TAL LANKA HOTELS PLC · 2017-08-10 · N 9. otice is hereby given that the Thirty Seventh (37th) To re-elect as a Director, Mr. R. K. Sarna who Annual General Meeting TALLanka Hotels

TAL LANKA HOTELS PLCCompany Registration No. PQ 183

Annual Report 2016 / 2017

CONTENTS

Page

Notice of Meeting 02

Corporate Information 03

Chairman's Review 04

Annual Report of the Board of Directors 06

Report on Corporate Governance 10

Statement of the Directors' Responsibilities 15

Independent Auditor's Report 16

Statement of Comprehensive Income 17

Statement of Financial Position 18

Statement of Changes in Equity 19

Cash Flow Statement 20

Summary of significant Accounting Policies 21

Notes to the Financial Statements 33

Shareholder Information 54

Six Years Financial Summary & Key Indicators 58

Community Initiatives 59

Form of Proxy 61

Attendance Slip 63

N

9.

th To re-elect as a Director, Mr. R. K. Sarna who otice is hereby given that the Thirty Seventh (37 )

retires by rotation in terms of Article 86 of the Annual General Meeting of TAL Lanka Hotels PLC will Articles of Association of the Company and being be held on 07th September 2017 at 10.30 a.m. at Taj eligible, has offered himself for re-election.Samudra Hotel, No. 25, Galle Face Centre Road,

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

purposes:thwas appointed to the Board of Directors on 5 May

2017, who retires at the end of the AGM in terms of To receive and consider the Annual Report of the Article 93 of the Articles of Association of the Board of Directors together with the Financial Company and being eligible, has offered himself Statements of the Company for the year ended

st for re-election.31 March 2017 and the Report of the Auditors

thereon.To re-elect as a Director, Mr. S. Singh who was

thappointed to the Board of Directors on 5 May To propose the following resolution as an ordinary 2017, who retires at the end of the AGM in terms of resolution for the reappointment of Dr. G. Article 93 of the Articles of Association of the Sundaram who has reached the age of seventy Company and being eligible, has offered himself eight (78) years.for re-election.

“IT IS HEREBY RESOLVED that the age limit To propose the resolution set out below, as an referred to in section 211 of the Companies Act ordinary resolution:No.07 of 2007 shall not apply to Dr. G. Sundaram

who has reached the age of seventy eight (78) “IT IS HEREBY RESOLVED THAT M/s SJMS years prior to this Annual General Meeting and Associates be and are hereby re-appointed as the that he be reappointed as a Director of the auditors of the Company to hold office from the Company. conclusion of this meeting until the conclusion of

the next Annual General Meeting to audit the To propose the following resolution as an ordinary

financial statements of the Company and the resolution for the reappointment of Mr. Tilak De

Directors of the Company be and are hereby Zoysa who has reached the age of seventy (70)

authorized to fix their remuneration as the auditors years.

of the Company for the aforesaid period”.

“IT IS HEREBY RESOLVED that the age limit

referred to in section 211 of the Companies Act

No.07 of 2007 shall not apply to Mr. Tilak De Any member entitled to attend and vote is entitled Zoysa who has reached the age of seventy (70) to appoint a proxy in his stead.years prior to this Annual General Meeting and

A form of proxy accompanies this notice. A proxy that he be reappointed as a Director of the need not be a shareholder.Company.

Instruments appointing proxies must be lodged To re-elect as a Director, Mr. B.K. Chaudhary who with the Company not less than 48 hours before retires by rotation in terms of Article 86 of the the meeting.Articles of Association of the Company and being

eligible, has offered himself for re-election.

To re-elect as a Director, Mr. V. Govindasamy 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.

3.

Note:-

a)

b)

c)4.

5.

By Order of the Board,CORPORATE SERVICES (PRIVATE) LIMITEDSecretariesTAL LANKA HOTELS PLCColombo, on this 06th day of July, 2017.

NOTICE OF MEETING

TAL LANKA HOTELS PLC

02 TAL LANKA HOTELS PLC ANNUAL REPORT 2016 - 2017

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. R.K. Sarna - Chairman

(resigned with effect from 15 October 2016)

(resigned with effect from 22 March 2017)

Mr. C. Subramanian (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.

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.

Mr. A.P. Goel

Mr. B.K. Chaudhary

Mr. R. De Mel

Mr. R.K. Chaudhary

Mr. T. De Zoysa

Dr. G. Sundaram

Mr. V. Govindasamy

Mr. S. Joshi

Mr. P. Verma

Mr. U. Narain

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

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 2016 - 2017

CHAIRMAN'S REVIEW

On behalf of the Board of Directors, I am pleased to decline or only marginal increase in US Dollar terms.

present the Annual Report of TAL Lanka Hotels PLC The Sri Lankan Rupee continues to experience

for the financial year ended March 31, 2017. downward volatility vis-à-vis the US Dollar, averaging

LKR149/US$ in 2016 and this trend is expected to

continue over the next five years given the

substantial trade deficit and inflation differential with

the United States. Inflation, as measured by the The Sri Lankan economy continues to inspire a fair Colombo consumer price index (CCPI), has degree of confidence, fortified by the gradual averaged 4.5% in the past five years.improvement in the external sector, with growing

exports and remittances, and tourist arrivals The largest numbers of arrivals were recorded from reaching a record high in 2016. The 2017 budget Asia. The highest arrivals were from China followed points towards the persistence of the government's by India, UK, Germany, France, Russia and Australia efforts to establish the country as a regional logistics (Source: SLTDA).and trading hub with better synergy with global

markets as well as further openness towards foreign

investments, particularly in tourism, apparel and

information technology.

The Company's gross revenues increased by 6%

Sri Lanka's annual GDP growth is at 4.6% in 2016, from LKR 2,664 million in the previous year to LKR

and is anticipated to increase at an average annual 2,830 million in the current year. The gross margin

rate of 5.2% between 2017 and 2021, as per the increased by LKR 73 million as compared to the

Economist Intelligence Unit (EIU), primarily led by previous year.

private consumption and the inflow of remittances, as

well as public investment in infrastructure. The profit for the year was LKR 104 million in the

Historically, the Services sector has continued to current year as compared to a loss of LKR 117 million

contribute over 60% to the GDP driven by the in the previous year. The Company's finance

strength of the apparel, tourism and information expenses decreased by LKR 160 million from LKR

technology industries. 383 million in the previous year to LKR 223 million in

the current year primarily due to decrease in loss on

Foreign Exchange. The USD-LKR exchange rate

has stabilized in the current year as compared to the

relatively high fluctuations witnessed in the previous Hotels in Colombo recorded an average occupancy year.of 64% in 2016/17, though the city average rates

have shown a decline. The city has witnessed room

night supply growth over the past three years in the

budget and mid-market segment, a welcome

addition to a market previously dominated by five star At the end of current financial year, the company was

and five star deluxe hotels. These hotels have been in the final stage of completing the installation of new

quickly absorbed in the market given their popularity guest elevators. Two mock up rooms were ready on

with the price conscious travelers; however, they the second floor and the balance rooms are expected

have added pressure on the existing five star hotels, to be renovated next year. Your company has also

thereby restricting the latter's ability to increase rates. planned to undertake improvement works to upgrade

The constant depreciation of the Sri Lankan Rupee the property in the coming financial year and to

has adversely affected the average room rate due to increase the market share of the hotel.

which market wide average room rates depict a

THE ECONOMY

COMPANY PERFORMANCE

INDUSTRY PERFORMANCE

CAPITAL DEPLOYMENT



CHAIRMAN'S REVIEW (Contd)

FUTURE OUTLOOK

APPRECIATION

Rakesh Sarna

Chairman

Date: 28 June, 2017

T

well as international brands entering the country.

Several of these projects are actively under

construction or near completion and we anticipate o sustain the Services driven economy and develop 60% of the proposed supply to be developed over the the nation as an integral trading hub, the Sri Lankan next five years. Colombo is unmatched in terms of Government has undertaken ambitious programmes availability of commercial and residential to modernize the island's roads, railways, ports, air developments, and quality infrastructure when transportation and other essential infrastructure. compared to other hotel markets in Sri Lanka. Coupled with improvements in the power and Therefore, though supply pressure may affect market telecom sectors, the infrastructure developments in performance in the short term, we believe that the city the Northern and Eastern provinces as well as will continue to remain a vital destination for tourism around Colombo will ensure long term economic in the country, and gradually absorb new supply to growth.establish itself as a robust hotel market.

While the Colombo South Port Expansion project and

the Hambantota Port development are already

underway, the Government is also focusing on

creating a sustainable road network with projects On behalf of the Board of Directors, I wish to express such as the Outer Circular Highway, Colombo-Kandy our appreciation of the continued support and co-Highway and the Southern Expressway. Additionally, operation of the Ministry of Tourism, Ceylon Tourist the Terminal 1 at Bandaranaike International Airport Board, the Financial Institutions and other is likely to be expanded by 2019 to accommodate 15 stakeholders. I also thank the shareholders for their million passengers annually from the existing continued support.capacity of 6 million, whereafter, construction of the

second airport terminal with the same capacity is In conclusion, on behalf of the Board of Directors, I expected to commence. extend my sincere thanks to the members of the staff,

at all levels, for their dedicated service and Going forward, we expect commercial demand to contribution to the company.drive business for the branded hotels, given the

increased interest in modernization of the city and the

infrastructure development in the country.

HVS is tracking approximately 4,200 rooms

announced as proposed supply for Colombo, with

both domestic players increasing their footprint, as



1.

Formation

2.

Principal 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 2017.

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 income statement, balance sheet, cash flow statement,

statement of changes in equity, and the notes to the financial statements of the Company for the year ended

31 March 2017 are set out on pages 17 to 53

The auditor's report is set out on page 16.

The accounting policies adopted in the preparation of the financial statements are given on pages 21 to 32.

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 2017 is set out on page 18. An

assessment of the financial performance of the Company is set out in the statement of comprehensive

income on page 17.

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 19 of the

Company's financial statements.

The parent company, 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 ended31 March 2017




As at 31 March 2017 the public holds 17.24 percent of the issued Share Capital of the Company.

The Director's interest in the contracts of the Company is disclosed under Note 32 to the financial

statements.

None of the Directors held any shares in the Company, at the beginning and end of the financial year.

Please refer Note 8 of the financial statements.

No entries were made under this heading in the Interests Register.

No entries were made under this heading in the Interests Register.

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

The following Directors held office during the year under review:

Mr. R. K. Sarna - Chairman

Mr. Anil P. Goel (resigned with effect from 15 October 2016)

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. S. Joshi (resigned with effect from 22 March 2017)

Mr. U. Narain

Mr. S. Singh and Mr. C. Subramanian were appointed to the board 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

Directors' interests in shares of the Company

Remuneration and other benefits of directors

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

Particulars of indemnity given or insurance effected to directors or employees under section 218

of the Companies Act No. 7 of 2007.

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

1,091,847 (2016 - Rs 1,054,598/-).

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 ended31 March 2017 (Contd)



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

14. Auditor's relationship or any interest with the Company

15.

Corporate governance

16.

Statutory payments

17.

Environmental protection

18.

Donations

19.

Going concern

20.

Future developments

21.

Post balance sheet events

22.

No remuneration is payable by the Company to the independent auditors of the Company as non-audit fees.

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 14 of this Annual Report.

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.

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.

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

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.

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.

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 28 to the financial statements.

Annual Report of the Board of Directors of the Company for the year ended31 March 2017 (Contd)



Annual Report of the Board of Directors of the Company for the Year Ended31 March 2017 (Contd)

Auditors

23.

V. Govindasamy T. De ZoysaDirector Director

The accounts have been audited by the external Auditors of the Company, Messrs SJMS Associates,

Chartered Accountants.

Corporate Services (Private) LimitedSecretariesColombo

08 May, 2017



CORPORATE INFORMATION Report on Corporate Governance

Board composition

As at 31 March 2017, the Board consists of 9

directors - 5 non executive non independent directors

and 4 non executive independent directors.

Independence of the directors has been determined

in accordance with CSE Listing Rules and all 4

independent non executive directors have submitted

signed confirmations of their independence.

architecture focused on creating value for the entire

stakeholder ecosystem, a recalibration of operations

and financial strategy as well as redesigning human

resources policy and practices for Taj's 26,000

associates worldwide.

Mr. Sarna has had an international upbringing. He

moved to Canada as a young adult and completed

his Diploma in Hospitality Administration from

Ottawa.Mr. R.K. SarnaNon-Executive Non-Independent Director Mr. B.K Chaudhary

Non- Executive Non-Independent DirectorRakesh Sarna joined The Indian Hotels Company

Limited as Managing Director and Chief Executive Mr. Binod K. Chaudhary, a Nepali businessman,

Officer on 1st September 2014. Mr. Sarna brings over industrialist and philanthropist is the Chairman of CG

three and a half decades of experience across Corp Global, a multi- dimensional conglomerate that

various leadership roles with Hyatt Hotels consists of 136 companies under 15 different

Corporation. He was the Group President - Americas business verticals that cover over 5 continents. He is

with a portfolio of 146 Full Service hotels, 233 Select also the first Nepali billionaire as listed by Forbes. CG

Service hotels and 15 Vacation Ownership facilities Corp Global is a multi-national conglomerate

across North America, the Caribbean and Latin headquartered in Nepal. It has diversified business

America with around 40,000 employees. In this role, interest including financial services, fast-moving

Mr. Sarna was responsible for the development and consumer goods, education, hospitality, energy,

management of all owned, managed and franchised EPC, consumer electronics, realty, biotech and

hotels across all Hyatt brands. Ayurveda.

Previously, he served as Chief Operating Officer- Mr. P. VermaNon- Executive Non-Independent DirectorInternational from June 2007 until his appointment as

Group President- Americas in October 2012. During Mr. Prabhat Verma, a hotel management graduate

this time, he was responsible for the development from IHMCTAN, Kolkata joined Taj group in the year

and management of all owned, managed and 1990 as a Management Trainee and has held key

franchised hotels across all Hyatt brands and for positions like General Manger of Taj Malabar, Cochin

overseeing the Divisional Offices in Hong Kong for and Taj Coromandel, Chennai. He was relocated as

Asia Pacific; in Zurich for Europe, Africa & Middle Hotel Manager to Crowne Plaza, St. James' Court

East; in Dubai for South West Asia and in Mexico City and 51 Buckingham Gate, the London properties of

for Latin America. In addition, during this time, Mr. the Taj. He subsequently took over as General

Sarna was also responsible for co- authoring the Manager - Crowne Plaza, St. James' and 51

brand attributes of Andaz (Hyatt's boutique brand) Buckingham Gate, London.

and leading the launch of this new brand.

In 2013, he was promoted to the role of Chief At Taj Hotels Palaces Resorts Safaris, Mr. Sarna has

Operating Officer of The Gateway Hotels of the Taj led the company in a new vision centered on Tajness

Group and was responsible for the operations and – the holistic brand and operations philosophy that

performance of 32 hotels of the SBU in India and Sri binds all the 101 hotels of the Taj, inspired by the

Lanka.nobility of heritage and traditions of India. Under this

vision, he has implemented restructuring of brand



CORPORATE INFORMATION Report on Corporate Governance (Contd)

Mr Verma is presently handling the portfolio of Sr Vice for asset management of the existing hotels in the

President Operations – South i.e. 40 Taj Hotels in company and for exploring opportunities for the

South India, SE Asia and UK since 2015. growth of the company.

Mr. Verma has won numerous industry accolades Mr. Narain graduated in Economics from St.

including young General Manger of the Year 2005, 5 Stephen's College, University of Delhi and then

Star Deluxe category by FHRAI and the International completed his Post Graduate Diploma in

Cooperation between the UK and India Awards' Management from the Indian Institute of

(2012) by Asian Voice. Management in Kolkata.

Mr. U. Narain Mr. R. De MelNon- Executive Non-Independent Director Non- Executive Independent Director

Mr. Uday Narain has a varied and diverse experience Mr. Russell De Mel is a professional accountant with

of more than 20 years in the Tata Group and over 20 years' experience in Development Banking

especially in the Taj, since joining the Tata including Project Financing, SME Financing and

Administrative Service in June 1995. He has spent 17 Merchant Banking and around 9 years of experience

years with the Taj across functions including Projects, in Commercial and Investment Banking. He is a

Development, General Management and Fellow of the Chartered Institute of Management

Operations. Mr. Narain started out in Projects and Accountants of UK (FCMA), Chartered Global

worked on the Taj Exotica in Goa, the Taj in Jodhpur Management Accountant (CGMA) and Fellow of the

and the Taj Flight Kitchen in Delhi. Thereafter he was Certified Management Accountants of Sri Lanka

responsible for the growth and development of the (FCMA).

Taj in the Middle East, Indian Ocean Rim and North Mr. Russell De Mel has served in the National

and West India.Development Bank (NDB) and Group as the Director/

He then spent three years as the Chief Operating CEO and the Group CEO from March 2010 to August

Officer for Ginger Hotels, during the initial growth 2013. Prior to that he has held the positions of Vice

phase of the company, when the company grew from President – Group Risk Management and Vice

one operational hotel to fourteen operational hotels. President of Corporate Banking Group of NDB.

From there, he moved to New York, where he was Mr. Russell De Mel has also served on the Boards of

responsible for Development and Projects for Taj in over 25 listed and non-listed companies, over a

The Americas.period of 25 years , covering a wide range of sectors

Thereafter, he spent two years with Tata Realty & i.e. Industry, Food & Beverage, Banking & Finance,

Infrastructure Ltd (TRIL) where he was Vice Insurance & Capital Markets, Healthcare, Hospitality

President - Real Estate & Hospitality, responsible for & Tourism, Plantations, Education & Communication,

development in the Real Estate vertical, program both within and outside NDB Group and within and

management of hospitality projects, and overseeing outside Sri Lanka. He currently serves on the Boards

the operations of assets, that included a mall and an of Nations Trust Bank PLC and Singer Finance Lanka

office building. In his assignment as Vice President - PLC as well.

Strategy for The Indian Hotels Company Limited, he Mr. T. De Zoysa

worked on putting together a three-year Strategic Non- Executive Independent Director

Initiative Plan for the organization.

A well-known figure in the Sri Lankan business He is currently designated as the Chief Operating

community, Mr. Tilak de Zoysa, FCMI (UK) FPRI Officer of TAL Hotels & Resorts Limited responsible

(SL), Honorary Consul for Croatia and Global




Ambassador for HelpAge International was G. Sundaram taught Economics in the well-known

conferred the title of “Deshabandu” by His Excellency Madras Christian College in 1959-1960. He was

the President of Sri Lanka in recognition of his selected to the premier federal Civil Service viz, the

services to the country and was the recipient of “The Indian Administrative Service in 1962.

Order of the Rising Sun, Gold Rays with Neck He joined the Ministry of Commerce, Government of

Ribbon” conferred by His Majesty the Emperor of India and specialized in export promotion, inter-

Japan. Governmental relations in relation to Trade

In addition to being the Chairman of the Supervisory Agreements and also negotiated some of

Board and Advisor to the Al-Futtaim Group of them.(1971-76)

Companies in Sri Lanka, he chairs Carsons On his return, his several positions included, Joint

Cumberbatch PLC, Associated CEAT (Pvt) Ltd., Secretary, Ministry of Defence, Government of India,

Amaya Hotels and Resorts USA (Radisson), Jetwing Chairman, Gujarat Pollution Control Board, Sales

Zinc Journey Lanka (Pvt) Ltd. and HelpAge Sri Tax Commissioner and the Ministry of Environment

Lanka, Trinity Steel (Pvt) Ltd., CG Corp Global Sri of the Government of India (1982-90). He was the

Lanka and Dutch Lanka Trailer Manufacturers (TATA first one in India in 1986 to suggest introduction of

Group).VAT on the EEC pattern. It has since become a reality

He is also the Vice Chairman of Ceat Kelani Holdings as a major financial reform in India.

(Pvt) Ltd., Orient Insurance Ltd. and serves on the He was Secretary to the Government of India during

boards of several listed and private companies which 1993-1996, which was the highest rank in the official

include TAL Hotels and Resorts Ltd, Lanka Walltiles hierarchy. After having been Secretary in the Cabinet

PLC, Nawaloka Hospitals PLC, Associated Electrical Secretariat and the Ministry of Civil Supplies,

Corporation Ltd., Inoac Polymer Lanka (Pvt) Ltd., Consumer Affairs and Public Distribution System, he

Cinnovation INC., GVR Lanka (Pvt) Ltd and Varun was Secretary, Ministry of Tourism. He retired on

Beverages Lanka (Pvt) Ltd (Pepsi).31.10.1996 at the then retirement age of 58.

Mr. Tilak de Zoysa is a past Chairman of the Ceylon He had attended many international conferences

Chamber of Commerce, the National Chamber of during his outstanding career. As Additional

Commerce of Sri Lanka, HelpAge International (UK) Secretary, Commerce, Government of India, he was

and served as a Member of the Monetary Board of Sri the official leader to the ESCAP Conference.

Lanka (2003-2009).

He was on the Board of many companies. Even at Dr. G. Sundaram

present, he serves on the Board of the Taj Group of Non- Executive Independent DirectorHotels. He is adviser to various consumer groups and

Dr. G. Sundaram has served his country as one of its social service organizations.most distinguished civil servants. During his

Mr. V. Govindasamyillustrious career, which spanned nearly thirty-five Non- Executive Independent Director

years, he has served in various capacities, carving a

niche for himself. Being an exponent in International Mr. Vish Govindasamy is the Group Managing trade with special reference to the EEC, he was one Director of Sunshine Holdings PLC (CSE: SUN), a of the persons who promoted relations between India diversified conglomerate listed in the Colombo Stock and the EEC (now EU) Exchange, Sri Lanka.

After obtaining a Masters Degree in Economics from Prior to moving to the Holdings company, he joined in the prestigious University of Madras, India in 1958, 1997 as the CEO, Watawala Plantations PLC (CSE:




WATA), a diversified Plantation Management Mr. R. K. ChaudharyNon- Executive Non-Independent Directorcompany set up via a JV with Tata's, having mature

agri assets across Palm Oil, Tea and Rubber with a Mr. Rahul Chaudhary is the Executive Director of CG

total extent under management in excess of 12,000 Corp Global, a multi-dimensional conglomerate with

HA and a large workforce in excess of 11,000 people.a portfolio of diversified business comprising over

136 companies under 15 different business verticals He holds a Bachelor of Science in Electrical that cover over 5 continents. He is the son of Binod. K Engineering and a MBA from the University of Chaudhary, the brain behind Wai Wai, and the only Hartford, USA. Before moving back to Sri Lanka, he Forbes listed billionaire from the Himalayan Republic held several leadership roles in both Finance and of Nepal. CG Corp Global is partners with and owns Management, specializing in the Educational some of the most iconic assets globally with some of Institutions.the leading hospitality brands over two decades such

At WATA, he was instrumental in turning around the as Taj, Alila, Jetwing, Radisson, The Farm and The distressed Plantation Company and was credited to Fern.having successfully navigated the plantation

Mr. Chandrasekaran Subramaniancompany through volatile times to become the Non- Executive Non-Independent Director

highest capitalized Regional Plantation Company in

the Colombo Stock Exchange ( CSE ). Further, his Mr. Chandrasekaran Subramanian who was vision saw the company move away from being a appointed to the Board of Directors 05th May 2017 is mono crop to a diversified crop portfolio in Palm Oil the Vice President Finance and Corporate HR of CG and Rubber. Today, in Sri Lanka, WATA is not only the Hospitality Holdings Inc and is responsible for largest producer of Ceylon Black tea but is also the corporate finance functions including budgeting / largest producer of Crude Palm Oil (CPO ). bottom line monitoring / introduction of systems / fund

management / re-organizing / negotiation for M & A / Mr. Vish's crowning achievement was in 1998 when

funding related support. He also oversees corporate he drove his company towards downstream

HR, which includes policies / procedures / exposure by successfully entering the branded tea

recruitment / performance management and core HR segment in Sri Lanka. Today, with approximately 3 mil

operations.kg's in sales, it enjoys Market Leadership position.

Mr. Sarabjeet SinghHis new avatar as the Group Managing Director of

Executive Non-Independent Directorthe holding company, since 2009, saw him

successfully transform a tightly held family run Mr. Sarabjeet Singh who was appointed to the Board

company into a respected diversified holdings of Directors on 05th May 2017 is the General

company and more importantly, leverage the TATA Manager of Taj Samudra Colombo and Area Director

relationship to expand the Group's footprint for - Sri Lanka & Maldives. He has over 29 years of

market expansion. experience with the Taj Group and is a hospitality

industry veteran. Besides Taj Samudra, Mr. Singh Mr. Vish's international experience coupled with his

oversees The Gateway Hotel Airport Garden, innate managerial capability and innovative qualities

Colombo, Vivanta by Taj Bentota and the two Taj has enabled him to play key leadership roles in the

properties in the Maldives -Taj Exotica Resorts and Private Sector in Sri Lanka and has further cemented

Spa and Vivanta by Taj Coral Reef.his recognition as a dynamic leader in the corporate

world.


Remuneration Committee related regulations and requirements. The

Committee also reviewed the adequacy of the The Remuneration Committee consists of Mr. Vish

internal controls and risk management and assessed Govindasamy and Mr. Tilak De Zoysa who are

the independence and performance of the external independent, non executive Directors. No

auditors. The Committee recommended the remuneration (either in cash or non cash) has been

financial statements to the Board for its approval and paid to any Director during the year under review

issuance.other than as disclosed in Note 32.2 to the Financial

The fees payable to the external auditor as audit fees Statements which reflect an aggregate of Rs. and the fees payable to the external auditors for non-501,042 paid to directors as Sitting Fees in respect of audit services provided by them during the year Audit Committee meetings and board meetings. under review has been set out in Items 13 and 14 of

Audit Committeethe Annual Report of the Board of Directors. Further

The Audit Committee comprises of three non – to the review of the non-audit services provided by

executive independent Directors. The Committee is the external auditors of the Company, it was

chaired by Mr. Vish Govindasamy. The other two determined by the Audit Committee that the

Committee members comprise of Mr. Tilak De Zoysa independence of the external auditor as the auditors

and Mr. Russell De Mel. Mr. Sarabjeet Singh, Area of the company had not been compromised.

Director Sri Lanka and Maldives / General Manager Internal Audits

and Mr. Soumitra Ray, Area Financial Controller Sri The Committee reviewed the accounting system and Lanka and Maldives / Financial Controller attend the the scope and coverage of the internal audit process Audit Committee meetings by invitation.to assess effectiveness of financial controls that have

The Chairman of the Audit Committee is Mr. Vish been designed to provide reasonable assurance to

Govindasamy, acclaimed for his professional the Directors that assets are safeguarded and that

knowledge and expertise in corporate finance. the financial reporting system can be relied upon in

Role of Audit Committee preparation and presentation of Financial

Statements. The Internal Audit function is being The Committee has been formed with specific terms

conducted by a leading audit firm. Follow-up of reference as described in the Corporate

reviews are scheduled to ascertain that audit Governance Rules of the Colombo Stock Exchange.

recommendations are being acted upon.Meetings

ConclusionThe Committee met four times during the year under

The Audit Committee is satisfied that the Company's review to discuss the matters within its purview.

accounting policies and operational controls provide Tasks of the Audit Committee reasonable assurance that the affairs of the

Company are managed in accordance with its The Committee reviewed the financial reporting policies and that the company's assets are system adopted by the company in preparation, adequately safeguarded.presentation and the adequacy of disclosures in the

annual / quarterly financial statements to ensure

reliability of the process, consistency of the

accounting policies and methods adopted and their

compliance with the Sri Lanka Accounting

Standards. The Committee also reviewed the

Company's compliance with financial reporting

requirements, information requirements of the

Companies Act and other relevant financial reporting



V GovindasamyChairmanAudit Committee17 May, 2017



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 page 16

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 17 to 53, 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.09 May, 2017


INDEPENDENT AUDITOR'S REPORT

TO THE SHAREHOLDERS OF TAL LANKA HOTELS PLC


Report on the Financial Statements

Board's Responsibility for the Financial Statements

Auditor's Responsibility

Opinion

In our opinion, the financial statements give a true and fair view of the financial position of the Company as at 31 March 2017 and of its financial performance and cash flows for the year then ended in accordance with Sri Lanka Accounting Standards.

Report on Other Legal and Regulatory Requirements

As required by section 163 (2) of the Companies Act No. 07 of 2007, we state the following:

a) The basis of opinion and scope and limitations of the audit are as stated aboveb) In our opinion:

- We have obtained all the information and explanations that were required for the audit and, as far as appears from our examination, proper accounting records have been kept by the company,

- the financial statements of the Company, comply with the requirements of section 151 of the Companies Act

SJMS ASSOCIATESChartered AccountantsColombo21 April, 2017

We have audited the accompanying financial statements of TAL Lanka Hotels PLC, (“the Company”), which comprise the statement of financial position as at 31 March 2017, and the statement of comprehensive income, the statement of changes in equity and the statement of cash flows for the year then ended, and a summary of significant accounting policies and other explanatory information.

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

Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with Sri Lanka Auditing Standards. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity's preparation of the financial statements that give a true and fair view 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 entity's internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by Board, as well as evaluating the overall presentation of the financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.


Notes Year ended 31 March

5

6

7

8

9

10


STATEMENT OF COMPREHENSIVE INCOME(All amounts are shown in Sri Lankan Rupees)

2016

The accounting policies and notes 1 to 33 form an integral part of these financial statements. from

Revenue

Direct cost

Gross profit

Other income

Marketing expenses

Administrative expenses

Finance expenses

Profit / (Loss) before tax

Income tax expense

Profit / (Loss) 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

Actuarial loss on employee benefit obligation, 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

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

Total comprehensive income / (expense) for the year

Earnings / (Loss) per share - basic

2017

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

)

2,664,067,931

1,957,877,045

18,450,648

123,732,472

327,947,087

383,217,499

)

)

)

)

)

)

)

( )

706,190,886

( )

( )

(

-

(2,969,708)

(2,969,708)

3,012,540

3,012,540

42,832

)

(110,255,524)

(6,658,541)

(116,914,065)

(116,871,233)

(0.84)


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. 7 of 2007.

Borrowings 23

Date: 21 April, 2017 Date: 21 April, 2017

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 21 April 2017.

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

23

24

26

27

Leasehold property - Right to use of land 13

Deposits, prepayments and advances

Cash and cash equivalents

19

20

Total equity

Deferred tax liability 25

Accumulated losses

2017

The accounting policies and notes from 1 to 33 form an integral part of these financial statements.

DirectorTilak De Zoysa - - DirectorV Govindasamy

2016

Current tax asset

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

464,681,509

882,781,875

4,653,329,211

3,,267,542,498 5,953,487

4,161,716,159

66,278,520

173,976,926

108,846,393

1,167,013

4,653,329,211

1,396,374,941

1,421,324,340

4,299,802

2,054,806,213

2,290,000,877

318,712,490

1,480,546,459

99,387,876

844,221,267

87,295,061

151,179,702

491,613,052

126,348,271

, (1,341,452,624)

3,172,782,752

11,715,830

47,283,822 43,998,907Investments 14

18



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

Balance as at 01 April 2015 1,396,374,941

Statedcapital

1,512,793,969

Revaluationreserve

(1,313,038,480)

Accumulatedlosses

1,597,417,692

Total

1,287,262

Available-for-salereserve

Total comprehensive income / (expense)for the year

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

- - (2,969,708) 42,832 3,012,540Other comprehensive income / (expense)

- - (2,969,708) 42,832

- (102,143,995) 102,143,995 - -Depreciation transfer

- 10,674,366 (10,674,366) - -Reversal of deferred tax on additional

depreciation during the year on revaluation

1,396,374,941 1,421,324,340 (1,341,452,624) 1,480,546,459Balance as at 31 March 2016

Total comprehensive income / (expense)for the year

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

- 905,611,563 - 905,611,563 -Revaluation gain during the year

- 796,938,176 93,597,912 891,704,673 1,168,585

- (102,112,692) 102,112,692 - -Depreciation transfer

- 10,670,609 (10,670,609) - -Reversal of deferred tax on additionaldepreciation during the year on revaluation

1,396,374,941 2,126,820,433 (1,156,412,629) 2,372,251,1325,468,387Balance as at 31 March 2017


3,012,540

4,299,802

- - (116,914,065) (116,914,065) -Loss for the year

- (108,673,387) - (108,673,387) -Deferred tax relating to revaluation ofbuilding


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 in cash and cash equivalentsincrease

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 fixed deposits

Cash flow from operating activities -


Gain on disposal of property, plant and equipment

Depreciation on property, plant and equipment

Adjustments for -

Amortisation of leasehold property

2017 2016

Interest expense

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

807,325,492

777,803,814

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

Amortisation of intangible asset 2,481,004

(6,722,463)

(1,080,822)

(27,760,722)

737,187,844

4,716,792

(6,712,430)

(8,117,377)

(371,161,456)

10,686,682

17,523,062

6,209,787 782,805

(2,107,650)

244,716,556

31,516,494 970,813

5,991,626(64,761,307)

687,861,540

673,031,733

33,001

(241,765,450)

(267,521,352)

213,550,300 (440,204,267)

(2,000,000)

(142,507,489)

34,348,925

116,830,777

151,179,702

151,179,702

151,179,702

(110,255,524)

(31,822)

412,127,508

13,190,952

142,507,489

2,107,650

1,837,999

(2,896,553)

(25,000,000)



1 General

1.1 Corporate information

(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.

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 and manages the operations of The Gateway Hotel Airport Garden, Colombo located

at Seeduwa.

1.4 Date of authorization for issue

The financial statements were authorised for issue by the Board of Directors on 21 April 2017.

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

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.

- Non-quoted investments are measured at fair value

- Defined benefit plans are measured at the present value

- 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 2017



2.4 Comparative Information

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

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

None of these amendments had a material effect on the Company's Financial Statements.

2.5 Materiality & aggregation

2.6 Functional and presentation currency

2.7 Changes in accounting standard which are effective from current year

2.8 New accounting standards issued but not effective

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

Classification and measurement

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

Customers

2.8.3 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.

A number of standards have been modified on miscellaneous points with effect from January 2016. Such

changes include Disclosure Initiative (Amendments to LKAS 1), Accounting for Acquisition of Interest in

Joint Operations (Amendments SLFRS 11), Sale or Contribution of Assets between an Investor and its

Associate or Joint Venture (Amendments to SLFRS 10 and LKAS 28), Investment Entities, applying the

Consolidation Exception (Amendments to SLFRS 10, SLFRS 12 and LKAS 28) and Annual

Improvements 2012 - 2014 (which made amendments to SLFRS 5 Non-current Assets Held for Sale and

Discontinued Operations, SLFRS 7 Financial Instruments: Disclosure, LKAS 19 Employee Benefits and

LKAS 34 Interim Financial Reporting).

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 2017.

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.

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 2017.

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

Summary of significant accounting policies for the year ended 31 March 2017(Contd.)



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.

A number of standards have been modified on miscellaneous points. These include Disclosure Initiative

(Amendments to LKAS 7), Recognition of Deferred Tax Assets for Unrealized Losses (Amendments to

LKAS 12) and Classifications and Measurements of Share Based Payment Transactions (Amendments

to SLFRS 2)

2.8.4 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.

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

relevant agreement.

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.

3.2 Expenditure recognition

Expenses are recognized in the income statement on the basis of a direct association between the cost

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

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

statement.

Financial impact of the above new accounting standards and improvements has not yet been assessed.




For the purpose of presentation of the income 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 Income taxes

Income tax expense comprises current and deferred tax. Income tax expense is recognised in the

statement of comprehensive income.

3.3.1 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.

3.3.2 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.

3.4 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.

3.5 Property, plant and equipment

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 income statement 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 each reporting date.

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.

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 :

3.6.1 Basis of recognition

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

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 operating profit. On disposal of

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

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

as at the end of the year.

3.6 Intangible assets

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.

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.

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.

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.

3.6.2 Subsequent Expenditure

3.6.3 Amortisation

3.6.4 De-recognition

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

revaluation increase.

3.8 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.




3.9 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.

3.10 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.

3.10.1Initial recognition

3.10.2 Initial measurement

3.10.3 Subsequent measurement

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 classified as fair value through profit or loss if it is held for trading or is designated

at fair value through profit or loss.

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.

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

because of credit deterioration

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 statement of comprehensive income.

The losses arising from impairment are recognised in the statement of comprehensive income 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 statement of comprehensive income in other operating

income.

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.

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.

3.10.4 De-recognition of financial assets

3.10.5 Identification, measurement and assessment of impairment

3.11 Cash and cash equivalents



3.12 Stated capital

3.13.2 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.

Ordinary shares are classified as equity. Dividends on ordinary shares are recognised in equity in the

period in which they are approved.

3.13 Financial liabilities

3.13.1 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.

3.13.3 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.





3.14 Employee retirement benefits

3.14.1 Defined benefit plan – gratuity

The company is liable to pay gratuity in terms of the Payment of Gratuity Act No. 12 of 1983, according to

which an obligation to pay gratuity arises only on completion of 5 years of continued service. The

company’s obligations under that the said Act is determined based on an actuarial valuation, using the

projected unit credit method, carried out by a professional actuary. The liability recognized in the

statement of financial position represents the present value of the defined benefit obligations at the end

of the reporting date estimated using the projected unit credit method. These benefits are not externally

funded.

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

the other comprehensive income.

3.14.2 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.

3.15 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.

3.16 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.

3.17 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.

3.18 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.



3.19 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:

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 expenses

Interest expenses on Bank borrowings

Exchange loss

Loans and receivablesInterest income

Other

For the year ended 31 March

2017

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

141,340,316

81,454,340

222,794,656

14,290,037

24,822,634

5,111,100

1,435,250

3,352,296

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

2016

1,586,849,406

979,841,559

38,178,400

31,129,083

5,316,330

1,213,446

21,539,707

2,664,067,931

16,146,176

18,450,648

31,822

165,000

2,107,650

142,507,489

240,710,010

383,217,499


Available for sale financial assetsDividend income from Lanka Island Resorts Limited 633,951 -


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

Defined contribution plans

Defined plansbenefit

8.1 Staff costs

Salary costs

8 Profit / (Loss) before tax

Profit / (Loss) before tax for the year is stated aftercharging all 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

Allowance for impairment of trade receivables

In respect of the current year

9 Income tax

616,390,987

18,839,453

39,749,613

674,980,053

2017

501,042

674,980,053

424,472,838

178,841,389

369,338

13,190,952

119,699,273

1,091,847

1,578,210

-

-


2016

1,325,590

615,236,396

413,965,507

167,244,413

1,696,809

13,190,952

124,097,802

1,054,598

6,209,787

560,985,391

17,523,062

36,727,943

615,236,396

-

-


9.1 Income tax recognised in profit or loss

Current tax

In respect of the current year

4,414,146

4,414,146

6,658,541

6,658,541

Deferred tax

4,414,146 6,658,541Total income tax expense recognised in the current year




Income tax expense calculated at 12% (2016: 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 tax credit (qualifying payment) recognized previouslyreversed in the current year

Income tax expense recognized in profit or loss

Statutory tax rate applied

108,129,835

12,975,580

(689,406)

(24,631,654)

25,268,348

4,414,146

12%

2017

Current tax

None

9.3 Income tax recognised in other comprehensive income

Arising on income and expenses recognised in othercomprehensive income:

Building revaluations

Profit / (Loss) attributable to shareholders

Weighted average number of shares in issue during the year

10 Earnings / (Loss) per share - Basic

Basic earnings / (loss) per share is calculated by dividing the profit / (loss) attributable to the shareholdersby the weighted average number of ordinary shares in issue during the year.

Basic earning / (loss) per share

-

108,673,387


103,715,684

139,637,494

0.74

(110,255,524)

(13,230,663)

-

(10,589,113)

-

6,658,541

12%

2016

8,094,057 30,478,317

(16,602,779)

-

Tax effect of expenses that are not deductible in determiningtaxable profit

-

-

Deferred tax


Remeasurement of employee benefit obligation 1,084,047 -

Total income tax recognised in other comprehensive income 109,757,434 -

(116,914,065)

139,637,494

(0.84)

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

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,62

0,6

24

)

1

,37

6,7

96

-

- -

-

-

-

1,8

46

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2

(2

8,3

16

,14

8)

43

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39

8

0,7

81

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3

As

at

31

Ma

rch

20

16

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st/

va

lua

tio

n

Accu

mu

late

d d

ep

recia

tio

n

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rry

ing

va

lue

6,6

92

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0

8

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(2

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)

-

16

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02

(1

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2,2

24

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9,9

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3

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5,5

44

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(1

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29

9,7

20

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9

88

6,7

32

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8

(5

87

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9)

22

4,3

55

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5

4

74

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7,9

63

(2

49

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2,3

18

)

43

7,5

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7

1

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6,6

82

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9

(5

99

,15

1,4

62

)

30

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8,9

20

8

9,9

09

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5

(5

8,9

50

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5)

43

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3,3

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43

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3,3

39

Tra

nsfe

r fr

om

ca

pita

l w

ork

in

pro

gre

ss

-

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3

6,5

04

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7

1,8

43

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0 1

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92

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0

4,0

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0

-

(54

,81

7,5

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)

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ost

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(1,9

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2)

(1

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)

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no

va

tio

n w

rite

-off

-

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--

-

(1

,11

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)

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no

va

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-off

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(1

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2)

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po

sa

ls

Tra

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r to

in

tan

gib

le a

sse

ts

-

-

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-

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(4

,16

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)

-

Revalu

ation s

urp

lus d

uring the y

ear

9

05

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3

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nsfe

r to

in

tan

gib

le a

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(1

42

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tal

-

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06

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42

5

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8,7

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4

(1

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2,3

10

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2)

--

-

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3,9

06

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(4

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)

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2

1,2

10

,14

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1

60

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9,7

04

3,4

48

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4,9

13 -

3,2

67

,54

2,4

98

1

,94

1,5

51

(4

12

,12

7,5

08

)

2

41

,76

5,4

50

3,2

67

,54

2,4

98

6

,23

2,1

76

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5

(2

,96

4,6

34

,46

7)

(1

,94

2,7

30

)

(1

,11

9,6

86

)

(1

0,6

86

,68

2)


(4

,16

4,6

79

)

-

9

05

,611

,56

3

(,

14

2,4

96

)

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

Valu

ati

on

of

pro

per

ty, p

lan

t an

d e

qu

ipm

ent

Bu

ild

ing

sP

lan

t &

Ho

tel

Ho

tel

Off

ice

Mo

tor

mach

inery

eq

uip

men

tfu

rnit

ure

&fu

rnit

ure

&veh

icle

Lan

dscap

ing

fitt

ing

seq

uip

men

t

To

tal

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

,91

4

(2,4

51,5

92)

6,5

96

,32

2

2,1

21

,79

2,4

50

(789,5

14,5

67)

1,3

32

,27

7,8

83

83

6,4

09

,93

3

(520,1

36,9

44)

31

6,2

72

,98

9

50

1,8

63

,65

4

(292,7

31,3

74)

20

9,1

32

,28

0

1,0

49

,78

2,6

51

(708,4

54,1

59)

34

1,3

28

,49

2

11

0,3

05

,79

5

(70,7

74,7

73)

39

,53

1,0

22

13

,00

0,0

00

(2,2

07,4

74)

10

,79

2,5

26

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

Rs.

1,0

68,2

49,1

08 (

31st

Marc

h 2

016 -

Rs.

935,5

88,2

63)

whic

h w

ere

in u

se

during th

e y

ear.

Co

st

As

at

31

Ma

rch

20

16

Accu

mu

late

d D

ep

recia

tio

n

Ca

rry

ing

va

lue

9,0

47

,91

4

(2,3

55,0

04)

6,6

92

,91

0

2,1

14

,28

4,8

25

(676,0

75,1

83)

1,4

38

,20

9,6

42

75

8,5

14

,21

6

(458,7

93,3

07)

29

9,7

20

,90

9

48

0,3

04

,18

2

(255,9

48,5

37)

22

4,3

55

,64

5

1,0

33

,84

9,0

41

(599,1

51,4

62)

43

4,6

97

,57

9

10

2,3

65

,47

7

(65,4

53,0

70)

36

,91

2,4

07

9,8

91

,39

9

(9,8

91,3

99) -

4,5

08

,25

7,0

54

(2,0

67,6

67,9

62)

2,4

40

,58

9,0

92

4,6

42

,20

2,3

97

(2,3

86,2

70,8

83)

2,2

55

,93

1,5

14





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

20,876,957

6,722,463

9,989,815

4,164,679

2017

As at 31 March

2016

9,989,815

2,896,553

6,950,766

142,496

Accumulated amortisation and impairment losses


Amortization


Carrying value 14,359,625

2,481,004

4,036,328

6,517,332

5,953,487

1,837,999

2,198,329

4,036,328

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

Amortised during 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 2017 was 63 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

56,225,807

(26,774,193)

831,030,315

359,783,533

1,204,004,800

13,190,952 372,974,485

844,221,267

346,592,581

1,204,004,800

13,190,952 359,783,533

83,000,000

57,118,280

(25,881,720)

The investment in ordinary shares of Lanka Island Resorts Ltd has been classified as an available for sale investment and has been measured at fair value on a net assets value basis.

14 Investments

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.

29,569,568

8,247,590

42,665,613

80,482,771

(7,400,795)

73,081,976

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

47,283,822

19,556,191

27,727,631Investments in fixed deposits

43,998,907

18,387,606

25,611,301

23,530,680

6,930,149

42,739,058

73,199,887

(6,921,367)

66,278,520


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

6,921,367

479,428

7,400,795

6,138,562

782,805

6,921,367

234,360,436

210,836,286

(35,463,987)

198,896,449

11,455,793

198,124,717

173,976,926

(33,885,777)

164,238,940

9,693,194

484,044 44,792

16.1 Allowance for impairment of doubtful trade receivables


Impairment allowance for doubtful trade receivables


33,885,777

1,578,210

35,463,987

27,675,990

6,209,787

33,885,777

As at 31 March

2017

As at 31 March

2016



20 Cash and cash equivalents

Cash at bank

Cheques in hand

Cash in hand - Main cash

- Petty cash

17 Amounts receivable from related parties

Lanka Island Resorts Limited

18 Deposits, prepayments and advances

Deposits

Prepayments

Advances


21 Stated Capital Issued and fully paid

139,637,494 Ordinary Shares

TAL Hotels and Resorts Limited

As at 31 March

As at 31 March

2016

1,155,845

1,167,012

11,168

1,396,374,941

87,295,061

17,629,210

30,729,791

38,936,060

118,283,971

29,096,365

1,747,366

2,052,000

151,179,702

19 Current tax assets and liabilities

Economic service charge

Withholding tax

11,715,831

-

11,715,831

-

Current tax assets

Current tax liabilities

-

Income tax payable

1,566,824

1,566,824

-

1,396,374,941

120,415,191

37,506,823

1,576,053

1,515,406

161,013,473

77,863,942

26,514,965

15,646,985

35,701,992

22,429,654

118,013

22,547,667

-

-


2017


22 Revaluation reserve

Balance at the beginning of year

Revaluation gain during the year

Reversal of deferred tax on additional depreciation during the year on revaluation

Balance at the end of year


23 Borrowings

Current

Bank borrowings

Lease payments in respect of leasehold land

Non-current

Bank borrowings


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

Total borrowings

- Hatton National Bank (Loan 2 - USD 4.00 Mn.)




As at 31 March

1,421,324,340

905,611,563

10,670,609

2,126,820,433

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%

2017

3 months LIBOR

+5.25%

6 months LIBOR

+5.00%

-

As at 31 March

6 months LIBOR

+3.85%

2016

6 months LIBOR

+5%

3 months LIBOR

+5.25%

1,512,793,969

-

10,674,366

1,421,324,340

462,681,509

2,000,000

464,681,509

8,000,000

2,519,487,722

2,054,806,213

2,046,806,213

6 months LIBOR

+5.03%

Deferred tax relating to revaluation of building (108,673,387) -

Depreciation transfer (102,112,692) (102,143,995)



23.2 Maturity of non-current borrowings

Non-current bank borrowings

Between 1 and 2 years



24 Retirement benefit obligations

Balance at the beginning of year

Current service cost

Actuarial losses


Not later than 1 year

Later than 1 year and not later than 5 years

Later than 5 years

Balance at the end of year

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

Actuaries, India on 31 March 2017, 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 2017.

Discount rate per annum

Annual Salary increment rate

Retirement age

Interest cost

Payments during the year


As at 31 March

311,938,150

467,907,257

1,715,659,857

2,000,000

4,000,000

6,000,000

-

12.75%

8.50%

55 years

108,846,393

6,866,350

9,033,725

118,099,730

11,973,103

(18,619,841)

2017

935,814,450

As at 31 March

2016

2,000,000

6,000,000

8,000,000

-

690,056,873

452,249,188

2,046,806,213

904,500,152

11%

8.50%

55 years

96,471,000

6,911,252

2,969,708

108,846,393

10,611,810

(8,117,377)

The principal assumptions used for this purpose are as follows :

24.1

24.2

Assumption regarding future morality are based on A67/70 Mortality table, issued by the Institute of Actuaries, London, United Kingdom.

24.3





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.

24.4

Sensitivity analysis

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

Delta effect of -1% change in rate of employee turnover

Delta effect of +1% change in rate of employee turnover

As at 31 March

6,171,765

2,152,630

2017

1,946,953

As at 31 March

2016

(5,896,546)

(1,117,762)

1,001,461

Project benefit obligation on current assumption 118,099,730 108,846,393

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

(5,899,674)

6,804,961

6,597,358

(5,721,106)

6,535,083

6,441,291

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

25 Deferred tax liability

Deferred tax assets

Deferred tax liabilities

(171,481,283)

412,001,135

240,519,852

(178,978,921)

126,348,271

305,327,192

As at 31 March 2017 Closingbalance

Recognizedin OCI

Tax losses

Qualifying payment- tax credit

-

109,757,434

-

(156,421,221)

240,519,852

-

Accelerated depreciation


Inventory provision

108,673,387

1,084,047

-

412,001,135

(14,171,967)

(888,095)

Recognizedin P&L

(16,602,780)

4,414,147

25,268,348

(1,999,443)

(2,194,447)

(57,531)

Openingbalance

(139,818,441)

126,348,271

(25,268,348)

305,327,191

(13,061,567)

(830,564)

As at 31 March 2016 Closingbalance

Recognizedin OCI

Tax losses

Qualifying payment- tax credit

-

-

-

(139,818,441)

126,348,271

(25,268,348)

Accelerated depreciation


Inventory provision

-

-

-

350,327,192

(13,061,567)

(830,564)

Recognizedin P&L

-

6,658,541

-

8,237,525

(1,485,047)

(93,937)

Openingbalance

(139,818,441)

119,689,730

(25,268,348)

297,089,667

(11,576,520)

(736,627)


tax losses

tax credits


26 Trade and other payables

Trade payables

Social security and other taxes payable

Deposits and advances obtained

Other payables

Accrued expenses

27 Amounts payable to related parties

The Indian Hotels Company Limited

TAL Hotels and Resorts Limited - Management fee

TAL Hotels and Resorts Limited - Interest on unsecured loan

As at 31 March

226,628,499

-

226,628,499

107,310,320

34,438,041

77,851,330

348,439,546

100,628,034

28,211,821

2017

As at 31 March

2016

364,984,997

219,297,778

584,282,775


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:

25.1

107,334,578

31,945,574

74,813,759

318,712,490

84,615,430

20,003,149

TAL Maldives Resort (Private) Limited

5,209,816

47,720,666

88,201,939

-

141,132,421

7,694,809

46,123,818

42,793,807

2,775,442

99,387,876

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.

28


29 Assets pledged as security

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


30 Contingent liabilities

Architects Co- Partnership (Private) Limited has filed an action against TAL Lanka Hotels PLC for a claim of

Rs.10,359,127 based on a contract entered into with TAL Lanka Hotels PLC. However, TAL Lanka Hotels

PLC has made a cross claim against this company under the same agreement for an amount of Rs. 25 million

on account of non- satisfactory work carried out by them.

Presently this matter had been fixed for judgment on 23 June 2017.

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

5,618,768,274 6,232,176,965 Property, plant and equipment and leasehold property

30.1 Pending litigation

2017

31 March

2016

31 March

Primary mortgage overstocks and book debts

Overdraft, term loans,import licenses obtained from HSBC

24,000,000 24,000,000 Inventories, receivables and prepayment

Supplementary mortgage overstocks and book debts

Overdraft , term loans,import licenses obtained fromHSBC

12,000,000 12,000,000 Inventories, receivables and prepayment

1,673,394 4,023,394Guarantees outstanding

As at31 March 2017

As at31 March 2016

30.2 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.



32 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. R. K. Sarna, 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

84,705,378 (2016 - Rs 79,837,291 ) and an Incentive Fee of Rs 94,136,011 (2016 - Rs.87,407,122) are payable

to TAL Hotels & Resorts Limited for the period under review.

Mr. R. K. Sarna is the Managing Director & Chief Executive Officer and Mr. P. Verma is the Senior Vice President

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 Plantations Limited and

Sunshine Travels & Tours Limited. During the year the Company has purchased tea from Watawala Marketing

Limited for Rs.2,402,361 (2016 - Rs. 2,372,008) and purchased air tickets amounting to Rs.105,000 (2016 - Rs.

2,384,019) from Sunshine Travels and Tours Limited.

- Mr. R. K. Sarna - Chairman

-

- Mr.

- Mr. U Narain

Mr. Anil P. Goel (resigned with effect from 15 October 2016)

- Mr. B. K. Chaudhary

- Mr. R. K. Chaudhary

T. De Zoysa

- Dr. G. Sundaram

- Mr. V. Govindasamy

- Mr. R. De Mel

- Mr. P. Verma

- Mr. S. Joshi (resigned with effect from 22 March 2017)

32.1 Key Management Personnel


31 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:

100,822,378 11,129,267Property, plant and equipment

As at31 March 2017

As at31 March 2016




501,042 1,325,590Directors' Sitting Fees

32.2 Key management personnel compensation

32.3 Related party transactions

Related Company

The Indian HotelsCompany Ltd

Lanka Island Resorts Ltd

TAL Maldives Resorts(Private) Limited

Vivanta by Taj - CoralReef, Maldives

Taj Exotica Resorts &Spa, Maldives

TAL Hotels and ResortsLimited

Relationship

Parent Company

Group Company

Group Company

Group Company

Group Company

Nature ofTransactions

-Reimbursement of expenses& reservation receipts fromIndia

-Reimbursement of expenses



-Management fee

-Interest on unsecured loan


Net Transactionsduring the year(This includes theeffect of forexfluctuations)

2,484,993

410,979

2,980,449

(45,408,132)

(205,007)

(1,596,848)

Balance as at31March 2017

(5,209,816)

1,566,824

-

-

(88,201,939)

(47,720,666)

-

Balance as at31 March 2016

(7,694,809)

1,155,845

205,007

(2,980,449)

(42,793,807)

(46,123,818)

11,168

As at31 March 2017

(11,168)

As at31 March 2016


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



33 Financial instruments - fair values and risk management

33.1 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 part 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 reasonable approximation of fair value.

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 - - -


As at 31 March 2016 Carrying amount Fair value

Level 1 Level 2 Level 3

Financial assets- Available for sale

Investments in Lanka Island Resorts Limited 18,387,606 - - 18,387,606

- Assets carried at amortised costInvestments in fixed deposits 25,611,301 - - - Trade and other receivables 173,976,926 - - -Amounts due from related parties 1,167,012 - - -Deposits 38,936,060 - - -Cash and cash equivalents 151,179,702 - - -

Total financial assets 409,258,607 - - 18,387,606

Financial liabilities- Liabilities carried at amortised cost

Interest bearing borrowings 2,509,487,722 - - -Liabilities to make leasehold payments 10,000,000 - - -Trade and other payables 180,899,925 - - -Amounts payable to related parties 99,387,877 - - -

Total financial liabilities 2,799,775,524 - - -



33.1.1 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 approximation of their fair value. Therefore, fair value hierarchy is not applicable.

33.2 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 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'S) has identified 3 critical types of risk which can affect on TLHP's operations adversely as credit, liquidity and market risks.



33.3 Credit risk

Credit risk is the risk that 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 fulfill 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 2017

157,922,013

27,727,631

432,187,922

147,380,336

25,611,301

385,904,623

As at31 2016March



Trade receivables 198,896,449 164,238,940

Other receivables (Note 16) 11,939,837 9,737,986

Deposits (Note 18) 35,701,992 38,936,060

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

Gross Receivables

137,538,592 110,300,272

2017 2016

Impairment Allowance Carrying Value

Not due 0-30 days

Past due:

36,337,043 30,812,735Past due 31-60 days

15,518,476 14,779,766Past due 61-90 days

1,334,028 5,350,976Past due 91-120 days

6,294,853 1,702,606 Past due 121-180 days

37,337,443 35,178,361More than 180 days

234,360,436 198,124,717Total

- -

2017 2016

- -

- -

- -

- -

35,463,987 33,885,777

35,463,987 33,885,777

137,538,592 110,300,272

2017 2016

36,337,043 30,812,735

15,518,476 14,779,766

1,334,028 5,350,976

6,294,853 1,702,606

1,873,456 1,292,584

198,896,449 164,238,940


Allowance for impairment of Rs. 35.46 Mn (31 March 2016 - Rs. 33.88 Mn) has been made in respect of trade receivables, as at the reporting date. Unimpaired amounts are considered collectible in full, based on historic payment behavior and analysis of customer's credit risks.

d) Investments

The company limits its exposure to credit risk by investing in fixed deposits with selected bankers with Board Approval.

e) Cash equivalents

The company held cash at bank and cheques in hand of Rs. 157.9 Mn as at 31 March 2017 (31 March 2016 - Rs.147.4 Mn) which represent its maximum credit exposure on these assets. The cash equivalents are held with bank and financial institutions counterparties, which have better rankings.

33.4 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 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

31 March 2016 Contractual maturities

Trade payables

Carrying amount

107,334,578

Up to 2 months

2-3months

3-12months

More than1 year

91,979,952 573,441 1,712,377 13,068,808

Interest-bearing borrowings 2,509,487,722 131,450,540 - 331,230,970 2,046,806,213

2,626,822,300 223,430,492 573,441 334,943,347 2,067,875,020


c) Movement in the impairment allowance

Provision for impairment

Balance at at the end of the year


As at31 March 2017

1,578,210

35,463,987

33,885,777

134,934

33,885,777

As at31 2016March

27,541,056

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

Liabilities to make leasehold payments 10,000,000 - - 2,000,000 8,000,000



33.5 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 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

(21,176,688)

21,176,688

As at31 March 2017

(2,117,668,792)

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 regular basis and ensures that such risks are managed on a timely manner.



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


Financial liabilities

Interest-bearing borrowings

(670,578)

(277,276)

(21,176,688)

670,578

277,276

21,176,688

157,922,013

27,727,631

2,117,668,792

-

-

124,307,158

1,341,155

3,327,316

-

As at 31 March 2016

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

-

(256,113)

(25,094,877)

256,113

25,094,877

147,380,336

25,611,301

2,509,487,722

-

-

138,523,772

-

1,920,848

-

-



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 11,234 registered shareholders, holding 139,637,494 shares as at 31 March 2017

Number of Total Range Shareholders Holdings Percentage

Foreign

1 - 1,000 Shares 54 24,376 2,100,444 0.02 1.50

1,001 - 10,000 Shares 27 995 129,997 3,323,087 0.09 2.38

10,001 - 100,000 Shares 7 127 272,903 0.20 2.43

100,001 - 1000,000 Shares 1 11 343,029 3,682,648 0.25 2.64

Over - 1000,001 Shares 3 2 117,627,220 8,743,716 84.24 6.26

TOTAL 92 11,142 118,397,525 21,239,969 84.79 15.21

GRAND TOTAL 11,234 139,637,494 100

The Stated capital of the company as at 31 March 2017 was Rs. 1,396,374,941 and the number of shares representing the stated capital of the Company was 139,637,494.

10,007

2. Shareholders

Local Foreign Local Foreign Local

3,390,074

3. Ratios 2017 2016Rs. Rs.

Loss Per shareBasic 0.74 (0.84)

Net Asset value per share 16.99 10.60

4. Market Value

Highest 31.20 34.00Lowest 20.00 20.00

stAs at 31 March 21.00

5. Dividends

No dividends have been declared during the year under review.

23.40



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 2017 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. 1,305,884 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 522,333 0.37

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 Mrs. Nafeesa Hamzaally Abdul Husein 163,000 0.12

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. Mascons (Pvt) Limited 100,000 0.07

20. Mr. Sithampalam Abishek 98,500 0.07

TOTAL 130,695,113 93.61

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

Negombo Hotels Limited


2017 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.


competition


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

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 Samudra has been successful in molding existing employees according to future requirements. Hence, maintaining healthy relations among ER Committee and the Management and maintaining industrial harmony is imperative for the well being of the company. Taj Samudra was able to resolve industrial conflicts during the past years, providing long term solutions through Employee Relations Committee and the Management and also through series of awareness sessions. The best practices, policies and procedures that are in place to ensure 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 and also, they will be undergoing on a Management Trainee Programme.

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 employee get-together, Annual pirith chanting ceremony, Long service award, Monthly birthday celebrations with employees and Department wise team outings etc for the associates.

Taj Samudra has also been selected as a “Great place to work” for the fifth consecutive year. This is a recognition granted to only the best organizations and reflects the commitment of the group to its employees.


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

Extraordinary items

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

Total comprehensive income for the year

Share capital

Available for sale reserve

(2,050,959)

108,130

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's

(346,601)

16/17

-

2016-17

(10,118)

1,169

787,989

891,705

5,468

Earnings / (Loss) per share - basic

35,366

(1,164,866)

143,375

41,793 35,327

942,108 622,638

1,641,867

477,001

(45,827)

(225,619)

240,921

(97,546)

143,375

(16,698)

126,677

1,641,867

19.38

240,921

126,677

1,396,375

1,791,167

(1,078,249)

2,113,522

2,679,063

82,768

2,967,538

854,016

1.63

15.14

30.90

0.91

Rs. 000's

205,707

11/12

-

2011-12

(1,906)

(2,376)

(4,281)

122,396

4,229

(1,383,473)

257,592

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's

230,630

12/13

-

2012-13

(345)

(4,122)

(4,467)

216,692

106

(1,435,170)

(501,986)

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's

(85,674)

13/14

-

2013-14

(11,848)

(257)

(12,106)

(542,088)

(151)

(1,719,304)

(237,084)

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's

(432,977)

14/15

-

2014-15

(11,319)

1,438

(9,881)

(190,709)

1,287

(1,957,877)

(110,256)

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's

(390,558)

15/16

-

2015-16

(2,970)

3,013

43

(116,871)

4,300

Gain or Revaluation of building. net of tax 796,938


Operating profit / (loss)

- - - - -

Community Initiatives undertaken by the hotel


Shramadana Campaign

Blood Donation Campaign

"Distribution of Lunch Packets for Blind Musicians Musical Show on 23/12/2015"

Community Initiatives undertaken by the hotel (Contd.)


Visit to Sariputta School Colombo to clean and raise awarenesson cleanliness.

Awareness on Tourism in Sri Lanka and Hotel Industry with cookery demonstration

Registered Office : 25, Galle Face Centre Road, Colombo 3.

For Against

.

Signed this.....................…day of.....................…Two Thousand and .

*I/We…………………………………………………………………………………………………….…………………

……of…………………………………………………………..………………………………..………………………… being *a shareholder / shareholders of TAL LANKA HOTELS PLC do hereby appoint

………………………………………………………………………………………………………………of

…………………………………………………………………………………………… or failing him/her

or failing him,or failing him,or failing him,

or failing him, or failing him,

or failing her,or failing him,

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 37th Annual General Meeting of the Company to be held on aj Samudra Hotel, No 25,Galle Face Centre Road, Colombo 03 and at any adjournment thereof, and at every poll which may be taken in consequence thereof.

Mr. R. K. Sarna (Chairman) or failing him,Mr. B.K. ChaudharyMr. R.K. ChaudharyMr. T. De ZoysaDr. G. SundaramMr. V. GovindasamyMr. R. De MelMr. P. VermaMr. U. Narain

(at “On Golden Pond”)

To receive and consider the Annual Report of the Board together with theFinancial Statements of the Company

To re-appoint as a Director, Dr. G Sundararm in terms ofsection 211 of the Companies Act.

To re-appoint as a Director, Mr. T. De Zoysa in terms of section 211 of theCompanies Act.

Mr. V. Govindasamy

Mr. R. K. Sarna

To re-elect as a Director, Mr. C. Subramanian who was appointed to the Board thof Directors on 5 May 2017, who retires at the end of the AGM in terms of

Article 93 of the Articles of Association of the Company and being eligible, has offered himself for re-election.

To re-elect as a Director, Mr. S. Sjngh who was appointed to the Board of thDirectors on 5 May 2017, who retires at the end of the AGM in terms of Article

93 of the Articles of Association of the Company and being eligible, has offered himself for re-election.

To appoint M/s. SJMS Associates, Chartered Accountants as the auditors of the Company for the Financial year 2017/2018 and to authorize the Directors to fix their remuneration as Auditors of the Company for the aforesaid period.

Seventeen

th Thursday the 07 September 2017 at 10.30 a.m. at the T

1.

2.

3.

4. To re-elect as a Director, Mr. in terms of Article 86 of the Articles of Association.

7.

....................................... *Signature/s

Note:1. *Please delete the inappropriate words2. Instructions as to completion are noted on the reverse hereof.

B. K. Chaudhary

5. To re-elect as a Director, in terms of Article 86 of theArticles of Association.

6. To re-elect as a Director, in terms of Article 86 of theArticles of Association.

8.

9.

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 SEVENTH 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

07th September 2017.

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 PLC · 2017-08-10 · N 9. otice is hereby given that the Thirty Seventh (37th) To re-elect as a Director, Mr. R. K. Sarna who Annual General Meeting TALLanka Hotels