tokyo cement -annual report 2010

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A N N U A L R E P O R T - 2 0 1 0

TheEastern Prideof a

Resurgent Nation



A N N U A L R E P O R T - 2 0 1 0



CORPORATE INFORMATION

NAME OF THE COMPANY Tokyo Cement Company (Lanka) PLC

REGISTRATION NO. PQ 115

LEGAL FORM A Public Quoted Company with Limited Liability, Incorporated

in Sri Lanka in 1982

BOARD OF DIRECTORS

Mr. Edgar Gunatunga Chairman, Non-Executive Independent Director

Mr. S. R. Gnanam Jt. Managing Director

Mr. K. Yanagihara Jt. Managing Director, Nominee Director of Nippon

Coke & Engineering Company Limited, Japan

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

Mr. E. J. Gnanam Non-Executive Director

Mr. R. Seevaratnam Non-Executive Independent Director

Dr. Harsha Cabral Non-Executive Independent Director

Mr. Tooru Tanimura

Mr. Shiro Takihara Nominee Directors of Nippon Coke & Engineering

Company Limited, Japan

Mr. S. V. Wanigasekera

COMPANY SECRETARY Seccom (Private) Limited,

1E - 2/1, De Fonseka Place, Colombo 5

T-Phone: 2590176 Fax: 2551386

E-Mail: kmaahamed@hotmail .com

HEAD OFFICE 469 - 1/1, Galle Road, Colombo 3

T-Phone: 2587619 Fax: 2500897

Website: www.tokyocement.lk

SUBSIDIARY COMPANIES Fuji Cement Company (Lanka) Limited

Tokyo Cement Colombo Terminal (Pvt) Limited

Tokyo Super Cement Company Lanka (Pvt) Limited

Tokyo Cement Power (Lanka) Limited

AUDITORS BDO Partners (Chartered Accountants)

Sir Chittampalam A. Gardiner Mawatha,

Colombo 2

LEGAL ADVISORS Murugesu & Neelakandan (Attorneys-at-Law)

2, Deal Place,

Colombo 3

TheEastern Pride

of aResurgent Nation



To actively participate in Sri Lanka’s ConstructionIndustry effort towards achieving global standards

by providing cement of high quality, better yield

and affordabil ity while meeting changing customer

requirements to satisfaction.

The Mission



TheEastern Pride




ContentsFINANCIAL REPORTS

06 Socially Responsible Growth

07 Financial Highl ights

09 Corporate Profi le

MESSAGES TO STAKEHOLDERS

11 Board of Directors

13 Chairman’s Review

15 Message from the President of Nippon Coke & Engineering Co. Ltd.,

16 Joint Managing Directors’ Message

OUR CONTRIBUTION TO SOCIETY

23 Report of the Directors30 Corporate Governance

32 Corporate Governance Disclosures under CSE l isting rules

34 Directors’ Responsibil ities

PERFORMING ON YOUR BEHALF

35 Audit Committee Report

36 Social Impact Report

ACHIEVEMENTS

41 Shareholders’ and Investors’ Information

49 Independent Auditor’s Report

51 Income Statement

52 Balance Sheet

SAFEGUARDING YOUR ASSETS

54 Statement of Changes in Equity

55 Cash Flow Statement

58 Notes to the Financial Statement

86 Five-Year Summary

88 Notice of Meeting



ANNUAL REPORT 2010 - TOKYO CEMENT COMPANY (LANKA) PLC. 07

FINANCIAL HIGHLIGHTS - 2009/10

PROFIT AFTER TAXATION

Year Rs. Mn

Year

200 400 600 800 1,000 1,200 0

2006

2010

2007

2009

2008

Rs. Mn

2006 640

2007 824

2008 572

2009 357

2010 351

CAPITAL INVESTMENTS DURING PAST 05 YEARS

Year Rs. Mn

Year

2,000 4,000 6,000 8,000 10,000 12,000 14,000 0

2006

2010

2007

2009

2008

Rs. Mn

2006 5,292

2007 7,814

2008 9,766

2009 12,200

2010 13,283

CAPITAL EMPLOYED - GROUP

Year Rs. Mn

Year

1,000 2,000 3,000 4,000 5,000 6,000 0

2006

2010

2007

2009

2008

Rs. Mn

2006 3,817

2007 4 ,485

2008 5,005

2009 5,243

2010 5,531



TOKYO CEMENT COMPANY (LANKA) PLC

Performance Highlights

Consolidated Company

Rs. Mn 2010 2009 2010 2009

PERFORMANCE

Turnover

Less: Cost of Sales

Gross Profit

Profit Before Tax

Profit Attributable to Ordinary Shareholders

INFORMATION TO SHAREHOLDERS

Earnings Per Share - Voting

Earnings Per Share - Non-Voting

Dividend Per Share - Voting

Dividend Per Share - Non-Voting

Net Assets Value Per Share

Market Value Per Share - Voting

Market Value Per Share - Non-Voting

KEY FINANCIAL INDICATORSReturn on Capital (ROCE)

Interest Cover

Price Earnings Ratio - Voting

Price Earnings Ratio - Non-Voting

Current Ratio

Quick Asset Ratio

17,652

(14,933)

2,719

647

357

1.28

1.28

0.30

0.30

20.00

125.00

9.00

27%

1.78

97.37

7.03

0.53:1

0.33:1

14,737

(12,456)

2,281

347

351

1.37

1.37

1.65

1.65

21.00

28.00

17.75

21%

1.41

20.47

12.98

0.62:1

0.49:1

6,045

(5,352)

693

143

143

0.53

0.53

0.30

0.30

12.10

125.00

9.00

6%

3.2

236.18

16.98

0.55:1

0.35:1

OPERATING HIGHLIGHTS

Group

Turnover decreased by 16.5% (To Achieve Rs. 14.7 Bn)

Pre-Tax Profit and Post-Tax Profit Rs. 347 Mn and Rs. 351 Mn respectively

Total assets decreased by 8% (To reach Rs. 12.4 Bn)

Company

Turnover grew by 1.3% (To Achieve Rs. 6.1 Bn)

Pre-Tax Profit and Post-Tax profit Rs. 1.464 Bn and Rs. 1.461 respectively

Total assets grew by 5% (To reach Rs. 7.8 Bn)

Ratios of the previous year have been restated.

TheEastern Pride


6,125

(4,835)

1,290

1,465

1,461

5.41

5.41

1.65

1.65

17.20

28.00

17.75

37%

6.73

5.17

3.28

0.88:1

0.76:1




A new decade! a new beginning!

The conclusion of the 2009/10 financial year ushers a new decade in which Tokyo Cement Company (Lanka) PLC

would also mark a corporate milestone of its own successful existence of three decades.

Our progress during the past 28 years has been recognized as rewarding to multiple stakeholders, consistent

and exemplary. For the Board of Directors, the management as well as the entire staff, the progress of

Tokyo Cement has been inspiring. The reason being every year of the past 28 years has delivered many challengestesting our resolve; yet we have braved many an adversity successfully. We as a good corporate citizen and a

strategically important enterprise for the economy have endeavoured to do the best and be the best.

The financial year 2009/10 epitomizes this corporate character of Tokyo Cement Company (Lanka) Plc.

Strong effects of a depressed economy were widely felt across the cement market as a result of a downturn

in construction activiti es. The Tokyo Cement Group in particular has been forced to operate in an environment

of successive years of declines in the market leading to contraction in output. When other corporates tend to

lose opportunities to improve during downturn, at Tokyo Cement, challenges strengthen the effort to keep

raising the bar in terms of efficiency, cost management as well as other best practices across the value chain.

It is through such inward looking holistic approach that Tokyo Cement has been able to outperform the cement

industry in tough years as well as other corporates in relatively good times.

In a year when economy could only manage to grow by perhaps one of the lowest ever rate of 3.5% and

national cement output contracted by 30%, Tokyo Cement fared better. Despite turbulent conditions in the

cement industry, Tokyo Cement retained its market leadership. Our portfolio of products namely Nippon,

Tokyo Super - Super Portland Cement, Tokyo Super - Super Pozzolana and last year’s innovati on Tokyo Super

- Super Masonry continue to enthral the market with the best quality and reliabil ity as well as value for money.

More importantly Tokyo Cement was also able to secure the same profitabil ity levels, that were achieved in

2008/9 financial year.

The resilience of the Company and the Group was more pronounced, especially in the fourth quarter of 2009/10

financial year when the construction sector began to rebound. This manifests the core strength of the Group to

maximize performance on the upturn and manage better in a downturn. Today, Tokyo Cement is a Group with

an installed capacity of near 2 million tons of cement, 500 employees and over Rs. 12 billion in assets.

Better times are certainly on the cards as evident by the fact that economy grew by 7% in the first quarter of calendar

year 2010 and forecast of 7% growth overall for the year. In the medium term projections are a high 8% to 10%

economic growth. As the country at large savours the initial benefits of the end of war, people of all communities are

hopeful of a fresh decade as well as a new era of unprecedented opportunities to enhance their socio-economic

prosperity. We at Tokyo Cement too are ready to take part in the rebuilding of Sri Lanka and serve the rebound.

Our past reinvestment of profits retained after distribution among multiple stakeholders in the core business has

put Tokyo Cement in good stead to leverage the new opportunities.

CORPORATE PROFILE




TheEastern Pride


In 2008/09 financial year the Group invested over Rs. 4 bil l ion for a new highly effic ient and advanced Vertical

Roller Mil as well as in a pioneering 10 MW Bio Mass eco-friendly power plant. These have been further

consolidated in the current financial year whilst plans are underway to expand capacity and foray into new

ventures in tandem with the upturn in the construction sector.

Despite externally 2009/10 was yet another year of challenges s everal new initiatives bore fruits within Tokyo

Cement Group.

The launch of cement based tile bond with two variants as solutions for new surfaces and existing surfaces or

tile on tile was a key milestone as part of product extension strategy tapping new markets especially as

Sri Lankan households are fast converting to ti les. The launch was possible owing to enhanced Research and

Development (R&D) efforts within the Group. Last year we launched pre-packed concrete as a solution to

individual and small and medium scale construction segments’ needs.

The management reviewed all cost aspects as a consciou s strategy to improve cost and operational ef ficiency.

Work was also undertaken in the year under review to prepare for the implementation of a state-of-the-art

Enterprise Resource Planning (ERP) software solution in 2010/11 financial year.

These overall measures wil l help in the management’s zeal to make Tokyo Cement efficient and leverage a

more agile organization to harness new growth opportunities and meet present demand cost effectively.

Preliminary efforts were also made towards incorporating a wholly owned subsidiary Tokyo Cement Power

(Lanka) Ltd., for setting up of and operation of a power generation plant for util ization of the power generated

by it for the supply to the national grid.

In a bid to better serve the post-war construction boom in the North, the Company also plans to invest

Rs. 60 mil l ion in putting a ready mix concrete plant in Jaffna in the new financial year. This wil l increase the

number of ready mix concrete plants to seven.

We continue to focus on sustainabil ity of our operat ions whilst preserving the env ironment in which we operate.

As part of continuous improvement from our pioneering position as the first corporate to secure ISO 14001Environmental Standards Certification, the Company invested further in making our operations in the

Trincomalee Jetty more environment friendly.

To our shareholders Tokyo Cement has been a corporate that strives to enhance value with many key initiatives

finalized in 2009/10 and for implementation in the New Year.

Midst unprecedented opportunities, th e way forward for Sri Lanka as an exemplary global citizen faces many

challenges. Addressing them early with bold and pragmatic solutions would quicken the forward march.

The nation as a collective force must unite with courage and confidence.

As Sri Lanka embraces a new era of permanent peace and rapid socio-economic development, the

persevering Tokyo Cement too remains committed and ever wil l ing to enhance its contribution to the country

and all other stakeholders, l ike it has done for the past 28 years.


CORPORATE PROFILE



BOARD OF DIRECTORS


Mr. S.R. GnanamJoint Managing Director

Mr. Edgar Gunatunga Chairman

Mr. S.V. WanigasekeraDirector

Mr. K. YanagiharaJoint Managing Director

Mr. E.J. GnanamDirector

Mr. A.S.G. GnanamDirector

Dr. Harsha Cabral

Director

Mr. R. Seevaratnam

Director

Mr. S. MoriDirector (Resigned on 28th June 2010)

Mr. T. Uetake

Director (Resigned on 28th June 2010)

Mr. W.C. FernandoGroup General Manager

Director, Fuji Cement, Tokyo Super Cement &Tokyo Cement Colombo Terminal



TheEastern Pride





The period under review, April 2009 - March 2010, was an eventful period in th e country. In May, the

Government security forces completely annihilated the Northern terrorists who were waging a war

against the State fighting for a homeland in the North & East for the past 29 years at great cost in men

and resources. It was the political wil l of the State that decided for a mil itary adventure which brought

about the welcome victory. The President seeing his popularity being enhanced, decided to call for a

poll to re-elect him for a second term, prematurely, which he won convincingly. In April, parliamentary

elections were held and the ruling party together with a few insignificant political parties was returnedto power with an increased majority. These events would augur well for the prosperity of the country.

Due to the continuing war situation that prevailed during the period and the slow recovery of the slow

down in the global economy, construction industry in the country was sluggish. In point of fact, there

were hardly any mega buildings and apartment projects. However, due to Company’s foreign

connections, it was successful in securing orders mainly from foreign contractors who were engaged in

mega projects in the country.

The Company’s performance is considered fairly satisfactory. The consolidated profit of the Group was

Rs. 351 mil l ion as against Rs. 357 mil l ion during the previous period. The profits of the Company was

Rs. 1.4 bil l ion as against Rs. 143 mil l ion in the previous year. The substantial increase in profit was due

to Rs. 1.1 bil l ion dividend being received from subsidiary company, Fuji Cement, out of that Company’s

carried forward tax free profits. The Company’s drop in profits was cushioned to some extent by

reduced cost in raw materials and substantial savings in cost of electricity, due to Company’s own

power generation.

Due to sluggish demand, the capacity util ization of the plants of the Company and that of its subsidiary

Tokyo Super Cement was 60%. Due to the said reason, the operations of Fuji Cement was marginal.

The contribution from the subsidiary company, Tokyo Cement Colombo Terminal was also in the

negative due to the reasons stated. The Company’s fleet of three vessels provides a useful service for

imports of raw materials. Using Company’s own ships at tracts low rates of import duties. Notwithst anding

the fierce competition in the l ine of trade, the contributions from the Company’s six batching plants were

satisfactory. The Bio Mass electricity generation plant commissioned in October 2008 at a substantialcost has proved to be a wise investment. It not only generates plant’s entire requirements at costs far

below the cost from the national grid, but it also generates excess power to be sold to the nationa l grid.

The Company enjoys tax free period until year 2013, and the subsidiary, Tokyo Super Cement, until

2018. The tax free period of Fuji Cement lapsed in 2008.

CHAIRMAN’S REVIEW




What is my forecast for the ensuing year ! Although the war scenario is now history, I do not see rapid

recovery of building projects in the South during the ensuing year. However, due to destruction from

the war in the North & East, I foresee considerable development in these areas . To meet the increased

demand in the North, a batching plant is currently being installed in the Peninsula. The upshot of these,

I predict, the Company will record a substantial increase in profitabil ity in the ensuing year. However,

I express a concern in that the CEPA which is being currently discussed may contain provisions enabling

India to export to the country at further concessionary terms. It is hoped that the authorities wil l takecognizance of the interest of the local industries prior to signing the agreement.

The Company is fortunate in having a committed workforce and I take the opportunity to record my

appreciation for their good work and commitment. I also thank my colleagues in the Board for their

valuable contribution and co-operation.

Thank you

Edgar Gunatunga Chairman

17th August, 2010 Colombo

TheEastern Pride



CHAIRMAN’S REVIEW



On behalf of the Japanese Joint Venture Partner, I would l ike to express our heartfelt appreciation to

the shareholders of Tokyo Cement Company (Lanka) PLC for the confidence they had placed in the

members of the Board.

I would l ike to thank the dealers and customers of Tokyo Cement Group for special consideration.

Also, management staff and employees of Tokyo Cement Group for their contribution to the Company.

In Fiscal Year 2009/2010, it became such a situation that the produ ction adjustment has been taken d ue

to the influence of slowdown of the world economy since the Autumn of 2008. Consequently, the

cement demand was sluggish and the profit of the Tokyo Cement Group ha s maintained similar level of

profitabil ity in comparison to the previous year. However, the 'profit of the Tokyo Cement Group has

increased substantially due to receipt of dividend from the subsidiary company Fuji Cement and

considerable cost saving of electricity from the Bio Mass Power Plant.

The Northern Province became peaceful recently and reconstruction and revival projects are being

proceeded gradually in this area. Hence, cement demand is expected to increase substantially.

I wish that Tokyo Cement Group will grow more and more, and then contribute to the construction

industry to a great degree.

I hope the Fiscal Year 2010 would be a prosperous year for Tokyo Cement Group.

Kiyoaki Ogura President

Nippon Coke & Engineering Co. Ltd.

17th August, 2010

MESSAGE FROM THE PRESIDENT OF NIPPON COKE & ENGINEERING CO. LTD.




TheEastern Pride


The financial year that ended on March 31, 2010 was a mixed one for Tokyo Cement Plc. The year was

characterized by economic downturn i n the early part of the year whilst at the tail end a recovery was

evident.

In comparison to a 6% growth in 2008, the country’s Gross Domestic Product (GDP) improved by only

3.5% in 2009. The Central Bank described the growth rate of 3.5% as a demonstration of the resil ience

of the economy amidst global and local shocks. The growth rate would have been much lower if not fora strong recovery in the latter part of 2009. GDP grew by a high 6.2% in the last quarter of 2009 and

for Tokyo Cement benefits of economic revival began translating only in the first quarter of calendar

year 2010 and the last quarter of financial year 2009/10.

In 2009, all major sectors of the economy grew, though lower in comparison to 2008. The agriculture

sector recorded a low growth of 3.2% compared to a high growth of 7.5% in 2008. The industry sector

slowed down registering a growth rate of 4.2% compared to a growth of 5.9% in 2008 whilst the

services sector which accounts for 55% of GDP, grew by 3.3%, down from 5.6% in 2008. The

deceleration in the Industry sector was witnessed in all sub-sectors consisting of factory, industry and

construction sectors.

The construction sector in 2009 grew by 5.6% but a near 30% contraction in comparison to the 7.8%

growth enjoyed in 2008. Despite this contraction in growth between the two years, Construction

sector’s contribution to the change in GDP was 10.3% up from 8.4% in the previous year.

The output of non-metall ic mineral products category which was mainly contributed by the cement and

building materials industries registered a negative growth of 3.3% in 2009 due to the slowdown in the

construction sub-sector.

According to the Central Bank the recorded growth in construction sub-sector came from positive

contributions from public sector mega construction projects such as Norochcholai and Upper Kotmale

power plants, road network development projects such as the Colombo – Katunayake and Southern

Expressways and construction of several flyovers and other rural road development projects under the“Maga Neguma” programme.

The calendar year 2009 also saw a deceleration in housing construction as reflected by the drop in the

volume of building material imports by 24.1% in 2009 whilst cement imports contract ed by 15% and local

cement production declined by 7.4%.

Whilst performance of construction and cement industries in 2009 could be described as most

disappointing, there was a pick up in fortunes in early 2010 and Tokyo Cement is confident the trend

will continue.

The Government is forecasting an economic growth of over 6% in 2010 with a positive contribution

being made by all the major sectors of the economy. The release of first quarter GDP data confirms this

optimism as the economy grew by 7.1% in comparison to a weak corresponding period in 2009.

JOINT MANAGING DIRECTORS’ MESSAGE





FINANCIAL PERFORMANCE

The overall depressed economic and market conditions which prevailed in most part of the 2009/10

financial year had a direct bearing in the financial performance of Tokyo Cement.

The Group’s consolidated revenue was Rs. 14.7 bil l ion in 2009/10, which is 16.5% decline over the top

line performance recorded in the previous financial year. The Group’s gross profit after other income

declined by 5.4% to Rs. 2.7 bil l ion whilst we succeeded to achieve a net profit similar to the previous

year. In a financial year when most corporates saw decline in their bottom line, Tokyo Cement retaining

its profitabil ity levels intact is noteworthy. It must also be recorded that for the full year net profit figure,

Rs. 351 mil l ion.

This substantiates our assertion that t he economic recovery has begun to be more pronounced from the

start of the 2010 calendar year. This phenomenon also augurs well for the outlook for the upcoming

2010/11 financial year.

MARKET CONDITIONS

As explained earlier on, the cement market was besieged by low level of construction activities, both

commercial and household. Cement production was down by 30% to 3.4 mil l ion metric tons in calendar

year 2009. The downturn forced the Group to temporarily shut down the subsidiary Fuji Cement’s plant

whilst the capacity util ization of other plants was a low 60%. In l ine with pick up in economic and

construction activities, the Group has been expanding capacity util ization and output.

In 2009 price of cement also declined as demand was slack. This however helped to encourage the

will ing builders in a depressed economic environment. It must be noted that the major users of cement

in the year under review were state funded large-scale infrastructure projects as the overall

commercial segment was under performing. Though there are greater signs of economic revival,

commercial construction activities h ave not picked up in equal velocity. This is a challenge for the overall

construction sector as well as the cement sub-sector.

It must be emphasized that cement sector has seen two years of decline in overall demand and sales

in comparison to the previous years.

Despite turbulent conditions in the cement industry, Tokyo Cement retained its market leadership.Our portfolio of products, namely Nippon, Tokyo Super - Super Portland Cement, Tokyo Super - Super

Pozzolana and last year’s innovation Tokyo Super - Super Masonry continue to enthra ll the market with

the best quality and reliabil ity as well as value for money.

CONSOLIDATED REVENUE

Year Rs. Mn

Year

3,000 6,000 9,000 12,000 15,000 18,000 0

2006

2010

2007

2009

2008

Rs. Mn

2006 8,956

2007 11,308

2008 13,893

2009 17,652

2010 14,737




TheEastern Pride


OPERATIONAL REVIEW

In 2008/09 financial year the Group invested over Rs. 4 bil l ion partly via bank borrowings for new

Vertical Roller Mill as well as the pioneering Bio Mass Power Plant. The first year of charging for

depreciation for the capital expenditure incurred was in 2009/10 which had an impact in the pre-tax

profitabil ity at Group level.

In terms of raw material, the year 2009/10 too was mixed with the early part seeing a decline due to

effects of the global recession but picking up with the rebound in the latter quarters.

As external conditions were depressed Tokyo Cement used the challenging times to look within for

process improvements. The management reviewed all cost aspects as a conscious strategy to improve

cost and operational efficiency. Work was also undertaken in t he year under review to prepare for the

implementation of a state-of-the-art Enterprise Resource Planning (ERP) software solution in 2010/11

financial year.

These overall measures wil l help in the management’s zeal to make Tokyo Cement efficient and

leverage a more agile organization to harness new growth opportunities and meet present demand

cost effectively.

It must be recalled that in the year 2008 Group successfully commissioned the highly efficient and

advanced Vertical Roller Mill along with the activation of the 10 MW Bio Mass eco-friendly power plant.

Benefits from the power plant helped the year und er review whilst the Roller Mill wil l enable the Group

to better service the evident rebound in the market in 2010/11.

Subsequent to the balance sheet date, the Company incorporated a wholly owned subsidiary Tokyo

Cement Power (Lanka) Ltd., for setting up and operation of a power generation plant to supply power

to the national grid.

During the year the Company also fully util ized a concessionary JICA funded cr edit scheme to the value

of Rs. 50 mil l ion via Bank of Ceylon to improve environmental-friendliness of the operations in the

Trincomalee Jetty.

The Group’s ready mix concrete solution branded Tokyo Supermix also performed satisfactorily in

2009/10. During the year we reactivated the plant in Anuradhapura makin g all six plants in the country

fully operational. Following the end of war, the Northern economy is rebounding and an increase in

medium scale commercial construction and house rebuilding is evident. To cater to this new demand

efficiently the Company plans to invest Rs. 60 mil l ion in putting a ready mix concrete plant in Jaffna in

the new financial year.






PRODUCT DEVELOPMENT

The Company also focused on enhanced Research and Development (R&D) in 2009/10 financial year

the fruit of which was the launch of cement based tile bond with two variants as solutions for new

surfaces and existing surfaces or ti le on tile.

These two products were developed based on extensive market research which revealed that existing

products do not satisfy user expectations effectively.

With the increase in per capit a income more households are opting for floor and wall ti les. This together

with the growth in construction activities make the launch of cement based tile bond timely and augurs

well for their success.

The product extension initiative is part of Tokyo Cement’s continuous strategy of identifying new

opportunities in the market. Last year we launched pre-packed concrete as a solution to individua l and

small and medium scale construction segments’ needs.

ENHANCING SHAREHOLDER RETURNS

During the year under review, Tokyo Cement successfully completed the sub-division of its voting shares

on the basis of ten for one, thereby enhancing the l iquidity of the Company’s shares in the

Colombo Stock Exchange.

During the year, the Company also saw its share price improved. Price of voting shares peaked to a

high of Rs. 340 before sub-division as opposed to the highest of Rs. 192 in the previous year. After the

sub-division the share price peaked to a high of Rs. 28.

Subsequent the Balance Sheet date, in May the Company also proposed t he capitalization of reserves

worth Rs. 573.7 mil l ion on the basis of one for eight existing held for both voting and non-voting shares

at a consideration of Rs. 17 per share. Following shareholder approval for the capitalization of

reserves, 22,500,000 voting shares and 11,250,000 non-voting shares of the Company were l isted on

7th July 2010.

In August, 2010 the Company announced an in terim dividend of Rs. 1.65 per share for both voting and

non-voting shareholders for 2009/10 financial year.




TheEastern Pride


FUTURE PROSPECTS

In our previous year’s Annual Report we emphasized that Sri Lanka as a nation is blessed with an

unprecedented opportunity to deliver high socio-economic growth following the end of the near

30-year old confl ict.

The country has begun to reap initial benefits of a Sri Lanka sans war. Tourism sector has been the firstbounce back with many leisure groups embarking on or announcing massive expansion. With your

Company’s fortunes directly l inked to the buoyancy of the construction sector, the new building or

improvements by the tourism sector is most welcome.

A great opportunity before a peaceful Sri Lanka is the overall rebuilding of the country, espec ially in the

North and East which was most ravaged by the war.

With post-war benefits also l ikely to encompass the industrial and agricultural sectors as well as the

overall economy of Sri Lanka, we remain optimistic of future prospects. A comfortably achievable 6% to

7% economic growth in the short-term and a high 8% to 10% growth envisaged in the medium to

long-term signify a new era of prosperity for Sri Lanka. The Government is also committed in the medium

term to doubling the per capita income to US$ 4,000 from the current $ 2,000.

These targets translate to higher construction activities at multiple levels of state, commercial and

households. All these point to an imminent economic resurgence in Sri Lanka in l ine with President

Mahinda Rajapakse’s new vision of making Sri Lanka the Asia’s wonder. A truly united, peaceful and

prosperous Sri Lanka is the overarching goal of people of all communities in the country.

We congratulate the Government for its bold vision and Tokyo Cement wil l strengthen itself to

contribute not only to the rebuilding of Sri La nka but also make it stronger and s uccessful. In this new era

of unprecedented opportunity it is important for the country to lay a solid foundation. As we have

repeatedly highlighted, the need for a national policy on construction sector as well as for cement

industry is paramount if Sri Lanka were to reap effectively and efficiently the true post-war potential.Such a national policy must take into heart the need to develop a viable and dynamic local cement

industry.

At present the capacity in the cement industry is underutil ized and this translates to waste of valuable

resources. The first milestone for the cement industry and the Government as a responsible and

pragmatic enabler of development is to ensure that the excess capacity is fully addressed. Tokyo

Cement which is nearing three decades of existence has been an integral part of Sri Lanka’s

development thus far by reinvesting profits for expansion and modernization.






Given our proven track record and long-standing commitment, we are confident Tokyo Cement is best

suited to lead the revival in cement industry, thereby lend a catalyst impetus to the overall construction

challenge of future Sri Lanka.

A more efficient public sector powered by competent and professional civil service sans personnel

co-opted from private sector with confl ict of interest, a robust public-private partnership for

infrastructure development, improved governance both at government and private sector level and a

greater degree of law and order with a ca ring society are some of the immediate priorities for th e new

post-war Sri Lanka.

The Government has thus far successfully managed to improve macro-economic environment with low

rates of interest and inflation and a stable exchange rate. These positives must be sustained withcontinued vigilance on fiscal management.

From a corporate perspective, in the new financial year Tokyo Cement wil l consolidate its operations

and investments made to date whilst gearing afresh and exploring new growth and expansion

opportunities. New capital expenditure for modernization, process improvements and greater cost

efficiency are in the pipeline for the next financial year (2010/11).

With Sri Lanka as a nation and corporates such as Tokyo Cement can plan ahead midst peaceful times.

We have set our sights to become a fully integrated cement manufacturer in the medium to long-term.

Thank you

S.R. Gnanam K. YanagiharaJoint Managing Director Joint Managing Director

17th August, 2010 17th August, 2010 Colombo Colombo




TheEastern Pride





The Directors of Tokyo Cement Company (Lanka) PLC., take special pride in presenting their report

along with the audited financial statements of the Company and the Group for the financial year

ended March 31, 2010, as the Company and Group begin its second quarter century of commitment

to excellence following Twenty Eight years of steady growth.

BUSINESS REVIEW OF PRINCIPAL ACTIVITIES

The manufacturing operations of the Company continue to be devoted solely to the production ofOrdinary Portland Cement, Pozzolana Cement, Masonry Cement and Ready Mixed Concrete;

all superior quality cement products. The overall performance of the Company during the year under

review is outl ined below and includes developments recorded in the same period.

GROUP TURNOVER

The Group recorded a total turnover of Rs.14.7 Bn, a decrease of Rs. 2.9 Bn over the previous financial

year. The turnover of the Company stood at Rs. 6.1 Bn which is an improvement of Rs. 80 Mn over the

equivalent figure of the previous year.

REVIEW OF THE RESULTS

2010 2009

(Rs. Mn) (Rs. Mn)

Group pre-tax profit 348 647

Group after tax profit 351 357

Net profit attributable to ordinary shareholders 369 347

Company pre-tax profit 1,465 143

Company after tax profit 1,461 143

Dividend

An interim dividend of Rs. 1.65 per share on both ordinary voting shares and ordinay non-voting shares

was declared by the Directors out of tax free dividend received from Fuji Cement Company (Lanka) Ltd.

and Ex-dividend date was 17th August, 2010

EARNINGS PER SHARE

Please refer page 71 note 7.

REPORT OF THE DIRECTORS




PROPERTY, PLANT & EQUIPMENT

The consolidated Property, Plant & Equipment, at cost, for the year ended March 31, 2010 stood at

Rs. 12.9 Bn as against Rs. 12.9 Bn recorded at the end of the preceding year. The share of the

Company’s fixed assets was valued at Rs. 6.9 Bn, compared to Rs. 6.8 Bn the previous year. Details

regarding the movement of assets are provided in the notes to the accounts. The Group’s total capital

expenditure stood at Rs. 1.1 Bn, compared to Rs. 2.4 Bn during the previous year. The value of assets

disposed of during the year amounted to Rs. 1.4 Bn.

CURRENT ASSETS

The total current assets of the Group as at March 31, 2010 were valued at Rs. 3.2 Bn, compared to

Rs. 3.6 Bn the previous year.

LONG-TERM LOANS

As at March 31, 2010, the long-term borrowings of the Group amounted to Rs. 3.7 Bn compared to

Rs. 3.4 Bn, which was the figure recorded at the end of the previous financial year. The share of

Company borrowings during this period stood at Rs. 1.1 Bn against Rs. 603 Mn in the previous year.

Loan repayment proceeds on schedule.

GROUP INVESTMENTS

A total of Rs. 1.1 Bn was expended on Property, Plant & Equipment and Investments. The total capital

expenditure during the previous year wa s Rs. 2.4 Bn. Short-term investments were made in Treasu ry Bil ls

and Term Deposits.

STATED CAPITAL

The stated capital of the Company at the end of the year under review was represented by 180 Mn

ordinary voting shares and 90 Mn ordinary non-voting shares.

GROUP RESERVES

The total reserves of the Group was calculated to be Rs. 5.5 Bn as at March 31, 2010, compared with

Rs. 5.2 Bn in the previous year. This includes Rs. 150 Mn in capital reserves and Rs. 3.5 Bn in revenuereserves.

GROUP DONATIONS

The Group donated a total amount of Rs. 7.4 Mn for various charities during the year. In the previous

year Group donations amounted to Rs. 63.2 Mn.

GROUP TAXATION

The Company is not l iable for income tax at the Balance Sheet date due to the reason mentioned in th e

accounting policy number 2.4.2.2 on page 66 of the Financial Statements. Income tax l iabil ity of Tokyo

Cement, Colombo Terminal (Pvt) Ltd has been Rs. 24.8 Mn.

TheEastern Pride






There is no l iabil ity for deferred tax at the Balance Sheet date due to the reason mentioned in the

accounting policy number 2.4.2.2.1 on page 66 of the financial statements. The Company is currently

enjoying a ten-year tax holiday and certain timing differences wil l not reverse for a considerable period

of time. Hence, the timing differences have been excluded from the tax expense.

SHAREHOLDERS’ / INVESTORS’ INFORMATION

Shareholders‘ / investors’ informations provided separately from pages 40 to 48.

EVENTS OCCURRING AFTER THE BALANCE SHEET DATE

Please refer note 27 on page 85.

EMPLOYMENT POLICIES

The Group continues to abide by its policy of not discriminating in terms of gender, race or religion in

the matter of employment. The Group respects each and every individual and career advancement

opportunities are provided to all employees without exception. The Group is as committed as always to

create a zero accident-free, work environment since the safety of all staff is of ultimate importance. A

total of 575 permanent employees and 55 casual workers was on our payroll in the year ended

March 31, 2010. They received a total remuneration package of Rs. 259 Mn which exceeds by

Rs. 2.2 Mn the figure for the previous year.

CUSTOMERS

The Directors consider invaluable the patronage of our customers who are our greatest source of

strength. The Company continues to be committed to provide total satisfaction to our customer base by

enhancing the quality of our range of products and services.

SUPPLIERS

The Group continues to thrive on the strong bonds with all its suppliers, based on trust and reliabil ity.

STATUTORY PAYMENTS

The Directors are satisfied that all statutory payments in respect of the employees and the staff havebeen complied to the full and to the best of their knowledge.

ENVIRONMENTAL PROTECTION

The Company, which was the first Sri Lankan company in the cement industry to obtain the ISO 14001

Environmental Management Certificate, has not relaxed its commitment to preserve the environment

and to the efficient use of natural resources with future generations in mind.





RESEARCH AND DEVELOPMENT

The Company invested heavily on research and development this year as well, since the continuous improvementof quality and maintaining high standards under the guidance of competent professionals remains a key andfoundational concern.

CORPORATE GOVERNANCE/INTERNAL CONTROL

The Company considers sound governance measures and appropriate internal control as an integral part ofoperations. The practices followed by the Company are set out on pages 30 to 33.

GOING CONCERN

Preparation of financial statements has been done on the going concern basis, as confirmed in the Statement ofDirectors’ Responsibil ities on page 34.

BOARD OF DIRECTORS

The following are the Directors who served the Company during the year ended March 31, 2010:

Mr. Edgar Gunatunga - Chairman - Non-Executive Independent DirectorMr. Simon Rajaseelan Gnanam - Joint Managing DirectorMr. Arul Selvaraj Gunaseelan Gnanam - Non-Executive DirectorMr. El i jah Jeyaseelan Gnanam - Non-Executive DirectorMr. Ranjeevan Seevaratnam - Non-Executive Independent Director

Mr. Kuniomi Yanagihara - Joint Managing Director, Nominee Director of

Nippon Coke & Engineering Company Limited, JapanMr. Stanley Vincent WanigasekeraMr. T. Uetake - (Resigned on 28th June, 2010)Mr. Shunichiro Mori - (Resigned on 28th June, 2010)

Dr. Harsha Cabral - Non-Executive Independent Director

RETIRING DIRECTORS

To re-elect Mr. Ranjeevan Seevaratnam who retires by rotation in terms of Article 113 of the Articles of

Association.

To re-elect as a Director, Mr. Edgar Gunatunga and being over the age of 70 years and who retires in terms of

Articles of Association and pursuant to Section 211 of the Companies Act No. 7 of 2007 for which special notice

of the following ordinary resolution has been given by a member for the purpose:

That the age limit referred to in Section 210 of the Companies Act No. 7 of 2007 shall not apply to

Mr. Edgar Gunatunga who is 78 years and that he be re-elected a Director of the Company.

DIRECTORS’ INTERESTS

The Directors’ Interests in the Company contracts appear on page 83 of the financial statements and have beendeclared at the meetings of the Directors. Apart from the information disclosed, the Directors have no other director indirect interest in any contracts or proposed contracts pertaining to the business of the Group.

MAJOR SHAREHOLDINGS

The twenty majority shareholders and the percentage held by each of them as at March 31, 2010 appear onpage 41 to 42.

ANNUAL GENERAL MEETING

The Annual General Meeting wil l be held on September 16, 2010 at 5 p.m. The notice of the Annual GeneralMeeting appears on page 88.

TheEastern Pride


Non-Executive Director, Nominee Directors ofNippon Coke & Engineering Company Limited, Japan





AUDITORS

BDO Partners, Chartered Accountants are the Auditors of the Company. They are recommended for

re-election.

DIRECTORS’ SHAREHOLDINGS

Directors’ Shareholding - Ordinary Shares

No. of No. ofShares held Shares held

as at 31.03.10 as at 31.03.09

Local Joint Venture Partner - St. Anthony’s Consolidated Ltd. 49,499,780 4,949,978

Mr. Gnanam A. S. G. 10 1

Mr. Gnanam S. R. 10 1

Mr. Gnanam E. J. 10 1

Foreign Joint Venture Partner - Nippon Coke & Engineering Co. Ltd.

(Mitsui Mining Company Ltd.) 49,499,940 4,949,994

Nominee Directors

Mr. Wanigasekera S. V. 4,800 480

Mr. K. Yanagihara - -

Mr. Shunichiro Mori - -

Mr. T. Uetake - -

Independent Directors

Mr. Edgar Gunatunga - -

Mr. Ranjeevan Seevaratnam - -

Dr. Harsha Cabral - -

49,504,770 4,950,477

Total Ordinary Shares in Issue 180,000,000 18,000,000

Directors’ Shareholding - Non-Voting Shares

Mr. Wanigasekera S. V. 3,000 3,600

Total Non-Voting Shares in Issue 90,000,000 90,000,000





TheEastern Pride


GROUP STRUCTURE

Tokyo Cement Co. (Lanka) Plc

Subsidiaries % of holding

- Fuji Cement Co. (Lanka) Ltd. 100% Owned

- Tokyo Super Cement Co. Lanka (Pvt) Ltd. 100% Owned

- Tokyo Cement Colombo Terminal (Pvt) Ltd. 56.85% Owned

- Tokyo Cement Power (Lanka) Ltd. (Stil l in gestation stage) 100% Owned

AUDITORS’ REPORT

The financial Statements for the year ended March 31, 2010 have been audited by BDO Partners and

their report is given on pages 49 & 50.

SIGNIFICANT ACCOUNTING POLICIES

The Significant Accounting Policies adopted in the preparation of Financial Statements are given on

pages 58 to 85 of the Annual Report.

DIRECTORS’ RESPONSIBILITIES FOR FINANCIAL STATEMENTS

The Directors are responsible for the preparation and presentation of Financial Statements of theCompany to reflect a true and fair view of the state of its affairs. The Statement of Directors’

Responsibil ities for the Financial Statements is given on page 34 of this Annual Report.

EQUITABLE TREATMENT TO SHAREHOLDERS

The Directors at all times ensure that all shareholders are treated equitably.

COMPLIANCE WITH LAWS AND REGULATIONS

To the best of the knowledge and belief of the Directors, the Group has not engaged in any activities

violating the laws and regulations of the Company.

OUTSTANDING LITIGATIONS

In the opinion of the Directors and t he Company lawyers / legal counsel , l itigations pendin g against the

Company will not have major impact to the Financial Statements.

INTEREST REGISTER

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

Company.





Mr. E. Gunatunge Hony. FIB

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

Mr. S. R. Gnanam

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

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

Mr. A. S. G. Gnanam

Appointed to the Board in August 1999. Attended I l l inois Institute of Technology Graduated in Industrial &Mechanical Engineering in 1973. Chairman & Managing Director St. Anthony’s Industries Group (Pvt) Ltd., AlsoChairman of Rhino Roofing Products Ltd., CEO of many private and public l iabil ity companies.

Mr. E. J. Gnanam BA (University of Texas), MBA (University of Melbourne)

Appointed to the Board in February 2007. Managing Director of South Asian Investments (Private) Limited, aninvestment company and also the Managing Director of Ceylon Synthetic Textile Mil ls Limited, Rhino Roofing Products

Limited and also in the Board of Private, Public and l isted companies. Has wide experience at leading corporatesector institutions in the garments trade, manufacturing and services.

Mr. R. Seevaratnam

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

Dr. H. Cabral

Appointed to the Board in March 2009. President’s Counsel, Ph.D. in Corporate Law (University of Canberra),Austral ia, Commissioner - Law Commission of Sri Lanka, Member (NCED-National Council for EconomicDevelopment), Legal Cluster, Member - Board of Studies - Council of Legal Education SL, Lecturer and Examiner -University of Wales, University of Colombo and Sri Lanka Law College, Vice-President - BRIPASL (Business Recovery

and Insolvency Practitioners’ Association of SL), Member - Academic Board of Studies - Institute of CharteredAccountants of Sri Lanka.

Mr. S. V. Wanigasekera

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

Mr. Shunichiro Mori

Appointed to the Board in June 2008. Bachelor of Economics, Nagasaki University, Nagasaki, Japan. Worked atGeneral Affairs Dept, Miike Office, Mitsui Coal Industry Co., Coal & Coke Dept, Mitsui Mining Co., (Tokyo, Japan),Mitsui Ming USA Inc., (Stationed in USA). General Manager of Coal & Coke Dept, General Manager of CorporatePlanning Dept.

Mr. Toshimitsu Uetake

Appointed to the Board in April 2002. Bachelor of Educatin at Hokkaido University. Worked as Senior Manager,Materials Procurement & Products Delivery Department.

BOARD OF DIRECTORS




Tokyo Cement Company (Lanka) PLC continues to hold the exclusive honour of being the only cement

manufacturer l isted in the Colombo Stock Exchange. The Company is proud of its commitment to

upholding the highest standards associated with good corporate governance, strictly complying with

the principles and provisions of the Code of Best Practice on Corporate Governance published by the

Institute of Chartered Accountants of Sri Lanka (ICASL).

BOARD OF DIRECTORS

The Board consists of ten members including seven Directors and three Independent and

Non-Executive Directors. Two Joint Managing Directors each represent the two major shareholders. All

Non-Executive Directors are professionals with vast experience in the spheres of business and

administration.

BOARD PROCESSES

The Board of Directors formulates corporate goals and overall business strategy. In addition, they

provide direction in managing the business, reviewing performance and reporting to shareholders on

the performance of the Company on a quarterly basis. The Board meets monthly to assess corporate

and operational performance in the context of budgets and macro-economic market conditions.

AUDIT COMMITTEE

The Audit Committee comprises three Non-Executive Directors of which two are independent. They

examined the adequacy and effectiveness of internal control and assessed compliance with regulatory

requirements. This Committee met with the Joint Managing Directors, Group General Manager and

Chief Financial Officer, attending meetings upon invitation. The report of the Audit Committee appears

on page 35.

AUDIT COMMITTEE MEMBERS

Mr. R. Seevaratnam, FCA - Chairman - Audit Committee - Independent Director

Mr. Edgar Gunatunga - Independent Director

Mr. S. V. Wanigasekera, FCA - Non-Executive Director

REMUNERATION COMMITTEE

The Remuneration Committee comprises three Directors of which one is an Independent Non-Executive

Director.

Mr. S. V. Wanigasekera, FCA - Chairman - Non-Executive Director

Mr. R. Seevaratnam, FCA - Independent Director

Mr. S. R. Gnanam - Joint Managing Director

Mr. W. C. Fernando, FCA - Group General Manager

The Committee was empowered to examine any matters relating to remuneration paid to executive

members. Their terms of reference also encompass the Human Resources of the Company.

CORPORATE GOVERNANCE

TheEastern Pride





INTERNAL CONTROL AND MONITORING

Internal control and monitoring of operations are carried out on a regular basis. Selected sales depots

are audited in addition to the review of systems. These reports are scrutinized and discussed by the

members of the Audit Committee and suitable action is taken where necessary in consultation with

senior management.

Members of the Audit Committee also examine the monthly accounts submitted to the Board.

The Audit Committee also reviews internal controls in compliance with various accounting standards.

GOING CONCERN

The Board has adopted the going concern basis in preparing financial statements given that the

Company possesses sufficient resources to continue operations into the foreseeable future.

TRANSPARENCY

The Board discloses full information, both financial and non-financial information within the bounds of

commercial realities. Being the only cement manufacturer l isted on the Colombo Stock Exchange, it is

committed to a responsible business philosophy. Publication of quarterly accounts, the release of the

Annual Report and Audited Accounts are complied with within the stipulated time frame.

INVESTOR RELATIONS

The Company continues to maintain good communication with all shareholders irrespective of whetherthey are corporates or individuals. The Board invites questions from shareholders during the General

Meeting. In addition, the Chairman and Executive Directors meet institutional investors and analysts to

discuss the Company’s performance. Share price sensitive information not available to other

shareholders is not divulged during this meeting.

SHAREHOLDER VALUE AND RETURNS

Persons of eminence who are respected in the community serve on the Board and this factor enhances

the value of the shares of the Company. The Board also maintains an attractive dividend rate in l ine

with the expectations of the shareholders as well as for Capital formations of future expansion.


CORPORATE GOVERNANCE



Board of Directors

i . The correct number of Non-Executive Directors, in accordance with Rule 7.10.1 (a)

i i . The correct number of Independent Non-Executive Directors, in accordance with

Rule 7.10.2 (a)

i i i . Specified whether the Non-Executive Directors submitted a Declaration annually of

his/her independence or non-independence to the Board of Directors – Rule 7.10.2 (b)

iv. Confirmed that the Board of Directors made an annual determination as to the

independence or non-independence of each Non-Executive Director based on the

Declaration mentioned above and other information available to the Board AND states

the names of Non-Executive Directors determined to be ‘ Independent’ – Rule 7.10.3(a)

v. If the Director does not qualify as ‘ Independent’, but if the Board taking into account all

the circumstances is of the opinion that the Non-Executive Directors is ‘ Independent”, the

Board has specified, in the Annual Report, the qualification not met under Rule 7.10.4 ofthe CSE List ing Rules and the basis for determining the Director to be ‘ Independent’

Rule 7.10.3(b)

vi . Published a brief resume in the Annual Report, of each Director of the Board, which

includes information on the nature of his/her expertise – Rule 7.10.3 ( c)

Remuneration Committee

vi i . The correct number of Independent Non-Executive Directors in the Remuneration

Committee, in accordance with Rule 7.10.5(a)

vi i i . Specified whether a separate Remuneration Committee was formed or whether l isted

parent Company’s Remuneration Committee used – Rule 7.10.5(a)

ix. Specified the names of Directors comprising the Remuneration Committee (where the

parent company’s Remuneration Committee qualifies to function as the listed company’s

Remuneration Committee, a statement in the Annual Report to this effect and disclosed

the names of the Directors) - Rule 7.10.5(c)

x. Disclosed the functions of the Remuneration Committee, in accordance with

Rule 7.10.5(b)

xi . Specified whether the Chairman of the Committee is a Non-Executive Director

Rule 7.10.5(a)

CORPORATE GOVERNANCE DISCLOSURES UNDER CSE LISTING RULES

RuleNo.

ComplianceStatus

Compliant

Compliant

Compliant

Compliant

N/A

Compliant

Compliant

Compliant

Compliant

Compliant

Compliant

Rule

TheEastern Pride





xi i . The Annual Report contained a statement on the Remuneration pol icy – Rule 7.10.5(c)

xi i i . Specified the aggregate remuneration paid to Executive AND Non-Executive Directors

in the Annul Report – [“Remuneration” should include cash and all non-cash benefits paid

in consideration of employment with the Listed Entity (excluding statutory entit lementssuch as EPF and ETF)] – Rule 7. 10.5(c)

Audit Committee

xiv. The correct number of Independent Non-Executive Directors, in accordance with

Rule 7.10.6(a)

xv. Specified whether a separate Audit Committee formed or whether l isted parent

company’s Audit Committee used - Rule 7.10.6 (a)

xvi . Specified the names of Directors comprising the Audit Committee (where the parent

company’s Audit Committee qualifies to function as the listed company’s

Audit Committee, a statement to this effect AND disclosed the names of the Directors)Rule 7.10.6(c)

xvi i . Confirmed that the functions of the Committee has being in accordance with

Rule 7.10.6(b)

xvi i i . Specified whether the Chairman of the Committee is a Non-Executive Director

Rule 7.10.6(b)

xix. Specified whether the Chairman or one member of Committee is a member of a

recognized professional accounting body – Rule 7.10.6( a)

xx. Specified whether the CEO and CFO attended Committee meetings, unless otherwise

determined by the Audit Committee – Rule 7.10.6 (a)

xxi . The Annual Report contained a report by the Audit Committee stating the manner of

compliance in relation to the functions required of the Audit Committee and the

determinations made by the Audit Committee – Rule 7.10.6 (c )

xxi i . Specified the basis for determining External Auditors as being Independent

Rule 7.10.6( c)

RuleNo .

ComplianceStatus

Compliant

Compliant

Compliant

Compliant

Compliant

Compliant

Compliant

Compliant

Compliant

Compliant

Compliant

Rule


CORPORATE GOVERNANCE DISCLOSURES UNDER CSE LISTING RULES



The responsibil ities of the Board of Directors in relation to the financial statements of the Company and

Group are set out as follows. The responsibil ity of the Auditors wh ich dif fer, are set out in the

Auditors’ Report.

According to the Companies Act No. 7 of 2007, the Directors are required to prepare financial

statements for each year, giving an accurate and impartial view of th e profit and loss of the Company

and its subsidiaries as evidenced at the close of the financial year.

The Directors are of the view that in the course of preparing the said financial statements, appropriate

accounting policies h ave been adhered to and maintained throughout. Material departures if any, have

been disclosed and explained. The Directors also confirm that all applicable Accou nting Standards have

been followed with judgments and estimates being made that are both reasonable and prudent.

The Directors are also of the view that the Company has adequate assets and resources to continue a

profitable operation in the future. Accordingly, the going concern has been used in the preparation of

the financial statements.

The Directors are responsible for the overall internal control systems of the Company while

acknowledging the fact that t here is no single system of internal control that could guarantee absolutely

against mismanagement or fraud, the Directors confirm that the systems in place are so designed as to

safeguard the Company’s assets and that all transactions are properly authorized and recorded, thusensuring that all material misstatements and irregularities are either prevented or detected speedily.

The Directors are required to provide the Auditors with every opportunity to take whatever steps and

undertake any inspections they consider appropriate for the purpose of enabling them to submit their

audit report.

The Directors are responsible for ensuring that the Company maintains sufficient accounting records to

be able to disclose with reasonable accuracy, the financial position of the Company and that of the

Group, thus ensuring that the Company’s financial statements comply with the requirements of the

Companies Act.

The Directors are of the view that they have discharged their responsibil ities to the best of their abil ity as

stated herein.

The Directors also confirm to the best of their knowledge, all taxes, duties and levies payable by the

Company and its subsidiaries, as well as all other well-known statutory dues that were due and

payable by the Company and its subsidiaries as at the Balance Sheet date have been paid, or where

relevant been provided for.

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

SECCOM (PRIVATE) LTD.

Company Secretaries,


DIRECTORS’ RESPONSIBILITIES

TheEastern Pride





The Company’s Audit Committee comprises of th ree Non-Executive Directors as part of good c orporate

governance practi ces. They are Mr. S. V. Wanigasekera, Mr. E. Gunatu nga and Mr. R. Seevaratnam.

The objective of the Audit Committee is to assist the Board of Directors of the Company in fulfi l l ing its

responsibil ities for the financial reporting process, the system of internal control over financial reporting,

the audit process and t he Company’s process for monitoring compliance w ith laws, regulations and best

practices.

The other members participating at the Audit Committee deliberations are Mr. S. R. Gnanam,

Mr. K. Yanagi hara (Jo int Man aging D irector s), Mr. W. C. Fernando, Grou p Genera l Manage r,

Mr. Nirantha Kuruwita, Chief Financial Officer and mil l managers and accountants by invitation.

The Audit Committee meets regularly and the areas covered under the Audit Report include

Sales Delivery, Banking & Receivables, Project, Production, Physical Verification, Stores Maintenance,

Empty Bags Usage (including damages ), Packing and Weigh Bridge Operation.

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

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

Quarterly accounts and the Annual Report to the shareholders are also checked and reviewed by the

Audit Committee before their release.

R. Seevaratnam

Chairman - Audit Committee


AUDIT COMMITTEE REPORT




SOCIAL IMPACT REPORT

With the policy decision to align operational processes towards environmentally sustainable

manufacturing, Tokyo Cement has initiated many internal technological and procedural improvements

to operationalise this policy of sustainabil ity. These initiatives which are aimed at minimizing

environmental impacts from point of importation to delivery, have put the Company on track with our

ultimate goal of becoming a producer of eco-friendly cement.

GREEN ENERGYTo uphold our commitment towards minimizing environmental impacts from manufacturing two years

ago, Tokyo Cement invested in green energy for our factories. As a result of this initiative, a Rs 2.4 bil l ion

Bio Mass Power Plant was commissioned in 2008 with a capacity of 10 MW. Powered by paddy husk

and Gliricidia wood, this environmentally-friendly power supply can meet the electricity requirements of

the three Tokyo Cement manufacturing factories in Trincomalee.

With this new source of renewable energy we have reduced considerable amount of power intake

from the national grid, which has translated into a saving for the Company. We also sell excess power

to the national grid, adding to our revenue streams.

The Bio Mass Power Plant has also contributed towards income generation of rural, farming communities

as the Company purchases paddy husk and Gliricidia wood from these communities. The Company is

also educating communities on the correct techniques of farming Gliricidia and continues t o supply seed

for Gliricidia farming.

CLEANING THE OCEAN BED

The Company continued to clean the sea bed at the Trincomalee Jetty, at the point of unloading cement

clinker from vessels. This is done to remove the small amount of cement clinker that fall into the sea at

the time of unloading, although cement clinker is essentially of l imestone composition and is not

environmentally harmful.

CONTROLLING DUST EMISSION

The Company invested Rs. 65 mil l ion durin g the year under review to modify th e cement hopper at thefactory premises in Trincomalee. These modifications contribute towards minimizing dust emissions to the

environment when unloading c linker.

The Company has also taken action to prevent transmission of cement dust to the outside environment

through vehicle wheels, by install ing water patches at entry and exit points to the factory. All vehicles

entering and exiting the premises pass through these water patches that clean vehicle wheels of

residual cement dust.

TheEastern Pride





SOUND CONTROLS

The sound controls at the factory premises were upgraded with new equipment to minimize sound

pollution.

COMMITMENT TO STAKEHOLDERS

Tokyo Cement has continued to uphold its responsibil ities towards various stakeholder groups of the

Company.

EMPLOYEE WELFARE

As part of our commitment to our workforce we upgraded accommodation facil ities for senior

managers at the Trincomalee factory premises.

COMMUNITY WELFARE

The Company continues to supply a nutritious, mid-day meal, everyday, for school children in four

underserved schools in Trincomalee and Kandy Districts. The provision of the free mid-day meal has

contributed towards better school attendance.

TRAINING FOR MASONS

The Company continued to provide training programmes for masons in the Central, Northern and

Eastern Provinces. The training sessions, that benefit about 25 persons per session, impart skil ls on

masonary work, concreting, ti l ing, brick work and other construction related activities.

Given the large success of this programme in providing much needed skil ls for the local construction

industry and in generating employment, Tokyo Cement is hoping to start a training institute for masons

over the coming months.





TheEastern Pride


Jt. Managing Director Mr. S. R. Gnanam lighting the traditional oil lampat Dealer Convention - 2009

Jt. Managing Director Mr. K. Yanagihara lighting the traditional oil lampat Dealer Convention - 2009

Director/Group General Manager Mr. W. C. Fernando lightingthe traditional oil lamp at Dealer Convention - 2009

Ancheneye Hardware receiving the award for the “Best Dealer” - 2009

Keerthi Hardware receiving the award for the“Best Dealer” First runners-up - 2009

Samsudeen Grill Industries receiving the award for the“Best Dealer” Second runners-up - 2009

Launch of Supermix Dry Mix Concrete Launch of Superbond Tile Adhesive

Kinniya Bridge - Constructed Exclusively using Nippon Cement





TheEastern Pride





EARNING PER SHARE - VOTING ORDINARY SHARES

Year Rs.

Year

1 2 3 4 5 0

2006

2010

2007

2009

2008

Rs.

2006 41.3

2007 3.2

2008 2.05

2009 1.28

2010 1.37

Number of SharesName



DIVIDEND PER SHARE - VOTING ORDINARY SHARES NON-VOTING ORDINARY SHARES(Restated)

Year Rs.

Year

0

2006

2010

2007

2009

2008

Rs.

2006 0.45

2007 0.50

2008 0.40

2009 0.30

2010 1.65

0.5 1 1.5 2

Number of SharesName


SHAREHOLDERS’ & INVESTORS’ INFORMATION



TheEastern Pride


14,000

Year

TOTAL ASSE TS

2,000 4,000 6,000 8,000 10,000 12,000 0

2006

2007

2008

2009

2010

Rs. Mn Year Rs. Mn

2006 7,602

2007 9,126

2008 11,342

2009 13,492

2010 12,409

21

Year

RETURN ON EQUITY

3 6 9 12 15 18 0

2006

2007

2008

2009

2010

% Year Return on Equity

2006 16.78

2007 18.37

2008 11.43

2009 6.81

2010 6.34


GRAPHICAL REVIEW



COMPOSITION OF LIABILITIES - GROUP

Shareholders’ Equity 5,531

Borrowings 3,744

Trade & Other Payables 2,220

Minority Interest 140

Other Liabil ities 774

12,409

Rs. Bn.

COMPOSITION OF ASSETS

PPE & CWIP 9,148

Inventories 688Trade & Other Receivables 1,313

Other Assets 1,260

12,409

Rs. Bn.

PPE & CWIP 74%

Other Assets 10%

Inventories 5%

Trade & Other Receivables 11%

Trade & Other

Payables 18%

Other Liabilities 6%Minority Interest 1%

Shareholders’ Equity

45%

Borrowings 30%


GRAPHICAL REVIEW



TheEastern Pride


SHAREHOLDERS’ INFORMATION - VOTING

Shares 500 & Less 0.06

Shares 501-5000 1.48Shares 5001-100,000 6.81

More than 100,000 Shares 91.65

100.00

%

Shares 5001-10000 6.81%

More than 10,000 Shares 91.65%

Shares 501-5000 1.48%

Shares 500 & Less 0.06%

SHAREHOLDERS’ INFORMATION - NON-VOTING

Shares 500 & Less 0.23

Shares 501-5000 2.78

Shares 5001-100,000 13.86

More than 100,000 Shares 83.13

100.00

Rs. Bn.

Shares 500 & Less 0.23% Shares 5001-10000 13.86%

Shares 501-5000 2.78%

More than 10,000 Shares 83.13%


GRAPHICAL REVIEW




INDEPENDENT AUDITOR’S REPORTTO THE SHAREHOLDERS OF TOKYO CEMENT COMPANY (LANKA) PLC

Report on the Financial Statements

We have audited the accompanying financial statements of Tokyo Cement Company (Lanka)

PLC, and consolidated financial statements of the Company and its subsidiaries as at

31st March, 2010 which comprise the balance sheet as at 31st March, 2010, and the income

statement, statement of changes in equity and cash flow statement for the year then ended,and a summary of significant accounting policies and other explanatory notes as set out on

pages 58 to 85.

Management’s Responsibility for the Financial Statements

Management is responsible for the preparation and fair presentation of these financial

statements in accordance with Sri Lanka Accounting Standards. This responsibil ity includes:

designing, implementing and maintaining internal control relevant to the preparation and fair

presentation of financial statements that are free from material misstatement, whether due to

fraud or error; selecting and applying appropriate accounting policies; and making accounting

estimates that are reasonable in the circumstances.

Scope of Audit and Basis of Opinion

Our responsibil ity is to express an opinion on these financial statements based on our audit.

We conducted our audit in accordance with Sri Lanka Auditing Standards. Those standards

require that we plan and perform the audit to obtain reasonable assurance whether the

financial statements are free from material misstatement.

An audit includes examining, on a test basis, evidence supporting the amounts and disclosures

in the financial statements. An audit also includes assessing the accounting principles used and

significant estimates made by management, as well as evaluating the overall

financial statement presentation.

"Charter House"

65/2, Sir Chittampalam A Gardiner Mawatha,

Colombo 02, Sri Lanka.Telepho ne : 94-11-2421 878-79-70,

94-112387002-03

94-11-2328831

Telefax : 94-11-2336064

E-mail : bdopar tners @bdo.l k

BDO Partners

Chartered Accountants



TheEastern Pride


We have obtained all the information and explanations which to the best of our knowledge and

belief were necessary for the purposes of our audit. We therefore believe that our audit

provides a reasonable basis for our opinion.

Opinion - Company

In our opinion, so far as appears from our examination, the Company maintained proper

accounting records for the year ended 31st March, 2010 and the financial statements give a

true and fair view of the Company’s state of affairs as at 31st March, 2010 and its profit and

cash flows for the year then ended in accordance with Sri Lanka Accounting Standards.

Opinion - Group

In our opinion, the consolidated financial statements give a true and fair view of the state of

affairs as at 31st March, 2010 and its profit and cash flows for the year then ended in

accordance with Sri Lanka Accounting Standards, of the Company and its subsidiaries dealt

with thereby, so far as concern the shareholders of the Company.

Report on other Legal and Regulatory Requirements

These financial statements also comply with the requirements of Section 153(2) and 153(7) of

the Companies Act No. 07 of 2007.

CHARTERED ACCOUNTANTS

17th August, 2010

Colombo

SR/ts

Partner : S. Rajapakse FCA, MBA. Ms. M. S. E. Raymond FCA.

S. G. Ranjith ACA. Tishan H. Subasinghe ACA.

H. S. Rathnaweera ACA, Ashane J. W. Jayasekara ACA, MBA,

H. M. Saman Siri lal ACA

Consultant: V. Sinnadorai FCA


INDEPENDENT AUDITOR’S REPORTTO THE SHAREHOLDERS OF TOKYO CEMENT COMPANY (LANKA) PLC




INCOME STATEMENT FOR THE YEAR ENDED MARCH 31, 2010


Rs. Note March 31, 2010 March 31, 2009 March 31, 2010 March 31, 2009

Turnover 14,737,746,491 17,652,390,974 6,125,479,102 6,045,332,950

Cost of Sales (12,456,588,445) (14,933,080,308) (4,835,376,262) (5,352,538,256)

Gross Profit 2,281,158,046 2,719,310,666 1,290,102,840 692,794,694

Other Income 3 463,986,887 185,148,940 1,315,154,773 198,197,367 2,745,144,933 2,904,459,606 2,605,257,613 890,992,061

Distributio n Cost (946,806,953) (1,095,455,809) (562,421,641) (452,664,747)

Administra tive Expenses (613,718,346) (327,573,442) (322,096,675) (230,453,880)

Finance Cost 4 (837,128,303) (834,474,275) (255,774,104) (64,973,957)

Profit Before Taxation 5 347,491,331 646,956,080 1,464,965,193 142,899,477

Income Tax Expense 6 3,868,190 (289,480,757) (3,612,167) -

Profit for the Year 351,359,521 357,475,323 1,461,353,026 142,899,477

Attributed to:

Equity Holders of the Company 369,303,901 346,631,241 1,461,353,026 142,899,477

Minority Interest (17,944,380) 10,844,082 - -

Earnings per Ordinary Share

- Voting (Rupees per Share) 7 1.37 1.28 5.41 0.53

- Non-Voting (Rupees per Share) 7 1.37 1.28 5.41 0.53

Dividend Per Ordinary Share

- Voting 8 1.65 0.30 1.65 0.30

- Non-Voting 8 1.65 0.30 1.65 0.30

Figures in brackets indicate deductions


The Accounting Policies and Notes from pages 58 to 85 form an intergral part of these Financial Statements.

17th August, 2010

Colombo



TheEastern Pride


BALANCE SHEET AS AT MARCH 31, 2010



ASSETS

Non-Current Assets

Property , Plant & Equipment 9 9,055,420,757 9,359,452,701 4,344,190,714 4,675,712,936

Capital Work-in-Pr ogress 93,376,092 396,523,614 89,792,430 111,645,843Goodwill 10 13,186,823 13,186,823 - -

Investment 11 - 500,000 1,235,150,030 485,650,030

Investment In Fixed Deposit 3,000,000 3,000,000 - -

Operatin g Lease Prepaymen t 12 69,460,316 73,801,586 - -

Total Non-Current Assets 9,234,443,988 9,846,464,724 5,669,133,174 5,273,008,809

Current Assets

Inventories 13 687,821,933 1,388,254,260 299,940,535 764,576,769

Trade & Other Receivables 14 1,313,085,689 1,727,638,781 479,402,366 1,060,892,352

Operating Lease Prepaymen t 12 4,341,270 4,341,270 - -

Tax Receivable 258,665,676 214,749,800 126,421,576 93,029,709

Amount Due from Related Parties 15 - - 1,173,923,511 12,499,272

Cash and Cash Equivalents 910,934,352 310,596,594 40,693,180 209,489,360

Total Current Assets 3,174,848,920 3,645,580,705 2,120,381,168 2,140,487,462

Total Assets 12,409,292,908 13,492,045,429 7,789,514,342 7,413,496,271


The Accounting Pol icies and Notes from pages 58 to 85 form an intergral part of these Financial Statements.






EQUITY & LIABILITIES Equity

Stated Capital 16 1,793,000,000 1,793,000,000 1,793,000,000 1,793,000,000

Reserves 17 150,000,000 150,000,000 - -

Retained Earnings 3,588,649,234 3,300,345,333 2,853,287,934 1,472,934,908

Equity Attributed to Equity Holders of the Company 5,531,649,234 5,243,345,333 4,646,287,934 3,265,934,908

Minor Interest 140,130,198 158,074,578 - -

Total Equity 5,671,779, 432 5,401,419,911 4,646,287,934 3,265,934,908

Non-Current Liabilities

Interest Bearing Borrowings 18 1,386,762,725 867,925,625 685,101,400 202,657,776

Deferred Tax 19 213,635,164 264,087,499 32,817,926 32,817,926

Retirement Benefits Obligation 20 29,867,590 23,039,761 21,028,732 16,695,742

Deferred Revenue 6,949,335 9,824,923 - -

Lease Creditors 53,198,560 98,027,938 1,497,494 13,934,530

Total Non-Curren t Liabilit ies 1,690,413,374 1,262,905,746 740,445,552 266,105,974

Current Liabilities

Trade & Other Payables 21 2,219,905,037 3,774,560,381 1,074,208,338 1,751,132,641

Amount Due to Related Parties - - 503,875,505 1,531,160,881

Current Maturity of Long-Term Loans 18 2,356,956,650 2,569,470,983 460,669,200 401,100,000

Lease Creditors 48,620,771 42,291,264 16,228,427 17,187,966Bank Overdrafts 421,617,644 441,397,144 347,799,386 180,873,901

Total Current Liabiliti es 5,047,100,102 6,827,719,772 2,402,780,856 3,881,455,3 89

Total Equity & Liabilities 12,409,292,908 13,492,045,429 7,789,514,342 7,413,496,271


The Accounting Pol icies and Notes from pages 58 to 85 form an intergral part of these Financial Statements.

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

Mr. Nirantha Kuruwita Chief Financial Officer (CFO)

The Board of Directors is responsible for the preparation and presentation of these Financial Statements.

Approved and Signed for and on behalf of the Board

Mr. S. R. Gnanam Mr. K. Yanagihara

Jt. Managing Director Jt. Managing Director

17th August, 2010

Colombo

SR/ts


BALANCE SHEET AS AT MARCH 31, 2010



TheEastern Pride


deniateRdetatSnoitpmedeRlatipaC

Rs. Reserve Fund Capital Earnings Total

CONSOLIDATED

Balance as at 31st March, 2008 150,000,000 1,793,000,000 3,061,714,092 5,004,714,092

Net Profit for the Year - - 346,631,241 346,631,241Dividend Paid - - (108,000,000) (108,000,000)


Net Profit for the Year - - 369,303,901 369,303,901

Dividend Paid - - (81,000,000) (81,000,000)


Stated Retained

Rs. Capital Earnings Total

COMPANY

Balance as at 31st March, 2008 - 1,793,000,000 1,438,035,431 3,231,035,431

Net Profit for the Year - - 142,899,477 142,899,477

Dividend Paid - - (108,000,000) (108,000,000)


Net Profit for the Year - - 1,461,353,026 1,461,353,026

Dividend Paid - - (81,000,000) (81,000,000)




17th August, 2010

Colombo

STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED MARCH 31, 2010




TheEastern Pride


CASH FLOW STATEMENT FOR THE YEAR ENDED MARCH 31, 2010

Rs. Note 31st March,2010 31st March,2009 31st March,2010 31st March,2009

Cash Flow from Investing Activities

Purchase of Property, Plant & Equipment A (1,074,267,479) (2,097,407,633) (71,287,961) (1,630,118,102)

Dividend Received - - 1,149,999,235 149,999,904Expenditure incurred on Capital Work-in-Progress (9,006,500) (311,505,418) (9,006,500) (42,954,690

Interest Received 778,958 526,438 - -

Proceeds from Sale of Property, Plant & Equipment 697,825,000 141,503,710 - 8,400,000

Net Cash from / (used) in Investing Activities (384,670,021) (2,266,882,903) 1,069,704,774 (1,514,672,888)

Cash Flow from Financing Activities

Repayment of Interest Bearing Loans and Borrowings (7,108,455,971) (5,425,342,697) (2,113,726,282) (841,037,559)

Receipt of Interest Bearing Loans and Borrowings 7,419,039,632 5,350,378,696 2,660,000,000 1,030,000,000

Investment in Subsidiary - - (750,000,000) -

Redemption of Preference Shares 500,000 - 500,000 -

Dividend Paid (81,000,000) (108,000,000) (81,000,000) (108,000,000)

Lease Rental Paid (68,021,702) (54,242,077) (22,026,935) (22,024,060)

Advances (to) / from Subsidiary - - (2,189,128,115) 924,868,578

Net Cash from / (used) in Financing Activities 162,061,959 (237,206,078) (2,495,381,332) 983,806,959

Net Increase / (Decrease) in Cash and Cash Equivalents 620,117,258 41,865,174 (335,721,665) 84,429,471

Cash and Cash Equivalents at beginning of period B (130,800,550) (172,665,724) 28,615,459 (55,814,012)

Cash and Cash Equivalents at end of period C 489,316,708 (130,800,550) (307,106,206) 28,615,459

Figures in brackets indicate deductionsThe Accounting Policies and Notes from pages 58 to 85 form an intergral part of these Financial Statements.

17th August, 2010

Colombo







A. Purchase of Property, Plant and Equipment

Purchases During the Year 987,149,356 1,353,366,909 69,663,179 966,519,745

Transferred from Capital Work-in-Progress 399,272,149 4,473,161,102 32,484,699 2,562,883,7541,386,421,505 5,826,528,011 102,147,878 3,529,403,499

Less: Leasehold Assets Addition During the Year - (115,734,796) - -

Less: Capital Work-in-Progress Balance as at

1st April, 2009 in Relation to Assets Transferred (312,154,026) (3,613,385,582) (30,859,917) (1,876,885,397)

Less: Assets Transfer to Subsidiaries - - - (22,400,000)

1,074,267,479 2,097,407,633 71,287,961 1,630,118,102

B Cash and Cash Equivalents at Beginning of Period

Bank Balances and Cash 310,596,594 181,147,783 209,489,360 96,218,544

Bank Overdraft (441,397,144) (353,813,507) (180,873,901) (152,032,556)

(130,800,550) (172,665,724) 28,615,459 (55,814,012)

C Cash and Cash Equivalent at End of Period

Bank Balances and Cash 910,934,352 310,596,594 40,693,180 209,489,360

Bank Overdraft (421,617,644) (441,397,144) (347,799,386) (180,873,901)

489,316,708 (130,800,550) (307,106,206) 28,615,459




CASH FLOW STATEMENT FOR THE YEAR ENDED MARCH 31, 2010




TheEastern Pride


SIGNIFICANT ACCOUNTING POLICIES ANDNOTES TO THE FINANCIAL STATEMENTS

1. CORPORATE INFORMATION

1.1 General

Tokyo Cement Company (Lanka) PLC is a Public Limited Liabil ity Company incorporated and domiciled in Sri Lanka

and l isted on the Colombo Stock Exchange. The Registered Office and the principal place of business of the

Company is located at No.469 1/1, Galle Road, Colombo 03. Factories are located at Cod-Bay, China Bay,

Trincomalee, No 77B, New Nuge Road, Peliyagoda, Pahalakondadeniya, Katugastota, Aluthgama, Miriswatte,

Itthapana, Anuradhapura and Colombo Port.

1.2 Principal Activities and Nature of Operations

During the year, the principal activities of the Company were Manufacturing and Sell ing Cement and Ready Mixed

Concrete to the local market.

1.3 Parent Enterprise

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

Cement Company (Lanka) PLC.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

2.1 GENERAL ACCOUNTING POLICIES

2.1.1 Basis of Preparation

These financial statements presented in Sri Lanka Rupees have been prepared under the historical cost basis in

accordance with generally accepted accounting principles and the standards laid down by the Institute of

Chartered Accountants of Sri Lanka.

2.1.2 Statement of Compliance

The Balance Sheet, Statement of Income, Changes in Equity and Cash Flows, together with Accounting Policies and

Notes (“Financial Statements”) of the Company and the Group as at 31st March, 2010 and for the year then ended

have been prepared in compliance with the Sri Lanka Accounting Standards (SLAS) issued by the Institute of

Chartered Accountants of Sri Lanka and t he requirement of the Companies Act No. 7 of 2007.

2.1.3 Going Concern

The directors have made an assessment of the Parent Company’s and its abil ity to continue as going concern and

they do not intend either to l iquidate or to cease trading. However, the Subsidiary Company of the Group has net

current l iabil ities of Rs. 625,015,854/- as at the Balance Sheet date. (2009 – Rs. 922,430,794/-)

2.1.4 Comparative Information

The accounting policies have been consistently applied by the Company and are consistent with those of the

previous year. The previous year’s figures and phrases have been rearranged wherever necessary to conform to

the current year’s presentation.






2.1.5 Discontinuing Operations

A discontinuing operation is a clearly distinguishable component of the Company’s business that is abandoned or

terminated pursuant to a single plan and which represents a separate major l ine of industry or geographical area

of operations.

As at the Balance Sheet date, the company does not have any discontinuing operations.

2.1.6 Foreign Currency Transaction

All foreign exchange transactions are converted to Sri Lanka Rupees, which is the reporting currency, at the rates of

exchange prevail ing at the time the translations were effected.

Monetary assets and l iabil ities denominated in foreign currencies are translated to Sri Lanka Rupee equivalents

using year end spot foreign exchange rates, the resulting gains or losses are accounted in the Income Statement.

Non monetary assets and l iabil ities are translated using exchange rates that existed when the values were

determined. The resulting gain or loss is accounted in the Income Statement.

2.1.7 Materiality and Aggregation

Each material class of similar items is presented separately in the financial statements. Items of a dissimilar nature or

function are presented separately unless they are immaterial .

2.1.8 Significant Accounting Judgements, Estimates and Assumptions

a) Judgements

In the process of applying the accounting policies, management has made the following judgements, apart from

those involving estimations, which have most significant effect on the amounts recognized in the financial statements.

b) Estimates and Assumptions

The key assumptions concerning the future and other key sources of estimation uncertainty at the Balance Sheet

date, that have a significant risk of causing material adjustments to the carrying amounts of assets and l iabil ities

within the next financial year, have been considered.

The preparation of the Company’s financial statements require management to make judgments, estimates and

assumptions that affect the reported amounts of revenue, expenses, assets and l iabil ities and the disclosure of

contingent l iabil ities at reporting date.



TheEastern Pride



2.2 Consolidation

a) Subsidiaries

Subsidiaries are all entities over which the Group has the power directly or indirectly to govern the financial and

operating policies generally accompanying a shareholding of more than one half of the voting rights. The existence

and effect of potential voting rights that are currently exercisable or convertible are considered when assessing

whether the Group controls another entity. Subsidiaries are ful ly consolidated from the date on which control is

transferred to the Group. They are de-consolidated from the date that control ceases.

The purchase method of accounting is used to account for the acquisition of subsidiaries by the Group. The cost of

an acquisition is measured as the fair value of the assets given, equity instruments issued and l iabil ities incurred or

assumed at the date of exchange, plus costs directly attributable to the acquisition. Identifiable assets acquired and

liabil ities and contingent l iabil ities assumed in a business combination are measured initial ly at their fair values at the

acquisition date irrespective of the extent of any minority interest. The excess of the cost of acquisition is over the fair

value of the group’s share of t he identifiable assets acquired is recorded as goodwil l . I f the cost of a cquisition is less

than the fair value of the net assets of the subsidiary acquired, the difference is recognized directly in the Income

Statement.

Related party transactions, balances and unrealized profits or losses between group of companies are eliminated.

Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies

adopted by the Group.

b) Minority interests

The interest of the outside shareholders in net assets of the Group and proportion of the profit after taxation

applicable to outside shareholders are stated separately in t he Consolidated Balance Sheet and the Consolidated

Income Statement under the heading minority interest.

c) Transactions Eliminated on Consolidation

Intra-group balances, transactions and any unrealized gains and expenses arising from intra-group transactions are

eliminated in preparing the consolidated financial statements.

d) Reporting Date

All the Group’s subsidiaries have a common financial year end.

2.3 ASSETS & BASES OF THEIR VALUATION

2.3.1 Property, Plant & Equipment

a) Cost

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






b) Cost and Valuation

All items of property, plant and equipment are initial ly recorded at cost. Where items of property, plant and

equipment are subsequently revalued, the entire class of such assets is revalued.

c) Depreciation

Provision for depreciation is calculated by using straight l ine on the cost or valuation of all property, plant and

equipment other than freehold land, in order to write off such amounts over the estimated useful l ives of such assets.

Assets held under finance lease are depreciated over the shorter of the lease term or the use l ives of equivalent

owned assets.

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

Per annum %

Factory Buildings 2.5

Generator House 5.0

Other Buildings 10.0

Fuel Storage Tanks 5.0 Plant and Machinery 5.0

Power Plant 5.0

Laboratory Equipment and Generators 10.0

Office Equipment 12.5 / 25.0

Factory and Other Equipment 15.0

Recycling system 12.5

Furniture and Fittings 12.5

Vehicles 17.5 / 25.0

Cement Silo 2.5

Tug Boat 10.0

Railway Platform 10.0

Barges 10.0 Computer and Other Electrical Equipment 12.5

Packer House 5.0

Landing Jetty 5.0

Batching Plant 10.0

Vessel 10 / 12.5

Vessel Dry Docking 40.0

Dry Docking - Special survey 20.0

Vessel Equipment 5.0

Bio Mass Building 10.0

Bio Mass Plant & Machinery 5.0




Depreciation of assets begins when it is available for use and ceases at the earl ier of the date that the asset is

classified as held for sale and the date that the asset is derecognized.

Vessel Dry Docking has exceptionally been depreciated from the date of completion of Dry Docking until the next

Dry Docking which is estimated as 2 ½ years. As per the rul ing obtained from the Urgent Issue Task Force (UITF) of the

Institute of Chartered Accountants of Sri Lanka, the special survey dry docking expenses are to be amortized over

five years.

The asset’s residual values, useful l ives and methods of depreciation are reviewed and adjusted if appropriate at

each financial year.

d) Restoration Costs

Expenditure incurred on repairs or maintenance of property, plant and equipment in order to restore or maintain

the future economic benefits expected from originally assessed standard of performance is recognized as an

expense when incurred.

e) DerecognizingAn item of property, plant and equipment is derecognized upon disposal or when no future economic benefits are

expected from its use or disposal. Any gain or loss arising on derecognizing of the asset is calculated as the

difference between the net disposal proceeds and the carrying amount.

2.3.2 Leases

a) Finance Leases – where the company is the lessee

Leases in terms of which the Group assumes that substantial ly of all the risks and rewards of ownership are classified

as finance leases. Assets acquired by way of a finance lease are measured at an amount equal to the lower of their

fair value or the present value of minimum lease payments at the inception less accumulated depreciation and

accumulated impairment losses.

The corresponding principal amount payable to the lessor is shown as a l iabil ity. The finance charges allocated to

future periods are separately disclosed in the notes.

The interest element of the rental obligation applicable to each financial year is charged to the income statement

over the period of the lease so as to produce a constant periodic rate of interest on the remaining balance of the

liabil ity for each period.

TheEastern Pride






The cost of improvements to or on leased property is capital ized, and depreciated over the unexpired period of

the lease or the estimated useful l ives of the improvements, whichever is shorter.

Any excess of sales proceeds over the carrying amount of assets in respect of a sale and leaseback transaction that

result in a finance lease, is deferred and amortized over the lease term.

b) Operating Leases

Leases where the lessor effectively retains substantial ly all the risks and rewards of an asset under the leased term,

are classified as operating leases.

Lease payments (excluding cost of service such as insurance and maintenance) paid under operating leases are

recognized as an expense in the income statement over the period of lease on a straight l ine basis.

2.3.3 Impairment of Assets

The Company assesses at each reporting date whether there is an indication that an asset may be impaired. If such

indication exists or when annual impairment testing for an asset is required the Company makes an estimate of the

asset’s recoverable amount. An asset’s recoverable amount is the higher of an asset’s or cash generating unit’s fairvalue less costs to sell and its value in use and determined for an individual asset, unless the asset’s does not

generate cash inflows that are largely independent of those from other assets or group of assets. Where the

carrying amount of an asset exceeds its recoverable amount, the asset is considered impaired and is written down

to its recoverable amount. In assessing value in use, the estimated future cash f lows are discounted to their present

value using a pretax discount rate that reflects current market assessment of the time value of money and the risk

specific to the asset. These calculations are collaborated by valuation multiples, quoted share prices or other

available fair value indicators.

Impairment losses of continuing operations are recognized in the income statement in those expense categories

consistent with the function of the impaired asset, except for property previously revalued where the revaluation

was taken to equity. In this case the impairment is also recognized in equity up to the amount of any previous

revaluation.

For assets excluding goodwil l, an assessment is made at each reporting date as to whether there is any indication

that previously recognized impairment losses may no longer exist or may have decreased. If such indication exists,

the company makes an estimate of recoverable amount. A previously recognized impairment loss is reversed only

if there has been a change in the estimates used to determine the asset’s recoverable amount since the last

impairment loss was recognized. If that is the case the carrying amount of the asset is increased to its recoverable

amount.





That increased amount cannot “exceed” the carrying amount that would have been determined, net of depreciation

had, had no impairment loss been recognized for the asset in prior years. Such reversal is recognized in the income

statement unless the asset is carried at revalued amount, in which case the reversal is treated as a revaluation

increase.

2.3.4 Goodwill

Goodwil l represents the excess of the cost of an acquisition over the fair value of the Group’s share of the net

identifiable assets of the acquired subsidiary at the date of acquisition.

Goodwil l is reviewed for impairment annually or more frequently if events or changes in circumstances indicate that

the carrying value may be impaired.

Impairment is determined for goodwil l by assessing the recoverable amount of the cash generating unit (or, group

of cash generating units) to which the goodwil l relates. Where the recoverable amount of cash generating unit (or,

group of cash generating units) is less than the carrying amount of cash generating unit (or, group of cash generating

units) to which goodwil l has been allocated, an impairment loss is recognized. Impairment losses relating to Goodwil l

cannot be reversed in future periods.

2.3.5 Capital Work in Progress

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

2.3.6 Investments

Long Term Investments

Long term investments are classified as non current investments and are stated at cost less any impairment losses.

The cost of the Investment includes acquisition charges such as brokerages fee, duties and bank charges.

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

Provision for impairment is made in the Income Statement when in the opinion of the Directors there has been a

decline other than temporary in the value of the investments determined on individual basis.

2.3.7 Inventories

Inventories are measured at the lower of cost and net realizable value, after making due allowances for obsolete

and slow moving items. Net realizable value is price at which inventories can be sold in the ordinary course of

business less the estimated cost of completion and estimated cost necessary to make the sale.

TheEastern Pride






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

formula.

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

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

Work In progress - At the cost of direct materials, direct labour and appropriate proportion of f ixed

production overheads.

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

Goods in Transit - At actual cost

2.3.8 Trade and Other Receivable

Trade and other receivables are recognized at the amounts they are estimated to realize net of provisions for

impairment.

Other receivables and dues from related parties are recognized at cost less provision for impairment. The amount

of the provision is recognized in the income statement.

2.3.9 Cash and Cash Equivalents

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

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

of outstanding bank overdrafts.

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

2.4 LIABILITIES & PROVISIONS

2.4.1 LiabilitiesLiabil ities classified under current l iabil ities in the balance sheet are those expected to fall due within one year from

the balance sheet date. Items classified as non-current l iabil ities are those expected to fall due at point of time after

one year from the balance sheet date.

Trade and Other Payables

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

2.4.2 Provisions, Contingent Assets and Contingent Liabilities

Provisions are recognized when the group has a present obligations (legal & constructive) as a result of a past event,

where it is probable that an outflow of resources embodying economic benefits wil l be required to settle the

obligation and a reliable estimate can be made of the amount of the obligation.





All the contingent l iabil ities are disclosed as notes to the Financial Statements unless the outflow of resources is made

contingent asset if exits are disclosed when inflow of economic benefit is probable.

All the contingent l iabil ities are disclosed on notes to the financial statements unless the outflow of resources is made

contingent asset if exits are disclosed when inflow of economic benefit is probable.

2.4.2.1 Retirement Benefit Obligations

2.4.2.1.1 Defined Benefit Plans – Gratuity

Provision has been made for retirement gratuities, in conformity with SLAS 16 / Gratuity Act No.12 of 1983. The

liabil ity is not externally funded. The gratuity l iabil ities were based on actuarial valuation carried out. The actuarial

gains and losses are charged or credited to the Income statement in the period is which they arise.

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

Employees are eligible for Employees’ Provident Fund Contributions and Employees’ Trust Fund Contributions in l ine

with respective statutes and regulations. The Company contributes 12% and 3% of gross emoluments of employees

to the Employees’ Provident Fund and to the Employees’ Trust Fund respectively

2.4.2.2 Taxation

The provision for Income Tax is based on the elements of income and expenditure as reported in the financial

statements and computed in accordance with the provisions of the Inland Revenue Act No.10 of 2006 and the

amendments thereto.

The Company has entered into an agreement with Board of Investment of Sri Lanka Law No. 4 of 1978 under which

the profit is exempt from Income Tax for a period of ten years of assessment from the date of the completion of the

stipulated investment of Rs.500 Mil l ion which was fulfi l led on 2003 and as such the tax exemption period

commenced on the said date.

Fuji Cement Company (Lanka) Limited a subsidiary of the Company, is l iable for income tax under the Inland Revenue

Act No. 10 of 2006 at the rate of 35% on its profit plus SRL on such tax at 1.5%.

Tokyo Cement Colombo Terminal (Pvt) Ltd a subsidiary of the Company is l iable to pay income t ax under the Inland

Revenue Act No.10 of 2006. There is no tax l iabil ity for the current year owing to continuous adjusted losses for

income tax purposes.

Tokyo Super Cement Company Lanka (Pvt) Ltd a subsidiary of the Company has entered into an agreement with

Board of Investment of Sri Lanka Law No. 4 of 1978 under which the profit is exempt from Income Tax for a period

of ten years of assessment reckoned from the date of commencement of business.

2.4.2.2.1 Deferred Taxation

Deferred tax is provided using the l iabil ity method on temporary differences at the Balance Sheet date between the

tax bases of assets and l iabil ities, and their carrying amounts for financial reporting purposes.

TheEastern Pride






Deferred tax assets and l iabil ities are recognized for all temporary differences. Deferred tax assets are recognized

for all deductible temporary differences, carry-forward of unused tax credits and unused t ax losses, to the extent

that it is probable that taxable profit wil l be available against which the deductible temporary differences, and the

carry-forward of unused tax credits and unused losses can be util ized.

The carrying amount of deferred tax assets is reviewed at each Balance Sheet date and reduced to the extent that

it is no longer probable that sufficient t axable profit wil l be available to allow all or part of the deferred tax assets to

be util ized. Unrecognized deferred tax assets are reassessed at each Balance Sheet date and are recognized to

the extent that it has become probable that future taxable profit wil l al low the deferred tax asset to be recovered.

Deferred tax assets and l iabil ities are measured at the t ax rates that are expected to apply to the year when the

asset is realized or the l iabil ity is settled, based on tax rates and tax laws t hat have been enacted or substantively

enacted at the Balance Sheet date.

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

Deferred tax asset and deferred tax l iabil ities are offset, if a legally enforceable right exists to set off current taxassets against current tax l iabil ities and the deferred taxes relate to the same taxable entity and t he same taxation

authority.

Since the Company enjoys a ten year tax holiday from the year of assessment 2003/04, certain temporary

differences wil l not be reversed for some considerable period ahead.

Considering the above, the tax effect of such timing differences have been excluded from the tax expenses for the

period under review and periods preceding it.

2.4.3 Commitments

All material commitments as at the Balance Sheet date have been identified and disclosed in the notes to the

financial statements.

2.5 INCOME STATEMENT

2.5.1 Revenue Recognition

a) Sale of Goods

Revenue is recognized to the extent that it is probable that the economic benefits wil l flow to the Company and the

revenue and associated costs incurred can be reliably measured. Revenue is measured at the fair value of the

consideration received or receivable net of trade discounts and sales taxes. Revenue is recognized when the

significant risks and records of ownership have been transferred to the buyer, recovery of the consideration is

probable, the associated costs and possible return of goods can be estimated reliably.





b) Interest

Interest income is recognized as the interest accrued on the time basis (taking into account the effective yield on the

asset) unless collectibil ity is in doubt.

c) Dividend

Dividend income is recognized when the share holder’s right t o receive payment has been established.

d) Others

Other income is recognized on an accrual basis.

e) Gains and Losses

Net gains and losses of a revenue nature on the disposal of property, plant and equipment and other non current

assets including investments have been accounted for in the income statement having deducted from proceeds on

disposal, the carrying amount of the assets and related property, plant and equipment amount remaining in

revaluation reserve relating to that asset is transferred directly to accumulated profit/( loss).

2.5.2 Expenditure Recognition

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

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

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

the profit for the year.

2.5.2.2 For the purpose of presentation of the income statement the directors are of the opinion that function of

expenses method presents fairly the elements of the Company’s performance and hence such presentation method

is adopted.

2.5.2.3 Borrowing Costs

Borrowing costs are recognized as an expense in the period in which they are incurred, except to the extent where

borrowing costs are directly attributable to the acquisition, construction or production of a qualifying assets which are

assets that necessarily takes a substantial period of time to get ready for its intended are added to the cost of those

assets. Until such time as the assets are substantial ly ready for their intended use or sale.

Investment income earned on temporary investment of specific borrowings pending their expenditure on qualifying

assets is deducted from the borrowing cost el igible for capital ization.

TheEastern Pride






2.6 GENERAL

2.6.1 Events Occurring after the Balance Sheet Date

All material events occurring after the Balance Sheet date have been considered and where necessary adjustments

to or disclosures have been made in the respective notes to the Financial Statements.

2.6.2 Related Party Transactions

Disclosures are made in respect of the transactions in which the Company has the abil ity to control or exercise

significant influence over the financial and operating decisions/policies of the other, irrespective of whether a price

is charged.

2.6.3 Earnings Per Share

The group presents basic earnings per share (EPS) for its voting and non voting ordinary shares. Basic EPS is

calculated by dividing the profit or loss attributable to ordinary share holders of the Company by the number of

voting and non voting ordinary shares.

2.6.4 Segment ReportingA segment is a distinguishable component of the Group that is engaged either in providing related products or

services within a particular economic environment (Geographical Segment), which is subject to risks and rewards

that are different from those of other segments.

2.6.5 Comparative Figures

Where necessary comparative figures have been reclassified to conform to t he current years presentation.




TheEastern Pride


SIGNIFICANT ACCOUNTING POLICIES AND NOTES TO THE F INANCIAL STATEMENTSYEAR ENDED MARCH 31, 2010

Rs. 31st March,2010 31st March,2009 31st March,2010 31st March,2009

Interest Income 778,958 526,438 - -

Miscellaneous Income 170,433,552 51,240,605 163,659,568 44,062,143

Differed Revenue (Sale and Lease Back) 2,875,587 5,821,441 - 4,135,320

Exchange Gain 2,987,118 - 1,495,970 -

Dividend Received from Fuji Cement Company Lanka Ltd. - - 1,149,999,235 149,999,904

Handling Charges 103,996,099 109,529,777 - -Hiring Income of Prime Movers - 18,030,679 - -

Freight Income 182,915,573 - - -

463,986,887 185,148,940 1,315,154,7 73 198,197,367


3. OTHER INCOME


Interest on Borrowings 791,968,372 785,335,194 247,143,749 54,925,551

Interest on Overdaft 7,265,916 5,848,584 - 555,445

Interest on Lease 29,521,826 25,883,594 8,630,355 7,432,698Exchange Loss 8,372,189 17,406,903 - 2,060,263

837,128,303 834,474,275 255,774,104 64,973,957


4. FINANCE COST


A. Profit /(Loss) Before Taxation 347,491,331 646,956,080 1,464,965,193 142,899,477

B. Profit/(Loss) Before Taxation is Stated After Charging

all Expenses including the following

Depreciation on Property, Plant, and Equipment 904,647,012 1,006,246,819 433,670,100 558,970,235

Directors Emoluments 14,960,712 12,765,306 14,960,712 12,765,306Auditors Remunaration - Audit Services 3,920,355 3,445,840 1,520,875 1,580,000

Charity and Donations 7,402,158 63,291,216 7,134,809 62,655,116

Staff Cost 259,024,277 256,804,944 176,441,333 166,513,542

Defined Benefits Cost - Retirement Benefit Obligation 7,789,673 6,476,744 4,926,884 3,978,929

RsDefined Contribution Plan Cost - E.P.F. & E.T.F. 16,805,217 15,095,020 10,996,727 9,219,331

Royalty - 37,364,867 - 29,479,582

Amortization of Operating Lease 4,341,270 4,341,270 - -

Research and Development Cost 1,964,313 1,819,891 1,957,713 1,819,891

Legal Expenses & Professional Fee 20,991,655 20,215,715 13,746,962 10,184,645

Repairs and Maintenance 554,977,215 399,786,062 422,767,587 317,786,990

Reimbursement of Vessel Operational Expenses 524,504,543 306,277,205 146,679,125 155,744,670

Sales Commission 309,946,481 390,942,124 138,145,812 126,490,553

NBT Expenses 256,972,593 23,291,261 149,955,811 18,679,774

Advertisements 60,651,072 43,212,289 53,188,532 21,589,453

Bad Debts Written off 2,460,160 5,853,851 - 378,155


5. NET PROFIT BEFORE TAXATION






Current Income Tax Provision 46,584,145 58,211,184 3,612,167 -

Deferred Taxation (50,452,335) 231,269,573 - -

(3,868,190) 289,480,757 3,612,167 -


6. INCOME TAX EXPENSE


Dividend - Interim

- Voting 1.65 0.30 1.65 0.30

- Non Voting 1.65 0.30 1.65 0.30


8. DIVIDEND PER SHARE

Consolidated

Reconcil iation between Current Tax Expense/(Income)and the Product of Accounting Profit.

Company

6.A. INCOME TAX

Consolidated

Basic Earnings Per Share

The Calculation of basic earning per ordinary share is based on the profit attributable to ordinary shareholders divided by the weighted average

number of ordinary shares in issue as at 31st March, 2010.

Company

7. EARNINGS PER ORDINARY SHARES

Note 01

Other Income consisting of Freight Income has been treated as exempt under section 13(dddd) of the Inland Revenue Act, No. 10 of 2006 as amended.

Note 01

As per the Special Resolution passed at the Extra Ordinary General Meeting (EGM) held on 20th January 2010, it was resolved that each of the issued

and subscribed 18Mn Voting Ordinary shares be sub - divided into 10 (ten) Ordinary shares (Voting) fully paid up. Therefore,the number of ordinary shares

outstanding is increased without an increase in resources.

Diluted Earnings Per Share

There is no potentially dilutive ordinary share of the Company and as a result the diluted earnings per share (EPS) is the same as basic EPS shown above.


Profit Attributable to Ordinary Shareholders - Voting 246,202,601 231,087,494 974,235,351 95,266,318

Profit Attributable to Ordinary Shareholders - Non Voting 123,101,300 115,543,747 487,117,675 47,633,159

Total Profit Attributable to Ordinary Shareholders 369,303,901 346,631,241 1,461,353,026 142,899,477

Weighted Average Number of Ordinary Shares - Voting 01 180,000,000 180,000,000 180,000,000 180,000,000

Weighted Average Number of Ordinary Shares - Non Voting 90,0 00,0 00 90,0 00,0 00 90,0 00,0 00 90,0 00,0 00

Basic Earnings per Ordinary Share - Voting 1.37 1.28 5.41 0.53Basic Earnings per Ordinary Share - Non Voting 1.37 1.28 5.41 0.53


Accounting Profit before Taxation 347,491,331 646,956,080 1,464,965,193 142,899,477

Less: Exempt Profit (Note 2.4.2.2.) 337,323,372 483,096,309 1,378,087,323 142,899,477

Trade loss carried forward to the Y/A 2010/2011 1,062,333,732 - -

Profit from Trade and Business 133,837,238 - - -

Liable Other Income 10,167,959 163,859,771 10,167,959 -

Exempt Other Income 01 182,915,573 - - -

Tax Rate for the Year 35% 35% 35% 35%

Income Tax Provision for the Year 21,434,967 57,350,920 3,558,785 -

Social Responsibil ity Levy 321,825 860,264 53,382 -

21,776,791 58,211,184 3,612,167 -

Income Tax Under Provision For Previous Years 24,807,354 - - -

46,584,145 58,211,184 3,612,167 -



TheEastern Pride


SIGNIFICANT ACCOUNTING POLICIES AND NOTES TO THE FINANCIAL STATEMENTSYEAR ENDED MARCH 31, 2010

9. PROPERTY, PLANT AND EQUIPMENT

9 A. CONSOLIDATEDCOST/VALUATION

Freehold Land 32,581,600 - - - 32,581,600 F ac to ry B ui ld in gs 6 39 ,6 93 ,8 89 3 66 ,7 87 ,4 50 - - 1 ,0 06 ,4 81 ,3 39

Generator House 22,558,795 - - - 22,558,795

O th er B ui ld in gs 3 09 ,6 07 ,5 53 3 7, 15 4, 11 6 - - 3 46 ,7 61 ,6 69

Fuel Storage Tanks 4,940,759 - - - 4,940,759

P la nt & M ac hi ne ry 3 ,1 78 ,7 52 ,8 97 1 6, 81 5, 36 2 - - 3 ,1 95 ,5 68 ,2 59

Power Plant 221,083,463 - - - 221,083,463

F ac to ry a nd O th er E qu ipm en t 2 55 ,8 64 ,0 93 2 ,7 88 ,4 93 - - 2 58 ,6 52 ,5 86

La bora tory Eq uipment 2 5,87 9,4 72 78,4 89 - - 25,9 57, 961

Office Equ ipment 1 2,49 1,0 15 99 2,2 43 - - 13,4 83, 258

Generators 18,647,905 5,790,000 - - 24,437,905

Recycl ing System 785,895 - - - 785,895

F ur ni tu re & F it ti ng s 1 0, 17 4, 05 3 1 ,2 94 ,9 13 - - 1 1, 46 8, 96 6

Vehicles 509,533,951 30,374,889 4,405,443 2,738,600 538,241,997

Bulk Cement Carriers 12,637,344 - - - 12,637,344

Ce me nt Sil os 44 8,79 4,04 1 6,32 5,51 5 - - 4 55,1 19, 556

Cement Silos - Steel 27,322,920 - - - 27,322,920

Tug Boat 1,628,408 - - - 1,628,408

Railway Platform 7,263,915 - - - 7,263,915

Barges 11,812,085 - - - 11,812,085

C om pu te r & O th er E le ct ro ni c E qu ip me nt 3 4, 73 2, 87 5 5 ,2 00 ,1 27 - - 3 9, 93 3, 00 2

Packer House 67,760,711 - - - 67,760,711

Landing Jetty 66,420,752 - - - 66,420,752

Batching Plant & Pumper Truck 222,704,579 - - - 222,704,579

Vessel 2,777,881,354 694,800,000 1,172,120,000 - 2,300,561,354

Vessel Dry Docking 1,236,312,613 208,207,265 219,358,597 - 1,225,161,281

Bio Mass Building 207,472,122 - - - 207,472,122

B io M as s P la nt & M ac hi ne ry 2 ,3 55 ,4 11 ,6 32 9 ,8 12 ,6 43 - - 2 ,3 65 ,2 24 ,2 75

12,720,750,691 1,386,421,505 1,395,884,040 2,738,600 12,714,026,756

Leasehold Land 25,815,500 - - - 25,815,500

L ea se ho ld A ss et s- Mo to r V eh ic le 1 96 ,4 52 ,1 46 - - ( 2, 73 8, 60 0) 1 93 ,7 13 ,5 46

12,943,018,337 1,386,421,505 1,395,884,040 (2,738,600) 12,933,555,802

Item As at Transfer to As at

Rs. 01.04.2009 Additions Disposals Freehold category 31.03.2010

ANNUAL REPORT 2010 - TOKYO CEMENT COMPANY (LANKA) PLC. 72 ANNUAL REPORT 2010 - TOKYO CEMENT COMPANY (LANKA) PLC. 73

- - - - - 32,581,600 32,581,600 2 02 ,6 33 ,9 41 2 1, 53 6, 28 2 - - 2 24 ,1 70 ,2 23 7 82 ,3 11 ,1 16 4 37 ,0 59 ,9 48

1 3, 53 1, 84 4 1 ,1 27 ,9 40 - - 1 4, 65 9, 78 4 7 ,8 99 ,0 11 9 ,0 26 ,9 51

1 05 ,5 73 ,1 53 3 1, 91 7, 96 1 - - 1 37 ,4 91 ,1 14 20 9, 27 0, 55 5 2 04 ,0 34 ,4 00

3 ,598 ,513 247 ,038 - - 3, 845 ,551 1,09 5,2 08 1, 342, 246

77 1, 17 1, 70 7 1 62 ,2 38 ,1 75 - - 9 33 ,4 09 ,8 82 2 ,2 62 ,1 58 ,3 77 2 ,4 07 ,5 81 ,1 90

1 16 ,8 85 ,9 64 1 0, 55 1, 97 3 - - 1 27 ,4 37 ,9 37 9 3, 64 5, 52 6 1 04 ,1 97 ,4 99

2 14 ,3 77 ,2 65 1 2, 37 7, 22 4 - - 2 26 ,7 54 ,4 89 3 1, 89 8, 09 7 4 1, 48 6, 82 8

9 ,3 60 ,3 55 2 ,3 34 ,0 15 - - 1 1, 69 4, 37 0 1 4, 26 3, 59 1 1 6, 51 9, 11 7

8, 488, 587 911, 812 - - 9, 400, 399 4 ,08 2,85 9 4, 002, 428

5 ,9 74 ,1 82 1 ,7 34 ,3 64 - - 7 ,7 08 ,5 46 1 6, 72 9, 35 9 1 2, 67 3, 72 3

785,895 - - - 785,895 - -

5, 822, 416 964, 469 - - 6,7 86, 885 4 ,682 ,081 4 ,3 51,6 37

250,004,800 80,341,172 657,697 2,738,600 332,426,875 205,815,122 259,529,151

12,637,344 - - - 12,637,344 - -

1 04 ,9 02 ,2 43 1 5, 17 0, 01 2 - - 1 20 ,0 72 ,2 55 33 5, 04 7, 30 1 3 43 ,8 91 ,7 98

2 ,6 31 ,6 82 5 ,0 82 ,5 84 - - 7 ,7 14 ,2 66 1 9, 60 8, 65 4 2 4, 69 1, 23 8

1,628,408 - - - 1,628,408 - -

7,263,915 - - - 7,263,915 - -

10,031,100 - - - 10,031,100 1,780,985 1,780,985

2 5, 00 8, 11 1 3, 89 5, 05 1 - - 2 8, 90 3, 16 2 1 1, 02 9, 84 0 9 ,7 24 ,7 64

2 7, 07 3, 27 5 1 ,8 47 ,9 90 - - 2 8, 92 1, 26 5 3 8, 83 9, 44 6 4 0, 68 7, 43 62 9, 72 8, 51 6 3 ,3 21 ,0 38 - - 3 3, 04 9, 55 4 3 3, 37 1, 19 8 3 6, 69 2, 23 6

4 4, 84 3, 27 6 2 2, 27 0, 45 8 - - 6 7, 11 3, 73 4 1 55 ,5 90 ,8 45 1 77 ,8 61 ,3 03

901,618,852 158,145,887 504,662,779 - 555,101,960 1,745,459,394 1,876,262,502

649,696,875 189,779,536 104,757,127 - 734,719,284 490,441,997 586,615,738

3 97 ,8 92 2 0, 74 7, 21 3 - - 2 1, 14 5, 10 5 1 86 ,3 27 ,0 17 2 07 ,0 74 ,2 30

2 ,2 58 ,6 14 1 17 ,9 36 ,4 91 - - 1 20 ,1 95 ,1 05 2 ,2 45 ,0 29 ,1 70 2 ,3 53 ,1 53 ,0 18

3,527,928,725 864,478,685 610,077,603 2,738,600 3,785,068,407 8,928,958,349 9,192,821,966

2,7 36,8 06 4 20,0 51 - - 3,15 6,85 7 22, 658, 643 23 ,07 8,69 4

52,900,105 39,748,276 - (2,738,600) 89,909,781 103,803,765 143,552,041

3,583,565,636 904,647,012 610,077,603 - 3,878,135,045 9,055,420,757 9,359,452,701

WDVDEPRECIATION

As at For the On Transfer to As at As at As at

01 . 04 .2009 Y ea r D is posa l s F reeho ld ca tegory 31 .03 .2010 31. 03. 2010 31 .03 .2009



TheEastern Pride


Freehold Land 17,906,600 - - 17,906,600

F ac tory Buil din gs 224,504,223 - - 224, 504,223

Generator House 22,558,795 - - 22,558,795

Other Buildings 298,238,140 37,154,116 - 335,392,256

Fuel Storage Tanks 4,940,759 - - 4,940,759

Plant & Machinery 1,005,405,239 16,679,267 - 1,022,084,506

Power Plant 210,267,852 - - 210,267,852

Factory and Other Equipment 242,598,624 1,673,569 - 244,272,193

Laboratory Equipment 25,879,472 78,489 - 25,957,961

Office Equipment 8,285,684 773,863 - 9,059,547

Generators 14,528,455 5,790,000 - 20,318,455

Recycling System 785,895 - - 785,895

Furniture & Fittings 8,143,901 1,207,156 - 9,351,057

Vehicles 399,922,920 20,552,233 - 420,475,153

Bul k Cement C arr iers 12,637,344 - - 12,637,344

Cement Silos 122,839,094 6,325,515 - 129,164,609

Tug Boat 1,628,408 - - 1,628,408

Railway Platform 7,263,915 - - 7,263,915

Barges 10,031,100 - - 10,031,100

Computer & Other Electronic - Equipment 19,955,281 2,101,027 - 22,056,308

Packer House 24,278,628 - - 24,278,628

Landing Jetty 66,420,752 - - 66,420,752

B at ch in g P la nt & P um pe r T ru ck 2 22 ,7 04 ,5 79 - - 2 22 ,7 04 ,5 79

Vessel 238,308,400 - - 238,308,400

Vessel D ry Doc kin g 1,016,954,016 - - 1,016,954,016

Bio Mass Building 207,472,122 - - 207,472,122

Bio Mass Plant & Machinery 2,355,411,632 9,812,643 - 2,365,224,275

6,789,871,830 102,147,878 - 6,892,019,708

Leasehold Land 25,815,502 - - 25,815,502

L ea se ho ld As se ts -M ot or V eh ic le 6 9, 53 7, 10 0 - - 6 9, 53 7, 10 0

6,885,224,432 102,147,878 - 6,987,372,310

9. B. COMPANY

COST/VALUATION

9. PROPERTY, PLANT AND EQUIPMENT

SIGNIFICANT ACCOUNTING POLICIES AND NOTES TO THE FINANCIAL STATEMENTSYEAR ENDED MAR CH 31, 2010

ItemRs. As at As atRs. 01.04.2009 Addition s Disposals 31.03.2010

ANNUAL REPORT 2010 - TOKYO CEMENT COMPANY (LANKA) PLC. 74 ANNUAL REPORT 2010 - TOKYO CEMENT COMPANY (LANKA) PLC. 75

- - - - 17,906,600 17,906,600

95,399,796 5,613,319 - 101,013,115 123,491,108 129,104,427

13,531,844 1,127,940 - 14,659,784 7,899,011 9,026,951

101,646,129 31,917,961 - 133,564,090 201,828,166 196,592,011

2,964,456 247,038 - 3,211,494 1,729,265 1,976,303

551,779,726 50,909,388 - 602,689,114 419,395,392 453,625,513

116,528,239 10,513,393 - 127,041,632 83,226,220 93,739,613

194,254,239 11,688,125 - 205,942,364 38,329,829 48,344,385

9,360,356 2,334,015 - 11,694,371 14,263,590 16,519,116

5,408,040 624,543 - 6,032,583 3,026,964 2,877,644

4,760,274 1,532,047 - 6,292,321 14,026,134 9,768,181

785,895 - - 785,895 - -

4,343,160 727,809 - 5,070,969 4,280,088 3,800,741

228,923,054 62,827,110 - 291,750,164 128,724,989 170,999,866

12,637,344 - - 12,637,344 - -

16,802,164 3,375,840 - 20,178,004 108,986,605 106,036,930

1,628,408 - - 1,628,408 - -

7,263,915 - - 7,263,915 - -10,031,100 - - 10,031,100 - -

13,713,096 1,555,343 - 15,268,439 6,787,869 6,242,185

13,353,232 1,213,932 - 14,567,164 9,711,464 10,925,396

29,889,338 3,321,038 - 33,210,376 33,210,376 36,531,414

44,682,453 22,270,458 - 66,952,911 155,751,668 178,022,126

238,308,400 - - 238,308,400 - -

452,284,632 65,382,771 - 517,667,403 499,286,613 564,669,384

397,892 20,747,213 - 21,145,105 186,327,017 207,074,230

2,258,614 117,936,491 - 120,195,105 2,245,029,170 2,353,153,018

2,172,935,796 415,865,774 - 2,588,801,570 4,303,218,138 4,616,936,034

2,736,806 420,051 - 3,156,857 22,658,645 23,078,696

33,838,894 17,384,275 - 51,223,169 18,313,931 35,698,206

2,209,511,496 433,670,100 - 2,643,181,596 4,344,190,714 4,675,712,936

As at For the On As at As at As at

01 .0 4. 20 09 Y ea r D is po sa ls 3 1. 03 .2 01 0 31 .0 3. 20 10 3 1. 03 .2 00 9

WDVDEPRECIATION



TheEastern Pride


10. GOODWILL

11. INVESTMENTS

12. OPERATING LEASE PREPAYMENT

Goodwil l reflects the excess of the purchase price of shares in Tokyo Cement Colombo Terminal (Pvt.) Ltd, (Formerly known as

Samudra Cement Company Lanka (Pvt) Ltd.) over the fair value of the proportionate share of the net assets of such Company as

at the date of acquisition. Unamortized balance of Goodwil l as at 01st April 2005 as well as goodwil l generated from further

acquisition which was made on 31st December 2006 recorded as a permanent asset subject to impairment testing.


Investments In Subsidiaries - Unquoted - At Cost

Fuji Cement Company (Lanka) Ltd.

Ordinary Shares (9,000,000 shares) - - 90,000,000 90,000,000

10% Convertible Preference Shares

(6,000,000 Shares) - - 60,000,000 60,000,000

Tokyo Cement Colombo Terminal (Pvt.) Ltd.

Ordinary Shares - 19,425,000 - - 235,050,010 235,050,010

Tokyo Super Cement Company Lanka (Pvt) Ltd.

Ordinary Shares of 85,010,002 Shares - - 850,100,020 100,100,020

- - 1,235,150,030 485,150,030

Investments - Quoted

Commercial Bank of Ceylon PLC.

13% Redeemable Preference Shares

(Market Value Rs.9.00 per Share) - 500,000 - 500,000

- 500,000 1,235,150,030 485,650,030



Balance as at 01.04.2009 78,142,856 82,484,126 - -

Amortization during the year (4,341,270) (4,341,270) - -

73,801,586 78,142,856 - -

Less: Current Portion of Prepayment 4,341,270 4,341,270 - -

Balance as at 31st March, 2010 69,460,316 73,801,586 - -







13. INVENTORIES


Raw Materials 304,750,093 638,349,092 86,104,877 323,324,791

Finished Goods - Manufactured 132,675,135 202,407,339 116,904,025 89,475,567

Packing Materials 139,443,645 403,073,369 10,181,876 247,766,448

Spares and Consumables 80,074,186 104,837,508 55,870,883 64,423,011

Grinding Media 30,878,874 39,586,952 30,878,874 39,586,952

Balance as at 31st March, 2010 687,821,933 1,388,254,260 299,940,535 764,576,769


14. TRADE & OTHER RECEIVABLES

Consolidated CompanyRs. 31st March,2010 31st March,2009 31st March,2010 31st March,2009

Group inventories have been pledged as security for term loans obtained, details of which are disclosed in Note 24.

Trade Debtors 921,376,332 983,764,018 308,912,193 588,330,288

Deposits, Advances and Pre-payments 57,207,144 78,608,301 24,690,252 29,841,393

Other Receivables 334,502,213 665,266,462 145,799,921 442,720,671

Balance as at 31st March, 2010 1,313,085,689 1,727,638,781 479,402,366 1,060,892,352

15. AMOUNT DUE FROM RELATED PARTIES



Tokyo Cement Colombo Terminal (Pvt) Ltd. - - 6,420,160 8,513,730

Tokyo Super Cement Company Lanka (Pvt) Ltd. - - 1,167,503, 351 3,985,542

Balance as at 31st March, 2010 - - 1,173,923,511 12,499,272

16. STATED CAPITAL


At the At the At the At the

Beginning Sub division End of Beginning Sub division End of

Rs. Note of the Year of the Year of the Year of the Year

Number Of Shares 01.04.2009 Shares 31.03.2010 01.04.2009 Shares 31.03.2010

Value Rs.

Ordinary Shares

- Voting

- Non Voting

Note 01

As per the Special Resolution passed at the Extra Ordinary General Meeting (EGM) held on 20th January 2010, it was resolved that each of

the issued and subscribed 18Mn Voting Ordinary shares be sub - divided into 10 (ten) Ordinary shares (Voting) fully paid up. Therefore,the

number of ordinary shares outstanding is increased without an increase in resources.

}1,793,000,000 - 1,793,000,000 1,793,000,000 - 1,793,000,000

Ordinary Shares

- Voting 01 18,000,000 162,000,000 180,000,000 18,000,000 162,000,000 180,000,000

- Non Voting 90,000,000 - 90,000,000 90,000,000 - 90,000,000

108,000,000 162,000, 000 270,000,000 108,000,000 162,000,000 270,000,000



TheEastern Pride


17. RESERVES


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

150,000,000 150,000,000 - -


18. INTEREST BEARING BORROWINGS



a) Shigyo and Company - Preliminary Expenses Rs.4,260,894/-

The above amount has been written back in the Financial Statements.


Nippon Coke & Engineering Co. Ltd

(Mitsui Mining Company Ltd) - 180,534,441 - 180,534,441

Shigyo & Company - Preliminary Expenses - 4,260,894 - 4,260,894

- 184,795,335 - 184,795,335

Balance as at 01.04.2009 3,437,396,608 3,097,565,274 603,757,776 -

Add:

Loans Obtained/Exchange Loss during the year 7,419,039,63 2 5,350,378,696 2,660,000,000 1,030,000,000

10,856,436,240 8,632,739,305 3,263,757,776 1,214,795,335

Less:

Settlements during the year/

(Exchange Gain) during the year (7,108,455 ,971) (5,195,34 2,697) (2,113,726 ,282) (611,037,55 9)

Loan Repayable Write Back (4,260,894) - (4,260,894) -

Balance as at 31.03.2010 3,743,719,375 3,437,396,608 1,145,770,600 603,757,776

Current Maturity Portion 2,356,956,650 2,569,470,983 460,669,200 401,100,000

Non Current Maturity Portion 1,386,762,725 867,925,625 685,101,400 202,657,776






Balance as at 01.04.2009 264,087,499 32,817,926 32,817,926 32,817,926

Charge to / (from) Income Statement (50,452,335) 231,269,573 - -

Balance as at 31.03.2010 213,635,164 264,087,499 32,817,926 32,817,926

Sri Lanka Accounting Standard 14 Income Taxes does not specify the recognition and measuement of deferred tax for companies which enjoy tax

holidays under local jurisdictions.

Section 17 of the Board of Investments Law No. 4 of 1978, under which the Board of Investment (BOI) in Sri Lanka is set up, has given the Board the

power to grant exemptions from the Inland Revenue Act. The Board on entering into agreement with entities in the Group has stated that the

provisions of the respective Inland Revenue Acts to the imposition, payment and recovery of income tax in respect of the profits and income of the

enterprise shall not apply during the period of the tax exemption. For certain companies of the Group the BOI has given the option to pay tax as a

percentage of turnover or at a concessionery rate after the expiration of the tax holiday period.

The Urgent Issues Task Force (UITF) of the Institute of Chartered Accountants of Sri Lanaka is at present interpreting the applicability of SLAS 14 to companies

under BOI tax holidays and if deemed applicable will specify the method of computing and the timing of accounting for deferred tax during the tax holiday

period. The Company awaits the ruling of the UITF to determine the accounting for deferred tax in relation to tax holiday companies.

20. RETIREMENT BENEFIT OBLIGATION

Provision for Retiring Gratuity


At the beginning of the Year 23,039,761 22,909,233 16,695,742 17,210,078

Acturial (Gains) /Losses 1,861,331 - 1,055,496 -

Current Service Cost 3,192,157 - 1,867,899 -

Interest Cost 2,736,185 - 2,003,489 -

Provision for the Year 7,789,673 6,476,744 4,926,884 3,978,929

30,829,434 29,385,977 21,622,626 21,189,007

Adjustment Made - (6,127,333) - (4,374,984)

Payments during the Year (961,844) (218,883) (593,894) (118,281)

At the end of the Year 29,867,590 23,039,761 21,028,732 16,695,742

19. DEFERRED TAX





20.1. The amounts recognised in the Balance Sheet are as follows


Present Value of Unfunded Obligations 29,867,590 23,039,761 21,028,732 16,695,742

Total Present Value of Obligations 29,867,590 23,039,761 21,028,732 16,695,742



SIGNIFICANT ACCOUNTING POLICIES AND NOTES TO THE F INANCIAL STATEMENTSYEAR ENDED MARCH 31, 2010

22. CAPITAL COMMITMENTS

Tokyo Cement Company (Lanka) PLC.

The Capital expenditure for the Jaffna Batching Plant Project, which is approved by the Board of Directors and contracted for, amounts

to approximately Rs.60 Mn.

23. CONTINGENT LIABILITIES AND CONTINGENT ASSETS

23.1 Contingent Liabilities

a) The Group awaits the rul ing of the UITF to determine the accounting for deffered tax in relation to tax holiday companies.

b) Value Added Tax assessment for the months ending November, 2002 and March, 2003 have been issued by the Department of InlandRevenue.

20.2 The Group has adopted SLAS 16 ( Revised 2006) in determining this l iabil ity in respect of retiring gratuity. According to SLAS 16, actuarial

techniques should be used to make a reliable estimate of the amount of the retirement benefit obligation to the employees. The Group has

adopted the ‘ Project Unit Credit Method’ to determine the present value of the retiring benefit obligation as recommended by SLAS 16. The

actuarial valuation was carried out by M/s Actuarial & Management Consultants ( Pvt) Ltd in respect of Tokyo Cement Company (Lanka) PLC,

Fuji Cement Company (Lanka) Ltd,Tokyo Super Cement Company Lanka (Pvt) Ltd, Tokyo Cement Colombo Terminal (Pvt) Ltd. The l iabil ity is not

externally funded.

20.3 The principal actuarial assumptions used in determining this obligation were;

2009/2010 2008/2009

a) Discount rate 11% 12%

b) Salary increment 10% 10%

c) Retirement age 55 years

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


21. TRADE & OTHER PAYABLES


Bil ls Payable 1,125,811,716 2,616,795,493 538,840,952 1,131,286,009

Expense Creditors 823,949,568 823,896,370 475,437,557 511,677,627

Other Creditors 270,143,753 333,868,518 59,929,829 108,169,005

2,219,905,0 37 3,774,560,38 1 1,074,208,33 8 1,751,132,6 41

TheEastern Pride





c) Value Added Tax assessment for the months ending December, 2003 March, 2004 have been issued by the Department of InlandRevenue to Fuji Cement Co. (Lanka) Ltd.

The Company has fi led an appeal with the Court of Appeal against the assessments.

d) The Department of Customs has fi led action against the claiming of higher rate of duty in respect of the importation of goods in the shipsowned and operated by the Company and its subsidiaries and also computation of freight charges for purposes of customs duty onclinker import using own vessel.

e) The Department of Inland Revenue has disallowed Rs.300 Mil l ion donation made in the year of assessment 2002/03. However, this

has been contested by the Company.

Representation provided by the legal and tax experts based on information available the contingent l iabil ities as atMarch 31, 2010 may not have a major impact on t he Financial Statements.

23.2 Contingent Assets

There were no material contingent assets for the Company or Group existing as at the balance sheet date.


SIGNIFICANT ACCOUNTING POL ICIES AND NOTES TO THE F INANCIAL STATEMENTSYEAR ENDED MARCH 31, 2010



24. ASSETS PLEDGED

Following assets have been pledged as security for liabilities.

}

Rs.

Name of the Nature of Liabil it ies & Loan/Facil ity Granted Balance Outstanding Balance Outstanding Repayment Security PledgedCompany the Name of Bank as at 31.03.2010 a s at 31.03.2009

371,770,746

100,000,000

450,000,000

50,000,000

200,000,000

725,000,000

750,000,000

450,000,000

125,000,000

500,000,000

200,000,000

700,000,000

300,000,000

20,000,000

30,000,000

750,000,000

40,000,000

(US $ 5,250,000)

(US $ 5,250,000)

850,000,000

402,500,000

(US $ 3.5Mn)

500,000,000

500,000,000

52,057,062

33,312,000.

450,000,000

-

200,000,000

537,839,443

329,075,102

390,117,196

-

251,601,475

213,720,000

152,437,600

187,500,000

15,833,000

-

750,000,000

40,000,000

-

-

-

-

563,333,326

96,500,000

108,319,461

246,594,000

283,314,978

58,320,000

-

50,000,000

-

594,239,631

320,300,270

450,000,000

112,590,000

31,133,944

359,240,000

311,100,000

262,500,000

-

25,896,882

-

-

(US $ 546,875)

Rs. 63,628,906

(US $ 656,250)

Rs. 76,354,688

733,333,330

-

-

-

Within f ive years

commencing, one year

after vessel starts operations.

Renewable quarterly

Renewable quarterly

On demand

On demand

On demand

On demand

On demand

On demand

On demand

On demand

Repayable in 48 equal monthlyinstalments

Repayable in 48 equal monthlyinstalments

Repayable in 47 equal monthlyinstalments and a f inal installmentsof Rs.415,100/-

Repayable in 48 instalments

Repayable in 35 equal monthlyinstalments and a f inal installmentsof Rs.20,810,000/-

Repayment wil l commence after12 months from f irst disbursement

of the loan, thereafter repayablein 48 equal monthly installments.

(US $ 109,375 @)48 months

(US $ 109,375 @)48 months

Repayable in 60 equal monthlyinstallments

On demand

On demand

On demand

The Loan Agreement, Corporate Guarantee ofTokyo Cement Company Lanka PLC andmortgage over the Merchant vessel.

Corporate guarantee of Fuji Cement CompanyLanka Ltd.

Corporate guarantee of Fuji Cement CompanyLanka Ltd.

Mortgage Bond over Inventory and book debts.

Loan agreement MML and hypothecation bondover stocks at Port Premises, Colombo and bookdebts of the company for Rs. 200mn.

Mortgage Bond over Inventory, book debts andLeasehold Land and Buildings.

Mortgage Bond over Inv entory and book debts.

Mortgage Bond over Inv entory and book debts.

Mortgage Bond over Clinkerand Cement stock.

On Demand Trust Receipt.


On Demand Loan Agreement.



Motor Vehicle



Con - Current Mortgaged over the Vesseland Corporate Guarantee fromTokyo Cement Company (Lanka) PLC.

(a) Primary mortgaged over proposed machineryand equipments

(b) Corporate Guarantee from Tokyo CementCompany (Lanka) PLC.




a. Term LoansBank of Ceylon,

b. Commercial Papers Issued

Commercial Bank ofCeylon PLC.,

c. Money Market Loansi. Bank of Ceylon

ii. Sampath Bank PLC.,

d. Trust Receipts Loansi Sampath Bank PLC.,

ii Commercial Bank of Ceylon PLC.,

e. Hypothecation Loani. Bank of Ceylon

a. Hypothecation L oani. Bank of Ceylon,

b. Trust Receipts Loans

i. Sampath Bank PLC.,

ii. Commercial Bank of Ceylon PLC.,

c. Term Loansi. Commercial Bank of Ceylon PLC.,

ii . Sampath Bank PLC.

iii . Bank of Ceylon,

a. Term Loansi. Seylan Bank PLC

ii. Sampath Bank PLC.,

a. Term Loans

i. DFCC Bank

ii. CITI Bank

iii . Sampath Bank PLC.,

iv. Commercial Bank of Ceylon PLC.,

Tokyo

Cement

Colombo

Terminal (Pvt)

Ltd.

Tokyo

Cement

Company(Lanka) PLC

Fuji Cement

Company

(Lanka) Ltd.

Tokyo Super

Cement

Co. Lanka

(Pvt) Ltd.

TheEastern Pride



SIGNIFICANT ACCOUNTING POLICIES AND NOTES TO THE FINANCIAL STATEMENTS

YEAR ENDED MARCH 31, 2010



.seinapmocgniwollofehtfosevitatneserpeR /srotceriDoslaeraynapmoCehtfosrotceriDehT1.52

25. RELATED PARTY TRANSACTIONS

St. Anthony’s Central Finance South Asian Rhino RoofingHardware PLC Investments Products(Pvt) Ltd. (Pvt) Ltd. Ltd.

Mr. Edgar Gunatunga - - - -

Mr. S. R. Gnanam x - x x

Mr. K. Yanagihara - - - -

Mr. S. V. Wanigasekera - x - -

Mr. A. S. G. Gnanam x - x x

Mr. E. J. Gnanam x - x xMr. R. Seevaratnam - - - -

Mr. T. Uetake - - - -

Mr. S. Mori - - - -

Dr. Harsha Cabral - - - -

“x” Denotes the companies in which each of the persons mentioned was a Director.

Note 01 : Mr. W. C. Fernando is a Director of the Fuji Cement Co (Lanka) Ltd ,Tokyo Super

Cement Co Lanka (Pvt) Ltd and Tokyo Cement Colombo Terminal (Pvt) Ltd.

Fuji Cement Tokyo Super Tokyo Cement Nippon Coke & St. Anthony’sCo. (Lanka) Cement Co. Colombo Engineering Company Consolidated

Ltd. Lanka Terminal Limited, Japan Ltd.(Pvt) Ltd. (Pvt) Ltd. (Representatives)

Mr. Edgar Gunatunga x x x - -

Mr. S. R. Gnanam x x x - x

Mr. K. Yanagihara x x x x -

Mr. S. V. Wanigasekera x x - - -

Mr. A. S. G. Gnanam x x - - x

Mr. E. J. Gnanam x x x - x

Mr. R. Seevaratnam x x - - -

Mr. T. Uetake x - - x -

Mr. S. Mori x - - x -

Dr. Harsha Cabral x x - - -


SIGNIFICANT ACCOUNTING POL ICIES AND NOTES TO THE F INANCIAL STATEMENTS

YEAR ENDED MARCH 31, 2010





TheEastern Pride


25.2 The Company has had following transactions with related entities during the Year or as at the Balance Sheet date in the ordinary

course of business at Commercial rates.


(a) St. Anthony's Consolidated (Pvt) Ltd

i. Sales Commission 242,810,872 390,942,124 138,145,812 126,490,553

ii. Rent paid in respect of office premises - 840,000 - -

iii. Cement Sales - 630,200 - -

(b) Nippon Coke & Engineerin g Co. Ltd

(Mitsui Mining Co (Ltd))

i. Royalty - 37,364,867 - 29,479,582

ii. A loan has been obtained from Nippon Coke

& Engineering Co. Ltd., the deatails are given in Note 18

(c) St. Anthony's Hardware (Pvt) Ltd

i. Purchase of Chemicals 50,512,387 43,898,275 50,512,387 43,898,275

(d) Tokyo Cement Colombo Terminal (Pvt) Ltd

i Sales of Cement including Transport Charges - - 330,782,756 406,398,661

ii. Advertisin g and Image Buildings - - 4,506,497 24,000,000

iii. Transfer of Steel Silo - - - 22,400,000

(e) Sampath Bank

i. Import Loan - 91,578,938 - -

ii. Lease Creditor - 19,099,153 - 16,744,796

iii. Bank Guarantee - 850,000,000 - -

iv. Trust Recept Loan - 2,371,607,772 - -

(f) South Asian Investment (Pvt) Ltd

i. Sales Commission 67,135,608 88,018,550 - -

(g) Rhino Roofing Products Ltd

i. Sale of Cement 1,219,341,677 1,507,741,320 - 98,300,655

(h) Amounts Due From Related Companies (Note 15)

i. Tokyo Cement Colombo Terminal (Pvt) Ltd. - - 6,420,160 8,513,730

ii. Tokyo Super Cement Company Lanka (Pvt) Ltd. - - 1,167,503,351 3,985,542

(i) Amounts Due To Related Companies

i. Fuji Cement Company (Lanka) Ltd. - - 503,875,506 1,231,165,874

(j) Central Finance PLC

i. Finance Lease 100,935,492 144,193,560 - -

(k) Tokyo Super Cement Company Lanka (Pvt) Ltd.

i . Investment In Share Capital - - 750,000,000 -




25.3 Transaction with key management pe rsonnel (KMP)

(a) Loans to Directors

No Loans have been given to the Directors of the Company.

(b) Key Management Personnel Compensation

Key Management Personnel comprises Directors of the Company Details of the compensation are given in Note 05 to the

Financial Statements.

The Remuneration Committee decides on the remuneration of Executive Directors and sets guidelines for the remuneration of the Management Staff

within the Group.

26. SUBSIDIARY COMPANIES

Company Holding

Fuji Cement Company (Lanka) Ltd 100%

Tokyo Cement Colombo Terminal (Pvt) Ltd 56.85%

Tokyo Super Cement Company Lanka (Pvt) Ltd 100%

Tokyo Cement Power (Lanka) Ltd (Stil l in gestation stage)

According to the letter dated 1st June, 2009 issued by Board of Investment of Sri Lanka, Fuji Cement Company (Lanka) Limited, a subsidiary of the

Parent Company has obtained the approval for suspension of operations ti l l 31st December, 2010.

27. EVENTS OCCURRING AFTER THE BALANCE SHEET DATE

(a) As required by section 56(2) of the Companies Act No. 07 of 2007, the Board of Directors have confirmed that the Company satisfied the

solvency test in accordance with Section 57 of the Companies Act No. 7 of 2007 and has obtained a certificate from the auditors, prior to paying

an interim dividend of Rs. 1.65 per share amounting to Rs.334,125,000 on the issued stated capital of ordinary voting shares and interim dividend

of Rs.1.65 per share amounting to Rs.167,062,500 on the Issued Stated Capital of non voting shares for the year under review.

(b ) Capitalization of Reserves and Issue of One share for every eight shares held.

An amount of Rs. 2,789,379,000 is standing to the credit of the Revenue Reserves in the Company's Balance Sheet as at 31st March 2010 (Draft).

The Board therefore recommended on 6th May, 2010 and approved by the shareholders on 28th June, 2010 that sum of Rs. 573,750,000 being

a part of the amount standing to the credit of the Revenue Reserve in the Company's Balance Sheet as at 31st March 2010, should be capital ized

and applied in paying up in ful l 22,500,000 Voting Ordinary Shares and 11,250,000 Non-Voting Ordinary Share in satisfaction the reof.

28. COMPARATIVE INFORMATION

Comparative figures have been re-classified where necessary in l ine with the presentation requirements for the current year.



100%



TheEastern Pride


FIVE YEAR SUMMARY

GROUP

OPERATING RE SULT

Rs. Mn

Year ended March 31, 2010 2009/2010 2008/2009 2007/2008 2006/2007 2005/2006

Turnover 14,029 11,310 8,956

Gross Profit 2,052 1,935 1,500

Profit Before Taxation 541 844 629

Taxation 32 (20) 11

Profit After Taxation 573 824 640

Minority Interest (19) (10) (12)Profit Attributable to Ordinary Shareholders 554 814 628

BALANCE SHEET

Rs. Mn

As at March 31, 2010 2009/2010 2008/2009 2007/2008 2006/2007 2005/2006

Assets

Property, Plant & Equipment 4,687 4,473 4,783

Capital Work-in-Progress 3,699 2,564 278

Goodwil l 13 13 10 Investment 0.50 0.50 0.50

Fixed Deposit 3 - 655

Operating Lease Prepayment 78 82 87

8,481 7,134 5,814

CURRENT ASSETS

Inventories 1,212 600 601

Trade & Other Receivable 1,464 948 613

Operating Lease Prepayment 4 4 4

Amount Due from Subsidiary/Affi l iates - - 164

Cash & Cash Equivalent 181 440 407 2,861 1,992 1,789

11,342 9,126 7,603

17,652

2,719

647

(289)

358

(11)347

9,359

397

13 0.50

3

74

9,846

1,388

1,943

4

-

3113,646

13,492

9,055

93

13-

3

70

9,234

688

1,572

4

-

9113,175

12,409

14,737

2,281

347

4

351

18369




TOTAL ASSETS

EQUITY & LIABILITIES

Capital & Reserves

Year ended March 31, 2010 2009/2010 2008/2009 2007/2008 2006/ 2007 2005/2006

Stated Capital 1,793 1,100 225

Reserves 150 376 1,251

Retained Earnings 3,062 3,009 2,341

5,005 4,485 3,817

Minority Interest 147 128 59

5,152 4,613 3,876

NON-CURRENT LIABILITIES

Interest Bearing Borrowing 1,272 1,772 1,532

Deferred Tax 33 69 83

Retirement Benefits Obligations 23 18 13

Deferred Revinue - - -

Lease Creditors 35 33 3

1,363 1,892 1,631

CURRENT LIABILITIES

Trade & Other Liabil ites 2,251 924 608

Current Maturity of Long-Term Loan 2,010 1,440 1,350

Lease Creditors 18 9 0.94

Bank Overdrafts 354 239 136

4,827 2,621 2,094

Total Equity and Liabil ities 11,342 9,126 7,601


1,793

150

3,300

5,243

158

5,401

868

264

23

10

98

1263

1,387

214

30

7

53

1,691

1,793

150

3,588

5,531

140

5,671

3,775

2.569

43

441

6,828

13,492

2,220

2,357

48

422

5,047

12,409

INVESTOR INFORMATION


Earnings Per Share - Vorting Ordinary Share (Rs.) 1.37 1.28 20.51 30.15 31.41

Earnings Per Share - Non-Vorting Ordinary Share (Rs.) 1.37 1.28 2.05 3.02 3.14

Dividend Per Share - Vorting Ordinary Share (Rs.) 1.65 3.00 4.00 5.00 4.50

Dividend Per Share - Non - Vorting Ordinary Share (Rs.) 1.65 0.30 0.40 0.50 0.45

Return on Equity (%) 6.34 6.81 11.43 18.37 16.78

Interest Cover (Time) 1.41 1.78 2.38 3.28 3.20

Market Price Per Share (Rs.) - Voting 28.00 125 251.25 250.00 181.00

Price Earnings Ratio (Times) 20.44 97.4 12.25 8.29 5.7

Assets Turnover Ratio (Times) 1.19 1.31 1.24 1.24 1.18

Rs. Mn

FIVE YEAR SUMMARY



TheEastern Pride


NOTICE OF MEETING

NOTICE IS HEREBY GIVEN that the Twenty Eighth Annual General Meeting of the Shareholders of

Tokyo Cement Company (Lanka) PLC will be held on Thursday 16th September 2010 at the Auditorium, Institute

of Chartered Accountants of Sri Lanka, 30A, Malalasekara Mw., Colombo 7 at 5.00 p.m. The business to be

brought before the Meeting wil l be :

Agenda

1. To receive and adopt the Report of the Directors, the Statement of Audited Accounts for the year ended

31 st March 2010 and the Report of the Auditors thereon.

2. To ratify the interim dividends authorized for payment on 6th August 2010, also as the final dividends for

the year 2009/10.

3. To re-elect Mr Ranjeevan Seevaratnam who retires by rotation in terms of Article 113 of the Articles of

Association.

4. To authorize the Directors to determine contributions to charities.

5. To authorize the directors to determine the remuneration payable to the Auditors Ms BDO Partners

(Chartered Accountants). (An auditor of a company, is deemed to be re-appointed at an Annual GeneralMeeting of the Company under section 158 of the Companies Act, No. 7 of 2007).

6. To re-elect as a director Mr Edgar Gunatunga and being over the age of 70 years and who retires in

terms of Articles of Association and pursuant to Section 211 of the Companies Act No 7 of 2007 for which

special notice of the following ordinary resolution has been given by a member for the purpose.

That the age limit referred to in Section 210 of the Companies Act No 7 of 2007 shall not apply to

Mr. Edgar Gunatunga who is 78 years and that he be re-elected a Director of the Company.

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


tokyo cement -annual report 2010

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