6)

7,5

42,5

04

11.3

11.4

Fair

valu

e m

easu

rem

en

t

(a)

Fair

valu

e h

iera

rch

y

The f

air v

alu

e o

f th

e b

uild

ing

was

dete

rmin

ed b

y ext

ern

al in

dependent

pro

pert

y va

luer,

havi

ng a

ppro

priate

reco

gniz

ed p

rofe

ssio

nal qualif

icatio

ns

and

re

cent e

xperience

in th

e lo

catio

n a

nd c

ate

gory

of t

he p

ropert

y bein

g v

alu

ed.

Fair v

alu

e m

easu

rem

ent o

f th

e p

ropert

y has

been c

ate

gorize

d a

s a le

vel 3

fair v

alu

e b

ase

d o

n th

e in

puts

to th

e v

alu

atio

n te

chniq

ues

use

d.

(b)

Valu

ati

on

tech

niq

ues a

nd

sig

nif

ican

t un

ob

serv

ab

le in

pu

ts

The fo

llow

ing ta

ble

show

s th

e v

alu

atio

n te

chniq

ues

use

d in

measu

ring fa

ir v

alu

e, a

s w

ell

as

the s

ignifi

cant u

nobse

rvable

inputs

use

d.

Valu

ati

on

tec

hn

iqu

es

Sig

nif

ican

t un

ob

serv

ab

le in

pu

tsIn

terr

ela

tio

nsh

ip b

etw

een

key u

no

bserv

ab

le i

np

uts

& f

air

valu

e m

easu

rem

en

ts

Direct

capita

l com

pariso

n

Est

imate

d c

onst

ruct

ed c

ost

per

Posi

tive c

orr

ela

tion s

ensi

tivity

meth

od /

Sum

matio

n m

eth

od

square

feet

Pro

pert

y, p

lant and e

quip

ment

incl

udes

fully

depre

ciate

d a

ssets

with

a c

ost

of R

s. 1

,249,8

79,2

34 (

31st

Marc

h 2

017 -

Rs.

1,0

68,2

49,1

08)

whic

h w

ere

in u

se

during th

e y

ear.

Co

st

As

at

31

Ma

rch

20

17

Accu

mu

late

d D

ep

recia

tio

n

Ca

rry

ing

va

lue

9,0

47,9

14

(2,4

51

,59

2)

6,5

96,3

22

2,1

21,7

92,4

50

(78

9,5

14

,56

7)

1,3

32,2

77,8

83

836,4

09,9

33

(52

0,1

36

,94

4)

316,2

72,9

89

501,8

63,6

54

(29

2,7

31

,37

4)

209,1

32,2

80

1,0

52,6

15,9

09

(70

8,4

54

,15

9)

344,1

61,7

50

97,8

50,0

83

(64

,27

2,5

48

)

33,5

77,5

35

13,0

00,0

00

(2,2

07

,50

0)

10,7

92,5

00

4,6

32,5

79,9

43

(2,3

79

,76

8,6

84

)

2,2

52,8

11,2

59

4,8

12,3

41,9

75

(2,7

44

,37

6,3

48

)

2,0

67,9

65,6

28




12 Intangible assets

Cost

Balance at the beginning of the year

Addition

Transfer capital work in progress

Balance at the end of the year

As at 31 March

25,147,271

4,270,314

20,876,957

-

2018

As at 31 March

2017

Accumulated amortisation and impairment losses


Amortisation for the year


Carrying value 14,468,232

4,161,707

6,517,332

10,679,039

13 Leasehold property - right to use of land

Valuation

Accumulated amortisationBalance at the beginning of the year

13.1 If the leasehold land was stated at historical cost, the net book value would be as follows :

Leasehold land

Cost

Accumulated depreciation

Carrying value

Amortisation for the year


Carrying value

The company obtained leasehold rights to the land situated at No. 25, Galle Face Centre Road, Colombo 3, for 99 years from the Urban Development Authority on 9 April 1981. The remaining lease period as at 31st March 2018 was 62 years. Based on the then Ruling 11 of the Urgent Issues Task Force (UITF) of the Institute of Chartered Accountants of Sri Lanka, it was stated at revalued amounts. As per the statement of Recommended Practice for Right-to-use of Land on Lease issued by the Institute of Chartered Accountants of Sri Lanka, the carrying value inclusive of revalued amounts of the leased property is amortised over the remaining lease period.

83,000,000

55,333,334

(27,666,666)

817,839,363

372,974,485

1,204,004,800

13,190,952 386,165,437

20,876,957

6,722,463

9,989,815

4,164,679

14,359,625

2,481,004

4,036,328

6,517,332

83,000,000

56,225,807

(26,774,193)

831,030,315

359,783,533

1,204,004,800

13,190,952 372,974,485


Intangible assets includes Computer Software

The investment in ordinary shares of Lanka Island Resorts Ltd has been classified as an available for sale investment and the fair value of unquoted shares are valued based on Directors' best estimate which approximate to fair value.

14 Other financial assets

15 Inventories

Food, beverages and tobacco

Other consumables

Engineering items

Less : Provision for Impairment of inventories

14.1 Investment in ordinary shares of Lanka Island Resorts Ltd.

25,054,501

12,572,640

54,720,098

92,347,239

(8,036,348)

84,310,891

Investments in ordinary shares of Lanka Island Resorts Ltd (Note 14.1)

19,618,335

19,618,335


Notes to the Financial Statements (Contd.)( All amounts are shown in Sri Lankan Rupees)

15.1 Provision for impairment of inventories


Provision during the year


16 Trade and other receivables

Trade receivables

Less : allowance for impairment of trade receivables

Trade receivables - net

Receivables from Airport Garden Hotel Limited

Other receivables

7,400,795

635,553

8,036,348

163,122,646

179,414,109

-

163,122,646

16,209,196

82,267

16.1 Allowance for impairment of trade receivables


Impairment allowance / (write-off) for trade receivables


35,463,987

(35,463,987)

-

As at 31 March

2018

As at 31 March

2017

19,556,191

19,556,191

29,569,568

8,247,590

42,665,613

80,482,771

(7,400,795)

73,081,976

6,921,367

479,428

7,400,795

234,360,436

210,836,286

(35,463,987)

198,896,449

11,455,793

484,044

33,885,777

1,578,210

35,463,987



20 Cash and cash equivalents

Cash at bank

Cheques in hand

Cash in hand - Main cash

- Petty cash

17 Amounts receivable from related parties

Taj Exotica Resort & Spa Maldives

18 Deposits, prepayments and advances

Deposits

Prepayments

Advances


21 Stated Capital Issued and fully paid

139,637,494 Ordinary Shares

Lanka Island Resorts Limited

As at 31 March

As at 31 March

2017

19 Current tax receivable and payable

Economic service charge

Withholding tax

Current tax receivable

Current tax payable

Income tax payable

12,100

4,846,342

3,869,070

1,396,374,941

101,052,095

31,081,382

5,426,147

1,305,246

138,864,870

93,178,258

17,570,294

42,268,692

33,339,272

36,627,695

247,906

36,875,601

15,880,733

20,994,868

2018

Vivanta by Taj President

27,151

Taj Gateway Hotel Whitefield 547,050

Taj Bengal 276,854

Taj West End 114,117

-

1,566,824

1,566,824

-

-

-

-

77,863,942

26,514,965

15,646,985

35,701,992

22,429,654

188,013

22,617,667

-

22,617,667

120,415,191

37,506,823

1,576,053

1,515,406

161,013,473

1,396,374,941



22 Revaluation reserve

Balance at the beginning of year

Revaluation gain during the year

Balance at the end of year


24 Borrowings

Current

Bank borrowings

Lease payments in respect of leasehold land

Non-current

Bank borrowings


24.1 The interest rate exposure on the bank borrowings as at the reporting date are as follows :

Total borrowings

- Hatton National Bank (Loan 1 - USD 4.00 Mn.)



As at 31 March

2,126,820,433

-

2,023,604,090

354,313,475

2,000,000

356,313,475

4,000,000

1,947,210,096

1,590,896,621

1,586,896,621

2018

6 months LIBOR

+5%

6 months LIBOR

+5%

3 months LIBOR

+4.25%

As at 31 March

2017

Deferred tax relating to revaluation of building -

Depreciation transfer (103,216,343)

23 Available for sale reserve



5,468,387

4,977,478

Change in fair value 62,144

Deferred tax relating to changes in fair value (553,053)

1,421,324,340

905,611,563

2,126,820,433

(108,673,387)

(91,442,083)

4,299,802

5,468,387

1,168,585

-

402,008,935

2,000,000

404,008,935

6,000,000

2,125,668,791

1,721,659,856

1,715,659,856

6 months LIBOR

+5%

6 months LIBOR

+5%

-



24.2 Maturity of non-current borrowings

Non-current bank borrowings

Between 1 and 2 years



25 Retirement benefit obligations

Present value of defined benefit obligation (Note 25.2)

Fair value of plan assets (Note 25.3)


Not later than 1 year

Later than 1 year and not later than 5 years

Net retirement benefit obligation

Shortfall


As at 31 March

403,548,640

159,572,595

1,586,896,620

2,000,000

4,000,000

6,000,000

146,067,744

27,314,198

118,753,546

118,753,546

2018

1,023,775,385

As at 31 March

2017

118,099,730

-

118,099,730

118,099,730

25.1 Net retirement benefit obligation

25.2 Movement of the retirement benefit obligation


Current service cost

Actuarial losses


Interest cost

Actuarial (gain)/ losses on obligation - Due to change indemographic assumptions

118,099,730

7,152,757

146,067,744

15,057,716

14,642,069

108,846,393

6,866,350

118,099,730

11,973,103

-

Actuarial (gain)/ losses on obligation - Due to change in Financialassumption 15,610,125 (12,073,454)

Actuarial (gain)/ losses on obligation - Due to Experience (7,910,790) 21,107,179

Payments during the year (16,583,863) (18,619,841)

311,938,150

467,907,257

1,715,659,857

935,814,450

2,000,000

4,000,000

6,000,000

25.3 Movement of the plan asset

Contribution paid into the plan

Fair value of the plan asset at the end of the year

26,373,014

27,314,198

Benefit paid by the plan (709,531)

Expected return on plan asset 1,650,715

-

-

-

-

Fair value of the plan asset at the beginning of the year - -




Retirement benefit liability of TAL Lanka Hotels PLC is partly funded externally through an employees'

group gratuity plan at Life Insurance Corporation (Lanka) Limited.

25.4

Sensitivity analysis is an analysis which will give the movement in liability if the assumption were not

proved to be true on different count. This only signifies the change in the liability if the difference between

assumed and the actual is not following the parameters of the sensitivity analysis.

25.9

Sensitivity analysis

Delta effect of -1% change in rate of salary increase

As at 31 March

(4,599,050)

2018

As at 31 March

2017

Project benefit obligation on current assumption 146,067,744

Delta effect of +1% change in rate of discounting

Delta effect of +1% change in rate of salary increase

Delta effect of -1% change in rate of discounting

(4,538,977)

4,890,077

4,913,138

An actuarial valuation was carried out by an independent professional valuer, Messers K A Pandit,

Actuaries, India on 31 March 2018, to ascertain the full liability arising in terms of the Payment of Gratuity

Act No 12 of 1983, in respect of all employees of the Company as at 31 March 2018.

25.5

The following payments are expected on employee benefit liabilities in future years from the fund.

25.6 Maturity analysis of the payments

4th following year

Sum of years 6 to 10

5th following year

23,176,475

59,673,436

16,731,137

13,491,031

69,643,845

18,780,793

1st following year

3rd following year

2nd following year

29,463,737

24,261,268

28,294,474

17,684,751

23,706,590

7,066,413

Discount rate per annum

Annual Salary increment rate

Retirement age

10.50%

10.00%

55 years

12.75%

8.50%

55 years

The principal assumptions used for this purpose are as follows : 25.7

Assumption regarding future mortality are based on A67/70 Mortality table, issued by The Institute of

Actuaries, London, United Kingdom.

25.8

(6,171,765)

118,099,730

(5,899,674)

6,804,961

6,597,358

The following is the analysis of deferred tax (assets) / liabilities presented in the company's statement of financial position:

26 Deferred tax liability

Deferred tax assets

Deferred tax liabilities

(211,942,396)

473,623,889

261,681,494

(171,481,283)

412,001,135

240,519,852




31 March 2017 Closingbalance

Recognizedin OCI

Tax losses

Qualifying payment- tax credit

-

109,757,434

-

(156,421,221)

240,519,852

-

Right to use Land - Revalued


Inventory provision

-

1,084,047

-

92,976,541

(14,171,967)

(888,095)

Recognizedin P&L

(16,602,780)

4,414,147

25,268,348

(1,475,817)

(2,194,447)

(57,531)

Openingbalance

(139,818,441)

126,348,271

(25,268,348)

94,452,358

(13,061,567)

(830,564)

Property, Plant and Equipment 108,673,387 319,024,594(523,626)210,874,833

31 March 2018 Closingbalance

Recognizedin OCI

Tax losses

Available for sale - Financial assets

-

3,680,850

553,053

(190,367,823)

261,681,494

553,053

Right to use Land - Revalued


Inventory provision

-

3,127,797

-

106,750,844

(20,449,484)

(1,125,089)

Recognizedin P&L

(33,946,602)

17,480,792

-

13,774,303

(9,405,314)

(236,994)

Openingbalance

(156,421,221)

240,519,852

-

92,976,541

(14,171,967)

(888,095)

Property, Plant and Equipment - 366,319,99247,295,398319,024,594

Tax losses

Tax credits

27 Trade and other payablesTrade payables

Social security and other taxes payable

Deposits and advances obtainedOther payables

Accrued expenses

As at 31 March

-

-

-

82,903,537

47,877,582

87,318,130

310,984,133

69,725,807

23,159,077

2018

As at 31 March

2017226,628,499

-

226,628,499

Unrecognized deductible temporary differences, unused tax losses and unused tax credits

Deductible temporary differences, unused tax losses and unused tax credits for which no deferred tax assets have been recognized attributable to the following:

26.1

28 Amounts payable to related partiesThe Indian Hotels Company Limited

TAL Hotels and Resorts Limited - Management fee

TAL Hotels and Resorts Limited - Interest on unsecured loan

Taj Krishna Hyderabad

3,476,478

48,823,255

88,543,161

25,294

140,868,188

Events after the reporting period There were no significant events after the reporting period that would require adjustments to or disclosures in the financial statements.

29

107,310,320

34,438,041

77,851,330

348,439,546

100,628,034

28,211,821

5,209,816

47,720,666

88,201,939

-

141,132,421



30 Assets pledged as security

The following assets have been pledged as security for the borrowings :


Nature of assets Nature of liability Value of pledged assets Included Under

All machinery and equipment, leasehold land, buildings,fixtures and fittings

Primary concurrentmortgage against loansobtained from HNBand interest

5,924,046,584 5,618,768,274 Property, plantand equipmentand leaseholdproperty

2018

31 March

2017

31 March

Primary mortgage overinventories and book debts

Overdraft , term loans,import lines obtained fromHSBC

- 24,000,000 Inventories,receivables andprepayment

Supplementary mortgage overinventories and book debts

Overdraft , term loans,import lines obtained fromHSBC

- 12,000,000 Inventories,receivables andprepayment

Leasehold land and building Overdraft facility 32,000,000 - Property, Plantand equipment andLeasehold Property

Leasehold land and building Credit facility 4,000,000 - Property, Plantand equipment andLeasehold Property

31 Contingent liabilities

The amount disclosed represents the bank guarantees obtained by the company. The extent to which an

outflow of funds will be required is dependent on the future operations of the company being more or less

favourable than currently expected.

One bank guarantee was issued by Hatton National Bank for Rs. 3.6 Mn for the purpose of refundable

deposits against tax appeal on behalf of TAL Lanka Hotels PLC on 22 March 2018. This will be effective from

22 March 2018 to 22 December 2018.

One bank guarantee was issued by Hatton National Bank for Rs. 2.3 Mn to Airport and Aviation Services (Sri

Lanka) Limited on behalf of TAL Lanka Hotels PLC on 6 July 2017. This will be effective from 6 July 2017 to 13

July 2019.

6,036,806 1,673,394Guarantees outstanding

As at31 March 2018

As at31 March 2017

In the normal course of business, the Company makes various commitments and certain contingent liabilities

with legal recourse to its third parties. No material losses are anticipated as a result of such transactions.



33 Related party disclosures

Related Parties include Key Management Personnel defined as those persons having authority and responsibility for planning, directing and controlling the activities of the company. Key Management Personnel include members of the Board of Directors of the company. The directors during the year are as follows :

Mr. B.K. Chaudhary, Mr. R.K. Chaudhary, Mr. V. Govindasamy, Mr. T. De Zoysa are Directors and Mr. Uday

Narain is the Chief Operating Officer of TAL Hotels & Resorts Limited with whom TAL Lanka Hotels PLC has

entered into a Hotel Operating Agreement. The Management Fees comprising of a Basic Fee of Rs 83,247,014

(2017 - Rs 84,705,378 ) and an Incentive Fee of Rs 84,544,209 (2017 - Rs.94,136,011) are payable to TAL Lanka

Hotels & Resorts Limited for the period under review.

Mr. R. Sarna was the Managing Director & Chief Executive Officer up to the period ended 30 September 2017

and Mr. P. Verma is the EVP – Operations, South India, International & Ancillary Business of The Indian Hotels

Company Limited, in whose favour TAL Hotels & Resorts Limited has assigned the Hotel Operating Agreement.

Mr. V. Govindasamy who is a Director of the Company is also a Director of Watawala Tea Ceylon Limited. During

the year the Company has purchased tea from Watawala Tea Ceylon Limited for Rs 2,583,512 (2017 - Rs.

2,402,361). During the year Company has received Rs.468,720 (2017 - Rs. 450,120) as rent income from

Watawala Tea Ceylon Limited.

- Mr. R. Sarna - Chairman (resigned with effect from 30th September 2017)

-

-

- Mr. S. Singh ( with effect from 5th May 2017)

Mr. B.K. Chaudhary

- Mr. R. De Mel

Mr. R. K. Chaudhary

- Mr. T. De Zoysa

Dr. G. Sundaram

- Mr. V. Govindasamy

- Mr. P. Verma

Mr. U Narain

appointed

-

-

- Mr. C. Subramanian (appointed with effect from 5th May 2017)

33.1 Key Management Personnel


32 Commitments Financial commitments

There were no material financial commitments outstanding at the end of the reporting period.

Capital commitments

Capital expenditure contracted for, at the end of the reporting period but not recognised in the financialstatements is as follows:

200,468,101 100,822,378Property, plant and equipment

As at31 March 2018

As at31 March 2017




710,350 501,042Directors' Sitting Fees

33.2 Key management personnel compensation

33.3 Related party transactions

Related Company

The Indian HotelsCompany Ltd

Lanka Island Resorts Ltd

Taj Bangalore

Vivanta by Taj President

Taj Exotica Resorts &Spa, Maldives

TAL Hotels and ResortsLimited

Relationship

Parent Company

Group Company

Group Company

Group Company

Group Company

Nature ofTransactions

-Reimbursement Expenses Business Promotions - TICRe Charged ExpensesRedemptions - TIC

-Re Charged Expenses



-Management fee

-Interest on unsecured loan

Net Transactionsduring the year(This includes theeffect of forexfluctuations)

(21,285,561.65)

3,449,316.16

12,100

167,791,223

27,151

1,102,589

Balance as at31March 2018

(3,476,478)

3,869,070

27,151

12,100

167,791,223

48,823,255

Balance as at31 March 2017

(5,209,816)

1,566,824

-

-

178,841,389

47,720,666

2018 2017

Debit/(Credit) Debit/(Credit) Debit/(Credit)

(14,963,186.18)

6,941,242

Group Company -Reimbursement Expenses 77,628 - -

Taj Gateway HotelWhitefield

Group Company -Re Charged Expenses 547,050 547,050 -

Taj Krishna Hyderabad Group Company -Re Charged Expenses 25,294 25,294 -

Taj Bengal Group Company -Re Charged Expenses 276,854 276,854 -

Taj West End Group Company -Re Charged Expenses 114,117 114,117 -

Taj Swarna Amritsar Group Company -Re Charged Expenses 71,850 - -

Transactions with related parties are carried out in the ordinary course of business. Outstanding related parties

account balances at the year-end are unsecured, interest free. No expense has been recognised in the current or

prior year for bad and doubtful debts in respect of the amount owed by related parties. There are no related parties

or related party transactions other than those in note 33.3 in the financial statements.


Year ended 31st March


34 Financial instruments - fair values and risk management

34.1 Accounting classification and fair value of financial instruments

Financial instruments measured subsequently on the ongoing basis either at fair value or amortised cost. The summary of significant accounting policies describes how the classes of financial instruments are measured, and how income and expenses, including fair value gains and losses, are recognised.

The following is a description of how fair values are determined for financial instruments that are recorded at fair value using valuation techniques. These incorporate the company’s estimate of assumptions that a market participant would make when valuing the instruments. The Company uses the following hierarchy for determining and disclosing the fair value of financial instruments by valuation techniques.

Level 1 : category of financial assets that are measured in whole or in party by reference to published quotes in an active market.

Level 2: other techniques for which all inputs which have a significant effect on the recorded fair value are observable, either directly or indirectly.

Level 3: techniques which use inputs that have a significant effect on the recorded fair value that are not based on observable market data.

The table below shows the carrying amounts and fair values of financial assets and financial liabilities, including their levels in the fair value hierarchy. It does not include fair value information of financial assets and financial liabilities not measured at fair value if the carrying amount is a reasonable approximation of fair value.

As at 31 March 2018 Carrying amount Fair value

Level 1 Level 2 Level 3

Financial assets- Available for sale

Investments in Lanka Island Resorts Limited 19,618,335 - - 19,618,335

- Assets carried at amortised costInvestments in fixed deposits - - - - Plan asset 27,314,198 - - -Trade and other receivables 179,414,109 - - -Amounts due from related parties 4,846,342 - - -Deposits 33,339,272 - - -Cash and cash equivalents 138,864,870 - - -

Total financial assets 403,397,126 - - 19,618,335

Financial liabilities- Liabilities carried at amortised cost

Interest bearing borrowings 1,941,210,096 - - -Liabilities to make leasehold payments 6,000,000 - - -Trade and other payables 310,984,133 - - -Amounts payable to related parties 140,868,188 - - -

Total financial liabilities 2,399,062,417 - - -



As at 31 March 2017 Carrying amount Fair value

Level 1 Level 2 Level 3

Financial assets- Available for sale

Investments in Lanka Island Resorts Limited 19,556,191 - - 19,556,191

- Assets carried at amortised costInvestments in fixed deposits 27,727,631 - - -Trade and other receivables 210,836,286 - - -Amounts due from related parties 1,566,824 - - -Deposits 35,701,992 - - -Cash and cash equivalents 161,013,473 - - -

Total financial assets 456,402,397 - - 19,556,191

Financial liabilities- Liabilities carried at amortised cost

Interest bearing borrowings 2,117,668,792 - - -Liabilities to make leasehold payments 8,000,000 - - -Trade and other payables 175,684,784 - - -Amounts payable to related parties 141,132,422 - - -

Total financial liabilities 2,442,485,998 - - -



34.1.1 Determination of fair value of financial assets with short maturities

Carrying values of financial assets and liabilities that have a short term maturity such as trade and other

receivables and payables, fixed deposits, cash and cash equivalents are reasonable approximations of their fair

value. Therefore, fair value hierarchy is not applicable.

34.2 Risk management framework, objectives and policies

Risk management of the company is the systematic process of identifying, quantifying and managing all risks

and opportunities that can affect the achievement of the TAL Lanka Hotels PLC strategic and financial goals.

Financial instruments held by the company, principally comprise of cash, trade and other receivables, trade and

other payables, loans and borrowings and investments held under the 'available for sale' category. The main

purpose of these financial instruments is to manage the operating, investing and financing activities of the

company.

The Board of Directors has overall responsibility for the establishment and oversight of the Company's risk

management framework.

Financial risk management of the company is carried out based on guidelines established by the finance division

which comes under the purview of the Board of Directors of the company. The finance division identifies,

evaluates and mitigates financial risk in close co-operation with the Group’s finance department.

TAL Lanka Hotels PLC (TLHP) has identified 3 critical types of risk which can affect TLHP's operations adversely

as credit, liquidity and market risks.



34.3 Credit risk

Credit risk is the risk that the counterparty will not meet its obligations under a financial instrument or customer contract, leading to a financial loss. The company is exposed to credit risk from its operating activities (primarily trade receivables), and from its financing activities, including deposits with banks, foreign exchange transactions and other financial instruments.

The company trades only with recognised, creditworthy third parties. It is the company’s policy that all clients who wish to trade on credit terms are subject to credit verification procedures. In addition, receivable balances are monitored on an ongoing basis with the result that the company’s exposure to bad debts is not significant.

With respect to credit risk arising from the other financial assets of the company, such as cash and cash equivalents, available-for-sale financial investments, the company’s exposure to credit risk arises from default of the counterparty. The company manages its operations to avoid any excessive concentration of counterparty risk and the company takes all reasonable steps to ensure that the counterparties fulfil their obligations.

The maximum risk positions of financial assets which are generally subject to credit risk are equal to their carrying amounts. Based on the review of their past performance and credit worthiness the company has obtained deposits and advances from its major customers.

The requirement for impairment is analysed at each reporting date on an individual basis for major customers. In order to mitigate settlement and operational risks related to cash and cash equivalents, the company uses several banks with acceptable ratings for its deposits.

a) The maximum exposure to credit risk at the reporting date

Cash at bank and cheques in hand (Note 20)

Investments in fixed deposits

As at31 March 2018

132,133,477

-

344,886,858

As at31 2017March


Trade receivables 163,122,646

Other receivables (Note 16) 16,291,463

Deposits (Note 18) 33,339,272

b) The ageing of the trade receivables at the reporting date

Gross Receivables

124,401,694 137,538,592

2018 2017

Impairment Allowance Carrying Value

Not due 0-30 days

Past due:

13,043,232 36,337,043Past due 31-60 days

5,948,955 15,518,476Past due 61-90 days

2,144,505 1,334,028Past due 91-120 days

1,622,423 6,294,853Past due 121-180 days

15,961,836 37,337,443More than 180 days

163,122,646 234,360,436Total

- -

2018 2017

- -

- -

- -

- -

- 35,463,987

- 35,463,987

124,401,694 137,538,592

2018 2017

13,043,232 36,337,043

5,948,955 15,518,476

2,144,505 1,334,028

1,622,423 6,294,853

15,961,836 1,873,456

163,122,646 198,896,449

157,922,013

27,727,631

432,187,922

198,896,449

11,939,837

35,701,992



Balance of the provision for impairment of Rs. 35.5 mn has been written off against the trade receivables, as at

the reporting date. Unimpaired amounts are considered collectible in full, based on the historic payment

behaviour and analysis of customer's credit risks.

d) Cash equivalents

The company held cash at bank and cheques in hand of Rs.132.13 mn as at 31 March 2018 (31 March 2017 -

Rs.157.9mn) which represent its maximum credit exposure on these assets. The cash equivalents are held with

bank and financial institutions counterparties, which have better rankings.

34.4 Liquidity Risk

Liquidity risk is the risk that the Company will encounter difficulty in meeting the obligations associated with its

financial liabilities that are settled by delivering cash or another financial asset.

The company’s policy is to hold cash and undrawn committed facilities at a level sufficient to ensure that the

company has available funds to meet its medium term capital and funding obligations and to meet any

unforeseen obligations. The company holds cash and undrawn committed facilities to enable the company to

manage its liquidity risk.

The company monitors its risk to a shortage of funds using a daily cash management process. This process

considers the maturity of both the company’s financial investments and financial assets (e.g. accounts

receivable, other financial assets) and projected cash flows from operations.

The company’s objective is to maintain a balance between continuity of funding and flexibility through the use of

multiple sources of funding including bank loans and overdrafts.

a) The following are the contractual maturities of the financial liabilities (excluding other payables and amounts due to related parties) at its carrying value:

31 March 2018 Contractual maturities

Trade payables

Carrying amount

Up to 2 months

2-3months

3-12months

More than1 year

Interest-bearing borrowings 1,941,210,096 79,825,000 - 274,488,475 1,586,896,621

1,947,210,097 79,825,000 - 276,488,475 1,590,896,621

31 March 2017 Contractual maturities

Trade payables

Carrying amount

Up to 2 months

2-3months

3-12months

More than1 year

Interest-bearing borrowings 2,117,668,792 103,348,450 - 298,660,485 1,715,659,857

2,125,668,792 103,348,450 - 300,660,485 1,721,659,857

c) Movement in the impairment allowance

Provision / (reversal) for impairment

Balance at at the end of the year


As at31 March 2018

(35,463,987)

-

35,463,987

As at31 2017March

Liabilities to make leasehold payments 6,000,000 - - 2,000,000 4,000,000

Liabilities to make leasehold payments 8,000,000 - - 2,000,000 6,000,000


1,578,210

35,463,987

33,885,777



34.5 Market risk

Market risk is the risk that the fair value of future cash flows of financial instruments will fluctuate due to the changes in market prices. Mainly the changes in market prices, such as foreign exchange rates and interest rates will affect the company’s income or the value of its holdings of financial instruments. The objective of market risk management is to manage and control market risk exposure within acceptable parameters, while optimising the return.

a) Foreign currency risk

The foreign currency risk is the risk that the fair value or future cash flows of a financial instrument fluctuating due to changes in foreign exchange rates. The Company is exposed to foreign currency risk on revenue, purchases, borrowings and cash deposits denominated in currencies other than the functional currency of the Company. The currencies giving rise to this risk are primarily US Dollars, Sterling Pounds, Euro and Japanese Yen.

The Company, as at the reporting date holds financial instruments denominated in currencies other than its functional/ reporting currency. A reasonable possible strengthening or weakening of the US Dollar (USD) against the Sri Lanka Rupee (LKR) as at the reporting date would have affected the measurement of USD denominated borrowings and affected equity and profit and loss by the amounts shown below. This analysis assumes that all other variables, in particular interest rates, remain constant.

Impact of increase in 1% USD rate - USD denominated borrowings - gain / (loss)

Impact of decrease in 1% USD rate - USD denominated borrowings - gain / (loss)

USD denominated borrowings

(19,412,101)

19,412,101

As at31 March 2018

1,941,210,096

b) Interest rate risks

Interest rate risk mainly arises as a result of the Company having interest sensitive assets and liabilities which are directly impacted by changes in the interest rates. Cash flow interest rate risk is the risk that the future cash flows of a financial instrument will fluctuate because of changes in market interest rates. Fair value interest rate risk is the risk that the value of a financial instrument will fluctuate because of changes in market interest rates. The management monitors the sensitivities on a regular basis and ensures that such risks are managed in a timely manner.




As at 31 March 2018

Financial assets

Fixed interest Variable Interest Total Impact of 1%increase

Impact of 1%decrease

Cash at bank and cheques in hand

Financial liabilities

Interest-bearing borrowings

(561,073)

(19,412,101)

561,073

19,412,101

132,133,477

1,941,210,096

-

95,119,295

1,122,145

-

As at 31 March 2017

Financial assets

Fixed interest Variable Interest Total Impact of 1%increase

Impact of 1%decrease

Cash at bank and cheques in hand

Investments in fixed deposits

Financial liabilities

Interest-bearing borrowings

(670,578)

(277,276)

(21,176,688)

247,276

21,176,688

157,922,013

27,727,631

2,117,668,792

-

-

124,307,158

1,341,155

3,327,316

-

670,578


The table below summarizes the nature of the interest rate risk associated with interest sensitive financial assets and financial liabilities of the Company:



Shareholder Information

1. Stated Capital

There were 10,971 registered shareholders, holding 139,637,494 shares as at 31 March 2018

Number of TotalRange Shareholders Holdings Percentage

Foreign Local Foreign Local Foreign Local

1 - 1,000 Shares 54 24,573 2,030,960 0.02 1.45

1,001 - 10,000 Shares 23 989 113,510 3,308,938 0.08 2.37

10,001 - 100,000 Shares 7 131 289,288 0.21 2.49

100,001 - 1000,000 Shares 1 11 343,029 3,678,038 0.25 2.63

Over - 1000,001 Shares 3 2 117,627,220 8,750,876 84.24 6.27

TOTAL 88 10,883 118,397,620 21,239,874 84.79 15.21

GRAND TOTAL 10,971 139,637,494 100

The Stated capital of the company as at 31 March 2018 was Rs. 1,396,374,941 and the number of shares representing the stated capital of the Company was 139,637,494.

9,750

2. Shareholders

3,471,062

3. Ratios 2018 2017Rs. Rs.

Earning Per shareBasic 0.68 0.74

Net Asset value per share 17.48 16.99

4. Market Value

Highest 19.60 31.20Lowest 14.50 20.00

stAs at 31 March 16.90

5. Dividends

No dividends have been declared during the year under review.

21.00



Shareholder Information (Contd.)

6. Major shareholders

The names and the number of shares held by major shareholders of the Company and the number of shares and the percentage of such shares held as at 31 March 2018 are set out in the table below.

Name of Shareholder No. of Shares %

0

0

0

0

0

0

0

0

0

1. TAL Hotels & Resorts Limited. 81,181,580 58.14

2. IHOCO BV 34,375,640 24.62

3. Employees Provident Fund 7,437,832 5.33

4. Mougin Investment Company Limited 2,070,000 1.48

5. Associated Electrical Corporation Ltd 1,313,044 0.94

6. E. W. Balasuriya & Co. (Pvt) Ltd 901,658 0.65

7. Sampath Bank PLC / Mr. Arunasalam Sithampalam 587,000 0.42

8. Seylan Bank Ltd. / Govindasamy Ramanan 525,931 0.38

9. 447,400 0.32

10. 343,029 0.25

11. 260,270 0.19

12. Ashan De Zoysa and Company Pvt Limited 215,000 0.15

13. Commercial Bank of Ceylon PLC A/c No. 04 212,390 0.15

14 Mr. Sri Mahadeva Mylventhen 154,792 0.11

15. Mr. Nawalage Joseph Hiran Mahinda Cooray 137,165 0.10

16. 122,000 0.09

17. 114,432 0.08

18. 100,000 0.07

19. 100,000 0.07

20. Mr. Sithampalam Abishek 98,500 0.07

TOTAL 130,697,663 93.60

Bank of Ceylon No. 1 Account

Hallsville Trading Group Inc.

People's Leasing & Finance PLC / L. P. Hapangama

Mrs. Binanthi Shamani Rasanayagam

Senkadagala Finance Company PLC

Mascons (Pvt) Limited

Negombo Hotels Limited

2018 17.24% of the24,080,274



Human Resources

In the context of changing hotel business models, human capital is exceedingly important. Employee skill

development, employee retention and escalation of employee cost are the most challenging areas in the

present industry scenario. We continue to engage and encourage our employees to perform to the best of

their talents through a performance-oriented culture founded on ethical and transparent behavior which in

turn promotes sustainable and profitable growth. We have attracted the best and brightest from the entire

pool of available talent to build a strong workforce that reflects the diversity of the guest we serve. Taj


Risks and Concerns

Hotel Business in general is sensitive to the economic environment. The Hotel sector may be unfavourably

affected by changes in global and domestic economies, changes in local market conditions, reduced

International or local demand for hotel rooms and associated services, competition in the Industry,

Government policies and regulations, fluctuations in interest rates and foreign exchange rates and other

natural and social factors, since demand for hotels is affected by World Economic growth, a global recession

could lead to a downturn in the hotel Industry.

Socio-Political Risk

In addition to economic risks, your company faces risks from the Socio-political environment, internationally

as well as within the country and is affected by events like political instability, conflict between nations, threat

of terrorist activities, occurrence of infectious disease, extreme weather conditions and natural calamities

etc, which may effect the level of travel and business activity.

Foreign Exchange Fluctuation Risk

Your Company also has a portfolio of Foreign Currency debt, in respect of which it faces exposure to

fluctuations in currency as well as interest rate risks.

Credit Risks

The Company provides services only to related companies and recognised credit worthy third parties. The

objective of the company to manage credit risk is to control potential exposure to recoverability problem.

Operational Risk - Breakdown of Internal Controls, processes and procedures

Your Company has reviewed internal controls and its effectiveness through the Internal Audit process.

Internal Audit were undertaken for every operational unit and all major corporate functions under the

direction of the group internal audit department. The focus of these reviews are as follows:

l Identify weakness and areas of improvement.

l Compliance with defined policies and processes.

l Safeguarding of tangible and intangible assets.

l Management of business and operational risks.

l Compliance with applicable statutes.

l Compliance with the Tata Code of Conduct.


Ownership and location Building in Sq.Ft

Land in acres

Freehold Leasehold

TAL LANKA HOTELS PLC No. 25, Galle Face Centre Road, Colombo 03. 472,630 -

11 Acres, 2Roods, 20.19Perches

Samudra has been successful in molding existing employees according to future requirements. In this

context Employee Relations Committee is playing a vital role to maintain industrial peace and harmony in

the Company. Also, the best practices, policies and procedures that are in place ensures that Taj Samudra is

“More than Just a work Place”.

The principle of equality underlies key HR functions across gender, religion and ethnic origin in an

environment where meritocracy prevails in determining career progression, benefits, remuneration and

other rewards for performance. Our strong policy framework provides the foundation for an enabling work

environment that is ethical and responsible where workers are empowered to function according to their

roles. It also provides for a workplace that is free from harassment and discrimination with formal grievance

handling and disciplinary procedures in place in case of exceptions.

Aligning performance, career development, training and personal development has been a key goal

embedded in our core strategy. Training requirements are identified during annual performance evaluations,

and through special requests by line managers. An extensive training calendar is planned based on the

requirements identified and implemented by the Training & Development division. In addition to the above

Taj Samudra seeks the possibility of providing the employment opportunities for the female undergraduates

those who have completed the degrees from the Universities in the rural areas like Sabaragamuwa and

Badulla to maintain the Gender Diversity. Also, we consider 'women' as a key aspect of organization's

success, and we are celebrating the Women's Day' in a grand manner every year.

We take a great effort in developing and enhancing the skills, attitudes, and knowledge of all the employees

regardless of their job role and designation. Mainly we have Programmes such as Hotelier Development

Programme, Cross Exposure Training, Hotel Operation Management Training Programme where

employees who have completed more than 01 year of service is send to India on a corporate training

program where they get the opportunity to work in different hotels to get the exposure and develop their skills

for higher positions and groom them to take new challenges and responsibilities.

Some of the employee engagement initiatives conducted during the year under review are New year

celebrations with the participation of all religious dignitaries, Bak Maha Ullela, Annual Pirith Chanting

Ceremony, Long Service Awards, Birthday Dinner Vouchers for all employees, Department wise team

outings etc. for the associates.

Please refer note 13 to the financial statements for details of valuation.

Please refer note 13 to the financial statements.


Cost of sales / Direct Costs


Six Years Financial Summary and Key Indicators

Finance expenses

Profit / (Loss) for the year

Other comprehensive income

Actuarial loss and employee benefit obligation,Net of tax

Net change in fair value on Financial Assets(available for sale)

Other comprehensive expense for the year


Share capital

Available for sale reserve

Earnings / (Loss) per share - basic

Gain or Revaluation of building. net of tax

Operating profit / (loss)

(2,059,147)

47,247 59,392

1,530,247 1,137,728

2,774,615

715,468

34,885

(102,711)

(338,606)

309,035

(180,798)

128,237

(33,362)

94,875

2,774,615

(1.97)

309,035

94,875

1,396,375

2,023,604

(983,791)

2,441,166

4,679,436

19,618

4,412,498

1,971,332

0.65

17.48

16.90

0.68

Rs. '000

(286,556)

17/18

2017-18

(25,469)

(491)

(25,960)

68,915

4,977

(1,383,473)

38,829 41,253

1,146,549 713,632

1,940,263

556,791

49,528

(59,682)

(260,406)

286,231

(28,640)

257,592

(36,432)

221,159

1,940,263

18.17

286,231

221,159

1,396,375

1,698,033

(764,301)

2,330,214

2,702,303

14,194

2,947,127

616,913

1.47

16.69

25.00

1.58

Rs. '000

230,630

12/13

2012-13

(345)

(4,122)

(4,467)

216,692

106

-

(1,435,170)

36,608 41,147

649,240 565,069

1,292,063

(143,106)

46,136

(75,435)

(261,310)

(433,716)

(68,270)

(501,986)

(27,996)

(529,982)

1,292,063

(33.41)

(433,716)

(529,982)

1,396,375

1,604,929

(1,213,026)

1,788,126

4,044,581

13,937

3,972,844

2,184,717

0.86

12.81

29.00

(3.80)

Rs. '000

(85,674)

13/14

2013-14

(11,848)

(257)

(12,106)

(542,088)

(151)

-

(1,719,304)

40,117 57,341

1,134,983 749,628

1,982,070

262,765

20,239

(78,490)

(284,423)

(79,909)

(157,176)

(237,084)

56,257

(180,828)

1,982,070

53.40

(79,909)

(180,828)

1,396,375

1,512,794

(1,313,038)

1,597,418

4,310,900

15,375

3,893,298

2,295,880

0.52

11.44

26.20

(1.29)

Rs. '000

(432,977)

14/15

2014-15

(11,319)

1,438

(9,881)

(190,709)

1,287

-

(1,957,877)

38,178 59,199

1,586,849 979,842

2,664,068

706,191

18,451

(123,732)

(327,947)

272,962

(383,217)

(110,256)

(6,659)

(116,914)

2,664,068

34.41

272,962

(116,914)

1,396,375

1,421,324

(1,341,453)

1,480,546

4,117,717

43,388

3,770,547

2,290,001

0.56

10.60

23.40

(0.84)

Rs. '000

(390,558)

15/16

2015-16

(2,970)

3,013

43

(116,871)

4,300

-

(2,050,959)

43,491 86,880

1,655,401 1,044,670

2,830,443

779,484

24,823

(123,936)

(349,446)

330,924

(222,795)

108,130

(4,414)

103,716

2,830,443

6.25

330,924

103,715

1,396,375

2,126,820

(1,156,413)

2,372,251

4,751,847

47,284

4,452,531

2,080,279

0.61

16.99

21.00

0.74

Rs. '000

(346,601)

16/17

2016-17

(10,118)

1,169

787,989

891,705

5,468

796,938


Income tax expense

-

Gross profit / (loss)

Community Initiatives undertaken by the hotel

Book donation and painting of library at Sariputtha Vidyalaya

"Distribution of Lunch Packets for Blind Musicians Musical Show on 23/12/2015"




Book donation and painting of library at Sariputtha Vidyalaya


Community Initiatives undertaken by the hotel (Contd)

Registered Office : 25, Galle Face Centre Road, Colombo 3.

*I/We…………………………………………………………………………………………………….…………………

……of…………………………………………………………..………………………………..………………………… being *a shareholder / shareholders of TAL LANKA HOTELS PLC do hereby appoint

………………………………………………………………………………………………………………of

…………………………………………………………………………………………… or failing him

Mr. G. Sanjeevi or failing him,Mr. B.K. Chaudhary or failing him,Mr. R.K. Chaudhary or failing him,Mr. T. De Zoysa or failing him,Dr. G. Sundaram or failing him,Mr. V. Govindasamy or failing him,Mr. R. De Mel or failing him,Mr. P. Verma or failing him,Mr. U. Narain or failing him,Mr. C. Subramanian or failing him,Mr. S. Singh or failing him,

as *my/our Proxy to vote for me/us on *my/our behalf at the 38th Annual General Meeting of the Company to be stheld on Tuesday the 31 July 2018 at 10.30 a.m. at the Taj Samudra Hotel, No 25,Galle Face Centre Road,

Colombo 03 (at “On Golden Pond”) and at any adjournment thereof, and at every poll which may be taken in consequence thereof. For Against

1. To receive and consider the Annual Report of the Board together with theFinancial Statements of the Company

2. To re-appoint as a Director, Dr. G Sundararm in terms of section 211 of theCompanies Act.

3. To re-appoint as a Director, Mr. T. De Zoysa in terms of section 211 of theCompanies Act.

4. To re-elect as a Director, Mr. R. K Chaudhary in terms of Article 86 of the Articles of Association.

5. To re-elect as a Director, Mr. N. I. R. De Mel in terms of Article 86 of theArticles of Association.

6. To re-elect as a Director, Mr. U. Narain in terms of Article 86 of theArticles of Association.

7. To re-elect as a Director, Mr. G. Sanjeevi who was appointed to the Board of Directors on 15th June 2018, who retires at the end of AGM in terms of Article 93 of the Articles of Association of the company and being eligible, has offered himself for re-election.

8. To appoint M/s. SJMS Associates, Chartered Accountants as theauditors of the Company for the Financial year 2018/2019 and to authorize the Directors to fix their remuneration as Auditorsof the Company for the aforesaid period.

.

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

....................................... *Signature/s

Note:1. *Please delete the inappropriate words2. Instructions as to completion are noted on the reverse hereof.

FORM OF PROXY



1. The instrument appointing a proxy may be in writing under the hands of the appointor or of his/her attorney duly authorized in writing or if such appointor is a corporation under its common seal or the hand of its attorney or duly authorized person.

2. The instrument appointing a proxy and the Power of Attorney or other authority, if any, under which it is signed or a notarially certified copy of that Power of Attorney or other authority will have to be deposited at the Registered Office of the company not less than 48 hours before the time appointed for the holding of the meeting.

INSTRUCTIONS AS TO COMPLETION


I hereby record my presence at the THIRTY EIGHT ANNUAL GENERAL MEETING of the Company

on

SIGNATURE OF THE SHAREHOLDER OR PROXY

Notes :

1. Shareholders/Proxy holders attending the meeting are requested to bring the Attendance slip with

them and hand it over at the hall after placing their signature on it.

2. Shareholders attending the Meeting are kindly requested to bring their National Identity Cards and

copies of the Annual Report with them.

3. Shareholders are requested to advise, indicating their Share Certificate Nos., the change in their

address, if any, to the Company's Registrars, Business Intelligence (Private) Limited, No. 8, Tickell

Road, Colombo 08.

at the T

31st July 2018.

aj

Samudra Hotel, No 25,Galle Face Centre Road, Colombo 03 (at “On Golden Pond”)


Registered Office : 25, Galle Face Centre Road, Colombo 3.

ATTENDANCE SLIP


Documents

TAL LANKA HOTELS PLCTAL Lanka Hotels PLC is a limited liability company incorporated in Sri Lanka and listed in the Colombo Stock Exchange. The Registered office and principal place