chilaw finance limited intro

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Chilaw Finance Limited Introductory Document

CHILAW FINANCE LIMITED

We understand People and Finance

CHILAW FINANCE LIMITED 44 A Kurunegala Road, CHILAW Tel: 032-2223273-032-2222055 Incorporated under The Companies ordinance No. 51 of 1938 and The Companies Act No. 17 of 1982 and Re- registered under The Companies Act No. 07 of 2007

INTRODUCTORY DOCUMENT For the obtaining the listing of 28,083,948

Ordinary Shares ( Voting )

On the Diri Savi Board of the Colombo Stock Exchange For further inquiries, please contact Finance Department of Chilaw Finance Ltd

If you are in any doubt regarding the contents of this document you should consult your stock broker, bank

manager, lawyer or any other professional advisor.

The delivery of this introductory document shall not under any circumstances constitute a representation or

create any implication or suggestion, that there has been no material change in the affairs of the company since

the date of this document.

Company Secretaries Consultants & Corporate Secretaries ( Pvt ) Ltd No:35 1/1 Devanampiyatissa Mawatha Colombo 10. Tel:2689618

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DECLARATION

The Directors of the Company, collectively and individually, having made all reasonable inquiries,

confirm that to the best of their knowledge and belief, the information contained herein is true and

correct in all material respects and that there are no other material facts, the omission of which, would

make any statement herein misleading.

The Board of Directors of Chilaw Finance Limited has taken reasonable care to ensure full and fair

disclosure it does not assume any responsibility for any investment decision made by investors based on

information contained herein. In making an investment decision, prospective investors must rely on their

own examination and assessment of the company including the risks involved.

No person is authorized to give any information or to make any representations not contained in this

Introductory Document and if given or made, any such information or representation must not be relied

upon as having been authorized by the Company.

The Colombo Stock Exchange (CSE) has taken reasonable care to ensure full and fair

disclosure of information in this Introductory Document. However, the CSE assumes

no responsibility for the accuracy of the statements made, opinion expressed or reports

included in this Introductory Document.

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ABBREVIATIONS USED IN THIS INTRODUCTORY DOCUMENT CDS - Central Depository Systems (Pvt) Ltd CSE - Colombo Stock Exchange CFL or the “Company” - Chilaw Finance Limited SEC - Securities & Exchange Commission of Sri Lanka CBSL - Central Bank of Sri Lanka Ordinary Share(s) - Ordinary Voting Shares(s) of the Company. EGM - Extra Ordinary General Meeting

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TABLE OF CONTENTS Page 1. CORPORATE INFORMATION 05

2. INFORMATION RELEVANT TO THE INTRODUCTION 06-08

2.1 Introduction of Ordinary Voting Shares for listing 2.2 Copies of Introductory Document

3. DETAILS OF THE BOARD OF DIRECTORS 09-10 3.1 Directors’ Profiles

4. CAPITAL STRUCTURE 11-16 4.1 Stated Capital 4.2 Details of the Ordinary share issue 4.3 Details of the Preference Share Issue 4.4 History of New Share Issues ,Rights and Bonus Issues 4.5 Additional Information 4.6 History of Dividends

5. THE FINANCE INDUSTRY IN SRI LANKA 17-19 5.1 Leasing and Hire Purchase Industry 5.2 Selected financial soundness indicators of RFC’s 5.3 Assets & Liabilities of Finance Companies

6. PROFILE OF THE ENTITY 20-26 6.1 Overview of the company and nature of the business 6.2 Details of the Ten Largest Shareholders 6.3 Degree of Dependence 6.4 Human Resources 6.5 Future Plans, Prospects and Associated Risks

7. MANAGEMENT TEAM 27-29

8. LITIGATION, DISPUTES, AND CONTINGENT LIABILITIES 30

9. FINANCIAL INFORMATION 31-32 9.1 Ratios and Share Information 9.2 Receivables

10. CORPORATE GOVERNANCE PRACTICES 33-36

10.1 Independent Non Executive Directors 10.2 Remuneration Committee 10.3 Audit Committee 10.4 Integrated Risk Management Committee

11. DECLARATION BY THE DIRECTORS 38 12. FINANCIAL STATEMENTS 40-113

12.1 Audited Financial Statements as at 31st March 2008 12.2 Audited Financial Statements as at 31st March 2009 12.3 Audited Financial Statements as at 31st March 2010 12.4 Disclosures to the Audited Financial Statements 2009/2010 12.5 Unaudited interim Financial Statements as at 31st December 2010

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1. CORPORATE INFORMATION

2.INFORMATION RELEVANT TO THE INTRODUCTION 2. INFORMATION RELEVANT TO THE INTRODUCTION

Name & Address of the Company Chilaw Finance Limited No. 44A, Kurunegala Road Chilaw Legal Form Under the Companies Act

In 1980, the Company was incorporated under the name style of Chilaw Finance Enterprises (Pvt) Ltd under the Companies Ordinance No. 51 of 1938. In 1985 the name of the Company was changed to Chilaw Finance (Pvt) Ltd in terms of Section 20 (3) of the Companies Act No. 17 of 1982. In 1990 the Company was converted to a Public Limited Liability Company and the company was re-name as Chilaw Finance Limited in terms of Section 20 (3) of Companies Act No. 17 of 1982. Subsequently, in 2007 the Company was re-registered under the Companies Act No. 7 of 2007 and was issued the Registration No. PB 508 by the Registrar General of Companies, Sri Lanka. Under the Finance Companies Act The Company is registered in terms of Section 2 of the Finance Companies Act No. 78 of 1988. Under the Finance Leasing Act The Company is registered under the Finance Leasing Act. No 56 of 2000.

Company Registration No. PB 508 Company Secretary Consultants & Corporate Secretaries (Pvt) Ltd No. 35 1/1, Devanampiyatissa Mawatha Colombo 10 Name and address of the Auditors D H P Munaweera & Company Chartered Accountants No. 5/6, Police Park Terrace Off Police Park Avenue Colombo 05 Bankers to the Company Seylan Bank PLC Sampath Bank PLC People’s Bank Bank of Ceylon Commercial Bank of Ceylon PLC Pan Asia Bank PLC DFCC Vardhana Bank

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2.INFORMATION RELEVANT TO THE INTRODUCTION 2.1 INTRODUCTION OF ORDINARY VOTING SHARES FOR LISTING.

This introductory document dated 17-03.2011 is published for the purpose of obtaining a listing on a Colombo Stock Exchange for the ordinary voting shares of Chilaw Finance Limited. The shares are to be listed on the Diri Savi Board of the Colombo Stock Exchange.

2.2 COPIES OF INTRODUCTORY DOCUMENT

Copies of the introductory document may be obtained from the manager of any member firm and trading member firm of the Colombo Stock Exchange.

2.2.1 Members and trading member of the CSE Members of the CSE

Acuity Stockbrokers (Pvt) Ltd Asha Phillip Securities Limited Level 6, Acuity House Level 4, “MillenniumHouse” 53, Dharmapala Mawatha 46/58, Navam Mawatha Colombo 03 Colombo 02 Tel: 2206206 Tel: 2429100 Fax: 2206298/9 Fax: 2429199 E-mail: [email protected] E-mail: [email protected] Asia Securities (Pvt) Limited Bartleet Mallory Stockbrokers (Pvt) Ltd Level 21, West Tower Level “G”, Bartleet House World Trade Centre 65, Braybrooke Place Echelon Square, Colombo 01 Colombo 02 Tel: 2423905, 5320000 Tel: 5220200 Fax: 2336018 Fax: 2434985 E-mail: [email protected] E-Mail: [email protected] Capital TRUST Securities (Pvt) Ltd Ceylinco Stockbrokers (Pvt) Ltd No. 42, Sir Mohammed Macan Markar Mw. Ceylinco House, Level 09 Colombo 03 69, Janadhipathi Mawatha Tel: 5-335225 Colombo 01 Fax: 5-365725 Tel:4-714300,4-714388,4-714389, 0777-

891871,0777-896064 E-Mail: [email protected] Fax: 2387228 E-mail: [email protected] CT Smith Stockbrokers (Pvt) Ltd Asset Line Securities (Pvt) Ltd 4-14, Majestic City 282, Kaduwela Road, No. 10, Station Road Battaramulla. Colombo 04 Tel: 4700111, 2307366 Tel: 2552290-4 Fax: 4700112, E-mail: [email protected] Fax: 2552289 E-mail: [email protected]

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DNH Financial (Pvt) Ltd JB Securities (Pvt) Ltd Level 16, West Tower 150, St. Joseph Street World Trade Centre Colombo 14 Colombo 01 Tel: 2490900, 077-2490900, 077-2490901 Tel: 5732222 Fax: 2430070, 2446085, 2447875 Fax: 5736264 E-mail: [email protected] E-mail: [email protected]

John Keells Stockbrokers (Pvt) Ltd Lanka Securities (Pvt) Ltd 130, Glennie Street 228/2, Galle Road Colombo 02 Colombo 04 Tel: 2306250, 2338066-7, 2342066-7 Tel: 4706757, 2554942 2446694/5, 2439047/8, 4710721/4 Fax: 2326863, 2342068

Fax: 4706767 E-mail: [email protected] E-mail: [email protected] NDB Stockbrokers (Pvt) Ltd SC Securities (Pvt) Ltd 5th Floor, NDB Building 2nd Floor 40, Navam Mawatha 55, D R Wijewardena Mawatha Colombo 02 Colombo 10 Tel: 2314170-8 Tel: 4711000 Fax: 2314180 Fax: 2394405 E-Mail: [email protected] E-mail: [email protected] Somerville Stockbrokers (Pvt) Ltd 137, Vauxhall Street Colombo 02 Tel: 2329201-5, 2332827, 2338292-3 Fax: 2338291 E-mail: [email protected] SOURCE: CSE Monthly- March 2011

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Trading Members of the CSE TKS Secutiries (Pvt) Ltd Capital Alliance Securities (Pvt) Ltd No. 14, Reid Avenue Level 5, “Millennium House” Colombo 07 46/58, Navam Mawatha Colombo 02 Tel: 2675200 Tel: 2317777 Fax: 2682553 Fax: 2317788 E-mail: [email protected] First Guardian Equities (Pvt) Ltd 32nd Floor, East Tower SKM Lanka Holdings (Pvt) Ltd World Trade Centre 377/3, Galle Road Colombo 01 Colombo 03 Tel: 5884400 Tel: 2372413-4 Fax: 5884401 Fax: 2372416 E-mail: [email protected] E-mail: [email protected] SMB Securities (Pvt) Ltd Taprobane Securities (Pvt) Ltd 47. Dharmapala Mawatha 2nd Floor Colombo 03 ` No. 10, Gothami Road Tel: 5539593 Colombo 08 Fax: 2339292 Tel: 5328200 E-mail: [email protected] Fax: 5328277 E-mail: [email protected] [email protected] Heraymila Securities Ltd Level 8 South Wing IIFL Securities Ceylon (Pvt) Ltd Millennium House 27th Floor 46/58, Navam Mawatha East Tower Colombo 02 World Trade Centre Tel: 2359100 Colombo 01 Fax: 2305522 Tel: 2333000 Email: [email protected] Fax: 2333383 Email: [email protected] Richard Pieris Securities (Pvt) Ltd Claridge Stock brokers ( Pvt ) Ltd No. 69, Hyde Park Corner 10, Gnanartha Pradeepa Mw Colombo 02 Colombo 08. Tel: 0777-281281 Tel: 2697974 Email: [email protected] Fax : 2677576 Email : [email protected]

New World Securities ( Pvt ) Ltd. Arrenga Capital (Pvt) Ltd 2nd Floor, 45/2 Braybrooke Street, 410/115, Bauddhaloka Mw Colombo 02 Colombo 07 Tel:2358700/20 Fax :2358701 Tel: 2689107 Email: [email protected] Fax: 2689106 SOURCE: CSE Monthly- March 2011

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3. DETAILS OF THE BOARD OF DIRECTORS As at the date of the Introductory Document, the Board of Director of Chilaw Finance Limited constitutes of 07 Non Executive Directors and 03 Executive Directors. Name of Director Age Address

Mr. N.M. Gnanalankara 73 “Navaratnapaya”,Karavita, Illippadeniya

Mr. D.S. Weerasuriya 89 “Vijitha” 42/1, Colombo Road, Chilaw

Mr. S.C.O. Gunasekara 76 Olidaluwa, Bandarawatta, Kakkaplliya

Mr. D.W. De Silva 67 No. 01, Colombo Road, Chilaw

Mr. R. H. Peethunanda 71 No. 24/4, Colombo Road, Chilaw

Mr. J.A.D.N. Jayasuriya 51 Rajakadaluwa. Arachchikattuwa

Mr. W.G.A. Fernando 77 No. 18, Aluthwatta Road, Chilaw

Mr. R.M.U. Rathnayake 63 No. 43, Pahala Mahawewa, Mahawewa

Mr. M.D.J.P.N. Perera 43 Dematapitiya., Kakkapalliya, Chilaw

Mr. R.W. Kulatunga 67 20/82, Fairfield Garden, Colombo 08

Mr. L.J. Rubera (Alternate Director to Mr. R.W. Kulatunga) 51 Beddagana Road, Pitakotte

3.1 DIRECTORS’ PROFILES Mr. Navaratne Mudiyanselage Gnanalankara – Chairman The Founder Chairman of the Chilaw Finance Limited. Mr. Gnanalankara has three decades of experience in the aspects of hire purchase and leasing in finance business. Mr. Gnanalankara does not hold a directorship in any other company. Mr. Don Sirisena Weerasuriya – Managing Director The Founder Managing Director of the Chilaw Finance Limited. Presently Chief Executive Officer of the Company. Mr. Weerasuirya has over three decades of experience in the aspects of hire purchase, leasing in finance business with focus in credit management, legal, strategic and corporate planning. He is a veteran financier and one of the authorities in matters relating to hire purchase and leasing in the country. Mr.Weerasuriya does not hold a directorship in any other company. Mr. Sembukuttiarachchige Collin Oswald Gunasekara Mr. Gunasekara functions as a Non Executive (Founder) Director of Chilaw Finance Limited. He holds three decades of experience in the field of finance. Mr. Gunasekara does not hold directorships of any other Company.

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Mr. Dedumuni Wimalaratne De Silva Mr. De Silva functions as an Executive Director of Chilaw Finance Limited. He has over three decades of experience in the business of finance. Mr. De Silva does not hold directorships of any other company. Mr. Ranepura Hewage Peethunanda Mr. Peethunanda functions as a non Executive (Founder) Director of Chilaw Finance Limited .He has three decades of experience in the business of finance. Mr. Peethunanda is a Director of New Bright City (Pvt) Ltd, Chilaw. Mr. Jayasuriya Arachchige Don Noel Jayasuriya Mr. Jayasuriya was appointed to the Board of Chilaw Finance Ltd as an Executive Director in 2009. He has over 17 years experience in the aspects of hire purchase and leasing in the business of finance. Mr. Jayasuirya is the Managing Director of Wayamba Distributors (Pvt) Ltd. Mr. Warnakulasuriya Gregory Alfred Fernando Mr. Fernando functions as a Non Executive Director of Chilaw Finance Ltd. Mr. Fernando is an Associate

Member of Institute of Electrical Engineers in London. He counts over 17 years experience in hire purchase and leasing in finance business. Mr. Fernando joined Ceylon Electricity Board in 1961 as an

Engineer until he retired in 1988. Mr. Fernando does not hold directorships of any other company. Mr. Rathnayake Mudiyanselage Upali Rathnayake Mr. Rathnayake was appointed to the Board of Chilaw Finance Ltd as a Non Executive Director in 2008.Mr. Rathnayake holds a Certificate in Mechanical Engineering from City & Guilds in London. Mr. Rathnayake does not hold directorships of any other company Mr. Madurawalage Don John Pradeep Nilantha Perera Mr. Perera was appointed to the Board of Chilaw Finance Ltd as a Non Executive Director in 2008. Mr. Perera is a graduate in Economics and also a Managing Director of Singhe Auto Services (Pvt) Ltd. Mr. Ranjith Wimal Kulatunga Mr. Kulatunga was appointed to the Board of Chilaw Finance Limited as a Non Executive Director in 2010. He is the Chairman of Ceylon Comany Group (Pvt) Ltd, Ceylon Comany Green Teas (Pvt) Ltd, Comany Management & Investment (Pvt) Ltd, Comany Imports & Exports (Pvt) Ltd, Comany Hotels (Pvt) Ltd, and South East Asia Constructions Company (Pvt) Ltd. He is also a Director of Quickshaws Travels Services (Pvt) Ltd. Mr. Kulatunga has over 35 years of management experience in commerce and industry in Japan. Mr. Lalendra Jerome Rubera (Alternate Director to Mr. R W Kulatunga) Mr. Rubera is the Managing Director of Ceylon Comany Group (Pvt) Ltd, Ceylon Comany Green Teas (Pvt) Ltd, Comany Management & Investment (Pvt) Ltd, Comany Imports & Exports (Pvt) Ltd, Comany Hotels (Pvt) Ltd, and South East Asia Construction Company (Pvt) Ltd. He is also Director of Horana Plantations PLC, Ceytea Plantation Management Ltd, Uni-dil Packaging Ltd, Uni-dil Paper Sacks (Pvt) Ltd, Quickshaws Travel Services (Pvt) Ltd, and Thompson Associates (Ceylon) Ltd. Mr. Rubera has over 25 years experience in finance and commerce. Mr. Rubera is a fellow member of the Institute of Chartered Accountants of Sri Lanka and fellow member of the Institute of Certified Management Accountants of Sri Lanka.

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4. CAPITAL STRUCTURE 4.1 STATED CAPITAL (Voting) Ordinary Shareholders as at 17th March 2011

TOTAL Level of Shareholding

No. of Shareholders Holdings %

Less than 5,000 Shares 10 40,994 0.15% 5,001-10,000 28 242,182 0.86%

10,001-20,000 43 679,478 2.42% 20,001-30,000 7 170,453 0.61% 30,001-40,000 9 315,588 1.12% 40,001-50,000 3 131,956 0.47%

50,001-100,000 10 771,261 2.75% 100,001-300,000 11 1,989,170 7.08% 300,001-500,000 9 3,837,548 13.66% 500,001-700,000 2 1,171,309 4.17% 700,001-900,000 4 3,063,284 10.91%

900,001-1,100,000 2 2,076,744 7.39% 1,100,001-1,600,000 2 2,940,697 10.47% 1,600,001-1,900,000 1 1,806,875 6.43% 1,900,001-3,000,000 2 5,740,199 20.44%

Over 3,000,000 1 3,106,210 11.06% Total 145 28,083,948 100.00%

TOTAL

No. of

Shareholders Holdings %

Individual 144 27,683,948 98.58% Institutions 1 400,000 1.42% Total 145 28,083,948 100.00%

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(Non Voting) Ordinary Shareholders as at 17th March 2011


No. Of Shareholders Holdings %

Less than 8,000 Shares 1

7,143

1%

8,001-15,000 2

28,643

5%

15,001-25,000 1

25,000

4%

25,001-30,000 1

30,000

5%

30,001-35,000 3

100,358

18%

35,001-40,000 -

-

0%

40,001-50,000 1

50,000

9%

50,001-60,000 1

58,000

10%

60,001-150,000 2

257,400

46%

Total 12

556,544 100%

TOTAL

No. of

Shareholders Holdings %

Individual 12 556,544 100% Institutions - - - Total 12 556,544 100% Preference Shareholders as at 17th March 2011 ( 16% Non Cumulative, Non Redeemable, Non Voting)


No. of Shareholders Holdings %

Less than 350,000 Shares 1

328,459

40%

350,001-500,000 1

500,000.00

60%

Total 2

828,459.00 100%

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4.2 DETAILS OF THE ORDINARY SHARE ISSUE The company has issued Bonus Shares of 5,862,312 on the basis of 1:4 in accordance with the resolution passed at the Extra Ordinary General Meeting held on 30.07.2006. The Company had an issue of 4,887,609 (voting) ordinary shares at a consideration of Rupees fifteen (Rs.15/-) per share in accordance with the ordinary resolution passed at the Extra Ordinary General Meeting of the shareholders of Chilaw Finance Limited held on 23rd January 2008. Of the 4,887,609 ordinary shares authorized by the shareholders 4,403,065 shares have been issued. In accordance with an Ordinary Resolution passed at an Extra – Ordinary General Meeting held on 23rd January 2008, the company had a rights issue of 4,885,260 Ordinary Shares at a consideration of Rs.Ten (10/= ) per share to existing Ordinary Shareholders of the company in the proportion of one new ( 01 ) Ordinary Share for every three ( 03 ) shares held in the company’s share register as at 23rd January 2008. As a result, total number of 2,836,926 ordinary shares have been issued. The issued ordinary shares as at 31.03.2007 have been subdivided on the basis of one share per one existing voting ordinary shares in accordance with the resolution passed at the Extra Ordinary General Meeting held on 23.01.2008. The total no of ordinary shares before the sub-division was 7,327,890 and after the sub-division it increased to 14,655,780. The company also had a rights issues of 5,239,000 ordinary shares offered by way of a right issue at a consideration of Rupees Ten (Rs., 10/-) per share to existing ordinary shares of the company in the proportion of one new (01) ordinary shares for every five (05) existing ordinary shares held in the company’s register of members as at 31st March 2009. Out of 5,239,000 Ordinary shares authorized by the shareholders 2,444,425 Ordinary Shares have been issued. In accordance with an Ordinary resolution passed at an Extra Ordinary General Meeting held on 23rd January 2008 , the company authorized to issue 1,000,000 Non Voting Ordinary Shares at a consideration of Rupees Seven ( Rs.7/=) per share out of which 556,544 shares have been issued. The Non voting ordinary shares will not be listed on the Colombo Stock Exchange. In accordance with the resolution passed at the Extra Ordinary General Meeting held on 22.03.2008, Bonus Shares of 3,743,752 were issued on the basis of 4: 1. 4.3 DETAILS OF THE PREFERENCE SHARE ISSUE The Company had an issue of 2,000,000 non cumulative /non redeemable / non voting 16% preference shares at a consideration of Rupees ten (Rs.10/-) per preference share in accordance with the ordinary resolution passed at the Extraordinary General Meeting of the shareholders of Chilaw Finance Limited held on 14th June 2008. Of the 2,000,000 preference shares authorized by the shareholders 828,459 shares have been issued. The balance preference shares are unsubscribed and are no more available to be issued. These preference shares will not be listed on the Colombo Stock Exchange. The purpose of the rights issues and new share issue was to comply with Finance Companies (Minimum Core Capital) Direction No. 01 of 2006. The CFL has obtained the approval of Monetary Board of Central Bank of Sri Lanka for the above share issues in order to comply with Finance Companies (Structural Changes) Direction No. 5 of 2005.

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4.4 HISTORY OF NEW SHARE ISSUES , RIGHTS AND BONUS SHARE ISSUES

Date of Allotment Class of Shares Type of

issue No. of Shares

Consideration

- Ordinary Shares - 1,041,000 Rs. 10.00 Per

Share

2004- Feb Ordinary Shares New Share

Issue- 10,000 Rs.10.00 Per

Share

2004- Jan Ordinary Shares New Share

Issue 85,000 Rs.10.00Per

Share

2004- Aug Ordinary Shares New Share

Issue- 35,775 Rs.10.00Per

Share

2005- Jan Ordinary Shares New Share

Issue- 278,000 Rs.10.00 Per

Share

2005- Apr Ordinary Shares New Share

Issue- 10,000 Rs.10.00 per

Share

2006- Jan Ordinary Shares -New Share

Issue 5,803 Rs.10.00 Per

Share

2006- Ordinary Shares Bonus

Shares 1:4 5,862,312 Rs.10.00 Per

Share TOTAL NO OF

ORDINARY SHARES as at 31.03.2007

7,327,890

2008-Jan-23 Ordinary Shares

Share split 1:1 14,655,780 -

2008-Feb-27 Ordinary Shares Rights Issue- 319,227 Rs.10.00 Per

Share

2008-Mar-31 Ordinary Shares New Share

issue- 745,000 Rs.15.00 Per

Share

2008-Mar-31 Ordinary Shares Rights Issue- 2,235,000 Rs.10.00 Per

Share

2008-July-04 Ordinary Shares

Bonus Shares 4:1

3,743,752 Rs.10.00 Per

Share


New Share Issue

106,750 Rs.15.00 Per

Share

2008-July-07 Ordinary Shares Non voting

New Share Issue

140,144 Rs.7.00 Per

Share


New Share Issue

639,421 Rs.15.00 Per

Share


New Share Issue

257,643 Rs.7.00 Per

Share


New Share Issue

1,295,384 Rs.15.00 Per

Share


New Share Issue

44,357 Rs.7.00 Per

Share

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2008-Aug-11 Ordinary Shares

Rights Issue 45,876 Rs.10.00 Per

Share

2008-Aug-11 Ordinary Shares New Share

Issue 13,350

Rs.15.00 Per Share

2008-Sep-01 Ordinary Shares

Non voting New Share

Issue 114,400

Rs.7.00 Per Share


New Share Issue 10,000

Rs.15.00 Per Share



Rs.15.00 Per Share

2008-Oct-13 Ordinary Shares


Rs.15.00 Per Share

2008-Nov-06 Ordinary Shares


Rs.15.00 Per Share


Rights Issue 22,300

Rs.10.00 Per Share


Rights Issue 5,000

Rs.10.00 Per Share



Rs 15.00 Per Share

2008-Dec-15 Ordinary Shares New Share

Issue 17,000

Rs.15.00 per Share

2008-Dec-15 Ordinary Shares Rights Issue 10,000

Rs.10.00 Per Share

2008-Dec-22 Ordinary Shares


Rs.15.00 pet Share

2009-Jan-05 Ordinary Shares Rights Issue 199,523

Rs.10.00 per Share

2009-Jan-05 Ordinary Shares

New Share Issue 1,387,167

Rs.15.00 Per Share

2009-Oct-19 Ordinary Shares Rights Issue 2,235,262 Rs.10.00 Per

Share

2009-Oct-19 16% Pre. Shares (Non Cum./Non

Red./Non Voting)

New Share Issue

328,459 Rs.10.00 Per

Share

2009-Nov-09 Ordinary Shares Rights Issue 184,163

Rs.10.00 Per Share



Rs.15.00 Per Share

2009-Nov-06 16%Pre.Shares (Non Cum/Non Red/Non Voting

New Share Issue

500,000 Rs.10.00 Per

Share

2009-Nov-16 Ordinary Shares Rights Issue 25,000

Rs.10.00 Per Share

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4.5 ADDITIONAL INFORMATION 1. There are no statutory restrictions on the free transfer of Securities of the Company. 2. No shares were re-purchased / redeemed by the company in terms of section 63, 64, 66, 67, 68, 69,

93 and 100 of Companies Act. 3. There was no any reduction of stated capital in terms of section 59 of the Companies Act No of 7 of

2007. 4. There are no outstanding convertible Debt Securities.

5. The issued preference shares are non convertible. 4.6 HISTORY OF DIVIDENDS Financial Year Dividend Rate Dividend Paid ( Rs. ) 2001/2002 Not Declared N/A 2002/2003 Not Declared N/A 2003/2004 10% 1,533,600 2004/2005 10% 1,313,797 2005/2006 Not Declared Not Declared 2006/2007 0.50 cents per share 3,487,484 2007/2008 0.30 cents per share 4,492,502 2008/2009 Ordinary shareholders who have

made investments during the F/Y 2008/2009- From the date of investments to 31.03.2009 - 15% p.a. Other Ordinary shareholders 0.30 cents per share.

15,411,502

2009/2010

0.75 Cents per Voting Ordinary Share. 0.65 Cents per Non – Voting Ordinary Share. 16% p.a. Preference Shares ( Non Cumulative/ Non /Non Voting/ Non Redeemable )

21,985,542

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5. THE FINANCE INDUSTRY IN SRI LANKA

5.1 LEASING AND HIRE PURCHASE INDUSTRY The Finance Industry in Sri Lanka comprises major financial institutions namely, the Licensed Commercial Banks (LCB’s), Licensed Specialized Banks (LSB’s) Registered Finance Companies (RFCs) and Specialized Leasing Establishments. There were 36 registered finance companies (RFCs) as at 31.12.2010. RFCs, continue to provide significant contribution to the economy, by way of providing finance facilities to diverse strata of customers who are devoid of or have no easy access to bank credit lines especially in the areas of vehicle financing. Accordingly, Finance Leasing and Hire purchase businesses are core products of RFCs in Sri Lanka.. The central bank of Sri Lanka, in its annual report for 2009 stated that market share of the two largest RFCs which accounted for approximately 46% of the total assets of the industry in 2008, reduced to 37% as at end 2009. The largest nine (09) RFCs accounted for approximately 73% of the total assets of RFCs where as eighteen medium size RFC’s accounted for only 24 % of total assets. According to the annual report for 2009 of Central Bank of Sri Lanka, Hire Purchase and Lease Facilities for vehicle financing accounted for about 63% of the RFC industry’s assets as at end 2009. In view of the rising delinquent loans, most RFCs took steps to curtail lending and adopted a relatively conservative approach when expanding their accommodations. As a result, total accommodations granted by RFCs increased marginally by 3% as at end 2009 to 116 billion compared to the 17% increase recorded in 2008. Despite the slight increase in the accommodations portfolio, RFCs lease facilities decreased by 1.3%, while hire purchase facilities increased marginally by 0.3% in 2009. Furthermore, owing to the current depression in the real estate market, loans against real estate declined considerably by 22.4% to Rs 8.3 billion in 2009. The public deposits are main source of funds of the finance industry. Hence, it is noteworthy to state that the finance industry sector benefited by the reduction in interest rates recently by the regulators. As a result, the interest rate for public deposits declined considerably. The Board of Directors of CFL believes that the recovery of the global economic crisis and prevailing single digit rate of inflation and low interest rates will improve the prospects of the RFC’s and extend the life line of the finance companies

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5.2 SELECTED FINANCIAL SOUNDNESS INDICATORS OF REGISTERED FINANCE COMPANIES.

Per-cent Indicator 2008 (a) 2009 (a) Regulatory capital to Risk weighted assets 14.0 9.8 Tier 1 capital to risk weighted assets 12.3 8.6 Non-performing loans net of provision to Capital funds 15.9 32.3 Non-performing loans to gross loans 6.7 10.2 Return on assets (before tax) 1.8 -0.8 Return on equity (after tax) 8.4 -13.6 Net interest income to total assets 2.4 3.3 Net interest income to gross income 20.6 17.4 Non- interest expenses to gross to income 28.0 29.9 Provision coverage ratio (total) 46.5 47.8 Source: Central Bank of Sri Lanka (a) Revised (b) Provisional

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5.3ASSETS & LIABILITIES OF REGISTERED FINANCE COMPANIES

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6. PROFILE OF THE ENTITY

6.1 OVERVIEW OF THE COMPANY AND NATURE OF THE BUSINESS

Chilaw Finance Ltd is a small size Finance Company established 30 years ago in the heart of the coconut triangle in Chilaw. It offers financial assets products such as Finance Leasing, Hire Purchase, Pawn Brokering, Micro Financing and Financial Liabilities products such as Fixed Deposits and Savings Accounts. Chilaw Finance Ltd is registered under section 2 of the Finance Companies Act No.78 of 1988. It is also a registered as a Finance Leasing Establishment in terms of the Finance Leasing Act No. 56 of 2000. The company was incorporated on 05th March 1980 as a Private Limited Company under the name of Chilaw Finance and Enterprises Limited and commenced business operations on 07th March 1980. The name of the company was subsequently changed to Chilaw Finance (Private) Limited with effect from 06th of December 1985. The Chilaw Finance Limited has been converted into a Public Unquoted Company with effect from 21st of November 1990. The company has won the absolute confidence of its depositors, shareholders and other stakeholders thereby steadily growing into a leading and stable financial organization in the country. During its three decades of history, CFL has been in the forefront of the social and economic development of the Wayamba province long before other financial players realized the potential and importance of the catering to areas outside the capital and commercial cities of the Island. The Company’s total management staff is 58 as at 31st March 2010 and includes three Executive Directors, Ten Managers, Four Executives, Twenty seven Officers and Two Management Trainees and Nine Office Assistants. The Company’s main competitors are other RFC’s , Licensed Commercial Banks (LCB’s), Licensed Specialized Banks (LSB’s) and Specialized Leasing Establishments. The CFL accepts term deposits and savings s from the General public which sustains the main source of funds of the organization. Its core liquid investments are Hire purchases, Finance leasing, and Mortgage loans.

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The following financial ratios as at 31-03-2010 and 31-12-2010 (unaudited) highlights the facts that its depositors are highly secure and in safe hands. 31-3-2010 31-12-2010 Total Loans and advance portfolio as a % of total public deposits 122 % 139 % Non Performing Accommodation (NPA) as a % of total assets 6.83 % 12.17 % Quality Loans to Public Deposits 92.86 % 103.67 % Public Deposits as a % of total assets 49.39 % 49.50 % Capital Funds to total Deposits 88.36 % 88.41 % NPA’s to Capital funds 15.51 % 27.70 % The CFL’s shareholder funds are also well secured according to the following financial ratios as at 31-03-2010 and 31-12-2010 (unaudited). 31-03-2010 31-12-2010 (unaudited) Return on Equity 11.45% 8.45 % Total Equity to total assets 43.65% 43.76% NPA’s to Equity 15.51% 27.70% Debt Ratio 49.39% 49.50% Cost to Income 66.27% 55.63% Performing Loans to Shareholders Funds 102.61% 116.46%

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6.2 DETAILS OF THE TEN LARGEST SHAREHOLDERS 6.2.1 DETAILS OF (VOTING) ORDINARY SHAREHOLDERS AS AT

17thMarch 2011

Ten Major Ordinary Shareholders as at 17-03-2011 Number of Shares %

1 Jayasuriya Arachchige Don Noel Jayasuriya 3,106,210 11.06

2 Ranjith Wimal Kulathunga 3,000,000 10.68

3 Disanayake, Subashini Samarasinghe (Mrs) 2,740,199 9.76

4 De Silva, Sampatha Waduge Silvia Anne Merline (Mrs) 1,806,875 6.43

5 Weerasuriya, Don Sirisena 1,510,297 5.38

6 Ranjith Samarasekara 1,430,400 5.09

7 Rathnayake Mudiyanselage Upali Rathnayake 1,080,074 3.85

8 Seetha Raman Saththiweln 996,670 3.55

9 Sujeewa Chandana Hiththetiyage 889,255 3.17

10 Gunasekara Sembukuttiarachchige Collin Oswald 739,875 2.63 6.2.2 DETAILS OF (NON VOTING) ORDINARY SHAREHOLDERS AS AT 17TH March 2011

Major Ordinary Shareholders as at 17-03-2011 Number of Shares %

1 Wanniarachchilage Sherly Chinthaka Perera 143,000 25.69

2 Jayamaha Hitihamilage Nalin Susantha Kumara 114,400 20.56

3 Indrawathi Bopage 58,000 10.42

4 Bopage Jinadasa 50,000 8.98

5 Hewa Welgamage Sarath 35,715 6.42

6 Balasuriya Mudiyanselage Dudula Nalani Senarath 32,500 5.84

7 Rajaguru Ahdikarimudiyanselage Kulasinghe Samarakoon

32,143 5.78

8 Mihindukulasuriya Chaminda Duglas Fernando 30,000 5.39

9 Basnayake Appuhamilage 25,000 4.49

10 Mahipala Mudalige Chandrawathi Siriseeli 14,357 2.58

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6.2.3 DETAILS OF PREFERENCE SHARES (NON CUMMILATIVE, NON REDEEMEBLE, NON VOTING) AS AT 17TH March 2011

*There were only two Preference Shareholders as at 17.03.2011 6.2.4 “that the company has declared to the CSE that 36% of the public holding as at 17.03.2011 is held by a minimum number of 100 public shareholders holding not less than 100 shares each.”

*Preference Shareholders as at 17.03.2011 Number of

Shares %

1 Dr. Wilfred Rajendra Wanasinghe

500,000 60.35

2 Mari Ajantha Wanasinghe

328,459 39.65

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6.3 DEGREE OF DEPENDENCE ON KEY CUSTOMERS AND SUPPLIERS. There is no significant dependency by the company on either its customers or suppliers 6.4 HUMAN RESOURCES No of Employees The following table indicates staff allocation for the last three years. As at 31st March 2010 2009 2008 Corporate Management 5 5 4 Senior Management 10 9 9 Executive 4 2 4 Officers 27 25 29 Customer Relation Assistants 1 1 1 Management Trainees 2 2 2 Office Assistants 9 7 7 Please note that

The Company is a solitary entity as it does not have any subsidiaries or affiliations.

CFL’s workforce is not unionized and has no collective agreement with the management.

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6.5 FUTURE PLANS, PROSPECTS AND ASSOCIATED RISKS The Company has designed a strategy that addresses and cut across all core elements of the business operating system that goes in to making the company more viable and profitable. In the near future the company seeks to exploit on the low rate of inflation that is expected to prevail in the economy, the country’s political stability and investor friendly environment in the Eastern and Northern provinces. CFL objectives and targets are realistic and achievable.

FUTURE OPERATIONAL STRATEGY

Presently CFL operates its Head Office in Chilaw. It has a branch office in Kuliyapitiya. The company has plans to extend its channels of distributions through strategically located branches in the entire Wayamba Province which is a repository of natural, industrial and commercial wealth.

NEW PRODUCTS TO BE OFFERED

The Company plans to offer new products in line with Marketing Strategies. New fixed deposit and savings accounts have already been designed to attract small and medium savers. In order to compete with competitors, the company has designed HP and Leasing Facilities with novel features.

CONSOLIDATION STRATEGIES

The company intends in consolidating its outsourcing processes thereby it shall constitute its own legal and valuation procedures.

MARKETING STRATEGY

The company has designed its marketing strategy to increase the market share of the company. The Company also plans several promotional campaigns in association with strategic partners. In the future CFL plans to become a Marketing oriented company and for that purposes aggressive Marketing Strategies will be introduced. CFL expects to capitalize the new marketing opportunities within the favorable economic conditions in the future. The company will assess and explore the potential market segments in order to contribute to the new business targets.

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FINANCIING STRATEGY

The Company’s main sources of funds are new fixed deposits and collection of recoveries. The Finance strategy of the company avoids the institutional borrowings due to its high cost of funds. The company also wishes to increase the low savings deposits base, because of the low cost of funds. The company believes that the prudent NPA management can be achieved by exercising effective credit management. The maintenance of the high deposits renewal rate, lower rate of pre-mature termination of leasing & Hire purchases, lower rate of pre-mature retirement of fixed deposits and effective fund management are also included in the company’s Financial Strategy. In addition, the company has issued ordinary shares and preference shares in order to strengthen the core capital of the company. The following Capital Adequacy Ratios of CFL as at 31.12.2010 were above the regulatory minima and on par with well capitalized finance company in the country. Core Capital to Risk Weighted Assets Ratio ( Minimum 5% ) = 36.32% Total Capital to Risk Weighted Assets Ratio ( Minimum 10% ) = 49.98% Capital Funds to Total Deposit Liabilities Ratio ( Minimum 10% ) = 89.03%

IT STRATEGY

The Company has outsourced its IT Management to Sampath IT Solutions - a benchmark company, providing most innovative advance technology in the IT Industry. The Company expects to minimize the operational costs by further developing and introducing modern IT. Assumptions and Risks on future plans of the company. ASSUMTIONS CFL expects the continuity of single digit rate of inflation in the country For the next three years. CFL expects towards favourable public confidence towards financial Institutions In the country. CFL expects the recovery of global economic crisis which directly affects the financial Sector. RISKS The company’s business and financial performance could get affected by unstable economic conditions in the country. Emergence of new competition , mergers and acquisitions will create high competition in the finance industry. Changes in the monetary policy, especially in the interest rates negatively affects the future plans of the company.

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7. MANAGEMENT TEAM

Mr. Don Sirisena Weerasuriya (CEO) Mr. Don Sirisena Weerasuriya of No: 42/1 Colombo Road, Chilaw is the founder Managing Director of the company. He is the most senior finance professional among the finance companies in Sri Lanka. He started his career as an English Training Teacher in 1960.Mr.Weerasuriya has over three decades of experience in the business of finance. Mr. Cyril Nobel Mariyaseelon (General Manager) Mr. Cyril Noble Mariyaseelon of No.21 Aluthwatta Road Chilaw was appointed as the General Manager in January 1999. He is a retired banker with 33 years of experience in state and private banks during his tenure. He holds Diploma in Management. Mr. K.E.K.Wijesinghe (Manager HP & Leasing) Counts 24 years of experience with the company. Joined in October 1986 as a Clerk. Promoted as Manager HP/ Leasing in 2008 Mr. H.P.M.M.Pushpa Kumara (Manager- Mortgage Loans) Counts 19 years of experience with the company. Joined in August 1991 as an Accounts Clerk. Promoted as Manager Loan in 2008 Appointed as Assistant Manager of CFL Kuliyapitiya Branch in 2010. Mr. R.W.M.J.Wijewardana ( Manager-Marketing ) Counts 2 years of experience with the company Joined in May 2008 as Marketing Manager. Mrs. P.A.N.A.Senevitathne (Manager- Anchor Division) Counts 14 years of experience with the company. Joined in September 1996 as Accounts Clerk. Promoted as Manager- Anchor Agency- CFL in 2008

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Mrs. M.R.A.L.Fernando (Manager- Fixed Deposits) Counts 15 years of experience with the company. Joined in October 1995 as clerk. Promoted as Manager- Fixed Deposits in August 2007. Completed National Diploma in Business Studies and followed the Higher National Diploma in Accountancy at Technical College- Kuliyapitiya. Mrs. W.P.M.De.Silva (Accountant) Counts 15 years of experience with the company. Joined in August 1995 as Accounts Clerk. Promoted to the post of Internal Auditor in 2000 Promoted to the post of Assistant Accountant in March 2006. Promoted as Accountant in April 2007. Mrs. De Silva holds the Higher National Diploma in Accountancy and National Diploma in Business Studies of the Sri Lanka Technical College. She is also a passed finalist of Association of Accounting Technicians of Sri Lanka and Licentiate of Institute of Chartered Accountants of Sri Lanka.

Mr. U.S.T.De Silva (Internal Auditor) Counts 3 years of experience with the company. Joined in September 2007 as Internal Auditor. He is a Finalist of Institute of Chartered Accountants of Sri Lanka and completed Diploma in Accounting and Advanced Book keeping of International Association of Book Keepers (UK) Mr. A.H.S.Weerakoon (Manager- Recovery) Counts 18 years of experience with the company. Joined in October 1992 as a Field Officer Promoted to the post of Recovery Manager in October 2007.

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Mrs. S.M.S.P.Herath (Management Trainee) Counts 2 years of experience with the company. Joined in June 2008 as Management Trainee. Passed Finalist of Association of Accounting Technician of Sri Lanka and Finalist of Institute of Chartered Accountants of Sri Lanka. Reading for Bachelor of Business Administration at University of Sri Jayewardenepura.

Miss W.M.Ariyawathie (Manager Administration) Counts 17 years of experience with the company. Joined in May 1994 as Manager Sales Centre of Chilaw Finance Limited. Promoted to the post of Manager Administration in 2008. Mr. Munasinghe Chandra Prema Mendis (Head of Legal affairs) Counts 13 years of experience with the company. Joined in 1997 as Head of Legal Affairs- Former Deputy Inspector General of Sri Lanka Police. The Chief Executive Officer nor any person nominated to become the Chief Executive officer is or was involved in the following events.

Petition under bankruptcy laws filed against such person or any partnership in which he was a partner or any corporation of which he was an Executive Officer.

Convicted for fraud, misappropriation or breach of trust or any other similar offence which the Exchange considers a disqualifications

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8. LITIGATION, DISPUTES AND CONTINGENT LIABILITIES There are no material legal, arbitration or mediation proceedings which may have or have had in the recent past significant effects on the entity’s financial position or profitably. No penalties have been imposed by regulatory and state authorities. There were no material contingent liabilities as per Note 24 of the Audited financial Statements as at the year ended 31-03-2010

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9. Financial Information

9.1 RATIOS AND SHARE INFORMATION Year ended March 31 9 Months ended December31 3 2010 2009 2010 2009 Net interest income/total average assets (%) Non-interest income/total average assets (%) Personal and other non-interest expenses/net interest income & non-interest income (%) Gross NPA ratio Liquid assets/customer deposits and short term funds Debt equity ratios Book value per share (Rs) Earnings per share (Rs) Diluted Earnings per share (Rs) Profit after tax/average equity (%) Return on Average Assets (%) Effective Tax Rate (Rs) Dividends /profit after tax

10.79 1.62 44.54 14.6 38.20 0.00 10.07 0.95 0.95 9.45 4.15 34.05 84.67

9.44 2.40 52.30 9.3 36.79 0.00 9.67 0.49 0.49 5.31 2.33 34.27 132.7

8.15 1.31 32.01 19.2 20.24 0.00 10.18 0.83 0.83 8.26 3.40 36.5 -

6.91 1.06 36.88 15.5 22.84 0.00 10.98 0.71 0.71 6.21 2.74 39.2 -

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9.2 RECEIVABLES

a. Where receivable have gone into arrears of over six months, the company classifies the same as non-performing receivables.

b. The percentage composition of receivables are as follows;

31.03.2010

% 31.03.2009

% 31.12.2010

% 31.12.2009

% Less than 3 months 3– 6 months Total performing loans 6–12 months Above 12 months Total non-performing loans Total

62

23

85

6

9

15

100

72

19

91

4

5

9

100

60

21

81

7

12

19

100

68

17

85

7

8

15

100

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10. CORPORATE GOVERNANCE PRACTICES

Corporate Governance is an essential safeguard for a stable finance company. Good Corporate governance should provide proper incentives for the Board and management to pursue objectives that are in the interests of the company and shareholders and should facilitate effective monitoring, thereby encouraging companies to use resources more efficiently. Good corporate Governance can reduce the cost of capital and enhance shareholder value. In a more direct sense, weaknesses in Corporate Governance in the finance companies, reduce their capacity to identify, monitor and manage their business risks, and can result in poor quality leading and excessive risk- taking by such companies. for example, inadequate corporate governance can lead to poor management of credit risks and insufficiently developed “credit culture”, excessive exposure concentration, poor management of interest rate risk and exchange rate risk and inadequacies in the management of connected exposures. In some cases, in adequacies in corporate governance and risk management have the potential to lead to finance company insolvency and financial instability. More than most other corporate entities, finance companies are critically reliant on maintaining the confidence of depositors and other creditors for their viability. The financial viability, and indeed survival, of a finance company are very much dependent on maintaining depositor and other counter-party confidence. Therefore, the directors and senior management of such companies could be said to have a special duty of care to their depositors who are extremely important stakeholders in a finance company. A finance company’s corporate governance arrangements could be expected to reflect this duty of care to depositors and other creditors in a number of ways, such as in the management of conflicts of interest between shareholders and creditors, and in the nature of financial disclosures made to creditors (and others) and in the nature of risk management systems. Finance companies differ from most companies in terms of the nature and range of their business risks, and the adverse consequences that would follow if these risks are poorly managed. Finance companies face a wide range of risks, many of them complicated in nature, including credit risks, exposure concentration risks, connected exposure risk, interest rate risks and business continuity risks. Therefore, they need corporate governance structures that promote effective identification, monitoring and management of all material business risks. Finance Companies are required to comply with a large number of regulatory requirements, including prudential requirements, taxation rules, various reporting obligations and the like. There is, therefore, a need for the corporate governance framework to include systems for ensuring that all statutory and regulatory requirements are being complied with and to highlight potential or actual breaches if and when they occur. The Board of Directors comprises of Ten members, out of which Seven (07) Non Executive Directors and Three (03) Executive Directors. All Directors are well experienced in credit management in Hire Purchase and Leasing .The Chairman provides leadership to the Board by running the Board and preserving order and facilitating the effective discharge of Board functions.

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10.1 INDEPENDENT NON EXECUTIVE DIRECTORS Independent, Non Executive Directors of Chilaw Finance Ltd are namely

( 1 ) Mr.N.M.Ganalankara ( 2 ) Mr.R.H.Peethunanda ( 3 ) Mr.W.G.A.Fernando Although in terms of criteria set out in rule 7.10.4 (e) of the listing rules of the Colombo Stock Exchange 1) Mr. N,M.Ganalankara 2) Mr. R.H.Peethunanda 3.) Mr.W.G.A.Fernando do not fall under the classification of an “Independent” Director as they have served the Board of Directors of Chilaw Finance Ltd for a period exceeding nine years from the date of the first appointment, the Board to determine, having taking into account all the circumstances 1) Mr. N.M.Ganalankara. 2) Mr.RH.Peethunanda 3.) Mr.W.G.A.Fernando to be Independent Directors as they have no significant shareholding in the company and the long standing finance business experience they possess ( Please refer “ Directors Profile “ in page 9 & 10-Section 3.1 ) The Company has three Board appointed Committees.

(1) The Remuneration Committee (2) The Audit Committee (3) The Intergraded Risk Management Committee

10.2 REMUNERATION COMMITTEE The Remuneration Committee is led by Mr.Nilantha Perera ( Non Executive Director ) and includes the following Directors. Mr. M.D.J.P.Nilantha Perera- Non Executive Director. Mr. W.G.A.Fernando- Independent- Non Executive Director Mr. R.H.Peethunanda- Independent- Non Executive Director Mr. R.M.U.Rathnayake- Non Executive Director Mr.N.M.Ganalankara –Independent Non Executive Director The Remuneration Committee shall recommend to the final determination of the Board, the remuneration payable to the Executive Directors and Chief Executive Officer of the company and/or equivalent position thereof, within the organization. The Remuneration packages is linked to individual performances and in line with the company’s long term strategy. The term “Remuneration” shall make reference to cash and all non-cash benefits whatsoever paid in consideration of employment with the Company and (excludes statutory entitlements such as Employees Provident Fund and Employees Trust Fund.)

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A Statement of the Remuneration Policy The Committee deliberates and determines the policies and criteria relevant to fees of Directors, emolument of Executive Directors, Salaries and perquisites of corporate management and the senior management. The aggregate Remuneration paid to Executive and Non Executive Directors Rs.293,656/= 10.3 AUDIT COMMITTEE The Audit Committee comprises of the following Directors and is headed by Mr. Lalindra Rubera-(Alternate Director to Mr.R W.Kulathunga.) Mr. Lalindra Rubera ( Alternate Director to Mr.R.W.Kulathunga Non Executive Director ) Mr. Don Sirisena Weerasuriya-Chief Executive Officer Mr W.G.A.Fernando- Non Executive Director Mr.R.H.Peethunanda-Non Executive Director The Audit Committee is established for the purpose of assisting the Board in fulfilling their responsibilities with regard to the integrity of Financial Statements, Risk Management, Internal Control and compliance with legal and regulatory requirements. It also assess of the independence and performance of the external auditors and internal audit function, make recommendations to the Board pertaining to appointment, re-appointment and removal of external auditors and approve the remuneration and terms of engagement of the external auditors. The Audit Committee is formally constituted as a sub-committee of the Main Board, to which it is accountable. The Audit Committee reviews the independence and objectivity of the external auditors and conducts a formal review of effectiveness of the external audit process. The committee reviewed the non audit services and its impact on the independence of the external auditors.

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10.4 INTEGRATED RISK MANAGEMENT COMMITTEE The Integrated Risk Management committee comprises of two non Executive Directors, CEO and key management personnel supervising credit, market, and liquidity, operational and strategic risks. 1.Mr.R.M.U.Rathnayake ( Non Executive Director ) 2.Mr.S.A.C.O.Gunasekara ( Non Executive Director ) 3.Mr.D.S.Weerasuriya ( CEO ) The committee work with key management personnel closely and make decisions on behalf of the Board within the frame work of the authority and responsibility assigned to the committee. The Board shall present a report on the performance, duties and functions of the Audit Committee and Integrated Risk Management Committee at the General Meeting of the company.

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INSPECTION OF DOCUMENTS The Introductory Document and Articles of Association of Chilaw Finance Ltd. are also hosted on the CSE website-www.cse.lk for a period of not less than fourteen (14) days.

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11. DECLARATION BY THE DIRECTORS We, the undersigned who are named in the Introductory Document as Directors of Chilaw Finance Limited, hereby declare and confirm that we have read the provisions of the Companies Act No. 07 of 2007 and the Colombo Stock Exchange Listing Rules and any amendments to it relating to the issue of this Introductory Document and that those provisions have been complied with. This Introductory Document has been seen and approved by us and we collectively and individually accept full responsibility for the accuracy of the information given and confirm that provisions of the CSE Listing Rules and of the Companies Act No. 07 of 2007 and any amendments to it from time to time have being complied with after making all reasonable enquiries and to the best of our knowledge and belief, there are no other facts, the omission of which would make any statement herein misleading or inaccurate. Furthermore, the Board of Directors and the Company Secretary hereby declare and confirm that ( a ) The shares which are to be listed are fully paid by shareholders.

( b ) The company has complied with all the applicable regulatory requirements and guidelines under the Central Bank of Sri Lanka and other relevant authorities.

(c ) There are no restrictions on listing with Colombo Stock Exchange (d ) There are no restrictions on trading of shares by any parties. ( e ) The company adherers to the Corporate Governance practices set out under Rule 7.10 of the Listing Rules.

1. Mr Navarathne Mudiyanselage Gnanalankara Sgd. 2. Mr Don Sirisena Weerasuriya Sgd.

3. Mr Dadimuni Wimalaratne de Silva Sgd. 4. Mr Sembukuttiarachchige Collin Oswald Gunasekara Sgd. 5. Mr Ranepura Hewage Peethunanda Sgd. 6. Mr Jayasuriya Arachchige Don Noel Jayasuriya Sgd.

7. Mr Warnakulasuriya Gregory Alfred Fernando Sgd. 8. Mr Rathnayake Mudiyanselage Upali Rathnayake Sgd.

9. Mr Madurawalage Don John Pradeep Nilantha Perera Sgd. 10. Mr Ranjith Wimal Kulatunga Sgd. 11 Mr Lalendra Jerome Rubera (Alternate Directors to Mr Ranjith Wimal Kulathunga) Sgd.

Consultants and Corporate Secretaries ( Pvt ) Ltd ( Company Secretary ) Sgd.

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FINANCIAL STATEMENTS

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FINANCIAL STATEMENTS FOR THE YEAR ENDED 31.03.2008

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DISCLOSURES TO THE AUDITED FIANANCIAL STATEMENTS FOR THE YEAR ENDED 31.03.2010

1. Assets pledged as collaterals by the company. No assets have been pledged as collateral by the Company.

2. Re- valuation of Property,Plant & Equipment The Land & Building were revalued during the financial year 2005/2006 by an independent Valuer. The results of such revaluation was incorporated in the financial Statements for the year ended 31.03.2006. Such assets were valued on an open market value for an existing use basis. The surplus arising from the re valuation was transferred to revaluation reserve. The company has obtained the prior approval from the Monetary Board of Central Bank of Sri Lanka , to revalue the Land & Building in accordance with the Guidelines issued under the Finance Companies( Risk Weighted Capital Adequacy Ratio ) Direction No 02 of 2003. Moreover, the company has issued Bonus shares by capitalizing the re-valuation reserves during the subsequent financial years 2006/2007 and 2008/2009 respectively. The company has obtained prior approval from Monetary Board of Central Bank of Sri Lanka in accordance with Finance Companies ( Structural Changes ) direction No: 05 of 2005. The carrying amounts of revalued assets that would have been included in the financial statements, had the assets been carried at cost are as follows. Cost Cumulative Net Carrying Net Carrying Net Carrying Net Carrying Depreciation Amount Amount Amount Amount 2010 2009 2008 2007

Rs. Rs. Rs. Rs. Rs Rs.. Class of Assets Freehold Land 2,084,000 - 2,084,000 2,084,000 2,084,000 2,084,000 Free hold Buildings 12,823,253 1,602,906 11,220,347 11,540,928 11,861,509 12,182,090

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3. Aggregate amount of Non Performing Loans As at 31.03.2010

Rs. Hire Purchase 19,380,043 Leasing 6,122,695 Mortgage Loans 25,004,127 Sundry Loans 4,587,331

Pawning 490,800

Within 1 year 1-5 Years Over 5 Years

4. Lease Rentals Receivables 7,323,132 50,358,013 - Hire Purchase Rentals Receivables 20,108,207 118,148,785 -

5. Segment Reporting A segment is distinguishable component of the company that is engaged in providing services ( Business Segment ) or in providing services within a particular economic environment ( Geographical Segment ) , which is subject to risks and rewards that are different from those of other segments. In accordance with Sri Lanka Accounting Standards No:28 “Segmental Reporting “ , segmental information is presented in respect of the company. The segments comprise Leasing, Hire purchase, Mortgage Loans , Sundry Loans ,Pawning , Investment in fixed deposits with Banks ,Investment in Government Securities. Segment results, assets and liabilities include items directly attributable to a segment as well as those that can be allocated on a reasonable basis.

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Financial Reporting by Segments 2009/2010 % 2008/2009 % ASSETS

Leasing

57,681,145.00 10.99 48,145,800.00 11.37

Hire Purchase 138,256,992.00 26.34

145,783,702.00 34.42

Loans 197,704,947.00 37.66

128,281,619.00 30.29

Pawning 25,728,622.00 4.90

19,722,268.00 4.66

Investment in Deposits with Banks 88,390,468.00 16.84

65,468,272.00 15.46

Investment in Government Securities 17,227,799.00 3.28

16,174,921.00 3.82

TOTAL 524,989,973.00 100.00

423,576,582.00 100.00

GROSS INCOME

Leasing 13,184,241.00 10.85

6,327,588.00 6.87

Hire Purchase 46,441,704.00 38.22

40,694,373.00 44.17

Loans 43,724,506.00 35.98

31,000,959.00 33.65

Pawning 4,689,946.00 3.86

4,300,324.00 4.67

Investment in Deposits with Banks 10,644,473.00 8.76

7,778,310.00 8.44

Investment in Government Securities 2,825,079.00 2.32

2,027,969.00 2.20

121,509,949.00 100.00

92,129,523.00 100.00

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6. The following new standards issued by the Institute of Chartered Accountants of Sri Lanka have

not been applied in preparing these financial statements as they are not effective for the financial period ended 31.03.2010. SLAS 44: Financial Instruments-Disclosures (effective for accounting periods beginning on or after 1st January2011); and SLAS 45: Financial Instruments – Recognition and Measurement (effective for accounting periods Beginning on or after 1st January 2011) SLAS 39 Share based payments- effective for period beginning on or after 1st January 2010, will be adopted for the financial year commencing from 1st April 2010.

7. The directors are of the opinion that the company does not have an ultimate parent and controlling interest if not exercised by any other organization.

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8. MATURITY ANALYSIS

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DISCLOSURES TO THE INTERIM FINANCIAL STATEMENTS FOR THE NINE MONTHS ENDED 31.12.2010

1. Contingent Liabilities and Assets The Company does not anticipate any contingent liabilities to arise out of any contingent event since the last Balance Sheet date. There are no contingent assets since the last Balance Sheet date.

2. Events after the Balance Sheet date

There have been no other events subsequent to the last Balance Sheet date which require disclosure in the interim financial Statements.

chilaw finance limited intro

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