annual report - colombo stock exchange · rs. 1.1 billion from 696 million in 2016 and improved our...

ANNUAL REPORTfmr mrmqfrka u;= mrmqrg ''''

Vision, Mission & Goals 1 Financial Highlights 2 Graphical Review 3 Chairman’s Review 4 Share Information 8 Statement of Value Added 11 Profile of Board of Directors 12 Corporate Social Responsibility 14 Human Resources and Productivity 17 Corporate Governance 20 Risk Management 25

Financial Reports

Annual Report of the Board of Directors 33 Statement of Directors’ Responsibilities 37 Board Integrated Risk Management Committee Report 38 Board Remuneration Committee Report 41 Board Audit Committee Report 42 Related Party Transactions Review Committee Report 44 Directors‘ Statement on Internal Control Over Financial Reporting 45 Independent Auditors’ Report 47 Statement of Comprehensive Income 49 Statement of Financial Position 50 Statement of Changes in Equity 51 Statement of Cash Flows 52 Notes to the Financial Statements 54

Ten Year Summary 102 Notice of Meeting 104 Form of Proxy 105/106 (Loose Leaf) Corporate Information - Back Inner Cover

CONTENTS

SINHAPUTHRA FINANCE PLC ANNUAL REPORT 2016/17 01

02 SINHAPUTHRA FINANCE PLC ANNUAL REPORT 2016/17

2016/2017 2015/2016 Change Rs.'000 Rs.'000 %

Financial Performance

Gross Income 1,253,994 1,103,270 13.7

Net Interest Income 515,426 439,890 17.2

ProfitBeforeTaxation 79,310 43,050 84.2

IncomeTaxCredit/(Expenses) 74,849 (42,046) 278.0

ProfitAfterTaxation 154,159 1,004 15,254.5

Financial Position

Shareholders’ Funds 1,149,553 695,740 65.2

DepositsfromCustomers 5,889,334 5,565,153 5.8

Borrowings 251,327 381,447 (34.1)

Lendingportfolio 5,690,623 4,964,461 14.6

TotalInterestEarningAssets 6,324,125 5,739,655 10.2

TotalAssets 7,686,080 6,756,987 13.8

MarketCapitalization 724,028 1,051,414 (31.1)

Key Performance Indicators

ReturnonAverageAssets(%) 2.13 0.02 10,550.0

ReturnonAverageShareholders’Funds(%) 16.71 0.14 11,835.7 PriceEarning(Times)-OrdinaryShares 4.70 1,047.61 (99.6)

Information per Ordinary Share

EarningsperShare(Rs.) 2.45 0.02 12,150.0

NetAssetsperShare(Rs.) 17.99 10.78 66.9

MarketValueattheYearEnd-Ordinary(Rs.) 11.50 16.70 (31.1)

Statutory Ratios

CoreCapitalRatio(%)(MinimumRequired5%) 7.31 9.82 (25.6)

TotalRiskWeightedCapitalRatio(%)(MinimumRequired10%) 9.06 11.64 (22.2)

LiquidAssets(%) 10.80 11.29 (4.3)

FINANCIAL HIGHLIGHTS


GRAPHICAL REVIEW

0

1,000,000

2,000,000

3,000,000

4,000,000

5,000,000

6,000,000

2012

2013

2014

2015

2016

2017

0

1,000,000

2,000,000

3,000,000

4,000,000

5,000,000

6,000,000

2012

2013

2014

2015

2016

2017

0

200,000

400,000

600,000

800,000

1,000,000

1,200,000

1,400,000

2012

2013

2014

2015

2016

2017

0

200,000

400,000

600,000

800,000

1,000,000

1,200,000

2012

2013

2014

2015

2016

2017

Gross Income Loans and Advances

Equity Deposits

Rs. Mn. Rs. Mn.

Rs. Mn. Rs. Mn.


CHAIRMAN’S REVIEW

"We enhanced our total equity to Rs.1.1 billion"

Duringaperiodfilledwithmanychallengesanduncertainties,thisyearhasbeenacontrastfromtheprevioustwoyears.ThiswasayearwherepressureforforcedmergersbytheCBSLeased,allowingtheCompanytoonceagainfocusonitscoreactivities

andafive-yeargrowthplan.

Inaneconomicenvironmentcharacterizedbyadverseweatherimpactingonagricultureproduction,inflationfueledbycurrencydepreciationandlowcommoditypricesplusinternationaluncertaintiessuchastheUSFederalReserve’suncertaindecisionsoninterestrates,increasinglocaltaxesandloantovalueratioshaveimpactedontheuptakeoffinancialproducts.Yet,opportunitiesfromincreasingtourismandconstructionhavecreatedacountervailingpositiveforce.Withinthiscontext,pressurestoconsolidatefromtheCentralBankofSriLankainthepastyearwheretheexisting47firmswithinthenon-bankfinancialinstitutionssectorcontinuewithinahyper-competitivemarketfordepositsandloans.DespitetheseseriouschallengesSinhaputhracontinueditstraditionsofstabilityandconservativemanagementforapositiveyear.

Thisyear,SinhaputhraFinancePLCearnedaprofitbeforetaxofjustRs.79million,resultinginearningsofRs.2.45persharecomparedwithRs.0.02thepreviousyear.

NetincomefromoperationsincreasedfromRs.414milliontoRs.500million.Thiswasduetoanincreaseininterestincomeof12%overthelastyear.TheimpairmentchargeshaveincreasedfromRs.79millionintheFYE2016toRs.92millionintheFYE2017.TheCompanyhaswrittenoffdistressed/NPAstockamountingtoRs.328millionduringthisyear.

TheCompanyattractedfreshpublicdepositsinexcessof Rs.1.2billionduringtheyearunderreview,indicatingthe

goodwillithasacquiredoverthelast36yearsinfinancialserviceandconfidenceintheCentralBankDepositInsuranceSchemeofferedtothissector.Ourfixeddepositbasestoodat Rs.5.9billionandbankborrowingsstoodatRs.251million whichdemonstratesamuchlowerdependencyonbankborrowingintheindustrywhichhasahigherratioofbankborrowingdependency.Therefore,ourCompany’sfundraisingpotentialisstillwideopenwithaRs.1.4billionunusedbufferofdebtorsthatcanbesecuritizedtofurtherourcreditgrowth.

Furthermore,lowratesofferedbybanks,wereextremelyattractiveincomparisontofixedtermdeposits.However,duetolacklustercreditgrowthandincreasedrevenuegenerationthroughrecoveries,theCompanyhasincreaseditsliabilitybyonly6%whichwouldbeconsideredsmallandendedtheyearwithexcessreserves.

Onthe31stMarch2017,SinhaputhraFinanceP/LwasacompanycommandingaRs.7.7billionassetbase-agrowthof14%fromlastyear.Duringtheyearweenhancedourtotalequityto Rs.1.1billionfrom696millionin2016andimprovedournetassetvaluefromRs.10.78persharetoRs.18/-pershare.

ThetotalassetbaseoftheLicensedFinanceCompaniesandSpecialisedLeasingCompanies(LFCs/SLCs)sectorgrewby21.7%in2016toRs.1,211.9billion.Thecapitalelementsofthesectorincreasedby18.7%toRs.146.1billionatend2016,mainlythroughinternallygeneratedprofits.

Corporate Governance

TheCompanyhasnowinstatedalltheregulatorycorporategovernancerequirements,andhasbenefitedimmenselyfromthesystemsinplace.Thissubjectisdiscussedatlengthundertherelevantheading.

Credit Evaluation

Acreditevaluationdepartmentwassetupwithexperiencedstaffwhohavebothlendingandrecoveriesbackgrounds.ThedepartmentissupervisedbymanagementatAGMlevelandaboveanddividedintotwosegmentsrequiringapproval:over


CHAIRMAN’S REVIEW....

1millionandbelow1million.Togetherwithtighterlendingcriteria,andrelaxationofareasthatwerenotconsideredpractical,theCompanyobservedgreaterefficiencywhencomparingrepaymentswithpreviouslendingportfolios.

Recoveries

Theintroductionofthecollectionandrecoveriesdivisionthreeyearsagoprovidedthedesiredattentiononrecoveryofmonieslent,whichwaspreviouslythesoleresponsibilityofthelendingdivision.Thiswasfurtherstrengthenedbyacollectionscallcentrewithsoftwareforrecordkeepingandfollow-up.However,thelendingdivisionwasalsogiventheresponsibilityfortheearlystagesoftherecoveryofmonieslent.Ourin-houselawyerandarbitrationprocessesarenowanintegralstepinassistingwithrecoveries.Thishasalsoresultedinfurtherimprovementsofbad

debtrecoveries.

Focus on Immovable Asset - Backed Mortgages and Tighter Criteria for Credit

Toenhancecollateral,theCompanyhastakenaproceduretoensureafasterprocessthroughin-houselegalservicesminimizingthetimetakenfortheloandisbursementwhilstensuringreliablecollateral.Thishasaddressedanareaofpast

customerserviceweakness.

Treasury Management

TheCompanyhasgivenspecialfocusoneffectivemonitoringoftreasuriestoensuremaximumreturns,optimumliquidity,

mitigatingrisksandreducingthetaxburden.

Human Resources

WearegearedupwithasystematicorientationprogramusingmultimediatechnologyinanovelmannertorapidlyabsorbnewrecruitstotheSinhaputhraculture.Weconsiderthemourvitalinternalcustomersandattempttoignitekeeninterestinthemaboutourproductsasaninitiatingprocess.Duetoincreasedoutreach,ourstaffstrengthhasgrownto261.

Education and Training

Asanever-growingCompany,webelieveinthewelfareofourstaff.Hence,wehaveenrolledourkeystaffandgrantedincentivesforotherstobecomediplomaholdersoftheInstituteofCreditManagementandjoinedhandswiththeCentreforBankingStudiestodeliverlecturesfromtheircurrentprogrammecalendar,toenhancetheproductivityofourstaffandhavearrangedtodefraysuchcostsbyincludingotherlicensedfinancecompany’sstaffintheCentralprovinceandregionsexternaltoColombo.Theprogrammeisconductedina“not-for-profit”mannerasaservicenotonlyforourstaffbutalsotheindustryasawhole.Inaddition,weprovidefacilitiestotheFinanceHousesAssociation(FHA)tocarryouttheirseminarsinourstate-of-the-

artconferencefacilitiesattheKandyheadoffice.

Corporate Social Responsibility

TheCompanywasdeterminedtomakeadifference.Therefore,wepartneredserviceorganizationswhichhaveatrackrecordofchoosingworthyprojectsandexecutingthemtotheoptimumbenefitofthecommunity;givingprominencetothearmedforceswasthechosenpriority.Blooddonationprograms,eyedonationprograms,prostheticlimbsforthedisabledthroughparkingfeeleviesweresomeofourhallmarkprojects.

Maximizing Benefits from the New Sinhaputhra Complex

ThenewcomplexwhichhaswonacclaimfromseveraltownplanningauthoritiesforitsheritagearchitecturehasgivenyouanassetwhichwasrevaluedtocaptureitsmarketvalueasrequiredbySLFRS.Partsofthe33,000squarefootcomplexhavebeenleasedoutandonarevenuesharebasistotheBritishCouncilwhichconductsLondon“O”leveland“A”levelexaminationsincludingtheirseminars.Theconferencehallshavebeenusedbyawiderangeofinstitutionsandassociationsforvariousfunctions.Wehopetomaintainthesepublicspaces,suchasthetwinauditoriumsandaroof-topterracenowundercover,complimentedwithacar/goodslifttomakethefacilityreadilyuseableenvisagingwiderpublicpatronage,resultingingreatervisibilityofourservices.


Imports, Used Vehicles and Land Sales Division

Sinhaputhrabecameapioneerofhybridvehicleimportsto SriLankafromtheUKandJapanboldlytakingonnegativemarketsentiments.YourCompanyisnowidentifiedwithexpertiseofthesetypesofvehicles.ThereforeyourCompanycommencedoperatingleasesonthesevehicleswithconfidencewitha “buy-backandreplacefornewoptionsafterthreeyears”policy.TheSinhaputhrayardswherecustomervehiclesarerepossessedfornegotiatedsettlementorre-salewerere-organizedforeffectivemanagementandtoensureachievingregularsalestargets.Aconvenientoptionforclientsintendingtoselltheirlandswasalsointroduced.AmarketingpackageworthmorethanRs.20,000/-isprovidedatRs.1,000/-oncethemultitudeofadvertisingcostsaresummed,attractingpotentiallyhigh

net-worthindividualstotheCompany.

Travel Division

YourCompanyalsomadeavailableafleetof“Hybrid”vehiclesforhiretoreapthebenefitsofbothalocalandforeigntouristclientele.Thishelpedtopositionourselvesatanentrypointof

alucrativemarketwithhighgrowthpotentials.

Tourism and Alternative Energy Solutions

TheCompanyobtainedformalapprovaltoinvestalimitedsumofmoneyinbudgettourismprojectsaswellasalternativeenergyprojects,inanefforttointroducetheseproductsinauniquemannertothemarketandthenfinancethesame,withoutengaginginitsmanagement.Hence,alargepartoftheCompany’sofficespaceswererentedouttoClockInn,abudgethotel,alongwithapilotprojectinvolvingasleepingcapsuleforbudgettourists.TheCompanyalsoinstalledasolarenergysystemcoveringnearly40%oftheCompany’selectricityneedsandisbenefittedbya100%depreciationallowance.ItistheintentionoftheCompanytomaketheseavailabletohouseholdsusingan

innovativefinancingmethod.

Wehavealsoembarkedonanewventureconvertingbusesthatcannotbeeasilysoldfromouryardsintomotorablecaravansapilotproject.

Foreign Currency Exchange

Sinhaputhrahasbecomethesecondfinancecompanyin SriLankatocatertotherequestoftheCentralBankofSriLankatoavailitselfasaforeigncurrencyexchangecountertobenefitforeignvisitorsandlocaltravelers.OurcompetitiveexchangeratesincomparisontobankshaveattractedanewclienteletotheCompany.

Expanding Our Outreach

Weconcentratedonfocusingonourbrandandstrengtheningour

branchefficiencyandinternalcontrolspriortofurtherexpansion.

Phone Banking, Visa, SMS Payments and ATM Networks

PhoneBankinginSinhala,TamilandEnglishwasintroducedtocustomerstoaccessvitalinformationthroughpasswordsecurity24/7.BycombiningbothSMSandATMtechnologieswehaveprovidedanoptionforoursavingsaccountholderstoaccessawiderrangeofATMsinSriLankaandworldwide,andexperiencewideravailabilityofthisinnovativeSMSwithdrawal/depositpaymentandfundtransfersystem.

“SMSCash”,wasfoundtobemorepopularinruralmarketsthaninurbanareas.Asaco-brandedissuerofVISAcreditcardsonbehalfofSeylanBank,wewerealsogiventwoproductsthatincludeaRupeeCardforsafekeepingofrupeesbyforeigntravelersaswellasTravelCardtoholdfivecurrencieswhen

SriLankan’stravelabroad.

YourCompanyisnowopen365daysoftheyearattheheadofficeinKandyuntil9p.m.However,restrictedhoursforlimitedservicesincludingforeigncurrencyexchange,receipting,savingswithdrawalsetc.arecarriedoutonSundaysandmercantile

holidays.



Conclusion

TheCoreCapitalbaseoftheCompanyreachedRs.470million, asumthatexceedstheproposedstatutoryminimumrequirementofRs.400millionfrom1stJanuary2015.Weembracetheideologythatthecorestrengthofacompanyisbasedonitscapitaladequacyandriskassets,andhavetransferredtherequisitesumof20%ofnetearningstoourstatutoryreservefundandweareconsideringretentionofallprofitstorapidlyachieveourRs.1billiongoalalongwithrealizingourrevaluationreserves.

Iwouldliketotakethisopportunitytothankourvalueddepositors,regulators,consultants,auditors,softwareproviders,bankers,andshareholdersfortheirsupportduringtheyear. Iwouldalsoliketothankourstaffinparticularfortheirvitalandunrelentingcommitmentdespiteallthechallengesasdescribedearlier,theirteamspiritandoptimismthathasmadeyourCompanycompetitiveandstrongandresponsibletoallitsstakeholders.

Dr. A.R. Karunaratna

Chairman

25thJuly2017



SHARE INFORMATION

General

StatedCapital Rs. 80,379,055

TheNumberofSharesRepresentingtheStatedCapitalare- Ordinary 62,958,930

Preference 6,707,650Stock Exchange Listing

SinhaputhraFinancePLC,isaquotedpubliccompanyandtheissuedOrdinarySharesofwhicharelistedintheColomboStockExchangeofSriLankawitheffectfrom2ndJune2010.Sharesheldbythepublicwas49.70%asat31stMarch2017.

Distribution of Shareholding

Therewere935OrdinaryShareholdersand501PreferenceShareholdersasat31stMarch2017.

20 Largest Ordinary Shareholders as at 31st March 2017

Name No. of Shares %

1. Mr.K.R.B.Wijeyeratne 31,650,870 50.27

2.BimputhFinancePLC 12,546,190 19.92

3.FirstCapitalMarketsLimited/DayaGroup(Pvt)Limited 5,100,000 8.10

4.Mr.I.Karunatilake 1,123,310 1.78

5.Mr.J.H.Leanage 751,306 1.19

6.Mr.A.A.Sunil 644,642 1.02

7.SeylanBankPLC/ LasanthaChandikaRanaweeraPathirana 563,402 0.89

8.Ms.F.A.A.Mack 450,000 0.719.Mr.J.P.Karunaratne 300,600 0.4710.Mr.P.A.J.Kumara 293,975 0.46

11.Mr.M.C.B.Talwatte 291,240 0.46

12.Mr.D.G.P.Abeygunawardane(Deceased) 282,820 0.45

Name No. of Shares %

13.Mr.T.K.Bandaranayake 282,789 0.45

14.Mr.P.C.B.Talwatte 265,690 0.42

15.SeylanBankPLC/ Dr.ThirugnanasambandarSenthilverl 240,006 0.38

16.Mrs.S.S.Silva 200,000 0.31817.GuardianFundManagementLimited/TheAitkenSpenceandAssociatedCompaniesExecutiveStaffProvidentFund 169,868 0.27

18.Mr.A.V.Abeygoonasekera 155,610 0.25

19.Dr.D.W.D.Collure 151,080 0.24

20.Miss.E.E.Mack 150,000 0.24

55,613,398 88.33Others 7,345,532 11.67

Total 62,958,930 100.00

Analysis Report of Ordinary Shareholders As At 31st March 2017

No. of No. of % of Total Total Shares Held Shareholders Shareholders Holding Holding %

Individual 882 93.73 43,382,448 68.91Institutional 59 6.27 19,576,482 31.09Total 941 100.00 62,958,930 100.00 Resident 932 99.04 61,698,060 98.00Non-Resident 9 0.96 1,260,870 2.00Total 941 100.00 62,958,930 100.00

Ordinary Shares As At 31st March 2017

No. of No. of % of Total Total Shares Held Shareholders Shareholders Holding Holding %

1 - 1,000 459 48.78 148,960 0.24 1,001 - 10,000 320 34.00 1,148,275 1.82 10,001 - 100,000 131 13.92 4,585,736 7.29100,001 - 1,000,000 27 2.87 6,655,589 10.57 Over 1,000,000 04 0.43 50,420,730 80.08 Total 941 100.00 62,958,930 100.00


SHARE INFORMATION.....

20 Largest Preference Shareholders As At 31st March 2017

1.

2.

3.

4.

5.

6.

7.

8.

9.

10.

11.

12.

Name

SeylanBankPLC/Dr.ThirugnanasambandarSenthilverl

SandwaveLimited

MBSL/N.KC.J.DeSilva

SeylanBankLimited/RuwanPrasannaSugathadasa

Dr.A.G.C.Wijeyratne

Mr.K.D.DeSilva

Mr.T.K.Hemachandra

Mr.J.A.M.U.Jayakody

Mr.G.G.Hemachandra

Mrs.B.H.DeSilva

Ms.V.R.Dandeniya

Mrs.R.M.A.P.RathnayakeandMr.P.V.D.S.S.Saparamadu

No. of Shares

1,168,337

301,092

230,000

217,950

212,300

208,901

202,480

200,000

180,010

162,626

120,000

110,312

%

17.42

4.49

3.43

3.25

3.17

3.11

3.02

2.98

2.69

2.42

1.79

1.64

13.

14.

15.

16.

17.

18.

19.

20.

Name

Mr.R.P.Sugathadasa

MerchantBankofSriLankaPLC/Mr.KamalRajaUpali

Mr.L.W.Warnapala

Mr.M.C.B.Talwatte

BanseiSecuritiesCapital(Pvt)Ltd/Mr.W.B.S.DeAlwis

Mr.R.E.Rambukwelle

Mr.H.W.G.S.KumaraandMrs.W.A.N.D.Weerasekara

Mr.J.A.M.Hussain

Others

Total

No. of Shares

109,751

100,000

90,000

87,370

82,458

70,000

69,310

68,828

3,991,725

2,715,925

6,707,650

%

1.64

1.49

1.34

1.30

1.23

1.04

1.03

1.03

59.51

40.49

100.00

Analysis Report of Preference Shareholders As At 31st March 2017

Preference SharesAs At 31st March 2017

11,001

10,001100,001

OverTotal

-1,000-10,000-100,000-1,000,000 1,000,000

236175

7912

1503

46.9234.7915.71

2.390.19

100.00

82,293690,557

2,511,0412,255,4221,168,337

6,707,650

1.2310.3037.4333.6217.42

100.00

No. ofShares Held

No. of

Shareholders

% of

Shareholders

Total

HoldingTotal

Holding %Category

IndividualInstitutionalTotal

ResidentNon-ResidentTotal

47231

503

5012

503

93.846.16

100.00

99.600.40

100.00

4,313,6912,393,959

6,707,650

6,401,558306,092

6,707,650

64.3135.69

100.00

95.444.56

100.00

No. of

Shareholders

% of

Shareholders

Total

HoldingTotal

Holding %

2017

62,958,930

2.45

17.99

-

21.00

10.40

11.50

2016

62,958,9300.02

10.78-

200.0010.2016.70

Market Statistics of the Ordinary Shares

NumberofOrdinarySharesEarningPerShare(Rs.)NetAssetPerShare(Rs.)DividendPerShare(Rs.)HighestSharePrice(Rs.)LowestSharePrice(Rs.)ClosingSharePrice(Rs.)

As At 31st March

OrdinarySharesHeldbyPublic,amountsto49.70%.


History of Dividend, Rights and Bonus Issues

DividendPaid (Rs.)

--

155,000310,000620,000

-395,250447,950790,500790,500

1,054,0001,581,0002,108,0003,689,0004,918,6662,459,3333,074,1662,459,3331,299,6663,688,999

--

6,510,000--

9,478,560-

12,825,0725,981,098

-3,497,718

447,177

2,819,017

2,819,0171,573,973

234,7684,721,920

570,150

12,591,7861,408,606

Year Ended31st March

1979-19861987

198819891990

1991199219931994199519961996/9719981999200020012002200320032003200420042004200520062006200720072008

2009

2010

2011

2012

Issue

-BonusRights

--

RightsBonus

---

Bonus--

BonusBonus

-----

BonusRights

-RightsBonus

-RightsBonusRightsBonusRights

(Non-votingPreference

Shares)-

-

-

-

Basis

-03:0201:1

--

01:1006:11

---

01:01--

01:0101:06

-----

01:0401:17

-01:2501:05

-02:1501:0701:1301:0903:10

-

-

-

-

SharesIssued

-94,020

153,300--

31,000186,000

---

527,000--

1,054,000351,333

-----

614,833180,834

-130,200677,040

-541,632657,696404,736629,589670,765

-

-

-

-

No. of Shares

62,680156,700310,000310,000310,000341,000527,000527,000527,000527,000

1,054,0001,054,0001,054,0002,108,0002,459,3332,459,3332,459,3332,459,3332,459,3332,459,3333,074,1643,255,0003,255,0003,385,2004,062,2404,062,2404,603,8725,261,5685,666,3046,295,8936,966,658

6,966,658

6,966,658

6,966,658

6,966,658

Dividend%

--5

1017.5

-15

8.51515101520

17.52010

12.510

515--

20--

25-

2510-

Rs. 0.50Rs. 0.60

(Re-distribution)

Rs. 0.50

Rs. 0.60Rs. 0.25Rs. 0.35Rs. 0.75Rs. 0.85

Rs. 2.00Rs. 2.10

Stated of Capital (Rs.)

626,800-

3,100,0003,100,0003,100,0003,410,0005,270,0005,270,0005,270,0005,270,000

10,540,00010,540,00010,540,00021,080,00024,593,33024,593,33024,593,33024,593,33024,593,33024,593,33030,714,66032,550,000

-33,852,00040,622,400

-46,038,72052,615,68056,663,04062,958,93080,379,055

80,379,055

80,379,055

80,379,055

80,379,055

Mr.K.R.B.WijeyeratnehasclaimedonlyRs.0.40perShare

(preference)

(preference)

(preference)

(preference)

(preference)

SHARE INFORMATION.....


STATEMENT OF VALUE ADDED

Fortheyearended31stMarch 2017 % 2016 % Rs. Rs.

Interest Income FeeBasedIncome Non-FinancialIncome

DepositorsandLendersasInterest CostofSalesandServices ImpairmentChargesforLoansandOtherLosses Value Added

Distribution of Value Added

Value Allocated to the Employees RemunerationandotherBenefits 59% 61%

To Providers of Capital ShareholdersasDividends - - - -

To Government VATonFinancialServices 5% 9% IncomeTax(Credit)/Expenses (26)% 18%

To Expansion and Growth RetainedProfit 52% 0.42% Depreciation 10% 12% Total 100% 100%

2015/20162016/2017

To Government

Value Allocated to the Employees

Expansion and Growth

61%

27%

12%

59%

-21%

62%

1,043,611,319 31,124,798 27,505,197

1,102,241,314

(603,721,519)(182,838,787)(79,351,776) 236,329,232

143,894,353

20,602,101 42,046,374

1,003,630 28,782,774

236,329,232

1,174,515,707

55,528,481 25,638,376

1,255,682,564

(659,089,266)

(209,244,617)

(92,361,199)

294,987,482

172,892,658

14,243,843

(74,849,131)

154,158,692

28,541,420

294,987,482


PROFILE OF BOARD OF DIRECTORS

Dr. A.R. Karunaratna Independent Non-Executive Director / Chairman

AppointedtotheBoardon19thJanuary2012.HoldsaPhDfromtheUniversityofSydneyN.S.W.,Australia,MComfromBondUniversity,GoldCoast,Qld.Australia,MBAfromtheUniversityofAdelaide,S.A.,Australia,BSc.(Hons),from FlindersUniversity,S.A.,Australia.

HeisCEOofBreakthroughBusinessIntelligence,Colombo,andformerAssociateProfessor(Adjunct),SchoolofBusiness,UniversityofAdelaide,S.A.,Australia.

Hehaspublicationsininternationaljournals,presentedpapersininternationalconferencesand25yearsteachingexperienceatUndergraduateandPostGraduatelevelsandextensiveconsultingexperience.

HeisalsotheHonoraryConsulforKandyfortheBritishHighCommission.

Mr. K.R.B. Wijeyeratne Managing Director / Executive Director

AppointedtotheBoardon28thJuly1995.Hehasover 29yearsexperienceintheFinanceIndustry.

HoldsaBA(Economics&Math)DegreefromOxfordUniversity,UKandKenyonCollege,USA

HehasbeenservingasanExecutiveCommitteememberoftheFinanceHousesAssociationofSriLanka,therepresentativebodyoflicensedFinanceCompaniesof SriLankasince1997

MemberandformerDirectoroftheLeasingAssociation ofSriLanka,abodyrepresentingBanksandFinancialInstitutionsengagedintheactivityofFinanceandOperationalLeasinginSriLanka

Mr. K.R.B. Wijeyeratne (Contd....)

FormerChairmanofSinhaputhraFinancePLC

FormerDirectorofKandyHotelsCorporation(1938)theowningcompanyofQueensHotelandSuisseHotel,Kandy

FormerDirectorofSinhaputhraComputers,TradersandSecurities

Hecountsover26yearsofAudit,BankingandFinanceexperiencewithErnst&Whinney,Kandy,SriLanka,CreditLyonnais,NYC,USAandSinhaputhraFinancePLC,SriLanka

HeisalsotheHonouryConsulfortheEmbassyofFrance

MemberoftheUNESCOHeritageCityCommitteeofKandy

Mr. K.G.D.S.J. De Alwis Executive Director

AppointedtotheBoardon1stAugust2009.Holds30yearsexperienceinthefieldofFinance.

HeisaMemberofInstituteofBusinessManagement.

Mr. E.A.D.P. Ekanayake Independent Non-Executive Director

AppointedtotheBoardon29thDecember2011.AreputedEntrepreneur,ChiefExecutiveOfficerofHulugangaTradingCompanyfrom1987to1999andEkraConstructionsCompanyfrom1983to2001.CommitteeMemberofCancerTreatmentCentre,KandyandanotedPhilanthropist.

Countsnearly39yearsofexperienceasanEntrepreneur.


PROFILE OF BOARD OF DIRECTORS....

Mr. T.M.S. Bulankulame Independent Non-Executive Director

B.Sc.AccountingandBusinessAdministrationwithaconcentrationinFinance(DominicanUniversity,USA)

CMACanada(CertifiedManagementAccountantsofCanada)

CertificationinCommodityTrading–ChicagoBoardofTrade,USA(1998)

Tiranjanbringsmorethan15yearsofexperienceinthefinancialmarketsandmanagementaccountingexperiencebothinUSAandCanada,andalsointheAsiaPacificregionincluding SriLanka.HealsositsontheBoardatSinhaputhraFinancePLCandholdsthepositionofChairmanofSinhaputhra’s AuditCommittee.

Tiranjanheads,SimlabITSriLanka,asoftwaredevelopmentcompanyinthevirtualrealityspacehead-quarteredinKuopio,Finland.HeisanactiveoptionstraderontheChicagoOptionsExchange.PriortohisrolewithSimlabIT,heheldpositionsastheGeneralManger&FinancialControllerofMDFASIAandpriorthatheldthepositionofVPofstockmarketsolutions atIronOneTechnologies;healsoheldpositionsasanInvestmentBankeratLaSalleBank(AmemberofBankofAmerica)andatJohnKeellsHotelsasaManagementAccountant.Tiranjanwasakeydriverofportfolio/wealthmanagementmodulesintheInvestmentbankingunitduringhistenureatLaSalleBank.

HealsoholdsthepositionofDirectorontheBoardsofSimlabITSriLanka(Pvt)Ltd.andSimlabITOy(FinlandHQ).

HewaseducatedatDominicanUniversity,Chicago,IllinoiswherehewastherecipientoftheShapiroScholarship(1997)awardedtobusinessstudentsforacademicachievement.

Senior Consultants to the Board

Mr. K.H.K. Wijayadasa Senior Consultant - Finance

FellowMemberoftheInstituteofCharteredAccountantsof SriLanka.FormerChairmanofSinhaputhraFinancePLCand theBoardAuditCommittee.Hehasover36yearsmanagementexperienceinthefieldofFinanceinSriLankaandoverseas.

Mr. A.M.G. Weerakoon

Senior Consultant - Legal

AmemberofPresident’sCounsel.OneofformerDirectorsofSinhaputhraFinancePLC.MemberofLegalPanelsofleadingbanks.Hehasover33yearsexperienceintheLegalfield.


CORPORATE SOCIAL RESPONSIBILITY

Blood Donation

TheAnnualBloodDonationCampaignwasorganized forthe10thconsecutivetimetocelebratethe 37thAnniversaryofSinhaputhraFinancePLC.

Itwasheldonthe7thofMarch2017.Nearly70donorsdonatedtheirbloodandcontributedtowardsthisworthycause.Thedoctors,nursesandstaffmembersoftheKandyBloodBankoftheGeneralHospital(Teaching)Kandyplayedamajorroleatthiseventastheyhavedoneinthepast.

‘‘Someone is needing Blood somewhere....”


Donation of a Limb

WedonatedalimbtoMr.D.PiyaratnefromAnuradhapura.Hislegwasamputatedduetoanaccident.Thedonationwasmadewiththecollectionfromourcarpark“CenterforHandicapped”CollectionBox.ThiswasdoneincollaborationwiththeCenterforHandicapped,Kundasale.

CORPORATE SOCIAL RESPONSIBILITY....

Sunera Workshop Kandy

WepartsponsortheaboveworkshopinKandyfordifferentlyabledchildren.Therearearound25-30whoattendthisworkshoponceaweekandarehelpedbytrainedtrainerswhoworkwiththeinart,musicanddrama.

“ The secret of getting things done is to act” - Dante Alighieri


Vesak Illumination

TheminorstaffoftheCompanybuiltandilluminatedabeautiful‘Dagaba’ infrontofourHeadOfficeforthesecondtimewhichbroughtbeautytothe entirecityofKandy.

CORPORATE SOCIAL RESPONSIBILITY....

‘Go – Green’

Were-cycleourpaper,weharvestourrainwater. Wecontributetothenationalgridwith210solarpanelsandourmanagementuseshybridcars.


HUMAN RESOURCES & PRODUCTIVITY

Our Team - Our Strength

TheCompanynowhasastaffof261atitsheadquartersinKandyandbranchesinColombo,Kurunegala,Anuradhapura,Bandarawela,Dambulla,KundasaleandKatugastotaandtwocollectioncentersinMataleandMahiyanganaya.Personnelaredistributedin15departmentsandareeachexpectedtonotonlytakeitssectionsforwardbutalsoco-operatewithotherdepartments.TheCompanyisproudofandstillmaintains open-doorpolicywhereallemployeeshaveaccesstoeachother’sexpertiseandknowledge.

Wecontinueourin-houseorientationprogramforournewrecruits,introducingtheCompanytotheemployeeandviseversa.ThisenablestheemployeetolearnabouttheVision,Mission,Goals,Culture&TraditionsoftheCompanyandbeawareoftheirtasksahead.

Thetitle“EmployeeoftheMonth”isgiventotheemployeewhobringsinthehighestvalueofdepositspermonth.Thisschemeisimplementedonamonthlybasistoencourageperformanceamongthestaffwhilstrecognizingthemfortheirdedicationandhardwork.

AnotherHReventmostpopularandlookedforwardtobythestaffistheCompany’sAnnualTrip.Theentirestaffjoinsinonanexpeditiontoenhancetogethernessamongfellowemployees,engagingthemselvesingamesandbanterandenjoyingthemselvesawayfromwork.ThetripisfullysponsoredbytheCompanyasameasureofappreciationfortheserviceofthestaff.

TheCompanyhasnomaterialconcernswithregardtoemployeeissueseitherbywayoflitigationagainstthemoremployee-managementrelationshipsduetothevigilantattentionofourlegaldivisionandconstantattentiontostaffwelfareandentertainment.TheregularCSRactivities,deathdonationbenefits,medicalandinsurancebenefits,companytrip,annualdinnerdancesetc.,unitethespiritoftheemployeesandstrengthentheteamspirit.

OurindustrialrelationshavebeenoptimizedbyourrepresentationintheFHA(FinanceHousesAssociation)atwhichforumtheCompanyhasbeenaCouncilmemberforover25years,andattheLASL(LeasingAssociationSriLanka).Thesebodiesdiscusscommonissuesthatbenefittheindustryasawhole.TheCompanyalsoaffordsitsconferencefacilitiesforCBSLandFHAseminarsthathelpthestandardofknowledgetotheindustrythroughseminars.TheCompanyalsoaccommodatestheregulatorsduringtheirscheduledon-siteexaminationsandfurnishesthemwithtimelyinformationasrequiredandregularlyattendsmeetingsforwhichtheCompanyisinvitedfor.

Ourstrengthhasalwaysbeenandstillisourmostvaluedassetandthatisour‘HumanResourcePower’.Weareblessedwithanefficient,talentedandhardworkingteambothatourHeadOfficeandour07Branchesand02CollectionCenters.Ourstaffcadreatalllevelsarededicatedanddevotedtothedutiesentrustedtothem.

TEAMTogether Everyone Achieves More


Staff Strength

As at 31st March 2017 2016

ExecutiveDirectors 2 2 Snr.AGMs/AGMs&Consultants 10 9 Managers/Asst.Managers 35 27 Snr.Executives 22 15 Executives 15 11 Jnr.Executives 19 12 Officers 51 52 Assistants 71 67 OfficeAssistants/ Drivers&SecurityOfficers 15 14 TraineeAssistants 21 27 Total 261 236

Age Analysis of the Staff

Years

Age Group Above 60 51 - 60 41 - 50 31 - 40 21 - 30 20 & below Total

ExecutiveDirectors - 1 1 - - - 2 Snr.AGMs/AGMs&Consultants 3 3 3 - 1 - 10 Snr.Managers/Managers/Asst.Managers 4 3 10 15 3 - 35 Snr.Executives 1 - 5 12 4 - 22 Executives - 1 2 10 2 - 15 Jnr.Executives - 1 3 6 9 - 19 Officers 3 2 3 12 31 - 51 Assistants 1 2 2 5 58 3 71 OfficeAssistants/Drivers&SecurityOfficers 1 6 2 3 3 - 15 TraineeAssistants - - - 17 4 21 2017 13 19 31 63 128 7 261 2016 8 19 28 50 123 8 236

HUMAN RESOURCES & PRODUCTIVITY....

24%

49%

20%

8%


Service Analysis

Above 20

16 - 20

11 - 15

06 - 10

5 & Below

Service Analysis of the Staff 2017

7%

71%

4%4%

14%48%

Male

Female

Gender of the Staff 2016

52%

HUMAN RESOURCES & PRODUCTIVITY....

Years

Service Group Above 20 16 - 20 11 - 15 06 - 10 5 & below Total

ExecutiveDirectors 2 - - - - 2 Snr.AGMs/AGMs&Consultants 6 - - 1 3 10 Managers/Asst.Managers 4 5 6 4 16 35 Snr.Executives 1 3 3 4 11 22 Executives 1 2 1 2 9 15 Jnr.Executives - - 1 8 10 19 Officers 1 - - 5 45 51 Assistants 2 - - 3 66 71 OfficeAssistants/Drivers&SecurityOfficers 1 - - 9 5 15 TraineeAssistants - - - - 21 21 2017 18 10 11 36 186 261 2016 19 8 9 29 171 236

Gender

2017 March

Male-135 Female-126


CORPORATE GOVERNANCE

Webelievethateffectivecorporategovernanceconsistsofasystemofsoundstructuring,operatingandcontrollingtheCompanyinameansthatcontributestowardsthelong-termsuccessoftheorganisationbycreatingvaluetoallitsstakeholders.

ThestakeholdersofacompanyexpectanacceptablestandardofcorporatebehaviorfromtheCompany.ItisthefirmbeliefoftheDirectorsthattheimplementationofGoodCorporateGovernancepracticeswillensurecreationofshareholderwealthandthelong-termstabilityoftheinstitution.TheCompanymaintainsthehigheststandardsofCorporateGovernancePracticesandiscommittedtoensuretheprevalenceofsuchpractices.TheBoardofDirectorslaysdownthePoliciesofGoodGovernanceandexpendsitsenergyinsafeguardingtheinterestsoftheCompany.ThemaintenanceofaccountabilityandtransparencyisapriorityintheagendaoftheBoard.TheDirectorsprovideforthepromotionofbusinesspracticesthatatalltimessafeguardstheinterestoftheCompanywhilstmaintainingthedignityandintegrityofemployeesinadditiontothebuildingofconfidenceofitsstakeholders.

Furthertowhatisreported,ourreferencetokeyterminologyisbasedontherequirementsenvisagedinthefollowingstatutesandtheCompany’spracticesarewithintheirconfines.

FinanceCompanies(CorporateGovernance)Direction,No.03of2008,issuedbytheMonetaryBoard

FinanceCompaniesActNo.78of1988anddirections,rules,determinations,noticesandguidelinesissuedthereunderCompaniesActNo.07of2007

InlandRevenueActNo.10of2006

FinanceBusinessActNo.42of2011

PreventionofMoneyLaunderingActNo.5of2006

FinancialTransactionsReportingActNo.6of2006

AllsubsequentAmendmentstotheaboveActs

ListingRulesoftheColomboStockExchange

SriLankaAccountingStandardsoftheInstituteofCharteredAccountantsofSriLanka

OtherRulesofComplianceIssuedbytheCBSL

ThisstatementdescribestheapplicationoftheCorporateGovernancepracticedwithintheCompanyduringtheyearunderreview.


Governance Structure

Asidentifiedinthebelowgovernancestructure,thelinkagemechanismensuresalignmentoftheCompany’sbusinessstrategyanddirectionthrougheffectiveengagementandcommunicationwithitsstakeholders,BoardofDirectors,BoardSub-CommitteesandManagement.ThisapparatusassuresthattheCompanysustainsitspotentialtodeliveritsvaluetothestakeholders.

Code of best pra e of corporate governance issued by ICASL and SEC

Finance Companies Dire on, No. 4 of 2008

Finance Companies Dire on, No. 9 of 2008

Companies Act No. 07 0f 2007

Lis ng Rules of Colombo Stock Exchange

External Auditors

Regulatory Framework

Management Commi ees

Shareholders

Board of Directors

MD

Corporate Management

Board Sub- Commi ees

Internal Audit

Company Secretary

Remunera on Commi ee

Audit Commi ee

Integrated Risk Management

Commi ee

Related Party

Cred Finance Marke ng Deposits

HR & Admin. IT Recoveries Legal

Employees

Responsibility

Appointment

Board of Directors

TheBoardofDirectorsconsistsofthreeIndependentNon-ExecutiveDirectorsandtwoExecutiveDirectors.Furthermore,twoSeniorConsultantsinthefieldsofAccountancyandLawareinvited.TheCompanyconductsmonthlyBoardMeetingsand,wherenecessaryspeciale-BoardMeetingsareconvenedinordertotransactspecialbusinessdecisions.DecisionsmadeatsuchmeetingareratifiedatregularBoardmeetings.Furthermore,videoconferencingisusedtoensure100%participationwheneverpossible.

CORPORATE GOVERNANCE....


The Board Responsibilities are:

TodrivethebusinessoftheCompanytowardsasatisfactoryfinancialperformancethatwillensurealong-termsustainablevalueandgrowth

Fortheformulationofpolicies,thesettingupofstrategiesclearlydefinedmanagementgoalsthatupholdtheCompany’sVision,Mission,ValuesandObjectives

Fortheidentificationofmajorbusinessopportunitiesandrisksandprovidingofeffectivecontrolsaswellastheemploymentofatimelyreportingmechanism

ForapprovaloflargefacilitiesbeyondthelimitsdelegatedtotheCorporateManagementandtheExecutiveDirectors

Fortheadoption,monitoringandimplementationofbudgetsandstrategicplansformulatedbyExecutiveDirectorsandtheCorporateManagement

ToensurethateffectivesystemsofRiskManagementandrobustinternalcontrolsareinplaceatalltimes

ToensurethatanefficientandtimelymanagementinformationsystemisavailableforeffectivedecisionmakingwithintheCompany

ToensurethatBoardCommitteesarefunctioningandreportingtothemainBoardofDirectors

Board Meetings

TheresultsoftheCompanyareregularlyevaluatedandmonitoredagainstthebudgetsatBoardMeetingsatwhichastandardagendaisdiscussedtogetherwithanyothermattersthatrequiretheattentionoftheBoardofDirectors.TheBoardmeetsonceamonthandwherevernecessarySpecialMeetingsoftheBoardareheld.

Duringtheyearended31stMarch2017,12meetingsoftheBoardofDirectorswereheldandtheattendanceissetoutbelow:

Name of Director Directorship Number of Meetings Status Meetings Held Attended in F/Y 2017 in F/Y 2016

Dr.A.R.Karunaratna Chairman/IndependentNon-ExecutiveDirector 12 11 K.R.B.Wijeyeratne ManagingDirector 12 12

K.G.D.S.J.DeAlwis ExecutiveDirector 12 10

*J.R.J.Nanayakkara IndependentNon-ExecutiveDirector 12 02

E.A.D.P.Ekanayake IndependentNon-ExecutiveDirector 12 11 T.M.S.Bulankulame IndependentNon-ExecutiveDirector 12 12


*CeasedfromtheBoardinJune2016


FollowingthebestpracticesofGoodCorporateGovernancethetwopositionsoftheChairmanandtheManagingDirectorareheldbyseparatepersonsthusenablingbalanceofpower,betteraccountabilitywhichenhancestheindependenceoftheBoard.

The Chairman

TheChairmanoftheCompanyisDr.A.R.Karunaratna.HeholdsaPhDfromtheUniversityofSydneyN.S.W.,Australia,MComfrom BondUniversity,GoldCoast,Qld.Australia,MBAfromtheUniversityofAdelaide,S.A.,Australia,BSc.(Hons),fromFlindersUniversity, S.A.,Australia.

HeisCEOofBreakthroughBusinessIntelligence,Colombo,andformerAssociateProfessor(Adjunct),SchoolofBusiness,UniversityofAdelaide,S.A.,Australia.

Hehaspublicationsininternationaljournals,presentedpapersininternationalconferencesand25yearsteachingexperienceatUndergraduateandPostGraduatelevelsandextensiveconsultingexperience.

HeisalsotheHonoraryConsulforKandyfortheBritishHighCommission.

The Managing Director

Mr. K.R.B.WijeyeratnehasbeentheManagingDirectoroftheCompanysince2009.

Committees of the Board

TheAuditCommittee,RemunerationCommittee,IntegratedRiskManagementCommittee&RelatedPartyTransactionsReviewCommitteearethemainCommitteesoftheBoard.Pleaserefertheirspecificreportstounderstandtheirfunctionsandcompositions.

Financial Disclosures and Transparency

FinancialStatementsarepreparedinaccordancewiththeSriLankaAccountingStandards,theCompaniesAct,theFinanceCompaniesActandtheDirectionsandRulesissuedthereunder.TheunauditedprovisionalquarterlystatementsofaccountsarepresentedincompliancewiththeListingRulesoftheColomboStockExchange.

M/sBakerTillyEdirisinghe&CompanyactsasExternalAuditorsoftheCompany.AuditorsareallowedtoactindependentlyandwithoutinterventionfromtheManagementortheBoardofDirectorsoftheCompanytoexpressanopinionontheFinancialStatementsoftheCompany.AlltherequiredinformationisprovidedforexaminationtotheAuditors.

Ethical Standards

TheBoardofDirectorsbelievethatthemaintenanceofthehighestlevelofethicalconductfromemployeesisessentialaspartofpracticesofGoodGovernanceandexpectsemployeestoactfairly,honestlyandwithloyalty.Allemployeesareexpectedtoprovidetheirbestservicesforcustomers,shareholdersandthecommunityatlargeinconductingbusinessoperations.TheweeklySeniorManagementCommitteeMeetingstowhichemployeesatalllevelsareinvitedactsasaforumtocommunicatetoemployees,thevalues,cultureandexpectationsoftheCompany.ThecontinuousinteractionoftheManagementandthestaffstrengthensthisposition.Further,exposuretostafftrainingprogramsandworkshops,in-houseandoutsideactsasacatalyst,totheinternallearningprocess,inadditiontotheorientationofthestaffonethicalprofessionalconduct.



Statutory Payments

AllStatutoryPaymentsduetotheGovernment,whichhavefallendue,havebeenmadeorwhererelevantprovidedfor,exceptforcertainassessmentsagainstwhichappealshavebeenlodged.

Retirementgratuitieshavebeenprovidedfor,inaccordancewithSriLankaAccountingStandardsLKAS-19EmployeeBenefits.

Compliance with Central Bank Regulations

AsaLicensedFinanceCompanyandaRegisteredFinanceLeasingEstablishment,theCompanyisgovernedbytheNon-BankFinancialInstitutionsDirections&RulesissuedbytheMonetaryBoardoftheCentralBankofSriLanka.

Accordingly,theCompanyhastocarryoutandmaintainbusinessactivitiesincompliancewiththeDirectionsfromtimetotimeissuedbytheCentralBankofSriLanka.

Accountability and Disclosure

Intheyearended31stMarch2017,themembersoftheBoardofDirectorshavereviewedindetailtheQuarterlyFinancialStatementsandAnnualFinancialStatementsinordertosatisfythemselvesthattheypresentatrueandfairviewoftheCompany’saffairsandthesepracticeshavebeenfurtherstrengthenedasperthecodeofbestpracticeonCorporateGovernance,ListingRulesofColomboStockExchangeandDirectionsissuedundertheFinanceCompaniesAct.

AsummaryofBoardofDirectors’ResponsibilitiesinrespectofFinancialStatementsisgivenonpage37.

ByOrderoftheBoard,

Priyanka Dilhani (Mrs.)

CompanySecretary25thJuly2017



RiskisinherentinanyFinanceCompany’sactivities.ThereforeeffectiveRiskManagementisfundamentalforthesuccessandthesustainabilityofeachfinancialinstitution.ThemajorrisksthatareencounteredbytheCompanyincludeCreditRisk,InterestRateRisk,LiquidityRisk,OperationalRisk,LegalRisk,TechnologicalRiskandReputationalRisk.Theestablishedpolicies,procedures,internalcontrolsandbalancesactasacatalystinmitigatingrisksthatareencounteredbytheCompanyinitsareaofoperations.

Transactionsrelatedtofinanceindustryevolvedailyandhavebecomecomplexovertheyears.ThishascreatedadditionalriskstothesectorandhasbroughtabouttheneedtoadoptsoundRiskManagementtechniquestopreventormitigatecorerisksandtosafeguardannualprofitsandassetsofacompany.RiskManagementobjectivesofcompaniesarethereforealignedtostrikeanappropriatebalancebetweenriskandrewardsinordertomaximizeshareholderwealth.TopreventlossesofstakeholdersofFinanceCompanies,amultitudeofregulationswereintroducedbytheregulatorinrecentyearstocountereminentrisks.ThesenewregulationsalongwiththeDepositInsuranceSchemehaverevitalizedpublicconfidenceonceagain.

Company’s Strategy for Risk Management

SinhaputhraadoptsaRiskManagementstrategythatfocusesinitiallyonunderstandingthepotentialrisktheCompanyfacesbymakingriskassessmentsandmeasuringrisklevels.TheRiskManagementprocessentailstheimplementationofpoliciesandprocedureslaiddowntocounterriskatvariouslevelsandtomonitorthelevelofriskcontinuouslyandtoevaluatetheeffectivenessoftechniquesadoptedinriskmitigation.

TheCompanyhasadopteditsownpoliciesandproceduresthathaveevolvedovertheyearscoupledwiththeindustry’sbestpracticestocreateaneffectiveRiskManagementsystem.Theseprocessesrevolvearoundachievinganappropriatetrade-offbetweenriskandrewardstodeliverasuperiorshareholdervalue.Annually,wedeployaconsiderablelevelofresourcestomaintainthisprocessinaneffectivemanner.WecontinuouslyreviewRisk

RISK MANAGEMENT

ManagementpracticestoensurethatitisstreamlinedtoachieveobjectivesofourRiskManagementsystem.Otherthanmeetingshareholderperception,RiskManagementobjectivesareaimedatultimatelymeetingcustomerexpectationsandobligationswhilepreservingthesolvencyoftheenterpriseaccordingtotheriskprofileexpectationspreliminarilylaiddown.

ToexecutetheRiskManagementprocess,Sinhaputhraadoptsaformaltopdownhierarchicalapproach,whichcommencesfromBoardlevelandpassesdowntothenextlevelbeingtheSeniorManagementlevel.SeniorManagementisentrustedwiththetaskofmanagingriskwithintheirareaofdutywhilecarryingoutroutinefunctionsrelevanttothedivision.AnillustrativerepresentationoftheRiskManagementstructureatSinhaputhraisgivenbelowandexplainedindepthintheensuingparagraphs.Thestructuremapstheimportanceofspecificcommitteesandtheauditfunctioninkeepingtogetherawell-balancedRiskManagementframeworkthatrequiresgovernancefromBoardleveltoindependentreviewsbeingcarriedoutonanongoingbasis.

Board of Directors’ Governance in Meeting Risk Management Obligations

TheBoardofDirectorshasultimateresponsibilityforproactiveRiskManagementpracticeintheCompany.TheBoardindischargingitsobligationstowardsRiskManagementhasestablishedtwokeysub-committeestomonitorkeyrisksattributabletotheCompany,i.e.,theAuditCommitteeandtheIntegratedRiskManagementCommittee(IRMC).ThesesubcommitteeshaveadequaterepresentationofBoardMemberswhoarewell-conversantonthesubjectandhavetheguidanceofSeniorConsultantswithprofessionalexpertiseandwideexperience.TheBoardofDirectorsisabletoobtainfirst-handinformationonspecificrisksandcloselymonitorsrisksthroughthesecommitteesandreviewmeasurestakenatsub-committeelevelandatmanagementlevelinmitigatingsuchrisksonanongoingbasis.


IRMC’s Role in Risk Management

TheprimarypurposeoftheIRMCistoassisttheCompany’sBoardofDirectorsinfulfillingitsresponsibilitiesonallaspectsofRiskManagementpracticesadoptedbytheCompany.

TheCommitteemeetsonaquarterlybasisandcarriesoutriskassessmentsonkeyrisksincludingLiquidityRisk,InterestRateRiskandOperationalRiskbystudyingreportsandstatisticstabledbyrespectiveheadsofdivisions.ThisincludesreviewingthematurityprofileofSinhaputhraFinanceassetsandliabilitiesandcurrentstrategiesthathavebeenputforwardtoaddressexistingmismatchesintheshortandlong-term.TheCommitteeinmeetingitsobligationsreviewedinterestratesonlendinganddepositstogetherwhilecorrelatinginformationontheirapplicableperiods.ThesestudiesenabletheCommitteetoassessanticipatedratechangesanditsimpacttoprofitability.ToassessOperationalRisk,theCommitteerecentlyreviewedtheadequacyofcurrentproceduresandpoliciesthathavebeenadoptedbyrespectivecoreoperationaldivisionsincludingtheCreditandRecoveriesDivisionsanddidrestructuringwherevernecessary.

Audit Committee’s Role in Risk Management

TheAuditCommitteeassiststheBoardinreviewingtheadequacyofinternalcontrolsthathavebeenincorporatedinouroperationsandprocessestosafeguardtheCompany’sassetsandtocounterrisksattransactionlevelaswellasrisksatmacrolevel.TheCommitteereviewsquarterlyreportsofInternalAuditorstoobtainafeedbackoftheManagement’scompliancetoproceduresandcontrolslaid-downincludingadherencetolawsandregulations.

TheAuditCommitteemaintainsitsindependenceasitcomprisesofindependentNon-ExecutiveDirectorsandSeniorConsultantstotheBoard,who,whentheneedarises,reporttotheBoardonsignificantmatters,theywouldcomeacrosswhendischargingtheirobligations.Aspartofitsscope,theCommitteemeetstheExternalAuditorsontheannualstatutoryaudittodiscussanysignificantrisksandreviewsreportingrequirementsoftheCompany.

The Company’s Risk Management Structure

RISK MANAGEMENT....

Board of Directors

Other Committees

Credit Committee

Management Committee

Audit CommitteeIntegrated Risk Management

Committee

Internal Audit & External Audit

Assistant General Managers

Credit Risk

MarketRisk

Liquidity Risk

Operational Risk

Legal Risk

Technological Risk

Reputational Risk


Significance of Other Committees inSupporting Risk Management

Specificcommitteesthatmeetatmanagementlevelperiodicallyfocusoncoreaspectsofbusinessmorecloselyandlendssupportinmanagingrisks,associatedwiththeirrespectiveareas,namely:

Credit Committee

TheCommitteeisentrustedtomonitorthequalityofcreditgrantedandtomanagerisksinherenttolending.TheCommitteemonitorshighvalueoverdueaccounts,andestablishesstrategiestoimprovecreditqualityandreduceoverduelevels.Italsoapprovesdisbursementsinvolvinghighervolumesbasedonlevelsofexposure.

Management Committee

TheManagementCommitteewassetupwiththeintentionofmonitoringtheCompany’sperformanceverycloselyandcommencedmeetingonaweeklybasis.TheCommitteereviewedactualresultsagainsttargetsonlending,depositcanvassing,recoveries,otherbusiness,borrowingrates,costsandprofitability.TheCommitteecomprisesofkeymembersofdivisions,headedbytheManagingDirector.Theweeklycreditcommitteedecisionsmadebycirculationaretabledforreviewatthismeeting.

TheSeniorManagementoftheCompanywasabletogatherup-to-dateinformationmorefrequentlywhichenabledthemtobemoreproactiveinavolatilesetting.ByhavingaclosemonitoringprocessoncoreactivitiestheCompanywasabletoresolvemattersspeedilyandreducerisksmoreeffectivelythanbefore.

Senior Management’s Role in Risk Management

TheresponsibilitytoactuallyimplementtheestablishedRiskManagementpoliciesandproceduresisultimatelypasseddowntotheSeniorManagementoftheCompany.SinhaputhraFinance’scorporatemanagementstructurehasbeenestablishedwithclearseparationoforganisationalfunctionsandresponsibilities,onasetoftoolsandproceduresthatencompassesasystemofin-housecontrolchecksthatdirecttheneededprecisionincarryingoutoperations.Toexecute

thisstructureinanefficientmanner,theCompanypossesseshighlycompetentandexperiencedstaffwhohavetheprecisemanagementorientationneededtoperformgiventasks.

TheSeniorManagementisrequiredtocarryoutriskassessmentsrelatedtotheirdepartmentalfunctionsandtoimplementtheappropriateriskmitigationtechniques.Eachdivisionisexpectedtoconstantlyreviewexistingprocessesandcontrolsandtheextentofitsimplementationinthelightofthechangingenvironmentandtakeappropriateprecautionsbyupdatingexistingproceduresandcontrolswhennecessary.TheCompany’s‘ManualofProcedure’withtherecentamendmentsisasignificantdevelopmentthatenabledseniormanagementtocommunicatestandardpracticestotheirsubordinatesintheirrespectivedivisions.Throughclearcommunicationofoperationalguidelinestostaffandaconstantlyupdatedindividualdutylistandanin-houseorientationprogramme,theCompanyhasbeenabletoguidenewrecruitsandstaffwithnewrolestofitintotheirassignedpositionsquiteefficientlyminimisingoperationallapses.

Company’s Approach to Managing Significant Risks

Credit Risk

CreditRiskariseswhenaborrowerisunabletomeethisfinancialobligationstowardsthelender.Beinginthebusinessoflending,creditriskisregardedasthemostpotentialriskfacingthesector.Managingcreditriskisconsideredapriority,since,ifhandledinappropriately,itcouldresultinbaddebtsthatwilleventuallybringdowntheprofitabilityofacompany.

Mitigation

TocounterCreditRisk,theCompanyhaslaiddownstringentproceduresfordisbursementofcreditwhichrequiresdocumentsthatspeedsuprecoveryandreducesinherentlegalrisksofthenation’slegalsystemandusesthisstrongpositionasanadvantageuntiltheborrowercompleteshispaymentsinfull.

Thisapprovalprocesstakesintoaccountrelevantstaffmembers’workexperienceandskilllevel.Thecreditpoliciesoutlineauthorisationlimitsthatextendup-toDirectorlevel,dependingonthevalueandcomplexityofthecredittobedisbursed.

RISK MANAGEMENT....


Asmeansofcreditcontrol,proposedfacilitiesaresubjectedtoanindependentreviewbythenextlevelofauthority.Significantlendingsthathaveexperienceddeteriorationinrepaymentareregularlysubjecttocreditexaminations.TheCreditCommitteewhichreviews,providesitsexpertknowledgebyreviewingaccountsneedingtheirattentionwhicharegenerallyofhighvalue.Theycovertheadequacyofexistingcreditpolicies,proceduresandcomplianceincludingadherencetocreditregulation.Theirobservationsandsuggestionsonimprovingexistingcontrolsystemsandprocesses,especiallyrelatedtocredit,areinformedtotheAuditCommitteeviaperiodicreports.TheAuditCommitteeinturnreviewstheadequacyofexistingcontrolsonbehalfoftheBoardandfollowsuponsuchauditobservationsandrecommendations.

Priortodisbursement,SinhaputhraFinanceCreditDivisionfollowsachecklistofstandardverificationstoensurethequalityoflendingissafeguarded.Thisencompassesreviewofacustomer’screditworthinessincludingreferencetopasttrackrecords,CreditInformationBureau(CRIB),internalInfosyssystem(ifapreviouscustomer)andcarryingoutprimaryinvestigations.Atthepreliminarystage,informationisgatheredontheborrower’sfinancialposition,assessingthecurrentfinancialpositionandtherepaymentcapacitythroughaformal‘creditappraisal’.Thereafter,thecreditapprovalprocesstakesintoaccountthetypeofcreditarrangement,eitherforagiventransactionortotalexposuretotheclientortoaparticularindustry.

TominimisetheCompany’sexposuretocreditrisk,appropriatecollateralisobtainedasanadditionalsafeguardcoveringtherequiredexposurelevels.TheCompanyensuresthatlendingisbackedbyrealisablesecurityandiscarriedoutinaccordancewithprevailingregulationstomaximizethespeedofdisposingsuchsecurities.

Toimproveskillsincreditdisbursement,officersattachedtotheCreditandMarketingareaffordedtrainingprogrammesthatcoveraspectsoncreditappraisal,creditproceduresandfocusonenhancingqualityofcreditdecisions.TheRecoveriesDivisionofSinhaputhraFinanceworkshandinhandwiththeCreditand

MarketingDivisiontoensureasmoothcollectionofinstallmentswithspecialattentiongiventooverdueaccounts.

Tosupportthecreditandrecoveryprocess,theFinanceDivisiontogetherwithITDivisionprovidesdaily,weeklyandmonthlystatisticsandfinancialreportsforrecoveryofficerstoassesscollectionperformancelevelsandtoplanrecoverytargets.TheKeyPerformanceIndicatorofthecreditstaffisreporteddailyassessingthequalityofthestaff.ThesepracticeshaveenabledmanagementtocutdownSinhaputhraFinancenon-performinglendinglevelssignificantlywithinthelasttwoyears.

Market Risk

MarketRiskistheriskarisingfromfluctuationsinmarketvariablessuchasinterestrates,foreigncurrencies,equitypricesandgoldprices.Thisistheriskthatthefairvalueorfuturecashflowsoffinancialinstrumentswillfluctuateduetochangesinthemarketvariables.AstheCompany’soperationsinvolvegrantingaccommodations,acceptingdepositsandobtainingfundingfacilities,themovementsininterestratesconstitutethemostimportantmarketriskfortheCompany.

Theimmediateimpactofvariationinmarketinterestratesisonthenetinterestincomeandinterestratespreads.Managingmarketriskthereforeisvitalinmaintainingtherequiredmarginsforbusinessestoremainprofitable.

MitigationTheCompany’sNetInterestMargin(NIM)ismonitoredforvarianceandappropriateremedialactionsaretakentomitigatetherisk.Inmanagingassociatedrisk,theManagementCommitteemonitorscompany’sratestructureagainstmarketratesweeklyandevaluatesanypotentialadverseeffectsthatmayarisefromsituationswhenthecostoffundingrisesatarelativelyhigherpacethantheyieldearnedonlendingandotherinvestments.

RISK MANAGEMENT....


Liquidity Risk

LiquidityRiskistheriskofnothavingsufficientresources,atareasonablecost,tomeetfinancialobligationsasandwhentheyarise.InthecaseoftheCompanythisrelatesmainlytotheabilitytomeetrefundofdepositsobtainedfromthepublicastheyfalldueandsettlementsofbankandotherborrowings.

Mitigation

LiquiditymanagementobjectivesofSinhaputhraprimarilyfocusonmaintainingaconsistentcashflowthatisadequatetofundoperationsandmeetobligationsandothercommitmentsonatimelymanner,inacost-effectiveway.Wearefinanciallysoundandstronginliquidity.Havingcash,otherliquidassetsandpossessingeasyaccesstomoneymarketsenableustomeetongoingoperationalcashoutflowsarisingfromobligationsincludingoverheadexpenses.Furthermore,theCompanyhastheneededflexibilitytoincurcapitalexpenditurefornecessarygrowthwhentheneedarises.Otherthanourlendingportfolio,wepossessashareinvestmentportfoliothatisliquidandcanbetradedatanymomentintheColomboStockMarket.

Wemaintainedourstatutoryliquidassetsratioabovetheregulatorylimitduringtheperiodunderreview.Asapractice,weensurethatourstatutoryliquidassetspositionismonitoreddailyespeciallyinthelightofasteeplyrisingdepositbase.

TheCompany’sFinanceDivisionisentrustedwiththetaskofmonitoringdailyliquidityrequirementsandisresponsibleforalltreasuryrelatedactivities.

Tomanageliquidity,theyreviewthefundingpositionagainstcashcommitmentsandbridgefundingneedsthroughavailablefundingsourcesintheshortandmedium-term.Inaddition,theIntegratedRiskManagementCommittee,asapartoftheirprimaryobjectivesoverseesandmonitorsliquidityrisk,especiallyonalong-termperspective.TheCommitteemeetsquarterlyandstudiesmaturitymismatchesenablingthemtoidentifymaturitygapsearlyandimplementstrategiesinthemediumandlong-term.Toidentifyassociatedrisks,theCommitteereviewsthe

maturityprofileofassetsandliabilities,growthratesinlending,depositsandthestatusofourborrowingsandgathersknowledgeontheprevailingtrendsinthesectorforourmainlinesofbusiness.

Operational Risk

TheOperationalRiskhasbeenidentifiedasadistinctcategoryofriskwithagrowingimportanceintheFinanceIndustry.ManagementofoperationalriskisakeyfeatureofsoundRiskManagementpracticesinthefinancialmarket.

Operationalriskarisesfromfailedorinadequateinternalprocesses,peopleandsystemsorfromexternaleventsleadingtolossesforanorganization.

Mitigation

Tomitigateriskarisingfromoperations,appropriatecontrolshavebeeninstalledbythemanagementtodetectpossiblehumanerrors,fraud,faultyinternalprocessesandsystems,non-adherencetoproceduresandnon-complianceofregulations.Sinhaputhraadoptsacompany-wideinternalcontrolsystemthathasevolvedovertheyears.Further,wehaveacomprehensive‘ManualofProcedure’fortheorganizationwhichprovidesclearpoliciesandproceduresforeachkeydivisionsothatstaffisguidedwhenexecutingtasks.

IndependentverificationscarriedoutbytheInternalAuditorsonoperationalactivitiesimprovecurrentbusinessprocessesandpractices.TheyrecommendbestoperationalpracticetoCorporateManagementwiththeintentionofovercomingrelatedrisks.TheauditfunctionalsoprovidesinsightintoanyoperationallapsesthatmayprevailandisanearlywarningmechanismforManagement,sothatManagementisproactiveinitsactionsthusavoidingoperationallosses.Furthermore,embeddedaspartofourcorporateculture,eachstaffmemberunderstandstheneedtofolloworganizationalproceduresatalltimes.

InformationTechnologyplaysamajorroleinoperationalriskmanagementsincerequiredcontrolscouldbecoupledtoourmainsystemthroughtheuseofstate-of-the-arttechnology.

RISK MANAGEMENT....


Toavoidunauthorisedaccess,infiltrationofdataandsystemerrors,numeroussecuritycontrolshavebeenin-builttothemainsystems.Specificlimitshavebeenplacedforvarioususerlevelsforauthorisationofatransactionandincertaininstancesasystemofdualcontrolisin-builttoprovidebettercontroloversystemtransactions.Variousmanagementreportsareavailableinthesystemformanagementtomonitortransactionsonaroutinebasis.Standardpracticesensurethatnewmodulesintroducedaretestedinthetestenvironmentandreportsareproducedforuserdepartment’sverification,priortotheirliveimplementation.Dailybacking-upofthedatabaseinasecureoff-sitelocationsecurescompanydatafromsystemmalfunctionandcorruption.Sinhaputhrasystemsareoutsourcedandappraisedcloselybywell-trainedandexperiencedinternalITstaffwhoareconversantinthefieldofITsystems.

Legal Risk

LegalRiskisanintegralpartofoperationalrisk,whicharisesoutofthelegalimplicationsoffailedsystems,people,processesoreternalevents.

Mitigation

TheBoardofDirectorsofSinhaputhrahasestablishedaneffectivemanagementsystemtohandleLegalRiskentrustingtheLegalDivisiontoprovideassistancetootherdivisionswhenexecutingtransactionsinthelightofimposedregulations.Asaprudentmeasure,relevantcoredivisionsrefercustomeragreements,additionalclausesandchangestoagreementsfortheadviceoftheLegalDivision.Dependingonthecomplexity,newlyintroducedlawsandregulationsareimplementedbytherespectivedivisionsinco-ordinationwiththeLegalDivisionformattersthatrequirelegalclarificationandadvice.Independently,theBoardofDirectorsofSinhaputhramonitorscompliancetoapplicablelawsandregulationsthroughtheAuditCommitteethatinturnobtainsfeedbackonthelevelofcompliancebyrespectivedivisionsthroughreportsfurnishedbyInternalAudit,atleastquarterly.

Technology Risks

SinhaputhraFinance'sCoreFinanceSysteminterconnectswithapproximately350networkeddevices.Theseincludecomputers,networkcablesandothernetworkingequipment.TheCompanydependsheavilyuponitsITnetworkandhighendsoftwareforitsday-to-dayactivities.Itisessentialthatthestability,integrityandsecurityoftheCompany’sITnetworkbesafeguarded.

Mitigation

VirtualizedApplicationServersprovidehigheravailabilitywithIBMIntelligentClustertoprotectthedatalossesandhighredundancy.Implementationofhigh-endInformationTechnologyhassimplifiedthesystemadministration,availabilitybyautomatingtheoperationstoprovidebettererrorhandingthroughUnifiedExtensibleFirmwareInterface(UEFI).MicrosoftAzureCloudinfrastructureandAzureBackupserviceisasimpleandcost-effectivesolution,thatgivesthetrustedtoolson-premiseswithrichandpowerfultoolsinthecloud.Thishelpsminimalmaintenance,consistenttoolsforoffsitebackupsandoperationalrecovery,andunifiedapplicationavailabilitytosustainthemissioncriticalITsystemsandresourcesoftheCompany,wherebyallsignificantITriskareidentifiedthroughthepredictivefailureanalysis,lightpathdiagnostic,monitoringcapabilitiesandalertsystemissueetc.

Wecontinuetoadopttechnologyasakeyelementinourstrategiesinsuchawaythatitiscombinedtogetherwithourcoreactivitiestodeliverasuperiorservice.Technologyhasbeenamaterialfeatureinourbusinessinmeetingneedsofourstakeholdersandinprovidingaservicethatisgratifying,creatingtherightplayingfieldtofacecompetition.EfficientuseoftechnologyhasbroughtSinhaputhrahighservicestandards,efficiencyandwithitimprovedresultsandhassupportedusinminimizingcost.Useofadvancedtechnologyhasbeencustomarywhenevernewtechnologyisavailablewithnotableinvestmentsmadetoourcoreinformationsystemespeciallytoimprovefeaturestothemodulesitencompasses.Sinhaputhra’sbranch

RISK MANAGEMENT....


RISK MANAGEMENT....

networkisinterconnectedwithanInternetProtocolVirtualPrivateNetwork(IPVPN)andIOTtechnologiestoenableaspeedysecuredtransactionchannel,onlineprocessingofbalancesandprovidesmanyotherfeaturesthatsupportthestaffinprovidinganefficientservice.

Reputational Risk

ReputationalRiskismultidimensionalanditexistsintheoverallbusinessmodeloftheCompany.Further,itreferstopotentialadverseeffects,whichcanarisefromtheCompany’sreputationbeingtarnishedduetoawidearrayofactions,includingfailuretocomplyregulatoryorlegalobligations,failuretodeliverexpectedstandardsofserviceandproducts,unethicalpractices,failuretoachievefinancialperformancetargets,labourunrestandenvironmentalbreachesetc.

Mitigation

TheCompanyhasidentifiedreputationalriskasoneofmajortypesofrisktheCompanyisexposedtoinachievingitsstrategicobjectives.AccordinglyReputationalRiskisbroadlymanagedthroughthesystemsandcontrolsadoptedforallotherrisktypessuchasCredit,Market,OperationalRisketc.

Further,promotionoftheValuedrivenculturewithintheorganizationandcustomerconfidencebuildinginitiativesemployedenhancethereputationoftheCompany.

Financial Reports

Annual Report of the Board of Directors 33

Statement of Directors' Responsibilities 37

Board Integrated Risk Management Committee Report 38

Board Remuneration Committee Report 41

Board Audit Committee Report 42

Related Party Transactions Review Committee Report 44

Directors' Statement on Internal Control Over Financial Reporting 45

Independant Auditors' Report 47

Statement of Profit or Loss and Other Comprehensive Income 49

Statement of Financial Position 50

Statement of Changes in Equity 51

Statement of Cash Flows 52

Notes to the Financial Statements 54

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ANNUAL REPORT OF THEBOARD OF DIRECTORS

In compliance with the provisions of the Companies Act No. 07 of 2007, the Board of Directors have pleasure in presenting to the Shareholders their report together with the Audited Financial Statements for the year ended 31st March 2017 of Sinhaputhra Finance PLC, a Public Limited Liability Company incorporated in Sri Lanka on 6th November 1978 and listed in the Colombo Stock Exchange in June 2010. Sinhaputhra Finance PLC is a Finance Company registered with the Central Bankof Sri Lanka under the Finance Companies Act No. 78 of 1988 and a registered Finance Leasing Establishment in terms of the Finance Leasing Act No. 56 of 2000. This report was approved by the Board of Directors on 25th July 2017.

Principle Activities

The principle activities of the Company are acceptance of Time and Savings Deposits from the general public and the investment of such mobilized funds on instruments such as Finance Leasing, Hire Purchase, Business Loans, Personal Loans, Pawn Broking, Real Estate, Vehicle Imports and in Capital Market Operations.

Financial Statements

Financial Statements of the Company are given on pages 49 to 101 of this Annual Report.

Auditors’ Report

The Auditors’ Report on the Financial Statements are given on page 47 of this Annual Report.

Significant Accounting Policies

Significant Accounting Policies adopted in the preparation of Financial Statements are given on pages 54 to 66 of this Annual Report.

Directors’ Interest Register

The Interest Register is maintained by the Company as required by the Companies Act No. 07 of 2007. All Directors have made declarations as required by Section 192 (1) and (2) of the Companies Act No. 07 of 2007. All related entries were made in the interest register for the year under review. The Interest register is available for inspection by shareholders or their authorized representatives as required by the Section 119 (1)(d) of the Companies Act No. 07 of 2007.

Directors’ Remuneration

The Board of Directors’ Remuneration in respect to the financial year ended 31st March 2017 is given in the Statement of Comprehensive Income to the Financial Statements. The remuneration amount to Rs. 13,143,495/-.

Internal Controls

The Board has instituted an effective and comprehensive system of Internal Controls covering financial operations, compliance control and risk management, to safeguard its assets and secure as far as possible the accuracy and reliability of the records to ensure that the business of the Company in carried out in an orderly manner.

Risk Management

An ongoing process is in place to identify and manage the risks that are faced by the Company. The Directors review this process through the Audit Committee and the Integrated Risk Management Committee.

Corporate Governance

The report on Corporate Governance as given on pages 20 to 24 of this report highlights details of systems and procedures that are in place to ensure that Corporate Governance is properly practiced.

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ANNUAL REPORT OF THE

BOARD OF DIRECTORS....

Investments

Details of the Company’s quoted and unquoted investments as at 31st March 2017 are given in Notes 21 and 23 to the Financial Statements on pages 73 to 74 and 77 to 79 respectively.

Reserves

Total Reserves including the Statutory Reserve Fund and Available for Sale Reserve of the Company as at 31st March 2017 amounts to Rs. 1,069,173,504/- (Rs. 615,360,981/- in 2016) details of which are given in Notes 37 to 41 to the Accounts.

Stated Capital

Stated Capital of the Company as at 31st March 2017 was Rs. 80,379,055/- consisting of 62,958,930 Ordinary Shares and 6,707,650 Non-Voting, Non-Redeemable, Non-Cumulative Participating Preference Shares.

Shareholdings

The distribution of Shareholding is given on Pages 8 to 10 of this report.

Share Information

Information relating to earnings, dividends and net assets per share is given in Share Information on page 9.

Major Shareholders

The 20 largest shareholders of the Company as at 31st March 2017 are given on pages 8 and 9.

Audit Committee Report

The Audit Committee Report is given on page 42 of this report.

Income

The Income of the Company as at 31st March 2017 was

Rs. 1,253,994,021/-.

Profits

The summarized details relating to the profits of the Company are given below:

2016/17 2015/16 Rs. Rs.

Net Profit Before Taxation 79,309,561 43,050,004Taxation 74,849,131 (42,046,374)

Net Profit After Taxation 154,158,692 1,003,630

Deferred Tax on Actuarial Loss 33,357 921,136

Actuarial Loss on Defined Benefit Plans (119,132) (3,289,772)

Additional Depreciation on Revaluation 6,093,596 6,110,290

Retained Profit Brought Forward (63,869,318) 232,162,673

Prior year adjustment - (286,443,848)

Balance Available for Appropriation 96,297,195 (49,535,891)

Appropriations:

Transfer to Statutory Reserve Fund (30,831,739) (14,333,427)

Transfer from/(to) Statutory Investment Fund - -

Reclassification of Available for Sales Reserve - -

Dividend Paid - -

Retained Profit Carried Forward 65,465,456 (63,869,318)

The movement of these reserves is shown in the Statement of Changes in Equity given on page 51.

Property, Plant and Equipment

Details of Land and Building, Plant and Equipment with additions made during the year and the depreciation charges for the year are shown in Note 29 to the Financial Statements.

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Resignations / New Appointments

Mr. J.R.J. Nanayakkara has ceased from the Board of Directors with effect from 01st of July 2016 on his retiring age of 70.

Company has Established Related Party Transactions Review Committee on 20th January 2017 and appointed Dr. A.R. Karunaratna as the Chairman and Mr. T.M.S. Bulankulame, Mr. K.G.D.S.J. De Alwis as Members of the Committee.

Directors’ Interest in Shares

The shareholdings of the Board of Directors together with their spouses at the beginning and as at 31st March 2017 were as follows:

* Ceased from The Board from July 2016

Directors’ Responsibility for Financial Reporting

The Board of Directors is responsible for the preparation of Financial Statements of the Company to reflect a true and fair view of the state of its affairs. The Directors are of the view that these Financial Statements have been prepared in conformity with the requirements of the Sri Lanka Accounting Standards.

Compliance with Laws and Regulations

The Company has not engaged in any activities contravening the laws and regulations. All officers responsible for ensuring compliance with the provisions of various laws and regulations confirm their compliance to the Board of Directors monthly.

Statutory Payments

The Board of Directors, to the best of their knowledge and belief are satisfied that all statutory payments due to the Government and in relation to employees have been made on time.

Contingent Liabilities

Except as disclosed in Note 42.1 to the Financial Statements on page 89 there were no material Contingent Liabilities as at the Statement of Financial Position Date.

Events After the Reporting Period

There were no material events occurring after the statement of reporting date that require adjustment to or disclosure in the Financial Statements.

Going Concern

The Board of Directors is satisfied that the Company has adequate resources to continue its operations in the foreseeable future. Accordingly, the Financial Statements are prepared based on the Going Concern concept.

Auditors

The retiring Auditors, M/s Baker Tilly Edirisinghe & Company has shown their willingness to continue in office and a resolution to re-appoint them as Auditors and authorizing the Board of Directors to fix their remuneration will be proposed at the Annual General Meeting.

Ordinary Shares Preference Shares

Name of Director 31/03/2017 31/03/2016 31/03/2017 31/03/2016

K.R.B. Wijeyeratne 31,650,870 31,650,870 - -

K.G.D.S.J. De Alwis 5,270 5,270 - -

E.A.D.P. Ekanayake 1,600 - - -

Dr. A.R. Karunaratna 5,300 5,300 10,000 10,000

J.R.J. Nanayakkara* - - 5,000 -

T.M.S. Bulankulame 500 - - -

Mrs. A.R.I. Wijeyeratne 3,450 3,450 8,000 8,000

ANNUAL REPORT OF THEBOARD OF DIRECTORS....

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ANNUAL REPORT OF THE

BOARD OF DIRECTORS....

Annual General Meeting

The 39th Annual General Meeting of the Company will be held on 28th September 2017 at the Registered Office of the Company, No. 11, Hill Street, Kandy at 9.30 a.m. Notice of Meeting relating to the 39th Annual General Meeting is given on page 104.

For and on Behalf of the Board,

K.R.B. Wijeyeratne K.G.D.S.J. De Alwis

Managing Director Director

By Order of the Board,


Company Secretary

25th July 2017

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STATEMENT OF DIRECTORS’RESPONSIBILITIES

The Board of Directors is required by the Companies Act No. 07 of 2007 to prepare Financial Statements for each financial year, which give a true and fair view of the statement of affairs of the Company as at the end of the financial year and the income and expenditure of the Company for the financial year.

The Board of Directors is also responsible to ensure that the Financial Statements comply with any regulations made under the Companies Act which specifies the form and content of Financial Statements and any other requirements which to the Company’s Financial Statements under any other law.

The Board of Directors considers that the Financial Statements presented in this Annual Report have been prepared using appropriate Accounting Policies, consistently applied and supported by reasonable and prudent judgments and estimates and in compliance with the Sri Lanka Accounting Standards, Companies Act No. 07 of 2007, Sri Lanka Accounting and Auditing Standards Act No. 15 of 1995 and Finance Business Act No. 42 of 2011 and the Directions issued there under.

The Board of Directors is responsible for ensuring that the Company keeps sufficient accounting records, which disclose the Financial Position of the Company with reasonable accuracy and enable them to ensure that the Financial Statements have been prepared and presented as aforesaid. They are also responsible for taking measures to safeguard the assets of the Company and in that context to have proper regard to the establishment of appropriate systems of internal control with a view to prevention and detection of fraud and other irregularities.

The Board of Directors continues to adopt the Going Concern basis in preparing the Financial Statements. The Directors, after making inquiries and review of the Company’s Business Plan for the financial year 2017/2018, including cash flows and borrowing facilities, consider that the Company has adequate resources to continue in operation.



Company Secretary

25th July 2017

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BOARD INTEGRATED RISK MANAGEMENTCOMMITTEE REPORT

Board Integrated Risk Management Committee (BIRMC)

The BIRMC was established by the Board of Directors to be in line with Sections 8.1 and 8.3 of the Finance Companies (Corporate Governance) Direction, No. 3 of 2008 issued by the Monetary Board under the Finance Business Act No. 42 of 2011. The scope and functions of the Committee conforms to the provisions of Section 8.3 b of the aforesaid Direction.

The Composition of the Board Integrated Risk Management Committee

The Board of Directors appointed Board Integrated Risk Management Committee (BIRMC) as at the end of the year comprised of the following members:

K.R.B. Wijeyeratne - Managing Director and Chairman of the Committee

K.G.D.S.J. De Alwis - Executive Director-Director Operations

Dr. A.R. Karunaratna - Independent Non-Executive Director

E.A.D.P. Ekanayake - Independent Non-Executive Director

Iresha Perera - Chief Financial Officer

Pandula Aluwihare - Snr. AGM Leasing

Sabriya Amanulla - Snr. AGM Credit & Risk Management

Gamini Pussepitiya - AGM Loans

Upali Hangawatte - AGM Recoveries

Shirani Dodanwala - AGM Collection

Menaka Rambukwella - AGM Leasing

Priyanka Dilhani - Junior Legal Officer

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The Committee held four meetings, for the year under review. The attendance of each member at meetings is illustrated in the table given below:

BOARD INTEGRATED RISK MANAGEMENT

COMMITTEE REPORT....

Name of Committee Member Status Number of Meetings Meetings Attended

Member Held in F/Y 2017 in F/Y 2017

K.R.B. Wijeyeratne Executive Director 4 4(Chairman of the Committee)

K.G.D.S.J. De Alwis Executive Director 4 4

Dr. A.R. Karunaratna Independent Non-Executive Director 4 4

E.A.D.P. Ekanayake Independent Non-Executive Director 4 3

Iresha Perera Chief Financial Officer 4 3

Pandula Aluwihare Snr. AGM Leasing 4 4

Sabriya Amanulla Snr. AGM Credit & Risk Management 4 4

Upali Hangawatte AGM Recoveries 4 4

Gamini Pussepitiya AGM Loans 4 4

Shirani Dodanwala AGM Collection 4 4

Menaka Rambukwella AGM Leasing 4 4

Priyanka Dilhani Junior Legal Officer 4 4

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BOARD INTERGRATED RISK MANAGEMENT

COMMITTEE REPORT....

Approach Adopted by the Board Integrated Risk Management Committee

The Committee has the right blend of members who currently represent core divisions covering areas in Credit, Recoveries and Finance.

During this financial period, the Committee activities revolved around the following activities:

Recommended the setting up of a revamped credit evaluation division with their own investigation offices for evaluations before disbursements

Assessed risk related to liquidity, credit, market and operations by re-evaluating important decisions taken by the Senior Management Committee at their weekly meetings

Ensured that the risks of the Company are within prudent levels accepted by the Committee. Where necessary, the Committee deliberated and adopted a corrective course of action to mitigate risk to prudent levels

Communicated with the relevant Heads of Divisions on the needed course of action, to improve the overall effectiveness of Risk Management and set time frames

Reviewed compliance status of Sinhaputhra to prevailing laws and regulations with specific focus on CBSL requirements

K.R.B. Wijeyeratne

Chairman - Integrated Risk Management Committee25th July 2017

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The Board Remuneration Committee comprises of two Independent Non-Executive Directors, and a Senior Consultant. Members of the Committee are Mr. E.A.D.P. Ekanayake -Chairman, Dr. A.R. Karunaratna & Mr. A.M.G. Weerakoon -Senior Consultant to the Board. The Managing Director and the Executive Directors as well as the Senior Management attend meetings of the Committee by invitation and provide relevant information and their views to the Committee for its deliberations, except when the Executive Directors’ own remuneration packages and other matters relating to them are discussed.

The Committee deliberates and determines the policies and criteria relevant to fees of Directors, emoluments of Executive Directors, salaries and prerequisites of Corporate Management and the Senior Management. These are based on profitability, projected budgets, target achievements, market conditions and retention priorities and collective monthly appraisals.

A primary objective of the remuneration policy of the Company is to attract and retain our professionally qualified and/or experienced workforce and reward their performance, bearing in mind the individual performance and long-term service to the Company.

The Committee meets as often as necessary and makes recommendations on compensation structures, bonuses, increments and also on matters pertaining to recruitment of Key Management personnel to ensure that the management and staff at all levels are adequately rewarded for their performance and commitment to the Company’s goals on a competitive basis.

BOARD REMUNERATION COMMITTEE REPORT

Remuneration Committee meetings held for the year including details on member participation is shown below:

E.A.D.P. Ekanayake

Chairman - Remuneration Committee

25th July 2017

Name of the Directorship / Number of Meetings Committee Membership Status Meetings Held Attended Member In F/Y 2017 In F/Y 2017

E.A.D.P. Ekanayake Independent Non-Executive 3 3

(Chairman of the Director

Committee)

Dr. A.R. Karunaratna Independent Non-Executive 3 3

Director

A.M.G. Weerakoon Snr. Consultant 3 3

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BOARD AUDIT COMMITTEE REPORT

The Composition of the Committee

The Committee is appointed by the Board and as at the end of the year comprised of the following Independent Non-Executive Directors and a Senior Consultant to the Board and a Fellow of the Chartered Accountants of Sri Lanka (FCA).

Mr. T.M.S. Bulankulame (B.Sc. Accounting & Finance -USA,CMA - Canada) (Committee Chairman) - IndependentNon-Executive Director.

Dr. A.R. Karunaratna - Independent Non-Executive Director.

Mr. E.A.D.P. Ekanayake - Independent Non-Executive Director.

Mr. K.H.K. Wijayadasa (FCA) - Senior Consultant (Finance) to the Board.

On invitation as needed are the Managing Director, Chief Financial Officer, Director Operations, Representatives from Internal/External Auditors, Members of the Senior Management.

Meetings

The Committee held six meetings during the financial year ended 31st March 2017. The summary proceedings of these meetings are regularly reported to the Board of Directors.

Audit Committee meetings held for the year including details on member participation is shown below:

Role of the Committee

The Audit Committee assists the Board of Directors in fulfilling its responsibilities over the accounting and financial reporting process and audit of the Financial Statements of the Company by monitoring the :

Integrity and reliability of Financial Statements

Quality and the appropriateness of accounting Policies and their adherence to statutory and regulatory compliance requirements and applicable Accounting Standards

Independence and qualifications of the External Auditor

Performance of the Internal and External Auditors

Effectiveness of the system of Internal Controls of the Company

Effectiveness of the Corporate Governance Report

Reporting of Financial Position and Performance

The committee supports the Board of Directors in discharging its responsibility in relation to financial reporting by reviewing:

Preparation of Financial Statements in accordance with the stipulated requirements of the new Sri Lanka Accounting Standards

Selection of most appropriate accounting policies and other significant accounting estimates used in preparation of Financial Statements

The effectiveness in the financial reporting systems including the management accounts to ensure the reliability of information provided to the Board and other stakeholders of the Company

Meetings Meetings Meetings Held Attended in F/Y 2017 in F/Y 2017

T.M.S. Bulankulame Independent Non- Executive 6 6(Committee Chairman) Director

Dr. A.R. Karunaratna Independent Non-Executive 6 6 Director

E.A.D.P. Ekanayake Independent Non-Executive 6 5 Director

K.H.K. Wijayadasa Snr. Consultant to the Board 6 5

Directorship / Membership Status

Name of theCommittee Member

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Conclusion

The Committee reports to the Board, identifying any matters in respect of which it considers the requirement of action or improvement and makes recommendations as to the steps to be taken.

The Audit Committee has recommended to the Board that M/s Baker Tilly Edirisinghe & Company be re-appointed as External Auditors of the Company for the financial year ending 31st March 2018 subject to the approval of shareholders at the Annual General Meeting.

T.M.S. Bulankulame

Chairman - Audit Committee

25th July 2017

BOARD AUDIT COMMITTEE REPORT....

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RELATED PARTY TRANSACTIONS REVIEW COMMITTEE REPORT

The Related Party Transactions Review Committee has been set-up during the year by the Board of Directors in order to strengthen the process of identifying, recording and reporting of related party transactions which in turn ensures strict compliance with the rules and regulations governing Related Party Transactions of Listed Entities and thus improves its internal control mechanisms.

Composition

- Dr. A.R. Karunaratna – Independent Non-Executive Director, Chairman of the Related Party Transactions Review Committee

- Mr. T.M.S. Bulankulame – Independent Non-Executive Director

- Mr. K.G.D.S.J. De Alwis – Executive Director

Purpose of the Committee

The purpose of the Committee is to ensure compliance with the rules and regulations governing Related Party Transactions of listed entities thereby strengthening the Company’s internal

control mechanism and Corporate Governance.

Policy and Scope

With the approval of the Board of Directors, the Company has implemented a policy on related party transactions that gives necessary guidelines in recognition, placing on record and bringing to light transactions of this nature. Its benefits are to make assessments as to whether related party transactions that have to be entered in to by the Company require either Board approval or by the Shareholders of the Company.

As a matter of principle, Directors will not participate in any of a discussion pertaining to a related party transaction of which either he or she has vested interests but on the contrary he/she is requested to participate by the Committee for the sole purpose giving information related to the transaction. Also, it ensures that immediate market disclosures and disclosures in the Annual Report, as required by the applicable rules and regulations are made in a timely and detailed manner.

Related Party Transactions During 2016/17

During the year 2016/17, there were no non-recurrent or recurrent related party transactions that exceeded the respective thresholds mentioned in the Listing Rules of the Colombo Stock Exchange.

Details of other related party transactions of the Company during the above period are disclosed in Note 44 to the Financial

Statements.

Meetings

The Committee held one meeting, for the year under review. The attendance of each member at the meeting is illustrated in the table given below:

Dr. A.R. Karunaratna

Chairman - Related Party Transactions Review Committee

25th July 2017

Name of the Directorship / Number of Meetings Committee Membership Status Meetings Held Attended Member In F/Y 2017 In F/Y 2017

Dr. A.R. Karunaratna Independent Non-Executive 1 1

(Chairman of the Director

Committee)

T.M.S. Bulankulame Independent Non-Executive 1 1

Director

K.G.D.S.J. De Alwis Executive Director 1 1

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DIRECTORS’ STATEMENT ON INTERNAL CONTROL OVER FINANCIAL REPORTING

Responsibility

In line with the Section 10(2)(b) of the Finance Companies (Corporate Governance) Direction No. 03 of 2008, the Board of Directors present this report on internal control over financial reporting.

The Board of Directors (“Board”) is responsible for the adequacy and effectiveness of the internal control mechanism in place at Sinhaputhra Finance PLC’s, (“The Company”).

The Board has established an ongoing process for identifying, evaluating and managing the significant risks faced by the Company and this process includes enhancing the system of internal controls as and when there are changes to business environment or regulatory guidelines. The process is regularly reviewed by the Board. The Board is of the view that the system of internal controls over financial reporting in place is sound and adequate to provide reasonable assurance regarding the reliability of financial reporting, and that the preparation of Financial Statements for external purposes is in accordance with relevant accounting principles and regulatory requirements.

The management assists the Board in the implementation of the Board’s policies and procedures pertaining to internal control over financial reporting. In assessing the internal control system over financial reporting, identified officers of the Company collated all procedures and controls that are connected with significant accounts and disclosures of the Financial Statements of the Company.

These in turn are being observed and checked by the internal auditors of the Company for suitability of design and effectiveness on an on-going basis.

Key Internal Control Processes

The key process that has been established in reviewing the adequacy and integrity of the system of internal controls include the following:

The Board has established committees to assist the Board in monitoring the effectiveness of the Company’s operations and ensuring that they are in accordance with the corporate objective, strategies and the budgetary targets as well as the policies and business directions that have been approved

The Board Integrated Risk Management Committee (BIRMC) is established by the Board to assist the Board to oversee the overall management of major areas of risk. The BIRMC includes representation of the other Committee Reports and Senior Management Team of the Company who assists the Board in the implementation of policies, procedures and controls identified by the Board

The Audit Committee of the Company reviews internal control issues identified by the internal auditors and external auditors, regulatory authorities and Management and evaluates the adequacy and effectiveness of risk management and internal controls. They also review the internal audit function focusing on the scope of audits and quality of reporting. The minutes of the audit committees meetings are tabled for the information of the Board on a quarterly basis

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Confirmation

Based on the above processes, the Board confirms that the financial reporting system of the Company has been designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of Financial Statements for external purposes and has been done in accordance with Sri Lanka Accounting Standards and the regulatory requirements of the Central Bank of Sri Lanka.


25th July 2017

DIRECTORS’ STATEMENT ON INTERNAL CONTROL

OVER FINANCIAL REPORTING....

K.R.B. Wijeyeratne

Managing Director

T.M.S. Bulankulame

Chairman-Audit Committee

A.R. Karunaratna

Chairman

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INDEPENDENT AUDITORS’ REPORT

TO THE SHAREHOLDERS OF SINHAPUTHRA FINANCE PLC

Report on the Financial Statements

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

Board’s Responsibility for the Financial Statements

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

Auditor’s Responsibility

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

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the Financial Statements. The procedures selected depend on the auditor’s judgment,

including the assessment of the risks of material misstatement of the Financial Statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the Company’s preparation of the Financial Statement that give a true and fair view in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by Board, as well as evaluating the overall presentation of the Financial Statements.

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

Basis for Qualified Opinion

The disposal proceeds received from sale of repossessed vehicles relating to certain lease and hire purchases contracts have been accounted as repayments in respect of the related rescheduled contracts. As a consequence to this practice, rescheduled contracts approximately Rs.115.7Mn at 1 April 2015 and Rs.54.3Mn during the year ended 31 March 2016 were incorrectly classified as performing. Further the Company has recognised interest income in respect of these contracts amounting to Rs. 2.1Mn during the year ended 31 March 2016. Had the Company classified these loans as non-performing, the provision for impairment as at 31 March 2017 would have been higher by approximately Rs.170Mn while the impairment charge and interest income recognised for the year ended 31 March 2016 would have been higher and lower respectively by

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INDEPENDENT AUDITORS’ REPORT....

Rs.54.3Mn and Rs. 2.1Mn and the retained earnings as at 1 April 2016 would have been less by approximately Rs.115.7Mn than the balances and amounts currently reported in the respective periods.

Qualified Opinion

In our opinion, except for the possible effects of the matter described in the Basis for Qualified Opinion paragraph, the Financial Statements give a true and fair view of the financial position of Sinhaputhra Finance PLC as at 31 March 2017, and of its financial performance and its cash flows for the year then

ended in accordance with Sri Lanka Accounting Standards.

Emphasis of Matter

As part of our audit of the Financial Statements for the year ended 31 March 2017, we also audited the adjustments described in Note 49 that were applied to restate the figures and balances reported in the Financial Statements for the year ended 31 March 2016. In our opinion, such adjustments are appropriate and have been properly applied. We were not engaged to audit, review, or apply any procedures to the Financial Statements for the year ended 31 March 2016 of the Company other than with respect to the adjustments and, accordingly, we do not express an opinion or any other form of assurance on those Financial Statements taken as a whole.

Other Matter

The Financial Statements of Sinhaputhra Finance PLC for the year ended 31 March 2016 were audited by another auditor who expressed a disclaimer of opinion on those statements on 22 July 2016.

Report on Other Legal and Regulatory Requirements

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

a) The basis of opinion and scope and limitations of the audit are as stated above.

b) In our opinion:

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

- except for the possible effects of the matter described in the Basis for Qualified Opinion paragraph, the Financial Statements of the Company give a true and fair view of its financial position as at 31 March 2017, and of its financial performance and cash flows for the year then ended in accordance with Sri Lanka Accounting Standards,

- the Financial Statements of the Company comply with the requirements of Sections 151 of the Companies Act No. 07 of 2007.

Edirisinghe & Co.,Chartered AccountantsColombo25th July 17

TO THE SHAREHOLDERS OF SINHAPUTHRA FINANCE PLC (CONTINUED)

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STATEMENT OF PROFIT OR LOSS ANDOTHER COMPREHENSIVE INCOME

Figures in brackets indicate deductions.The Financial Statements are to be read in conjunction with the related Notes on pages 54 to 101 which form an integral part of these Financial Statements of the Company.

For the year ended 31st March 2017 2016 Note Rs. Rs. Restated

Gross Income 1,253,994,021 1,103,269,765

Interest Income 9 1,174,515,707 1,043,611,319Interest Expenses (659,089,266) (603,721,519)

Net Interest Income 515,426,441 439,889,800

Fee and Commission Income 10 55,528,481 31,124,798

Fee and Commission Expenses (4,723,048) (4,796,448)

Net Fee and Commission Income 50,805,433 26,328,350

Net Gain/(Loss) from Trading 11 300,007 -

Net Gain/(Loss) from Financial Instruments

Designated at Fair Value through Profit or Loss 1,688,543 (1,028,451)

Other Operating Income 12 23,649,826 28,533,648

Impairment Charges for Loans and other Losses 13 (92,361,199) (79,351,776)

Net Operating Income 499,509,051 414,371,571

Less:

Personnel Expenses 14 (172,892,658) (143,894,353)

Other Expenses 15 (233,062,989) (206,825,113)

Operating Profit BeforeTax and VAT on Financial Services 93,553,404 63,652,105

Value Added Tax on Financial Services (14,243,843) (20,602,101)

Profit Before Income Tax 79,309,561 43,050,004

Income Tax Credit/(Expenses) 16 (74,849,131) (42,046,374)

Profit for the Year 154,158,692 1,003,630


Other Comprehensive Income

Items that are or may be Reclassified to Profit or Loss

Net Losses on Remeasuring Available for Sale Financial Assets (179,572) (2,775,496)

Net Amount Transferred to Profit or Loss - - (179,572) (2,775,496)Items that will never be Reclassified to Profit or Loss

Actuarial Loss on Defined Benefit Plans (119,132) (3,289,772)

Revaluation Surplus During the Year 329,388,081 -

Deferred Tax Charge on Revaluation Surplus (29,468,903) -

Deferred Tax on Actuarial Loss 33,357 921,136

Other Comprehensive Income /(Loss) for the Year, Net of Tax 299,653,831 (5,144,132)

Total Comprehensive Income /(Loss) for the Year, Net of Tax 453,812,523 (4,140,502)

Basic Earnings Per Share 17 2.45 0.02

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STATEMENT OF FINANCIAL POSITION

As at 31st March 2017 2016 01.04.2015 Note Rs. Rs. Rs. Restated Restated

Assets Cash and Cash Equivalents 19 54,512,302 61,548,982 60,485,499 Balances with Central Bank - Held to Maturity 20 417,653,561 399,813,445 372,644,411 Placements with Banks 209,395,304 370,629,486 367,987,848 Financial Assets - Held for Trading 21 23,468,363 19,973,126 16,326,573Loans and Advances 22 5,690,623,435 4,964,461,240 4,576,763,081Financial Assets - Available for Sale 23 6,720,266 6,850,133 9,536,327Financial Assets - Held to Maturity 6,183,545 6,212,075 5,056,123Current Tax Receivable 24 15,758,554 - -Deferred Tax Assets 25 58,630,378 32,075,797 45,768,917Other Receivables 26 30,397,459 61,747,821 63,479,225Other Assets 27 31,439,275 8,711,843 229,353,449Real Estate Stock 28 118,855,399 109,292,951 123,217,549Property, Plant and Equipment 29 1,003,918,449 694,435,867 709,576,428Intangible Assets 30 18,524,014 21,234,199 9,894,833

Total Assets 7,686,080,304 6,756,986,965 6,590,090,263

Liabilities

Deposits from Customers 31 5,889,334,223 5,565,152,640 5,369,746,307Other Borrowings 32 251,326,667 381,446,668 436,801,667Finance Lease Liability 33 1,125,152 3,727,951 6,135,779Current Tax Payable 24 - 18,962,867 4,509,737Retirement Benefit Obligation 34 40,571,487 43,466,867 34,000,553Other Liabilities 35 354,170,216 48,489,936 39,015,682

Total Liabilities 6,536,527,745 6,061,246,929 5,890,209,725

Equity

Stated Capital 36 80,379,055 80,379,055 80,379,055Statutory Reserve Fund 37 196,153,575 165,321,836 150,988,409Revaluation Reserve 38 679,946,977 386,121,395 392,231,685General Reserve 39 129,013,127 129,013,127 129,013,127Available for Sale Reserve 40 (1,405,631) (1,226,059) 1,549,437Retained Earnings/Accumulated Losses 41 65,465,456 (63,869,318) (54,281,175)

Total Equity 1,149,552,559 695,740,036 699,880,538

Total Liabilities & Equity 7,686,080,304 6,756,986,965 6,590,090,263Figures in brackets indicate deductions.The Financial Statements are to be read in conjunction with the related Notes on pages 54 to 101 which form an integral part of these Financial Statements of the Company.

It is certified that the Financial Statements have been prepared in compliance with the requirements of the Companies Act No. 07 of 2007.

The Board of Directors is responsible for the preparation and presentation of these Financial Statements. Approved and signed for and on behalf of the Board,

Kandy - 25th July 2017

H.A.I.M. PereraChief Financial Officer

K.R.B. WijeyeratneChief Executive Officer / Managing Director

T.M.S. BulankulameDirector / Chairman Audit - Committee

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STATEMENT OF CHANGES IN EQUITY

For the year ended 31st March 2017 Stated Capital

Ordinary Preference Statutory Revaluation General Available for Retained Total Shares Shares Reserve Fund Reserve Reserve Sale Reserve Earnings Rs. Rs. Rs. Rs. Rs. Rs. Rs. Rs.

Balance as at 1st April 2015 (as previously stated) 63,609,930 16,769,125 150,988,409 400,761,906 129,013,127 1,549,437 232,162,673 994,854,607

Prior Year Adjustment (Note 49) - - - (8,530,221) - - (286,443,848) (294,974,069)

Balance as at 01st April 2015 (Restated) 63,609,930 16,769,125 150,988,409 392,231,685 129,013,127 1,549,437 (54,281,175) 699,880,538

Profit for the Year (Restated) (Note 49) - - - - - - 1,003,630 1,003,630


Actuarial Loss on Defined Benefit Plans - - - - - - (3,289,772) (3,289,772)

Net Losses on Remeasuring Available for Sale Financial Assets - - - (2,775,496) - (2,775,496)

Deferred Tax on Actuarial Loss - - - - - - 921,136 921,136

Transfers During the Year - - 14,333,427 - - - (14,333,427) -

Additional Depreciation on Revaluation - - - (6,110,290) - - 6,110,290 -

Balance as at 31st March 2016 (Restated) 63,609,930 16,769,125 165,321,836 386,121,395 129,013,127 (1,226,059) (63,869,318) 695,740,036

Balance as at 01st April 2016 (Restated) 63,609,930 16,769,125 165,321,836 386,121,395 129,013,127 (1,226,059) (63,869,318) 695,740,036

Profit for the Year - - - - - 154,158,692 154,158,692


Actuarial Loss on Defined Benefit Plans - - - - - (119,132) (119,132)

Net Losses on Remeasuring Available

for Sale Financial Assets - - - - - (179,572) - (179,572)

Revaluation Surplus During the Year - - - 329,388,081 - - 329,388,081

Deferred Tax Charge on Revaluation Surplus - - - (29,468,903) - - - (29,468,903)

Deferred Tax on Actuarial Loss - - - - - - 33,357 33,357

Transfers During the Year - - 30,831,739 - - - (30,831,739) -

Additional Depreciation on Revaluation - - - (6,093,596) - - 6,093,596 -

Balance as at 31st March 2017 63,609,930 16,769,125 196,153,575 679,946,977 129,013,127 (1,405,631) 65,465,456 1,149,552,559

Figures in brackets indicate deductions.

The Financial Statements are to be read in conjunction with the related Notes on pages 54 to 101 which form an integral part of these Financial Statements of the Company.

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STATEMENT OF CASH FLOWS

For the year ended 31st March 2017 2016 Note Rs. Rs. Restated

Cash Flows from Operating Activities

Interest and Commission Receipts 1,174,515,707 1,043,611,319 Interest Payments (658,725,222) (603,331,546) Other Income 78,069,426 58,541,635Operating Expenditure (377,284,807) (316,715,002)Payment of Retirement Gratuity (7,747,847) (124,930)Value Added Tax on Financial Services (14,243,843) (20,602,101)Operating Profit Before Changes in Operating Assets and Liabilities A 194,583,414 161,379,375

Changes in Operating Assets

Funds Advanced to Customers (818,523,396) (467,049,931)Real Estate Stocks (9,562,448) 10,207,932Other Assets 8,622,930 222,373,010

Changes in Operating Liabilities

Deposits from Customers 324,181,583 195,406,333 Other Liabilities 10,123,372 7,349,308Net Cash (Used in) / Generated from Operating Activities Before Income Tax (290,574,545) 129,666,027

Income Tax Paid (14,699,102) (12,978,989)

Net Cash (Used in) / Generated from Operating Activities (305,273,647) 116,687,038

Cash Flows from Investing Activities

Dividend Income 1,408,888 1,116,810Net Investments in Treasury Bills and Bonds (17,884,226) (27,291,848)Net Investments in Shares/Debentures/Units (2,884,345) (5,797,445) Purchase of Property, Plant and Equipment (5,925,737) (24,981,579)Net Cash Used in Investing Activities (25,285,420) (56,954,062)

Cash Flows from Financing Activities

Bank Loans Obtained - 75,000,000Repayment of Bank Loans (130,120,001) (130,355,000)Repayment of Finance Lease (3,148,703) (2,797,800)Net Cash Used in Financing Activities (133,268,704) (58,152,800)

Net Cash Flow Change During the Year (463,827,771) 1,580,176Cash and Cash Equivalents at the Beginning of the Year 429,654,764 428,074,588Cash and Cash Equivalents at the End of the Year (34,173,007) 429,654,764

Reconciliation of Cash and Cash Equivalents at the End of the Year

Cash and Short-term Funds 54,512,302 61,548,983 Deposits with Banks 209,395,304 370,629,486 Bank Overdraft (298,080,613) (2,523,705) (34,173,007) 429,654,764

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STATEMENT OF CASH FLOWS....

Figures in brackets indicate deductions.

The Financial Statements are to be read in conjunction with the related Notes on pages 54 to 101 which form an integral part of these Financial Statements of the Company.

For the year ended 31st March 2017 2016 Rs. Rs.

Restated

Note A

Profit Before Income Tax 79,309,561 43,050,004

Depreciation and Amortisation 28,541,420 28,782,775

Written-off of Real Estate Stocks - 3,716,666

Net Gains from Financial Instruments Designated at Fair Value through Profit or Loss (1,688,543) 1,028,451

Impairment Charges for Loans and Receivables 92,361,201 78,979,870

Bad Debts Written-off During the Year - 371,904

Dividend Income (1,408,888) (1,116,810)

Provision for Retiring Gratuity 4,852,466 6,301,472

Interest Paid on Finance Lease 364,044 389,973

Payment of Retirement Gratuity (7,747,847) (124,930)

194,583,414 161,379,375

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NOTES TO THE FINANCIAL STATEMENTS

1. Corporate information

1.1 Reporting Entity

Sinhaputhra Finance PLC was incorporated on 16th November 1978 and is domiciled in Sri Lanka. As a Non-banking financial institution it is governed by the Finance Business Act No. 42 of 2011. The registered office of the Company is situated at No. 11, Hill Street, Kandy. The Company was re-registered under the Companies Act No. 07 of 2007. The Ordinary shares of the Sinhaputhra Finance PLC are listed on the Diri Savi Board on the Colombo Stock Exchange.

As a registered finance company, it is supervised by the Department of Supervision of Non-Bank Financial Institutions of the Central Bank of Sri Lanka.

1.2 Number of Employees

The staff strength of the Company as at 31st March 2017 was 261 (2016 - 241).

1.3 Principal Activities

The principal activities of the Company continued to be financing and related activities such as accepting deposits, providing of financial accommodations in the form of finance lease, hire purchase, personal loans, business loans, pawning, deposit loans and real estate etc.

There were no significant changes in the nature of the principal activities of the Company during the financial period under review.

1.4 Approval of Financial Statements by Directors

The Financial Statements were authorized for issue by the Board of Directors on 25th July 2017.

2. Basis of Preparation

2.1 Statement of Compliance

The Financial Statements of the Company have been prepared in accordance with Sri Lanka Accounting Standards (SLFRSs and LKASs) as issued by the Institute of Chartered Accountants of Sri Lanka and comply with the requirements of the Companies Act No.07 of 2007, and Finance Business Act No. 42 of 2011 and the amendments to these acts and provide appropriate disclosures as required by the Central Bank of Sri Lanka and Listing rules of Colombo Stock Exchange.

The formats used in the preparation of the Financial Statements and the disclosures made therein also comply with the specified format prescribed by the Central Bank of Sri Lanka for the preparation, presentation and publication of Annual Audited Financial Statements of Non-Bank Financial Institutions.

2.2 Directors’ Responsibility Statement

The Board of Directors takes the responsibility for the preparation and presentation of these Financial Statements.

2.3 Presentation of Financial Statements

Financial assets and financial liabilities are offset and the net amount reported in the Statement of Financial position only when there is a legally enforceable right to offset the recognised amounts and there is an intention to settle on a net basis, or to realize the assets and settle the liability simultaneously. Income and expenses are not offset in the Statement of Profit and Loss and other comprehensive income unless required or permitted by any accounting standard or interpretation, and as specifically disclosed in the Accounting Policies of the Company.

2.4 Bases of Measurement

The Financial Statements have been prepared on the historical cost basis and applied consistently with no adjustments being made for inflationary factors affecting the Financial Statements, except for the following:

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NOTES TO THE FINANCIAL STATEMENTS....

Land and buildings are measured at cost at the time of acquisition and subsequently at revalued amounts, which are the fair values at the date of revaluation less accumulated depreciation and impairment losses, if any.

Available for sale financial assets are measured at fair value.

Assets held for trading are measured at fair value.

Liability for defined benefit obligation is carried at present value of defined benefit obligation less unrecognized actuarial losses.

2.5 Functional and Presentation Currency

The Financial Statements are presented in Sri Lankan Rupees and which is the functional currency.

2.6 Significant Accounting Judgments,

Estimates and Assumptions

In the process of applying the Company’s accounting policies, management has exercised judgment and estimates in determining the amounts recognised in the Financial Statements. Use of available information, estimates and assumptions and application of judgment is inherent in the preparation of the Financial Statements as they affect the application of accounting policies and the recorded amounts in the Financial Statements. The Company believes its estimates including the valuation of assets and liabilities are appropriate. Estimates and underlying assumptions are reviewed on a continuous basis. However the actual results may differ from those estimates. The most significant uses of judgments and estimates are as follows.

2.6.1 Going Concern

The Financial Statements has been prepared on the going concern basis which assumes the Company will have sufficient cash to pay its debts as and when they become payable for a period of at least 12 months from the date of the Statement of Financial Position.

In making this assessment, Directors conducted a comprehensive review of the Company’s affairs including, but not limited to:

The Company’s Financial Position for the financial year ended 31st March 2017

Significant events and transactions the Company has entered into since 31st March 2017

The cash flow forecast for the Company for the period up to 31st March 2018

Revenue and profitability forecasts for the Company for not only the next financial year, but beyond 31st March 2018, and

The continued support of the Company’s shareholders, customers and lenders

Directors also Considered the impact of following;

1. Regulatory requirement to increase its core capital to Rs. 1 Bn by 31st December 2017

2. Operational caps imposed by the regulator on maximum amounts that it could undertake as customer deposits and lend to customers

In order to increase the core capital, the directors consider capitalising the available revaluation reserve through a sale and leaseback transaction with a strategic partner. By doing this, the Company hopes to enhance the core capital with a realized profit of over Rs. 700 Mn on sale of a selected property. The transaction has been reviewed and approved by the Board of Directors to proceed with which is subject to shareholder approval. Directors are confident of gaining shareholder support in relation to this matter. The regulator has expressed no objection to proceed with the proposed transaction. The Company has identified a strategic partner who is currently engaged in discussion with its banker. The Company aims to complete the transaction by end October 2017.

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The Company also intends to execute following plans in order to enhance the capital;

1. Issue non-voting share – Approvals from the Board of Directors and the Central Bank of Sri Lanka has been obtained.

2. Setting-up of a Holding Company – Approvals from the Board of Directors and the Central Bank of Sri Lanka has been obtained.

To monitor the progress of the above matters, since May 2017, the Directors have undertaken the following initiatives:

Entered into discussions with various parties to identify a strategic partner and secure additional equity funding from current or new shareholders

Undertaken a programme to continue to monitor the Company’s ongoing working capital requirements and minimum expenditure commitments, and

Continued their focus on maintaining an appropriate level of corporate overheads in line with the Company’s available cash resources

A fundamental component of the ability to continue as a going concern is company’s ability to pay its obligations as and when they arise. The Company’s current liquidity position is healthy. Monthly cash inflow net of deposit inflows, bank borrowings and early settlements being 10 fold greater than interest commitment to Banks and depositors, and with interest accruals on deposits, about 4.5 fold. The directors monitor the collection overtime and review its improvement. The Company is currently collecting nearly Rs. 220 Mn a month.

As a consequence of the above, the Directors believe that the Company will be able to continue as a going concern and, accordingly, the Financial Statements have been prepared on a going concern basis. The Financial Statements does not include any adjustments relating to recoverability and classification of recorded asset amounts or the amount and classification of liabilities that might not be necessary should the Company not continue as a going concern.

2.6.2 Fair Value of Financial Instruments

Where the fair values of financial assets and financial liabilities recorded in the Statement of Financial Position cannot be derived from active markets, they are determined using a variety of valuation techniques that include the use of mathematical models. The inputs to these models are derived from observable market data where possible, but if this is not available, judgment is required to establish fair values. The judgments include considerations of liquidity and inputs such as discount rates.

2.6.3 Impairment Losses on Loans and Advances

The Company reviews its individually significant loans and advances including rental receivable at each Statement of Financial Position date to assess whether an impairment loss should be recorded in the Statement of Profit or Loss & other comprehensive income. In particular, management’s judgment is required in the estimation of the amount and timing of future cash flows when determining the impairment loss. These estimates are based on assumptions about a number of factors and actual results may differ, resulting in future changes to the allowance.

Loans and advances including rental receivable that have been assessed individually and found not to be impaired and all individually insignificant loans and advances are then assessed collectively, in groups of assets with similar risk characteristics, to determine assessed collectively, in groups of assets with similar risk characteristics, to determine whether provision should be made due to incurred loss events for which there is objective evidence, but the effects of which are not yet evident. The collective assessment takes account of data from the loan portfolio (such as levels of arrears, assets characteristic, etc.), and judgments on the effect of concentrations of risks and economic data. The impairment loss on loans and advances including rental receivable is disclosed in more detail in Note 22.

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2.6.4 Impairment of Available for Sale Investments

The Company reviews its debt securities classified as available for sale investments at each reporting date to assess whether they are impaired. This requires similar judgment as applied to the individual assessment of loans and advances.

The Company also records impairment charges on available for sale equity investments when there has been a significant or prolonged decline in the fair value below their cost. The determination of what is ‘significant’ or ‘prolonged’ requires judgment. In making this judgment, the Company evaluates, among other factors, historical share price movements and duration and extent to which the fair value of an investment is less than its cost.

2.6.5 Taxation

The Company is subject to income tax and other taxes including VAT on financial services. Significant judgment was required to determine the total provision for current, deferred and other taxes pending the issue of tax guidelines on the treatment of the adoption of SLFRS in the Financial Statements and the taxable profit for the purpose of imposition of taxes. Uncertainties exist, with respect to the interpretation of the applicability of tax laws, at the time of the preparation of these Financial Statements. The Company recognized assets and liabilities for current, deferred and other taxes based on estimates of whether additional taxes will be due. Where the final tax outcome of these matters is different from the amounts that were initially recorded, such differences will impact the income and deferred tax amounts in the period in which the determination is made.

3. Significant Accounting Policies - Recognition of Assets and Liabilities

3.1 Cash and Short-Term Funds

Cash and cash equivalents comprise cash in hand, balances with banks, and money at call & short notice. For the purpose of the statement of cash flows, cash and cash equivalents consist of cash and short-term deposits.

Cash and cash equivalents are carried at amortised cost in the statement of financial position. Details of the cash and cash equivalents are given in Note 19 to the Financial Statements.

3.2 Balances with Central Bank

The Central Bank requires that all Finance Company to maintain assets in the form of Sri Lanka Government Treasury Bills and Bonds equivalent to 7.5% on all deposit liabilities at each period end.

3.3 Securities Purchased Under Re-Sale Agreement

Securities Purchased Under Re-Sale Agreements are the Government securities purchased subject to an agreement to sell at a predetermined price at a future date. The difference between the purchase and sale price represents interest income and is recognized in the statement of profit or loss and other comprehensive income over the period of the resale agreement.

3.4 Financial Assets

Financial Assets within the scope of LKAS 39 are classified as Financial Assets at Fair Value Through Profit or Loss, Loans and Receivables, Held-to-Maturity Investments, Available-for-Sale Financial Assets as appropriate. The Company determines the classification of its financial assets at initial recognition.

3.4.1 Date of Recognition

All financial assets and liabilities are initially recognised on the trade date, i.e. the date that the Company becomes a party to the contractual provisions of the instrument. This includes ‘regular way trades’: purchases or sales of financial assets that require delivery of assets within the time frame generally established by regulation or convention in the market place.

3.4.2 Initial Measurement of Financial Instruments

The classification of financial instruments at initial recognition depends on their purpose and characteristics and the management’s intention in acquiring them. All financial instruments are measured initially at their fair value plus

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transaction costs, except in the case of financial assets and financial liabilities recorded at fair value through profit or loss.

3.4.3 Held for Trading Financial Assets - At Fair Value

Through Profit or Loss

Financial Investments are classified as held for trading if they are acquired principally for the purpose of selling or repurchasing in the near term or holds as a part of a portfolio that is managed together for short-term profit or position taking. Financial investments held for trading are recorded in the statement of financial position at fair value. Changes in fair value are recognised in the statement of profit or loss and other comprehensive income. Interest and dividend income is recorded as income according to the terms of the contract, or when the right to receive the payment has been established.

3.4.4 Loans and Receivables

‘Loans and advances to customers’ include non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. After initial measurement, ‘Loans and Advances to Customers’ are subsequently measured at amortised cost using the EIR, less allowance for impairment. Amortised cost is calculated by taking into account any fees and costs that are an integral part of the EIR. The amortisation is included in ‘Interest income’ in the statement of profit or loss and other comprehensive income. The losses arising from impairment are recognised in the statement of profit or loss and other comprehensive income under ‘Impairment charge’.

Loans and receivables comprises of loans and receivables to the Company.

3.4.5 Finance Leases

Assets leased to customers which transfer substantially all the risks and rewards associated with ownership other than legal title, are classified as finance leases. Amounts receivable under finance leases are included under ‘Loans and Advances’. Leasing balances are stated in the Statement of Financial Position after

deduction of initial rentals received, unearned lease income and the impairment allowances.

3.4.6 Hire Purchase

Assets hired to customers under the hire purchase agreements, which transfer substantially all the risks and rewards associated with ownership as well as the legal title at the end of such contracts are classified as loans rentals. Amounts receivable under Hire purchase receivable are included under ‘Loans and advances’, balances are stated in the statement of financial position after deduction of initial rentals received, unearned hire purchase income and the allowances for impairment.

3.4.7 Available for Sale Financial Assets

Available for sale assets are non-derivative investment that are designated as available for sale or are not classified as another category of financial assets. Unquoted equity securities whose fair value cannot reliably be measured are carried at cost. All other available for sale investments are carried at fair value.

Interest income on available for sale assets is recognised in Statement of Profit and loss and Other Comprehensive Income using the Effective Interest Rate (EIR). Dividend income is recognised in Statement of Profit and Loss and Other Comprehensive Income when the Company becomes entitled to the dividend.

Other fair value changes are recognised in other comprehensive income until the investment is sold or impaired, where upon the cumulative gains and losses previously recognised in other comprehensive income are classified to profit or loss as a reclassification adjustment.

3.4.8 Held to Maturity Financial Assets

Held to maturity financial assets are non-derivative financial assets with fixed or determinable payments and fixed maturities, which the Company has the intention and ability to hold to maturity. After initial measurement, held to maturity financial assets are subsequently measured at amortised cost using the Effective Interest Rate (EIR) less impairment. Amortised cost is calculated by taking into account any discount or premium


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on acquisition and fees that are an integral part of the EIR. The amortisation is included in ‘Interest and similar income’ in the Statement of Profit or Loss and other comprehensive income. The losses arising from impairment of such investments are recognised in the Statement of Profit or Loss and other comprehensive income. If the Company were to sell or reclassify more than an insignificant amount of held to maturity investments before maturity (other than in certain specific circumstances), the entire category would be tainted and would have to be reclassified as available for sale. Furthermore, the Company would be prohibited from classifying any financial asset as held to maturity during the following two years.

3.5 Reclassification of Financial Assets

Reclassifications are recorded at fair value at the date of reclassification, which becomes the new amortised cost.

For a financial asset reclassified out of the ‘available for sale’ category, any previous gain or loss on that asset that has been recognised in equity is amortised to profit or loss over the remaining life of the investment using the EIR. Any difference between the new amortised cost and the expected cash flows is also amortised over the remaining life of the asset using the EIR. If the asset is subsequently determined to be impaired, then the amount recorded in equity is recycled to the Statement of Profit or Loss and Other Comprehensive Income.

3.6 Derecognition of Financial Assets

A Financial Asset is derecognised when:

The rights to receive cash flows from the asset have expired

The Company has transferred its rights to receive cash flows from the asset or has assumed an obligation to pay the received cash flows in full without material delay to a third party under a ‘pass–through’ arrangement; and either:

The Company has transferred substantially all the risks and rewards of the asset, or

The Company has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset

3.7 Impairment of Financial Assets

The Company assesses at each reporting date, whether there is any objective evidence that a financial asset or a group of financial assets is impaired. A financial asset or a group of financial assets is deemed to be impaired if, and only if, there is objective evidence of impairment as a result of one or more events that have occurred after the initial recognition of the asset (an ‘incurred loss event’) and that loss event (or events) has an impact on the estimated future cash flows of the financial asset or the Group of financial assets that can be reliably estimated.

3.8 Write-off of Loans and Advances

Loans (and the related impairment allowance accounts) are normally written off, either partially or in full, when there is no realistic prospect of recovery. Where loans are secured, this is generally after receipt of any proceeds from the realization of security.

3.9 Collateral Valuation

The Company seeks to use collateral, where possible, to mitigate its risks on financial assets. The collateral comes in various forms such as cash, securities, guarantees, real estate, land & building receivables, inventories, other non-financial assets and credit enhancements. The fair value of collateral is generally assessed, at a minimum, at inception and based on the guidelines issued by the Central Bank of Sri Lanka. Non-financial collateral, such as real estate, vehicle, land & building is valued based on data provided by third parties such as independent valuers.

3.10 Collateral Repossessed

Repossessed stock includes assets of facilities which were in default and are now repossessed. Repossessed stocks are valued at outstanding facility balance at the time of closing the facility and net realizable value of the asset whichever is lower. Net realizable value is the estimated selling price less the estimated cost necessary to make the sale.


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3.11 Measurement of Fair Values

A number of the Company’s accounting policies and disclosures require the measurement of fair values, for both financial and non-financial assets and liabilities.

When measuring the fair value of an asset or a liability, the Company uses observable market data as far as possible. Fair values are categorised into different levels in a fair value hierarchy based on the inputs used in the valuation techniques as follows.

Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities.

Level 2: inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices).

Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs).

If the inputs used to measure the fair value of an asset or a liability fall into different levels of the fair value hierarchy, then the fair value measurement is categorised in its entirety in the same level of the fair value hierarchy as the lowest level input that is significant to the entire measurement.

The Company recognises transfers between levels of the fair value hierarchy at the end of the reporting period during which the change has occurred.

Further information about the assumptions made in measuring fair values is included in the following notes:

Note 18.1 – Fair Value of Financial Instruments

Note 29.3 – Property, Plant & Equipment

3.12 Property, Plant and Equipment

Property, Plant and Equipment are recognised if it is probable that future economic benefits associated with the assets will flow to the Company and cost of the asset can be reliably measured.

3.12.1 Basis of Recognition

Property, Plant and Equipment are recorded at cost of purchase or construction or valuation together with any incidental expenses thereon. These assets are stated at cost or valuation less accumulated depreciation and any accumulated impairment loss.

3.12.2 Depreciation

Depreciation is provided at the rates indicated below on straight-line basis over the period appropriate to the estimated useful lives of the different types of assets.

Buildings 2.5% per annum ( 40 Years )

Solar Power System 10% per annum ( 10 Years )

Office Equipment 25% per annum ( 4 Years )

Furniture and Fittings 25% per annum ( 4 Years )

Computer Equipment 20% per annum ( 5 Years )

Freehold Motor Vehicles 25% per annum ( 4 Years )

Leasehold Motor Vehicles 25% per annum ( 4 Years )

Leasehold Equipment 25% per annum ( 4 Years )

3.12.3 Cost Model

The Company applies the cost model to all Property, Plant and Equipment except for freehold land and building and records at cost less accumulated depreciation and accumulated impairment if any.

3.12.4 Revaluation Model

The Company applies the Revaluation Model for the entire class of freehold land and building for measurement after recognition. Such properties are carried at a revalued amount, being the fair value of such properties as at the revaluation date less any subsequent accumulated depreciation and impairment. On revaluation of an asset, any increase in the carrying amount is credited directly to equity under the revaluation reserve. Revaluation surplus will be credited to the statement of profit or loss and other comprehensive income to the extent that it


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reverses the previously recognized revaluation loss of the same asset in the Statement of Profit or Loss and Other Comprehensive Income. Any decrease in the carrying amount on revaluation will be debited to the Statement of Profit or Loss and Other Comprehensive Income. Revaluation deficit will be debited to the revaluation reserve to the extent that it reverses the previously recognized revaluation surplus of the same asset.

3.12.5 Subsequent Measurement

The cost of replacing part of an item of Property, Plant and Equipment is recognized in the carrying amount of the item if it is probable that the future economic benefits embodied within that part will flow to the Company and its cost can be reliably measured. The costs of day to day servicing of Property, Plant and Equipment are charged to the Statement of Profit or Loss and Other Comprehensive Income as incurred. The carrying amount of the item replaced will be derecognized based on the de recognition criteria.

3.12.6 Derecognition

The carrying amount of an item of Property, Plant and Equipment is derecognized on disposal or when no future economic benefits are expected from its use or disposal. The gain or loss arising from the derecognition of an item of Property, Plant and Equipment is included in the Statement of Profit or Loss and Other Comprehensive Income when the item is derecognized. When replacement costs are recognized in the carrying amount of an item of Property, Plant and Equipment, the remaining carrying amount of the replaced part is derecognized. Gains and losses on disposal of an item of Property, Plant and Equipment are determined by comparing the proceeds from disposal with the carrying amount of Property, Plant and Equipment and are recognized net within “Other income” in statement of profit or loss and other comprehensive income.

3.12.7 Intangible Assets

The intangible assets include the value of computer software cost of purchased licenses. An intangible asset is recognised only when its cost can be measured reliably and it is probable that the expected future economic benefits that are attributable to it will

flow to the Company. The intangible assets are carried at cost less accumulated amortisation and accumulated impairment losses if any.

3.12.8 Amortisation of Intangible Assets

Amortisation is calculated using the straight-line method to write-down the cost of intangible assets to their residual values over their estimated useful lives as follows:

Computer Software 10% per annum (10 Years)

3.13 Financial Liabilities

Initial recognition and measurement of financial liabilities within the scope of LKAS 39 are classified as deposits from customers, debt issued and other borrowed funds as appropriate. The Company determines the classification of its financial liabilities at initial recognition. The Company classifies financial liabilities in to financial liabilities as other financial liabilities in accordance with the substance of the contractual arrangement and the definitions of financial liabilities.

The Company recognizes financial liabilities in the Statement of Financial Position when the Company becomes a party to the contractual provisions of the financial liability.

3.14 Other Financial Liabilities

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

3.15 Other Borrowed Funds

Financial instruments obtained by the Company are classified as liabilities under ‘Other Borrowed Funds’, where the substance of the contractual arrangement results in the Company having an obligation either to deliver cash or another financial asset to the holder, or to satisfy the obligation other than by the exchange of a fixed amount of cash or another financial asset for a fixed


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number of own equity shares. After initial measurement, Other Borrowings are subsequently measured at amortised cost using the EIR. Amortised cost is calculated by taking into account any discount or premium on the issue and costs that are an integral part of the EIR.

3.16 De-recognition of Financial Liabilities

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

3.17 Finance Lease Liability

A finance lease and its corresponding liability are recognised initially at the fair value of the asset or, if lower, the present value of the minimum lease payments. Finance charges payable are recognised in ‘Interest Expense’ over the period of the lease based on the EIR method.

3.18 Retirement Benefit Obligations

3.18.1 Defined Contribution Plans - EPF and ETF

All employees who are eligible for Employees’ Provident Fund contributions and Employees’ Trust Fund contributions are covered by relevant contribution funds in line with respective statutes and regulations.

Contribution to Provident Funds and Trust Funds covering the employees are recognised as an expense in the statement of profit or loss and other comprehensive income.

3.18.2 Defined Benefit Plans

A Defined Benefit Plan is a post employment benefit plan other than a defined contribution plan. The defined benefit obligation is calculated annually using the projected unit credit method.

The service of a qualified actuary is obtained to determine the valuation of the define benefit obligation for the Company that adopted the actuarial valuation method in computing the provision required in accordance with LKAS 19 on “Employee Benefits”. The projected unit credit method projects the current data using the actuarial assumptions and calculates projected benefits at the participants’ assumed retirement date. The key assumptions used in determining the benefit obligations are given in Note 34 to these Financial Statements.

Provision has been made for the defined benefit plan from the first year of service for all employees in conformity with LKASs 19 on “Employee Benefits”.

However, under the Payment of Gratuity Act No .12 of 1983 the liability to and employee arises only on completion of five years of continued service.

3.19 Commitments and Contingencies

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

Contingent liabilities are possible obligations whose existence will be confirmed only by uncertain future events or present obligations where the transfer of economic benefit is not probable or cannot be reliably measured. Contingent liabilities are not recognised in the Statement of Financial position but are disclosed unless they are remote.

3.20 Segment Reporting

A segment is a distinguishable component of the Company that is engaged in providing services (Business Segment).

In accordance with Sri Lanka Financial Reporting Standard SLFRS No. 8 – Operating Segments, segmental information is presented for identifiable operating units of the Company. The segments comprise of financing and investing segments.

Segment results, assets and liabilities include those items directly attributable to a segment as well as those that can be allocated on a reasonable basis. Unallocated items comprises mainly of head office expenses.


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4. Significant Accounting Policies - Recognition of Income and Expenses

Revenue is recognised to the extent that it is probable that the economic benefits will flow to the Company and the revenue can be reliably measured. The following specific recognition criteria must also be met before revenue is recognised.

4.1 Interest Income and Expense

For all financial instruments interest income or expense is recorded using the EIR. EIR is the rate that exactly discounts estimated future cash payments or receipts through the expected life of the financial instrument or a shorter period, where appropriate, to the net carrying amount of the financial asset or financial liability. The calculation takes into account all contractual terms of the financial instrument (for example, prepayment options) and includes any fees or incremental costs that are directly attributable to the instrument and are an integral part of the EIR, but not future impairment losses. The carrying amount of the financial asset or financial liability is adjusted if the Company revises its estimates of payments or receipts. The adjusted carrying amount is calculated based on the original EIR and the change in carrying amount is recorded as ‘Interest income’ for financial assets and ‘Interest expense’ for financial liabilities.

Once the recorded value of a financial asset or a group of similar financial assets has been reduced due to an impairment loss, interest income continues to be recognised using the rate of interest used to discount the future cash flows for the purpose of measuring the impairment loss.

4.2 Fee and Commission Income

The Company earns Fee and Commission Income from a diverse range of services it provides to its customers. Fee income can be divided into the following two categories:

Finance Charges

Commission income

4.3 Fee Income Earned from Services that are Provided

Over a Certain Period of Time

Fees earned for the provision of services over a period of time are accrued over that period. Credit related fees are deferred and recognized as an adjustment to the EIR of the loan.

4.4 Dividend Income

Dividend Income is recognized when the Company’s right to receive the payment is established.

4.5 Net Trading Income

Results arising from trading activities include all gains and losses from changes in fair value and related interest income or expense and dividends for financial assets and financial liabilities ‘held for trading’. This includes any ineffectiveness recorded in hedging transactions.

4.6 Rental Income

Rental Income is recognized on an accrual basis.

4.7 Other Income

Other Income is recognized on an accrual basis.

4.8 Other Expenses

All Other Expenses have been recognized in the Financial Statements as they are incurred in the period to which they relate. All expenditure incurred in the operation of the business and in maintaining the capital assets in a state of efficiency has been charged to revenue in arriving at the Company’s profit for the year.

4.9 Earnings Per Share (EPS)

The Company presents basic and diluted earnings per share for its ordinary shares. Basic EPS is calculated by dividing the profit or loss attributable to ordinary shareholders of the Company by the weighted average number of ordinary shares outstanding during the period. Diluted EPS is determined by adjusting the profit or loss attributable to ordinary shareholders and the weighted average number of ordinary shares outstanding for the effects of all dilutive potential ordinary shares.


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5. Significant Accounting Policies - Tax Expenses

Income Tax Expense comprises current and deferred tax. Income tax expense is recognized in the Statement of Profit and Loss and Other Comprehensive Income except to the extent it relates to items recognized directly in equity or OCI, in which case it is recognized in equity or in OCI.

5.1 Current Tax

Current Tax receivable and payable consists of amounts expected to be recovered from or paid to the Commissioner General of Inland Revenue in respect of the current as well as prior years. The tax rates and tax laws used to compute the amount are those that are enacted or subsequently enacted by the reporting date. Accordingly, provision for taxation is made on the basis of the profit for the year as adjusted for taxation purpose in accordance with the provision of the Inland Revenue Act No. 10 of 2006 and the amendment thereto, at the rates specified in the Financial Statements.

5.2 Deferred Tax

Deferred Tax is provided using the liability method on temporary differences at the statement of financial position date between the tax bases of assets and liabilities and their carrying amounts for financial reporting purpose. Deferred tax liabilities are recognised for all temporary differences, except:

Where the deferred tax liability arises from the initial recognition of goodwill or of an asset or

Liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss

Deferred tax assets are recognised for all deductible differences. Carry forward of unused tax credits and unused tax losses, to the extent that it is probable that taxable profits will be available against which the deductible temporary differences and the carry forward of unused tax credits and unused tax losses can be utilised.

The carrying amount of a deferred tax asset is reviewed at each Statement of Financial Position date and reduced to the extent it is no longer probable that sufficient taxable profit will

be available to allow all or part of the deferred tax asset to be utilised. Unrecognised deferred tax asset are reassessed at each statement of financial position date and are recognise to the extent that is probable that future taxable profit will allow the deferred tax asset to be recovered.

Deferred tax assets and liabilities are measured at the tax rate that are expected to apply in the year when the assets are realized or the liabilities are settled, based on tax rates and tax laws that have been enacted or substantively enacted at the statement of financial position date.

5.3 Value Added Tax on Financial Services

The value base for the computation of Value Added Tax on Financial Services is calculated by adjusting the depreciation computed on rates prescribed by the Department of Inland Revenue to the accounting profit before Income Tax and emoluments payable. Emoluments payable include benefit in money and not in money including contribution or provision relating to terminal benefit.

5.4 National Building Tax on Financial Services (NBT)

With effect from 01st January 2014, NBT of 2% was introduced on supply of financial services via amendment to the NBT Act No. 09 of 2009. NBT is chargeable on the same base used for calculation of VAT on financial services are explained in Note 5.3 above.

5.5 Crop Insurance Levy (CIL)

As per the provisions of the Section 14 of the Finance Act No. 12 of 2013, the CIL was introduced with effect from 01st April 2013 and is payable to the National Insurance Trust Fund. Currently, the CIL is payable at 1% of the profit after tax.

6. Statement of Cash Flows

The Satement of Cash Fows has been prepared by using the ‘Direct Method’ in accordance with LKAS 7 - Statement of Cash Flows, whereby gross cash receipts and gross cash payments of operating activities, financing activities and investing activities have been recognized. Cash and cash equivalents comprise


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mainly cash balances, call placements, balances with the Central Bank of Sri Lanka, highly liquid investments of which original maturity of 3 months or less and net amount due from banks.

7. Operating Segments

The Company’s segmental reporting is based on the following operating segments: lease, hire purchase, personal loans, business loans, pawning and investments.

7.1 Segment Reporting

A segment is a distinguishable component of the Company that is engaged in providing services (Business Segment).

In accordance with Sri Lanka Financial Reporting Standard SLFRS No. 8 – Operating Segments, segmental information is presented in respect of the Company. The segments comprise of Finance Leasing, Hirepurchase, Loans and Advances, Pawning, Investing segments and other segments.

Segment results, assets and liabilities include those items directly attributable to a segment as well as those that can be allocated on a reasonable basis.

Segment capital expenditure is the total cost incurred during the period to acquire segment assets that are expected to be used for more than one accounting period.

8. Significant Accounting Policies

8.1 New Accounting Standards Issued But Not Yet Effective

A number of new standards and amendments to standards which have been issued but not yet effective as at the Reporting date have not been applied in preparing these consolidated Financial Statements. Accordingly, the following Accounting Standards have not been applied in preparing these Financial Statements and the Company plans to apply these standards on the respective effective dates.

SLFRS 9 –“Financial Instruments”

SLFRS 9, issued in 2014, replaces the existing guidance in LKAS 39–Financial Instruments: Recognition and Measurement. SLFRS 9 includes revised guidance on the classification and measurement of financial instruments, including a new expected credit loss model for calculating impairment on financial assets, and the new general hedge accounting requirements. It also carries forward the guidance on recognition and derecognition of financial instruments from LKAS 39.

SLFRS 9 is effective for annual reporting periods beginning on or after January 01st, 2018. The impact on the implementation of the above standard has not been quantified yet.

SLFRS 15 –“Revenue from Contracts with Customers”

SLFRS 15 establishes a comprehensive framework for determining whether, how much and when revenue is recognised. It replaces existing revenue recognition guidance, including LKAS 18 on ’Revenue’ and LKAS 11 on ‘Construction Contracts’.

SLFRS 15 is effective for annual reporting periods beginning on or after 01st January 2018. The impact on the implementation of the above standard has not been quantified yet.

SLFRS 16 - Leases

“SLFRS 16 introduces a single, on balance sheet lease accounting model for leases. A lessee recognises a Right-Of-Use (ROU) asset representing its right to use the underlying asset and a lease liability representing its obligation to make lease payments. There are optional exemptions for short-term leases of low-value items. Lessor accounting remains similar to the current standard – i.e. lessor continue to classify leases as finance or operating leases. “SLFRS 16 replaces existing leases guidance, including LKAS 17 Leases, IFRIC 4 Determining whether an arrangement contains a lease, SIC-15 Operating Leases – Incentives and SIC-27 Evaluating the Substance of Transactions Involving the Legal Form of a Lease.

The standard is effective for annual periods beginning on or after 01st January 2019. Early adoption is permitted for entitles that apply SLFRS 16 at or before the date of initial application of SLFRS 16.


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8.2 Amendments to Existing Accounting Standards

SLFRS 14 –“Regulatory Deferral Accounts”

SLFRS 14 – Regulatory Deferral Accounts is effective from 01st January 2016 and this standard did not have any impact on Financial Statements of the Company.

Amendments to existing accounting standards with effect from 01st January 2016 published by the Chartered Accountants of Sri Lanka did not have any impact on the Financial Statements of the Company.


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National Tax Credit for Withholding Tax on Government Securities on Secondary Market Transactions

Section 137 of the Inland Revenue Act No.10 of 2006, provides that a company which derives interest income from the secondary market transactions in Government securities would be entitled to a notional tax credit (being one ninth of net interest income) provided such interest income forms part of the statutory income of the Company for that year of assessment.

Accordingly the net income earned from secondary market transactions in Government securities for the year, has been grossed up in the Financial Statements, and the resulting notional tax credit amounts, to Rs. 4,212,742/- (2015/16 - Rs. 2,785,341/-) for the Company.

For the year ended 31st March 2017 2016 Rs. Rs. Restated.

9. Interest Income

Finance Leases 324,405,280 284,491,837

Hire Purchases 85,920,936 140,111,327

Business Loans 540,828,389 422,602,000

Personal Loans - 4,884

Pawning Advances 23,920,370 10,345,680

Fixed Deposit Loans 14,768,633 13,544,796

Overdue Interest 118,348,188 106,610,248

Treasury Bills and Bonds 42,127,422 27,853,405

Debentures 481,470 560,952

Deposits with Banks 22,908,787 36,184,929

Savings Accounts 350,127 867,234

Staff Loans 456,105 434,027

Total 1,174,515,707 1,043,611,319

2017 2016 Rs. Rs. Restated

Interest Expenses

Customer Deposits 609,366,448 567,140,624

Medium and Long-term Borrowings 40,078,685 35,368,712

Short-term Borrowings 9,280,089 822,210

Finance Lease 364,044 389,973

Total 659,089,266 603,721,519

Net Interest Income 515,426,441 439,889,800

10. Fee and Commission Income and Expenses

10.1 Fee and Commission Income

Finance Charges 47,546,829 22,704,795

Insurance Commissions 7,981,652 8,420,003

Total 55,528,481 31,124,798


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12. Other Operating Income (Net)Gain on Revaluation on Foreign Exchange 593,053 1,009,660

Gain on Sale of Real Estate 588,528 991,879

Bad Debts Recoveries 12,425,352 15,473,733

Rent Income 6,834,239 5,562,170

Other Income 1,799,766 4,379,397

Dividend Income 1,408,888 1,116,809

Total 23,649,826 28,533,648

13. Impairment Charges on Loans and Other Losses Loans and ReceivablesCharge to the Income Statement on Individual Impairment 46,999,231 5,558,880

Charge to the Income Statement on Collective Impairment 28,916,605 73,420,992

Bad Debts Written-off During the Year - 371,904

Provision for Other Receivables 16,445,363 -

Total 92,361,199 79,351,776

14. Personnel ExpensesSalaries and Bonus 118,142,545 92,863,343

Directors Emoluments 13,143,495 12,211,297

Contribution to Employees' Provident Fund 11,461,906 9,475,394

Contribution to Employees' Trust Fund 2,865,477 2,368,849

Retirement Benefit Obligations 4,733,334 6,301,472

Other Personnel Costs 22,545,901 20,673,997

Total 172,892,658 143,894,353

For the year ended 31st March 2017 2016 Rs. Rs. Restated

10.2 Fee and Commission Expenses

Commissions Paid to Brokers 4,723,048 4,796,448

Total 4,723,048 4,796,448

11. Net Gain / (Loss) from TradingVehicle Trading Income 300,007 -

Total 300,007 -


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16. Income Tax Expenses

Current Tax Expense (Restated Refer Note 49) 16.1 - 27,432,118

Over Provision for Prior Year (18,859,004) -

Deferred Tax Expense (Restated Refer Note 49) 16.2 (55,990,127) 14,614,256

Total (74,849,131) 42,046,374

16.1 Reconciliation of Effective Tax Rate

Tax charge is based on taxable profit which differs from profit for financial reporting purposes. These differences are explained in the following reconciliation

statement.

Profit Before Income Tax 79,309,561 43,050,004 Add - Disallowable Expenses 99,855,771 162,099,248

Less - Allowable Expenses (293,616,358) (83,559,205)

(114,451,026) 121,590,047

Add - Adjustments

Tax Loss from Lease Business During the Year (341,449,108) -

Business Loss Claimed During the Year - (23,618,197)

Taxable Income (455,900,134) 97,971,850

Current Tax @ 28% - 27,432,118

Effective Tax Rate 0% 64 %

For the year ended 31st March 2017 2016 Note Rs. Rs. Restated.

15. Other Expenses

External Auditors' Remuneration 775,000 775,000

Internal Audit Fee 699,000 603,000

Depreciation of Property, Plant and Equipment 28,541,420 28,782,774

Advertising and Marketing Expenses 11,477,383 4,012,829

Loss on Sale of Repossessed Vehicles 99,076,437 97,528,184

Professional and Legal Expenses 1,688,451 2,794,071

Penalty Charges - Others 9,302,696 -

Penalty Imposed by the CBSL 2,500,000 -

Establishment and Administration Expenses 79,002,602 72,329,255

Total 233,062,989 206,825,113


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18. Financial Instruments – Fair Values

18.1 Accounting Classifications and Fair Values

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


16.2 Deferred Tax Expense

(Reversal)/Charge of Deferred Taxation for the Year (Restated - Refer Note 49) (55,990,127) 14,614,256

Total (55,990,127) 14,614,256

17. Earnings Per Share

17.1 Basic Earnings Per Share

Basic earnings per share has been calculated by dividing the net profit attributable to equity holders of the Company, by the weighted average number of

Ordinary Shares in issue during the year


Profit Attributable to the Equity Holders of the Company (Rs.) 154,158,692 1,003,630

Weighted Average Number of Ordinary Shares 62,958,930 62,958,930

Basic Earnings Per Share (Rs.) 2.45 0.02


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31st March 2017 Designated as Available Loans & Held To Other Total Level 1 Level 2 Level 3 Total FVTPL for Sale Receivables Maturity Financial Liabilities

Financial Assets Measured at Fair Value

Held for Trading

Investments in Equity Securities - Quoted 23,468,363 - - - - 23,468,363 23,468,363 - - 23,468,363

Available for Sale

Government Securities - 2,864,440 - - - 2,864,440 - 2,864,440 - 2,864,440

Investments in Units - 850,000 - - - 850,000 850,000 - - 850,000

Investments in Equity Securities - Quoted - 2,755,533 - - - 2,755,533 2,755,533 - - 2,755,533

Total 23,468,363 6,469,973 - - - 29,938,336 27,073,896 2,864,440 - 29,938,336

Financial Assets not Measured at Fair Value

Cash and Cash Equivalents - - 54,512,302 - - 54,512,302 - - - -

Balances with Central Bank - Held to Maturity - - - 417,653,561 - 417,653,561 - 399,226,393 - 399,226,393

Placements with Banks - - 209,395,304 - - 209,395,304 - - - -

Loans and Advances

Leasing - - 1,855,662,986 - - 1,855,662,986 - - 1,931,665,548 1,931,665,548

Hire Purchase - - 304,755,961 - - 304,755,961 - - 712,750,255 712,750,255 Term Loans - - 2,076,098,711 - - 2,076,098,711 - - 2,132,278,283 2,132,278,283

Pawning Advances - - 155,227,113 - - 155,227,113 - - 154,243,501 154,243,501 Other Advance - - 1,298,878,664 - - 1,298,878,664 - - - -

Investments in Equity Securities - Unquoted - 250,293 - - - 250,293 - - - -

Financial assets - held to maturity - - - 6,183,545 - 6,183,545 - - - -

Total - 250,293 5,954,531,041 423,837,106 - 6,378,618,440 - 399,226,393 4,930,937,587 5,330,163,980

Financial Liabilities not Measured at Fair Value Deposits from Customers - - - - 5,889,334,223 5,889,334,223 - - - -

Other Borrowings - - - - 251,326,667 251,326,667 - - - -

Finance Lease Liability - - - - 1,125,152 1,125,152 - - - -

Total - - - - 6,141,786,042 6,141,786,042 - - - -

Carrying Amount (Rs.) Fair Value (Rs.)

18.1 Accounting Classifications and Fair Values (Contd..)


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18.2 The following is a list of financial instruments which have not been considered under the fair value measurement hierarchy, because the carrying amount of those financial instruments is a reasonable approximation of fair value since they are short-term in nature or re-price to current market rates frequently.

Assets

Cash and Cash Equivalents

Placements with Banks

Other Advances

Liabilities

Other Borrowings


31st March 2016 Designated as Available Loans & Held To Other Total Level 1 Level 2 Level 3 Total FVTPL for Sale Receivables Maturity Financial Liabilities

Financial Assets Measured at Fair Value

Held for Trading

Investments in Equity Securities - Quoted 19,973,126 - - - - 19,973,126 19,973,126 - - 19,973,126

Available for Sale

Government Securities - 2,904,773 - - - 2,904,773 - 2,904,773 - 2,904,773

Investments in Units - 976,000 - - - 976,000 976,000 - - 976,000

Investments in Equity Securities - Quoted - 2,719,067 - - - 2,719,067 2,719,067 - - 2,719,067

Total 19,973,126 6,599,840 - - - 26,572,966 23,668,193 2,904,773 - 26,572,966

Financial Assets Not Measured at Fair Value

Cash and Cash Equivalents - - 61,548,982 - - 61,548,983 - - - -

Balances with Central Bank - Held to Maturity - - - 399,813,445 - 399,813,445 - 399,226,393 - 399,226,393

Placements with Banks - - 370,629,486 - - 370,629,486 - - - -

Loans and Advances Leasing - - 1,778,062,563 - - 1,778,062,563 - - 1,931,665,548 1,931,665,548

Hire Purchase - - 610,457,824 - - 610,457,824 - - 712,750,255 712,750,255

Term Loans - - 2,078,439,302 - - 2,078,439,302 - - 2,132,278,283 2,132,278,283

Pawning Advances - - 126,840,908 - - 126,840,908 - - 154,243,501 154,243,501

Other Advance - - 370,660,643 - - 370,660,643 - - - -

Investments in Equity Securities - Unquoted - 250,293 - - - 250,293 - - - -

Financial Assets - Held to Maturity - - - 6,212,075 - 6,212,075 - - - -

Total - 250,293 5,396,639,708 406,025,520 - 5,802,915,521 - 399,226,393 4,930,937,587 5,330,163,980

Financial Liabilities Not Measured at Fair Value

Deposits from Customers - - - - 5,565,152,640 5,565,152,640 - - - -

Other Borrowings - - - - 381,446,668 381,446,668 - - - -

Finance Lease Liability - - - - 3,727,951 3,727,951 - - - -

Total - - - - 5,950,327,259 5,950,327,259 - - - -

Carrying Amount (Rs.) Fair Value (Rs.)

18.1 Accounting Classifications and Fair Values (Contd..)

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21. Financial Assets - Held for Trading

No. of Total Market No. of Total Market Shares Cost Value Shares Cost Value As at 31.03.2017 31.03.2017 31.03.2017 31.03.2016 31.03.2016 31.03.2016 Rs. Rs. Rs. Rs.

Bank, Finance and Insurance

Commercial Bank of Ceylon PLC 4,610 660,718 601,144 4,545 660,718 570,398

Nations Trust Bank 6,500 673,712 481,000 6,500 673,712 482,300

Sampath Bank PLC 1,883 393,053 487,697 1,743 393,054 383,530

Seylan Bank PLC (NV) 10,000 455,040 528,700 10,000 455,040 630,000

Peoples Leasing & Finance PLC 151,000 2,443,373 2,355,600 39,000 636,678 624,000

LB Finance PLC 22,291 2,773,975 2,639,254 22,291 2,773,975 2,365,075

Softlogic Finance PLC 23,900 1,233,775 740,900 23,900 1,233,775 915,370

Total 8,633,646 7,834,295 6,826,952 5,970,673

Beverage, Foods and Tobacco Renuka Agri Foods PLC 170,000 790,758 476,000 170,000 790,758 527,000

Total 790,758 476,000 790,758 527,000

Construction and Engineering Access Engineering PLC 10,000 269,990 238,000 10,000 269,990 208,000

Colombo Dockyard PLC 600 106,682 45,600 600 106,682 64,860

Total 376,672 283,600 376,672 272,860

As at 31st March 2017 2016 Rs. Rs.

19. Cash and Cash Equivalents Cash in Hand 10,057,227 19,018,883

Balances with Licensed Commercial Banks 44,455,075 42,530,099

Total 54,512,302 61,548,982

20. Balances with Central Bank - Held to Maturity Statutory Balances with Central Bank 417,653,561 399,813,445

Non-Statutory Balances with Central Bank - -

Total 417,653,561 399,813,445

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Diversified Holdings John Keells Holdings PLC 12,604 2,001,595 1,738,092 11,029 2,001,595 1,632,292

Total 2,001,595 1,738,092 2,001,595 1,632,292

Health Care

The Lanka Hospitals Corporation PLC 10,000 502,566 615,000 10,000 502,566 510,000

Total 502,566 615,000 502,566 510,000

Manufacturing Piramal Glass Ceylon PLC 141,000 603,484 789,600 141,000 603,484 719,100

Lanka Walltiles PLC 11,600 1,215,058 1,078,800 11,600 1,215,058 1,146,080

Textured Jersey Lanka Ltd. 159,800 4,443,982 5,912,600 159,800 4,443,982 5,065,660

Tokyo Cement Co. (Lanka) PLC 22,450 1,030,466 1,369,450 22,450 1,030,466 830,650

Tokyo Cement Co. (Lanka) PLC (NV) 5,000 185,050 265,000 5,000 185,050 161,500

Swisstek (Ceylon) PLC 10,360 602,311 679,616 10,360 602,311 569,800

ACL Cables PLC 27,580 1,653,448 1,503,110 13,790 1,653,448 1,391,411

Total 9,733,799 11,598,176 9,733,799 9,884,201

Motors

United Motors Lanka PLC 5,000 495,407 390,000 5,000 495,407 415,000

Total 495,407 390,000 495,407 415,000

Power & Energy

Laugfs Gas PLC 21,500 798,343 533,200 21,500 798,343 761,100

Total 798,343 533,200 798,343 761,100

Total Cost and Market Value 23,332,786 23,468,363 21,526,092 19,973,126

21. Financial Assets - Held for Trading (Contd...)

2017 2016 Note Rs. Rs. Restated

Gross Loans and Receivables 22.1 5,990,554,172 5,472,184,744Less: Allowance for Individual Impairment 22.2.1 (65,253,806) (301,963,178) Allowance for Collective Impairment 22.2.2 (234,676,931) (205,760,326)

Net Loans and Receivables 5,690,623,435 4,964,461,240

22. Loans and Receivables to Other Customers


As at 31st March

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As at 31st March 2017 2016 Note Rs.. Rs. Restated

22.1 Loans and Receivables by ProductPersonal Loans 7,865,835 7,898,807

Business Loans 3,365,112,618 2,531,007,362

Leasing 22.4 1,973,594,455 1,945,927,860

Hire Purchase 22.5 371,648,731 769,022,042

Pawning Advances 159,796,289 131,512,363

Fixed Deposit Loans 108,688,364 83,584,012

Staff Loans 3,847,880 3,232,298

Total 5,990,554,172 5,472,184,744

22.2 Impairment Losses

22.2.1 Individual Impairment

Loans 22.3.1 30,731,474 95,746,024

Leases 22.4.1 19,423,806 97,707,822

Hire Purchases 22.5.1 15,098,526 108,509,332

Total 65,253,806 301,963,178

22.2.2 Collective Impairment

Loans 22.3.2 84,375,024 85,547,965

Leases 22.4.2 98,507,663 70,157,475

Hire Purchases 22.5.2 51,794,244 50,054,886

Total 234,676,931 205,760,326

22.3 Impairment Losses for Loans

22.3.1 Movement in Allowance for Individual Impairment

Opening Balance 95,746,024 85,012,530

Written off During the Year (119,538,245) -

Charge for the Year 54,523,695 10,733,494

Closing Balance 30,731,474 95,746,024

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As at 31st March 2017 2016 Note Rs. Rs. Restated.

22.3.2 Movement in Allowance for Collective Impairment

Opening Balance 85,547,965 52,042,651

(Release) / Charge for the Year (1,172,941) 33,505,314

Closing Balance 84,375,024 85,547,965

22.4 Net Investments Lease

Gross Investment in Leases Receivable within One Year 673,918,028 695,556,025

Gross Investment in Leases Receivable Between One and Five Years 1,707,717,225 1,651,813,089

Gross Investment in Leases Receivable After Five Years 160,098,490 154,857,477

2,541,733,743 2,502,226,591

Unearned Interest Income (568,139,288) (556,298,731)

1,973,594,455 1,945,927,860

Impairment Losses

Provision for Individual Impairment Losses 22.4.1 (19,423,806) (97,707,822)

Provision for Collective Impairment Losses 22.4.2 (98,507,663) (70,157,475)

Net Investment in Finance Leases After Impairment 1,855,662,986 1,778,062,563

22.4.1 Movement in Individual Impairment Losses

Balance at the Beginning of the Year 97,707,822 136,520,202

Written-off During the Year (94,947,992) -

Provision / (Reversal) Made During the Year 16,663,976 (38,812,380)

Balance at the End of the Year 19,423,806 97,707,822

22.4.2 Movement in Collective Impairment Losses


Provision Made / (Reversal) During the Year 28,350,188 11,797,706


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As at 31st March 2017 2016 Note Rs. Rs. 22.5 Hire Purchase

Gross Investment in Hire Purchase Receivable within One Year 126,287,227 281,896,343

Gross Investment in Hire Purchase Receivable Between One and Five Years 288,871,337 583,715,995

Gross Investment in Hire Purchase Receivable After Five Years 44,065,119 89,041,423

459,223,683 954,653,761 Unearned Interest Income (87,574,952) (185,631,719)

371,648,731 769,022,042

Impairment Losses

Provision for Individual Impairment 22.5.1 (15,098,526) (108,509,332)

Provision for Collective Impairment 22.5.2 (51,794,244) (50,054,886)

Net Investment in Hire Purchase 304,755,961 610,457,824

22.5.1 Movement in Individual Impairment Losses


Written-off During the Year (113,810,193) -

Provision / (Reversal) Made During the Year 20,399,387 (4,238,731)


22.5.2 Movement in Collective Impairment Losses


Provision Made During the Year 1,739,353 28,117,972


The above balance include Rs. 172.1Mn which relate to certain hire purchases and lease contracts which were rescheduled with customer consents at below market rate subsequent to the sale of related repossessed vehicles. The above balance is the outstanding balance net of proceeds received from sale of related repossessed vehicle. However for operational purpose, the Company accounts for disposal proceeds received as overpayments from customers and subsequently as repayments when the instalments are due in respect of these rescheduled contracts. As a consequent, the contracts are considered performing.

23. Financial Assets - Available for Sale

Government Securities - Treasury Bonds 2,864,440 2,904,773

Quoted Shares Held by the Company 23.1 2,755,533 2,719,067

Investments in Units 23.2 850,000 976,000

Unquoted Shares Held by the Company 23.3 250,293 250,293

Total 6,720,266 6,850,133


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23.1 Quoted Shares



Hotels and Travels

Kandy Hotels Company PLC 7,000 17,878 35,000 7,000 17,878 42,000

Aitken Spence Hotels Ltd. 3,800 403,468 133,760 3,800 403,468 201,400

Total 10,800 421,346 168,760 10,800 421,346 243,400

Bank, Finance and Insurance

Commercial Bank of Ceylon PLC 5,517 156,314 568,803 5,429 156,314 613,477

Union Bank Colombo PLC 700 17,500 9,940 700 17,500 11,620

Nations Trust Bank 10,000 854,464 740,000 10,000 854,464 742,000

Nations Lanka Finance PLC 81,000 181,666 81,000 81,000 181,666 81,000

Vanik Incorporation PLC 100,050 294,253 - 100,050 294,253 -

Merchant Bank PLC 5,000 79,874 54,000 5,000 79,874 51,000

Total 202,267 1,584,071 1,453,743 202,179 1,584,071 1,499,097

Beverage, Foods and Tobacco Nestle Lanka PLC 86 171,819 179,680 86 171,819 174,442

Total 86 171,819 179,680 86 171,819 174,442

Diversified Holdings Richard Pieris 95 557 789 95 557 684

Total 95 557 789 95 557 684

Chemicals and Pharmaceuticals CIC Holding PLC 9 - 561 9 - 644

Total 9 - 561 9 - 644

Manufacturing Royal Ceramics Lanka PLC 8,000 1,310,515 952,000 8,000 1,310,515 800,800

Total 8,000 1,310,515 952,000 8,000 1,310,515 800,800

Total Cost and Market Value 221,257 3,488,308 2,755,533 221,169 3,488,308 2,719,067

Net Carrying Amount of Quoted Investments 2,755,533 2,719,067

23. 2 Investments in Units

Candor Opportunities Fund 100,000 1,000,000 850,000 100,000 1,000,000 976,000

Total 850,000 976,000

No. of Total Market No. of Total Market Units Cost Value Units Cost Value 31.03.2017 31.03.2017 31.03.2017 31.03.2016 31.03.2016 31.03.2016 Rs. Rs. Rs. Rs.

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As at 31st March 2017 2016 Note Rs. Rs. Restated

24. Current Tax Receivable/(Payable)

Income Tax Payable 24.1 11,568,700 (18,962,867)

Economic Service Charges 4,189,854 -

Total 15,758,554 (18,962,867)

24.1 Income Tax Receivable/(Payable)

Balance at Beginning of the Year (18,962,867) (4,509,739)

BalanceTax Paid 1,163,316 -

Self-assessment Payments 3,000,000 8,000,000

W.H.T. Deducted on Fixed Deposits, Treasury Bills and Bonds for the Year 7,509,247 (4,978,990

(7,290,304) 8,469,251

Prior Year Over Provision 18,859,004 -

Current Tax Liability for the Year - (27,432,118)

Balance at the End of the Year 11,568,700 (18,962,867)

No. of Total Shares Cost Value

As at 31.03.17 31.03.16 Rs. Rs.

Regulatory Institutions

Finance Houses Consortium (Pvt) Ltd. 200,000 200,000

Credit Information Bureau of Sri Lanka 50,293 50,293

Total 250,293 250,293

Sector classification and market value per share are based on official valuations list published by Colombo Stock Exchange as at current week closing price of year end 31st March 2017.

23.3 Unquoted Shares

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Statement of Finnancial Position

Statement of Other Comprehensive Income

Income Statement


As at 31st March 2017 2016 Rs. Rs. Restated

25. Deferred Tax Asset


Amount Credited /(Charge) During the Period 26,554,581 (13,693,120)


25.1 Reconciliation of Net Deferred Tax Asset

Deferred Tax - Liability

Accelerated Depreciation for Tax Purposes - Own Assets 29,021,823 28,668,479

Accelerated Depreciation for Tax Purposes - Leased Assets 134,883,851 155,066,612

Revaluation Surplus on Property 92,374,336 64,611,639

Total 256,280,010 248,346,730

Deferred Tax - Assets Retirement Benefit Obligation 11,360,016 12,170,723

Tax Credits 303,550,371 268,251,804

Total 314,910,388 280,422,527

Net Deferred Tax Asset 58,630,378 32,075,797

2017 2016 2017 2016 2017 2016

Deferred Tax Liabilities on:

Accelerated Depreciation for Tax Purposes - Own Assets (29,021,823) (28,668,479) 353,344 5,267,474 - -

Accelerated Depreciation for Tax Purposes - Leased Assets (134,883,851) (155,066,612) (20,182,761) 71,468,059 - -

Revaluation Surplus on Freehold Building (92,374,336) (64,611,639) (1,706,206) (1,710,881) 29,468,903 -

Total (256,280,010) (248,346,730) (21,535,623) 75,024,652 29,468,903 -

Deferred Tax Assets on:

Retirement Benefit Obligation 11,360,016 12,170,723 844,064 (1,729,432) (33,357) (921,136)

Tax Credits 303,550,371 268,251,804 (35,298,567) (58,680,964) - -

Total 314,910,388 280,422,527 (34,454,504) (60,410,396) (33,357) (921,136)

Deferred Tax Effect on Income Statement and Other Comprehensive Income (55,990,127) 14,614,256 29,435,546 (921,136)Net Deferred Tax Assets 58,630,378 32,075,797

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As at 31st March 2017 2016 Note Rs. Rs.

26. Other Receivables

Other Receivables 26.1 9,934,322 43,095,533

Deposits and Advances 19,554,616 17,683,815

Sundry Debtors 908,521 968,473

Total 30,397,459 61,747,821

- Deposits and advances and sundry debtors do not contain any impaired assets. - Fair value of other receivables approximate their carrying value due to short term nature of there assets.

26.1 Other Receivables

Balance at the End of the Year Before Provision 26,379,685 43,095,533

Provision For Other Receivables (16,445,363) -

Balance at the End of the Year Net of Provision 9,934,322 43,095,533

As at 31st March 2017 2016 Note Rs. Rs. Restated

27. Other Assets

Repossessed Stocks 27.1 27,103,462 1,844,351

Stock of Gift Items 417,795 438,945

Stock of Stationery 1,265,265 1,491,685

Tiller Stock 2,579,436 4,744,429

Trading Stocks 73,317 192,433

Total 31,439,275 8,711,843

27.1 Repossessed Stocks

Balance at the End of the Year Before Provision 71,569,083 90,897,799

Provision for fall in value of Repossessed Stocks 27.2 (44,465,621) (89,053,448)

Balance at the End of the Year Net of Provision 27,103,462 1,844,351

27.2 Provision for Fall in Value of Repossessed Stocks


(Reversal)/Provision Made During the Year (44,587,827) 23,724,109


27.3 Fair Value Measurement

Market value of the repossessed stock as at 31st March 2017 is Rs. 61,141,000/-. Valuation was carried out by an independent valuer.

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28. Real Estate Stock


General Provision for Real Estate Stock - -


28.1 Measurement of Fair Value

Real estate stock of the Company is considered under Level 3 of fair value hierarchy. Forced sale value of the real estate stock as at 31st March 2017 is Rs. 155,000,000/-. Valuation was carried out by the independent valuer based on the prevailing market condition.

29. Property, Plant and Equipment

2017 2016 Total Total Rs. Rs.

As at 31st March


As at 31st March Land Buildings Solar Power Office Furniture & Computer Freehold Leasehold 2017 2016 System Equipment Fittings Equipment Motor Vehicles Motor Vehicles Total Total Rs. Rs. Rs. Rs. Rs. Rs. Rs. Rs. Rs. Rs.

Cost/Valuation

Balance at the Beginning of the Year 278,037,500 403,977,014 9,969,518 25,840,234 15,270,738 26,470,136 55,577,081 10,305,600 825,447,821 813,661,962Additions - - - 1,946,040 1,040,183 2,459,294 430,220 - 5,875,737 11,785,859Disposals - - - - - - - - - -Revaluation During the Year 224,141,997 105,246,083 - - - - - - 329,388,080 - Transfers - - - - - - - - - -

Balance at the End of the Year 502,179,497 509,223,097 9,969,518 27,786,274 16,310,921 28,929,430 56,007,301 10,305,600 1,160,711,638 825,447,821

Accumulated Depreciation Balance at the Beginning of the Year - 21,303,170 1,166,209 22,397,870 13,596,402 20,131,072 45,789,177 6,628,054 131,011,954 104,085,534 Charge for the Year - 10,099,425 996,952 1,911,120 951,779 2,815,415 6,430,144 2,576,400 25,781,235 26,926,420 Depreciation on Disposals - - - - - - - - - - Transfers to Revaluation - - - - - - - - - - Balance at the End of the Year - 31,402,595 2,163,161 24,308,990 14,548,181 22,946,487 52,219,321 9,204,454 156,793,189 131,011,954

Net Book Value As at 31st March 2017 502,179,497 477,820,502 7,806,357 3,477,284 1,762,740 5,982,943 3,787,980 1,101,146 1,003,918,449 -

As at 31st March 2016 278,037,500 382,673,844 8,803,309 3,442,364 1,674,336 6,339,064 9,787,904 3,677,546 - 694,435,867

29.1 The Cost of Fully-Depreciated Property, Plant and Equipment of the Company which are Still in Use as at the Financial Position Date is as follows:

Furniture & Fittings 12,985,739 11,362,355 Office Equipment 21,174,438 18,136,333 Computer Equipment 13,639,849 13,449,471 Company Vehicle 34,518,624 24,206,289 Total 82,318,650 67,154,448

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29. Property, Plant and Equipment (Contd...)

29.2 Information of Freehold Land and Buildings of the Company - Valuations

Extent of Cost Revalued Net Book Net Book Land and Amount as at Value as at Value as at Buildings 31.03.2017 31.03.2017 31.03.2016

Rs. Rs. Rs. Rs.

Land

No. 11A, Hill Street, Kandy 41.87 P 44,130,000 502,179,497 502,179,497 278,037,500

Building

No. 11A, Hill Street, Kandy 57537 sq.ft. 188,332,099 477,820,503 477,820,503 382,673,844

Total 232,462,099 980,000,000 980,000,000 660,711,344

29.3 Measurement of Fair Value

Fair Value Hierarchy

The fair value of properties set out above were determined by external, independent property valuer, Mr. W.D.J.S. Kumara, dated 25th May 2017, who has appropriate recognised professional qualifications and recent experience in the location and category of the property being valued.

These values have not been incorporated in the Financial Statements.

Freehold land and buildings of the Company are considered under Level 3 of fair value hierarchy.

29.4 Securities Pledged

Land and buildings situated at No. 11A, Hill Street, has been mortgaged as security for overdraft facilities shown in Note 35 to these Financial Statements.

Land situated at No. 15A and No. 9, Hill Street, have been mortgaged as security for bank loans shown in Note 32.1 to these Financial Statements.

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As at 31st March 2017 2016 Note Rs. Rs.

30. Intangible Assets

Computer Software

Cost


Additions During the Year 50,000 13,195,720


Amortization


Charge for the Year 2,760,185 1,856,354


Net Book Value 18,524,014 21,234,199

31. Deposits from Customers

Fixed Deposits 5,710,769,109 5,361,234,515

Savings Deposits 178,565,114 203,918,125

Total 5,889,334,223 5,565,152,640

32. Other Borrowings


Obtained During the Year - 75,000,000

381,446,668 511,801,667

Repayments During the Year (130,120,001) (130,354,999)

Balance at the End of the Year 32.1 251,326,667 381,446,668

Securities Pledged

Gross amount of Lease rentals receivable and Stock out on hire which have been pledged against borrowings as at reporting date is Rs. 441,819,999/- (2016 - Rs. 846,599,605/-).

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Note Rs. Rs.

32.1 Bank and Non-Bank Loans

Seylan Bank - Loan (Revolving) 40,000,000 70,000,000

Seylan Bank Loan (RL) 40,000,000 60,000,000

Seylan Bank 41,666,667 61,666,668

Sampath Bank 16,500,000 36,540,000

Sampath Bank-1324 59,920,000 79,960,000

Sampath Bank-1301 53,240,000 73,280,000

Total 251,326,667 381,446,668

Lease receivable under loans and advances have been pledged as security for the above loans. In addition, personal guarantee of Mr. K.R.B. Wijeyeratne and Land situated at Hill street, Kandy, has been mortgaged as security for the Seylan Bank loan.

33. Finance Lease Liability


Obtained During the Year - -

3,963,550 7,572,712

Repayments During the Year (2,622,935) (3,609,162)


Interest in Suspense (215,463) (235,599)

Finance Lease Liability at the End of the Year 33.1 1,125,152 3,727,951

33.1 Finance Lease Payable within One Year 1,125,152 2,585,934

Finance Lease Payable Between One and Five Years - 1,142,017

Total 1,125,152 3,727,951

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34. Retirement Benefit Obligation

Present Value of Defined Benefit Obligations 43,466,867 34,000,553

Actuarial Loss During the Year 119,132 3,289,772

Gain Arising from Change in the Assumption (2,860,513) -

Current Service Cost/Charge for the Year 3,247,162 2,671,670

Interest Cost 4,346,686 3,629,802

Benefit Paid (7,747,847) (124,930)

Net Retirement Benefit Obligations 40,571,487 43,466,867

31.1 Contribution for Defined Benefit Plan Recognised in the Income Statement

Current Service Cost/Charge for the Year 3,247,162 2,671,670

Interest Cost 4,346,686 3,629,803

Total 7,593,848 6,301,473

As per the report of the qualified Actuary, Mr. Piyal S. Goonethilleke, dated 5th May 2017, the retirement benefit obligation of the Company as at 31st March 2017 was Rs. 40,571,487/- (31st March 2016 - Rs. 43,466,868/-)

Details of Actuarial Assumptions are as follows:

Discount Rate Per Annum 11% 10%

Future Salary Increases 10% 10%

Retirement Age (Years) 55 55

Discount rate and future salary increment have a significant effect on the amounts recognized in Income Statement. A 1% change in either one of the assumptions would have the following effects:

Future Salary Increases Discount Rate

1% Increase 1% Decrease 1% Increase 1% Decrease

Rs. Rs. Rs. Rs.

Present Value of Defined Benefit Obligation After 1% Change 43,637,623 37,773,302 38,002,774 43,432,000

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As at 31st March 2017 2016 Rs. Rs. Restated

35. Other Liability

Bank Overdraft 298,080,613 2,523,705

Accrued Expenditure - Non-Interest 36,332,958 45,966,231

Unclaimed Overpayment Balance 19,756,645 -


The other liabilities as at 31st March 2017 include an amount of Rs. 19,756,645/- which represents reconciled differences aged above 5 years in the overpayment account. These balances are now held as unclaimed overpayments in separate ledger account in order for management to perform detailed reconciliation to resolve them over next two years.

Fixed deposit amounting to Rs. 17,806,081/- has been pledged against Commercial Bank overdraft facility.

36. Stated Capital

Ordinary Shares

62,958,930 Ordinary Shares 63,609,930 63,609,930

Preference Shares

Non-Cumulative, Non-Redeemable, Participating

6,707,650 Preference Shares 16,769,125 16,769,125

Stated Capital at the End of the Year 80,379,055 80,379,055

6,707,650 Listed, non-voting, non-cumulative, non-redeemable and participating preference shares were issued by the Company on 18th February 2008. Preference Shareholders are entitled to receive a premium of 10 cents over the dividend per Ordinary Share, this is executed only after declaring dividends to Ordinary Shareholders.

37. Statutory Reserve Fund


Transfers During the Year 30,831,739 14,333,427


The Company's statutory reserve fund was created according to the Direction No. 1 of 2003 (Capital Funds) of Central Bank Regulations. During the year a sum equivalent to 20% of the net profit for the year was transferred to the fund.

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Rs. Rs.

38. Revaluation Reserve


Depreciation Charged to Income Statement on Revalued Assets (6,093,596) (6,110,290)

Deferred Tax Effect on Revaluation Surplus on Freehold Building (29,468,903) -

Revaluation Surplus on Freehold Land and Building 329,388,081 -


39. General Reserve


Appropriations Made During the Year - -


40. Available for Sale Reserve

Opening Balance (1,226,059) 1,549,437

Net Losses on Remeasuring Available for Sale Financial Assets (179,572) (2,775,496)

Re-classification of Retained Earnings To/ From Available for Sale Reserve - -

Closing Balance (1,405,631) (1,226,059)

41. Retained Earnings Restated

Opening Balance (63,869,318) (54,281,175)


Other Comprehensive Income (85,775) (2,368,636)

Transfer to Reserves (30,831,739) (14,333,427)

Additional Depreciation on Revaluation 6,093,596 6,110,290

Closing Balance 65,465,456 (63,869,318)

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2017 2016 Rs. Rs.

44.2 Compensation of Key Management Personnel

Short-term Employee Benefits 13,143,495 12,211,296

Post Employment Benefit Plan

Contributions to Provident Fund and Trust Fund 1,316,223 1,164,472

44.3 Deposits Held by Key Management Personnel 13,318,653 46,953,437


42. Capital Commitments and Contingent Liabilities

42.1 Contingent Liabilities

The Company has given a guarantee to Seylan Bank PLC in respect of VISA international credit cards amounting to Rs.50,000,000/- .

43.2 Capital Commitments There were no material capital commitments that require adjustment in or disclosure to the Financial Statements as at the reporting date.

43. Events After the Reporting Period

There were no material events occurring after the statement of reporting date that require adjustment to or disclosure in the Financial Statements.

44. Related Party Transactions

44.1 Transactions with Key Management Personnel (KMP) of the Company

According to Sri Lanka Accounting Standard - LKAS 24 Related Party Disclosures, Key management personnel, are those having authority and responsibility for planning, directing and controlling the activities of the entity. Accordingly, the members of the Board of Directors (including Executive and Non-Executive Directors) have been classified as key management personnel of the Company.

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45. Segment Reporting

Finance Leasing Hire Purchase Loans & Advances Pawning Investments Other Unallocated Total As at 31st March 2017 2016 2017 2016 2017 2016 2017 2016 2017 2016 2017 2016 2017 2016 Rs. Rs. Rs. Rs. Rs. Rs. Rs. Rs. Rs. Rs. Rs. Rs. Rs. Rs.

Total Assets 1,855,662,986 1,778,062,563 304,755,961 610,457,824 3,375,079,654 2,444,428,489 155,124,834 126,840,908 663,421,039 803,478,265 1,332,035,830 993,718,916 7,686,080,304 6,756,986,965Total Liabilities 1,578,124,624 1,594,982,542 259,175,772 547,601,413 2,870,292,910 2,192,735,424 131,923,912 113,780,605 564,197,856 720,747,308 1,132,812,671 891,399,637 6,536,527,745 6,061,246,929

Information on Cash Flows

Cash Flows from Operating Activities 167,432,218 (181,179,037) 444,585,404 453,045,058 (453,939,655) 58,785,177 (13,710,633) 7,473,006 33,436,201 37,760,573 (139,512,846) (144,638,539) (305,273,647) 116,687,038 Cash Flows from Investing Activities - - - - - - - - (19,359,683) (31,972,483) (5,925,737) (24,981,579) (25,285,420) (56,954,062) Cash Flows from Financing Activities (31,415,085) (14,890,449) (5,159,307) (5,646,618) (57,137,754) (19,820,012) (2,626,156) (975,836) (11,231,257) (6,181,467) (25,699,144) (10,638,418) (133,268,704) (58,152,800)

Net Cash Flow Generated/(Used in) During the Year (136,017,133) (196,069,486) 439,426,097 447,398,440 (511,077,409) 38,965,165 (16,336,788) 6,497,170 2,845,261 (393,377) (171,137,727) (180,258,536) (463,827,771) 1,580,176

Category / Segment No. of Customers Amount Outstanding As At 31.03.2017 (Rs.)

Less than 5 Mn 11,103 4,991,643,148

5-10 Mn 39 274,145,304

10-20 Mn 21 309,556,006

20-30 Mn 6 143,064,201

30-40 Mn 1 35,760,802

Over 50 Mn 1 50,418,612

(Restated) (Restated) (Restated)

Given Below is the Profile of the Existing Customers Based on Their Outstanding Loan Balances:

Finance Leasing Hire Purchase Loans & Advances Pawning Investments Other Unallocated Total For the year ended 31st March 2017 2016 2017 2016 2017 2016 2017 2016 2017 2016 2017 2016 2017 2016 Rs. Rs. Rs. Rs. Rs. Rs. Rs. Rs. Rs. Rs. Rs. Rs. Rs. Rs.

Income From Operation Interest Income 364,875,314 326,890,615 102,142,503 164,136,636 617,709,714 476,771,868 23,920,370 10,345,680 65,867,806 65,466,521 - - 1,174,515,707 1,043,611,319Interest Expenses - - - - - - - - - - (659,089,266) (603,721,519) (659,089,266) (603,721,519)Net Interest Income 364,875,314 326,890,615 102,142,503 164,136,636 617,709,714 476,771,868 23,920,370 10,345,680 65,867,806 65,466,521 (659,089,266) (603,721,519) 515,426,441 439,889,800Investment Income Fee and Commission Income 8,480,314 6,137,653 4,645,668 5,050,443 39,209,781 18,625,061 2,015,260 1,311,641 - - 1,177,458 - 55,528,481 31,124,798Fee and Commission Expenses (4,723,048) (4,767,708) - (28,740) - - - - - - - - (4,723,048) (4,796,448)Other Income - - - - - - - - 3,097,431 88,358 22,540,945 27,416,839 25,638,376 27,505,197Total Operating Income 368,632,580 328,260,560 106,788,171 169,158,338 656,919,495 495,396,930 25,935,630 11,657,320 68,965,237 65,554,879 (635,370,863) (576,304,680) 591,870,250 493,723,347Expenses Credit Loss Expenses 49,933,828 (27,014,675) 91,671,448 (23,879,241) 110,775,318 (63,291,462) - (4,671,455) - - (344,741,794) (14,524,293) (92,361,199) (79,351,776)Depreciation - - - - - - - - - - (28,541,420) (28,782,774) (28,541,420) (28,782,774)Personnel and Other Expenses (117,427,589) (100,840,305) (32,822,067) (50,633,417) (198,492,394) (147,076,172) (7,686,477) (3,191,469) (21,165,700) (20,195,330) - - (377,414,227) (321,936,692)Total Expenses (67,313,761) (73,825,630) 58,849,381 (74,512,658) (87,717,075) (210,367,634) (7,686,477) (7,862,924) (21,165,700) (20,195,330) (373,283,214) (43,307,067) (498,316,846) (430,071,242) Segment Results 301,318,819 254,434,931 165,637,552 94,645,681 569,202,420 285,029,295 18,249,153 3,794,396 47,799,537 45,359,549 (1,008,654,077) (619,611,747) 93,553,404 63,652,105

VAT on Financial Services (14,243,843) (20,602,101)Profit on Ordinary Activities Before Income Tax 79,309,561 43,050,004Income Tax Expense 74,849,131 (42,046,374) Profit for the Year 154,158,692 1,003,630

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Finance Leasing Hire Purchase Loans & Advances Pawning Investments Other Unallocated Total As at 31st March 2017 2016 2017 2016 2017 2016 2017 2016 2017 2016 2017 2016 2017 2016 Rs. Rs. Rs. Rs. Rs. Rs. Rs. Rs. Rs. Rs. Rs. Rs. Rs. Rs.

Total Assets 1,855,662,986 1,778,062,563 304,755,961 610,457,824 3,375,079,654 2,444,428,489 155,124,834 126,840,908 663,421,039 803,478,265 1,332,035,830 993,718,916 7,686,080,304 6,756,986,965Total Liabilities 1,578,124,624 1,594,982,542 259,175,772 547,601,413 2,870,292,910 2,192,735,424 131,923,912 113,780,605 564,197,856 720,747,308 1,132,812,671 891,399,637 6,536,527,745 6,061,246,929

Information on Cash Flows

Cash Flows from Operating Activities 167,432,218 (181,179,037) 444,585,404 453,045,058 (453,939,655) 58,785,177 (13,710,633) 7,473,006 33,436,201 37,760,573 (139,512,846) (144,638,539) (305,273,647) 116,687,038 Cash Flows from Investing Activities - - - - - - - - (19,359,683) (31,972,483) (5,925,737) (24,981,579) (25,285,420) (56,954,062) Cash Flows from Financing Activities (31,415,085) (14,890,449) (5,159,307) (5,646,618) (57,137,754) (19,820,012) (2,626,156) (975,836) (11,231,257) (6,181,467) (25,699,144) (10,638,418) (133,268,704) (58,152,800)

Net Cash Flow Generated/(Used in) During the Year (136,017,133) (196,069,486) 439,426,097 447,398,440 (511,077,409) 38,965,165 (16,336,788) 6,497,170 2,845,261 (393,377) (171,137,727) (180,258,536) (463,827,771) 1,580,176


(Restated) (Restated) (Restated) (Restated)

(Restated)

Finance Leasing Hire Purchase Loans & Advances Pawning Investments Other Unallocated Total For the year ended 31st March 2017 2016 2017 2016 2017 2016 2017 2016 2017 2016 2017 2016 2017 2016 Rs. Rs. Rs. Rs. Rs. Rs. Rs. Rs. Rs. Rs. Rs. Rs. Rs. Rs.

Income From Operation Interest Income 364,875,314 326,890,615 102,142,503 164,136,636 617,709,714 476,771,868 23,920,370 10,345,680 65,867,806 65,466,521 - - 1,174,515,707 1,043,611,319Interest Expenses - - - - - - - - - - (659,089,266) (603,721,519) (659,089,266) (603,721,519)Net Interest Income 364,875,314 326,890,615 102,142,503 164,136,636 617,709,714 476,771,868 23,920,370 10,345,680 65,867,806 65,466,521 (659,089,266) (603,721,519) 515,426,441 439,889,800Investment Income Fee and Commission Income 8,480,314 6,137,653 4,645,668 5,050,443 39,209,781 18,625,061 2,015,260 1,311,641 - - 1,177,458 - 55,528,481 31,124,798Fee and Commission Expenses (4,723,048) (4,767,708) - (28,740) - - - - - - - - (4,723,048) (4,796,448)Other Income - - - - - - - - 3,097,431 88,358 22,540,945 27,416,839 25,638,376 27,505,197Total Operating Income 368,632,580 328,260,560 106,788,171 169,158,338 656,919,495 495,396,930 25,935,630 11,657,320 68,965,237 65,554,879 (635,370,863) (576,304,680) 591,870,250 493,723,347Expenses Credit Loss Expenses 49,933,828 (27,014,675) 91,671,448 (23,879,241) 110,775,318 (63,291,462) - (4,671,455) - - (344,741,794) (14,524,293) (92,361,199) (79,351,776)Depreciation - - - - - - - - - - (28,541,420) (28,782,774) (28,541,420) (28,782,774)Personnel and Other Expenses (117,427,589) (100,840,305) (32,822,067) (50,633,417) (198,492,394) (147,076,172) (7,686,477) (3,191,469) (21,165,700) (20,195,330) - - (377,414,227) (321,936,692)Total Expenses (67,313,761) (73,825,630) 58,849,381 (74,512,658) (87,717,075) (210,367,634) (7,686,477) (7,862,924) (21,165,700) (20,195,330) (373,283,214) (43,307,067) (498,316,846) (430,071,242) Segment Results 301,318,819 254,434,931 165,637,552 94,645,681 569,202,420 285,029,295 18,249,153 3,794,396 47,799,537 45,359,549 (1,008,654,077) (619,611,747) 93,553,404 63,652,105

VAT on Financial Services (14,243,843) (20,602,101)Profit on Ordinary Activities Before Income Tax 79,309,561 43,050,004Income Tax Expense 74,849,131 (42,046,374) Profit for the Year 154,158,692 1,003,630

45. Segment Reporting (Contd...)

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46. Maturity Analysis

46.1 Definition of Maturity

Time interval between Statement of Financial Position date and contractual maturity dates.

46.2 Allocation of Amounts

Amounts are allocated to respective maturity groupings based on installments falling due as per contract. The amounts therefore represent total amount

receivable or payable in each maturity grouping.

46.3 Profile


Up to 3 - 12 1 - 3 3-5 > 5 Unallocated Total 3 Months Months Years Years Years 2017 Rs. Rs. Rs. Rs. Rs. Rs. Rs.

Assets with Contractual Maturity (Interest Bearing Assets)

Cash and Cash Equivalent 6,189,506 - - - - - 6,189,506 Placements with Banks 90,026,968 9,435,043 - 109,933,293 - - 209,395,304 Balance with Central Bank 417,653,561 - - 2,864,440 - - 420,518,001 Loans and Advances 973,902,684 1,059,707,972 2,241,156,778 1,064,607,828 351,248,173 - 5,690,623,435

Other Assets (Non-interest Bearing Assets)

Cash and Short-term Funds 48,322,796 - - - - - 48,322,796

Financial Assets - Held for Trading 23,468,363 - - - - - 23,468,363

Financial Investment - Available for Sale - 6,720,266 - - - - 6,720,266

Financial Assets - Held to Maturity - - - 3,319,105 - - 3,319,105

Other Receivables 5,202,271 5,660,615 11,971,530 5,686,789 1,876,253 - 30,397,459

Deferred Tax - - - - - 58,630,378 58,630,378

Current Tax Receivables - 15,758,554 - - - - 15,758,554

Other Assets - 31,439,275 - - - - 31,439,275

Real Estate Stock - - - - - 118,855,399 118,855,399

Property, Plant and Equipment - - - - 1,003,918,449 - 1,003,918,449

Intangible Assets - - - - 18,524,014 - 18,524,014

Total Assets as at 31st March 2017 1,564,766,149 1,128,721,725 2,253,128,308 1,186,411,455 1,375,566,889 177,485,777 7,686,080,304

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47. Financial Risk Management

47.1 Introduction

Risk is inherent in the Company’s activities but is managed through a process of ongoing identification, measurement and monitoring, subject to risk limits and other controls. This process of risk management is critical to the Company’s continuing profitability and each individual within the Company is accountable for the risk exposures relating to his or her responsibilities. The key financial risk faced by the Company is;

Interest Rate Risk

Credit Risk

Market Risk

Liquidity Risk

Operational Risk

Up to 3 - 12 1 - 3 3-5 > 5 Unallocated Total 3 Months Months Years Years Years 2017 Rs. Rs. Rs. Rs. Rs. Rs. Rs.

Interest Bearing Liabilities Deposits from Customers 1,928,665,149 2,183,819,465 1,204,361,128 572,488,481 - - 5,889,334,223

Other Borrowings 33,210,496 94,694,656 123,421,515 - - - 251,326,667

Bank Overdraft 298,080,613 - - - - - 298,080,613

Unclaimed Overpayment - 19,756,645 - - - - 19,756,645

Non-Interest Bearing Liabilities

Creditors & Accrued Expenses 9,364,528 28,093,583 - - - - 37,458,110

Retirement Benefit Obligations - - - - - 40,571,487 40,571,487

Stated Cpital - - - - - 80,379,055 80,379,055

Statutory Reserves - - - - - 196,153,575 196,153,575

General Reserves - - - - - 679,946,977 679,946,977

Revaluation Reserves - - - - - 129,013,127 129,013,127

Fair Value Reserves - - - - - (1,405,631) (1,405,631)

Retained Earnings - - - - - 65,465,456 65,465,456

Total Liabilities as at 31st March 2017 2,269,320,786 2,326,364,348 1,327,782,643 572,488,481 - 1,190,124,046 7,686,080,304

46.3 Profile (Contd...)

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47.2 Risk Management Framework

The Board of Directors has overall responsibility for the establishment and oversight of the Company's Risk Engagement Framework. The Board has delegated its authority to Board Integrated Risk Management Committee (IRMC) which is responsible for developing and monitoring the Company’s Risk Management Policies. The Committee comprises of Executive and Non-Executive Directors and Senior Management. Meetings of IRMC are held regularly, and the Board of Directors is duly updated of its activities and concentrates mainly on liquidity management, interest rates and statement of financial position optimization and new business. The Company's risk management policies are established to identify and analyse the risks faced by the Company, to set appropriate risk limits and controls, and to monitor adherence to established limits. Risk management policies and systems are reviewed regularly to reflect changes in market conditions, products and services offered. The Companies all employees are assigned and made to understand their respective roles and responsibilities.

47.3 Credit Risk

Credit Risk is the risk of financial loss to the Company if a borrower or counterparty to a financial instrument, fails to meet its contractual obligations, and arises principally from the Company’s loans and advances to customers and investments in debt securities. In addition to the credit risk from direct funding exposure, the Company would also be exposed to indirect liabilities such as guarantees etc., which would carry credit risk.

Credit evaluations process is done by an independant division who is directly reporting to the intergrated Risk Managment Committee.

The Company considers and consolidates all elements of credit risk exposure (such as individual obligor default risk, country and sector concentration risks) to ensure stringent Credit Risk Management.

The amount and type of collateral required depends on an assessment of the credit risk of the counterparty. Guidelines are in place covering the acceptability and valuation of each type of collateral. The main types of collateral obtained are, as follows:

For corporate lending, charges over real estate properties, inventory and fixed deposits

For retail lending, mortgages over residential properties, vehicles

The Company also obtains guarantees from corporate and individuals for lease, hire purchase and loans. Management monitors the market value of collateral and will request additional collateral in accordance with the underlying agreement. It is the Company’s policy to dispose of repossessed properties in an orderly fashion. The proceeds are used to reduce or repay the outstanding claim. In general, the Company does not occupy repossessed properties for business use.

47.4 Impairment Assessment

The Company uses Net Flow Rate model for the recognition of losses on impaired financial assets. The losses can only be recognized when objective evidence of a specific loss event has been observed. This includes,

Significant financial difficulty of the customer

A breach of contract such as a default of payment

It becomes probable that the customer will enter bankruptcy or other financial reorganization

Observable data that suggest that there is a decrease in the estimated future cash flow from the loans


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47.5 Individually Assessed Allowances

The allowances appropriate for each individually significant loan or advance is determined on an individual basis, including any overdue payments of interests, credit rating downgrades, or infringement of the original terms of the contract. Items considered when determining allowance amounts include the sustainability of the counterparty’s business plan, its ability to improve performance if it is in a financial difficulty. Projected receipts and the expected payout should bankruptcy ensue, the availability of other financial support, the realizable value of collateral and the timing of the expected cash flows. Impairment allowances are evaluated at each reporting date, unless unforeseen circumstances require more careful attention.

47.6 Write-off policy

"The Company writes-off a loan balance and any related allowances for impairment losses with the approval of the Board of Directors, when it determines that the loans security is uncollectible. This determination is made after considering information such as the occurrence of significant changes in the borrower’s financial position such that the borrower can no longer pay the obligation or that proceeds from collateral will not be sufficient to pay back the entire exposure.

47.7 Interest Rate Risk

Interest Rate Risk arises from the possibility that changes in interest rates will affect future cash flows or the fair values of financial instruments. Interest rate risk is mainly managed with Maturity Gap Analysis that distributes interest rate sensitive assets, liabilities and their reprising during the periods of changes in market interest rates. Interest rate sensitivity is measured as a ratio of interest rate sensitivity assets divided by interest rate sensitivity liabilities. If the ratio is above one demonstrates an assets sensitive position. An assets sensitive position in a rising interest rate environment will benefit the Company with widening interest rate margin.

47.8 Equity Price Risk

Equity Price Risk is that the fair value of equities decreases as the result of changes in the level of equity indices and individual stocks. The non-trading equity price risk exposure arises from equity securities classified as available for sale.

47.9 Market Risk

Market Risk is the likelihood of the Company incurring losses as a result of values of assets and liabilities or revenues being adversely affected by changes in financial market conditions such as movements in interest rates, exchange rates, equity prices or commodity prices. The Companies exposure to market risk arises as a result of dealing in financial products including lease, hire purchase, loans, fixed deposits, treasury bill, short-term borrowings and long-term borrowings to facilitate both customer driven and proprietary transaction.

47.10 Liquidity Risk

Liquidity Risk is the risk that the Company will encounter difficulties in meeting its financial commitments that are settled by delivering cash or another financial asset. Hence the Company may be unable to meet its payment obligations when they fall due under both normal and stress circumstances. To limit this risk, management has arranged diversified funding sources in addition to its core deposit base, and adopted a policy of continuously managing assets with liquidity in mind and of monitoring future cash flows and liquidity on a daily basis. The Company has developed internal control processes and contingency plans for managing liquidity risk. This incorporates an assessment of expected cash flows and the availability of high grade collateral which could be used to secure additional funding if required.

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47.11 Operational Risk

Operational Risk is the risk of losses resulting from inadequate or failed internal processes, people, and system or from external events. This identification include legal risk, but exclude strategic and reputational risk. The legal risk includes but is not limited to, exposure to fines, penalties or damages resulting from supervisory actions, as well as private settlement.

The Company identified that operational risk is inherent in all business activities and can bring unprecedented losses or damages to its business through direct or indirect financial loss, brand or reputational damage, customer dissatisfaction, or legal or regulatory penalties if such risk are not objectively managed.

Operational Risks of the Company are mitigated and managed through a control framework which consists of monitoring and responding to potential risks such as segregation of duties, access, authorization and reconciliation procedures, staff education and assessment processes, Business Continuity Planning etc.

47.12 Regulatory Risk

Regulatory Risk is the risk of non-compliance with applicable legislation, regulation and regulatory directives, Sinhaputhra Finance PLC manages day by day regulatory risk primarily by educating and training employees about regulatory requirements, establishing and maintaining appropriate policies and procedures, and monitoring for compliance. The Company has appointed a Compliance Officer for communicating regulatory requirements to each business unit, ensuring that business units have appropriate policies and procedures in place and that staff are trained to meet regulatory requirements and for tracking, escalating and reporting significant issues and finding to senior management and the Board.

In this latter process, the Compliance Officer is supported and assisted by the Company’s internal auditors, Messrs. L.M. Associates also report on any issues of non-compliance, with both internal and external regulations. Compliance with regulatory requirements is also documented through formal procedure manuals for each business unit.

47.13 Reputation Risk

Reputation Risk is the risk to earning, capital or brand arising from negative public or employee opinion. A company’s reputation is a valuable business asset in its own right, essential to optimising shareholder value. Reputation risk cannot be managed in isolation from other forms of risks, since all risks can have an impact on reputation, which in turn can impact the brand, earning and capital. Credit, liquidity, interest rate, operational, and regulatory risk must all be managed effectively in order to safeguard the Company’s reputation.

The Company maintains a portfolio of highly marketable and diverse assets assumed to be easily liquidated in the event of an unforeseen interruption of expected cash flow. The Company also has committed lines of credit that could be utilized to meet liquidity needs. Further, the Company maintains a statutory deposit with the Central Bank of Sri Lanka equal to 7.5% of customer deposits. In accordance with the Company’s policy, the liquidity position is assessed and managed under a variety of scenarios, giving due consideration to stress factors relating to both the market in general and specific to the Company. The most important of these is to maintain the required ratio of liquid assets to liabilities, to meet the regulatory requirement. Liquid assets consist of cash, short–term bank deposits and liquid debt securities available for immediate sale.

Ratio 2017 2016

Liquidity Ratio 10.80% 11.29%

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47.14 Capital Adequacy and Management

Capital adequacy measures the Company's aggregate capital in relation to the risk, which may arise from its assets and off balance sheet transactions, its dealing operations and its human activities, technology and natural incidents. It is also a measure of financial strength and the stability of a company.

The capital adequacy ratio is calculated as a percentage of companies capital to its risk-weighted assets as specified by the Direction No. 02 of 2006, Finance Companies (Risk-Weighted Capital Adequacy Ratio) and there are two measures to define the capital adequacy of the Company, namely, core capital to risk-weighted asset ratio and total capital to risk-weighted assets ratio.

The minimum requirement for core capital adequacy ratio and total capital adequacy ratio are 5% and 10% respectively.

Capital and Risk Weighted Assets

As at 31st March Minimum Requirement 2017 2016

Capital to Risk Weighted Asset Ratio

Tier I (%) 7.31 9.82

Deduction - Tier I (%)

Core Capital 5.00 7.31 9.82

Tier II (%) 9.06 11.64

Deduction - Tier II (%) Total Capital Base 10.00 9.06 11.64

Details of Computation Capital Base

As at 31 March 2017 2016

Rs.'000 Rs.'000

Tier I: Core Capital Stated Capital 80,379 80,379

Statutory Reserve Fund 196,154 150,988

Retained Profits 64,060 232,163

General and Other Reserves 129,013 129,013 469,606 592,543 Less: Deductions

Other Intangible Assets - -

Total Tier I Capital 469,606 592,543

Tier II: Supplementary Capital General Provisions - -

Revaluation Reserve (Approved by Central Bank of Sri Lanka) 115,729 115,729

Less: Deductions Investment in the Capital of Other Banks and Financial Institutions (3,211) (5,631)

Eligible Tier II Capital 112,518 110,098

Capital Base 582,124 702,641

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Computation of Total Risk Weighted Assets


As at 31 March Risk Weights 2017 2016 % Rs.'000 Rs.'000 Rs.'000 Rs.'000

Cash in Hand & Bank Balances 0 54,512 - 60,485 -

Fixed Deposit with Banks 20 209,395 41,879 367,988 73,598

Sri Lanka Government Treasury Bills 0 420,518 - 372,644 -

Loans Against Fixed Deposits with the Company 0 461,910 - 83,747 -

Pawning Less than 10% in Total Advances 0 159,796 - 131,228 -

Staff Loans Secured by Provident Fund 0 3,848 - 3,583 -

Other Loans & Advances 100 5,065,069 5,065,069 4,717,934 4,717,934

Property, Plant and Equipment 100 1,022,442 1,022,442 719,471 719,471

Other Assets 100 288,589 288,589 474,777 474,777

7,686,080 6,417,980 6,931,857 5,985,780

Guarantee Issued 100 3,727 3,727 50,000 50,000

Total Risk Weighted Assets 7,689,807 6,421,707 6,981,857 6,035,780

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48. Sensitivity Analysis

The graph below depicts the sensitivity analysis carried out on the statement of financial position as at 31st March 2017, on the changes of interest rate right across the market in a hypothetical situation. The Company is exposed to interest rate fluctuations due to the availability of short term and floating rate funding. The exposure will partly diminish by the short term, rate sensitive investments. The time horizon of the study is restricted to a 12 months period. The Company undertakes varying degrees of such rate shocks and evaluate them to ensure that the risk exposures are within the risk appetite of the Company as compared to the anticipated market rate movements.

-2650000-2600000-2550000-2500000-2450000-2400000-2350000-2300000-2250000-2200000-2150000

Impact on NII - Rate shock of 100 bp

2016/2017

2015/ 2016

* Parallel increase in rates would have a positive impact on earning whereas parallel decrease have a negative effect In arriving at the above result the Company considered only rate sensitive asset and liabilities.

100 bp Parallel Increase / Decrease* Rs.'000


Average for the Year +/- 2392 +/-2481Maximum for the Year +/- 2309 +/-2334Minimum for the Year +/- 2477 +/-2616

Sensitivity to Projected Net Interest Income


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49. Restated Financial Statements

The Company had significant number of contracts which were rescheduled several times during the period up to 01st April 2016 and had classified these contracts as performing despite significant number of arrears accumulated. As a result of this erroneous classification, provision for impairment against the outstanding balances of these contracts as at 01st April 2015 was understated by Rs. 328 Mn. Furthermore, the Company had recognised interest income of Rs. 34 Mn against these contracts during the year ended 31st March 2016.

Certain lease and hire purchases contracts have been rescheduled subsequent to the repossession of related vehicles and have since been considered performing. As a consequence, provision for impairment was understated approximately Rs. 31.4 Mn at 01st April 2015 and Rs. 14.1 Mn during the year ended 31st March 2016.

Further, the Company had not accounted for losses of Rs. 28 Mn and Rs. 34 Mn on vehicles repossessed and sold during the periods to 01st April 2015 and the year ended 31st March 2016 respectively in connection with certain leases and hire purchase contacts.

During the year ended 31st March 2015, the Company leased out one of its premises to a third party subject to a condition that the lessee incur significant upgrade to convert the premise to a hotel and then operate it for a period of 10 years. Management estimated that Rs. 8.5 Mn worth of upgrades made by the lessee are residual to the Company at the end of the lease period. During the same year but near completion of the upgrade, the Company revalued its building including this premise and accounted for revaluation surplus ignoring the above benefit accrued to the Company through the lease arrangement. The residual benefit should have been considered prepaid rental and amortised over lease period as rental income on the leased premise.

As these errors in the prior periods constituted material errors, in terms of LKAS 08 -'Accounting policies, Changes in Accounting Estimates and errors', the Statement of Financial Position as at 31st March 2016 and the Statements of Profit or Loss for the year ended 31st March 2016 and the retained earning balance in the Statement of Changes in Qquity as at 01st April 2015 were restated.

Since the effect of these errors to the balances reported in the Statements of Financial Position as at 01st April 2015 is material, a third Balance Sheet has been presented.

The Summary of Corrections of Errors is as Follows:

At 01st April 2015

Under Provision on Rescheduled Contracts Decrease in Loans and Advances due to Increase in Provision for Impairment - (328,296,430) - - Decrease in Retained Earnings due to Increase in Impairment Losses - - (328,296,430) -

Under Provision on Repossessed and Rescheduled Contracts

Decrease in Loans and Advances due to Increase in Provision for Impairment - (31,433,093) - - Decrease in Retained Earnings due to Increase in Provision - - (31,433,093) - Deferred Tax Effect of Above Increase in Deferred Tax Asset - 100,724,266 100,724,266 -

Statement of Profit or Loss

and Other Comprehensive

IncomeRs.

Statement of Financial Position

Rs.

Statement of Change in

Equity

Rs.

Statement of Cash Flows

Rs.


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Statement of Profit or Loss

and Other Comprehensive

IncomeRs.

Statement of Financial Position

Rs.

Statement of Change in

Equity

Rs.

Statement of Cash Flows

Rs.

Recognition of Losses on Sale of Repossessed Vehicles*

Decrease in Other Assets due to Recognition of Losses - (27,807,463) - - Decrease in Retained Earnings due to Increase in Losses - - (27,807,463) -

Recognition of Prepaid Rentals and Related Rent Income for the Period Increase in Prepaid Rental / Decrease in Revaluation Reserve - 8,530,221 (8,530,221) - Increase in Rent Income with a Corresponding Decrease to Prepaid Rent and Increase in VAT Liability on Rent Income - (512,326) 512,326 - Increase in Income Tax Liability / Income Tax Charge - 143,451 (143,451) -

For the Year ended and at 31st March 2016 Reversal of Interest Income Recognised in Error Decrease in Interest Income (34,184,081) - - (34,184,081)Decrease in Loans and Advances Due to Decrease in Interest Receivable - (34,184,081) - 34,184,081

Under Provision on Repossessed and Rescheduled Contracts Increase in Impairment Losses (14,152,389) - - (14,152,389) Decrease in Loans and Advances Due to Increase in Provision for Impairment - (14,152,389) - (14,152,389)

Deferred Tax Effect of Above Increase in Deferred Tax Asset 3,962,669 3,962,669 - -

Recognition of Losses on Sale of Repossessed Vehicles Increase in other Expenses Due to Increase in Losses on Sale of Repossessed Vehicles (34,358,585) - - (34,358,585) Decrease in Other assets due to Recognition of Losses - (34,358,585) - 34,358,585

Recognition of Rent Income, VAT and Income Tax Liability thereto Increase in Rent Income with a Corresponding Decrease to Prepaid Rent and Increase in VAT Liability on Rent Income 853,022 (853,022) - -

Effect on Income Tax Arising from Error Corrections Decrease in Income Tax Expenses 7,300,392 - - - Decrease in Income Tax Liability (7,300,392) - -

* No income tax effect on this has been considered since the assessment for the related tax year has already been issued by Inland Revenue and the time bar has been reached.

49. Restated Financial Statements (Cont...)



TEN YEAR SUMMARY

For the year 2007/2008 2008/2009 2009/2010 2010/2011 2011/2012 2012/2013 2013/2014 2014/2015 2015/2016 2016/2017 Rs.'000 Rs.'000 Rs.'000 Rs.'000 Rs.'000 Rs.'000 Rs.'000 Rs.'000 Rs.'000 Rs.’000 (Restated)

Assets Cash and Cash Equivalents 69,960 64,232 93,962 69,515 62,832 61,588 72,247 60,485 61,549 54,512 Balance with Central Bank - Held to Maturity 253,446 185,424 245,751 256,938 218,781 274,736 317,468 372,644 399,813 417,654 Placement with Banks 218,333 82,518 81,249 87,211 131,178 143,390 170,237 367,988 370,629 209,395Loans and Advances 2,213,017 2,365,693 2,198,500 2,654,551 3,396,914 3,915,825 4,476,195 4,576,763 4,964,461 5,690,623Other Financial Assets 25,445 29,592 25,507 20,088 21,690 31,945 35,927 30,919 33,036 36,372Investments in Associate Companies 790 790 790 790 790 - - - - -Tax Receivable 30,431 42,199 52,311 48,604 56,896 42,536 12,424 - - 15,759Deferred Tax Assets - - - - - - - 45,769 32,076 58,630Other Receivables 191,249 257,460 236,844 86,068 73,146 50,356 53,297 63,479 61,748 30,397Other Assets 83,426 58,204 101,620 219,176 152,018 189,550 425,192 229,354 8,712 31,439Real Estate Stocks 7,599 8,769 37,186 65,987 71,898 109,156 123,094 123,218 109,293 118,856Property, Plant and Equipment 309,332 345,901 337,338 336,542 657,429 656,511 727,784 709,576 694,436 1,003,919Intangible Assets - - - - 13,649 12,757 11,335 9,895 21,234 18,524

Total Assets 3,403,028 3,440,782 3,411,058 3,845,470 4,857,221 5,488,350 6,425,200 6,590,090 6,756,987 7,686,080

Liabilities

Deposits from Customers 2,274,304 2,148,588 2,435,524 2,955,261 3,591,624 4,011,946 4,511,621 5,369,746 5,565,153 5,889,334Other Borrowings 475,377 618,443 325,320 261,942 255,392 330,647 504,869 436,802 381,447 25,1,327Finance Lease Liability - - - - - - 8,321 6,136 3,728 1,125Retirement Benefit Obligation - - - 2,535 7,046 14,457 29,844 34,001 43,467 40,572Current Tax Payable - - - - - - - 4,510 18,963 -Deferred Tax Liability 31,390 34,606 34,645 9,428 100,577 76,683 48,464 - - -Other Liabilities 200,087 200,245 171,795 134,243 128,757 228,479 353,950 39,016 48,489 354,170

Total Liabilities 2,981,158 3,001,882 2,967,284 3,363,409 4,083,396 4,662,212 5,457,069 5,890,210 6,061,247 6,536,528

Equity

Stated Capital 80,379 80,379 80,379 80,379 80,379 80,379 80,379 80,379 80,379 80,379Statutory Reserve Fund 82,009 84,350 85,905 91,291 102,121 117,094 145,493 150,988 165,322 196,154Revaluation Reserves 112,032 111,745 111,745 112,414 360,485 354,619 406,855 392,232 386,121 679,947General Reserve 129,013 129,013 129,013 129,013 129,013 129,013 129,013 129,013 129,013 129,013Investment Fund Reserve - - - - 10,408 18,131 24,231 - - -Retained Earnings 18,437 33,413 36,732 68,964 91,419 130,203 184,256 (54,281) (63,869) 65,465Available for Sale Reserve - - - - - (3,301) (2,096) 1,549 (1,226) (1,406)

Total Equity 421,870 438,900 443,774 482,061 773,825 826,138 968,131 699,880 695,740 1,149,552

Total Liabilities & Equity 3,403,028 3,440,782 3,411,058 3,845,470 4,857,221 5,488,350 6,425,200 6,590,090 6,756,987 7,686,080

Profit & Loss Account

Interest Income 672,620 695,069 628,064 582,141 640,431 797,799 989,759 1,050,577 1,043,611 1,174,516Interest Expenses (462,160) (527,252) (480,175) (396,281) (399,720) (542,125) (664,653) (619,742) (603,721) (659,089)Net Interest Income 210,460 167,817 147,889 185,860 240,711 255,674 325,106 430,835 439,890 515,427

Fees and Other Income 39,066 22,613 29,173 64,402 59,679 59,286 75,928 52,280 58,630 81,167Net Income from Operations 249,526 190,430 177,062 250,262 300,390 314,960 401,034 483,115 498,520 596,594Operating Expenses Personnel Expenses (50,449) (47,672) (41,970) (45,968) (71,784) (89,638) (114,105) (116,105) (131,683) (159,749)Directors’ Remuneration (7,336) (6,476) (7,563) (11,305) (11,632) (11,952) (9,186) (10,818) (12,211) (13,144)Other Overhead Expenses (38,855) (34,235) (40,653) (46,909) (45,062) (54,731) (77,232) (139,318) (182,839) (209,245)Depreciation of Property, Plant and Equipment (7,991) (15,820) (17,816) (17,791) (17,427) (21,846) (27,938) (30,803) (28,783) (28,541)Operating Profit Before Taxation & Possible Losses 144,895 86,227 69,060 128,289 154,485 136,793 172,573 186,071 143,004 185,915Allowances for Impairment for loans and receivables (105,692) (55,475) (42,949) (91,576) (60,865) (56,161) (82,085) (116,078) (79,352) (92,361)Operating Profit After Provision for Possible Losses 39,203 30,752 26,111 36,713 93,620 80,632 90,488 69,993 63,652 (93,554)VAT on Financial Services (10,521) (10,063) (10,059) (14,312) (12,947) (11,365) (13,706) (14,765) (20,602) (14,244)Profit Before Taxation 28,682 20,689 16,052 22,401 80,673 69,267 76,782 55,228 43,050 79,310Less: Taxation 23,264 (8,982) (8,279) 4,527 (27,780) 4,858 6,912 (27,748) (42,046) 74,849

Profit for the Year 51,946 11,707 7,773 26,928 52,893 74,125 83,694 27,480 1,004 154,159

Earnings Per Share (Rs.) 8.25 1.86 1.23 4.28 8.40 11.77 13.37 4.36 0.02 2.45

Dividends Per Share (Rs.) 0.00 0.50 0.40 0.75 2.00 - - - - -


For the year 2007/2008 2008/2009 2009/2010 2010/2011 2011/2012 2012/2013 2013/2014 2014/2015 2015/2016 2016/2017 Rs.'000 Rs.'000 Rs.'000 Rs.'000 Rs.'000 Rs.'000 Rs.'000 Rs.'000 Rs.'000 Rs.’000 (Restated)

Assets Cash and Cash Equivalents 69,960 64,232 93,962 69,515 62,832 61,588 72,247 60,485 61,549 54,512 Balance with Central Bank - Held to Maturity 253,446 185,424 245,751 256,938 218,781 274,736 317,468 372,644 399,813 417,654 Placement with Banks 218,333 82,518 81,249 87,211 131,178 143,390 170,237 367,988 370,629 209,395Loans and Advances 2,213,017 2,365,693 2,198,500 2,654,551 3,396,914 3,915,825 4,476,195 4,576,763 4,964,461 5,690,623Other Financial Assets 25,445 29,592 25,507 20,088 21,690 31,945 35,927 30,919 33,036 36,372Investments in Associate Companies 790 790 790 790 790 - - - - -Tax Receivable 30,431 42,199 52,311 48,604 56,896 42,536 12,424 - - 15,759Deferred Tax Assets - - - - - - - 45,769 32,076 58,630Other Receivables 191,249 257,460 236,844 86,068 73,146 50,356 53,297 63,479 61,748 30,397Other Assets 83,426 58,204 101,620 219,176 152,018 189,550 425,192 229,354 8,712 31,439Real Estate Stocks 7,599 8,769 37,186 65,987 71,898 109,156 123,094 123,218 109,293 118,856Property, Plant and Equipment 309,332 345,901 337,338 336,542 657,429 656,511 727,784 709,576 694,436 1,003,919Intangible Assets - - - - 13,649 12,757 11,335 9,895 21,234 18,524

Total Assets 3,403,028 3,440,782 3,411,058 3,845,470 4,857,221 5,488,350 6,425,200 6,590,090 6,756,987 7,686,080

Liabilities

Deposits from Customers 2,274,304 2,148,588 2,435,524 2,955,261 3,591,624 4,011,946 4,511,621 5,369,746 5,565,153 5,889,334Other Borrowings 475,377 618,443 325,320 261,942 255,392 330,647 504,869 436,802 381,447 25,1,327Finance Lease Liability - - - - - - 8,321 6,136 3,728 1,125Retirement Benefit Obligation - - - 2,535 7,046 14,457 29,844 34,001 43,467 40,572Current Tax Payable - - - - - - - 4,510 18,963 -Deferred Tax Liability 31,390 34,606 34,645 9,428 100,577 76,683 48,464 - - -Other Liabilities 200,087 200,245 171,795 134,243 128,757 228,479 353,950 39,016 48,489 354,170

Total Liabilities 2,981,158 3,001,882 2,967,284 3,363,409 4,083,396 4,662,212 5,457,069 5,890,210 6,061,247 6,536,528

Equity

Stated Capital 80,379 80,379 80,379 80,379 80,379 80,379 80,379 80,379 80,379 80,379Statutory Reserve Fund 82,009 84,350 85,905 91,291 102,121 117,094 145,493 150,988 165,322 196,154Revaluation Reserves 112,032 111,745 111,745 112,414 360,485 354,619 406,855 392,232 386,121 679,947General Reserve 129,013 129,013 129,013 129,013 129,013 129,013 129,013 129,013 129,013 129,013Investment Fund Reserve - - - - 10,408 18,131 24,231 - - -Retained Earnings 18,437 33,413 36,732 68,964 91,419 130,203 184,256 (54,281) (63,869) 65,465Available for Sale Reserve - - - - - (3,301) (2,096) 1,549 (1,226) (1,406)

Total Equity 421,870 438,900 443,774 482,061 773,825 826,138 968,131 699,880 695,740 1,149,552

Total Liabilities & Equity 3,403,028 3,440,782 3,411,058 3,845,470 4,857,221 5,488,350 6,425,200 6,590,090 6,756,987 7,686,080

Profit & Loss Account

Interest Income 672,620 695,069 628,064 582,141 640,431 797,799 989,759 1,050,577 1,043,611 1,174,516Interest Expenses (462,160) (527,252) (480,175) (396,281) (399,720) (542,125) (664,653) (619,742) (603,721) (659,089)Net Interest Income 210,460 167,817 147,889 185,860 240,711 255,674 325,106 430,835 439,890 515,427

Fees and Other Income 39,066 22,613 29,173 64,402 59,679 59,286 75,928 52,280 58,630 81,167Net Income from Operations 249,526 190,430 177,062 250,262 300,390 314,960 401,034 483,115 498,520 596,594Operating Expenses Personnel Expenses (50,449) (47,672) (41,970) (45,968) (71,784) (89,638) (114,105) (116,105) (131,683) (159,749)Directors’ Remuneration (7,336) (6,476) (7,563) (11,305) (11,632) (11,952) (9,186) (10,818) (12,211) (13,144)Other Overhead Expenses (38,855) (34,235) (40,653) (46,909) (45,062) (54,731) (77,232) (139,318) (182,839) (209,245)Depreciation of Property, Plant and Equipment (7,991) (15,820) (17,816) (17,791) (17,427) (21,846) (27,938) (30,803) (28,783) (28,541)Operating Profit Before Taxation & Possible Losses 144,895 86,227 69,060 128,289 154,485 136,793 172,573 186,071 143,004 185,915Allowances for Impairment for loans and receivables (105,692) (55,475) (42,949) (91,576) (60,865) (56,161) (82,085) (116,078) (79,352) (92,361)Operating Profit After Provision for Possible Losses 39,203 30,752 26,111 36,713 93,620 80,632 90,488 69,993 63,652 (93,554)VAT on Financial Services (10,521) (10,063) (10,059) (14,312) (12,947) (11,365) (13,706) (14,765) (20,602) (14,244)Profit Before Taxation 28,682 20,689 16,052 22,401 80,673 69,267 76,782 55,228 43,050 79,310Less: Taxation 23,264 (8,982) (8,279) 4,527 (27,780) 4,858 6,912 (27,748) (42,046) 74,849

Profit for the Year 51,946 11,707 7,773 26,928 52,893 74,125 83,694 27,480 1,004 154,159

Earnings Per Share (Rs.) 8.25 1.86 1.23 4.28 8.40 11.77 13.37 4.36 0.02 2.45

Dividends Per Share (Rs.) 0.00 0.50 0.40 0.75 2.00 - - - - -


Notice is hereby given that the Thirty Ninth Annual General Meeting of Sinhaputhra Finance PLC, will be held at the Registered Office of the Company, No. 11, Hill Street, Kandy on Thursday, 28th of September 2017 at 9.30 a.m. for the following purpose:

i. To receive and consider the Financial Statements of the Company for the year ended 31st March 2017 together with the Report of the Directors and Auditors thereon.

ii. To re-appoint retiring Auditors M/s Baker Tilly Edirisinghe & Company and authorizing the Directors to fix their remuneration.

iii. To authorize the Directors to determine and make donations for charities for the next year.

Compliance with Rules

Notwithstanding anything to the contrary contained in the Articles of Association of the Company, so long as the Company is listed on the Colombo Stock Exchange, the Company shall comply with the Rules of Colombo Stock Exchange and the Central Depository Systems, which shall be in force from time to time.

By Order of the Board of, Sinhaputhra Finance PLC

Priyanka Dilhani (Mrs)

Company Secretary01st August 2017Kandy

Note

i. A Member entitled to attend and vote at the meeting is entitled to

appoint a Proxy who need not be a member, to attend instead of him/her.

A Proxy may vote on a poll or on a show of hands and to speak at the

meeting.

ii. The Shareholders and the Proxy holders are kindly requested to bring this

report along with an acceptable form of identity.

iii. A Form of Proxy is enclosed in this Report.

iv. The completed Form of Proxy should be deposited at the Registered

office of the Company at No. 11, Hill Street, Kandy not less than 48 hours

before the appointed time for the meeting.

NOTICE OF MEETING


FORM OF PROXY

*I/we.........................................................................................................................................................of...........................................................

...............................................................................................................................................................................................................................

being a *member/members of Sinhaputhra Finance PLC hereby appoint:

Dr. A.R. Karunaratna of Kandy or failing him

Mr. K.R.B. Wijeyeratne of Kandy or failing him

Mr. K.G.D.S.J. De Alwis of Kandy or failing him

Mr. E.A.D.P. Ekanayake of Kandy or failing him

Mr. T.M.S. Bulankulame of Kandy or failing him

*Mr/Mrs..............................................................................................of................................................................................................................

............................................................................................................................................. as *my/our proxy to vote for *me/us on *my/our

behalf at the Thirty Nineth Annual General Meeting of the Company to be held at the Registered Office of the Company, No. 11, Hill Street, Kandy on the 28th September 2017 at 9.30 a.m. and at any adjournment thereof, and at every poll which may be taken in consequence thereof.

For Against

1. To adopt the Financial Statements of the Company for the Year ended 31st March 2017.

2. To re-appoint retiring Auditors M/s Baker Tilly Edirisinghe & Company and authorizing the Directors to fix their remuneration.

3. To authorize the Directors to determine and make donations for charities.

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

………………………………........…Signature of Shareholder

Note

* Please delete the inappropriate words.

(Instructions as to completion are noted on the reverse hereof)


Form of Proxy....

Instructions as to Completion of Proxy

1. Kindly perfect the Form of Proxy after filling in legibly your name in full and address and by signing in the space provided. Please fill in the date of signature

2. A member entitled to attend and vote at the meeting is entitled to appoint a Proxy who need not be a member, to attend and vote instead of him/her.

3. In the case of corporate member, the Form of Proxy must be completed under its Common Seal, which should be affixed and attested in the manner prescribed by the Articles of Association.

4. If the Form of Proxy is signed by an Attorney, the relevant Power-of- Attorney should also accompany the completed Form of Proxy, in the manner prescribed by the Articles of Association.

5. The completed Form of Proxy should be deposited at the Registered Office of the Company No. 11, Hill Street, Kandy not less than Forty Eight (48) hours before the appointed time for the meeting.

Board of DirectorsDr. A.R. Karunaratna - ChairmanK.R.B. Wijeyeratne - Managing DirectorK.G.D.S.J. De AlwisE.A.D.P. EkanayakeT.M.S. Bulankulame

Senior Consultants to the BoardK.H.K. WijayadasaA.M.G. Weerakoon

Branches Colombo : Unit No. F 160 (250/1/10), First Floor, Liberty Plaza,

Colombo 03. Tel: 011 237 5688 Kurunegala : 16, Kandy Road, Kurunegala. Tel: 037 564 8111 Bandarawela : Park Road, Bandarawela. Tel: 057 567 7797 Anuradhapura : 07, Maithreepala Senanayake Mawatha, Anuradhapura. Tel: 025 562 0620 Katugastota : 34, Kurunegala Road, Katugastota. Tel: 081 567 1671 Kundasale : 94/B/1, Warapitiya Junction, Kundasale. Tel: 081 563 4111 Dambulla : 633/1, Anuradhapura Road, Dambulla. Tel: 066 570 2703

Collection Centres

Matale : 297 Main Steet, Matale. Tel: 066 570 1701 Mahiyanganaya : 22, Vidanagamage Shopping Complex, Mahiyanganaya. Tel: 055 570 2702

Pawning Centre Dehiwala : 62, Galle Road, Dehiwala. Tel: 011 594 4200

Foreign Currency Exchange Centre Kandy : Railway Station Building, William Gopallawa Mawatha, Kandy.

Legal FormQuoted Public Company, Incorporated in Sri Lanka on 06th November 1978. Licensed under “The Finance Companies Act No. 78 of 1988” An approved Credit Agency under: “The Mortgage, Act No. 06 of 1949” and “The Trust Receipts Ordinance No. 12 of 1947”.

A Registered Finance Leasing Establishment under the “Finance Leasing Act No. 56 of 2000.” Registered under the New Companies Act No. 07 of 2007.Sinhaputhra Finance Limited listed in Colombo Stock Exchange on 2nd June 2010 and the Company changed it’s name to “Sinhaputhra Finance PLC”.

Bankers Seylan Bank Commercial Bank Sampath Bank Hatton National Bank Union Bank Nations Trust Bank

Name of Company Sinhaputhra Finance PLC

Company Registration No. PB/PQ 259

Registered Office11, Hill Street, Kandy.Tel: 081 555 5555 / 222 3235 Fax: 081 220 3403 / 223 9064E-mail: [email protected] Website: www.sinhaputhra.lk

Principle Lines of Business Acceptance of Time Deposits Acceptance of Savings Deposits

Finance Leasing Hire Purchase Business / Personal Loans Pawn Broking Vehicle Imports Real Estate Developers Foreign Currency Exchange Sub-Agents for Insurance Sub-Agents for Western Union Money Transfer

Audit CommitteeT.M.S. Bulankulame - ChairmanE.A.D.P. EkanayakeDr. A.R. KarunaratnaK.H.K. Wijayadasa - Snr. Consultant to the Board

Remuneration CommitteeE.A.D.P. Ekanayake - ChairmanDr. A.R. KarunaratnaA.M.G. Weerakoon - Snr. Consultant to the Board

Related Party Transactions Review CommitteeDr. A.R. Karunaratna - Chairman T.M.S. BulankulameK.G.D.S.J. De Alwis

Integrated Risk Management CommitteeK.R.B. Wijeyeratne - Chairman Ms. Iresha Perera K.G.D.S.J. De Alwis Upali Hangawatte Dr. A.R. Karunaratna Gamini PussepitiyaE.A.D.P. Ekanayake Mrs. Shirani DodanwalaPandula Aluwihare Menaka RambukwellaMrs. Sabriya Amanulla Ms. Priyanka Dilhani

Secretary Mrs. Priyanka Dilhani Attorney-at-Law11, Hill Street, Kandy.

External AuditorsBaker Tilly Edirisinghe & Company Chartered Accountants 45, Braybrooke Street, Colombo 02.

Internal AuditorsL.M. Associates Chartered Accountants 45, Kings Street, Kandy.

NDB Bank DFCC Vardhana Bank Bank of Ceylon People’s Bank Pan Asia Bank

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CORPORATE INFORMATION

www.sinhaputhra.lk

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