prospectus - hdfc 2013.pdfhdfc housing development finance corporation bank of sri lanka ats...

ProspectusHDFC Bank of Sri Lanka

Debenture Issue 2013

WWW.HDFC.lk

HOUSING DEVELOPMENT FINANCE CORPORATION BANK OF SRI LANKA

“THE COLOMBO STOCK EXCHANGE (CSE) HAS TAKEN REASONABLE CARE TO ENSURE FULL AND FAIR DISCLOSURE OF INFORMATION

IN THIS PROSPECTUS.HOWEVER, THE CSE ASSUMES NO RESPONSIBILITY FOR THE ACCURACY OF THE STATEMENTS MADE,

OPINIONS EXPRESSED OR REPORTS INCLUDED IN THE PROSPECTUS. MOREOVER, THE CSE DOES NOT REGULATE THE PRICING OF

DEBENTURE WHICH IS DECIDED SOLELY BY THE COMPANY / ISSUER”

HOUSING DEVELOPMENT FINANCE CORPORATION BANK OF SRI LANKA

LISTING ON THE MAIN BOARD OF THE COLOMBO STOCK EXCHANGE

ISSUE OPENS ON 21st OCTOBER 2013

MANAGERS TO THE OFFERING

Treasury – Investment Banking Unit13th Floor, No 75, Sir Chittampalam A. Gardiner Mw,

Colombo 02

Issue of Ten Million (10,000,000) Listed, Secured, Redeemable Debentures of LKR 100/- each with an option to issue a further Ten Million (10,000,000) Debentures in the event of an over

subscription of the initial Ten Million (10,000,000) Debentures

HDFC Bank of Sri LankaDebenture Issue 2013

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Corporate Information

Housing Development Finance Corporation Bank of Sri Lanka.

Legal Form

A licensed specialised bank under the provisions of Housing Development Finance Corporation, Act No. 07 of 1997, amended by Act No. 15 of 2003 and No. 45 of 2011.

Details of IncorporationIn 1984 Incorporated as a building Society and obtained the Specialized banking Licence in 2003.

Registered & Head Offi ceP.O. Box 2085, Sir Chittampalam A Gardiner Mawatha, Colombo 02.Telephone : 2356800, 2446241, 2446239, 2447354Fax : 2446392, 2356829, 2356827Web Site : www.hdfc.lk

Company SecretaryMrs. Dharshani De SilvaAttorney - at - Law & Notary Public, Company Secretary,Commissioner of Oaths.Tel. 2423362E-mail [email protected]

Board of DirectorsMrs. S.N. Wickramasinghe (Chairman)Mr. W.J.L.U. Wijayaweera (Director)Mrs. C. Wijayawardhana (Director)Mr. W.D.R.D. Goonaratne (Director)Mr. S.A.J. Samaraweera (Director)Mr. L. E. Susantha Silva (Director)Mr. G.L.S. Senadeera (Director)Mr. Prasad Galhena (Director)Mr. Muthurajah Surendran (Director)

HDFC Credit RatingBBB (stable) RAM Ratings (Lanka) Limited

Rating to the IssueBBB (stable) RAM Ratings (Lanka) Limited

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HDFC Bank of Sri Lanka Debenture Issue 2013

Credit Rating AgencyRAM Ratings (Lanka) LimitedNo.11, Melbourne AvenueColombo 04.

AuditorsAuditor General - Department of Auditor General Battaramulla.

BankersBank of Ceylon - Corporate BranchSampath Bank PLC - Head Quarters BranchPeople’s Bank - Head Quarters BranchCommercial Bank of Ceylon Limited - Union Place Branch

Parties to the off ering

Lawyers to the off eringNithya PartnersAttorneys at lawNo.97A, Galle RoadColombo 03Tel +94 11 2335579Fax +94 11 2328817

Credit Rating Agency to the off eringRAM Ratings (Lanka) LimitedNo.11, Melbourne AvenueColombo 04

Arranger to the off eringPeople’s Bank - Investment Banking Unit13th Floor, People Bank,No. 75, Chittampalam A Gardiner Mawatha,Colombo 02Tel +94 11 2206795-6

Registrars of the off eringSSP Corporates Services (Pvt) LtdNo 101, Inner Flower Road,Colombo 03Tel +94 11 2573894 +94 11 2576871Fax +94 11 2573609

Trustees to the off eringDeutche Bank AGNo.90, Galle Road,Colombo 03Tel +94 11 2447062Fax +94 11 2576530

Bankers to the off eringPeople’s BankNo 75, Sir Chittampalam A Gardiner Mw,Colombo 02.


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Salient Feature at a Glance

Issuer Housing Development Finance Corporation Bank of Sri Lanka

Instrument Listed, Secured, Redeemable & Rated Debentures

Listing Main Board of the Colombo Stock Exchange

No of Debenture to be Issued 10,000,000 (Ten Million) Debentures with the option to issue a further 10,000,000 (Ten Million), totalling up to maximum of 20,000,000 (Twenty Million) Debentures

Face Value of a Debenture LKR 100.00 (Rupees one Hundred)

Total Value to the Issue LKR 1,000,000,000.00 (One Billion Rupees) with an option to increase up to LKR 2,000,000,000.00 (Two Billion Rupees) in the event of an oversubscription.

Tenure of the issue 3 years (2013/2016) 4 Years (2013/2017) & 5 Years (2013/2018)

Issue Opening Date 21st October 2013

Issue Closing Date 7th November 2013

Type of the debenture & at the discretion of the Investor

Interest Rate 3 Years - Option 1 Fixed interest rate of 14.50% p.a. payable quarterly (AER 15.31%)

4 Years - Option 2 Fixed interest rate of 15.00% p.a. payable quarterly (AER 15.87%)

5 Years - Option 3 Fixed Interest rate of 15.50% p.a. payable annually (AER 15.50%)

Basis of Allotment in the event of an over subscription, basis of allotment will be decided within 7 working days from the date of closure.

Minimum Subscription Minimum subscription per application is Rupees One Million (LKR 1,000,000) or Ten Th ousand (10,000) Debentures. Applications in excess of the minimum subscription shall be in multiple of Rupees Five Hundred thousand (LKR 500,000) or Five Th ousand (5,000) Debentures.

Dates of Payments of interest the quarterly interest payments shall be made on 31st March, 30th June, and 30th September and 31st December each year whereas, the annual interest payments will fall on 31 December each year from the date of allotment until redemption/ maturity.

Interest payments will be made within three (03) market days from the Interest due date.

Redemption/ Maturity on completion of 3 years, 4 years & 5 years respectively from the date of allotment or on such earlier date on which the debentures are redeemed or become payable in terms of the trust deed.

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List of Defi nitions, Abbreviations & Interpretations

CBSL Central bank of Sri Lanka

CDS Central Depositary System (Pvt) Ltd

CSE/Exchange Th e Colombo Stock Exchange

LKR Lankan Rupees, the lawful currency of the democratic socialist republic of Sri Lanka

SEC Th e Securities and Exchange Commission of Sri Lanka

SIA Securities Investment Account

HDFC Housing Development Finance Corporation Bank of Sri Lanka

ATS Automated Trading System

Debentures All the listed, Secured, redeemable rated 3 year, 4 year and 5 year debentures to be issued pursuant to this prospectus.

Secured means the primary mortgage granted by the Corporation in favour of the Trustee for and on behalf of the Debenture Holders in terms of Clause 5 of the Trust Deed and the term “secured” shall be construed accordingly.

Redemption the repayment of principal and maturity together with any interest accruing up to that time.

Market Day a day on which trading takes place on the Colombo Stock Exchange

Trust Deed Trust Deed dated 7th October 2013 between HDFC and Deutsche Bank AG Colombo.

Trustee Deutsche Bank AG, Colombo Branch, a licensed Commercial Bank under the Banking Act No. 30 of 1988 or its successors and assigns..

Interest Period (a) In respect of RSRD Type A and RSRD Type B means the three month period from the date immediately succeeding a particular Interest Payment Date and ending on the next Interest Payment Date (inclusive of the aforementioned commencement date and end date) and shall include the period commencing from the Date of Allotment and ending on the fi rst Interest Payment Date (inclusive of the aforementioned commencement date and end date) and the period from the date immediately succeeding the last Interest Payment Date before the Date of Redemption and ending on the date immediately preceding the Date of Redemption (inclusive of the aforementioned commencement date and end date).

(b) In respect of RSRD Type C means the one year period from the date immediately succeeding a particular Interest Payment Date and ending on the next Interest Payment Date (inclusive of the aforementioned commencement date and end date) and shall include the period commencing from the Date of Allotment and ending on the fi rst Interest Payment Date (inclusive of the aforementioned commencement date and end date) and the period from the date immediately succeeding the last Interest Payment Date before the Date of Redemption and ending on the date immediately preceding the Date of Redemption (inclusive of the aforementioned commencement date and end date).


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1.0 INFORMATION RELATING TO THE ISSUE ................................................................ 10

1.1 PARTICULARS OF THE ISSUE ........................................................................................ 10 1.2 INVITATION TO SUBSCRIBE .......................................................................................... 10 1.3 SUBSCRIPTION LIST ......................................................................................................... 10 1.4 PROSPECTUS ....................................................................................................................... 11 1.5 OBJECTIVES OF THE ISSUE ............................................................................................ 11 1.6 INTEREST ON THE DEBENTURES ................................................................................ 11 1.7 PAYMENT OF PRINCIPAL & INTEREST ....................................................................... 12 1.8 REDEMPTION ..................................................................................................................... 12 1.9 TRUSTEES TO THE OFFERING ...................................................................................... 13 1.10 RIGHTS OF THE DEBENTURE HOLDERS ................................................................... 13 1.11 RISK FACTORS ASSOCIATED WITH DEBENTURES ................................................ 14 1.12 BENEFITS OF INVESTING IN THE DEBENTURES .................................................... 15 1.13 TRANSFER OF DEBENTURES ......................................................................................... 15 1.14 LISTING ................................................................................................................................. 16 1.15 RATING OF THE INSTRUMENTS .................................................................................. 16 1.16 COST OF THE ISSUE .......................................................................................................... 16 1.17 UNDERWRITING ............................................................................................................... 16 1.18 INSPECTION OF DOCUMENTS ..................................................................................... 16 1.19 SECURITY AND STAMP DUTY ...................................................................................... 17

2.0 PROCEDURE FOR APPLICATION ................................................................................ 18

2.1 PROSPECTUS AND APPLICATION FORM .................................................................. 18 2.2 WHO MAY APPLY .............................................................................................................. 18 2.3 HOW TO APPLY.................................................................................................................. 19 2.4 MODE OF PAYMENT ......................................................................................................... 21 2.5 FOREIGN CURRENCY REMITTANCE .......................................................................... 22 2.6 REJECTION OF APPLICATIONS ..................................................................................... 23 2.7 BASIS OF ALLOTMENT .................................................................................................... 24 2.8 ACCEPTANCE & REFUNDS ............................................................................................. 24 2.9 CDS LODGEMENTS AND TRADING OF DEBENTURES ......................................... 24

3.0 INDUSTRY

OVERVIEW ..................................................................................................................................... 25 3.1 HOUSING FINANCE MARKET AND HDFC’S SHARE ............................................. .25

4.0 OVERVIEW OF HOUSING DEVELOPMENT AND FINANCE CORPORATION OF SL ................................................................................................... 26

4.1 COMPANY VISION & MISSION ...................................................................................... 26 4.2 INCORPORATION, LEGAL BACKGROUND AND SHAREHOLDERS ................... 27 4.3 BUSINESS OVERVIEW ...................................................................................................... 29

Table of Contents

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4.4 KEY PRODUCTS AND SERVICES ................................................................................... 30 4.5 COMMITMENT TOWARDS LONG-TERM ECONOMIC PROSPERITY ................ 31 4.6 TOP TEN SHAREHOLDERS OF THE COMPANY AS AT 31st AUGUST 2013 ....... 32 4.7 HUMAN CAPITAL .............................................................................................................. 32 4.8 EMPLOYEES AND LABOUR UNION DETAILS ........................................................... 33 4.9 DIVIDEND POLICY ........................................................................................................... 33 4.10 DEGREE OF DEPENDENCE ON KEY CUSTOMERS AND SUPPLIERS ................. 33 4.11 PARTICULARS OF LOANS, LIABILITIES, OTHER BORROWINGS & INDEBTEDNESS ................................................................................ 33 4.12 TAXATION ........................................................................................................................... 34 4.13 LITIGATION, DISPUTES AND CONTINGENT LIABILITIES .................................. 34 4.14 MATERIAL CONTRACTS ................................................................................................. 34 4.15 TRANSACTIONS RELATED TO PROPERTY ............................................................... 34 4.16 DETAILS OF COMMISSIONS & BENEFIT PAID .......................................................... 34 4.17 CORPORATE GOVERNANCE PRACTICES .................................................................. 34 4.18 ORGANISATIONAL STRUCTURE .................................................................................. 35

5.0 BOARD OF DIRECTORS ................................................................................................ 36

5.1 DETAILS OF THE BOARD OF DIRECTORS ................................................................. 36 5.2 DIRECTORS PROFILES ..................................................................................................... 36 5.3 DIRECTORS’ STATEMENT ............................................................................................... 39 5.4 DIRECTORS INTEREST ASSETS ..................................................................................... 39 5.5 DIRECTORS INTEREST IN CONTRACTS OR ARRANGEMENTS ......................... 39 5.6 DIRECTORS’ EMOLUMENTS .......................................................................................... 39

6.0 CORPORATE MANAGEMENT AND SENIOR MANAGEMENT ................................. 40

6.1 DETAILS OF THE SENIOR MANAGEMENT ................................................................ 40 6.2 DECLARATION BY THE MANAGING DIRECTOR/ CHIEF EXECUTIVE OFFICER ......................................................................................... 43 6.3 EMOLUMENTS OF THE SENIOR MANAGEMENT ................................................... 43

7.0 STATUTORY DECLARATION ........................................................................................ 44

7.1 STATUTORY DECLARATION BY THE DIRECTORS ................................................. 44 7.2 DECLARATION BY THE MANAGERS TO THE ISSUE .............................................. 45 7.3 DECLARATION BY THE COMPANY ............................................................................. 45

ANNEXURE I : FINANCIAL INFORMATION .......................................................................... 47

ANNEXURE II : COLLECTION POINTS ..................................................................................... 87

ANNEXURE III : CUSTODIAN BANKS ......................................................................................... 93

ANNEXURE IV : ISSUE RATING REPORT BY RAM RATING AGENCY .............................. 95


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1.0 INFORMATION RELATING TO THE ISSUE.

1.1 PARTICULARS OF THE ISSUE Th e Board of Directors of the Housing Development Finance Corporation Bank Sri Lanka

(hereinaft er called Th e Bank or HDFC) by resolution passed on 5th September 2013 resolved to borrow a sum of LKR One Billion (LKR 1,000,000,000/-) with the option of increasing the borrowing up to LKR Two Billion (LKR 2,000,000,000/-) in the event of oversubscription, from the public by the issue of Listed Secured Redeemable 3, 4 & 5 year Debentures at an issue price of LKR 100/- per debenture.

Under this issue, Twenty Million (20,000,000) Listed Secured Redeemable 3,4 & 5 year Debentures will be issued at the issue price of LKR 100/- each with a fi xed interest.

1.2 INVITATION TO SUBSCRIBE Th is prospectus invites the public to make applications for the purchase of any or all of the

Debentures, which have the below interest rate options; and which shall rank equal and pari passu to each other and diff er only with respect to the interest coupon off ered, tenor and frequency at which the interest is paid. Th e descriptions of the debentures are as follows;

Options Interest Period Interest Rate3 Years – 1 Option Quarterly 14.50% (AER 15.31%)4 Years – 2 Option Quarterly 15.00% (AER 15.87%)5 Years – 3 Option Annually 15.50% (AER 15.50%)

Th e issue value shall be rupee one Billion (LKR 1,000,000,000/-) with the option to raise a

further rupee One Billion (LKR 1,000,000,000/-) where the cumulative issue value becomes a maximum of rupee Two Billion (LKR 2,000,000,000). Subject to this limit, the public could subscribe to any number (subjected to the minimum number) of Debentures (for any one interest rate option or all options) mentioned above. Th e minimum subscription would be one million (LKR 1,000,000/-) for any debenture of any interest option outlined in this prospectus.

Once application has been submitted for a particular debenture with a particular interest rate option, it is not possible for investors to switch to Debentures with other interest rate options.

1.3 SUBSCRIPTION LIST Subject to provisions contained below, the subscription list for the Debenture will be open

at 9.30 a.m on 21st October 2013 and shall remain open for 14 market Days until closure at 4.30 p.m on 07th November 2013.

However in the event of an over subscription of the 10,000,000 Debentures, the subscription list will close at 4.30 p.m on the same day on which it is fully subscribed, with the notifi cation of CSE, unless otherwise decided by the Bank to keep the Subscription List open until subscription of a further 10,000,000 Debentures or part thereof as may be decided by the Bank. In such event, Subscription List will close at 4.30 p.m on the day on which a further 10,000,000 Debentures or part thereof as may be decided by the Bank have been subscribed,

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with the notifi cation of the CSE or on 7th November 2013 whichever is earlier.

Application may be made forthwith. Duly completed applications in the manner set out under the procedure for application in section 2 of this prospectus will be accepted.

1.4 PROSPECTUS Th e date of this prospectus is 04th October 2013. Th is prospectus has been prepared by People’s Bank - Investment Banking Unit on behalf

of HDFC form the information provided by the Bank and which is publicly available. Th e Bank and its Directors having made all reasonable inquiries, confi rm that to the best of their knowledge and belief the information contain in the prospectus 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. While People’s Bank Investment Banking Unit has taken reasonable care to ensure full and fair disclosure of information, the People’s Bank Investment Banking Unit doesn’t assume responsibilities for any investment decisions, prospective investors must rely on their own examination and assessments of the Bank, including the risk involved.

Any Other person other than HDFC or People’s Bank Investment Banking Unit or authorized agent assigned by HDFC or People’s Bank Investment Banking Unit, giving information to take any representation in connection with the Listed, Secured, Redeemable, Rated Debenture issue other than the information and representations contained in this prospectus and if given or made, such information or representations must not be rely upon as having been authorized by the Issue Manager or Housing Development Finance Corporation Bank Sri Lanka.

1.5 OBJECTIVES OF THE ISSUE- To raise medium and long term matching funds to manage assets and liabilities gap

exposure and associated risks of the bank.- To fi nance the budgeted lending targets and improve balance sheet growth and earning

capacities.- Provide investors a structure to meet their risk return and maturity needs while off ering

HDFC medium and long term funds at attractive interest rates.

1.6 INTEREST ON THE DEBENTURES Th e Debentures consist of three investment options for the investors to choose from and

they rank equal and pari passu to each other, except the interest coupon off ered, tenor and the frequency at which the interest is paid.

3 Years Option 1 - Fixed interest rate of 14.50% p.a. payable quarterly from the date of allotment until the

expiry of 3 years from the date of allotment on the principle sum of the Debenture 4 Years Option 2 - Fixed interest rate of 15.00% p.a payable quarterly from the date of allotment until the

expiry of four 4 years from the date of allotment on the principle sum of the Debenture. 5 Year Option 3 - Fixed interest of 15.50% p.a payable annually from the date of allotment until the


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expiry of four 5 years from the date of allotment on the principle sum of the Debenture. Th e quarterly interest payments would be made on 31st December, 31st March, 30th June

& 30th September each year where as annual payments would be made on 31st December from the date of allotment until redemption / maturity.

For quarterly interest payment options, interest will be payable quarterly within three (3) market days from the end of every three (3) months, with the fi rst interest payment being made on 31st December 2013. For annually interest payment options, interest will be payable annually within three (3) market days from the end of every twelve (12) months, with the fi rst interest payment being made on 31st December 2013.

In respect of Debentures option 1 & 2, the fi rst interest payment shall be made from the period commencing from the date of allotment until 31st December 2013. Th e fi nal interest payment of Debentures option 1 & 2 shall be made from 30th September 2016 & 2017 respectively, until preceding date of redemption/maturity with the repayment of the principal.

In respect of Debentures option 3 the fi rst interest payment shall be made from the period commencing from the date of allotment until 31st December 2013. Th e fi nal interest payment will be made from 31st December 2017 until preceding date of redemption/maturity with the repayment of the principal.

Th e interest calculation will be based upon the actual number of days in each interest payment period (Actual / Actual).

In order the accommodate the Debenture interest cycle in the Automated Trading System (ATS), interest payments shall not include the Debenture holders holding Debentures in the ATS as at the last day of the payment cycle (Quarterly / Annually), but one day prior to the due date of interest (entitlement date). If the entitlement date is a holiday, interest shall be calculated including the entitlement date.

1.7 PAYMENT OF PRINCIPAL & INTEREST Payment of the principal and interest in the debenture will be made in Sri Lankan Rupees

aft er deducting any taxes and charges thereon (if any) to the debenture Holders upon receipt of information relating to the Debenture Holders from the CDS as of the payment date (in the case of joint Debenture Holders, the payment will be made to the one whose name stands fi rst in the Register of debenture holders) to the registered Address with the CDS through Post to the Debenture holder, by crossed cheques marked “Account Payee Only”

Interest payable on all Debenture options will be made only by cheques within three (3) market days from the end of each period.

“At maturity / redemption, the payment of the principal along with the balance interest payment due will be made by cheque only”

1.8 REDEMPTION Th ese Debentures are redeemable at maturity on the expiry of three (3) four (4) and fi ve

(5) years respectively from the date of the allotment in accordance with the provisions contained in the Trust Deed.

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Th e Debenture holders shall not have any right or option to call for redemption of the Debentures before the maturity date of such Debentures, except due to unforeseen circumstances beyond the control of the bank. Repayment before maturity of the principal sum on a debenture in any circumstances shall be subject to the prior written approval of the Director Bank Supervision of the CBSL and 3/4th of the Debenture holder’s nominal value of the Debentures outstanding when the Principal sum is repaid before maturity

If the date of maturity / redemption falls on a non-working day on which the banks are closed for business in Sri Lanka, then the Debentures shall be redeemed on the succeeding day of the date of maturity / redemption together with all the accrued interest thereon up to the preceding date of Redemption of the Debenture.

1.9 TRUSTEES TO THE OFFERING Deutsche Bank AG, Colombo Branch has been appointed as the Trustee to this Debenture

Issue. Th e Bank and the Trustee have executed a Trust Deed. In the application form for subscription of Debentures the applications are required to irrevocably authorize the trustee, subject to any overriding clauses in the Trust Deed to act as their agent in entering in to such deeds, writing and instruments with the Bank and to act as trustee for the benefi t of and interest of the debenture holders on the terms and conditions contained in the said Trust Deed.

Th e rights and the Obligations of the Trustee are set out in the Trust Deed which is hosted on HDFC and CSE websites.

1.10 RIGHTS OF THE DEBENTURE HOLDERS a) Debenture Holders are entitled to the following rights:

- Receive principal on the date of maturity / redemption, and interest on the Debenture as per section 1.6 of this Prospectus and the provisions contained in the Trust Deed.

- In accordance with the Listing rules of CSE, receiving audited fi nancial statements of the Bank within a period of not exceeding fi ve (5) months from the close of each fi nancial year. Audited accounts will be sent in CD form, unless a specifi c request for a hard copy is received by the Bank.

- In the event of liquidation, rank above ordinary voting shares and non voting share holders, Preference shareholders, Subordinated debt instruments, and senior debt instruments of the bank.

- Call, receive notice, attend and vote at the meeting of Debenture holders in accordance with the provisions contained in the Trust Deed.

- Th e other rights of the Debenture Holders are set out in the Trust Deed.

b) Debenture Holders are not entitle for the following- Attending and voting at meetings of holders of shares and other types of debentures.- Sharing in the profi t of the company- Participating in any surplus in the event of liquidation- The Debenture Holders will not be entitled to any of the rights and privileges

available to the shareholders of the Bank including the right to receive notices of Annual Meeting, General Meetings or attend and vote at the Annual General Meeting of the Bank.


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c) Obligations on the Debenture- Th e Bank shall repay the principal sum on the date of maturity / redemption and

interest on the Debenture as per section 1.6 of this Prospectus and the provision contained in the Trust Deed and comply with all terms and conditions stipulated in the Trust Deed in respect of these Debentures.

- When making payment of the principal sum and interest on the Debentures, the Bank shall always act on the information by the CDS and it shall be the responsibility / obligation of each Debenture holder to keep all the information in respect of such Debenture holder updated in the CDS. Each Debenture holder shall absolve the Bank, CDS and CSE from any responsibility or liability in respect of any error or absence of necessary changes initiated by the Debenture Holders in the information recorded with the CDS.

1.11 RISK FACTORS ASSOCIATED WITH DEBENTURES Subscribers to the Debentures will be exposed to the following risks: (It is vital to note however that these risks are not unique to debentures issued by HDFC

and apply generally to any unsecure fi xed income security, fi xed deposit or any other term or money deposit)

(a) Interest Rate Risk Th e price of a typical debenture will change in the opposite direction to a change in the

market interest rates assuming all other factors are equal. “Market Interest Rate” refers to interest rate expected by the investors for investments with similar maturity and risk profi le. As market interest rates rise, price of the debenture may fall and as market interest rates fall, the price of the debenture may rise. If an investor sells a Debenture prior to maturity when market interest rate is higher than on these Debenture interest rates, the investor may incur a capital loss. Similarly, if an investor sells a debenture prior to maturity when market interest rate is lower than on the debenture interest rate, then the investor may receive a capital gain. Th is uncertainty is known as “interest rate risk”.

(b) Reinvestment Risk HDFC shall pay interest on the Debentures quarterly and annually. Th e investor may

decide to reinvest this interest payment and earn interest on interest. Depending on the prevailing market interest rates, the Debenture Holder may be able to reinvest the paid interest at a higher or lower interest rate than that is off ered by these Debentures. Th is uncertainly is known as “reinvestment risk”.

(c) Default Risk Default risk also known as credit risk refers to the risk that the Issuer of a Debenture

may default, i.e. the Issuer will be unable to pay interest and principal when due. It is advisable for prospective HDFC Debenture investors to take into account past earnings and asset growth performance of HDFC, present fi nancial strengths as refl ected in the Balance Sheet of HDFC, its risk management policies and the experience of the Directors and Senior Management when forming an opinion on Default Risk. However, In the event of default the Trustee will exercise the primary mortgage and collect loans receivable to the account that HDFC bank Opens with Trustee.

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(d) Liquidity Risk Liquidity risk depends on the ease with which debentures can be sold aft er the initial

placement. As the Debentures will be listed on the CSE, investors will be able to trade the instrument in the secondary market and convert to cash mitigating liquidity risk. However transaction price or bid-ask spread will be dependent upon the marketability, demand, supply and other macro factors such as market interest rates.

(e) Call Risk Call Risk refers to the risk that the issuer will retire all or part of the principal value of

the debenture before maturity. Th e risk to investor is in that, the timing of the call is not known and the investor will be faced with a reinvestment risk in the event the call is made at a time when the market interest tares have declined.

1.12 BENEFITS OF INVESTING IN THE DEBENTURES- An attractive interest income for a period of up to Five (05) years.- Opportunity to realize capital gain according to interest rate fl uctuations in the

fi nancial markets.- Capacity to exit from the investment at any time, aft er the Debentures are listed on

the CSE- Can be used as collateral to obtain credit facilities from banks and fi nancial

institution other than HDFC since regulations precludes Banks to provide accommodations against the security of its own shares and debentures.

- As per the current tax legislation of Sri Lanka, interest income earned on Debenture listed aft er 1st January 2013 is exempted from Withholding tax and Income tax

1.13 TRANSFER OF DEBENTURES(a) Th ese Debentures shall be freely transferable and transmittable through the CDS as

long as the Debentures are listed in the CSE and the registration of such transfer shall not be subject to any restriction, save and except to the extent required for compliance with statutory requirements.

(b) Subject to provisions contained in the Trust Deed, the Company may register without assuming any liability any transfer of Debentures, which are in accordance with the statutory requirements and rules and regulations in force for the time being as laid down by the CSE, SEC and the CDS.

(c) In the case of the death of a Debenture holder,- Th e survivor where the deceased was a joint holder; and- Th e executors or administrators of the deceased (or where the administration of

the estate of the deceased is in law not compulsory, the heirs of the deceased) where such Debenture holder was the sole or only surviving holder; shall be the only persons recognized by the issuer as having any title to his/her Debentures.

(d) Any person becoming entitled to any Debenture in consequence of bankruptcy or winding up of any Debenture holder, upon producing proper evidence that such debenture holder sustains the character in respect of which such debenture holder proposes to act or such debenture holder’s title as the Board of Directors of the Company thinks suffi cient, may at the discretion of the Board be substituted and


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accordingly registered as a Debenture holder in respect of such Debentures subject to the applicable laws, rules and regulations of the Company , CDS , CSE and SEC.

(e) No change of ownership in contravention of the above conditions will be recognized by the Company.

1.14 LISTING An Application has been made to the CSE for permission to deal in and obtain a quotation

on the Main Board for these Listed, Secured, Redeemable, and Rated Debentures at a par value of LKR100/- each, all of which are off ered to the public by way of this Debenture issue. Th e CSE however, assumes no responsibility for the correctness of the statements made or opinions expressed or reports included in this Prospectus. Admission to the Offi cial List is not to be taken as an indication of the merits of HDFC or of the Debentures issued.

1.15 RATING OF THE INSTRUMENTS RAM Ratings (Lanka) Limited (RAM) has assigned a long term rating of BBB to these

Debentures. A copy of the Rating report issued by RAM is attached herewith (Annexure - IV).

1.16 COST OF THE ISSUE Th e directors estimate that the total cost of the issue including the Listing fees, Trustee

fees, Brokerage, Printing, Marketing, Stamp duties, Managers and Registrars fees and other costs connected with the issue will be approximately LKR 20 Million and will be funded by Housing Development Finance Corporation Bank.

Brokerage at the rate of 0.25% of the nominal value of the Debentures will be paid in respect of the number of debentures allotted on applications bearing the stamp of any member and trading member of the CSE and any agent appointed by the Bank.

1.17 UNDERWRITING Th e debenture issue is not underwritten.

In the event the issue is not fully subscribed, the subscribers shall be allotted in full and funds will be utilized to meet the objectives of the issue stipulated in Section 1.5 of the Prospectus.

1.18 INSPECTION OF DOCUMENTS Certifi ed copies of the HDFC Act, the Audited fi nancial statements of the Company for the

last fi ve years ending 31st December 2008, 2009, 2010, 2011 & 2012, Rating Report, Trust Deed and all other documents pertaining to the Bank to which references are made in this Prospectus could be inspected by the Public during normal business hours at the Registered Offi ce of HDFC from seven (7) market days before the date of opening of the subscriptions list, until the maturity date of the Debentures.

Th e Prospectus, Trust Deed & HDFC Act of the Bank will be hosted in the Bank’s website, www.HDFC.lk and the CSE website, www.cse.lk from date of opening until the maturity date of the Debentures.

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1.19 SECURITY AND STAMP DUTY(a) Th e Corporation shall grant a primary mortgage in favour of the Trustees for and on

behalf of the Debenture Holders in respect of receipts from the identifi ed portfolio of housing loan agreements morefully described in the Schedule attached to the trust deed and such other loans which maybe added thereto from time to time in terms of Clause 5 (b) of the trust deed and any bank accounts mentioned in the clause 10.2 (a) and (b) of the trust deed.

(b) Th e Corporation shall at all times ensure that the ratio of the monetary value of the Non-Delinquent Receivables which are referred to in Clause 5 (a) of the trust deed to the total amount which will be payable to Debenture Holders on account of the principle sum of the Debentures and interest due thereon until the Date of Redemption is in excess of 1.3:1.

(c) Th e Corporation shall ensure that in the event of the ratio referred to in Clause 5 (b) of the trust deed falling below 1.3:1 that it shall replace housing loans which are in default with Non-Delinquent Receivables within Fift een (15) days of 31st of December and the 30th of June each year until the Date of Redemption.

(d) Th e Corporation shall pay all charges, stamp duties and other similar duties or taxes payable on or in connection with (i) the issue of the Debentures, the Security and (ii) the execution of Th ese Presents.

(e) Th e claims of the Debenture Holders shall in the event of a winding up of the Corporation rank in priority to the claims of all other creditors with respect to any realization from the proceeds of the Security and in priority to any preferential claims under Section 365 of the Companies Act No. 07 of 2007 and the claims and rights of the shareholders of the Corporation.

(f) Total value of the mortgaged loans attached to the schedule as of 26th September 2013 is LKR 3,100,662,639.84 and the total number of mortgaged loans as of same date are 2,734. Any amendments thereaft er to the schedule will be made available on the Company and CSE website until the date of maturity of the Debentures.


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2.0 PROCEDURE FOR APPLICATION

2.1 PROSPECTUS AND APPLICATION FORM

Copies of the Prospectus and the Application Forms may be obtained free of charge from the following places / institutions:-

Registered Offi ce / Head offi ce of HDFC Sir Chittampalam A Gardiner Mawatha, Colombo 02.

Manager to the Off ering People’s Bank - Investment Banking Unit 13th Floor, People Bank, No. 75, Chittampalam A Gardiner Mawatha, Colombo 02.

Registrars to the Off eringSSP Corporates Services (Pvt) LtdNo 101, Inner Flower Road,Colombo 03.- All HDFC Branches (Annexure II - Collection points)- Members & Trading Members of the CSE (Annexure II - Collection Points)- Selected Branches of People’s Bank (Annexure II - Collection points)

2.2 WHO MAY APPLY

Applications are invited for the subscription of Debentures from the following categories of applications:

(a) Citizens of Sri Lanka who are resident in Sri Lanka and above 18 years of age.

(b) Companies, corporations or institutions incorporated or established within Sri Lanka and who are authorized to invest in Debentures.

(c) Approved provident funds and approved contributory pension schemes registered / Incorporated /established in Sri Lanka and who are authorized to invest in Debentures. Applications by these bodies must be in the name of the trustee/board of management thereof.

(d) Foreign institutional investors, corporate bodies incorporated outside Sri Lanka, foreign citizens and Sri Lankan residents outside Sri Lanka and above eighteen (18) years of age.

Applications will not be accepted from individuals under the age of eighteen (18) years, or in the names of sole proprietorships, unincorporated trusts or non-corporate bodies.

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2.3 HOW TO APPLY

(a) Applications must be made on the Application Forms issued with this Prospectus. Applications are also permitted on photocopies of the Application Forms issued with the Prospectus. Applicants using photocopies are requested to inspect the prospectus, which is available for inspection and also issued free of charge at the Head Offi ce / Registered Offi ce of HDFC and the Collection Points listed in Annexure II. Prospectus and Application Forms could also be downloaded from the Company’s and CSE’s websites. Applications that do not strictly conform to such instructions and the other instructions set out below or which are illegible may be rejected.

(b) Applications should be made for a minimum subscription value of Sri Lanka Rupees one million (LKR 1,000,000) of Ten Th ousand (10,000) Debentures. Applications exceeding 10,000 Debentures should be in multiples of 5,000 Debentures (LKR 500,000). Applications for less than 10,000 Debentures or for a number, which is not in multiples of 5,000 Debentures, will be rejected.

(c) Only one type of Debentures should be applied per Application form. Investors may apply for Diff erent types of Debentures on separate Application Forms using photocopies. Only one application should be made by any person or entity in respect of the same type of Debentures. Multiple Applications for the same type of Debentures will be rejected.

(d) Joint Applications may be made. However, an applicant of a joint application will not be eligible to send a separate application individually or jointly with another party. Only one Application should be made for the benefi t of any person or corporate body. Th e interest cheques will be drawn in favour of the principal applicant as given in the Application Form.

(e) In the case of Corporate Applicants, the common seal of the company should be affi xed and attested if required by the Articles of Association or such other constitutional documents of such Applicants or as per the statutes governing them. In case of approved provident funds, trust funds and approved contributory pension schemes, the Applications should be in the name of the Trustees / Board of Management.

(f) A Sri Lankan citizen must state his / her National Identity Card (NIC) number on the Debenture Application Form. Th e Passport number can be given only when the NIC number is not available. In the case of a corporate entity, the Company registration number must be given. A foreign citizen must state his / her passport number in the space provided.

(g) Th e Application Forms may be signed by someone on behalf of the Applicant(s) provided that such person holds the Power of Attorney (POA) of the Applicant(s). A copy of such POA certifi ed by a Notary Public as “True Copy” should be attached with the Application Form. Original of the POA should not be attached.

(h) Applicants who wish to apply through their Margin Trading Account should submit the application in the name of the “Margin Provider / Applicants Name” signed by the margin provider. A copy of the margin Trading Agreement should be attached with


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the Application Form. Please note that the margin provider can apply under its own name and such Applications will not be construed as multiple Applications. Photo copy of the Margin Trading Agreement must be submitted along with the Application.

(i) As per the Directive of the SEC made under Circular No. 08/2010, dated 22 November 2010 and Circular No. 13/2010 issued by the CDS dated 30th November 2010, all Debentures allotted must be directly uploaded to the CDS accounts. As such, all applicants should indicate their CDS account number in the Application Form.

Applicants who do not have a CDS account are advised to open a CDS account prior to submitting the Application, in order to facilitate the uploading of allotted Debentures to their CDS account.CDS account can be opened through any member/ trading member of the CSE or through a custodian Bank. (Annexure II & III)

Please note that upon the allotment of Debentures under this issue the allotted Debentures would be credited to the applicant’s CDS account so indicated. Please note that Debenture certifi cates shall not be issued. Applications which do not carry the CDS account number, which is not opened at the time of the closure of the subscription list or which indicate an incorrect / inaccurate CDS account number shall be rejected, and no allotment will be made.

It should be noted that in the event the Applicant’s CDS Account number is correctly stated in the Application Form, all correspondence with such Applicant will be sent to the address given to the CDS by such Applicant.

Further in the event the name or the address of the Applicant mentioned in the Application Form diff er from the name or address given to the CDS by such Applicant in respect of the CDS Account mentioned in the Application Form, the name and the address given to the CDS by such Applicant in respect of the CDS Account mentioned in the Application Form will be considered as the name and address of such applicant.

(j) Foreign Investors and Non-Resident Investors may be aff ected by the laws of the jurisdiction of their residence. It is the responsibility of such investors to comply with the laws relevant to their country of residence and the Laws of Sri Lanka, when making an Application for subscription of the Debentures.

(k) Application Forms properly fi lled in accordance with the instructions thereof together with the remittance (cheque, bank draft or bank guarantee as the case may be) for the full amount payable on application should be enclosed in an envelope marked “HDFC Bank / Debenture Issue 2013” on the top left hand corner in capital letters and dispatched by post or delivered by hand to the Registrars to the Issue at the following address:

SSP Corporate Services (Pvt) LimitedNo. 101, Inner Flower Road, Colombo 3Tel : +94(011) 2573894Fax : +94 (011) 2573609

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In the alternative, Application Forms could also be handed over to any of the Collection Points set out in Annexure II.

(l) Applications sent by post or delivered to any places mentioned in Annexure II (Collection Points) should reach the offi ce of the Registrars to the Issue at least by 4.30 p.m. on the following working day upon the closure of the subscription list. Applications received aft er the said period will be rejected even though they have been delivered to any of the Collection Points prior to the closing date or carry a post mark dated prior to the closing date.

2.4 MODE OF PAYMENT

(a) Payment should be made separately in respect of each application only by way of cheque, bank draft or bank guarantee, as the case may be. Each Application Form should be accompanied by no more than one cheque, bank draft or bank guarantee. Applications with two or more cheques, bank draft s or bank guarantees will be rejected. Application Forms accompanied by cash will not be accepted.

(b) Payments for applications for Debentures of a value below Rupees One Hundred Million (LKR 100,000,000) could be supported by a cheque or bank draft only. Cheques or bank draft should be drawn upon any commercial bank in Sri Lanka and crossed “Account Payee Only” and made payable to “ HDFC Bank / Debenture Issue 2013”. Bank guarantees will not be accepted for values less than Rupees One Hundred Million (LKR 100,000,000).

In such instances Application Form should be accompanies by only one cheque or bank draft ,and should be issued for the full amount indicated in the Application Form. An Application for Debentures of a value below Rupees One Hundred Million (LKR 100,000,000/-) accompanied by two or more cheques/bank draft s will be rejected at the outset.

(c) Th e amount payable should be calculated by multiplying the number of Debentures applied for by the issue price of LKR 100 per Debenture. If there is discrepancy in the amount payable and the amount specifi ed in the payment mode (Cheque / Bank Draft / Bank Guarantee), the Application will be rejected.

(d) All cheques/bank draft s/bank guarantees received in respect of the applications will be banked on the next working day immediately aft er the closure of the Subscription List. Payments in any form other than as mentioned above will not be accepted. In the event cheques are not realized within two (2) market days from the closure of the subscription list, such Applications may be rejected in order to facilitate the completion of the allotment within seven (7) market days of the closure of the issue, and cheques realized aft er such date will be refunded and no allotment of Debentures will be made.

(e) Th e Bank Guarantees should be in a form acceptable to the Company and the Registrars to the Issue and should be issued by a licensed commercial bank in Sri Lanka and payable on demand unconditionally to “HDFC Bank / Debenture Issue 2013. Please note that Bank Guarantees should be valid for a minimum of one (1) month from the date of opening the issue.


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2.5 FOREIGN CURRENCY REMITTANCE

Th is section is applicable to Citizens of Sri Lanka above eighteen (18) years of age, who are resident overseas, Foreign Institutional Investors and Corporate bodies incorporated or established outside Sri Lanka and Foreign Citizens above eighteen (18) years of age (irrespective of whether they are resident of Sri Lanka or overseas), who wish to apply for the Debentures. Applications in respect of such Applicants should be made in conformity with the requisite declarations accompanied by the documentation stipulated by the Controller of Exchange of Sri Lanka. Payment for the subscription of the Debentures by Foreign Investors and non-resident Sri Lankan citizens should be made through a SIA maintained with any commercial bank in Sri Lanka.

Such applications must be accompanied with a letter from the respective Commercial Bank confi rming that the cheque / bank draft / bank guarantee is issued out of funds from a SIA account. Such payments should be made in one of the following ways;

(a) A Foreign Investor may use a service of a Custodian bank (Please refer Annexure III for Custodian Banks) as an intermediary when investing in the Sri Lankan Securities Market. Th e intermediary may open a SIA, on the investor’s behalf. In conjunction with the SIA, an account must be opened with the CDS. Payments for the Debentures could be made through Bank Draft s purchased out of the funds in the SIA and made payable to “HDFC Bank / Debenture Issue 2013”

(b) Inward remittances of foreign currency may be held in a Foreign Currency Bank Unit (FCBU) account of the Applicant with any licensed commercial bank in Sri Lanka, in which case such Applicant could forward his / her application supported by a Bank Guarantee only [If the value of such application is Sri Lankan Rupees One Hundred Million (LKR 100,000,000/-) and above] drawn on the Applicant’s FCBU Account pending allotment of the Debentures. Upon allotment of the Debentures, payment for the Debentures allotted would be called on the Bank Guarantee. Foreign currency to the extent of Sri Lankan Rupee equivalent value of the Debentures allotted should then be credited to the SIA opened in favour of the Applicant via the aforementioned FCBU account and payment for such Debentures should be made through the funds in the SIA. Th is procedure would protect a prospective investor from any losses accruing due to fl uctuating exchange rates.

(c) Bank Guarantees issued by a licensed commercial bank in Sri Lanka against the Applicant’s SIA maintained with the said Bank will also be accepted from Foreign Investors and Non-resident Sri Lankan Citizens Bank

Guarantees should be in a form acceptable to the Company and the Registrars to the

Issue and payable on demand unconditionally to “HDFC Bank / Debenture Issue 2013”

An endorsement should be made by the licensed commercial bank on the face of the Bank Guarantee to the eff ect that such Bank Guarantee has been drawn against the Applicant’s SIA maintained with the said bank.

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Please note that the Bank Guarantees shall be permitted only for applicants who subscribe for Sri Lankan Rupees One Hundred Million (LKR 100,000,000/-) and above only. Th e Applications with Bank Guarantees less than Rupees One Hundred Million (LKR 100,000,000/-) will be rejected.

2.6 REJECTION OF APPLICATIONS

(a) Application Forms and the accompanying remittance mode (Cheque / Bank Draft / Bank Guarantee) which are illegible or incomplete in any way and / or are not in accordance with the terms, conditions and instructions set out in this Prospectus will be rejected at the sole discretion of the Company.

(b) Applications from individuals under the age of eighteen (18) years or in the names of Sole Proprietorships, Partnerships or Unincorporated Trusts will also be rejected.

(c) An Applicant of a Joint Application will not be eligible to submit another application either individually or jointly under the same interest rate option. Only one Application should be made by any person or entity under one interest rate option. Multiple Applications will be rejected.

(d) Applications which do not carry a valid CDS account number at the time of the closure of the subscription list or which indicate an incorrect / inaccurate CDS account number shall be rejected, and no allotment will be made. Application Forms stating third party CDS account numbers, instead of their own CDS account numbers, except in the case of Margin Trading Accounts, will also be rejected.

(e) Any Application Form which does not state the NIC, Passport or Company Registration number, as the case may be, will be rejected.

(f) In the event that cheques are not realized within two (2) market days from the closure of the subscription list and realized aft er such date the monies will be refunded and no allotment of Debentures will be made. Cheques must be honored on fi rst presentation for the Application to be valid. In the event Cheques are dishonored / returned on fi rst presentation, the Application will be rejected.

(g) Applications delivered by hand to the Registrars to the Issue, or to any place / institution discussed in Section 2.01 and Annexure II (Collection Points) aft er the subscription list is closed will be rejected.

(h) Applications sent by post by 4.30 p.m. on the following day to any place / institution discussed in Section 2.01and Annexure II (Collection Points) should also reach the offi ce of the Registrars to the issue at least on the following day immediately upon the closure of the Subscription List. Applications received aft er the said duration will be rejected even though they have been delivered to any of the Collection points prior to the closing date or carry a post mark dated prior to the closing date.


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2.7 BASIS OF ALLOTMENT

Th e basis of Allotment will be decided by the Board of Directors of HDFC before the expiry of Seven (07) Market Days from the closure of the Issue and will be announced to the CSE.

No preferential allotment will be made by HDFC with regard to any specifi c individual or entity. Th e allotments will be made in a fair manner.

Th e successful applicants will be informed of the allotment within Ten (10) Market Days from the closure of the Subscription List.

Th e Board of Directors of HDFC reserves the right to refuse any Application or to accept any Application or part only, without assigning any reason therefore.

2.8 ACCEPTANCE & REFUNDS

Where an Application is not accepted, subsequent to the Cheque being realized, the applicant’s money in full or where an Application is accepted only a part, the balance of the Applicant’s money will be refunded.

Refunds due on Applications fully or partially accepted will be paid within Ten (10) Market Days excluding the date of closure of the Issue. Applicants will be entitled to receive interest at the rate of last quoted Average Weighted Prime Lending Rate (AWPLR) published by the Central Bank of Sri Lanka plus 5% for the delayed period on any refunds not made within this period.

All refunds will be made by crossed cheques and sent by register post to the registered address. In the case of a Joint Application, a “Crossed Cheque” will be drawn in favour of the applicant whose name appears fi rst in the Application Form.

2.9 CDS LODGEMENTS AND TRADING OF DEBENTURES

(a) If the Applicant’s CDS Account number is correctly stated in the Application Form the Debentures allotted will be directly uploaded to the CDS account stated in the Application Form before the expiry of eighteen (18) market days, from the date of closure of the subscription list. A written confi rmation in this regard will be sent to the Applicant within two (02) market days of crediting the CDS account, by ordinary post to the registered address of such Applicant.

(b) Th e Company shall submit to the CSE a ‘Declaration’ as set out in the listing rules of the CSE on the market day immediately following the day on which the investors’ CDS Accounts are credited with the Debentures and trading of the Debentures will commence on or before the third (03rd) market day upon receipt of the declaration by the CSE.

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3.0 INDUSTRY OVERVIEW IN BRIEF

3.1 HOUSING FINANCE MARKET AND HDFC’S SHARE

Housing Finance Market Sri Lanka’s housing fi nance balance has reached LKR 304 billion representing 10% of

the Gross Domestic Product (GDP) as at 31st December 2012 and out of which HDFC Bank has contributed 5%. Based on the CBSL information, HDFC holds 0.41% share of the Banking Industry’s assets and 3% of the Licensed Specialised Banking (LSB) sector’s assets as at 31st December 2012. (Source : HDFC Research Dept)

Strategic Distribution of Service. Over the years HDFC Bank has strategically distributed its loan portfolio

proportionately among the income segments of the population. Over 70% of the loan portfolio has been distributed to the Low and Middle income group of the country that represents 60% to 70% of the population. Over the years, movements of the average size of the loan as tabulated in Table-1, warrants its commitment to this segment of the population and Table-2 showcases how HDFC Bank has responded to the demographic transition needs of the country. (Source : HDFC Annual Report)

Contribution to the National Housing Stock During the year 2012, HDFC contributed towards increasing Sri Lanka’s national

housing stock by approximately 10,024 new houses. HDFC fi nanced LKR 3,599 million of the construction value of these houses. Th e number of construction loans granted during the year decreased by 17 compared to 12,142 loans in 2011. Th e Bank also granted LKR 71 million for repairs, renovations and improvements of existing dwellings. Bank has granted 9,268 loans worth of 2.7 Billion up to 30th June 2013.

Average Size of loans Year LKR-M 2007 0.240 2008 0.255 2009 0.235 2010 0.285 2011 0.330 2012 0.290

Geographical Distribution of the Loan Book as at 31st December 2012 Region LKR-M % Western 8,413 54% Central 1,681 11% Southern 1,471 9% Uva 685 4% North Western 1,327 8% Sabaragamuwa 1,171 7% North Central 414 3% Nothern 74 0% Eastern 468 3% Total 15,708 100%


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4.0 OVERVIEW OF HOUSING DEVELOPMENT FINANCE CORPORATION BANK OF SRI LANKA

4.1 COMPANY VISION & MISSION

Our Vision To be the premier fi nancial service institution for the purpose of enhancement of lifestyle

of Sri Lankans. Our Mission To be a dominant player in the fi nancial service sector by delivering innovative solutions to

meet the needs of housing and construction sector with best-in-industry service excellence creating superior long-term shareholder value and contributing to economic development in Sri Lanka through an inspired team.

Our Objectives Customer: to provide a caring customer service anticipating solutions required by our customers and

innovatively satisfying them beyond expectations.

Shareholders: to optimise return on shareholders’ fund. Organization: to commit ourselves to the highest standards in corporate and business ethics whilst

maintaining fi nancial stability and growth.

Employees: to motivate, develop, recognise and reward our employees.

Community: to be strongly committed to contribute to the national goal of providing shelter for all.

Industry: setting industry benchmarks of international standards in delivering customer value

throughout comprehensive product range, customer service and all our activities. Ethics: maintaining the highest ethical standards worth of a leading corporate citizen. Values Th e foundation of the success story. Transparency: being honestly and candidly accountable. Fairness: stakeholders viewing as winners. Openness: respecting each other and showing genuine interest

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4.2 INCORPORATION, LEGAL BACKGROUND AND SHAREHOLDERS Corporate Objective and Incorporation HDFC was incorporated by the Government of Sri Lanka with primary objective of

providing housing fi nance and ancillary services within the scope of operation enacted by the Act. Th e corporation was originally established as a Building Society in 1984 and converted to a Public Corporation under the provision of Housing Development Finance Corporation Act No 07 of 1997 and obtained the status of a Licensed Specialised Bank (LSB) in 2003 , under the Housing Development Finance Corporation amended Act No. 15 of 2003 and No 45 of 2011. Th e ordinary shares of the Bank were listed at the Colombo Stock Exchange (CSE) in 2005.

HDFC marked its 28th year in 2012 since incorporation as a Building Society and 8th milestone as a licensed specialised bank. Year 2012 also marked the completion of the 7th year since listing at the Colombo Stock Exchange.

Governance Framework HDFC Bank of Sri Lanka is to comply directly with the constitutional boundaries under

the provisions of the HDFC Act and Finance Act and also regulatory boundaries of the Central Bank of Sri Lanka and listing rules of the Colombo Stock Exchange (CSE). Further HDFC Bank is under the purview of the Ministry of Finance and Planning. Th e Board of Directors of the Bank is to take necessary measures to maintain an eff ective relationship with the aforesaid regulatory authorities. Th e Bank also adopts the code of best practices of corporate governance issued jointly by Th e Institute of Chartered Accountants of Sri Lanka and CSE.

Composition of the Board of Directors. Th e Board of Directors of the Bank consisting with the Independent, Non-Independent

and Non-Executive Directors as mandated by the Central Bank of Sri Lanka representing various governmental institutions and ministries such as the Ministry of Construction Common Amenities and Housings and Ministry of Finance and Planning, Department of Labour. Five directors could be from public investors.


28

Corporate Milestones1984 Incorporated as a Building Society2000 Converted to a public corporation.2003 Obtained the status of a Licensed Specialised Bank2004 Winner – NCCSL Business Excellence Award – Financial Service Sector.2005 Listed at Colombo Stock Exchange.2005 Winner- NCCSL Business Excellence Award – Financial Service Sector.2006 Runner up- NCCSL Business Excellence Award – Financial Service Sector2010 Runner up- NCCSL Business Excellence Award – Financial Service Sector2010 Winner- ACCA Sustainability Reporting Award 2010- Small Scale Category.2010 Winner- ACCA Sustainability Reporting Award 2010- First time entry group.2010 Winner – Golden Maco Award 2010.2011 Achieved LKR 2,000 Million capital requirement2011 Reached LKR 20 Billion balance sheet.2011 Merit winner - NCCSL Business Excellence Award 2011– Financial Service

Sector2011 Winner of a certifi cate of recognition for the Annual Report 2010, from the

Institute of Chartered Accountants of Sri Lanka.2011 Winner- ACCA Sustainability Reporting Award 2011- Small Scale Category.2012 Winner- ACCA Sustainability Reporting Award 2012- Small Scale Category2012 Runner up - NCCSL Business Excellence Award 2012– Financial Service

Sector2012 Bronze Award - Annual Report competition 2012, the Institute of Chartered

Accountants of Sri Lanka.

Government’s Shareholding. Th e Government of Sri Lanka holds approximately 51% shares of HDFC, largely through

the National Housing Development Authority (NHDA) 49.73%, Urban Development Authority 0.46% and Common Amenities Board 0.46%

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Five Largest Shareholders.

Five largest institutional shareholders hold 84.30% of shares of the Bank, namely NHDA 49.73% , Lanka Orix Leasing Company PLC (LOLC) 15 %t , Th urston investment Ltd% of the shareholding as at 31st August 2013. HFDC is the fi rst state bank in Sri Lanka to have instituted an Employee Share Ownership Programme, which divested 5.395 of the Bank’s ownership to the staff as tabulated in the fi ve largest shareholder list given below.

Five Largest Shareholders As at 31st August 2013No. of Shares %Nominal Value Rs 10/-

National Housing Development Authority 32,180,000 49.73%Lanka Orix Leasing Company PLC 9,707,740 15.00%Th urston Investment Ltd 7,575,000 11.71%Legalinc Trustee Services Private Ltd 3,485,520 5.39%Perpetual Capital Pvt Ltd 1,605,425 2.48%Total held by largest fi ve shareholders 54,553,685 84.30%Other Shareholders 10,156,835 15.70%Total Shares 64,710,520 100.00%

4.3 BUSINESS OVERVIEW

Values and Business Philosophy

With all the achievements over the years with leaps and bounds, company has taken robust steps ahead with the direction of the strategic vision and mission to be the premier fi nancial service institution for the purpose of enhancement of lifestyle of Sri Lankans and to be a dominant player in the fi nancial service sector by delivering innovative solutions to meet the needs of housing.

HDFC is committed to create long term values to its shareholders while balancing economic, environmental and social foot prints for the long term prosperity of the economy. Th e Bank pursue its values; transparency, fairness and openness and also pay maximum concern to economic, environment and social rights and interest of its stakeholders particularly paying more emphasis on being compliant with all regulatory requirements and locally and internationally accepted industry standards, norms and social codes.

As at 31st December 2012, bank’s total assets amounted to LKR 21 bn and Shareholders fund recorded as LKR 2.4 bn. Bank has young staff of 488 and 32 dedicated branches and customer service outlets.


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4.4 KEY PRODUCTS AND SERVICES

(b) Savings Scheme

(a) Loan Schemes

(c) Investment Plans

31


4.5 COMMITMENT TOWARDS LONG-TERM ECONOMIC PROSPERITY Responsible housing fi nance

Decent housing is a basic human need. Housing assists in several dimensions to improve the physical quality of life and economic growth of a country. Owning a house is the largest investment of an average income earning family. It is also the only lifetime saving for many. Because of ever increasing construction costs and land prices, gaining an ownership of a house has become a dream which most families struggle to realise. HDFC Bank’s core business and statutory objective is assisting people in fi nance in housing development and other necessities. As per the income distribution, around 60-65% of the Sri Lankan population is coming under the low and middle income households segment that commonly faces the challenge of realising the dream of housing from their average income. In these circumstances, HDFC Banks is strategically as well as obligatorily has to focus more on this large segment of the market in managing its core business.

HDFC is therefore focused in managing the core operation of the Bank in a manner which delivers long-term value creation in the economic, environmental and social front of the largest segment of the population and thereby seizing economic opportunities that ensures the Bank’s continued growth and stability maximising shareholders’ wealth while delivering its overriding objective of expanding home ownership in the country.

Commitment towards Millennium Development Goals (MDGs).

Access to safe and healthy shelter is essential to a person’s physical, psychological, social and economic well-being. Th e right to adequate housing is a basic human right and is emphasised in the Universal Declaration of Human Rights and the International Covenant on Economic, Social and Cultural Rights. Decent housing assists in several dimensions to improve physical quality of life and economic growth of a country as measured and communicated by the Millennium Development Goals (MDGs). Th e country is marching towards achieving the most of MDGs by year 2015. HDFC Bank being a prominent development fi nance partner strives to contribute in realising these goals, through promoting responsible housing fi nance.

In this context, HDFC bank’s corporate philosophy is strategized in four main directions; acting as a social and economic stabiliser, Improving accessibility to housing fi nance, managing ecological footprint and being a role model of a good corporate citizen.

Product Diversifi cation

With the amendment of the parliamentary Act of Incorporation at the end of 2011, HDFC Bank was permitted to play in a wider scope of operation and carried out the business activities articulated in the schedule four of the Banking Act while maintaining housing fi nance as core business. Within this privilege the Bank is strategically diversifying its products portfolio with more short tenure loans products with the focus of lifestyle development and economic empowerment of people. In this context gold loans life style loans leasing & hire purchase project fi nance business loans schemes have already being launched.


32

Risks Associated with Future strategies

Economic- Lack of long term funds exposes the Bank into high level of asset and liability

mismatch.- High level of assets and liability mismatch exposes the bank into interest rate

mismatch risk and liquidity risk. Th is risk factor infl uences the fi nancial bottom-line of the bank in a volatile fi nancial market situation.

Environment- High credit risk on granting loans to customers with agriculture based income due to

climate change.- Risk of environmental degradation due to increasing consumption of non-renewable

resources.- Climate change could create health problems and demand for foods which are more

fundamental than payment for housing.

Society- Credit risk due to lack of fi nancial literacy.- Main segment of the market is highly vulnerable- Unfocused publicity could damage the brand value

4.6 TOP TEN SHAREHOLDERS OF THE COMPANY AS AT 31st AUGUST 2013

National Housing Development Authority 32,180,000 49.73% Lanka Orix Leasing Company PLC 9,707,740 15.00% Th urston Investments Limited 7,575,000 11.71% Legalinc Trustee Services (Pvt) Ltd 3,485,520 5.39% Perpetual Capital (Pvt) Ltd 1,605,425 2.48% Dr. Senthiverl Th irugnanasambandar 1,376,926 2.13% DFCC Vardhana Bank LTD/Mr. C.H.R.de Soysa 668,958 1.03% Mr.Dinal Gitanjan Wijemanne 395,010 0.61% Mr. Chandaka Haren Ranil De Soysa 342,624 0.53% Dr. Ruwanpura Rohitha De Silva 302,128 0.47%

4.7 HUMAN CAPITAL Th e Staff Strength of HDFC as at 30th June 2013 was as follows

Team Profi le and Other indicators 30th June 2013Corporate Management 9Senior Management 23Junior Management 163Other Staff 336Total 531Percentage of Women 41%Percentage of Graduates 19%Percentage of Professionals (Including Banking) 46%Average Age (Years) 36

33


4.8 EMPLOYEES AND LABOUR UNION DETAILS HDFC has one Trade Union, Ceylon Bank Employees’ Union, (CBEU) with 389 members.

Th e Bank has entered in to a collective agreement with CBEU which is renewable every three years.

4.9 DIVIDEND POLICY Th e dividend policy will be determined based on number of factors, including but not

limiting to the Bank’s earnings, capital requirements and overall fi nancial condition. Dividends paid and payable are subject to the requirement Banking & HDFC Act.

Th e board of directors subject to the incorporate act under specialized banking license in 2003 may recommend and declare dividends to the shareholders from and out of the profi t of the bank.

4.10 DEGREE OF DEPENDENCE ON KEY CUSTOMERS AND SUPPLIERS HDFC adheres to prudential requirements set out by the Central Bank of Sri Lanka,

by virtue of which exposure to any one group of companies, any one company and any individual borrower is regularly monitored. As such HDFC is not overly dependent on any customer or any one sector for income at any given time. HDFC is also not signifi cantly dependent on any single supplier for its requirements.

4.11 PARTICULARS OF LOANS, LIABILITIES, OTHER BORROWINGS & INDEBTEDNESS

Type Of Facility Outstanding Balance as at 30th June 2013( LKR’000)

Special Scheme Borrowings 111,639Refi nancing Facilities 1,737,514Unlisted Debentures 195,000Interbank Facilities 724,780Other Liabilities 149,743Total 2,918,677

OTHER DEBT SECURITIES

Type of Debenture - Unlisted

Date of Issue Date of Maturity

Applicable Int. as at 30th June 2013

Outstanding Balance at 30th June 2013

Unsecured Redeemable

8 Dec 2005 8 Dec 2020 2.5% 110,000,000

Unsecured Redeemable

8 Dec 2005 8 Dec 2015 2.5% 85,000,000

Total 195,000,000

Th e bank has not issued any convertible or any other debt securities other than the Debentures mentioned above as at 30th June 2013.


34

4.12 TAXATION Th e Bank is not enjoying any tax concessions or tax exemptions as at 31st August 2013.

4.13 LITIGATION, DISPUTES AND CONTINGENT LIABILITIES As at 31st August 2013, the bank has no material contingent liabilities that would aff ect

current and future profi ts.

4.14 MATERIAL CONTRACTS Th e Bank has not entered into any material contracts other than those contracts entered

into in the ordinary course of business.

4.15 TRANSACTIONS RELATED TO PROPERTY Th ere are no transactions related to the property that took place within the two preceding

years in which any vendor of the property to the bank or any person who is or who was at the time of the transaction, a promoter or a director or proposed director of the Bank had any interest, direct or indirect.

4.16 DETAILS OF COMMISSIONS & BENEFIT PAID No commission or benefi ts were payable, paid, given or intended to be paid or given in

two preceding years for subscribing or agreeing to subscribe or procuring or agreeing to procure or promoting or agreeing to promote, subscriptions for any shares or Debentures of the Bank.

4.17 CORPORATE GOVERNANCE PRACTICES HDFC is a licensed specialised Bank incorporated by HDFC Act No. 07 of 1997 (amended

by Act No. 15 of 2003 and Act No 45 of 2011). Bank adopts the following statutes, regulations and social codes of best practices, with regard to the Area of Corporate Governance.

(a) HDFC Act

(b) Mandatory codes of Corporate Governance issued by the Central Bank of Sri Lanka, and compliance with relevant laws under the Banking Act.

(c) Code of Best Practices on Corporate Governance issued jointly by the Institute of Chartered Accountants and Securities Exchange Commission of Sri Lanka.

(d) Compliance with the continuing listing requirements under section 7.10 of the listing rules issued by the Colombo Stock Exchange.

HDFC obtained an external auditor’s certifi cation from the Auditor General of Sri Lanka, on compliance with corporate governance directions of the CBSL, which is a further confi rmation of Bank’s position.

35


4.18 ORGANIZATIONAL STRUCTURE


36

5.0 BOARD OF DIRECTORS

5.1 DETAILS OF THE BOARD OF DIRECTORS

Name & Qualifi cations Position Residential AddressMrs. S.N. Wickramasinghe Chairman No.56 Mahindarama Road,

Ethul KotteMr. W.J.L.U. Wijayaweera Non Executive Independent

DirectorNo.409/1 Waragoda, Kelaniya.

Mrs. C. Wijayawardhana Non Executive Independent director

No.13A,Janapriya Mawatha, Borupana Road, Ratmalana.

Mr. W.D.R.D. Goonaratne Non Executive Non Independent Director

No.79, Railway Avenue Maharagama.

Mr. S.A.J.Samaraweera Non Executive Non Independent Director

Mawala South, Wadduwa.

Mr. Prasad Galhena Non Executive Independent Director

No.21/2, Alfred House Gardens, Colombo

Mr. G.L.S Senadeera Non Executive Independent Director

No.452/B, Godallawatta Mawatha, Malabe

Mr. L.E. Susantha Silva Non Executive Independent Director

No.19/4, 1st Lane, De Mel Avenue, Uyana , Moratuwa

Mr. Muthurajah Surendran Non Executive Non Independent Director

No. 88/3 Elie House Road, Colombo 15.

5.2 DIRECTORS PROFILES

Mrs. S. N. Wickramasinghe Chairman (Non - Executive, Independent Director) Mrs. Siromi Wickramasinghe was appointed as the Chairman of HDFC Bank in May 2010. She held many senior positions in fi nancial institutions including the post of DGM, Hatton

National Bank PLC, GM /CEO, Lankaputhra Development Bank, Director, Commercial Bank of Ceylon PLC, and Director, Sri Lanka Banks’ Association (Guarantee) Ltd.

She was also a Commission Member of the Securities and Exchange Commission of Sri Lanka (SEC) and the Chairman of Ceybank Asset Management (Pvt.) Ltd an Associate Company of Bank of Ceylon.

She is an Attorney at Law of the Supreme Court of Sri Lanka and Commissioner of Oaths, and is a Fellow of the Chartered Management Institute U.K.

Mr. W. J.L.U. Wijayaweera (Non - Executive, Independent Director) Mr. Upali Wijayaweera was appointed as a Director of the HDFC Bank in June 2006 and is

also functioning as the Secretary to the Ministry of Labour and Labour Relations. He is the Chairman of National Institute of Occupational safety and Health, Srama Vasana Fund and National Institute of Labour Studies. He has been posted to the Sri Lanka Administrative

37


Service in 1984. He has joined the Department of Labour in 1985 and has held several important posts; Assistant Commissioner of Labour, Senior Assistant Commissioner of Labour, Deputy Commissioner of Labour, Commissioner of Labour, Commissioner General of Labour. In 1997, he was posted as the Counsellor in the Sri Lankan Embassy in the State of Kuwait followed by the posting in the Sri Lankan Embassy in the Kingdom of Saudi Arabia as the Counsellor in 1999. In year 2000 he was appointed as the Commissioner of Labour Standards. From 2009 - 2010 he held the post of Commissioner General of Labour and from 2010 November, he is functioning as the Secretary to the Ministry of labour and labour relations. He was also a director of National Child protection Authority. He holds a B.Com (special) Degree from the University of Kelaniya and is a PGD in Public Administration from SLIDA (Sri Lanka).

Mrs. C. Wijayawardhana (Non - Executive, Independent Director) Mrs. Chandanie Wijayawardhana holds a Bachelor of Arts (Hons.) degree from the

University of Ruhuna (1992) and Master of Arts in Development Studies from the Institute of Social Studies, the Netherlands (2000). She was appointed as a Director of the HDFC Bank in June 2010. Currently she is a Director in the Department of National Planning of the Ministry of Finance & Planning. She joined the Sri Lanka Planning Service as an Assistant Director in 1994 and has previously worked at the Department of National Planning for 10 years and at the Department of National Budget for 6 years. In addition to her duties at the Department of National Planning, she represents the Treasury on the Director Boards of National Housing Development Authority and Condominium Management Authority. She was a Director of State Mortgage and Investment Bank.

Mr. W. D. R. D. Goonaratne (Non - Executive, Non-Independent Director) Mr. Raja Goonaratne was appointed as a Director of the HDFC Bank in June 2010, and is

an elected director of HDFC representing the National Housing Development Authority, the major shareholder of the Bank. He is a senior lecturer in law in the academic staff of the Department of Legal Studies, Faculty of Humanities and Social Sciences of the Open University of Sri Lanka. At present, he works as the National Housing Commissioner. He is academically qualifi ed with LL.B (Hon) Colombo, LL. M (Monash) Australia, and Diploma in Forensic Medicine and also he is professionally qualifi ed as an Attorney-at-Law of the Supreme Court of Sri Lanka. He is also a member of the Board of the National Housing Development Authority.

Mr. S. A. J. Samaraweera (Non - Executive, Non Independent Director) Mr. Jayantha Samaraweera was appointed as a Director of the HDFC Bank in June 2010.

Currently he is the Chairman of National Housing Development Authority, Board Director of Tea, Rubber & Coconut Estates Control of Fragmentation Board, Urban Settlement Development Authority and Urban Development Authority.

He was a Member of Parliament of the Democratic Socialist Republic of Sri Lanka during the years 2004 - 2010. In 1999 he was elected to the Western Provincial Council as a member.

Mr. Samaraweera holds a Diploma in Journalism from the University of Sri Jayawardenapura, Sri Lanka.


38

Mr. Prasad Galhena ( Direcitor) (Non Executive Independent Director) Prasad Galhena is a fellow member of the Chartered Institute of Management Accountant

UK, and has a MBA from the University of Colombo. He is presently the Chairman of the Sri Lanka Sustainable Energy Authority and is the Commissioner, Public utilities Commission of Sri Lanka.

He has also held the position as Chairman of the National Gem & Jewellery Authority of Sri Lanka, Ceylon Shipping Corporation Ltd, and Handcraft Board - Laksala. He has a wide overseas exposure in renewable energy area and has worked as a team member in several foreign funded consultancy projects.

Mr. Muthurajah Surendran (Director) (Non Executive Non Independent Director) Mr. M. Surendran known as Suren Muthurajah is an Investment Analyst of Free Lanka

Group and has Vast Exposure to various business and fi nancial functions and had been with the Bank since 1993.

He has a Diploma in Marketing and a Master Degree in Finance. Mr. Surendran has a wealth experience in operations and IT in restructuring companies to enhance performance.

Mr. L. E. Susantha Silva (Non - Executive, Independent Director) Mr. Susantha Silva was appointed to the Board of the HDFC Bank in May 2012. Mr. Silva is

a Fellow of the Institute of Chartered Accountants of Sri Lanka, a Fellow of the Institute of Certifi ed Management Accountants and a Fellow of the Institute of Certifi ed Professional Managers and B.Com (SP) Degree with a second class (upper division) from the University of Kelaniya. He is presently the Managing Director of Ceylon Petroleum Corporation and has vast experience and exposure locally and internationally in Business Management.

Mr. G. L. S. Senadeera (Non - Executive, Independent Director) Mr. Sunil Senadeera was appointed to the Board of HDFC Bank in January 2013. He

is presently the Additional Secretary (Housing & Development) to the Ministry of Construction, Engineering Services, Housing and Common Amenities. He is a Grade 01 SLAS offi cer. He started his career as Secretary, Urban Council Ja-ela in 1985. He has served as an Assistant Divisional Secretary to the Divisional Secretariat Narammala, and Divisional Secretary to the Divisional Secretariat Rajanganaya. He held many post; as Cooperative Commissioner of the Provincial Council Sabaragamuwa, Deputy Commissioner of the Department of land Settlement, General Manager Sri Lanka Cement Corporation, Deputy Controller of the Department of Immigration and Emigration, Controller (Travel) of the Department of Immigration and Emigration. He holds a Bachelor of Art (Second Lower) Degree from the University of Sri Jayewardenepura and a Master of Arts (Social Science) from the University of Keleniya.

39


5.3 DIRECTORS’ STATEMENT No director or a person nominated to become a Director is/ was involved in the following

events

A petition under bankruptcy laws fi led against such a person or any partnership in which he was a partner or any corporation of which he was as an executive offi cer.

A conviction of fraud, misappropriation or breach of trust or any other similar off ence which the CSE considers a disqualifi cation.

5.4 DIRECTORS INTEREST ASSETS Directors hold no interest in any assets acquired, disposed or leased by Housing Development

Finance Corporation Bank of Sri Lanka during the past two years preceding the issue, and proposed to be acquired, disposed or leased during the two years succeeding the issue.

5.5 DIRECTORS INTEREST IN CONTRACTS OR ARRANGEMENTS Th ere are no contracts or arrangements in force in which a Director of Housing Development

Finance Corporation Bank of Sri Lanka is materially interested, in relation to the business of the Bank as at the date of Prospectus.

5.6 DIRECTORS’ EMOLUMENTS Th e Aggregate emoluments paid to the directors comprising and/or profi t sharing payment

during the fi nancial year ended 31st December 2012 was LKR 2,351,600.00 and the aggregate emoluments paid to the directors (including General Manager) comprising and/or profi t sharing payment during the fi nancial year ended 31st December 2011 was LKR 2,374,900.00

Th e estimated emoluments including bonus and/or profi t sharing payment payable for the fi nancial year ending 31st December 2013 is LKR 2,400,000.00


40

6.0 CORPORATE MANAGEMENT & SENIOR MANAGEMENT

6.1 DETAILS OF THE SENIOR MANAGEMENT

Mr. Nimal Mamaduwa CEO/GM Mr. Nimal Mamaduwa is a Senior Professional Banker with 38 years experience in

commercial and development banking. He started his banking career at HNB PLC and during his 29 years service at HNB he has held many senior positions in the area of Credit, Development Banking & operations. He left HNB in 2003and joined Sanasa Development Bank PLC in the capacity of Asst. General Manager (credit) and was evaluated to Deputy General Manager in the year 2005 and in June 2006 he assumed duties as Chief Executive Offi cer/ General Manager at Sanasa Development Bank PLC, Which he held Until October 2012. During this period he has been successful in transforming the Sanasa Development Bank from a literally unknown enterprise to a vibrant dynamic development bank by increasing the Branch network from 25 to 85 within 6 year span. He has extensively travelled overseas and has represented Sanasa Development bank at various International forums in Canada, Netherlands, Vietnam and China in relation to Micro Finance. He assumed duties as chief Executive Offi cer/ general Manger of HDFC Bank with eff ect from 1st January 2013. He is an Assosiate Member of the Institute of Credit Management of Sri Lanka, holds a Diploma in Bank Management from Institute of Bankers Sri Lanka and a Fellow Member of the Chartered Management Institute of UK.

Mr. S. Dissanayake Chief Operating Offi cer Mr. S. Dissanayake is an Associate Member of the Institute of Chartered Accountants of Sri

Lanka (ICASL). He holds a Bachelor of Science (Business Administration) special degree, from the University of Sri Jayewardenepura. He counts more than 25 years experience in the fi eld of accounting and fi nance in organisations where public and private sector. He had been the head of the Finance section of the state sector institutions for several years. He joined HDFC in 1995 as Assistant General Manager (Finance) and had been the head of the Finance since the assumption of the portfolio as Deputy General Manager (Finance) for over 11 years. In addition to being the Head of Finance he oversaw the duties of the Chief Operations Offi cer for two years. Th e Credit Division, Recovery Division, Administration division and Branch Operations had been under his supervision for several years. Presently he is the Chief Operating Offi cer of the Bank.

Mr. D. Vidana Pathirana Chief Finance Offi cer Mr. D.Vidana Pathirana is a Fellow Member of the Institute of Chartered Accountants of

Sri Lanka (FCA), a Fellow Member of the Institute of Certifi ed Management Accountants of Sri Lanka (FCMA), a Fellow Member of the Institute of Certifi ed Professional Managers of Sri Lanka (FCPM) He holds a Bachelor of Science Degree (Specialised in Public Administration) from the University of Sri Jayawardanapura, and MBA Specialised in Sustanability in Business Management. He has over 27 years experience in the fi elds of Auditing, Accounting, Financial Management, Management Accounting, Banking, Projects and Investment Promotion both in Sri Lanka and overseas. He is currently responsible for Finance and Planning Department of the Bank.

41


Mr. W. M. A. Bandara Chief Information Offi cer Mr. W.M.A. Bandara is the Assistant General Manager- Information Technology of the HDFC

Bank. He holds a Bachelor of Science Degree from the University of Colombo followed by a Post Graduate Diploma in Information Technology from University of Stirling, Scotland. He has over 20 years of experience as an IT professional with over 5 years experience in senior managerial capacity. He has extensive experience in installing, confi guring and maintaining a wide range of UNIX based system, specialised in confi guring and maintaining Informix Database, Network administrative activities and Project Management. He has attended key training course relevant IT industry at international organisations such as CICC-Japan and IBM-Malaysia. He had also worked in NEC Corporation in Japan for one year.

Mr. A. J. Atukorala Chief Internal Auditor Having been appointed as the Chief Internal Auditor in 2009 Mr. Athukorala counts

over 25 years of executive experience in the banking sector. Specialising in the auditing function, he has had exposure to both Private and Public sector banks. Graduated from the University of Colombo (BSc in Physical Science), he is also an Associate Member of the Chartered Institute of Management Accountants (CIMA-UK). He also holds the Diploma in Computer Systems Design awarded by the National Institute of Business Management, Sri Lanka and also awarded with the titles of ‘Certifi ed Information Systems Auditor’ and ‘Certifi ed Information Security Manager’ by the Information Systems Audit & Control Association (ISACA - USA).

Mr. L. Edirisinghe Chief Manager - HR & Administration Mr. Leslie Edirisinghe holds a B Sc Special Degree in Business Administration at the

University of Sri Jayewardenepura and has obtained a National Diploma in Human Resource Management of the Institute of Personnel Management of Sri Lanka. He is also an Associate Member of the Institute of Personnel Management of Sri Lanka (AMIPM) and his main forte lies in Human Resource Management and Training and Development. He has over two decades of professional career experience in Human Resource Management and Training and Development in both public and private sectors, locally and overseas.

Mrs. W. W. D. S. C. Perera Chief Manager - Legal Ms. Sudishna Perera is an Attorney-At-Law by profession. She began her carrier at HDFC

Bank as a Legal Offi cer in 1992 and was promoted to the post of Manager Legal, in 2001. She counts over 20 years of professional experience in the fi eld of law, specialising in housing fi nance, banking and litigation. She has participated in numerous Law conferences and training programs on leadership, banking, and banking law both locally and overseas. Presently she heads the Legal division and is responsible for all the legal functions of the Bank.


42

Mrs. H.S. Gunathilake Chief Manager (Business Development & Marketing) Mrs. Himali Gunathilake is the Chief Manager (Business Development and Marketing) of

Th e HDFC Bank. She holds a Bachelor of Arts Degree from the University of Peradeniya followed by a Post Graduate Diploma in Urban Management from the Institute of Housing Studies (presently integrated with Erasmus University),Th e Netherlands. She also holds a Master of Business Administration Degree from the University of Sri Jayewardenepura. She counts over 30 years experience in the fi eld of housing both in public and private sector and she has extensively participated for training programmes in housing locally and overseas. She Joined HDFC in 1991 and currently responsible for Business Development and Marketing of the Bank.

Mr. C.R.P. Balasooriya Chief Manager - Treasury Mr. Balasuriya is a MAAT member of the Institute of Associated Accounting Technicians

of Sri Lanka and completed fi nal part one examination conducted by the Institute of Chartered Accountants of Sri Lanka. He holds a Bachelor of commerce (Special) Degree from the University of Sri Jayawardanapura, he has over two decades of professional career experience in merchant & specialised Banking sector. He is currently responsible for treasury management functions of the bank.

Mr. Manjula Kithsiri Dissanayake Chief Manger - Credit Mr. Dissanayake brings in a high level of experience and expertise gained from a career

spanning over 15 years in the fi eld of Credit and Finance. Prior to joining HDFC Bank he served as Credit Offi cer, Account Manager, Senior Account Manager, Accountant and Senior Manager Credit and Operations in major private sector fi nancial institutions. He has experience in the fi eld of Auditing, Financial Management, Taxation, Operations and Credit Management. He is currently responsible for managing all Credit functions of the Bank.

Mr. Manjula Dissanayake is an Associate Member of the Institute of Chartered Accountants of Sri Lanka.

43


6.2 DECLARATION BY THE MANAGING DIRECTOR/ CHIEF EXECUTIVE OFFICER Th e Managing Director/Chief Executive Offi cer is not and was not:

(a) Involved in a petition under any bankruptcy laws fi led against such person or any partnership in which he was a partner or any corporation of which he was an executive offi cer;

(b) Involved in a conviction for fraud, misappropriation or breach of trust or any other similar off ence which the CSE consider as a disqualifi cation; or

(c) Th e subject of any order, judgment or ruling of any court of competent jurisdiction temporarily enjoining him from acting as an investment advisor, dealer in securities, director or employee of a fi nancial institute and engaging in any type of business practice or activity

6.3 EMOLUMENTS OF THE SENIOR MANAGEMENT Th e Aggregate emoluments paid to the Senior Management comprising and/or profi t sharing

payment during the fi nancial year ended 31st December 2012 was LKR 22,979,464.00 and the aggregate emoluments paid to the Senior Management comprising and/or profi t sharing payment during the fi nancial year ended 31st December 2011 was LKR 19,564,946.00

Th e estimated emoluments including bonus and/or profi t sharing payment payable for the fi nancial year ending 31st December 2013 is LKR 18,869,093.00


44

7.0 STATUTORY DECLARATIONS

7.1 STATUTORY DECLARATION BY THE DIRECTORS

We, the undersigned who are named herein as Directors of Housing Development Finance Corporation Bank of Sri Lanka hereby declare and confi rm that we have read the provisions of the Companies Act No. 7 of 2007 relating to the issue of the Prospectus and that those provisions have been complied with.

“Th is Prospectus has been seen and approved by the Directors of Housing Development Finance Corporation Bank of Sri Lanka and they collectively and individually accept full responsibility for the accuracy of the information given and confi rm 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 been complied with and aft er making all reasonable enquiries and to the best of their knowledge and belief, there are no other facts the omission of which would make any statement herein misleading or inaccurate. Where representations regarding the future performance of the Entity have been given in the Prospectus, such representations have been made aft er due and careful enquiry of the information available to the entity and making assumptions that are considered to be reasonable at the present point in time in the best judgment of the Directors.”

Sgd Mrs. S.N Wickramasinghe Chairman

Sgd Mr. W.J.L.U. Wijayaweere Director

Sgd Mrs. C. Wijayawardhana Director

Sgd Mr. W.D.R.D. Goonaratne Director

Sgd Mr.S.A.J. Samaraweera Director

Sgd Mr. Prasad Galhena Director

Sgd Mr. Muthurajah Surendran Director

Sgd Mr.L.E. Susantha Silva Director

Sgd Mr. G.L.S. Senadeera Director

45


7.2 DECLARATION BY THE MANAGERS TO THE ISSUE

We, People’s Bank - Investment Banking unit, who are named in the Prospectus as the Managers to the Issue hereby declare and confi rm that to the best of our knowledge and belief this Prospectus constitutes full and true disclose of all material facts about the Issue and Issuer and that we are satisfi ed that applicable forecasts have been stated by the Directors aft er due and careful inquiry.

Sgd. Sgd. Director Director

7.3 DECLARATION BY THE COMPANY An application has been made to the Colombo Stock Exchange for permission to deal in

and for a listing for the Debenture to be issued by the Bank pursuant to this Prospectus. Such permission will be granted when the Debentures are listed on the Colombo Stock Exchange. Th e Colombo

Stock Exchange assumes no responsibility for the correctness of any of the statements made or opinions expressed or reports included in this Prospectus. Listing on the Colombo Stock Exchange is not to be taken as an indication of the merits of the Company or of these Debentures.

Sgd. Sgd. Director Director

Annexure IFinancial Information


48

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3

Five year summary &

Accountant’s Report for the inclusion in the

prospectus


50

51



52

HDFC Bank Of Sri LankaStatement of Financial PositionLKR: ‘000

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HDFC Bank Of Sri LankaCash Flow StatementsLKR: ‘000


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INCOME STATEMENTFigures in LKRFor the Year Ended 31st December Notes 2012 2011

INCOME 2,691,396,936 2,385,602,199

Interest Income 1 2,634,758,527 2,260,965,957Interest Expenses 2 (1,805,319,955) (1,354,293,472)Net Interest Income 829,438,573 906,672,485

Fee and Commission Income 3 58,458,381 83,664,242Fee and Commission expenses - -Net fee and commission Income 58,458,381 83,664,242Net Trading income/(expense) - -Net gain/(loss) from fi nancial instruments - -designated at fair value through Profi t or Loss - -Net gain/(loss) from fi nancial investments - -Other operating income (net) 4 (1,819,973) 40,972,000Total Operating Income 886,076,981 1,031,308,727Impairment Charges for Loans and Other Losses 5 1,496,477 10,063,247Net Operating income 884,580,504 1,021,245,480

Staff Costs 6 458,115,188 360,797,118Amortisation and impairment of intangible assets - -Other Expenses 7 303,799,488 258,787,491Operating Profi t/(loss) before Value Added Tax (VAT) 122,665,827 401,660,871Less : VAT On Financial Services 8 49,892,630 81,005,187Operating Profi t/(loss) aft er Value Added Tax (VAT) 72,773,197 320,655,684Share of Profi ts of associates and joint ventures - -Profi t/(Loss) before tax 72,773,197 320,655,684Tax expenses 9 70,321,030 104,636,709Profi t/(Loss) for the year 2,452,167 216,018,975

Profi t attributable to :Shareholders 2,452,167 216,018,975Non-controlling interests - - 2,452,167 216,018,975

Earnings per Share on Profi tsBasic Earnings per Share 0.04 3.34Diluted earnings per ordinary share - -


58

STATEMENT OF COMPREHENSIVE INCOME

For the Year Ended 31st December Notes 2012 2011

Profi t for the Year 2,452,167 216,018,975

Other Comprehensive income/(expenses)Changes in revaluation reserve of Property, Plant and - -equipment (If fair value option adopted) - -Actuarial gains and losses on defi ned benefi t plans - -Gains and losses (arising from translating the fi nancial ?statements of a foreign operation) - -Gains and Losses on re-measuring available-for-sale fi nancial assets - -Gains and Losses on cash fl ow hedges/Others - -Gains on Revaluation Investment Property 53,081,000 -Less: Tax expenses /(income) relating to componentsof other comprehensive income - -Other comprehensive income for the year, net of tax 53,081,000 -Total Comprehensive Income for the Year 55,533,167 216,018,975

Attributable to :Shareholders 55,533,167 216,018,975Non-Controlling Interest

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STATEMENT OF FINANCIAL POSITION

Figures in LKRAs at 31 st December Notes 2012 2011

AssetsCash and balances with central banks 11 107,856,602 91,605,426Sri Lanka government securities 12 872,144,634 84,913,933Balances with banks 13 411,219,276 436,471,254Loans and Receivables from other customers 14 15,965,668,211 14,887,525,122Financial Investments - Held-to-Maturity 15 2,287,725,326 3,346,862,949Property, Plant and equipment 16 288,119,377 250,012,336Investment properties 17 738,677,165 692,547,709Deferred tax assets 18 23,128,512 17,569,657Other assets 19 106,067,546 119,665,294Total assets 20,800,606,649 19,927,173,679

LiabilitiesDue to banks and Other Institutes 20 3,189,297,697 3,555,867,320Due to other customers 21 12,922,906,404 12,336,016,318Current Tax liabilities 22 61,881,876 45,573,143Other liabilities 23 2,235,313,589 1,653,167,621Total liabilities 18,409,399,566 17,590,624,400

EquityStated capital/Assigned capital 24 962,092,936 962,092,936Statutory reserve fund 25 61,994,005 61,871,397Retained earnings 26 1,138,801,032 1,169,978,442Other reserves 27 228,319,110 142,606,504Total shareholders’ equity 2,391,207,083 2,336,549,279

Non-controlling interestsTotal equity 2,391,207,083 2,336,549,279Total equity and liabilities 20,800,606,649 19,927,173,679Contingent liabilities and commitments - -

Book Value Per Share 36.95 36.11

Th e Signifi cant Accounting policies and Notes on pages 143 to 157 form an integral part of these Financial Statements.Th ese fi nancial statements have been prepared in accordance with the Sri lanka accounting standards.

D.V. Pathirana Nimal J B MamaduwaChief Financial Offi cer CEO/General Manager

Th e Board of Directors are responsible for the preparation and presentation of these Financial Stateme-ments.which were approved by the Board of Directors and signed on their behalf,

Ms. S N Wickramasinghe Mrs. C. WijeyawardhanaChairman Director30 April 2013Colombo


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CASH FLOW STATEMENT

Figures in LKRFor the Year Ended 31st December 2012 2011

Cash Flows From Operating ActivitiesInterest Received 2,512,109,154 2,254,935,569Interest payments (1,286,202,145) (1,054,218,343)Receipt from other operating activities 54,393,085 113,011,850Cash payments to employees & suppliers (513,865,159) (423,404,161)Payments on other operating activities (213,331,567) (195,781,542)Operating profi t before changes in operating assets 553,103,368 694,543,373

(Increase)/Decrease In Operating Assets:Funds Recovered from customers 2,705,212,439 2,676,093,783Funds advanced to customers (3,678,415,278) (4,672,588,403)Other Assets 20,456,990 (192,700,027) (952,745,849) (2,189,194,647)

Increase / ( Decrease ) In Operating LiabilitiesDeposits from customers 586,890,086 3,809,682,607Others 31,642,908 (42,941,518) 618,532,994 3,766,741,089Net cash from operating activities before income tax 218,890,512 2,272,089,816Income Tax & Deemed Dividend Tax Paid (42,323,040) (84,535,283)Net cash from operating activities 176,567,472 2,187,554,533

Cash Flows From Investing ActivitiesDividends received 17,857 15,000(Purchase)/Sale of Investment Securities 1,060,429,214 (1,060,429,214)Purchase of property, plant and equipments (94,026,260) (92,375,555)Disposal of property,Plant and equipment 3,102,830 50,535,077Net cash from Investing activities 969,523,641 (1,102,254,692)

Cash Flows From Financing ActivitiesIssue/(Redemption) of Shares - -Redemption of Contribution towards Share Capital - -Repayment of Borrowings (1,973,151,227) (1,479,553,229)Proceeds from Borrowings 1,606,581,604 1,406,288,106Dividends paid - (32,320,460)Net cash from fi nancing activities (366,569,624) (105,585,583)

Net increase in cash & cash Equivalents 779,521,489 979,714,258Cash & cash equivalents at beginning of the period 2,899,393,749 1,919,679,491Cash & cash equivalents at the end of the period 3,678,915,238 2,899,393,749

Reconciliation Of Cash And Cash EquivalentsCash & Short Term Funds 201,373,664 199,097,283Government of Sri Lanka Treasury Bills,Bond / Bank Placements 3,477,541,573 2,700,296,466 3,678,915,238 2,899,393,749

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62

ACCOUNTING POLICIES

Corporate Information

1. Reporting Entity HDFC Bank of Sri Lanka has been incorporated in Sri Lanka as a Building Society in 1984 under

section 11 of the National Housing Act of 1956. Subsequently converted to a corporation under the Housing Development Finance Corporation of Sri Lanka Act.No.7 Of 1997 and obtained the status of a specialised bank under Housing Development Finance Corporation of Sri Lanka (Amendment) Act No 15of 2003and amended act No 45 of 2011 which authorised to apply the all activities of the schedule IV of Banking Act No. 30 of 1980 with amendments thereaft er. HDFC bank’s Head offi ce is located at NHDA secretariat Colombo-02 Sri Lanka.

2. Principal Activities and Nature of Operations Th e principal business activities of HDFC Bank during the year were granting loans and other

forms of fi nancial assistances relating to housing purposes.

3. Basis of Preparation

3.1. Th e Statement of Compliance Th e Statement of Financial position, Income Statement, of Comprehensive Income,Statement of

Changes in Equity and Cash Flow Statement are drawn up in conformity with generally accepted accounting principles and the accounting standards laid down by the Institute of Chartered Accountants of Sri Lanka applied consistently on a historical cost basis and fair value accounting wherever it is necessary. Th e fi nancial statements are presented in Sri Lanka Rupees.

Sri Lanka Accounting Standards (LKAS)and the Sri Lanka Financial Regulating Standards (SLFRS) applicable from January 2012 which are introduced by the Institute of Chartered Accountants of Sri Lanka mandated for all specifi ed business enterprises to adopt these new Accounting were used to prepare these fi nancial statements . Th e comparative fi gures were also restated as per the above standards.

Rounding

Th e amounts in the Financial Statements have been rounded-off to the nearest Rupees ,except where otherwise indicated as permitted by the Sri Lanka Accounting Standard (LKAS) No - 1 “Presentation of Financial Statements”

Format of Accounts and Prior year Figures Financial statements are presented in accordance with the format of accounts prescribed by the

Central Bank of Sri Lanka and Th e Accounting Policies adopted by the bank is consistent with those of the previous fi nancial year as permitted by the Sri Lanka Accounting Standard No .01 “Presentation of Financial Statements” However,when the presentation or classifi cation of items in the Financial Statements is amended, comparative amounts are also re-classifi ed to conform with the current year in order to provide a better presentation.

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4. Valuation of Assets

4.1 Loans and Advance to Customers: Loans and Advances to customers are stated in the balance sheet net of impairment loss for

possible loan losses.

4.2 Provision for Impairment Losses Provision for possible impairment losses is made on the basis of a continuous review of all loans

and advances to customers in accordance with the Sri Lanka Accounting Standard No. 39 on “Financial Instruments : Recognition and measurement” in the Financial Statements of the Banks. Th e following valuation techniques were used to calculate fair value of loans as it is necessary which are as follows

1. Collective Impairment Method2. Individual Impairment Method.

4.2.1 Collective impairment Provisions Collective impairment provisions for possible loan losses are made in accordance with the Sri

Lanka Accounting Standard No. 39 on ‘Financial Instruments: Recognition and measurement in the Financial Statements of the Bank. Th e Bank used to make the collective impairment provision by using rolling rate method when the individual impairment is not possible.

Mortgage & Guarantor Loans Th e default rolling rate for a reasonable period is used for impairment adjustment and no provision

is made for Zero defaulters.

Cash Margin Loans No Special provision was made for the loans granted against the cash deposit Balances as defaulted

cash backed loans can be recovered on the bank’s discretion at any time.

EPF Loans Th e collective impairment method is used for valuation of EPF back loans and no Provisions,

made for Zero defaulters and up to 18 months arrears, the bank uses the rolling rate applicable to the range 0-3. If the default Category is greater than 18 months, the bank used Rolling rate applicable to relevant category.

Acquired Properties for Sale Properties mortgaged to HDFC Bank are auctioned if the customers default for a reasonable time

and the properties which are not disposed at such auctions are recognised as acquired properties which are presented under the loans & advances.

Th e valuation of such properties are as follows.- If the Cash fl ow is predicted with reasonable assurance individual impairment is calculated.- If there is no reasonable assurance for cash fl ows 100% impairment is made for loans against

the acquired property.

Project Loans- No impairment provision made for Zero defaulters and Individual. Impairment is made for

defaulted loans with reasonable assurance for cash recoveries.


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4.2.3 Treasury Bills & Bonds Investment in treasury bills and Bonds are stated at cost plus interest receivable

4.2 Property, Plant& Equipment Th ese are recorded initially at cost plus other expenses which are necessary for the assets bringing

to its useable condition or at fair value by using the latest valuation report which is not more than 3 years as per the Sri Lanka Accounting Standard No. 16

4.3.1 Basis of Recognition Property, Plant & Equipment are recognized, if it is probable that future economic benefi ts

associated with the asset will fl ow to the bank and cost of the asset can be reliably measured.

4.3.2 Basis of Measurement Fixed Assets are recorded at cost or at valuation together with any directly attributable cost of

bringing the assets to its working condition. Th e property and equipments are stated at cost less accumulated depreciation, which is provided for on the basis specifi ed in (b) below. No fresh valuations called during the year under review,

Depreciation is provided at the following rates on a straight-line basis over the estimated lives of diff erent types of assets.

Class of Assets % per Annum Buildings 6 2/3 Offi ce Equipment 12.50 Furniture & Fittings 10.00 Motor Vehicles & Bicycles 20.00 Plant and Machinery 25.00 Tools & Equipment 12.50 Computer Equipment & ATM 12.50 Computer soft ware -Foreign 25.00 Computer soft ware -Local 25.00

Total annual depreciation is provided on the assets which is purchased during the year and used for the year and no depreciation is provided for the year of disposal. Further depreciation is not provided for the freehold lands.

05. Investment Property

Investment properties are recorded at current market value and the diff erence between carrying value and market value is presented under other comprehensive income.

06. Liabilities and Provisions

6.1 Due to other Customers Th ese include interest bearing deposits, savings deposits, term deposits, deposits payable at call

and certifi cates of deposit. Th ey are stated in the Balance Sheet at amounts payable. Th e interest paid/payable on these deposits is charged to the Income Statement and presented under other liabilities.

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6.2 Borrowings Borrowings include refi nance borrowings, call money borrowings, and borrowings from fi nancial

institutions and are shown at the gross value of the outstanding balance. Th ey too are stated in the Balance Sheet at amounts payable. Interest paid/payable on these borrowings are charged to the Income Statement using amortisation cost method and presented under other liabilities.

6.3 Gratuity Provision is made in the Accounts for retirement gratuities payable under the Payment of Gratuities

Act No.12 of 1983 for employees from the time of joining the bank. Th e item is grouped under other liabilities in the Statement of fi nancial Position. Th e Special Gratuity provision as per the collective agreement with CBEU for Special employees who have completed more than 15 years staff at HDFC Bank has been provided on actual basis.

6.4 Employees’ Provident Fund Th e Bank and employees contribute to the Employee’s Provident Fund at 12% and 8% on the

salaries of each employee, respectively to the Provident Fund managed by the Central Bank of Sri Lanka.

6.5 Employees’ Trust Fund Th e Bank contributes at the rate of 3% of the salaries of each employee to the Employees Trust

Fund managed by Employee Trust Fund Board

6.6 Other Liabilities Other liabilities include interest, fees and expenses and amounts payable for gratuity/pensions and

other provisions. Th ese liabilities are recorded at amounts expected to be payable at the Financial Position date.

07. Revenue Recognition.

7.1 Interest Income on Loans and Advances Interest income is recognised on an accrual basis for all Loans using the eff ective interest rate

method.

7.2 Over due Interest Income. Over due interest for late payment of loan installment is recognised on a cash basis for the loans

except EPF Loans.

7.3 Income from Government Securities and Investment. Discounts/premiums on Treasury Bills and Treasury Bonds are amortised over the period of

investment using eff ective interest rate method.

7.4 Other Income Commission income is recorded on accrual basis and other incomes are recognized on the cash

basis .


66

08. EXPENSES

8.1 Interest on Deposits, Borrowings In terms of the provisions of the Sri Lanka Accounting Standard No. 39 on “Financial Instruments:

Recognition and measurement”, the interest cost on deposits and borrowings are recognised on eff ective interest rate method and charged to the income statement.

8.2 Other Expenses All expenditures incurred in operations and in maintaining the Properties, Plants and Equipment

in a state of effi ciency are charged to the Income statement in arriving at the profi t or loss for the year are recognised ond accrual basis.

09. Taxation

Income tax expense comprises net of current year tax and deferred tax. Income tax expense is recognised in the Income Statement except to the extent it relates to items recognized directly in Equity in which case it is recognised in Equity

9.1 Current Taxation Current tax assets and liabilities consist of amounts expected to be recovered from or paid to

the taxation authorities in respect of the current as well as prior years. Th e tax rates and tax laws used to compute the amounts are those that are enacted or substantially enacted by the date of the Statement of Financial Position. Accordingly, provision for taxation is made on the basis of the profi t for the year as adjusted for taxation purposes in accordance with the provisions of the Inland Revenue Act No. 10 of 2006 and the amendments thereto, the note also includes the major components of tax expense, the eff ective tax rates and a reconciliation between the profi t before tax and tax expense as required by the Sri Lanka Accounting Standard No. 12 on ‘Income Taxes.

9.2 Deferred Taxation Deferred taxation is provided on the liability method. Th e tax eff ect of timing diff erences which

occur where items are allowed for income tax purposes in a period diff erent from that when they are recognized in fi nancial statements is included in the provision for deferred tax at current rate of taxation.

9.3 Value Added Tax on Financial Services Th e base for the computation of Value Added Tax on Financial Services is the accounting profi t

before emoluments paid to employees and income tax, which is adjusted for the depreciation computed on prescribed rates. Th e amount of Value Added Tax charged in determining the profi t for the period is given in to the Financial Statements.

10. Cash Flow Statement

Th e Cash Flow Statement has been prepared by using the ‘Direct Method’ of preparing cash fl ows in accordance with the Sri Lanka Accounting Standard No. 7 on ‘Cash Flow Statements’, whereby gross cash receipts and gross cash payments on operating activities, investing activities and fi nancing activities are recognized. Cash and Cash Equivalents comprise of short term, highly liquid investments that are readily convertible to known amounts of cash and are subject to an insignifi cant risk of changes in value.

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11. Statutory Reserve Fund

5% of the net profi t aft er tax is transferred to the Statutory Reserve fund before all distributions as per CBSL Direction.

General Reserve Fund 10% of the net profi t aft er tax is transferred to the General Reserve fund before dividend

distribution as per the HDFC Act.

12. Dividends on Ordinary Shares

Dividends on Ordinary Shares are recognized as a liability and deducted from equity when they are approved by the annual General Meeting.

Dividends on Ordinary Shares for the year that are recommended by the Directors aft er the Balance Sheet date for approval of the Shareholders at the Annual General Meeting are disclosed separately to the Financial Statements.

13. Earnings Per Share

Basic EPS is calculated by dividing the profi t or loss attributable to Ordinary Shareholders of the Bank by the weighted average number of Ordinary Shares outstanding during the period. Diluted EPS is determined by dividing the profi t or loss attributable to the Ordinary Shareholders by the weighted average number of Ordinary Shares outstanding adjusted for the eff ects of all dilutive potential Ordinary Shares.

14. Inventory Valuation Th e consumable stocks are recorded at cost and the issues of inventory items are based on the fi rst

in fi rst out (FIFO) method.


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NOTES TO THE FINANCIAL STATEMENTIn LKR 2012 2011

01 Interest Income Sri Lanka government securities 13,190,178 71,535,632 Balance With Banks - - Derivatives - - Financial assets held-for -trading - - Financial assets designated at fare value through - - Profi t or Loss - - Loans and receivables to banks - - Loans and receivables to other customers 2,277,680,253 2,055,390,073 Financial investments - Held -to- maturity 343,888,096 134,040,252 Financial investments - Available-for-sale - - Others - - Total Interest Income 2,634,758,527 2,260,965,957

02 Interest Expenses Due to Banks 124,159,138 30,568,901 Derivatives - - Financial liabilities at fair value through profi t - - or loss - - Due to other customers 1,561,107,148 1,085,351,720 Debt securities issued - - Other Borrowings 120,053,669 238,372,851 Total interest expenses 1,805,319,955 1,354,293,472

Net interest income 829,438,573 906,672,485

Bank In LKR 2012 2011

03 Net Fee and Commission Income Fee and Commission income 58,458,381 83,664,242 Fee and Commission Expenses - - Net Fee and Commission Income 58,458,381 83,664,242 Comprising of Loans 48,341,506 66,197,736 Cards - - Trade and remittances - - Investment banking - - Deposits - - Guarantees - - Others 10,116,875 17,466,506 Net Fee and Commission Income 58,458,381 83,664,242

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BankIn LKR 2012 2011

4 Other Operating Income (net) Gain on sale of investment properties - 40,972,000 Loss on sale of investment properties (1,819,973) Others - - Other Operating Income (net) (1,819,973) 40,972,000

5 Impairment Charges for Loans and Other Losses Loans and Receivables - - To banks - - To Other Customers 1,496,477 10,063,247 Financial investments - - Held-to-maturity - - Available-for-Sale - - Investment in subsidiaries - - Investment in associates and Join ventures - - Property, Plant and equipment - - Investment Properties - - Off -balance sheet exposures - - Others - - Total 1,496,477 10,063,247

5.1 To Other Customers Individual Impairment (11,128,270) (71,613,639) Collective Impairment 12,624,747 81,676,886 1,496,477 10,063,247

6 Staff Costs Salary and Bonus 318,911,611 264,115,904 Contributions to defi ned contribution plans 42,740,828 32,712,985 Contributions to defi ned benefi t plans 41,179,693 9,441,554 Staff Loan Benefi ts 16,212,647 16,163,318 Staff Medical 18,138,032 16,305,476 Overtime & Offi cers Allowance 6,947,752 10,584,466 Encashment of Annual Leave 9,470,816 8,006,379 Incentive Payments 4,513,811 3,467,036 Total 458,115,188 360,797,118

6.1 Remuneration to key management Total Salary of key management 22,979,464 19,564,946 Provision for Retirement Benefi ts 2,267,375 2,527,971 25,246,838 22,092,917


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7 Other Expenses Directors’ emoluments 2,351,600 2,374,900 Auditors’ remunerations 460,000 327,800 Professional expenses 3,416,165 777,500 Legal expenses 231,774 1,523,161 Depreciation of Property, Plant and equipment 54,260,794 45,502,793 Amortization of Leasehold property 364,642 364,642 Electricity & Water 19,389,074 14,490,009 Telephone Charges 18,881,882 17,959,332 Computer Maintenance 17,434,174 10,996,715 Rent 43,477,410 40,872,204 Repair & Maintenance 3,705,329 2,584,318 Donation 1,225,822 1,791,557 Business Dev.& Advertising 27,556,915 21,501,684 Other Offi ce admin. and establishment expenses 111,043,907 97,720,876 Total 303,799,488 258,787,491

8 VAT On Financial Services Total Value Addition 424,762,043 712,347,633 Value Addition Attributable for Financial Services 415,771,911 674,959,628 Finance VAT % 12.00 12.00 VAT on Financial Services For Current year 49,892,630 80,995,155 Under ( Over ) Provision in Previous Years - 10,032 49,892,630 81,005,187

9 Tax Expenses Current Tax Expense Current Year 49,012,129 79,441,776 Prior years’ Provision 26,867,756 25,858,062 Deferred Tax Expenses (5,558,855) (663,130) Total 70,321,030 104,636,709

9.1 Reconciliation of tax expenses Accounting Profi t 72,773,197 414,288,287 Add :Disallowable Expenses 176,818,351 154,289,347 Less :Allowable Expenses 74,548,230 177,238,837 Adjusted Profi t Before Tax 175,043,318 391,338,797 Income tax 70,321,030 104,636,709 Eff ective tax rate 96.63% 25.26%

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9.2 Relationship Between Tax Expense and Accounting Income Profi t Before Tax as per the Income Statement 72,773,197 414,288,287 Add :Disallowable Expenses 176,818,351 154,289,347 Less :Allowable Expenses 74,548,230 177,238,837 Taxable Income 175,043,318 391,338,797 Tax @ 28% (2011 @ 20%) 49,012,129 78,267,759 Social Responsibility levy @ 1.5% - 1,174,016 Under (Over ) Provision 26,867,756 25,858,062 Less : Deferred Tax Adjustments (5,558,855) (663,130) Provision for income Tax 70,321,030 104,636,709

9.2 Th e deferred tax (credit)/charge in the income statement comprise of the following. Deferred tax assets 19,200,733 1,696,153 Deferred tax Liabilities (13,641,878) (1,033,023) Other temporary diff erences - - Deferred tax (credit)/ Charges to income Statement 5,558,855 663,130

10 Earning Per Share Net profi t attributable to ordinary equity holders Adjust: Interest on preference shares - - Interest on convertible bonds - - Net profi t attributable to ordinary equity holders 2,452,167 216,018,975 adjust for the eff ect of dilution - - Weighted average number of ordinary shares for 64,710,520 64,710,520 basic earnings per share - - Eff ect on dilution - - Convertible bonds - - Convertible preference shares - - Others - - Weighted average number of ordinary shares for - - Adjusted for the eff ect of dilution - - Basic earnings per ordinary share Diluted earnings per share 0.04 3.34

11 Cash and Balances with Central Banks Cash in Hand 107,856,602 91,605,426 Total 107,856,602 91,605,426

12 Sri Lanka Government Securities Held-to-maturity Treasury bonds/ Treasury bills 35,144,634 34,913,933 Treasury Bills Under Repurchase Agreements 837,000,000 50,000,000 Total 872,144,634 84,913,93


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13 Balance With Banks Placements 93,517,062 107,491,857 Others 317,702,214 328,979,397 Total 411,219,276 436,471,254

14 Loans and receivables From Other Customers Gross loans and receivable 16,289,990,476 15,210,350,910 (less) :Individual impairment charges (61,445,794) (72,574,064) Collective impairment charges (262,876,471) (250,251,724) Net loans and Receivables 15,965,668,211 14,887,525,122

14 a. Analysis By Product Gold Loan 50,751,350 - Staff Loans 416,398,468 415,382,998 Housing Loans 15,822,840,658 14,794,967,912 Gross Total 16,289,990,476 15,210,350,910

By Currency Sri Lankan Rupee 16,289,990,476 15,210,350,910 Gross Total 16,289,990,476 15,210,350,910 By industry Housing 16,289,990,476 15,210,350,910 Grand Total 16,289,990,476 15,210,350,910

14 b. Movements in Individual and Collective Impairment Charges during the Year Individual impairment charges Opening balance at 01-01 72,574,063 249,577,190 Charges/(Write back) to income statement (11,128,269) (177,003,126) Net write-off during the year - - Other movements - - Closing balance 31-12 61,445,794 72,574,063 Collective impairment charges - - Opening balance at 01-01 250,251,724 168,574,838 Charges/(Write back) to income statement 12,624,746 81,676,886 Net write-off during the year - - Other movements - - Closing balance 31-12 262,876,471 250,251,724 Total 324,322,265 322,825,787

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15 Financial Investments -Held-to- Maturity (Excluding Sri Lanka Government Securities) Equity securities 30,600 30,600 Debt Securities - - Fixed Deposit 1,821,716,644 2,286,403,135 Overnight Deposit 465,978,082 - Commercial Paper - 1,060,429,214 (Less) Impairment charges - - Net Total 2,287,725,326 3,346,862,949 Of Which : Held-To-Maturity Investments designated at fair value through profi t or loss - - Held-To-Maturity Investments 2,287,725,326 3,346,862,949

Buildings Properties In LKR Offi ce Land Computer Hardware & Soft ware and Leasehold Equipment, Furniture and Fittings Others Total16 Property ,Plant and Equipment 2012 Cost/Fair Value Opening Balance at 01-01-2012 5,847,679 53,246,408 146,223,947 136,022,327 55,466,361 396,806,722 Additions 17,575,000 - 18,958,752 39,262,921 18,229,587 94,026,260 Disposals - 875,364 - 827,466 1,400,000 3,102,830 Exchange rate Variance - - - - - - Closing Balance at 31-12-2012 23,422,679 52,371,044 165,182,698 174,457,782 72,295,949 487,730,153 (less): Accumulated depreciation Opening Balance at 01-01-2012 997,455 3,646,418 71,368,046 42,616,827 28,165,642 146,794,388 Charge for the year - - - - - - Additions 908,537 364,642 21,837,868 17,917,858 13,596,532 54,625,436 Disposals - - - 409,048 1,400,000 1,809,048 Exchange rate Variance - - - - - - Closing Balance at 31-12-2012 1,905,991 4,011,060 93,205,914 60,125,637 40,362,173 199,610,776 (less):Impairment charges - - - - - - Net Book Value at 31-12-2012 21,516,688 48,359,985 71,976,784 114,332,145 31,933,775 288,119,377

2011 Cost/Fair Value Opening Balance at 01-01-2011 42,609,808 54,121,772 120,912,992 96,916,800 40,404,873 354,966,245 Additions - - 25,347,954 40,981,982 26,045,619 92,375,555 Disposals 36,762,129 875,364 37,000 1,876,455 10,984,130 50,535,078 Exchange rate Variance - - - - - - Adjustments - - - - - - Closing Balance at 31-12-2011 5,847,679 53,246,408 146,223,946 136,022,327 55,466,362 396,806,722 (less) : Accumulated depreciation Opening Balance at 01-01-2011 624,889 3,281,776 51,749,610 29,583,539 27,296,531 112,536,344 Charge for the year 372,566 364,642 19,643,874 14,191,113 11,295,241 45,867,436 Additions - - - - - - Disposals - - 25438 1,157,825 10,426,130 11,609,393 Exchange rate Variance - - - - - - Adjustments - - - - - - Closing Balance at 31-12-2011 997,455 3,646,418 71,368,046 42,616,827 28,165,642 146,794,387 (less):Impairment charges - - - - - - Net Book Value at 31-12-2011 4,850,225 49,599,991 74,855,901 93,405,500 27,300,720 250,012,336


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17 Investment Properties a. Investment Properties at Cost/fair Value Cost/fair value Opening Balance at 01-01 692,547,709 692,547,709 Additions - - Disposals 6,951,545 - Revaluation 53,081,000 - Closing Balance at 31-12 738,677,165 692,547,709

17.1 Investment Properties details

Location Extent Deed Bank (Perches) No 2012 2011

No;s 441 Sangarajah Mw,Aluthkade East 59.20 1127 207,000,000 153,919,000 No.192 Srimath Bandaranayake Mw,, Kotahena Colombo 13. 123.20 1124 320,319,000 320,319,000 No.192 (Part) Sri Sangarajah Mawatha, Kotahena Colombo 13. 15.00 1126 38,999,000 38,999,000 Avissawella -Housing Project 172,359,165 179,310,709 738,677,165 692,547,709

17.2 Revaluation of Land No 192 Srimath Bandaranayake Mw, Kotahena Deed No 1127

Name of the Valuer P D D S MutuKumarana Qualifi cation of the Valuer Fellow Member of Institute of Valuers Valuation Date 13th September 2012

17.3 Pending Court Case Investment Property

Two lands (Deed No 1124, 1126) in extent of 3 Roods and 18.2 perches were purchased by the HDFC Bank from Building Material Corporation (BMC) in the Years 2005 and 2007. Since the BMC did not handover the vacant possession of the above land to HDFC Bank, the Bank fi led an ejectment case bearing No. 21514/L at the District Court of Colombo against the BMC to obtain possession of the land. Th e Order in the above case was delivered on 18th October 2012 in favour of the HDFC Bank. Th e BMC has fi led an appeal against this order of the district court to Civil appeal of Colombo under reference No. WP/HCCA/COL-180/2012 F, Which is pending to date.

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18 Deferred Tax Assets/Liabilities Deferred tax assets 41,731,663 22,530,929 Deferred tax Liabilities (18,603,151) (4,961,273) Net Total 23,128,512 17,569,657

19 Other Assets Receivables 10,014,421 21,830,099 Deposits and Prepayments 33,290,261 35,121,577 Sundry debtors - - Others 62,762,864 62,713,618 Total 106,067,546 119,665,294

20 Due to Banks and Other institutes Borrowings from Banks 992,254,636 1,070,804,333 Borrowings from Other Institutes 2,197,043,061 2,485,062,987 Total 3,189,297,697 3,555,867,320

20. a Th e book overdraft is included in the borrowing from banks and which is always above the real overdraft utilised.

21 Due to Other Customers At amortised cost 12,922,906,404 12,336,016,318 (Less): Designated at fair value through profi t or Loss - - Total 12,922,906,404 12,336,016,318

a. Analysis By Product Demand deposits (current accounts) - - Savings deposits 1,792,896,228 1,544,965,604 Fixed deposits 11,122,976,433 10,790,386,713 Other Deposits 7,033,743 664,000 Total 12,922,906,404 12,336,016,318 By Currency Sri Lankan Rupee 12,922,906,404 12,336,016,318 United State Dollar - - Great Britain Pound - - Others - - Total 12,922,906,404 12,336,016,318

22 Provision For Taxation and Deemed Dividend Tax Taxation - current 71,472,617 37,915,772 VAT Payable 13,478,057 22,243,950 Debit & PAYE Tax 322,418 1,084,316 WHT Received (23,391,216) (15,670,895) 61,881,876 45,573,142


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23 Other Liabilities Sundry creditors 210,507,342 157,599,808 Interest payable 1,797,000,597 1,277,882,787 Impairment charges in respect of off -balance sheet credit exposures (Note 10) Long Term Funds & Deposits 23,154,576 23,493,062 Charges recovered in advance 204,651,075 194,191,964 Total 2,235,313,589 1,653,167,621

24 Stated Capital /Assigned Capital Authorized Capital 2,000,000,000 2,000,000,000 Stated Capital 962,092,936 962,092,936 Total 962,092,936 962,092,936


25 Statutory Reserve Fund Opening balance as at 01-01 61,871,397 46,388,818 Transfer During the Period 122,608 15,482,579 Closing Balance 31-12 61,994,005 61,871,397

26 Retained Earnings Opening balance 1,169,978,442 1,086,759,081 Profi t for the year 2,452,167 216,018,975 Transfer to other reserves 33,629,578 100,444,50 Dividend - 32,355,110 Closing Balance 1,138,801,032 1,169,978,442

24.1 Housing Development Finance Corporation of Sri Lanka Act No. 07 of 1997 and consequent amendments, (Act no 15 of 2003 and 45 of 2011) the authorised Capital of Bank shall be Rupees Two Th ousand Million (Rs. 2,000 Mn) Divided into Two Hundred Million (200 Mn) shares of Rupees Ten (Rs. 10/=) each with eff ect from 08th march 2012. Th e issued shares of the Bank which amount to 6,471,052 (Ordinary Voting) shares by dividing every one share in to 10 ordinary shares without increasing the share capital of the Bank.

24.2 (64,710,520 ordinary shares of Rs. 10/- each )

24.3 Shares under employee share ownership plan (ESOP) 3,485,520 Ordinary Voting shares are being held by the Trustee of employees, Legal Link trustee Services Ltd of Colombo 10 as for which Rs. 49,842,936 is receivables.

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27 Other Reservesa. Bank-2012 Opening Balance Movement/ Closing BalanceIn LKR 01-01-2012 transfers as at 31-12-2012 General reserve 50,144,292 245,216 50,389,508 Revaluation Reserve 35,014,318 52,205,636 87,219,954 Investment Fund 53,996,769 33,261,753 87,258,522 Available-for-sale reserve - - - Cash fl ow reserve - - - Foreign currency translation reserve - - - Special Reserve 3,451,125 - 3,451,125 Total 142,606,504 85,712,605 228,319,109

a. Bank -2011 General reserve 19,179,134 30,965,158 50,144,292 Revaluation Reserve 35,889,682 (875,364) 35,014,318 Investment Fund - 53,996,769 53,996,769 Available-for-sale reserve - - - Cash fl ow reserve - - - Foreign currency translation reserve - - - Special Reserve 3,451,125 - 3,451,125 Total 58,519,941 84,086,563 142,606,504

Up to 3 to 12 1 to 3 3 to 5 More than Total 3 Months Months Years Years 5 Years

Assets Cash 107,857 - - - - 107,857 Due from Banks 93,517 - - - - 93,517 Investments 1,878,704 1,406,344 79,250 79,250 34,024 3,477,572 Loans & Advances 853,975 1,121,453 3,464,175 3,024,566 7,501,500 15,965,668 Fixed Assets - - - - 288,119 288,119 Other Assets 24,783 60,671 9,600 6,621 766,199 867,873 Total Assets 2,958,836 2,588,468 3,553,025 3,110,436 8,589,842 20,800,607 Percentage 31st Dec 2012 14.22 12.44 17.08 14.95 41.30 100.00 Percentage 31st Dec 2011 7.57 21.43 15.67 14.02 41.31 100.00

Liabilities Total Capital Fund - - - - 2,391,207 2,391,207 Deposits 6,296,293 5,887,241 209,724 88,778 440,871 12,922,906 Borrowings 202,573 373,356 891,245 745,792 976,331 3,189,298 Other Liabilities 1,555,610 470,311 59,768 22,854 188,653 2,297,195 Total Liabilities 8,054,475 6,730,908 1,160,736 857,424 3,997,063 20,800,607 Percentage 31st Dec 2012 38.72 32.36 5.58 4.12 19.22 100.00 Percentage 31st Dec 2011 22.98 34.37 18.19 5.23 19.24 100.00

28 Maturity Analysis An analysis of the interest bearing assets and liabilities based on the remaining period at the date

of the Statement of Financial Position to the respective contractual maturity date is as follows,

As at 31st December 2012 (LKR.000’)


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29. Directors Interests in Contracts with the Bank None of the Directors posses any material interest on any transaction or proposed contract

involving HDFC Bank of Sri Lanka except for the disclosures in Note 29.1 of the accounts.

29.1 Related Party Transactions

30. Events Occurring Aft er the Balance Sheet Date

Th ere has been no material event aft er the balance sheet date that requires adjustments or disclo-sure in the fi nancial statement.

Name Related Party Offi ce Transactions Nature of % Holding Transactions Regulatory Capital Mr. S.A.J Samaraweera National Housing (Director HDFC) Development Authority Chairman 17Mn Rent for 0.86% Head Offi ce Building Mrs. S.N Wickramasinghe Chairman HDFC Chairman 1.5Mn Fixed Deposit 0.08% (Chairman HDFC) 0.33Mn Savings 0.02% Deposit Mr. W.J.L.U Wijeweera Director HDFC Director 0.0091Mn Dananidana 0.0005% (Director HDFC) 0.093Mn Deposit

Savings 0.0048% deposit Mrs. D.G.K Dilani Mr. W.J.L.U Wijeweera 5.9Mn Fixed Deposit 0.31% (Spouse of Director) (Director HDFC) Mr. W.D.R.D Goonaratne Director HDFC Director 0.0011Mn Savings Deposit 0.0001% Mr. A.M Chandrasagara Director HDFC Director 0.0011Mn Savings Deposit 0.0001%

31. Assets Pledged Th e assets pledged as a security for credit facilities obtained are as follows.

Type of Facility Amount of Nature of Value of Balance as at Facility Security Security 31-12-2012

Rs. Mn Rs. Mn Rs. Mn

Overdraft 100 Part of Portfolio 150 - (Sampath Bank) Borrowing (Term Loan) (Sampath Bank) 1000 Part of Portfolio 1250 824.86 Borrowing (Term Loan) (BOC) 1000 Part of Portfolio 1000 95.83

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80

HDFC Bank Of Sri LankaStatement of Financial PositionAs at 30th June 2013

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HDFC Bank Of Sri LankaStatement of Cash FlowRs”000”

83


HDFC Bank Of Sri LankaAnalyse of Financial Instrument by Measurement BasisAs at 30th June 2013

HDFC Bank Of Sri LankaAnalyse of Financial Instrument by Measurement BasisAs at 31st December 2012


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HDFC Bank Of Sri LankaSelected Performance Indicators

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Annexure IICollection Points


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Copies of the Prospectus can be obtained free of charge from the following Collection points

Managers to the Issue

People’s Bank Treasury(Investment Banking Unit)13th fl oor, No 75,Sir Chittampalam Gardiner Mw, Colombo 02.Tel : 0112206795-6

Members and trading Members of the CSE

Acuity Stockbrokers (Private) LimitedNo. 53, Dharmapala Mawatha,Colombo 03T: 011 2 206206

Asha Phillips Securities LimitedNo. 10, Prince Alfred Towers,2nd Floor, Alfred House GardensColombo 03T: 011 2 429100

Asia Securities (Private) LimitedLevel 21, West Tower,World Trade Centre, Echelon Square,Colombo 01,Tel. 011 2 423905, 011 5 320000

Assetline Securities (Pvt) Ltd.No. 120,120A , Pannipiti ya RoadBatt aramullaT: 011 4 700111,011 2 307366

Bartleet Religare Securities (Private) LimitedLevel G, “Bartleet House”No. 65, Braybrooke Place,Colombo 02T: 011 5 220200

Capital Trust Securities (Private) LimitedNo. 42, Mohamed MacanMarkarMawatha,Colombo 03T: 011 2 174174

CT Smith Stockbrokers (Private) Limited4-14, Majesti c City,No. 10, Stati on Road,Colombo 04T: 011 2 552290-4

Capital Alliance Securities (private) LimitedLevel 5, “Millenium House”,No. 46/58, Navam Mawatha,Colombo 02T: 011 2 317777

Claridge Stockbrokers (Pvt) LtdNo. 10, Gnanaratha Pradeepa MawathaColombo 08T: 011 2 697974

D N H Financial (Pvt) Ltd.Level 16, West Tower, World Trade CenterColombo 01T: 011 5 700 777

First Guardian Equities (Private) Limited32nd Floor, East Tower, World Trade Centre,Echelon Square,Colombo 01T: 011 5 884400

Heraymila Securities Ltd.Level 8, South Wing, Millennium HouseNo. 46/58, Nawam Mawatha,Colombo 02T: 011 2 359100

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IIFL Securities Ceylon (Pvt) Ltd.27th Floor, East Tower, World Trade CenterColombo 01T: 011 2 333000

J B Securities (Pvt) Ltd.No. 150, St. Joseph StreetColombo 14T: 011 2 490900, 077-2490900

John Keells Stockbrokers (Private) LimitedNo. 130, Glennie Street,Colombo 02T: 011 2 306250

Lanka Securities (Private) LimitedNo. 228/1, Galle Road,Colombo 04T: 011 4 706757, 011 2 554942

LOLC Securities LtdLevel 18, West Tower, World Trade CenterColombo 01T: 5880880

Nation Lanka Equities (Private) LimitedNo. 44, Guildford CrescentColombo 07T: 011 4 714300, 4 714388


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Northern RegionJaff naAddress : No-127, KKS Road, Jaff naTel : +94 (0)21 2219 283Fax : +94 (0)21 2219 284

VavuniyaAddress : No-66, Station Road,Vairavapuliyankulam,Vavuniya.E-mail : [email protected] : +94 (0)24 2225 770Fax : +94 (0)24 2225 771

North Central RegionAnuradhapuraAddress : No-396/14 , Court Place, Bandaranayaka Mawatha,AnuradhapuraE-mail : [email protected] : +94 (0)25 2223 289 / +94 (0)25 2235 018Fax : +94 (0)25 2223 289

North Western RegionChilawAddress : No-17,Fort Road,Chilaw.E-mail : [email protected] : +94 (0)32 2222 594Fax : +94 (0)32 2222 666

KuliyapitiyaAddress : No-22/A,Parakrama Mawatha, Kuliyapitiya.E-mail : [email protected] : 037-2281406/07Fax : 037-2281407

KurunegalaAddress : No-42,Kandy Road,Kurunegala.E-mail : [email protected] : +94 (0)37 2224 201 / +94 (0)37 2221 656Fax : +94 (0)37 2224 20

Eastern RegionAmparaAddress : HDFC Bank Sri Lanka, Uhana Road, Ampara.E-mail : [email protected] : +94 (0)63 2224 318Fax : +94 (0)63 2223 762

BatticaloaAddress : No-58/1,Baily Road, Batticaloa.E-mail : [email protected] : +94 (0)65 2222 792Fax : +94 (0)65 2227 573

TrincomaleeAddress : No-99,North Coast Road, Trincomalee.E-mail : [email protected] : +94 (0)26 2226 405Fax : +94 (0)26 2226 406

Central RegionGampolaAddress : No-134, Kandy Road,Gampola.E-mail : [email protected] : 081-2 353 374 / 081-2 353 394Fax : 081-2 353 374

KandyAddress : HDFC Bank Sri Lanka, NHDA Building,Yatinuwara Veediya, Kandy.E-mail : [email protected] : +94 (0)81 2234 268Fax : +94 (0)81 2222 717

MataleAddress : No-11, Kandy Road,Matale.E-mail : [email protected] :+94 (0)66 2223 055 / +94 (0)66 234 400Fax :+94 (0)66 2234 400

Nuwara EliyaAddress : No.72,Park Road,Nuwara-Eliya.E-mail : [email protected] : +94 (0)52 2235 752Fax : +94 (0)52 2223 369

Western RegionColomboAddress : P.O. Box 2085, Sir Chittampalam A Gardiner, Mawatha, Colombo 2.E-mail : [email protected] : +94 (0)11 2446 241 / +94 (0)11 2447 354Fax : +94 (0)11 4714 113

Housing Development Finance Corporation Bank Branches

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Hyde-ParkAddress : No-63, Hydeparkcorner,Colombo 02.E-mail : [email protected] : +94 (0)11 2699 639Fax : +94 (0)11 2699 638

NugegodaAddress : HDFC Bank Sri Lanka, 1st Floor, Railway Station, Nugegoda.E-mail : [email protected] :+94 (0)11 2826 161Fax :+94 (0)11 2826 162

GampahaAddress : Sisira Building,No-27, Ranathunga Mawatha,Gampaha.E-mail : [email protected] : +94 (0)33 2222 506 / +94 (0)33 2234 370Fax : +94 (0)33 2234 370

PiliyandalaAddress : No-21, Vidyala Mawatha, Piliyandala.E-mail : [email protected] : +94 (0)11 2604 843 / +94 (0)11 2604 876Fax : +94 (0)11 2604 876

KalutaraAddress : No-13, Gnanodaya Mw, Kalutara South, Kalutara.E-mail : [email protected] : +94 (0)34 2222 985Fax : +94 (0)34 2227 700

HomagamaAddress : No-99,Station Road, Homagama.E-mail : [email protected] : +94 (0)11 2748 218Fax : +94 (0)11 2857 722

HoranaAddress : No-231, Panadura Road, Horana.E-mail : [email protected] : +94 (0)34 2260 155 / +94 (0)34 2260 156Fax : +94 (0)34 2260 156

JaelaAddress : No-170/A/1, Colombo Road,Ja-Ela.E-mail : [email protected] : +94 (0)11 2247 750 / +94 (0)11 2228 844Fax : +94 (0)11 2247 750

PeliyagodaAddress : HDFC Bank Peliyagoda, 1st Floor,Shop No:03, RMU 06, Peliyagoda.E-mail : [email protected] : 011-2 981 698Fax : 011-2 981 005

Sabaragamuwa RegionRatnapuraAddress : No-51, Main Street, Ratnapura.E-mail : [email protected] : +94 (0)45 2223 174 / +94 (0)45 2226 954Fax : +94 (0)45 2223 174

KegalleAddress : 371,Main Street,KegalleE-mail : [email protected] : +94 (0)35 2222 265 / +94 (0)35 2222 870Fax : +94 (0)35 2222 870

AvissawellaAddress : No 79, Ratnapura Road, Avissawella.E-mail : [email protected] : +94 (0)36 2233 622Fax : +94 (0)36 2233 893

EmbilipitiyaAddress : No-93 B, Malwatta Building, New Town Road,EmbilipitiyaE-mail : [email protected] : +94 (0)47 2230 068Fax : +94 (0)47 2230 069

Southern RegionGalleAddress : No-4, Sri Dewamiththa Mawatha,Galle.E-mail : [email protected] : +94 (0)91 2234 163Fax : +94 (0)91 2227 060

MataraAddress : No-9, HGPM Building, Kotuwegoda, Matara.E-mail : [email protected] : +94 (0)41 2224 790Fax : +94 (0)41 2225 780


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TangalleAddress : No-31, Beach Road,Tangalle.E-mail : [email protected] : +94 (0)47 2240 592Fax : +94 (0)47 2247 774

Uva RegionBadullaAddress : No-69/1/2 , New Passara Road,Badulla.E-mail : [email protected] : +94 (0)55 2223 530Fax : +94 (0)55 2223 130

MonaragalaAddress : No-310/A, Kachcheriya Junction, Wellavaya Road,Monaragala.Email: [email protected] : +94 (0)55 2277 047Fax: +94 (0)55 2276 814

Selected Branches of People’s BankLucky PlazaNo. 70, St. Anthonys Mawatha,Colombo 03. 011-2576531

HeadquartersNo. 75, Sir Chittampalam A Gardiner Mawatha,Colombo 02. 011-2436948

KandyDalada Veediya,Kandy. 081-2222589

MataraNo. 215, Anagarika Dharmapala Mawatha,Matara. 041-2223437

KurunagalaDambulla Road,Kurunagala. 037-2222330

Jaff na3rd Cross Street,Jaff na. 021-2227925

NegomboNo. 72, Greens Road,Negombo. 031-2231381

TrincomaleeNo. 423, Dockyard Road, Nelaweera Building,Tricomalee. 026-2222346

Golden JubileeNo. 1161, Maradana Road, Colombo 08. 011-2694621

Annexure IIICustodian Banks


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Bank of CeylonHead Offi ce,11th Floor,04, Bank of Ceylon Mawatha,Colombo 01Tel: 011 2317777, 011 2448348

Banque IndosuezC/O Hatton National Bank Limited,Cinnamon Garden Branch,251, Dharmapala Mawatha,Colombo 07Tel: 011 268 6537, 011 268 9176

Citi Bank65 C, Dharmapala Mawatha,P.O. Box 888,Colombo 07Tel: 011 244 7316/8, 011 244 7318, 011 244 9061,011 232 8526, 011 479 4700

Commercial Bank of Ceylon LimitedCommercial House,21, Bristol Street,P.O. Box 853,Colombo 01Tel: 011 244 5010-15, 011 238 193-5

Deutsche BankP.O. Box 314No. 86, Galle Road,Colombo 03Tel: 011 244 7062, 011 243 8057

Hatton National Bank PLCHNB Towers,479, T.B. Jayah Mawatha,Colombo 10Tel: 011 266 4664

Nations Trust Bank Ltd242, Union Place,Colombo 02Tel: 0114 313131

National Savings BankSavings House255, Galle Road, Colombo 03Tel: 5 730081-5

Th e Hong Kong and Shanghai Banking CorporationLimited24, Sir Baron Jayathilake Mawatha,Colombo 01Tel: 011 232 5435, 011 244 6591

People’s BankHead Offi ce, 5th Floor,Sir Chittampalam A Gardiner MawathaColombo 02Tel: 011 278 1481,011 2446316

Pan Asia Bank450, Galle RoadColombo 03Tel: 011 2 565565

Sampath Bank Limited110, Sir James Peiris Mawatha,Colombo 02Tel: 011 533 1458

Seylan Bank LimitedLevel 8, Ceylinco Seylan Towers,90, Galle Road,Colombo 03Tel: 011 245 6789, 011 470 1812

Standard Chartered Bank37, York Street,P. O. Box 112,Colombo 01Tel: 011 479 4400, 011 248 0000

State Bank of India16, Sir Baron Jayathilake Mawatha,Colombo 01Tel: 011 232 6133-5, 011 243 9405-6

Union BankNo 15A, Alfred Place,Colombo 03Tel: 011 2 370 870

Annexure IVIssue Rating Report by RAM Rating Agency


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