for the nation people · 2018-11-26 · we look forward to the future with the new found strength...

Nation LankaFinance PLC

Nation Lanka Finance PLCNo.28, Dickman’s Road, (Sir Lester James Peiris Mawatha),

Colombo 05.www.nlfplc.com

for the Nation and its People


Annual Report 2014/15

Nation Lanka Finance PLC Annual Report 2014/15

We look forward to the future with the new found strength that stems from joining the Nawaloka Group. We are on a firm footing to accomplish our mission of progressively growing the wealth of the Nation and its People through the establishment of the most efficient client servicing processes. So as we build on yesterday’s proud heritage of being a responsible corporate citizen, our goal is to reinvent ourselves in managing the growing needs of the Financing Industry of the Country. Thus, we can proudly say that we are building a better future for the Nation and its People.

Corporate Information

NAME OF THE COMPANY

Nation Lanka Finance PLC

FORMER NAMES OF THE COMPANY

Ceylinco Securities & Investments LtdCeylinco Securities & Financial Services PLCCeylinco Finance PLC

LEGAL STATUS

A Public Quoted Company with Limited Liability incorporated in Sri Lanka on 15th July 1987. Approved Credit Agency under the Mortgage Act No.6 of 1949 and Inland Trust Receipts Act No.14 of 1990. Registered as a Finance Leasing Establishment w.e.f. 01/08/2002 under the Finance Leasing Act No.56 of 2000 and Registered as a Finance Company w.e.f 5th March 2012 under the Finance Business Act No.42 of 2011.

REGISTRATION NUMBER

PQ 33

ACCOUNTING YEAR END

31st March

TAX PAYER IDENTIFICATION NUMBER (TIN)

134001518

REGISTERED / BUSINESS OFFICE

No.28, Dickman’s Road, (Sir Lester James Peiris Mawatha), Colombo 05.Tel: 4760800Fax: (941) 4760867E-Mail: [email protected] Web: www.nlfplc.com

SUBSIDIARIES

Nation Lanka Equities (Pvt) LtdCeylinco Towers LtdFirst Lanka Treasuries Ltd

BANKERS

Bank of CeylonCommercial Bank PLCHatton National Bank PLCPeople’s BankSeylan Bank PLC

BOARD OF DIRECTORS

Mr H K J DharmadasaChairman (Non Executive)Mr V R RamananNon Executive DirectorMr J RudraNon Executive DirectorMr U H DharmadasaNon Executive DirectorMr H J C PereraExecutive Director / Chief Executive Officer(Appointed w.e.f. 06-04-2015)Mr P M L K KarunaratneNon Executive / Independent DirectorMr K M S KandegedaraNon Executive / Independent DirectorMr A C SeneviratneNon Executive Director(Resignation tendered)

COMPANY SECRETARIES & REGISTRARS

Corporate Arcade LtdNo.122/37, Kirulapone Avenue,(Baseline Road)Kirulapone.Tel : 2514420 / 2514421Fax : 2513621E-Mail : [email protected]

AUDITORS

M/s KPMGChartered AccountantsP.O.Box 186, Colombo

LAWYERS

Ms P KatulandaAttorney-at-LawNo.28, Dickman’s Road,Colombo 05

Designed & produced by REDWORKS

Photography by Taprobane Street (Pvt) Ltd

Life Photography

Digital plates & Printed by Printel (Pvt) Ltd


Our Vision

To Be the Benchmark in Financial Strength, Stability and Success.

Our Mission

To provide a diversified range of financial products and services focusing on financial markets, SME sector and the property sector, in an efficient, professional and ethical manner, thereby creating entrepreneurship and wealth of the Nation and its People.

Nation LankaFinance PLCAnnual Report 2014/15

About us

Nation Lanka Finance PLC is a Public Limited Liability Company incorporated in Sri Lanka on 15th July 1987 under the Company's Act No. 17 of 1982 and re-registered under the Companies Act No.07 0f 2007.

The Company is also a Finance Company licensed and regulated by the Central Bank of Sri Lanka with a rich heritage of 28 years. Nation Lanka Finance (NLF) has built its reputation on strong connections with local communities. A deepening understanding of sustainability means we are extending this commitment to a broader range of stakeholders. With our reach in 25 locations throughout Sri Lanka, NLF is well placed to support our communities at a local and national level. Our strategy is built around our customers, placing them at the centre of everything we do and helping them realise their true potential.

ContentsFinacial Highlights .....................................................................2The Story of Nation Lanka Finance PLC .............................. 4Chairman’s Review....................................................................8Chief Executive Officer’s Review ..........................................10Board of Directors ..................................................................14Strategic Management Team ..............................................18Tactical Management Team .................................................20Operational Management Team .........................................22Management Discussion and Analysis ..............................26Our Network ............................................................................32Corporate Governance .........................................................33Risk Management ...................................................................45Integrated Risk Management Committee Report...........48Human Resource Development .........................................52Corporate Social Responsibility ..........................................54

Financial ReportAnnual Report of the Board of Directors

on the Affairs of the Company ........................................60Audit Committee Report .......................................................64Statement of Directors’ Responsibilities ...........................67Directors’ Statement on Internal Controls .......................68Independent Auditors’ Report .............................................69Statement of Profit or Loss and

Other Comprehensive Income ........................................72Statement of Financial Position ..........................................73Statement of Changes in Equity ..........................................74Statement of Cash Flows ......................................................76Notes to the Financial Statements .....................................78Statement of Value Added ................................................ 126Ten Year Summary - Group .............................................. 127Shareholders & Investor Information ............................. 128Notice of Meeting ................................................................ 130Form of Proxy ....................................................................... 131Corporate Information ........................................................ BIC

2

Group Company2014/15 2013/14 Change 2014/15 2013/14 ChangeRs 000's Rs 000's % Rs 000's Rs 000's %

Financial performanceRevenue 1,215,341 1,610,180 -23% 1,158,849 861,072 35%Gross Interest Income 1,164,901 860,920 35% 1,158,012 860,027 35%Net Interest Income 574,846 385,958 49% 562,727 379,304 48%Gain on Disposal of Subsidiaries - - 0% 304,612 - 100%Operating Income 571,746 522,039 10% 818,913 503,172 63%

Operating Expenses (886,064) (772,267) -15% (772,431) (661,554) -17%

Operating Profit/(Loss) before Impairment for Loan Losses & Investment and Tax (314,318) (250,228) -26% 46,482 (158,382) 129%

Impairment of Accommodations/Investment on Subsidiaries & Property (283,652) 180,029 -258% (323,650) 192,123 -268%Profit/(Loss) before VAT & Income Tax (596,276) (70,199) -749% (277,168) 34,031 -914%Total Comprehensive Income (571,730) 57,133 -1101% (282,476) 23,620 -1296%

Financial PositionAccommodations (adjusted for Impairment)Lease 219,839 234,846 -6% 219,839 234,846 -6%Loans 1,608,029 885,237 82% 1,608,029 870,020 85%Hire Purchase 275,957 324,063 -15% 275,957 324,063 -15%Micro Finance 2,169,241 1,059,164 105% 2,169,241 1,042,644 108%Pawning 135,933 169,123 -20% 135,933 169,123 -20%Other Assets 2,719,714 2,662,504 2% 2,612,472 1,973,640 32%Total Assets 7,128,713 5,334,937 34% 7,021,471 4,614,336 52%

Public Borrowings 5,617,985 3,806,042 -48% 5,617,985 3,806,042 -48%Bank & Other Borrowings 1,507,299 376,268 -301% 1,253,202 176,959 -608%Other Liabilities 214,085 613,829 65% 111,468 318,343 65%Total Liabilities 7,339,369 4,796,140 -53% 6,982,655 4,301,344 -62%Net Assets (210,656) 538,797 -139% 38,816 312,992 -88%

Information per Ordinary ShareEarnings/(Loss) Rs. (2.18) 0.17 -1401% (1.12) 0.06 -1882%Net Assets Rs. (1.10) 1.10 -200% 0.15 1.25 -88%

Product Wise - Interest Income

Interest Income 2014/15 2013/14 ChangeRs 000’s Rs 000’s %

Lease 76,846 55,047 40%Term Loans 278,736 208,053 34%Micro Finance 660,448 449,664 47%Hire Purchase 99,860 90,470 10%Pawning 10,955 42,217 -74%Short Term Lending 31,167 14,576 114%Total Interest Income(Gross) 1,158,012 860,027 35%

52% 48% 48% 67%Asset Growth Increase in Net

Interest Income Deposit Base Growth

Lending Base Growth

Finacial Highlights

3

Nation Lanka Finance PLC | Annual Report 2014/15

2013/14

Lease

Term Loans

Micro Finance

Hire Purchase

Pawning

Other Lending

2014/15

As at 31-03-2014As at 31-03-2015

Lease

Loans

Hire Purchase

Micro Finance

Pawning

Product-wise Portfolio

Five Year Summary

In Rs . 000’2011 2012 2013 2014 2015

Deposit Base 2,123,398 1,984,023 2,723,272 3,806,042 5,617,985 Lending Base 497,369 1,024,165 1,692,141 2,640,696 4,408,999 Total Assets 2,157,041 2,740,249 3,441,619 4,614,336 7,021,471 Turnover 552,146 363,876 568,957 861,072 1,158,849

Deposit Base (Rs.000’)

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

2015

2014

2013

2012

2011

Total Assets (Rs.000’)

0 1,000 2,000 3,000 4,000 5,000 6,000 7,000 8,000

2015

2014

2013

2012

2011

Lending Base (Rs.000’)

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

2015

2014

2013

2012

2011

Turnover (Rs.000’)

0 200 400 600 800 1,000 1,200

2015

2014

2013

2012

2011

Product Wise - Interest Income (Cont.)

4

The Story ofNation Lanka Finance P LC

1993- 1999 � Listed at Colombo Stock Exchange

� Licensed Primary Dealer appointed by the Central Bank of Sri Lanka from 1994 to 1999

2000 - 2004 � Registered as a specialized leasing company under section 5 of the Finance Leasing Act No. 56 of 2000

� Classifi ed in the Milanka Price Index at the Colombo Stock Exchange

2005 - 2010 � The company obtained a license in Finance Leasing from the Central Bank of Sri Lanka in 2005

� Opened our 12th Branch in Chunnakam Jaff na in May 2010

2010 – 2012 � Commenced Microfi nance operations in October 2011

� Raised Rs. 500mn through private placement

� Additional Rs. 800mn through a rights issue to strengthen the Core Capital

5


2012 - 2013 � Obtained the Finance Company Licence on 5th March 2012

� Kotahena Branch openedon 15th June 2012

� Mannar Branch openedon 31st January 2013

� Mathugama Branch openedon 31st January 2013

� Embilipitiya Branch openedon 14th February 2013

� Batticaloa Branch openedin June 2013

� Presence in four new locations

� Kuliyapitiya – April 2013

� Vavuniya – May 2013

� Mathale – May 2013

� 1st Premier Branch -Colombo – November 2013

� Implementation of Oracle e-Financial Management System

� Securing Scienter e-Financial System as our core system

� CCTV cameras in all locations

� Launch of new Website

� MF portfolio crossed Rs. 1.0bn for the fi rst time

2014 - 2015 � Sale of two subsidiaries, Millennium Housing Developers Ltd & Nation Lanka Capital Ltd with a net gain of 305 million

� Launching a new product “Biz Cash” which became a great success in our core business

� Planned relocations of our branches for strategic advantage

� Kotahena

� Matale

� Matugama

� Successful implementation of fully integrated ERP System

Management Information

8

Chairman’s Review

“Board of Directors and the management

of Nation Lanka Finance are fully

cognizant of their responsibilities

towards enhancing shareholder value”

9


It gives me great pleasure to present the Annual Report and fi nancial statements of Nation Lanka Finance PLC for the fi nancial year 2014/15.

The operating environment

Nation Lanka’s performance in the 2014/15 fi nancial year should be viewed against the broader backdrop of global and domestic economic developments.

Globally, economic growth remained sluggish in 2014 despite the sharp decline in oil prices during the second half of the year. The global economic growth rate remained at 2013 levels, 3.4%, with many countries continuing to be weighed down by the legacies of the global fi nancial crisis and a cloudy future.

The Sri Lankan economy, meanwhile, remained resilient in 2014, fuelled by services and industrial sectors, culminating in a stronger GDP growth rate of 7.4% against the 7.2% of 2013. However, despite the low infl ation and low interest rate environment, credit demand remained fl at and fi nancial markets experienced high excess liquidity for the fi rst half of the year. Responding to the circumstances, the Central Bank continued to adjust market rates downward, which resulted in market interest rates declining to historic lows during 2014. The policy stimulus took eff ect by the second half of the year with credit demand reviving to contribute towards a strong performance from the non-bank fi nancial sector. A signifi cant feature was the number of mergers and acquisitions within the non-bank fi nancial sector under the Central Bank’s fi nancial sector consolidation plans. I am confi dent these structural adjustments, coupled with improvements to risk management methodologies, will contribute towards enhancing the stability of the Sri Lankan fi nancial sector.

Company Performance

I am pleased to report a robust revenue growth during the year, coupled with commendable growth in lending and an increase in deposits, indicating the strength of the Nation Lanka brand and public confi dence in the Company. This growth in assets, lending and deposits augers well for the future growth of the Company over the short term as we forge ahead with a new strategic direction that is structured to position the Company for sustained shareholder returns.

During the current year, in spite of the many challenges faced by the Company, the top line of the Company moved up by 35% year on year and grew up to Rs 1.15 bn. Despite the overall damp demand for credit that prevailed for a large part of the year, our lending portfolio achieved an impressive growth of 67%, to reach Rs 4.41 bn from Rs 2.64 bn in the previous year, while our deposit base increased by 48% to register Rs 5.62 bn from Rs 3.81 bn. Boosted by

the growth in accommodations, the asset base increased by 52% to reach Rs 7.02 bn in value from Rs 4.61 bn.

Despite this commendable performance, the Company reported a net loss of Rs. 282 million for the year due to Rs 324 mn in impairment provisioning for the year. However, I am confi dent of an improved bottom line in the new fi nancial year, led by the new growth strategy that is already being rolled out.

Future prospects

I would like to place on record that the Board of Directors and the management of Nation Lanka are fully cognizant of their responsibilities towards enhancing shareholder value, and recovery measures have already been initiated under a new growth strategy. This growth focus is coupled with measures to improve governance and regulatory compliance, to align the Company with statutory requirements.

In order to strengthen the fi nancial fundamentals of the Company and ensure compliance with the minimum statutory capital requirements, all arrangements are in place for a rights issue in the new fi nancial year. This move will be reinforced by the proposed Rs 500 million subordinated debenture issue that will provide funding for planned business expansion. In addition, oversight and control measures are in the process of being further strengthened to elicit greater fi nancial discipline, as the Company moves ahead with its growth plans.

Acknowledgements

I am convinced all our stakeholders will enjoy the returns of a sustainable recovery over the short term, as our ambitious and well-defi ned plans take eff ect. On that optimistic note, I extend my sincere gratitude to the Board for their unstinted support in fulfi lling the mission of the organization. I am confi dent that the new Executive Director/CEO, Mr Jayantha Perera, with his strategic insight and commitment, together with his management team, are fully capable of overcoming any challenges faced at operational level and will achieve our newly articulated objectives. I am also conscious of the role played by each and every employee during this challenging year and I commend them for their faith in the organization. Finally, I would like to thank all stakeholders for placing their trust and confi dence in us. I call on them to join us as we blaze a new trail of growth and prosperity into the future.

Sincerely

Jayantha DharmadasaChairman

“Board and the management team of

N LF have formulated a detailed recovery and growth plan to return the Company

to profitability”

10

Chief Executive Offi cer’s Review

I am indeed honoured by my appointment as the CEO of Nation Lanka Finance PLC (NLF) and I would like to thank the Board of Directors for their confi dence in me and for their unstinted support for the future success of the Company. The year has indeed been a defi ning one, in which NLF’s future strategic direction in the domestic fi nancial landscape was redefi ned within the propitious backdrop of becoming an associate member of the diversifi ed Nawaloka Group of Companies. The union with this corporate giant, one of the oldest and most stable home-grown business conglomerates in Sri Lanka, will lead to stronger business fundamentals and enhanced brand image through association with the reputational might of the Nawaloka brand. Henceforth, Nation Lanka Finance is poised to begin a new chapter in its existence and is facing an unprecedented era of growth and opportunity.

The year under review was also a challenging one for NLF due to both internal as well as external factors. The internal changes to the organization during the year distracted the operational focus, preventing the Company from attaining its full potential. Meanwhile, in the external environment, the intensifying competition in the non-bank fi nancial sector, coupled with lower net interest margins and slow growth in demand for credit during a major part of the year, resulted in a diffi cult business environment. Finance companies are now increasingly faced with the necessity of developing more cost effi cient operating models to counter rising cost structures and shrinking interest margins. The market sectors of auto fi nance, pawning, business working capital fi nance and micro fi nance are NLF’s main business segments. The auto fi nance market showed some recovery during the year under review, while volatility in the international gold market posed challenges to the expansion of the pawning sector. However, the micro fi nance sector sustained robust growth with non-bank fi nancial institutions becoming more active in this previously limited market. I will briefl y touch upon NLF’s performance in these areas, however further details are available in the Management Discussion and Analysis section of this report.

Operational Results

The Company sustained strong growth in its two main areas of operations: microcredit and business loans. The two sectors account for 85% of the total accommodations portfolio and 81% of revenues for the year. The microcredit portfolio posted an exceptional growth of 108% against the preceding year, growing by over Rs 1 bn within the year under review. Working capital loans (Biz cash) also recorded an increase during the year, although the growth percentage was lower than that of the Micro Finance portfolio.

The loan portfolio displayed extremely vigorous growth, expanding by 85% year-on-year to reach Rs 1.6 bn, from Rs 870 mn in the previous year, driven by the strong customer relationships maintained by the Company, the ever-expanding reach and fast and effi cient provision of services. Auto fi nance continues to pose some challenges due to extreme competition in this market and lower focus in this segment. The current fi nancial year saw a marginal decline in both leasing and hire purchase portfolios, with the leasing account contracting by 6% to Rs 219.84 mn and the hire purchase base falling by 15% to Rs 275.96 mn. However, the drawbacks faced by these segments will be addressed under the Company’s expansion plans for stronger growth in the near future.

The growth in credit and micro fi nance contributed towards a top line growth of 35% year-on-year. The strategic disposal of two subsidiaries contributed towards the conversion of the previous year’s operating loss into an operating profi t. However, as explained by the Chairman, the Company reported a negative bottom line of Rs 282 mn after tax due to the prudent and far-sighted decision by the management towards fair provisioning for bad debts as a strong contingency for future fi nancial sustainability of the company.

While total value of assets increased by 52% to over Rs 7 bn from Rs 4.6 bn, the net asset value declined by 88% to Rs 39 mn, as a result of reporting the net loss for the year.

This increase in liabilities has amply displayed that the public confi dence in the Company has continued to grow over the years. With the sharp decline in the interest rate, company was able to capitalize by borrowing from the banking circle. These funds facilitated expansion of the credit portfolio, contributing towards higher profi t margins.

A noteworthy improvement in internal effi ciencies during the year was the implementation of an integrated ERP system. The ERP system will contribute towards improvement of oversight mechanisms and will also directly support strategic decision-making. We concluded the year with a total network in 25 locations operating across the island, giving the Company a strong foothold in the country’s fi nancial services industry.

On another positive note, building team spirit across the organization through the intimate bonds built through sports, the NLF rugby team was crowned ‘plate’ champions in the Mercantile Rugby Championships. During the year, NLF also continued to support many social welfare initiatives undeterred by the ups and downs of the market, as social responsibility is a core aspect of the Company’s business philosophy.

11


The year ahead

I am happy to report that the Board and the management team of NLF have formulated a detailed recovery and growth plan to return the Company to profi tability, while also strengthening fi nancial fundamentals, within the short term.

We have already embarked on a strategic rebalancing of Company liabilities and funding portfolios to generate fl ows of lower cost funding over the short to medium term. The planned 5-year subordinate debenture issue for Rs 500 mn, which is scheduled for the third quarter of 2015, will provide the Company with a large low cost funding injection that will contribute towards expansion of operations, while rebalancing the debt portfolio more favourably. This fund management initiative will be supported by a restructuring of the existing product portfolio to minimize asset and liability mismatch and to mitigate market risks through higher asset-backed securitization and a wider market spread. Revenues will be enhanced by generating new revenue sources through new products and rebranding and value additions to existing products. In line with growing demand, the auto fi nance portfolio will be expanded to capture a larger market share. Our target for the new fi nancial year is to expand the asset base to Rs 9 bn, while further reducing the current NPL ratio by 50%, continuously improving portfolio quality.

Our growth plans will be underpinned by eff orts at developing our people, spearheaded under the guiding theme of ‘One Team-One Focus,’ for the purpose of team building. We will continue to invest in training, while motivating higher productivity through performance-based rewards, career development opportunities and provision of technological support systems.

I am confi dent the full thrust of this growth strategy, coupled with the Company strengths of its island wide presence and brand equity, which is now further enhanced through the link to the Nawaloka brand, will lead to a quick and sustainable fi nancial recovery.

Appreciations

I would like to take this opportunity to thank the Assistant Governor, Director and the staff of the Non-Bank Supervision Department of the Central Bank, the staff of The Securities and Exchange Commission of Sri Lanka and Colombo Stock Exchange for their invaluable guidance during the year. My deepest gratitude is extended to the Board of Directors for their support and advice towards leading the Company successfully along its newly-charted course. I appreciate and value the contributions made by the NLF team towards the Company and I extend my sincere thanks to the leadership team, management and staff , who have embraced the changes that will drive this Company into a new era of growth. My gratitude is also extended to all stakeholders – external auditors, customers, investors, suppliers, strategic partners and others - for their support throughout this challenging year. I solicit your continued support in our journey ahead.

Sincerely

Jayantha PereraExecutive Director / Chief Executive Offi cer

12

Chief Executive Offi cer’s Review

In Our Quest to be An

“Exemplary Corporate Citizen”

“ Shareholder activism is not a privilege - it is a right and a responsibility. When we invest in a company, we own part of that company and we are partly responsible for how that company progresses. If we believe there is something going wrong with the company, then we, as shareholders, must become active and vocal ”

- Mark Mobius -


2. Mr. Jayaprakash Rudra Non Executive Director

3. Mr. Lalith Karunaratne Non Executive / Independent Director

1. Mr. Victor Ramanan Non Executive Director

4

7

51

23 6

14

Board of Directors

6. Mr. Sunil Kandegedara Non Executive /

Independent Director

7. Mr. Jayantha Perera Executive Director / Chief Executive Offi cer

4. Mr. Jayantha Dharmadasa Chairman (Non Executive)

5. Mr. Harshith Dharmadasa Non Executive Director

Mr. Asanga SeneviratneNon Executive Director(Absentee - Resignation Tendered)

15


16

Mr. Jayantha DharmadasaChairman (Non Executive)

Appointed to the Board on 11th March 2011. He is a Fellow Member of the Institute of Certified Professional Managers. A distinguished self-driven business personality with an impressive and amazing track record of successful business management over 39 years of experience in Executive Business Management and 29 years in Health Care Industry, he is currently the Chairman of Nawaloka Holdings (Pvt) Ltd, which consists of over 17 Companies under its umbrella.

Mr. Dharmadasa has been appointed as the Honorary Consul General for Singapore in Sri Lanka and also a Board Member in multiple organizations.

Mr. Jayantha PereraExecutive Director/ Chief Executive Officer

Mr. H Jayantha C Perera is a CFA Charter holder from the CFA Institute, Charlottesville, USA. He is also a Diploma Holder from the National Computing Centre, UK. Mr. Perera is licensed by the Securities and Exchange Commission of Sri Lanka to Trade and provide Investment Advise on Securities.

Mr. Perera has well over 2 decades of work experience in the corporate sector having worked in many divisions and in many capacities in many business establishments. He brings with him experiences in Management, Strategy, Treasury, Finance, Corporate Finance and Sales.

He is the Executive Director/Chief Executive Officer and has previously worked in the Finance/Financial Services areas in the capacities of Managing Director, Director/CEO at Richard Pieris Securities Private Ltd., as the CEO of Richard Pieris Arpico Finance Limited, As the CFO of Nawaloka Hospitals PLC, as the Senior Manager heading Capital markets at the Merchant Bank of Sri Lanka, and also as the VP Head of Research at DFCC Stock Brokers Private Limited. Prior to these appointments, he worked at NDBS Stock Brokers as an Investment Advisor, Stock Broker and Floor Trader and later became the Research Manager at Lanka Securities Private Limited.

Mr. Victor RamananNon Executive Director

Mr. Victor Ramanan is a Sri Lankan born British National residing in London. Appointed to the Board on October 2012. Being educated in Sri Lanka and the UK, Mr. Ramanan is a B.Sc. Graduate and holds a Diploma in Software Engineering, Business Admin & Sales Techniques (UK).

He is a versatile marketer and administrator with more than 26 years of hands on experience working in many countries including United Kingdom, Kuwait, Dubai, Baharain, Germany, France, USA and Sri Lanka. He has worked in areas such as IT, HR, Marketing and Business Development of which more than 17 years has been in the fields of Oil, Gas and Logistics sectors.

Mr. Harshith DharmadasaNon Executive Director

Appointed to the Board on 11th March 2011. He is an Associate Member of the Institute of Certified Professional Managers. A young business personality with over 22 years experience in Executive Management. He has acquired extensive experience in the fields of trading, manufacturing and construction sector.

He also served as a Director during the period 2003/2004 in the Export Development Board of Sri Lanka and Sathosa Retail Ltd. He currently serves as a Director of Nawaloka Holdings Companies and all other Companies under its umbrella, including Nawaloka Hospitals PLC.

Mr. Jayaprakash RudraNon Executive Director

Appointed to the Board on 11th March 2011. He is a well-established businessman. Currently he serves as a Director in many Companies. He has wide experience especially in the property development sector.

Board of Directors

17


Mr. Lalith KarunaratneNon Executive / Independent Director

Appointed to the Board on 11th March 2011. He is an Associate Member of the Institute of Chartered Accountants of Sri Lanka and holds a Postgraduate Degree in Business Management (MBA) from the University of Sri Jayawardenapura. He also possesses 24 years experience in senior financial management positions in both private and public sectors

Mr. Sunil KandegederaNon Executive / Independent Director

Mr K M Sunil Kandegedara has a Diploma in Tax Administration at California, USA, and successfully completed Hons. Degree in Mathematics and Chemistry at the University of Peradeniya.

He worked as a Commissioner General in the Department of Inland Revenue. He joined the Department in September 1976 as an Assessor (Executive Staff) and served 34 years as a Assessor, Senior Assessor, Deputy Commissioner, Commissioner, Senior Commissioner and Deputy Commissioner General in various divisions such as Kandy, Negombo, Rathnapura regions and Head Office. He has completed “Double Taxation Agreements with several Countries. He has also worked as a Mathematics Lecturer at the University of Peradeniya (1974 – 1975). Mr. Sunil Kandegedara has been appointed as a Consultant of the Government of Maldives.

Mr. Asanga SeneviratneNon Executive Director - (Resignation Tendered)

Appointed to the Board on 11th March 2011. Mr. Seneviratne’s experience and expertise in the field of Finance, Investment and Capital Management extends nationally and Internationally for over 2 decades. He was the Director/CEO of Asia Capital PLC, the largest Listed Investment Bank with the CSE.

Mr. Seneviratne pioneered on-line trading enabling direct access to CSE and has been involved in key capital market, private direct investment deals from high net-worth individuals and large foreign Financial Institutions in Sri Lanka over the last 24 years. Currently he serves as the Managing Director of Asia Fort Asset Management (Pvt) Ltd, Anilana Hotels and Properties PLC and Investor Access Equities (Pvt) Ltd and as a Director in many Companies including the Colombo Stock Exchange

Left to Right

Mr. Pradeep Balasooriya Ms. Preethie Katulanda Mr. Upali Rajapaksha Mr. Dilan Wasantha

GM - Micro Finance Operations

AGM - Legal DGM – Credit & Pawning Operations

GM – Investment & Sales

18

Strategic Management Team

Left to Right

Mr. Jayantha Perera Mr. Prasanna Habaragamuwa Ms. Shubhani Jayawardana

Executive Director / Chief Executive Offi cer

Chief Financial Offi cer Chief Operation Offi cer

19


Left to Right

Mr. P. N. Suranga FernandoHead of Admin

Ms. Shenika MathangaweeraHead of Customer Relationship Management

Mr. G. R. N. Dilip KumaraHead of Internal Audit

Mr. W. K. Lakmal De SilvaHead of Credit – Sales

20

Tactical Management Team

Left to Right

Ms. Dayana BalendranManager – Brand & Marketing

Mr. Mangala UdawattaHead of Recoveries

Mr. Thusitha PereraHead of HR

Mr. Selvanathan ThineshkumarManager IT

21


First Row Left to Right:

Mr. Amil Nilanka Operations Manager - MF North Western Region | Mr. Selvam Kovarthan Operations Manager - MF Eastern Region | Mr. Rukshan Thilakarathna Regional Manager - North Western | Mr. Nagularaja Sureshkumar Regional Manager - North & East | Ms. Princy Perera Manager - Credit Operations |Mr. Milinda Roopasinghe Manager - Investment Operations | Mr. Jeewan Athukorala Operations Manager - MF Sabaragamuwa Region| Mr. Stanislaus Angelo Operations Manager - MF Northern Region | Mr. Mithila Ranasinghe Regional Manager- Central | Ms.K.D.P. Rupika Manager - Legal Recoveries |Mr. Janaka Goonasekara - Accountant

Second Row Left to Right:

Mr. Tharaka Jayamanna Manager - MF Negombo | Mr. Aruna Jayarathna Acting Manager - MF City Branch |Mr. Tharmalingam Mahinthan Acting Manager-Nelliady | Mr. Subramaniam Ravindran Second Offi cer- Mannar | Mr. Sivarasa Pravinkumar Offi cer In Charge - Vavuniya | Mr. Samantha Mirigama Manager- Ratnapura |Mr. Tilak Ariyarathna Manager Dambulla |Mr. Gamini Mendis Manager- Anuradhapura | Mr. Kodithuwakku Hewage Sudantha Manager - Matara | Mr. Priyantha Herath Manager - MF Kandy | Mr. Diluk Pathirana Manager - MF Kegalle | Mr. Sumith Ekanayaka Manager - Training & Development - MF Dambulla

22

Operational Management Team

Third Row Left to Right:

Mr. Vairamuththu Uthayakanthan Manager - MF Trincomalee | Mr. Rajanayagam Rajesh Manager - MF Nelliady |Mr. Buddhimal Fernando Manager - MF Dambulla | Mr. Velapody Dinesh Manager - MF Vavuniya |Mr. Saman Wickramarathna Manager - MF Kuliyapitiya | Mr. Niranjan Sirimanna Manager - MF Anuradhapura | Mr. Lasith Dulanjala Manager - MF Kurunegala | Mr. Weerathunga Chaminda Manager - MF Matale |Mr. Krishnapillai Krishnakanthan Manager - MF Kalmunai | Mr. Dinesh Asanka Manager - MF Matara | Mr. Subash Ravindra Manager - MF Embilipitiya | Mr. Sarod Kalhara Manager - MF Galle

Fourth Row Left to Right:

Mr. Kanagasabapathi Packiyanesan Acting Manager - MF Chawakachcheri | Mr. Sivarasa Premnath Manager - MF Mannar | Mr. Thivendram Nirupan Manager - MF Chunnakam | Mr. Prageeth Perera Manager Kegalle |Mr. Nishantha Weerasinghe Manager Kurunegala | Mr. Dileep Premarathna Manager - MF Ratnapura |Mr. Priyantha Ganga Manager - Panadura |Mr. Dilan Sampath Manager - MF Panadura | Mr. Kalpa Mendis Manager Galle | Mr. Asela Zoysa Manager - MF Mathugama | Mr. Kirushnapillai Srikanth Manager - MF Batticaloa

Absentees

Mr. Tissa Silva Regional Manager - Sabaragamuwa | Mr. Nishantha Perera Operations Manager - MF Southern Region |Mr. Michell Gunalan Manager - Batticaloa | Mr. Fernando Amalas Manager- Chunnakam | Mr. Ranjith Wimalaweera Manager - MF Gampaha | Mr. Dinesh Eranda Manager - Trincomalee | Mr. Thushan Peiris Acting Manager Kotahena | Mr. Indika Gunawardena Manager -Premier Branch | Mr. Aruna Gunawardana Senior Manager - Sales

23


Management Discussion and Analysis

26


Economic Environment

The world economy delivered a mixed economic performance in 2014 due to deflationary trends and the oil crisis contributing towards uneven global impacts, causing overall global economic activity to remain flat year-on-year. As per the World Economic Outlook April 2015 of the International Monetary Fund, the rate of global economic growth remained at 3.4 percent in 2014, as in 2013. Advanced economies saw the pace of growth increase to 1.8 percent from 1.4 percent in the previous year, whilst emerging markets and developing economies clocked up a lower rate of growth of 4.6 percent compared to the 5 percent growth in 2013.

Of the developed nations, the United States and United Kingdom retained momentum in economic activity, and posted stronger results, supported by stronger consumer and investor sentiments. The Euro zone displayed uneven economic advancement with the core led by Germany, exhibiting steady growth, although still below potential, and fringe Euro economies continuing to suffer from deflationary trends underpinned by sluggish economic activity. Meanwhile, despite the recent ‘Abenomic’ reforms, the Japanese economy continued to deteriorate to post negative growth. Emerging and developing economies, led by China, collectively accounted for a major share of three-fourths of global growth in 2014 but also posted a lower rate of growth year-on-year.

Overall, global growth is projected to reach 3.5 percent in 2015. Growth is expected to be stronger in advanced economies, but weaker in emerging markets, reflecting more subdued prospects for some large emerging market economies and oil exporters. Emerging and developing Asia’s growth forecast has been trimmed to 6.6 percent in 2015, compared to 6.8 in 2014.

Domestic economy

The Sri Lankan economy exhibited a robust growth despite domestic as well as external challenges, with real GDP growing at 7.4 percent in 2014, in comparison to the growth of 7.2 percent in 2013. Accordingly, the GDP per capita increased to US dollars 3,625 in 2014 from US dollars 3,280 in the previous year, on track with projected upper middle income aspirations in the medium term, sustained by a favourable high growth and low inflation nexus. Expansion in both investment and consumption activities supported the higher GDP growth rate in 2014, with the industry sector expanding by 11.4 percent compared to the 9.9 percent growth of 2013, while the services sector registered a 6.5 percent rate of growth, against 6.4 percent in 2013. The agriculture sector saw weak growth of 0.3 percent due to erratic weather conditions experienced during the year. In

terms of sub sectors, construction registered an impressive growth of 20.2 percent within the industry sector, as compared to 14.4 percent growth in the preceding year.

Inflation remained at low single digit levels throughout 2014 with headline inflation, as measured by the Colombo Consumers’ Price Index (CCPI) (2006/07=100), falling further to 2.1 percent in December 2014 in comparison to 4.7 percent in 2013. The annual average rate of inflation decelerated to 3.3 percent from 6.9 percent in 2013. The downward revision to administered prices of electricity, water, LP gas and fuel, in the latter half of the year, resulted in headline inflation declining to 1.5 percent in November, the lowest recorded for 2014.

A relaxed monetary policy was continued by the Central Bank, resulting in the longest period of monetary policy easing since 2004. In January 2014, the Central Bank moved on to a standard rate corridor and reduced the Standing Lending Facility Rate (SLFR), by 50 basis points to 8.00 percent, while the Standing Deposit Facility Rate (SDFR) remained unchanged at 6.50 percent. In addition, limits were also placed on accessing the Standing Deposit Facility (SDF) of the Central Bank by the participants in open market operations. However, demand or credit remained lackluster from the previous year, for the major part of 2014 and picked up only towards the tail end of the year.

Low credit demand in the environment of low inflation and low interest rates resulted in money markets experiencing excess liquidity. By August 2014, excess liquidity peaked at Rs. 350 billion and remained at these high levels during the balance period of the year, while market rates fell to historic lows.

Exchange Rate

The Sri Lankan rupee appreciated by 0.29 percent against the US dollar in the first nine months of 2014, backed by higher export earnings, workers’ remittances and inflows to the finance account. However, this trend was reversed in the fourth quarter of 2014. Consequently, by the year-end, the rupee depreciated by 0.23 percent against the US dollar, to Rs. 131.05. The rupee appreciated against all other major currencies as a result of cross currency exchange rate movements.

Non-Bank Financial Sector

The non-bank financial sector posted a stronger performance in 2014, compared to 2013. By end 2014, the non-bank financial sector represented 7 percent of Sri Lanka’s financial system and comprised 48 Licensed Finance Companies (LFCs) and 8 Specialised Leasing Companies (SLC). Despite an environment of low credit demand for the

27


fi rst half of the year, the sector posted a profi t after tax of Rs. 13.9 bn, compared to a profi t of Rs. 7.7 bn in 2013. Total assets of the LFCs and SLCs sector stood at Rs. 853 bn by end 2014.

Finance leases, hire purchases and secured advances were the major sources of accommodations accounting for 43 percent, 27 percent and 19 percent, respectively of the accommodations portfolio. The pawning business reduced to 3.5 percent (Rs. 22.6 billion) in 2014, from 4.8 percent in 2013. The investment portfolio of the sector, which comprised of equity and debt, recorded a notable increase of 39.6 percent during 2014 to Rs. 42 billion. The share of deposits among the funding sources of the sector increased to 48.5 percent from 47 percent recorded in 2013, while the share of borrowings decreased to 25.4 percent in 2014 from 26.8 percent in 2013. The deposits grew by 22.7 percent to Rs. 414 billion as at the end of 2014, compared to a 32.7 percent growth in 2013. Total borrowings in the sector reached Rs. 217 billion, an increase of 12.9 percent as at end 2014 compared to the growth rate of 9.3 percent recorded in 2013.

Operational review

The strategic priorities for the year were ensuring compliance with regulatory requirements and strengthening the balance sheet. In this broader context the Company focused on more effi cient and eff ective management of resources and maintaining asset quality while expanding the asset base.

Loans and Receivables

Lending portfolio

Auto finance

Leasing Term loans

Business loans

Personal Loans

Mortgage Loans

Pawning

Microfinance

Hire purchase

Loan products

Nation Lanka’s lending portfolio as at March 31 2015, consisted of the lending products of leasing, hire purchase, and loans. The range of loans off ered by the Company includes term loans, personal Loans, business loans (Biz Cash), mortgage loans, pawning and micro fi nance. The lending portfolio grew by 67 percent year on year from Rs 2.64 bn in 2013/14, to Rs 4.41 bn, boosted by micro fi nance and loans, while the auto fi nance segment and pawning sectors declined.

Lending base growth over 5-years of 2011-2015

Lending Base (Rs.000’)

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

2015

2014

2013

2012

2011

Interest income by product

2013/14

Lease

Term Loans

Micro Finance

Hire Purchase

Pawning

Other Lending

2014/15

2013/14

Lease

Term Loans

Micro Finance

Hire Purchase

Pawning

Other Lending

28

Interest income from the lending portfolio increased to Rs 1.15 bn and accounted for 99 percent of total income of the company.

Lending product composition as at 31st March

As at 31-03-2014As at 31-03-2015

Lease

Loans

Hire Purchase

Micro Finance

Pawning

As at 31-03-2014

Lease

Loans

Hire Purchase

Micro Finance

Pawning

The total number of disbursements increased by 78 percent during the year from Rs 2.88 bn, to Rs 5.12 bn, mainly due to the focus on micro finance and business loans.

Microfinance

Micro finance accounted for 50 percent of the total portfolio of the Company, with the “Dinawamu Lanka” micro finance brand gaining further popularity during the year. The total lending base increased by a significant 108 percent, from Rs 1.04 bn to Rs 2.16 bn. The micro finance customer base too, expanded during the year, from 41,698 customers to 64,884 customers.

Auto finance

Total lease lending declined by 6 percent, to reach Rs 219 mn from Rs 234 mn in the previous year, while the hire purchase portfolio reduced by 15 percent to register Rs 275 mn from Rs 324 mn. This decline was mainly due to lower demand during the first part of the year and also due to the inability of the Company to compete successfully in the face

of high cost of funds. This situation is in the process of being addressed by the Company, by sourcing low cost funds that will support the future growth of these segments.

Pawning

In the prevailing scenario of drastic declines in international gold prices, the pawning portfolio continued to shrink by 20 percent during the year, totaling at Rs 135 mn from Rs 169 mn in 2013/14. On a positive note, the capital depletion declined to Rs. 1.5 mn, as against 15 mn, and the interest in Non Performing Loans in the pawning portfolio declined from Rs. 37 mn to Rs. 7 mn year-on-year, supported by the focused recovery measures of the Company.

Funding

The current low interest rate environment has opened up opportunities to raise low cost funding through the debt market and banking system. Therefore, work on rebalancing the funding portfolio commenced during the current financial year by increasing the proportion of lower interest institutional funding against the higher cost public deposits. As at end March 2015, total institutional liabilities were increased to 12 percent of total liabilities, compared to 4 percent in the previous year, while the proportion of deposits shrank to 8 percent from 9 percent. In the new financial year, the Company plans to raise Rs 500 mn from the debt market through a subordinated debenture issue and another Rs.500 mn through a Rights Issue to strengthen funding streams.

However, while the share of deposits in total funding saw a decline, the deposit base continued to grow during the current year and increased by 48 percent year on year to reach Rs 5.6 bn. This growth in deposit base denotes the strength of the Nation Lanka brand, public trust and confidence in the brand.

Deposit Base (Rs.000’)

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

2015

2014

2013

2012

2011


29


Branch network

Ensuring greater accessibility to Nation Lanka products and services for all communities across the country is a priority for the Company. The strategic locations of the branch network have facilitated accessibility to a wider population in the surrounding localities, enhancing the reach of service delivery.

During the current year, the Company envisages to strengthen its distribution channel by having a wider reach, subject to regulatory clearances and a stronger balance sheet.

Good Governance & Compliance

Following the changes of directorate the Company has implemented many improvements towards further strengthening corporate governance. The Company is also in the process of introducing required oversight measures based on industry best practices, for greater operational controls. As listed below, the year witnessed groundwork being laid out as well as the introduction of many new governance measures. Steps were also taken to further strengthen the existing governance measures.

� The adoption of the Sri Lanka Financial Reporting Standards (SLFRS) accounting system from 2013

� A Self Assessment Policy was developed and reviewed by the Board. The Policy will be implemented in the new financial year, starting from the Board of Directors, ensuring compliance with all statutory requirements at all levels.

� Measures have been initiated to comply with statutory requirements. A Rights Issue of Rs. 500 Milllion is planned for the new financial year to meet the statutory tier 1 capital adequacy requirements and to strengthen the balance sheet

� Measures have been initiated to strengthen the financial fundamentals of the Company. The funding portfolio and the debt portfolio are in the process of being restructured, through use of lower cost funding tools. A subordinated debenture issue for Rs 500 Million is planned for the new financial year.

� The Board has reviewed and realigned growth strategies and strategic priorities over the short, mid and long term to provide clear direction to the management and employees.

� Clear reporting and monitoring channels have been defined to strengthen oversight on all operational aspects of the Company, facilitating greater controls

� The implementation of the integrated ERP system which was introduced in the previous year to support oversight and strategic decision making.

Financial review

Revenue

Total revenue of the Company increased by 35 percent during the year to reach Rs 1.15 bn compared to Rs 861 mn in the preceding year with the Company’s main source of income, which is interest income, increasing by 35 percent.

Profitability

The Company recorded an improvement to operating profitability during the year, by achieving a profit of Rs 46 mn compared to operating losses of Rs 158 mn recorded previous year. This change in operational finances reflects better operational controls, particularly in relation to costs, as profits were achieved in spite of the continued expansion of the business during the year.

However, the bottom line fell into the negative range due to a staggering Rs. 324 mn impairment provision of accommodation and fall in value of investments in subsidiaries, associates and properties. This situation is expected to change in the new financial year as we implement new revenue growth strategies.

Net interest margins

The gross interest income increased by 35 percent year-on-year to reach Rs 1.15 bn compared to Rs 860 mn in the previous year, while the net interest income increased by 49 percent to reach Rs 598 mn from Rs 401 mn.

30

Expenditure

Total cost structure of the Company saw some variation during the year due to business expansions and introduction of new IT systems. However, the company is confident of yielding positive results from those investments, going forward.

Assets

Total assets of the Company grew by 52 percent to reach Rs 7.0 bn in value compared to Rs 4.6 bn in 2013/14, driven by the 67 percent growth in the lending portfolio.

Total Assets (Rs.000’)

0 1,000 2,000 3,000 4,000 5,000 6,000 7,000 8,000

2015

2014

2013

2012

2011

Liabilities

During the year, the Company’s total liabilities increased by 62 percent to Rs. 7 bn by end 31st March 2015, from Rs 4.3 bn as at 31st March 2014. The public deposit base increased by 48 percent to Rs 5.6 bn from Rs 3.8 bn, while Bank and other borrowings increased 608 percent to Rs 1.25 bn from Rs 177 mn, while other liabilities increased by -65 percent to Rs 111 mn from Rs 318 mn.

This change reflects the rebalancing of the Company’s debt portfolio, where the proportion of higher cost public deposits is being reduced in place of lower cost institutional borrowings.

FY 2013/14FY 2014/15

Fixed Deposits (Public)

Bank & Other Borrowings

FY 2013/14

Fixed Deposits (Public)

Bank & Other Borrowings

Statutory ratios

The core capital ratio was .15 percent as at March 31 2015, compared to the regulatory minimum of 5 percent and the total risk weighted capital ratio was .15 percent against the statutory minimum of 10 percent. The proposed rights issue and the planned subordinated debenture will assist us in reaching these statutory requirements. The current years expected profitability too will assist in this context.

Strengthening Financial Discipline

Under the supervision of a new management team, the Company will focus on improving financial discipline to ensure long term financial sustainability, together with a bottom line growth. All areas will be improved and performance will be evaluated against targets to ensure financial targets are met. Due emphasis will be placed on collections and recoveries to curb non- performing facilities. Information technology will be increasingly integrated into operations to streamline internal business processes for greater productivity and cost efficiencies. We are confident that these efforts will facilitate greater cost controls that will contribute towards maintaining margins, despite the additional expenditure from physical expansion.

Future Outlook

The Company has already set in motion extensive plans aimed at strengthening its financial base and the new financial year will see the results of these strategies. The planned rights issue and debenture issue will strengthen the company’s financial standing, reversing the current negative outlook triggering a faster growth momentum. Internal restructuring has already commenced and the human resource base is being upgraded through training and development and also new recruitments to ensure the availability of correct skills and experiences to drive the


31


company in achieving its new strategic growth objectives. Such internal realignments will also be supported by appropriate technology to enable systems and process improvements by providing technology support facilities.

Branch expansion will remain a priority to ensure market penetration through the establishment of new branches in new geographic locations.

Auto finance and loan sectors have been earmarked as key growth areas over the short term, with emphasis to maintain portfolio quality. Leasing, hire purchase and loan products will be revamped to meet demand trends and to enable faster growth in disbursements. Our target is a loan book of Rs 9 bn by end March 2016.

Human resource development will be emphasized to facilitate the effective and efficient implementation of growth strategies. In this context, training and development of staff, their wellbeing, and nurturing a performance based culture with highest standards in business ethics will be prioritized. Career development opportunities will be developed to enable personal growth, reward and retention of experienced employees.

We are confident our growth strategy will generate tangible results and a positive turnaround of the Profit or Loss by the end of the new financial year.

32

Our Network

Chunnakam Nelliady

Chavakachcheri

Mannar

Vavuniya

Anuradhapura

Trincomalee

Dambulla

KurunegalaMatale

KandyKegalleNegombo

KotahenaColombo

Gampaha

Panadura

Mathugama

Ratnapura

Kalmunai

MataraGalle

33


Corporate Governance

Eff ective corporate governance in accordance with high standard is important to the Company. In line with today’s increase focus on corporate governance issues, the company established a strong corporate governance function, aimed at strengthening its numerous corporate governance initiatives such as manipulation of fi nancial markets to money laundering and discrimination, highlighting the need for eff ective and effi cient oversight and risk management combined with greater attention to the needs of all stakeholders.

Our organizational structure is designed for promoting a basis for responsible management and control of the company with a focus on sustainable value creation through the eff ective decision making on the basis of appropriate information, good relation with shareholders, eff ective cooperation with management, board together with performance based compensation system with sustainable and long term focus and transparent and timely reporting.

Governance Structure

BOD

Shareholder

Chief Executive Officer

Audit Committee

Remuneration Committee

Procurement Committee

Credit Committee

Assets & Liability Committee

Recoveries Committee

IT Steering Committee

External Auditors

Com. ActSEC CSE CBSL

Marketing

Credit

Investments

Finance

Recoveries

Human Resources

IT

Legal

Administration

CRM

Corporate Management

Management Committees

ExecutiveDirector

Board SubCommittees

Head of Internal Audit

Appointing flowReporting flowRegulating flow

IRMC

BOD : Board of DirectorsIRMC : Integrated Risk Management CommitteeALCO : Assets & Liabilities Committees

34


Regulations and Guidelines

The Company is governed by various directions, acts, rules, regulations and guidelines of external authorities and the management. We are pleased to record that the company was not subject to any major liabilities during the financial year under consideration.

External Regulations on Corporate Governance;

Relevant regulations are as follows;

1. Directions issued by the Central Bank of Sri Lanka

a) Finance Companies (Corporate Governance) Direction No. 3 of 2008 which shall be applicable to every finance company registered in terms of section 2 of the Finance Companies Act No. 78 of 1988.

2. Rules, guidelines and recommendations issued by the following:

a) Best Practice on Corporate Governance Issued jointly by the Securities Exchange Commission of Sri Lanka and the Institute of Chartered Accountants of Sri Lanka

b) Listing Rules issued by the Colombo Stock Exchange

3. Statutory Requirements

a) Companies Act No 07 of 2007.

b) Finance Business Act No 42 of 2011

Internal Regulations;

1. Articles of Association of the Company

2. Procedures laid down by the board approved operations manuals.

3. Internal Audit Manuals

4. Internal Memos and Circulars issued from time to time.

No major violation recorded affecting the overall Corporate Governance of the company.

Structure of Ownership

As per the shareholder register the structure of ownership for the financial years 2013/2014 and 2014/2015. Are as follows;

Five major shareholders as at 31st March 2015 are shown below with comparative figures.

Major Share holder Name

As at 31st March 2014

Name

As at 31st March 2015

No of Shares % No of Shares %

First Hatton National Bank/ Investor Access Equities (Pvt) Ltd

38,700,000 34.47 Hatton National Bank/ Investor Access Equities (Pvt) Ltd

42,400,000 32.82

Investor Access Equities (Pvt) Ltd

28,155,000 Seylan Bank PLC/ Investor Access Equities (Pvt) Ltd

19,325,000

Seylan Bank PLC/ Investor Access Equities (Pvt) Ltd

19,325,000 Investor Access Equities (Pvt) Ltd

14,718,644

Nation Lanka Capital Limited/ Investor Access Equities (Pvt) Ltd

6,000,000

Second Mr J Rudra 19,060,625 7.63 Mr J Rudra 19,060,625 7.59Third Pan Asia Banking

Corporation PLC /17,862,425 7.25 Pan Asia Banking

Corporation PLC /17,862,425 7.21

Nawaloka Construction Company (Pvt) Ltd

249,700 Nawaloka Construction Company (Pvt) Ltd

249,700

Fourth Mr. V.R. Ramanan 12,809,259 5.12 Mr.W.A.S.P. De Saram 13,883,761 5.53Fifth National Wealth Corporation

Limited.6,246,325 2.50 Mr. V.R. Ramanan 12,809,259 5.10

Others Others 107,543,184 43.03 Others 104,853,847 41.75TOTAL 249,951,518 100.00 TOTAL 251,163,261 100.00

35


Performance Governance

Chairman and the Board of Directors evaluate the performance of the company at the Board level and take appropriate strategic decisions to improve the performance. Meetings are held by the Executive Director with divisional heads to communicate the new strategies and to review the activities and the performances of the divisions. Further, Mangers’ meetings are held with the corporate management to review the performance of the branch network.

Chairman

Mr. H K J Dharmadasa was appointed as the Chairman to the Board with effect from 11th March 2011.There is no relationship, financial or otherwise between Chairman and the Executive Director.

Mr. U H Dharmadasa is a Non-Executive Director and he is the son of the chairman Mr. H K J Dharmadasa.

Chief Executive Officer

Mr. Charith Amarasekara was appointed as the Chief Executive Officer from 11th March 2013 and he has resigned from the post with effect from 06th May 2015.

Board Sub Committees

The operation of the Board Sub Committees during the financial year under review is given in the following table.

Committee Meetings Held

Audit Committee FiveIntegrated Risk Management Committee FourRemuneration Committee Two

Attendance of the Directors to the Board Sub Committees are as follows.

Director Board Remuneration Committee

Audit Committee Integrated Risk Management Committee

Elig

ibili

ty

Atte

ndan

ce

Elig

ibili

ty

Atte

ndan

ce

Elig

ibili

ty

Atte

ndan

ce

Elig

ibili

ty

Atte

ndan

ceMr. H K J Dharmadasa 12 09 2 2 - - - -Mr. A C Senaviratne 12 08 2 2 - - - -Mr. J Rudra 12 09 - - - - - -Mr. U H Dharmadasa 12 10 - - - - - -Mr. P M L K Karunaratne 12 10 2 2 5 5 4 4Mr. K M.Sunil Kandegedara 12 09 - - 5 2 4 2Mr. V R Ramanan 12 11 - - - - - -Mr. H Dharmadasa - - - - 5 2 - -

36


Compliances to the Finance Companies (Corporate Governance) Direction No 3 of 2008 issued by the Central Bank of Sri Lanka which shall be applicable to every finance company registered in terms of the Finance Companies Act.

Section Description Level of compliance

02 Directors’ Responsibility

1) The Board shall strengthen the safety and soundness of company by;

a. Approving and overseeing the company’s strategic objectives and corporate values and ensuring that such objectives and values are communicated throughout the company.

Complied with

Approval and the overseeing the company’s strategic objectives and corporate values are mainly done at the board level at the Board meetings.

Communication of such objectives is done at the periodical management meetings with Heads of divisions and the Heads of the Branches.

b. Approving the overall business strategy of the overall company including risk management procedures with measurable goals at least for immediate next three years.

Complied with.

c. Identifying risk and ensuring implementation of appropriate risk management techniques prudently.

Complied with.

As prescribed in CBSL Directions, Integrated Risk Management Committee (IRMC) closely monitored the risk management process of the company.

d. Approving the policy of communication with all stakeholders.

Complied with

e. Reviewing the adequacy and the integrity of Company’s internal control system & MIS.

Complied with.

The Board Audit Committee of the company reviews the adequacy and the integrity of Company’s Internal Control System & MIS.

f. Identifying and designating key management personnel who are in a position to;

f.i) Significantly influence policyf.ii) Direct activitiesf.iii) Exercises control over business activities and

operation of risk management.

Complied with.

Key management personnel were filled by the Board with the consultation of existing top management.

g. Defining the authority levels and key responsibilities for the board/key management personnel.

Complied with.

All the authority levels and the responsibilities are clearly defined in the operations manuals.

h. Ensure the appropriate supervision of the affairs of the company by key management.

Complied with.

37



i. Periodically assessing the effectiveness of its governance practices including;

i.i) Selection, nomination & election of directors & appointment of key management personnel.

i.ii) Management of conflict of interest andi.iii) The identification of weaknesses and

implementation of changes where necessary.

Complied with.

j. Ensuring the proper succession plan for key management personnel.

Complied with.

k. Having regular meetings with key management to review policies and establishing lines of communication and monitoring progress towards corporate objectives.

Complied with

The company has the practice of periodical meetings with the key management team and with the Heads of the Branches as well.

l. Understanding the regulatory environment. Complied with

The company always gives the topmost priority to be in line with regulator’s requirements. The company was not liable for any deviations from the regulator’s requirements during the year under review.

m. Exercising the due diligence in the hiring and oversight of external auditors.

Complied with.

The company selected a well reputed audit firm as the external auditor.

2) The Board shall appoint the Chairman and the CEO and define & approve the functions and responsibilities of the Chairman and the CEO in line with the direction.

Complied with.

The Chairman and the CEO positions were headed by two individuals as specified in CBSL directions under corporate governance.

3) Ensure a procedure for enabling directors, upon reasonable request to seek independent professional advice in appropriate circumstances at the company’s expense.

Complied with.

4) The director shall abstain from voting on any board resolution in relating to a matter in which he or any of its relative or a concern in which he has substantial interest, and he shall not be counted for the quorum for the relevant agenda item of the board meeting.

Complied with

5) The board shall have a formal schedule of matters specifically reserved for decisions to ensure that the direction and the control of the company is firmly under its authority.

Complied with

The board established systems with necessary controls to ensure the company is firmly under its authority.

38



6) The board shall ensure keeping informed the CBSL before taking any remedial action if the company’s becoming insolvent or is about to suspend payments due to lenders/creditors.

Complied with.

Such a situation has not arisen.

7) The board is responsible for the annual report and annual corporate governance report setting out the compliance with this direction.

Complied with.

03 Meetings of the Board.

1) The board shall meet at least twelve times a financial year at approximately monthly intervals.

Complied with. Twelve board meetings were held during the financial year under review.

04 Composition of the Board

1) The board members should not be less than five & not more than thirteen.

Complied with.

The board comprised of seven directors.

2) Period of director other than Chief Executive Officer/Executive Director shall not be exceeding nine years.

Complied with.

The service period of the directors is less than nine years.

3) Number of executive directors shall not exceed half of the board.

Complied with.

4) No of independent non-executive directors shall be at least one fourth of the total number of directors.

Complied with

There are three independent non-executive directors on the board.

5) Non-executive directors shall have necessary skill and experience to bring an objective judgment to bear on issues of strategy, performance and resources.

Complied with.

The Non-Executive Directors possess the necessary skills and experience to bring an objective judgment on issues of strategy, performance and resources.

05 Criteria to assess fitness and propriety of directors.

1) Age of the director shall not exceed seventy years. Complied with.

The age limit of all the directors is within the maximum period permitted by CBSL.

2) The Director of the company shall not hold the office as a director or any other equivalent position in more than 20 companies/ Societies/ Corporate Bodies/ Associate Companies and Subsidiaries of the Company. Provided that such director shall not hold office of a director or any other equivalent position in more than 10 companies that are classified as specified business entities in terms of the SLAuS act No 15 0f 1995.

Complied with.

07 The Chairman & Chief Executive Officer.

1) The role of the Chairman & Chief Executive Officer shall be separated and shall not be performed by one and the same person.

Complied with.

The Chairman and the CEO positions are held by two individuals.

39



2) The Board shall disclose in its corporate governance report, which shall be an integral part of its Annual Report, the name of the Chairman and Chief Executive Officer and the nature of any relationship, if any, between the Chairman and the chief executive officer and relationships among members of the Board.

Complied with.

This report provides the said disclosure requirement.

3) The role of Chairman is to provide leadership to the board, ensure that the board works effectively and discharge its responsibility, ensure that all key issues are discussed by the board in a timely manner.

Complied with.

4) The Chief Executive Officer shall function as the apex executive – in – charge of the day to day management of the finance company operations and business.

Complied with.

The CEO is responsible for the day to day operations of the company.

08 Board appointed committees.

1) The company shall have at least an Audit Committee and Integrated Risk Management Committee (IRMC).

Complied with

The following sub committees have been appointed by the board;

1. Audit Committee.2. Integrated Risk Management

Committee.3. Remuneration Committee.

Following Rules shall be applicable to the Audit Committee

a) The Chairman of the committee shall be a non-executive director who possesses qualifications and experience in accountancy and/or audit.

Complied with;

The brief profile of the Chairman of the Audit Committee is given in the Audit Committee Report.

b) The Board members appointed to the committee shall be Non - Executive directors.

Complied with.

The Audit Committee comprises of three non-executive directors.

c) The committee shall make recommendations on matters in connection with: (i) the appointment of the external auditor for audit services to be provided in compliance with the relevant statutes; (ii) the implementation of the Central Bank guidelines issued to auditors from time to time; (iii) the application of the relevant accounting standards; and (iv) the service period, audit fee and any resignation or dismissal of the auditor, provided that the engagement of an audit partner shall not exceed five years, and that the particular audit partner is not re-engaged for the audit before the expiry of three years from the date of the completion of the previous term.

Complied with.

d) The Committee shall review and monitor the external auditor’s independence and objectivity and the effectiveness of the audit processes in accordance with applicable standards and best practices.

Complied with.

40



e) The committee shall develop and implement a policy with the approval of the Board on the engagement of an external auditor to provide non-audit services that are permitted under the relevant statutes,regulations, requirements and guidelines. In doing so, the committee shall ensure that the provision by an external auditor of non-audit services does not impair the external auditor’s independence or objectivity. When assessing the external auditor’s independence or objectivity in relation to the provision of non-audit services, the committee shall consider: (i) whether the skills and experience of the auditor make it a suitable provider of the non-audit services; (ii) whether there are safeguards in place to ensure that there is no threat to the objectivity and/or independence in the conduct of the audit resulting from the provision of such services by the external auditor; and (iii) whether the nature of the non-audit services, the related fee levels and the fee levels individually and in aggregate relative to the auditor, pose any threat to the objectivity and/or independence of the external auditor.

Complied with.

f) The committee shall review the financial information of the finance company, in order to monitor the integrity of the financial statements of the finance company, its annual report, accounts and periodical reports prepared for disclosure, and the significant financial reporting judgments contained therein. In reviewing the finance company’s annual report and accounts and periodical reports before submission to the Board, the committee shall focus particularly on: (i) major judgmental areas; (ii) any changes in accounting policies and practices; (iii) significant adjustments arising from the audit; (iv) the going concern assumption; and (v) the compliance with relevant accounting standards and other legal requirements.

Complied with.

g) The committee shall discuss issues, problems and reservations arising from the interim and final audits, and any matters the auditor may wish to discuss including those matters that may need to be discussed in the absence of key management personnel, if necessary.

Complied with.

h) The committee shall take the following steps with regard to the internal audit function of the finance company: (i) Review the adequacy of the scope, functions and resources of the internal audit department, and satisfy itself that the department has the necessary authority to carry out its work; (ii) Review the internal audit program and results of the internal audit process and, where necessary, ensure that appropriate actions are taken on the recommendations of the internal audit department;

Complied with.

41



(iii) Review any appraisal or assessment of the performance of the head and senior staff members of the internal audit department; (iv) Recommend any appointment or termination of the head, senior staff members and outsourced service providers to the internal audit function; (v) Ensure that the committee is apprised of resignations of senior staff members of the internal audit department including the chief internal auditor and any outsourced service providers, and to provide an opportunity to the resigning senior staff members and outsourced service providers to submit reasons for resigning; Ensure that the internal audit function is independent of the activities it audits and that it is performed with impartiality, proficiency and due professional care;

i) The committee shall consider the major findings of internal investigations and management’s responses thereto;

Complied with

j) The committee shall have: (i) explicit authority to investigate into any matter within its terms of reference; (ii) the resources which it needs to do so; (iii) full access to information; and (iv) authority to obtain external professional advice and to invite outsiders with relevant experience to attend, if necessary.

Complied with

k) The committee shall meet regularly, with due notice of issues to be discussed and shall record its conclusions in discharging its duties and responsibilities.

Complied with

The committee has met five times during the financial year under review.

l) The Board shall, in the Annual Report, disclose in an informative way, (i) details of the activities of the audit committee; (ii) the number of audit committee meetings held in the year; and (iii) details of attendance of each individual member at such meetings.

Complied with.

The Audit Committee comprises of two Non-executive Independent Directors and one non-executive Director, The said Committee met 05 times during the year. The Head of Internal Audit, functions as the Secretary to the Audit Committee. The Chairman of the Audit Committee is an Independent Non-executive Director, appointed by the Board.

m) The Secretary to the committee (who may be the company secretary or the head of the internal audit function) shall record and keep detailed minutes of the committee meetings.

Complied with.

The Head of Internal Audit functions as the Secretary to the Audit Committee and keep the minutes of the committee meetings.

42



n) The committee shall review arrangements by which employees of the finance company may, in confidence, raise concerns about possible improprieties in financial reporting, internal control or other matters. Accordingly, the committee shall ensure that proper arrangements are in place for the fair and independent investigation of such matters and for appropriate follow-up action and to act as the key representative body for overseeing the finance company’s relations with the external auditor.

Complied with.

Following rules shall be applied to the IRMC

a) The committee shall consist of at least one non-executive director, CEO and key management personnel supervising broad risk categories, i.e., credit, market, liquidity, operational and strategic risks. The committee shall work with key management personnel closely and make decisions on behalf of the Board within the framework of the authority and responsibility assigned to the committee.

Complied with.

There are two non-executive directors in the IRMC.

b) The committee shall assess all risks, i.e., credit, market, liquidity, operational and strategic risks to the finance company on a monthly basis through appropriate risk indicators and management information.

Complied with

c) The committee shall review the adequacy and effectiveness of all management level committees such as the credit committee and the asset-liability committee to address specific risks and to manage those risks within quantitative and qualitative risk limits as specified by the committee.

Complied with

d) The committee shall take prompt corrective action to mitigate the effects of specific risks in the case such risks are at levels beyond the prudent levels decided by the committee on the basis of the finance company’s policies and regulatory and supervisory requirements.

Complied with

e) The committee shall meet at least quarterly to assess all aspects of risk management including updated business continuity plans.

Four IRMC meeting were held by complying with the requirement.

f) The committee shall take appropriate actions against the officers responsible for failure to identify specific risks and take prompt corrective actions as recommended by the committee, and/or as directed by the Director of the Department of Supervision of Non-Bank Financial Institutions of the Central Bank of Sri Lanka.

Complied with.

g) The committee shall establish a compliance function to assess the finance company’s compliance with laws, regulations, directions, rules, regulatory guidelines, internal controls and approved policies on all areas of business operations. A dedicated compliance officer selected from key management personnel shall carry out the compliance function and report to the committee periodically.

Complied with.

43



09 Related Party Transactions

1) The board shall take the necessary steps to avoid any conflicts of interest that may arise from the transactions of the company with related parties.

Complied with.

Transactions carried out with related parties in the normal course of business are disclosed in the “Related Party Disclosure”.

2) The board shall ensure that the company does not engage in transactions with related parties in a manner that would grant such party more favorable treatment than that is accord to other similar constituents of the finance company.

Complied with

10 Disclosure 1) The Board shall ensure that: (a) annual audited financial statements and periodical financial statements are prepared and published in accordance with the formats prescribed by the regulatory and supervisory authorities and applicable accounting standards, and that (b) such statements are published in the newspapers in an abridged form, in Sinhala, Tamil and English

Complied with.

In the preparation of quarterly and annual financial statements, the company has complied with the requirements of the Companies Act No. 07 of 2007, the Finance Business Act No. 42 of 2011, and are prepared and presented in conformity with Sri Lanka Accounting Standards and comply with the reporting requirements prescribed by the Regulatory Authorities such as the Central Bank of Sri Lanka and Colombo Stock Exchange

2) The Board shall ensure that at least the following disclosures are made in the Annual Report:

a) A statement to the effect that the annual audited financial statements have been prepared in line with applicable accounting standards and regulatory requirements, inclusive of specific disclosures.

Complied with. Annual audited financial statements are prepared as per the Sri Lanka Accounting Standards.

b) A report by the Board on the finance company’s internal control mechanism that confirms that the financial reporting system has been designed to provide a reasonable assurance regarding the reliability of financial reporting and that the preparation of financial statements has been done in accordance with relevant accounting principles and regulatory requirements.

Complied with.

The Director’s Statement on Internal Control will provide assurance of the internal control mechanism which confirms the effectiveness of the financial reporting system designed by the Board.

c) The external auditor’s certification on the effectiveness of the internal control mechanism in respect of any statements prepared or published after March 31, 2010.

Not Complied with.

d) Details of directors, including names, transactions with the finance company.

Complied with. This has been disclosed in the Note 42.1,2,3.

e) Fees/remuneration paid by the finance company to the directors in aggregate, in the Annual Reports published after January 1, 2010.

Complied with. This has been disclosed in the Note 12.

44


f) Total net accommodation as defined in paragraph 9(4) outstanding in respect of each category of related parties and the net accommodation outstanding in respect of each category of related parties as a percentage of the finance company’s capital funds.

Complied with. This has been disclosed in the Note 42.1,2,3.

g) The aggregate values of remuneration paid by the finance company to its key management personnel and the aggregate values of the transactions of the finance company with its key management personnel during the financial year, set out by broad categories such as remuneration paid, accommodation granted and deposits or investments made in the finance company.

Complied with. This has been disclosed in the Note 42.3.

h) A report setting out details of the compliance with prudential requirements, regulations, laws and internal controls and measures taken to rectify any non - compliances.

Complied with.

This is fulfilled in the Audit Committee Report and the Risk Management Report.

i) A statement of the regulatory and supervisory concerns on lapses in the finance company’s risk management, or non - compliance with the Act and rules and directions that have been communicated by the Director of the Department of Supervision of Non-Bank Financial Institutions, if so directed by the Monetary Board to be disclosed to the public, together with the measures taken by the finance company to address such concerns.

Complied with.

j) The external auditor’s certification of the compliance with the Act and rules and directions issued by the Monetary Board in the annual Corporate Governance reports published after January 1, 2011.

Not Complied with.

By the order of Board

28th August 2015


45


Risk Management

Integrated Risk Management

NLF PLC believes that a sound Integrated Risk Management system is an integral part of good management practice. The effective IRM creates value in the business and help the management decision making process and sound corporate governance.

As a business in the financial services sector NLF PLC has appropriately priced risk and prudently managed the risk of its assets and liability portfolios. Further, a proactive and forward looking risk management philosophy has been evolved and it is clearly understood throughout the organization.

The overall adequacy and effectiveness of the risk management is governed through the Integrated Risk Management Committee (IRMC), the Board Audit Committee which comprises solely of Non-executive Directors and the Assets and Liabilities Management Committee (ALCO) which comprises of Management level staff members in charge of key related functions.

Acting within authority delegated by the Board, these Committees review specific risk areas and receive regular reports on internal controls, risk management, Policies and standards.

The management of risk is at the helm of NLF. Lending to customers is our core business. Beyond credit risk, we are exposed to other risks such as Interest rate risk, Liquidity risk, operational risk, reputation risk, market risk, and technology risk.

The management of operational risk in particular, continues to be enhanced across all areas of the company.

Risk Management Framework

The objective of risk management is to ensure the management of an event risk exposure to understand the risk drivers and identify the internal/external trend related to the risk exposure of the company.

Our risk governance is mainly based on a three line defense approach as follows,

The first line of defense is the front office that has a clear responsibility for risk in terms of identifying risks and reporting on any changes in the risk profile of the clients or positions.

As a second line of defense, IRMC, ALCO and other control functions such as company compliance have their own responsibilities for developing, overseeing and reporting on risk frameworks. In addition, IRMC is responsible for identifying individual and portfolio risk, approved transactions, trades and ensure that they are within approved limits and monitor and report on the portfolio, taking into account current and future potential developments through stress testing.

Finally, Audit function forms the third line of defense as a completely independent check to ensure adherence to approved policies and procedures.

FIRST LINE OF DEFENSEStrategy, Performance and

Risk management

SECOND LINE OF DEFENSE THIRD LINE OF DEFENSE

Independent Assurance

Board of managementBusiness Units

Identification andmanagement of the risk in

the business

Integrated RiskManagement Committee

Assets and Liability Committee

Audit committeeExternal Auditors

Internal Audit Division

Framework, risk oversightAnd Reporting

Independent challenge andReview of Adequacy andEffectiveness of process

and Controls

BOARDCEO/ED

SENIOR MANAGEMENTProvide oversight of three line of Defense

Credit Risk

Credit Risk is the potential financial loss that could arise as a result of the failure of a borrower or counterparty to honor its contractual obligations. Company Credit Risk management policy is not to eliminate the Credit Risk but to accept the risk with certain limits. Various guidelines, rules and regulations stipulated by the regulators help the company to manage the credit risk.

All credit exposure limits are approved within a delegated credit approval authority framework. Credit Division has developed a Credit Scoring System considering the risk indicators and it is monitored through the IRMC and ALCO.

Credit approval

The credit approving limits in place are structured based on the need of delegation requirement to manage the network of branches without compromising the risk of the Company.

46

Risk Management

Collateral

Collateral is used for credit risk mitigation purposes and minimize losses that would otherwise be incurred. Where possible, the NLF PLC takes collateral as a secondary recourse to the borrower.

Interest Rate Risk

The company believes that most of the Finance Companies collapsed in the recent past due to not maintaining a rational interest rate gap. Interest Rate Risk occurs due to not having a comfortable gap between the borrowing and the lending interest rates. The Company closely monitors the lending interest rate as the borrowing rates are controlled by CBSL directives. According to the organizational structure of the company, both Finance and Credit divisions are involved in this process. Lending and Borrowing interest rates are decided by the top management after considering the market rates and various other factors.

Liquidity Risk

Liquidity risk is the risk we will face by not having financial resources to meet our obligations when they fall due. It is our policy to maintain adequate liquidity at all times and be in a position to meet all obligations as they fall due.

Regulators monitor the process of liquidity maintenance of the company by the following mechanisms.

CBSL Direction Requirement

Finance Companies (Liquid Asset) Direction No 01 of 2009

This is the ratio of liquid assets against the total deposits.

Finance Companies (Capital Fund) Direction No 01 of 2003

Minimum capital fund requirement to be maintained as against the total deposits.

Requirement of maintaining reserve funds.

Operational Risk

Operational risk includes processing errors, fraudulent acts, inappropriate behavior of staff, vendors’ poor performance, system failure and natural disasters. Operational risk is inherent in most of the NLF businesses and activities.

The Board appointed Audit Committee and the Integrated Risk Management Committees oversee the management of operational risks with the help of the audit department. All business units are responsible for setting and maintaining standards for operational risk management.

The group internal audit division closely monitors the operational procedures that are in operation and make every effort to have an updated and effective set of procedures.

Audit findings and management responses are forwarded to the Audit Committee which formulates the recommendations to the board for rectification.

Market Risk

Market risk is identified as the risk arising from changes in interest rates, equity prices and risk related factors such as market volatilities. Our objective risk management is to obtain the best balance of risk and return whilst meeting the customer requirements.

Market risks arising from interest rate volatility is managed with direction from the IRMC and ALCO which continuously monitor the cost of funds of the company and take necessary actions to ensure that required margins are maintained by the Company.

Reputational Risk

Reputational risk could arise from the failure of the Company to effectively mitigate the risks in its businesses including credit, liquidity, market, regulatory, legal or other operational risks. Damage to the Company’s reputation could cause existing clients to reduce or cease to do business with the Company and prospective clients to be reluctant to do business with the Company. All employees are responsible for day-to-day identification and management of reputational risk.

Reputational risk may also arise from a failure to comply with environmental and social standards. A comprehensive list of legal and regulatory compliance is tabled at monthly Board meetings. Compliance to rules and regulations by the subsidiary companies are called on a monthly basis and tabled to manage reputational risk, which could arise from the activities of other Group companies.

47


The Company insures deposit liabilities in a deposit insurance scheme operated by the Monitory Board in terms of Sri Lanka deposit insurance scheme regulation No 1 of 2010 issued under section 32A to 32E of the Monitory law act with effect from 1st October 2010.

Technology Risk

Any company which relies heavily on information system is vulnerable to system break-downs and various types of difficulties.

The Company uses modern information systems in all its main activities in order to provide a better service to customers and to improve the quality of management information system. The Company bears the risk of data losses and pilferage of information to competitors which cannot be totally avoided. Having understood the risk associated with Information Systems, the Company has already adopted all the available precautionary measures at present.

48

Integrated Risk Management Committee Report

The Company established the Integrated Risk Management Committee (IRMC) by adhering to the Section 8. (3), of the Corporate Governance Direction No 03 of 2008, issued by the Central Bank of Sri Lanka (CBSL) which shall be applicable for every company registered in terms of section 2 of the Finance Companies Act No 78 of 1988.

Composition of the Integrated Risk Management Committee

The committee consists of the following members.

Mr. P M L K KarunaratneChairman – Independent Non – Executive Director(With effect from 1st March 2013)

Mr. K M KandegedaraMember – Independent Non –Executive Director(With effect from 1st March 2013)

Management Representatives :

Mr. C Amarasekara - CEO*

Mr. P M Eddusuriya - General Manager*

Ms. L S Jayawardana - Chief Operating Officer

Mr. H P G P Habaragamuwa – Chief financial officer

Mr. K D D Wasantha – AGM Investment

Mr. C Sarukkali - Chief Financial Consultant*

Mr. P Polwatte – Chief Internal Auditor**Resigned

P M L K Karunaratne is an Associate Member of the Institute of Chartered Accountants of Sri Lanka and holds a Postgraduate Degree in Business Management (MBA) from the University of Sri Jayawardenapuara and Master Degree for Financial Mathematics from the University of Colombo. He possesses 24 years of experience in senior management position in both private and public sector.

Mr. P Polwatte, Chief Internal Auditor served as the Secretary to the IRMC.

Objective of the IRMC

The main objective of the IRMC is to assist the Board of Directors to;

� Recommend an appropriate policy concerning overall risk assessment and risk management of the company.

� Review the adequacy, completeness and implementation effectiveness of the Company’s risk management process and recommend improvements that were deemed necessary.

Terms of Reference

The terms of reference have been clearly defined in the Charter of the IRMC as per the guidelines given in the Corporate Governance Direction No 03 of 2008 issued under the Finance Companies Act No 78 of 1988 by the CBSL.

Meetings

Four committee meetings of IRMC were held during the financial year under review and the attendance are as follows.

Member Eligibility Attendance

Mr. P M L K Karunaratne 4 4

Mr. K M Kandegedara 4 2

Mr. C Amarasekara 4 3

Mr. M Eddusurya 4 3

Ms. L S Jayawardana 4 3

Mr. P Habaragamuwa 4 2

Mr. K D D Wasantha 4 4

Mr. P Polwatte 4 4

Mr. C Sarukkali 4 4

49


Key Responsibilities

� Periodically review the organization’s risk management framework including but not limited to:

� The risk governance structure

� The risk competencies of the company

� The risk tolerance of the company

� The risk management strategy and associated risk management initiatives.

� The coordination of risk management activities of the company

� Review the company’s risk exposure and compliance with risk policies covering the risk of the company, including but not limited to, strategic risk, market risk, credit risk, operational risk, liquidity risk.

� Review the adequacy and effectiveness of the management committees of Credit Committee and Asset & Liability Committee to address specific risks and to manage those risks within quantitative and qualitative risk limits as specified by the committee.

� Assess the company’s monitoring, prioritizing and reporting framework to support effective management of risks.

� Periodically review and assess the adequacy of the charter and recommend any proposed changes to the Board for approval.

� Carry out any other responsibilities and duties delegated to it by the Board from time to time, related to the responsibilities outlined above.

� Evaluate its own performance annually and report its findings and recommendations to the Board.

During the financial year 2014/15, IRMC reviewed overall business strategy within a set of prudent risk parameters that are reinforced by an effective risk management framework.

In conclusion, the Committee would like to thank the Secretary and his staff for the generous contribution made by them for their efforts in promoting corporate governance within the overall risk management frame work of the company.

P M L K KarunaratneChairman, Integrated Risk Management Committee.

Colombo28th August 2015

Sustainability Review

52

Human Resource Development

The Company considers its staff as its main asset and believes a motivated workforce is key to successful growth. The Company policy is underpinned by equality, diversity and fairness to all its employees and aims to provide a working environment where everyone is treated fairly and with respect. We oppose all forms of unlawful and unfair discrimination or victimization. We will not accept any behavior that may be considered discriminatory, harassment, bullying, victimisation, or favoritism.

Performance is directly linked to employee increments and promotions, all increments and promotions are carried out in a transparent manner.

Employees are eligible to 24-hour personal accident insurance cover and medical insurance for hospitalization and OPD. These are additional benefits provided to employees.

Employee details

As at the end of the financial year 2014/15, the total head count of the company reached 490 personnel.

Total workforce by permanent, probation & contract

Employee Type Permanent Probation Contract Total

Male Female Total Male Female Total Male Female Total

Management 109 16 125 2 3 5 5 0 5 135

Executive 136 15 151 57 6 63 4 0 4 218

Non-Executive 48 32 80 26 18 44 11 2 13 137

Total 293 63 356 85 27 112 20 2 22 490

Total workforce by region and gender

Region Male Female Total

Central 38 6 44

North Western - Wayamba 23 2 25

Sabaragamuwa 38 8 46

North Central 9 2 11

Western 171 39 210

Southern 24 6 30

Eastern 41 6 47

Northern 66 11 77

Total 410 80 490

53


Age analysis

Age Group No of Employees Management Executive Non Executive

19-23 84 2 48 34

24-28 147 16 79 52

29-33 110 44 45 21

34-38 60 32 19 9

39-43 42 23 13 6

44-48 27 8 11 8

49-53 7 5 0 2

54-60 7 2 2 3

60 + 6 3 1 2

Total 490 135 218 137

Recruitment and selection

Recruitments are conducted to select the most suitable person for the job, in terms of relevant experience, abilities and qualifications. A structured selection process has been developed for all jobs, at all levels. Personnel specifications and job descriptions are utilized for effective recruitment.

During the financial year, 151 new employees were recruited into the Company. Out of this number, 77 were absorbed by the growth in the microfinance business and the balance were absorbed in to the core business and back office operational work.

Recruitments during the year

Employee Type Total Gender

Male Female

Management 4 4 0

Executive 87 82 5

Non - Executive 60 32 28

Total 151 118 33

Employee retention

The Company pays particular attention towards employee retention to build skill and knowledge base. Therefore, all efforts are made to retain employees through the provision of a range of benefits above and beyond statutory requirements and through the creation of a safe and happy work-place.

Attrition in 2014/15 Employee Type Total Gender

Male Female

Management 17 13 4

Executive 44 42 2

Non – Executive 21 9 12

Total 82 64 18

Training

In order to maintain the competencies of the workforce, continuous training and development programs are conducted. During the financial year, 270 staff attended indoor training and 35 attended outdoor training sessions.

Training programmes - Indoor


Male FemaleManagement 37 23 14

Executive 70 53 17

Non - Executive 163 67 96

Total 270 143 127

Training programmes - Outdoor


Male FemaleManagement 22 15 7

Executive 9 5 4

Non - Executive 4 - 4

Total 35 20 15

54

Corporate Social Responsibility

Nation Lanka Finance PLC has been actively involved in supporting community development through a range of CSR projects and programmes during the year. These CSR activities have contributed towards community welfare in many different ways, placing emphasis on supporting rural and underserved communities.

Dinawamu Lanka – Developing micro entrepreneurs

The importance of the private sector contribution to the overall economic development of the country, as well as the development of the lower income strata of the economy, cannot be over-emphasized.

Thus, not limiting itself with merely granting financing to micro enterprises, the Company aims to develop the technical, managerial and entrepreneurial skills of microfinance loan beneficiaries, under the broad theme of “Dinawamu Lanka”. Striving to uplift the quality of life of this segment, free training and development sessions are organized island wide. These skill development programmes have contributed towards creating more business oriented and financially educated, rural micro-entrepreneurs across the country.

Awareness Programs: Fund management and entrepreneurship programmes are conducted by Officials of Nation Lanka at selected villages, establishing “Self Managed Financial Circles” amongst participants. These programmes strive to impart knowledge on financial management as well as building support groups within the community.

Financial Literacy Training at Family Level: The families of the female members of the “Self Managed Financial Circles” are trained on prudent financial management practices as a first step in this series of training programmes.

Business Idea Generation Training: In order to expand business opportunities of self-employed members, this programme conducts knowledge sharing sessions.

55


Business Development Training: This program aims to provide consultancies and training on how to face the challenges which may arise in conducting daily business activities

Technical Skill Development Training: This segment imparts knowledge and technical-know-how required to develop a business. Members are trained on technical knowledge pertaining to different industries.

Agriculture Technical Training: Taking into account that many of our members are engaged in agriculture related production / businesses, special emphasis is given to agriculture related training. Sessions are conducted by our island-wide branch network.

Leadership Skill Development Training: This program aims to enhance leadership and managerial skills of the President, Secretary and other officials of the Self-regulated Fund. Programs are conducted under the auspices of the Provincial Development Department of the Central Bank of Sri Lanka and the Central Bank has become instrumental in providing resource personnel for this programme.

Community Social Rehabilitation Program: In addition to financially empowering our members, under the guidance and the active involvement of the Board of Directors and the Management of Nation Lanka Finance PLC, we strive to develop our Members intellectually through cultural and social development.

56

Building a home for a better future

NLF stepped forward to support a deserving family in rural Sri Lanka, by building a home for them in collaboration with the Lions Club of Colombo Royalty.

Susantha, who lives in Kabithigollawa, Medawachchiya, with his young family, was in dire need of a helping hand. Susantha lost his wife when their third child was 3 months old, due to sudden heart failure. His 8 year old second son suffers from leukemia and is being treated at the Maharagama Cancer hospital. Faced with the burden of taking care of his ailing child and his two other children, Susantha is unable to hold down a full-time employment. During the current year, NLF contributed towards building a home for Susantha and his family, to ensure their safety and security.

Corporate Social Responsibility

Health Camp

In commemoration of the second anniversary of our Matugama branch, we conducted a highly successful one-day health camp in February 2015, at St Mary’s College in Matugama, with the participation of 10 doctors and 47 support medical staff. Over 500 people benefited from the heath camp, where free medical checkups were conducted, including vision tests, and fasting patients were provided with breakfast to ensure their wellbeing. A Health Education Centre was held to raise awareness about health, hygiene and healthy lifestyles. The participants greatly appreciated the high quality of the programme and the commitment of the Nation Lanka staff, which rendered this event a major success.

57


Financial Report

60

Annual Report of the Board of Directors on the Affairs of the CompanyThe Directors of Nation Lanka Finance PLC present their report together with the Audited Consolidated Financial Statements of the Group for the year ended 31st March 2015.

The Report contains pertinent information and disclosures required under the Companies Act No.07 of 2007, the Listing Rules of the Colombo Stock Exchange, the Finance Companies Act, recommended Best Practices of Corporate Governance and the requirements of the Sri Lanka Accounting Standards

Principal Activities

The principal business activities of the Group are Lending including Financial Leases, Micro Finance, Hire Purchase, Loans, Financial Services, Trading in Real Estate, Property Development and Share Broking. There were no significant changes in the nature of the principal activities of the Company and the Group during the Financial year under review.

Group Turnover

The gross income of the Group after deducting Turnover Tax and Defense levy was Rs. 1,208 Mn

Results and Appropriations

The Financial Statements of the Company and the Group are given on Pages 72 to 125 of this Annual Report.

Review Of Operations & Performance

The Chairman’s Review provides an overall assessment of the Company’s Operations and Performance during the financial year under review on Page 9.

Mission Statement & Corporate Goals

The Mission Statement and Vision Statement of the Company are given on Page 1.

Branch Network

The Company has 25 locations in different parts of the Island and the details of the locations are set out under Corporate Information on Page 32

Subsidiaries

The Company currently has 03 Subsidiaries diversified into different lines of business activity. Two Subsidiaries of the Company namely Millennium Housing Developers PLC and Nation Lanka Capital Limited were divested in October 2014 and September 2014 respectively.

Property, Plant and Equipment

Group expenditure on the acquisition and disposal of fixed assets during the year amounted to Rs. 39 Mn and 2 Mn respectively, and information relating to movement in Property Plant & Equipment is given in Note 28 to the Accounts

Dividends

The Board of Directors does not recommend the payment of a dividend for the Ordinary Shareholders for the financial year under review.

Investments

The Company has invested Rs. 267 Mn in Subsidiaries. Investment in Shares in addition to the above, amounted to Rs. 91.2 Mn. Details of Investments held by the Company are described in Note 22 and 18.

Stated Capital

The Stated Capital of the Company as at 31st March 2015 was Rs.1,826,717,242/- representing 251,163,261 Ordinary Shares. The structure of the Stated Capital is given in Note 41 to the Accounts.

Major Shareholdings

The number of shares and the percentage of the respective holdings of the 20 Major Shareholders of the Company as at 31st March 2014 and 2015 are listed on Page 128 under the title Investor and Shareholder Information

Shareholding

As at 31/03/2015 there were 14,428 Registered Shareholders. The distribution, categories and location of shareholders are indicated on Page 128 under “Shareholders and Investors” information.

61


Stock Market Information

Information relating to earnings, dividends, net assets per share and share trading are given on Page 129.


The Board of Directors place great emphasis on good Corporate Governance practices and principles and ensures that the Company adheres with the codes of Best Practice on Corporate Governance. The compliance of Corporate Governance by the Company is set out on Page 33.

Directorate

The Members of the Board during the financial year under review were as follows :-

Mr H K J Dharmadasa - Non Executive

Mr A C Seneviratne - Non Executive

(Resignation tendered).

Mr V R Ramanan - Non Executive

Mr J Rudra - Non Executive

Mr U H Dharmadasa - Non Executive

Mr H J C Perera - Executive

Mr P M L K Karunaratne - Non Executive / Independent

Mr K M S Kandegedara - Non Executive / Independent

The Profile of the Board of Directors of the Company are given in Page 14 to 17.

Resignation of CEO

The CEO - Mr Charith Amarasekara, resigned from the Company w.e.f. 6th May 2015.

New / Executive Appointment

Mr H J C Perera was appointed to the Board w.e.f. 6th April 2015 and designated as the CEO with effect from 10th June 2015.

Retirement of Directors & Their Re – Election

In accordance with Article 88 of the Articles of Association of the Company, Mr. K M S Kandegedara, retires by rotation and is eligible for re-election.

Mr. H J C Perera retires in term of Article 88 of the Articles of Association of the Company

Directors’ & CEO’s Shareholding

AS AT 31-03-15 31-03-14

Mr H K J Dharmadasa 1,262,000 1,262,000Mr A C Seneviratne 1,099,417 504,122Mr J Rudra 19,060,625 19,060,625Jt with Ms S L Arumugam 6,187 16,187Mr U H Dharmadasa 25,000 25,000Mr P M L K Karunaratne - -Mr K M S Kandegedara - -Mr V R Ramanan 12,809,259 12,809,259Mr H J C Perera 625,000 625,000

Statement of Directors’ Responsibilities

The Directors Responsibilities in compliance with the requirements in preparation of financial statements are set out in Page 67.

Directors’ Remuneration

The remuneration paid to the Executive and Non Executive Directors during the financial year under review is given in Note 12 to the financial statements.

Audit Committee

As at 31st March 2015, the Audit Committee comprises of Mr P M L K Karunaratne, Mr U H Dharmadasa and Mr K M S Kandegedara of whom Mr P M L K Karunaratne, functions as the Chairman of the Committee.

The report of the Audit Committee is given on Page 64.

Remuneration Committee

As at 31st March 2015, the Remuneration Committee comprised of Mr H K J Dharmadasa, Mr A C Seneviratne, Mr P M L K Karunaratne and Mr K M S Kandegedara of whom Mr H K J Dharmadasa functions as the Chairman of the Committee.

62

Nomination Committee

As at 31st March 2015, the Nomination Committee comprised of Mr H K J Dharmadasa and Mr A C Seneviratne

Statutory Payments

The Directors, to the best of their knowledge and belief are satisfied that all statutory payments have been made up to date or provided for same.

Internal Control Systems

The Board has overall responsibility for the Company’s Systems of Internal Control. The Company’s internal control and check systems have been designed to provide the Directors with reasonable assurance that the Assets are protected, safeguarded and transactions are authorized thereby ensuring that errors and irregularities are either prevented or detected within a timely period, whilst ensuring that Corporate Governance is properly practiced and adhered to.

Interests Register

An Interests Register is maintained, in compliance with the Companies Act No.07 of 2007.

The particulars of the entries made in connection with the General Disclosure in terms of Section 192(2) of the Companies Act No.07 of 2007 are given in Note 42 under Related Party transactions.

Going Concern

The Board of Directors of the Company is satisfied that the Company has adequate resources to continue its operations in the foreseeable future. Therefore, the Company continues to adopt a going concern concept in preparing the accounts of the Company.

Environmental Protection

The Board of Directors has taken adequate precautions to ensure that the Company and the Group does not engage in any activities which could be detrimental to the environment.

Risk Management

The Board of Directors has structured proper systems and controls to identify probable risk. These systems are periodically evaluated and reviewed by the Board through the Integrated Risk Management Committee to ensure smooth functioning. Remedial measures also have been implemented to mitigate risk.

Contributions to Charities

The Company has not contributed to charities during the financial year under review.

Accounting Policies

There has been no change in the Accounting Policies adopted by the Company in preparation of Financial Statements during the Financial Year under review.

Post - Balance Sheet Events

Subsequent to the date of the Balance Sheet no circumstance has arisen which require adjustments to the accounts.

Annual Report of the Board of Directorson the Affairs of the Company

63


Auditors

The accounts for the year have been audited by M/s KPMG, Chartered Accountants, who retire and are eligible for re-appointment. The Directors recommend their re-appointment.

The Auditors were paid a sum of Rs. 1.6 Mn as Audit Fees by the Company for the financial year under review. As far as the Board is aware the Auditors do not have any relationship with the Company other than carrying out the External Audit.

By order of the Board

H J C Perera J RudraExecutive Director Director

Corporate Arcade Ltd Company Secretaries

28th August 2015

64

The Audit Committee

The Audit Committee (AC) assists the Board of Directors in carrying out effectively its responsibilities in relation to financial reporting requirements, risk management, internal auditing and the assessment of internal controls. The Audit Committee also reviews and follow-up on the Company’s internal audit reports and manages the Company’s relationship with the External Auditors.

Composition of the Committee

The Audit Committee comprises of the following Directors, who conduct Committee proceedings in accordance with the terms of reference approved by the Board of Directors.

� Mr. Lalith Karunaratne (Chairman) Independent/ Non Executive Director

� Mr. K M Kandegedara Independent/ Non Executive Director

� Mr. Harshith Dharmadasa Non Executive Director

Mr. Lalith Karunarathne, was appointed as the Chairman and Mr. K M Kandegedara, and Mr. Harshith Darmadasa as Committee members from January 2013.

Brief profiles of the members are given in the pages 16 and 17 of the Annual Report.

By invitation of the Audit Committee, the Chief Internal Auditor, Chief Executive Officer, Chief Operations Officer, Executive Directors, Chief Financial Officer, General Manager, and the External Auditors also attend the Audit Committee meetings. The Chief Internal Auditor functions as the Secretary of the Audit Committee.

Charter of the committee

The Board of Directors will periodically review and revise with the concurrence of the Audit Committee Charter and Terms of Reference of Audit Committee for the purposes of delegating the authority, scope, and responsibilities of Audit Committee. With its delegated powers Audit Committee will determine the scope and duties of Internal Audit Function by way of Nation Lanka Group Internal Audit Charter and recommend it to the Board of Directors for approval. This process ensures that new developments and concerns are adequately addressed. The functions of the committee are agreed to assist the Board of Directors in its general Oversight on financial reporting, internal audit, internal controls and external audit.

Regulatory Compliance

The Roles and functions of the Audit Committee are regulated by the Finance Business Act, No. 42 of 2011, the mandatory Code of Corporate Governance for Licensed Finance Companies issued by the Central Bank of Sri Lanka, the Rules on Corporate Governance as per direction 3 and 4 of 2008 and Corporate Governance for Listed Companies issued by the Colombo Stock Exchange and the Code of Best Practice on Corporate Governance issued jointly by the Institute of Chartered Accountants of Sri Lanka (ICASL) and the Securities and Exchange Commission (SEC).

Qualifications

Mr. Lalith Karunaratne, the Chairman of the AC, an independent Non-Executive Director, is an Associate Member of the Institute of Chartered Accountants of Sri Lanka, and counts many years of experience in both private and public sector.

Duties and Role of the Audit Committee

The Audit Committee is responsible for:

� Examine any matter relating to financial and other related affairs of the company internally.

� Monitor and follow up the internal and external audit program and plan, review the external and internal audit reports and follow up on findings and recommendations.

� Analysis and review the risk management measures and examine the adequacy, efficiency and effectiveness of the internal control systems and procedures in place to avoid or to mitigate the risk.

� Ensure that efficiency and sound financial reporting systems are in place to provide accurate, appropriate and timely information to the board.

� Review the quality and appropriateness of accounting policies and disclosures in accordance with Sri Lanka Accounting Standards /Sri Lanka Financial Reporting Standards.

� Review the compliance of financial reporting obligation under Colombo Stock Exchange (CSE), listing rules and regulation of Security and Exchange Commission (SEC), Companies Act No 7 of 2007, Finance Business Act No 42 of 2011 and other reporting requirements under the Central Bank of Sri Lanka (CBSL) regulations.

Audit Committee Report

65


� Review of the financial information of the Company, in order to monitor the integrity of the financial statements of the Company, its annual report, accounts and quarterly reports prepared for disclosure.

� Reviewing accounting and financial reporting, risk management processes and regulatory compliance.

� Reviewing effectiveness of the Company’s systems of internal control over financial reporting to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes has been done in accordance with applicable accounting standards and regulatory requirements.

� Engaging independent advisors on specialized functions where it is deemed necessary.

During the year ended 31 March 2015 the principal activities of the Audit Committee were as follows:

Financial Reporting

The Audit Committee reviewed and discussed with Management and the External Auditors the quarterly and annual financial statements focusing on, without limitation, the quality and acceptability of accounting policies and practices, the clarity of the disclosures and compliance with financial reporting standards and relevant financial and governance reporting requirements. To aid their review, the Audit Committee considered reports from the CFO and also reports from the External Auditors, KPMG, on the scope and outcome of their half-year review and annual audit.

Annual Corporate Governance Report

As required by the directions issued by the Central Bank of Sri Lanka (CBSL), on Corporate Governance for Licensed Finance Companies, Direction No. 3 and 4 Central Bank of Sri Lanka 2008, the External Auditor of the Company should report on the Company’s compliance with the Corporate Governance Directions in the Corporate Governance Reports published by the Company.

Internal Audit

The Audit Committee monitored and reviewed, the scope, extent and effectiveness of the activity of the Company’s Internal Audit Department that included updates on audit activities and achievements against the Company’s audit plan, advising corporate management to take precautionary measures on significant audit findings and assessment of

resource requirements of the Internal Audit Department. The Audit Committee had necessary interactions with The Chief Internal Auditor throughout the year.

During the year, Audit Committee reviewed the internal audit plan and monitored the progress on a regular basis. The sections covered and the regularity of audits depends on the risk level of each section, with higher risk sections being audited more frequently.

The Internal Audit Dept. comprises of 4 broad areas namely, Branch, Functional Department and Subsidiary Company audits / Corporate Governance, Compliance, and Procedure Manual Review / Forensic and Fraud Investigations/ IT auditing.

In F/Y 2014/2015 Audit Committee and the corporate management reviewed 29 inspection reports on internal branch audits, department audits, subsidiary company audits, microfinance audits, pawning audits, spot audits and 03 duty transfers,07 special investigations and 03 data migration inspection reports. Audit findings presented in the reports are prioritized based on the level of risk. The Committee followed up on internal audit recommendations with the corporate management. Internal audit reports are made available to external auditors as well.

Along with the significant findings Internal Audit Dept has been engaged in sharing and providing knowledge through regular training to Company’s staff on better control awareness.

In keeping with Audit Committee recommendations Internal Audit has also provided inputs to the Corporate Management for effective control and prevention of fraud, which are regularly addressed to stay on course.

External Auditors

The Audit Committee reviewed and monitored the independence of the External Auditors and the objectivity and effectiveness of the audit process and provided the Board of Directors with its recommendation to the shareholders on the reappointment of M/S KPMG as External Auditors for the financial year ended 31st March 2015 at the next Annual General Meeting. The Audit Committee recommended the scope and fees for audit and permitted non audit services provided by M/S KPMG.

The Committee has received a declaration from M/S KPMG as required by the Companies Act No. 7 of 2007, confirming

66

that they do not have any relationship or interest in the company, which may have a bearing on their independence within the meaning of the Code of Conduct and Ethics of the Institute of Chartered Accountants of Sri Lanka.

The Committee reviewed the external audit plan as well as management letters and followed up on issues raised. Private meetings were held with M/S KPMG to ensure that there were no restrictions on the scope of their audit and to discuss matters without management being present.

Audit Committee effectiveness

An independent evaluation of the effectiveness of the committee was carried out by the other members of the Board during the year, considering the overall conduct of the committee and its contribution on the overall performance of the Company, the committee has concluded its performance was effective.

Lalith KarunaratneChairman - Audit Committee

28th August 2015Colombo, Sri Lanka

Audit Committee Report

67


Statement of Directors’ Responsibilities

The responsibility of the Directors in relation to Financial Statements of Nation Lanka Finance PLC and the Consolidated Financial Statements of the Company and its Subsidiaries is set out in this Statement.

In terms of Section 150(1), 151, 152(1) & 153 of the Companies Act No.07 of 2007, the Directors are responsible to ensure compliance with the requirements set out therein to prepare Financial Statements for each financial year giving a true and fair view of the state of the affairs of the Company and the Group as at the end of the financial year and the Financial Performance of the Company and the Group for the financial year. The Directors are also responsible, in terms of Section 148 for ensuring that proper accounting records are maintained to disclose with reasonable accuracy, the financial position and to enable the preparation of Financial Statements.

The Board accepts responsibility for the integrity and objectivity of the Financial Statements prepared and presented in this Annual Report. The Directors confirm that in preparing the Financial Statements, appropriate accounting policies have been adopted so that the form and substance of transactions are properly reflected. The Financial Statements provide the information required by the Companies Act, Listing Rules of the Colombo Stock Exchange and the Sri Lanka Accounting Standards based on SLFRS.

The Directors have taken reasonable measures to safeguard the assets of the group and in that concepts have instituted appropriate system of internal control with a view to prevent and detect fraud and other irregularities.

The external Auditors, M/s. KPMG, were re-appointed in accordance with a resolution passed at the last Annual General Meeting, and they were provided with every opportunity to undertake the inspection they considered appropriate to enable them to form their opinions on the Financial Statements. The Report of the Auditor shown on pages 69 and 71 sets out their responsibilities in relation to the Financial Statements.

Compliance Report

The Directors confirm that to the best of their knowledge, all statutory payments relating to employees and the Government that were due in respect of the Company and its Subsidiaries as at the Balance Sheet date have been paid or provided for, in arriving at the financial results for the year under review.

68

Responsibility

The board of directors are responsible for the adequacy and effectiveness of Nation Lanka Finance PLC’s systems of internal control. The system has been designed to manage the Company’s key operational areas whilst the associated risk is within acceptable levels when achieving the policies and business objectives of the Company, rather than eliminating the total risk of failure.

Accordingly, the system of internal control may not provide an absolute assurance against material misstatements of management, financial information, records or against the possible frauds and malpractices .Hence, only a reasonable assurance could be placed on the efficiency of the internal control procedures.

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 the business environment or regulatory guidelines which are regularly reviewed by the board.

Key Features of the process adopted in Reviewing the Effectiveness of the Systems of Internal Control

Steps have been taken by the Board of Directors to ensure effective internal control mechanisms are in place as given below. Sub-committee are established to assist the Board in ensuring the effectiveness of the Company’s daily operations. The sub-committee’s that were active during the financial year include,

1. Audit Committee

2. Integrated Risk management Committee

3. Remuneration Committee

The Internal Audit Division of the company checks for compliance with policies and procedures and the effectiveness of the Internal Control System on an ongoing basis highlighting the significant findings in respect of any non-compliance. Audits are carried out in Branches every month. Findings of the Internal Audit Division are submitted to the Audit Committee for review at their meetings. The annual audit plan is reviewed and approved by the audit Committee.

The Audit Committee reviews the internal control issues identified by the Internal Audit Division and reviews the adequacy and the effectiveness of the Internal Control Systems. The salient points of the Audit Committee meetings are tabled at the Board meetings.

A Board paper is also submitted on a monthly basis stating the non-compliance issues with regard to the rules and guidelines, if any.

Consequent to full convergence of Sri Lanka accounting standards with International Financial Reporting Standards, the Company is in the process of implementing required controls to required adjustment to the financial reporting process. The company has manually calculated the adjustments required for convergence.

Confirmation

Based on the above the Board of Directors confirm that the financial reporting system of the company is designed to provide reasonable assurance on the financial reporting and preparation of Financial Statements is done in accordance with the Sri Lanka Accounting Standard and regulatory requirements of the Central Bank of Sri Lanka.

For and on behalf of the Board

Jayantha DharmadasaChairman

Lalith KarunarathneChairman – Audit Committee

Jayantha PereraExecutive Director

28th August 2015

Directors’ Statement on Internal Controls

69


Independent Auditors’ Report

TO THE SHAREHOLDERS OF NATION LANKA FINANCE PLC

Report on the Financial Statements

We have audited the accompanying financial statements of Nation Lanka Finance PLC, (“the Company”), and the consolidated financial statements of the Company and its subsidiaries (“Group”), which comprise the statement of financial position as at 31 March 2015, and the statements of profit or loss and other comprehensive income, changes in equity and cash flows for the year then ended, and notes, comprising a summary of significant accounting policies and other explanatory information set out on pages 72 to 125 of the annual report.

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.

Auditors’ Responsibility

Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit 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 auditors’ judgment, including the assessment of the risks of

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

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

Basis for Qualified Opinion

1. As disclosed in Note 20.1.3 to the financial statements, the Company has assessed the provision for impairment of Micro Finance Receivables of Rs. 45,601,978/- as at 31 March 2015 in accordance with the regulations issued by the Central Bank of Sri Lanka. However, provision for impairment of micro finance receivables as at 31 March 2015 has not been calculated in accordance with LKAS 39 “Financial Instruments – Recognition and Measurement”. We are unable to quantify the effect on the financial statements in the absence of sufficient and appropriate audit evidence.

2. As disclosed in Note 35 to the financial statements, the Company has recorded a liability of Rs. 244,565,471/- as at 31 March 2015 relating to “Saving Accounts” from Micro Finance facility holders. However, the accounting system of the Company does not have the facility to generate a detailed break up of this balance. Accordingly, we are unable to verify the accuracy and completeness of the deposit liability as at 31 March 2015.

70

Independent Auditors’ Report

3. As disclosed in Note 22 to the financial statements, the Company has recorded an investment of Rs. 282,487,448/- in Nation Lanka Equities (Private) Limited, which is a subsidiary company with a shareholding of 66.05% as at 31 March 2015 Further, as per Note 20.1.1 to the financial statements, loans and advances include a receivable from the above subsidiary amounting to Rs. 19,955,260/- and as per Note. 24 to the financial statements, amount due from related parties include an amount of Rs. 26,028,264/- due from Nation Lanka Equities (Private) Limited as at 31 March 2015.

As per the audited financial statements of this subsidiary company for the year ended 31 March 2015, the subsidiary company has reported a loss of Rs. 59,027,529/- during the financial year ended 31 March 2015 and accumulated losses of Rs. 270,480,168/- and net assets of Rs. 88,635,468/- as at that date. These factors indicate that there is a possible impairment of this investment, loan receivable and related party receivable balance as at 31st March 2015. Accordingly, the management of the Company has carried out an impairment test to verify the valuation of the investment and made a provision for impairment amounting to Rs. 25,000,000 as at 31 March 2015. However, we were not able to verify the accuracy of the assumptions used for the determination of the impairment due to unavailability of sufficient and appropriate audit evidence. Accordingly, we are unable to verify the adequacy of the provision for impairment loss for investment, loans receivable from related party and related party receivable balance as at 31 March 2015.

4. As disclosed in Note 24 to the financial statements, terms of repayment on receivables from related parties amounting to Rs. 38,500,000/- were renegotiated by the Company subsequent to 31 March 2015, consequent to non-recovery of repayments based on previously agreed terms. These receivables have not been considered for impairment provisioning and we are unable to satisfy ourselves as to the basis of this assessment for non-provisioning.

The above amount includes Rs. 8,000,000/- receivable from Nation Lanka Capital Limited. Repayments based on the original terms of this loan were not received and due to the uncertainty relating to receiving this amount based on the new terms, we are unable to establish the recoverability of the receivable balance of Rs. 8,000,0000/- as at 31 March 2015.

5. First Lanka Treasuries Limited and Ceylinco Towers Limited, Subsidiaries of the Group are either incurring continuous losses and / or facing financial difficulties or have ceased operations. These aspects raise doubts as to the ability of the said subsidiary companies to continue as going concerns. However, the consolidated financial statements have been prepared on a going concern basis, without making adjustments that may be required to recorded amounts and classification of assets and liabilities, which should have been made if one or more, of the said subsidiary companies could not continue as going concerns.

6. First Lanka Treasuries Limited, a subsidiary of the Group had not provided confirmations and documentary evidence for the verification of short term borrowings of Rs.84,488,634/- as at 31 March 2015. This amount is included under other borrowings in the Consolidated Statement of Financial Position. We are unable to establish the accuracy, completeness and existence of this balance by alternative audit procedures.

Qualified Opinion

In our opinion, except for the effects of the matters 1 to 6 described in the Basis of Qualified Opinion paragraph, the consolidated financial statements give a true and fair view of the financial position of the Group as at 31 March 2015, and of its financial performance and cash flows for the year then ended in accordance with Sri Lanka Accounting Standards.

Emphasis of Matter

Without further qualifying our opinion, we draw attention to Note 45 to the consolidated financial statements which more fully describes the existence of doubt on the going concern of the Group and the mitigating steps taken by the Group.

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 matters 1 to 4 described in the “Basis for Qualified Opinion” paragraph given above.

71


� Except for the effects on the financial statements for the matters 1 to 4 referred to in “Basis for Qualified Opinion” paragraph, the financial statements give a true and fair view of the financial position of the Company as at 31 March 2015, 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, and the Group comply with the requirements of sections 151 and 153 of the Companies Act No. 07 of 2007. However, it should be noted that the company’s net assets are less than half of the stated capital and face a serious loss of capital situation in terms of Section 220 of the Companies Act No. 07 of 2007. However, the Company has held an Extra Ordinary General Meeting on 16th July 2010 as required by the Companies Act No. 07 of 2007 and communicated to the Shareholders the steps taken by the board of directors to prevent further such losses and revive the Company.

� As disclosed in Note 44.6 to the financial statements, the Company does not fulfil the requirements of the directions issued by the Central Bank of Sri Lanka to finance companies for the core capital ratio and the risk weighted capital adequacy ratio.

CHARTERED ACCOUNTANTS

Colombo28th August 2015

72

Statement of Profit or Loss and Other Comprehensive Income

Group CompanyFOR THE YEAR ENDED 31ST MARCH Notes 2015 2014 2015 2014

Rs. Rs. Rs. Rs.Re-Presented Re-Presented

Income 8 1,215,340,840 1,610,180,404 1,158,849,300 861,072,039Interest Income 9 1,164,900,861 860,919,754 1,158,012,211 860,027,430Direct Interest Cost 10 (590,054,468) (474,961,928) (595,285,412) (480,723,471)Net Interest Income 574,846,393 385,957,827 562,726,799 379,303,959

Revenue from Real Estate Sales 15,327,991 13,206,165 15,327,991 13,206,164Cost of Sales of Real Estate (13,658,051) (10,712,695) (13,658,051) (10,712,695)Impairment for Fall in Value of Real Estate Stock (18,801,107) - (18,801,107) -Net Gain on Land & Property Development (17,131,167) 2,493,470 (17,131,167) 2,493,470

Fees and Commission Income 50,439,979 34,964,937 837,089 1,044,609Fees and Commission Expenses (10,186,106) (12,699,089) - -Net Fees and Commission Income 40,253,873 22,265,848 837,089 1,044,609

Net Change in Fair Value of Financial Assets Held for Trading (17,941,864) (2,290,243) (17,941,864) (2,290,243)Other Operating Income / (Costs) 11 (8,281,422) 113,611,861 (14,189,961) 122,620,409Gain on Disposal of Subsidiaries - - 304,612,057 -

571,745,813 522,038,763 818,912,953 503,172,204Operating ExpensesPersonnel Costs (258,793,688) (311,945,056) (232,824,479) (212,546,406)Provision for Retirement Benefit Obligations 37.5 (83,427) (8,270,387) 1,390,530 578,777Premises Equipment & Establishment Expenses (108,339,547) (123,355,559) (108,335,948) (87,300,643)Other Overhead Expenses (496,139,756) (296,919,109) (423,457,444) (348,595,302)Other Finance Costs (22,707,354) (31,776,795) (9,203,429) (13,690,378)

(886,063,772) (772,266,906) (772,430,770) (661,553,952)Operating Profit / (Loss) Before Impairment for Loan Losses and Investments (314,317,959) (250,228,143) 46,482,183 (158,381,748)

Impairment (charge)/ reversal for Loan and other Losses (283,652,216) 180,029,227 (283,652,216) 192,412,322Impairment of Investment in Subsidiary - - (25,000,000) -Impairment of Investment in Associate - - (14,997,819) -Profit / (Loss) Before VAT & Income Tax Expenses (596,275,629) (70,198,916) (277,167,852) 34,030,574

Value Added Tax on Financial Services (169,477) (13,784,566) (169,477) (13,784,566)Share of Profit of Associate 5,699,391 4,890,800 - -Profit / (Loss) Before Income Tax Expense 12 (592,440,261) (79,092,683) (277,337,329) 20,246,008Income Tax Expense 13.1 (3,497,767) (5,176,572) (2,696,103) (4,535,409)Profit / (Loss) from continuing operations (595,938,028) (84,269,254) (280,033,432) 15,710,599

Discontinued OperationsProfit from discontinuing operations, net of tax 15.1 25,289,779 130,302,046 - -Profit / (Loss) for the year (570,648,249) 46,032,792 (280,033,432) 15,710,599

Other Comprehensive Income from Continuing OperationsItem that will not be reclassified to Profit or LossActuarial Gain/ (Loss) on Retirement Benefit Obligations 37.4 (1,081,835) 11,050,305 (2,442,615) 7,909,246

(1,081,835) 11,050,305 (2,442,615) 7,909,246Other Comprehensive Income from Discontinued OperationsItem that will not be reclassified to Profit or LossActuarial Gain/ (Loss) on Retirement Benefit Obligations - 54,176 - -Tax Effect on Actuarial Gain on Retirement Benefit Obligations - (4,001) - -

- 50,175 - -

Total Other Comprehensive Income (1,081,835) 11,100,480 (2,442,615) 7909,246

Total Comprehensive Income for the Year (571,730,084) 57,133,271 (282,476,047) 23,619,845

Profit / (Loss) Attributable to:Equity Holders of the Company (547,349,717) 41,956,328 (280,033,432) 15,710,599Non-Controlling Interests (23,298,532) 4,076,463 - -

(570,648,249) 46,032,791 (280,033,432) 15,710,599Total Comprehensive Income Attributable to:Equity Holders of the Company (548,893,537) 52,020,908 (282,476,047) 23,619,845Non-Controlling Interests (22,836,547) 5,112,363 - -

(571,730,084) 57,133,271 (282,476,047) 23,619,845

Basic Earnings / (Loss) Per Share 14 (2.18) 0.17 (1.12) 0.06

The Accounting Policies and other explanatory notes set out in pages 78 to 125 form an integral part of these Financial Statements. Figures in brackets indicate deductions.

73


Statement of Financial Position

Group CompanyAS AT 31st March Notes 2015 2014 2015 2014

Rs. Rs. Rs. Rs.

ASSETSCash and Cash Equivalents 16 152,318,187 114,751,211 119,547,331 48,255,090Deposits with Licensed Commercial Banks 17 199,190,739 54,943,686 69,190,739 54,943,686Financial Assets - Held for Trading 18 91,190,715 4,850,995 91,190,715 4,850,995Financial Assets - Available for Sale 19 23,300 23,300 23,300 23,300Loans and Receivables from Customers 20 4,389,043,603 2,672,432,713 4,408,998,863 2,640,695,591Financial Assets - Held to Maturity 21 884,859,667 261,820,856 884,469,391 197,430,580Investments In Subsidiaries 22 - - 267,487,448 449,410,828Investment in Associate 23 61,696,663 58,232,634 18,296,241 33,294,060Amounts Due From Related Companies 24 94,639,516 231,183,885 138,249,149 217,580,501Real Estate Stock 25 160,961,029 180,474,417 160,961,029 180,474,417Investment Properties 26 538,012,125 488,229,315 538,012,125 451,830,315Intangible Assets 27 25,460,792 41,664,356 25,202,280 40,637,617Property, Plant & Equipment 28 199,410,956 231,393,433 96,825,067 110,567,643Trade & Other Receivables 29 147,858,393 328,289,364 22,470,642 48,135,732Inventories 30 - 519,873,138 - -Deferred Tax Assets 31 - 6,169,639 - -Other Assets 32 123,637,060 82,459,630 120,137,060 78,061,263Retirement Benefit Plan Assets 37 60,409,892 58,144,519 60,409,892 58,144,519TOTAL ASSETS 7,128,712,637 5,334,937,090 7,021,471,272 4,614,336,137

LIABILITIESDebentures 33 - 3,250,000 - -Due to Banks and Financial Institutions 34 541,596,955 173,912,371 371,987,621 141,961,768Due to Customers 35 5,617,985,491 3,806,042,165 5,617,985,491 3,806,042,165Current Tax Liabilities 1,937,358 48,240,096 - 4,535,409Amounts Due to Related Companies 36 10,988,670 3,500,000 12,052,686 95,037,558Retirement Benefit Obligations 37 24,275,058 43,729,609 18,014,856 15,649,398Finance Lease Obligations 38 746,667 1,866,667 746,667 1,866,667Other Payables 39 176,136,138 516,492,690 80,654,077 201,254,238Other Borrowings 40 965,702,248 199,106,019 881,213,613 34,997,067TOTAL LIABILITIES 7,339,368,585 4,796,139,616 6,982,655,011 4,301,344,269

CAPITAL AND RESERVESStated Capital 41 1,826,717,242 1,818,416,802 1,826,717,242 1,818,416,802Statutory Reserve Fund 8,335,530 8,335,530 8,335,530 8,335,530Other Reserves 83,754,943 83,754,943 39,000,000 39,000,000Investment Fund Reserve - 5,341,799 - 5,341,799Accumulated Losses (2,193,778,886) (1,640,320,244) (1,835,236,511) (1,558,102,263)TOTAL EQUITY ATTRIBUTABLE TO EQUITY HOLDERS OF THE COMPANY (274,971,171) 275,528,830 38,816,261 312,991,868Non-Controlling Interests 64,315,223 263,268,644 - -TOTAL EQUITY (210,655,948) 538,797,474 38,816,261 312,991,868TOTAL EQUITY AND LIABILITIES 7,128,712,637 5,334,937,090 7,021,471,272 4,614,336,137

Net Asset per share (1.10) 1.10 0.15 1.25

The Accounting Policies and other explanatory notes set out on pages 78 to 125 form an integral part of these Financial Statements. Figures In brackets indicate deductions.It is certified that the Financial Statements have been prepared in compliance with the requirements of the Companies Act No.07 of 2007

H P G P HabaragamuwaChief Financial Officer

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

H J Dharmadasa H J C PereraChairman Director

28th August 2015Colombo

74

Statement of Changes in EquityCO

MPA

NY

Sta

ted

Cap

ital

Inve

stm

ent

Rev

alua

tion

Res

erve

Gen

eral

Reta

ined

T

otal

Cap

ital

Red

empt

ion

Fun

d Re

serv

e R

eser

ve F

und

Res

erve

Earn

ings

/ R

eser

ve F

und

Accu

mul

ated

Los

ses

Rs

Rs

Rs

Rs

Rs

Rs

Rs

Rs

Bala

nce

as a

t 31.

03.2

013

1,8

17,9

52,3

30 3

0,00

0,00

0 -

50,

546,

457

7,5

50,0

00 9

,000

,000

(1,6

26,1

41,2

37)

288

,907

,550

Tota

l Com

preh

ensi

ve In

com

ePr

ofit f

or th

e ye

ar -

- -

- -

- 1

5,71

0,59

9 1

5,71

0,59

9O

ther

Com

preh

ensi

ve In

com

e fo

r the

yea

r-

--

--

- 7

,909

,246

7,9

09,2

46-

--

--

- 2

3,61

9,84

5 2

3,61

9,84

5Tr

ansa

ctio

n w

ith

owne

rs o

f the

Com

pany

Tran

sfer

to R

etai

ned

Earn

ings

- -

- (5

0,54

6,45

7) -

- 5

0,54

6,45

7 -

Tran

sfer

dur

ing

the

year

to In

vest

men

t Fun

d -

- 5

,341

,799

- -

- (5

,341

,799

) -

Tran

sfer

dur

ing

the

year

to R

eser

ve F

und

- -

- -

785

,530

(7

85,5

30)

- Sh

ares

Issu

ed d

urin

g th

e ye

ar 4

64,4

72 -

- -

- -

- 4

64,4

72 4

64,4

72 -

5,3

41,7

99 (5

0,54

6,45

7)78

5,53

0 -

44,

419,

128

464

,472

Bala

nce

as a

t 31.

03.2

014

1,8

18,4

16,8

02 3

0,00

0,00

0 5

,341

,799

-8,

335,

530

9,0

00,0

00 (1

,558

,102

,263

) 3

12,9

91,8

68

Bala

nce

as a

t 01.

04.2

014

1,8

18,4

16,8

02 3

0,00

0,00

0 5

,341

,799

-8,

335,

530

9,0

00,0

00 (1

,558

,102

,263

) 3

12,9

91,8

68

Tota

l Com

preh

ensi

ve In

com

eLo

ss fo

r the

yea

r -

- -

- -

- (2

80,0

33,4

32)

(280

,033

,432

)O

ther

Com

preh

ensi

ve In

com

e fo

r the

yea

r-

--

--

- (2

,442

,615

) (2

,442

,615

)-

--

--

- (2

82,4

76,0

47)

(282

,476

,047

)Tr

ansa

ctio

n w

ith

owne

rs o

f the

Com

pany

Tran

sfer

of I

nves

tmen

t Fun

d to

Ret

aine

d Ea

rnin

gs -

- (5

,341

,799

) -

- -

5,3

41,7

99 -

Shar

es Is

sued

dur

ing

the

year

8,3

00,4

40 -

- -

- -

- 8

,300

,440

8,3

00,4

40 -

(5,3

41,7

99)

- -

- 5

,341

,799

8,3

00,4

40

Bala

nce

as a

t 31.

03.2

015

1,8

26,7

17,2

42 3

0,00

0,00

0 -

-8,

335,

530

9,0

00,0

00 (1

,835

,236

,511

) 3

8,81

6,26

1

Capi

tal R

edem

ptio

n Re

serv

e Fu

ndA

stat

utor

y ca

pita

l res

erve

bui

lt up

whi

ch is

equ

al to

the

nom

inal

val

ue o

f the

pre

fere

nce

shar

es a

lread

y re

deem

ed b

y th

e co

mpa

ny.

Reva

luat

ion

Rese

rve

Cons

ists

of n

et s

urpl

us re

sulti

ng fr

om th

e re

valu

atio

n of

Pro

pert

y, P

lant

& E

quip

men

t.

Rese

rve

Fund

As p

er th

e Fi

nanc

e Le

asin

g (R

eser

ve F

und)

Dire

ctio

n N

o. 5

of 2

006

Issu

ed b

y th

e Ce

ntra

l Ban

k of

Sri

Lank

a th

e Co

mpa

ny s

hall

mai

ntai

n a

Rese

rve

Fund

and

sha

ll, o

ut o

f the

net

pro

fit a

fter t

he p

aym

ent

of ta

x fo

r eac

h ye

ar, b

efor

e an

y di

vide

nd is

dec

lare

d,tr

ansf

er to

the

rese

rve

Fund

:-

i A

sum

equ

ival

ent t

o no

t les

s th

an 5

% o

f suc

h pr

ofits

unt

il th

e am

ount

of t

he R

eser

ve F

und

is e

qual

to 5

0 pe

rcen

t of t

he is

sued

and

pai

d-up

ord

inar

y sh

are

capi

tal o

f the

rele

vant

est

ablis

hmen

t; an

dii

A fu

rthe

r sum

equ

ival

ent t

o no

t les

s th

an 2

% o

f suc

h pr

ofits

unt

il th

e am

ount

of t

he R

eser

ve F

und

is e

qual

to th

e is

sued

and

pai

d-up

ord

inar

y sh

are

capi

tal o

f the

rele

vant

est

ablis

hmen

t.

Inve

stm

ent F

und

Rese

rve

Inve

stm

ent

fund

acc

ount

was

abo

lishe

d by

CBS

L w

ith e

ffect

fro

m 1

st O

ctob

er 2

014.

Con

sequ

ently

, the

Com

pany

tra

nsfe

rred

the

inve

stm

ent

fund

acc

ount

bal

ance

tha

t pr

evai

led

as a

t 30

th

Sept

embe

r 201

4 am

ount

ing

to R

s. 5

,341

,799

/- b

ack

to re

tain

ed e

arni

ngs.

The

Acco

untin

g Po

licie

s an

d ot

her e

xpla

nato

ry n

otes

set

out

on

page

s 78

to 1

25 fo

rm a

n in

tegr

al p

art o

f the

se F

inan

cial

Sta

tem

ents

. Fig

ures

in b

rack

ets

indi

cate

ded

uctio

ns

75


GRO

UP

Attr

ibut

able

to O

wne

rs o

f the

Com

pany

Non

- S

tate

d C

apita

l In

vest

men

t Ca

pita

l R

eval

uatio

n R

eser

ve

Gen

eral

Re

tain

ed

Tot

al

Cont

rolli

ng

Tot

al

Cap

ital

Red

empt

ion

Fun

d Re

serv

e R

eser

ve

Res

erve

F

und

Res

erve

Ea

rnin

gs /

Inte

rest

sEq

uity

Res

erve

Fun

dAc

cum

ulat

ed L

osse

s R

s R

s R

s R

s R

s R

s R

s R

s R

s R

s R

s

Bala

nce

as a

t 01.

04.2

013

1,81

7,95

2,33

0 4

7,63

6,39

3 -

27,

118,

550

50,

546,

457

7,5

50,0

00 9

,000

,000

(1,7

60,0

37,4

20)

199

,766

,310

196

,164

,225

395

,930

,535

Tota

l Com

preh

ensi

ve In

com

ePr

ofit f

or th

e ye

ar -

- -

- -

- 4

1,95

6,32

8 4

1,95

6,32

8 4

,076

,463

46,

032,

791

Oth

er C

ompr

ehen

sive

Inco

me

for t

he y

ear

10,

064,

581

10,

064,

581

1,0

35,8

99 1

1,10

0,48

0 5

2,02

0,90

9 5

2,02

0,90

9 5

,112

,362

57,

133,

271

Tran

sact

ion

wit

h ow

ners

of t

he C

ompa

nyTr

ansf

er to

Ret

aine

d Ea

rnin

gs -

- -

(50,

546,

457)

- -

50,

546,

457

- -

-Tr

ansf

er d

urin

g th

e ye

ar to

Inve

stm

ent F

und

- -

5,3

41,7

99 -

- -

(5,3

41,7

99)

- -

-D

ivid

ends

Pai

d -

- -

- -

- -

- -

(10,

730,

804)

(10,

730,

804)

Tran

sfer

dur

ing

the

year

to R

eser

ve F

und

- -

- -

- 7

85,5

30

- (7

85,5

30)

- -

- Sh

ares

issu

ed d

urin

g th

e ye

ar 4

64,4

72 -

- -

- -

- 4

64,4

72 -

464

,472

Effec

t of c

hang

e in

per

cent

age

hold

ing

in

subs

idia

ries

- -

- -

- -

- 2

3,27

7,13

9 2

3,27

7,13

9 7

2,72

2,86

1 9

6,00

0,00

0 4

64,4

72 -

5,3

41,7

99 -

(50,

546,

457)

785

,530

-

67,

696,

267

23,

741,

611

61,

992,

057

85,

733,

668

Bala

nce

as a

t 31.

03.2

014

1,81

8,41

6,80

2 4

7,63

6,39

3 5

,341

,799

27,

118,

550

- 8

,335

,530

9

,000

,000

(1,6

40,3

20,2

44)

275

,528

,830

263

,268

,644

538

,797

,474

Bala

nce

as a

t 01.

04.2

014

1,81

8,41

6,80

2 4

7,63

6,39

3 5

,341

,799

27,

118,

550

- 8

,335

,530

9

,000

,000

(1,6

40,3

20,2

44)

275

,528

,830

263

,268

,644

538

,797

,474

Tota

l Com

preh

ensi

ve In

com

eLo

ss fo

r the

yea

r -

- -

- -

- -

(547

,349

,717

) (5

47,3

49,7

17)

(23,

298,

532)

(570

,648

,249

)O

ther

Com

preh

ensi

ve In

com

e fo

r the

yea

r (1

,543

,820

) (1

,543

,820

) 4

61,9

85 (1

,081

,835

) -

- -

- -

- -

(548

,893

,537

) (5

48,8

93,5

37)

(22,

836,

547)

(571

,730

,084

)Tr

ansa

ctio

n w

ith

owne

rs o

f the

Com

pany

Tran

sfer

dur

ing

the

year

to In

vest

men

t Fun

d -

- (5

,341

,799

) -

- -

5,3

41,7

99 -

- -

Shar

es is

sued

dur

ing

the

year

8,3

00,4

40 -

- -

- -

- 8

,300

,440

- 8

,300

,440

Issu

e of

sha

res

by s

ubsi

diar

y-

--

--

--

--

17,8

00,0

0017

,800

,000

Dis

posa

l of s

ubsi

diar

ies

- -

- -

--

- (2

03,8

23,7

78)

(203

,823

,778

)Eff

ect o

f cha

nge

in p

erce

ntag

e ho

ldin

g in

subs

idia

ries

- -

- -

- -

- (9

,906

,904

) (9

,906

,904

) 9

,906

,904

- 8

,300

,440

- (5

,341

,799

) -

--

- (4

,565

,105

) (1

,606

,464

) (1

76,1

16,8

74)

(177

,723

,338

)

Bala

nce

as a

t 31.

03.2

015

1,82

6,71

7,24

2 4

7,63

6,39

3 -

27,

118,

550

-8,

335,

530

9,0

00,0

00 (2

,193

,778

,886

) (2

47,9

71,1

71)

64,

315,

223

(210

,655

,948

)

The

Acco

untin

g Po

licie

s an

d ot

her e

xpla

nato

ry n

otes

set

out

on

page

s 78

to 1

25 fo

rm a

n in

tegr

al p

art o

f the

se F

inan

cial

Sta

tem

ents

. Fig

ures

in b

rack

ets

indi

cate

ded

uctio

ns

76

Statement of Cash Flows

Group CompanyFOR THE YEAR ENDED 31ST MARCH 2015 2014 2015 2014

Rs. Rs. Rs. Rs.

Cash Flows from Operating ActivitiesProfit / (Loss) for the year (570,648,249) 46,032,792 (280,033,432) 15,710,599

Adjustments forCash Flows from Operating ActivitiesNet Change in Fair Value of Financial Assets Held for Trading 17,941,864 2,290,243 17,941,864 2,290,243Dividend Income (1,908,722) (4,058,450) (1,510,664) (29,602,294)Depreciation 62,160,138 68,377,790 58,854,243 54,987,623Amortization of Intangible Assets 10,228,817 428,226 - -Provision for Impairment / (Reversal of Provision) of Loans and Advances 242,620,691 (180,029,227) 242,620,691 (192,412,322)Provision for impairment of Trade and Other Receivables 41,031,524 (1,642,816) 41,031,524 289,351Impairment for fall In Value of Real Estate Stock 18,801,107 (12,534,990) 18,801,107 (12,534,990)Provision for Fall in in Value of Investments in Subsidiaries - - 25,000,000 -Provision for Fall in in Value of Investment in Associate - - 14,997,819 -Impairment of Intangible Asset 5,599,747 - 5,599,747 -Change in Fair Value of Investment Property 19,813,600 (63,776,953) 19,813,600 (63,776,953)Gain on Disposal of Subsidiary - - (304,612,057) -Profit from Discontinued Operations (25,289,779) (130,302,046) - -Other Finance costs 22,707,354 31,776,795 9,203,429 (13,690,378)Provision / (Reversal of Provision) for Retiring Benefit Obligations 83,427 8,270,387 (1,390,530) (578,777)Gain on Sale of Property, Plant & Equipment (342,815) (9,421,789) (195,500) (9,421,789)Loss on Disposal of Investment Property 1,444,590 - 1,444,590 -Impairment of Property, Plant & Equipment - 19,832 - -Income tax 3,497,767 5,176,572 2,696,103 4,535,409Share of profit from Associate (5,699,391) (4,890,800) - -Operating Profit/(Loss) before Working Capital Changes (157,958,329) (70,285,046) (129,737,464) (244,204,278)

Working Capital Changes(Increase)/Decrease in Other Assets (82,374,257) 22,445,714 (90,338,833) 22,154,986(Increase)/Decrease in Inventories - 33,010,812 - -(Increase)/Decrease in Lease, Loans & Hire Purchase Receivables (2,045,267,587) (759,384,352) (2,010,923,962) (756,142,853)(Increase)/Decrease in Other Borrowings 66,961,998 (16,526,285) 1,264,152 21,624,311(Increase)/Decrease in Investment in Real Estate 712,281 100,234,902 712,281 100,234,902(Increase)/Decrease in Related Party Receivables 82,830,459 (48,730,221) 79,331,352 (194,333,451)Increase/(Decrease) in Related Party Payables 35,279,333 3,500,000 (82,984,872) (5,391,019)Increase/(Decrease) in Trade & Other Receivables (73,328,036) 32,229,313 25,665,090 14,364,536Increase/(Decrease) in Trade & Other Payables (73,556,598) (5,016,065) (120,600,162) 70,139,602Increase/(Decrease) in Public Deposits 1,811,943,326 1,082,769,792 1,811,943,326 1,082,769,792Cash Generated From/(Used) in Operations (434,757,409) 200,249,176 (515,669,092) 111,216,528

Income Tax Paid (360,102) (22,994,620) -Gratuity Paid (1,153,249) (5,370,206) (952,000) (4,601,743)Other Finance Costs Paid (15,938,097) (31,776,795) (2,434,172) 13,690,378Net Cash from/(used) in Operating Activities (452,208,858) 140,107,555 (519,055,264) 120,305,163

Cash Flows from Investing ActivitiesProceeds from the Sale of Property, Plant & Equipment 743,799 155,016,045 195,500 150,742,592Acquisitions of Property, Plant & Equipment (39,086,004) (140,929,972) (35,276,077) (123,864,256)Acquisitions of Investment Property (108,160,000) (130,260,809) (108,160,000) (93,861,809)Proceeds from Disposal of Investment Property 720,000 35,000,000 720,000 35,000,000Acquisitions of Intangible Assets - (400,000) - -Net Proceeds from Disposal of Subsidiaries (Note 15.3) 351,977,723 - 487,535,437 -Investment in Subsidiaries - - (26,000,000) -Net proceeds from Commercial Papers 64,000,000 (64,390,276) - -Net Acquisitions of Financial Assets Held for Trading (104,281,584) (2,555,166) (104,281,584) (2,555,165)

77



Rs. Rs. Rs. Rs.

Net Acquisitions of Government Securities (687,038,811) (144,183,311) (687,038,811) (144,183,311)Dividend Income 4,144,084 7,173,650 1,510,664 29,602,294Net Cash from/(used in) Investing Activities (516,980,794) (285,529,838) (470,794,871) (149,119,655)

Cash Flows from Financing ActivitiesDividends Paid - (10,730,804) - -Dividends Paid to Non Controlling Interests (224,163) - - -Repayment of Loans (322,878,365) (89,981,341) (243,258,049) (89,981,341)Proceeds from Borrowings 1,179,985,664 15,000,000 1,179,985,664 15,000,000Lease Rentals Paid (1,120,000) (373,333) (1,120,000) (373,333)Proceeds from Shares Issue 8,300,440 96,464,472 8,300,440 464,472Proceeds from Share Issue by subsidiary 17,800,000 - - -Net Cash from/(used in) Financing Activities 881,863,575 10,378,994 943,908,055 (74,890,202)

Increase/(Decrease) in Cash & Cash Equivalents (87,326,077) (135,043,288) (45,942,082) (103,704,694)Cash & Cash Equivalents at the Beginning of the Year 29,342,540 164,385,829 (5,202,977) 98,501,717Cash & Cash Equivalents at the End of the year (57,983,537) 29,342,540 (51,145,059) (5,202,977)

Reconciliation of Cash & Cash EquivalentsCash in Hand & at Bank 152,318,187 114,751,211 119,547,331 48,255,090Bank Overdraft (409,492,463) (140,352,357) (239,883,129) (108,401,754)Short Term Investments 199,190,739 54,943,686 69,190,739 54,943,686

(57,983,537) 29,342,540 (51,145,059) (5,202,977)

The Accounting Policies and other explanatory notes set out in pages 78 to 125 form an integral part of these Financial Statements. Figures in brackets indicate deductions.

78

Notes to the Financial Statements

1. CORPORATE INFORMATION

1.1 Reporting Entity

Nation Lanka Finance PLC, regulated under the Finance Business Act No. 42 of 2011, was incorporated on 15th July 1987 as a public limited liability company domiciled in Sri Lanka under the provisions of the Companies Act No. 17 of 1982 and re registered under the Companies Act No. 7 of 2007. Ordinary Shares of the Company were listed on the main board of the Colombo Stock Exchange on 31st June 1994.

Registered office and the principal place of business are situated at No. 28, Dickmans Road, Colombo 5.

1.2 Financial Year

Financial Statements of the Company and Group entities ends on 31st March.

1.3 Principal activities and Nature of Operations

The principal activities of the Company is granting of loans, providing finance leases, hire purchase asset financing, pawning and mobilization of deposits and trading of real estate.

Nation Lanka Equities (Pvt) Limited a subsidiary of the Group is engaged in trading in equity and debt security brokering and undertaking placement of equity and debt securities.

Nation Lanka Promotions Limited is engaged in the business of managing the Havelock ground for different sports events and providing opportunities for companies to advertise themselves.

First Lanka Treasuries Limited was engaged in the business of dealing in government securities, lending and investment activities.

Ceylinco Towers Limited has not carried out any business activities during the year.

2. BASIS OF PREPARATION

2.1 Statement of compliance

The consolidated financial statements of Nation Lanka Finance PLC, comprising of the statement of financial position, statement of profit & loss and other comprehensive income, statement of cash flow, statement of changes in equity and notes to the Consolidated financial statements have been prepared in accordance with the Sri Lanka Accounting Standards (hereinafter referred to as SLFRS/LKAS) issued by the Institute of Chartered Accountants of Sri Lanka, Sri Lanka Accounting & Auditing Standards Act No. 15 of 1995 and the requirements of the Companies Act No. 7 of 2007 and the listing rules of the Colombo Stock Exchange.

2.2 Approval of Financial Statements

These consolidated financial statements were authorized for issue in accordance with a resolution of the Board of Directors on 28th August 2015.

2.3 Going Concern

The Directors have made an assessment of the group’s ability to continue as a going concern and they do not intend either to liquidate or to cease trading [Note No. 45] to the financial statements provides details relating to the assessment.

2.4 Basis of Preparation

These financial statements are prepared on a historical cost basis with no adjustments being made for inflationary factors affecting the financial statements, except for the following material items in the statement of financial position:

Fair value Through Profit or Loss Financial Instrument - Fair Value

Loans and Receivables financial instrument - Amortised Cost

Held to Maturity financial instrument - Amortized Cost

Investment Property- Fair Value

Defined benefit obligation- Present value of the defined benefit obligation less the net totals of plan assets and unrecognized past service cost

Assets and Liabilities are grouped by nature and listed in an order that reflects their relative liquidity and maturity pattern

2.5 Functional and Presentation Currency

Consolidated Financial statements of the group are presented in Sri Lankan Rupees, which is the group’s functional and presentation currency. The said Financial Statements have been prepared in Sri Lankan Rupees (Rs.).

2.6 Use of estimates and judgements

The preparation of consolidated financial statements in conformity with Sri Lanka Accounting Standards (SLFRSs/ LKASs) requires management to make judgments, estimates and assumptions that affects the application of policies and reported amounts of assets and liabilities, income and expenses. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making the judgment about carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates.

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimate is revised, if the revision affects only that period, or the period of the revision and future periods if the revision affects both current and future periods.

Information about critical judgments in applying accounting policies that have the most significant effect on the amounts recognized in the consolidated financial statements is included in following notes.

79


Fair Valuation of Investment Properties

Measurement of Intangible Assets

Measurement of Retirement Benefit Obligations

Measurement of Deferred Tax Assets and Liabilities

Impairment of Loans and Advances

Financial Instruments Fair Value through profit & loss

Financial Investments – Available for sales

Going Concern

Commitments & Contingencies

3. SIGNIFICANT ACCOUNTING POLICIES The accounting policies set out below have been applied

consistently to all periods presented in this financial period. These accounting policies are consistent with those of the previous years’ figures and phrases.

3.1 Changes in accounting policies

The Group has adopted the following new standards and amendments to standards, including any consequential amendments to other standards, with a date of initial application of 1 January 2014.

i. SLFRS 10 - “Consolidated Financial Statements”

ii. SLFRS 12 - “Disclosure of Interests in Other Entities”

iii. SLFRS 13 - “Fair Value Measurements”

The nature and the effects of the changes are explained below.

3.1.1. Subsidiaries, including structured entities

As a result of SLFRS 10, the Group has changed its accounting policy for determining whether it has control over and consequently whether it consolidates other entities. SLFRS 10 introduces a new control model that focuses on whether the Group has power over an investee, exposure or rights to variable returns from its involvement with the investee and the ability to use its control over to affect those returns.

In accordance with the transitional provisions of SLFRS 10, the Group re-assessed its control conclusions as of 1 April 2014. However, the re-assessment did not have an impact on the Group’s Financial Statements.

3.1.2. Interests in other entities

As a result of SLFRS 12, the Group has expanded disclosures about its interests in its subsidiaries.

3.1.3. Fair value measurement

In accordance with the transitional provisions of SLFRS 13, the group has applied the definition of fair value, as set out in accounting policies prospectively. The change had no significant impact on the measurements of the Group’s assets and liabilities, but the Group has included new disclosures in the Financial Statements, which are required under SLFRS 13. These new disclosure requirements are not included in the comparative information. However, to the extent that disclosures were required by

other standards before the effective date of SLFRS 13, the Group has provided the relevant comparative disclosures under those standards

3.2. Basis of consolidation

The consolidated Financial Statements include the Financial Statements of the company, its subsidiaries over which it has control. The group’s Financial Statements comprise of the consolidated Financial Statements of the Company and the Group which have been prepared in compliance with the group’s accounting policies.

3.2.1. Business combinations

The Group accounts for business combinations using the acquisition method as at the acquisition date which is the date on which control is transferred to the Group. Control is achived when the Group is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee. In assessing control, the Group takes into consideration potential voting rights that currently are exercisable. The consideration transferred in the acquisition is generally measured at fair value, as are the identifiable net assets acquired. Any goodwill that arises is tested annually for impairment. Any gain on a bargain purchase is recognized in profit or loss immediately. Transaction costs are expensed as incurred, except if related to the issue of debt or equity securities

The Group measures goodwill at the acquisition date as:

• The fair value of the consideration transferred; plus

• The recognized amount of any non–controlling interest in acquiree; plus

• If the business combination is achieved in stages, the fair value of the pre–existing equity interest in the acquire; less

• The net recognized amount (generally fair value) of the identifiable assets acquired and liabilities assumed

• When the excess is negative, a bargain purchase gain is recognized immediately in profit or loss.

3.2.2. Subsidiaries

Subsidiaries are entities controlled by the Group. The Financial Statements of subsidiaries are included in the consolidated Financial Statements from the date that control commences until the date that control ceases. The accounting policies of subsidiaries have been changed when necessary to align them with the policies adopted by the Group.

3.2.3. Non-controlling interests

Non-controlling interests are measured at their proportionate share of the acquiree’s identifiable net assets at the date of acquisition.

Changes in the Group’s interest in a subsidiary that do not result in a loss of control are accounted for as transactions with owners in their capacity as owners. Adjustments to non-controlling

80

interests are based on a proportionate amount of the net assets of the subsidiary. No adjustments are made to goodwill and no gain or loss is recognized in profit or loss.

3.2.4. Loss of Control

On the loss of control, the Group derecognizes the assets and liabilities of the subsidiary, any non-controlling interests and other components of equity related to the subsidiary. Any surplus or deficit arising on the loss of control is recognized in profit or loss. If the Group retains any interest in the previous subsidiary, then such interest is measured at fair value at the date that control is lost. Subsequently it is accounted for as an equity accounted investee or as an available for sale financial asset depending on the level of influence retained.

3.2.5. Interests in equity-accounted investees

The Group’s interests in equity-accounted investees comprise interests in associates. Associates are those entities in which the Group has significant influence, but not control over the financial and operating policies.

Interests in associate is accounted for using the equity method. It is initially recognized at cost, which includes transaction costs. Subsequent to initial recognition, the consolidated financial statements include the Group’s share of the profit or loss and OCI of equity accounted investees, until the date on which significant influence or joint control ceases.

3.2.6. Transactions eliminated on consolidation

Intra-group balances and transactions, and any unrealized income and expenses arising from intra-group transactions, are eliminated in preparing the consolidated Financial Statements. Unrealized losses are eliminated in the same way as unrealized gains, but only to the extent that there is no evidence of impairment.

3.3. Foreign Currency

3.3.1 Foreign currency transactions

All foreign exchange transactions are translated at the rate of exchange prevailing at the time the transaction was effected.

All monetary assets and liabilities in foreign currency at year end are translated at the rate prevailing on the balance sheet date. Non-monetary assets and liabilities which are carried in terms of historical cost in a foreign currency are translated using the exchange rate at the date of transaction. Non-monetary assets and liabilities denominated in foreign currencies that are stated at fair value are translated to reporting currency using the exchange rate that was prevailing on the date the fair value was determined. The resulting gains or losses on translations are dealt with in the Income Statement.

3.4 Financial Instruments

3.4.1 Initial Recognition of Financial Instruments

The Group shall recognize a financial asset or financial liability in its statement of financial position when, and only when, the entity becomes a party to the contractual provisions of the instrument, i.e. all the financial assets and liabilities except “Regular way trades” are initially recognized on the trade date. Regular way trade means 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. Those trades are initially recognized on the settlement date.

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 transaction costs that are directly attributable to the acquisition or issue of such financial instrument, except in the case of financial assets and financial liabilities at fair value through profit or loss as per Sri Lanka Accounting Standard — LKAS 39 on “Financial Instruments: Recognition and measurement”.

Transaction costs in relation to financial assets and financial liabilities at fair value through profit or loss are dealt with through the statement of profit or loss and other comprehensive income.

3.4.3. Classification and Subsequent measurement of financial assets

The Group classifies non derivative financial assets into the following categories;

a) Fair value through Profit or Loss financial assets

b) Available for Sale financial assets

c) Loans and Receivables

d) Held to Maturity financial assets

(A) Loans and Receivables

Loans and receivables are financial assets with fixed or determinable payment that are not quoted in an active market. Such assets are recognized at fair value plus any directly attributable transaction costs. Subsequent to initial recognition loans and receivables are measured at amortized cost using the effective interest method, less any impairment losses.

Loan and receivables comprise of cash & cash equivalents, deposits with licensed commercial bank, loans and receivables from customers, and trade receivables and other receivables.

- Loans and Advances

Loans, lease, hire purchase and pawning advances are stated at their amortized cost, after providing for impairment losses. Loans and advances to customers are financial assets with fixed or determinable payments and fixed maturities.


81


After initial measurement, loans and advances to customers are subsequently measured at cost less allowance for loan losses. The losses arising from impairment are recognized in profit or loss as ‘Impairment of Loans and Other Losses’.

(B) Fair Value through profit or loss financial assets

A financial asset is classified as at fair value through profit or loss if it is classified as held for trading or is designated as such on initial recognition. Financial assets are designated as at fair value through profit or loss if the Company manages such investments and makes purchase and sale decisions based on their fair value in accordance with the Company’s documented risk management or investment strategy. Attributable transaction costs are recognized in profit or loss as incurred. Financial assets at fair value through profit or loss are measured at fair value and changes therein, which takes in to account any dividend income, are recognized in profit or loss.

Financial assets designated as fair value through profit or loss comprise equity securities in quoted companies that otherwise would have been classified as available for sale.

(C) Held to maturity financial assets

Held to maturity financial assets are non-derivative financial assets with fixed determinable payments and fixed maturities, which the Company has the intention and ability to hold to maturity. After initial measurement, Held to Maturity financial investments are subsequently measured at amortized cost using the effective interest rate (EIR), less impairment. Amortized cost is calculated by taking in to account any discount or premium on acquisition and fees that are an integral part of the EIR. The amortization is included in profit or loss in the Statement of Profit or Loss and Other Comprehensive Income.

If the Group was to sell or reclassify more than an insignificant amount of Held to Maturity investment before maturity (Other than in certain specific circumstances permitted in the Sri Lanka Accounting Standards— LKAS 39 on “Financial Instruments : Recognition and Measurement “), 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. The Company has designated investments in treasury bills, commercial papers and preference shares as Held to Maturity financial assets.

(D) Available for sale financial assets

Available-for-sale financial assets are financial assets that are designated as available for sale and are not classified in any of the previous categories. Subsequent to initial recognition, they are measured at fair value and changes therein, other than impairment losses on available for sale equity instruments are recognised in other comprehensive income and presented within equity in the fair value reserve. When an investment is derecognised, the cumulative gain or loss in other comprehensive income is transferred to profit or loss.

Available for sale financial assets comprise of investment in unquoted shares for long term purpose.

3.4.4 Classification and Subsequent measurement of financial liabilities

At inception a financial liability is classified into one of the following categories:

• Fair value through profit or loss financial liabilities

• Financial Liabilities

The subsequent measurement of financial liabilities depends on their classification.

3.4.4.1 Fair Value through Profit or Loss Financial Liabilities

Financial liabilities at fair value through profit or loss include financial liabilities held for trading and financial liabilities designated upon initial recognition as at fair value through profit or loss. Financial liabilities 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. Gains or losses on liabilities held for trading are recognised in the Statement of Profit or Loss and Other Comprehensive Income.

The Company has not designated any financial liabilities upon initial recognition at fair value through profit or loss.

3.4.4.2. Financial Liabilities through amortized cost

Financial instruments issued by the Company that are not designated at fair value through profit or loss, are classified under this as appropriate, 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 number of own equity shares.

After initial recognition, such financial liabilities are subsequently measured at amortized cost using the EIR method. Amortized cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are an integral part of the EIR. The EIR amortization is included in ‘Interest Expenses’ in the Statement of Profit or Loss and Other Comprehensive Income. Gains and losses are recognized in the Statement of Profit or Loss and Other Comprehensive Income when the liabilities are derecognized as well as through the EIR amortization process.

These financial liabilities comprise of public deposits, ‘Interest Bearing Borrowings - Medium and Long Term’ and short term borrowings from individuals and several private companies.

3.4.5. Derecognition of Financial Instruments

The Group derecognizes a financial asset when the right to receive cash flows from the asset have expired or when it transfers the financial asset in a transaction in which substantial risks and rewards of the ownership of the financial assets are transferred and it does not retain control of the financial asset.

82

In transactions in which the Group neither retains nor transfers substantially all the risks and rewards of ownership of a financial asset and it retains control over the asset, the Company continues to recognize the asset to the extent of its continuing involvement, determined by the extent to which it is exposed to changes in the value of the transferred asset.

On derecognition of a financial asset, the difference between the carrying amount of the asset (or the carrying amount allocated to the portion of the asset transferred), and the sum of (i) the consideration received (Including any new asset obtained less any new liability assumed) and (ii) any cumulative gain or loss that had been recognized in other comprehensive income is recognized in profit or loss. The Company derecognizes a financial liability when its contractual obligations are discharged or cancelled or expired.

Financial assets and liabilities are offset and the net amount presented in the statement of financial position when and only when, the Group has a legal right to offset the amounts and intends either to settle on a net basis or to realize the asset or settle the liability simultaneously.

3.4.6. Determination of Fair Value

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.

The fair value measurement is based on the presumption that the transaction to sell the asset or transfer the liability takes place either:

• in the principal market for the asset or liability or

• in the absence of a principal market, in the most advantageous market for the asset or liability.

All assets and liabilities for which fair value is measured or disclosed in the financial statements are categorized within the fair value hierarchy, described as follows, based on the lowest level input that is significant to the fair value measurement as a whole:

• Level 1 - Quoted (unadjusted) market prices in active markets for identical assets or liabilities

• Level 2 - Valuation techniques for which the lowest level input that is significant to the fair value measurement is directly or indirectly observable

• Level 3 - Valuation techniques for which the lowest level input that is significant to the fair value measurement is unobservable

3.4.7. Determination of Fair Value

Level 1

When available, the Company measures the fair value of an instrument using active quoted prices or dealer price quotations (assets and long positions are measured at a bid price; liabilities and short positions are measured at an

asking price), without any deduction for transaction costs. A market is regarded as active if quoted prices are readily and regularly available and represent actual and regularly occurring market transactions on an arm’s length basis.

Level 2

If a market for a financial instrument is not active, then the Company establishes fair value using a valuation technique. Valuation techniques include using recent arm’s length transactions between knowledgeable, willing parties (if available), reference to the current fair value of other instruments that are substantially the same, discounted cash flow analyses, credit models, option pricing models and other relevant valuation models. The chosen valuation technique makes maximum use of market inputs, relies as little as possible on estimates specific to the Company, incorporates all factors that market participants would consider in setting a price, and is consistent with accepted economic methodologies for pricing financial instruments. Inputs to valuation techniques reasonably represent market expectations and measures of the risk-return factors inherent in the financial instrument. The Company calibrates valuation techniques and tests them for validity using prices from observable current market transactions in the same instrument or based on other available observable market data.

The best evidence of the fair value of a financial instrument at initial recognition is the transaction price, i.e. the fair value of the consideration given or received, unless the fair value of that instrument is evidenced by comparison with other observable current market transactions in the same instrument, i.e. without modification or repackaging, or based on a valuation technique whose variables include only data from observable markets. When transaction price provides the best evidence of fair value at initial recognition, the financial instrument is initially measured at the transaction price and any difference between this price and the value initially obtained from a valuation model is subsequently recognised in profit or loss on an appropriate basis over the life of the instrument but not later than when the valuation is supported wholly by observable market data or the transaction is closed out.

Level 3

Certain financial instruments are recorded at fair value using valuation techniques in which current market transactions or observable market data are not available. Their fair value is determined by using valuation models that have been tested against prices or inputs to actual market transactions and also using the best estimate of the most appropriate model assumptions. Models are adjusted to reflect the spread for bid and ask prices to reflect costs to close out positions, credit and debit valuation adjustments, liquidity spread and limitations in the models. Also, profit or loss calculated when such financial instruments are first recorded (‘Day 1’ profit or loss) is deferred and recognised only when the inputs become observable or on derecognition of the instrument.


83


3.4.8. Impairment

The Group assesses at each reporting date whether there is any objective evidence that financial assets 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 has occurred after the initial recognition of the asset and that loss event has an impact on the estimated future cash flows of the financial asset that can be estimated reliably estimated.

Objective evidence that financial assets impaired includes default or delinquency by a debtor, restructuring of an amount due to the Company on terms that the Company would not consider. otherwise, indications that a debtor or issuer will enter bankruptcy, adverse changes in the payment status of borrowers or issuers, economic conditions that correlate with defaults or the disappearance of an active market for a security.

(a) Impairment losses on financial assets carried at amortized cost

Impairment losses on assets carried at amortized cost are measured as the difference between the carrying amount of the financial asset and the present value of estimated future cash flows discounted at the asset’s original effective interest rate. Impairment losses are recognized in profit or loss and reflected in an allowance account against loans and advances. When a subsequent event causes the amount of impairment loss to decrease, the decrease in impairment loss is reversed through profit or loss.

The Group considers evidence of impairment for loans and receivable on a specific asset and collective basis. Therefore loans and receivables are assessed individually and made specific impairment provision and collectively for those which are not individually significant.

(b) Impairment losses on available for sale financial assets

Impairment losses on available-for-sale investment securities are recognised by transferring the cumulative loss that has been recognised in other comprehensive income to profit or loss as a reclassification adjustment. The cumulative loss that is reclassified from other comprehensive income to profit or loss is the difference between the acquisition cost, net of any principal repayment and amortisation, and the current fair value, less any impairment loss previously recognized in profit or loss. Changes in impairment provisions attributable to time value are reflected as a component of interest income.

If, in a subsequent period, the fair value of an impaired available-for-sale debt security increases and the increase can be objectively related to an event occurring after the impairment loss was recognised in profit or loss, the impairment loss is reversed, with the amount of the reversal recognized in profit or loss. However, any subsequent recovery in the fair value of an impaired available-for-sale equity security is recognised in other comprehensive income.

(c) Impairment of non-financial assets

The carrying amounts of the Company’s non-financial assets, other than inventories are reviewed at each reporting date to determine whether there is any indication of impairment. If any such indication exists, then the asset’s recoverable amount is estimated. An impairment loss is recognised if the carrying amount of an assets or cash generating unit (CGU) exceeds its recoverable amount.

The recoverable amount of an asset or CGU is the greater of its value in use and its fair value less costs to sell. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre¬tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset or CGU. For impairment testing, assets are grouped together into the smallest Group of assets that generates cash inflows from continuing use that are largely independent of the cash inflows of other assets or CGUs.

Impairment losses are recognised in the statement of income. Impairment losses recognised in respect of CGUs are allocated first to reduce the carrying amount of any goodwill allocated to CGU (if any) and then to reduce the carrying amounts of other assets in the CGU (Group of CGUs) on pro rata basis. An impairment loss in respect of goodwill is not reversed. For other assets, an impairment loss is reversed only to the extent that the assets carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortisation, if no impairment loss had been recognised.

3.5 Stated Capital

Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of ordinary shares are recognized as a deduction from equity, net of any tax effects.

3.6 Inventories

Inventories are valued at lower of cost and estimated net realizable value, after making due allowances for obsolete and slow moving items. Net realizable value is the price at which inventories can be sold in the normal course of business after allowing for cost of realization and/or cost of conversion from their existing state to saleable condition. The cost of each category of inventory is determined on the following basis.

The cost of each category of inventory is determined on the following basis:

• Raw materials - At actual cost on first-in-first-out basis.

• Finished Goods - At the cost of direct materials,

• Work-in-progress - Direct labor and appropriate proportion of production overheads based on normal operating capacity.

3.7 Investment in Real Estate

Land purchase cost, development cost and borrowing cost incurred during the development period of the real estate projects have been capitalized as investment in real estate.

84

3.8 Property, Plant and Equipment

3.8.1 Recognition and measurement

Property, plant and equipment are tangible items that are held for servicing, or for administrative purposes and are expected to be used during more than one period.

(a) Recognition

Property, plant and equipment are recognized 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.

(b) Measurement

Items of property, plant and equipment are stated at cost or valuation less accumulated depreciation and impairment losses.

Cost includes expenditures that are directly attributable to the acquisition of the asset. The cost of self-constructed assets includes the cost of materials and direct labour, any other cost directly attributable to bringing the asset to a working condition for its intended use, and the cost of dismantling and removing the items and restoring the site on which they are located.

Purchased software that is integrated to the functionality of the related equipment is capitalized as part of that equipment.

Expenditure on repairs or maintenance of property, plant and equipment made to restore or maintain future economic benefits expected from the assets has been recognized as an expense when incurred.

(c) Subsequent expenditure

Expenditure incurred to replace a component of an item of property, plant and equipment that is accounted for separately, including major inspection and overhaul expenditure, is capitalized. The cost of replacing part of an item of property, plant andequipment is recognized in the carrying amount of the item, if it is probable that the future economic benefits embodied within the part will flow to the Company and its cost can be measured reliably. The carrying amount of the replaced part is derecognized. The cost of the day-to-day servicing of property, plant and equipment are recognized in profit or loss as incurred.

(d) Derecognition

An item of property, plant and equipment is derecognized upon disposal or when no future economic benefits are expected from its use. Any gain or loss arising on derecognizing of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the asset), is recognized in “other expenses” in profit/loss in the year the asset 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 as required by LKAS.

(e) Revaluation

If an asset’s carrying amount is increased as a result of a revaluation, the increase shall be credited directly to equity under the heading of revaluation surplus. However, the increase shall be recognised in profit or loss to the extent that it reverses a revaluation decrease of the same asset previously recognised in profit or loss.

If an asset’s carrying amount is decreased as a result of a revaluation, the decrease shall be recognised in profit or loss. However, the decrease shall be debited directly to equity under the heading of revaluation surplus to the extent of any credit balance existing in the revaluation surplus in respect of that asset. The company transfer portion of revaluation reserve to retained earnings as the assets are used by the entity, since the future economic benefits embodied in the assets are consumed principally through its use rather than on retirement or disposal.

(f) Depreciation

Depreciation is recognized in profit or loss on a straight-line basis over the estimated useful lives of each part of an item of property, plant and equipment. The estimated useful lives of the assets are as follows.

The estimated useful lives for the current and comparative years are as follows:

Buildings - 5%

Plant and Machinery - 10% - 20%

Furniture and Fittings -15%

Motor Vehicles -25%

Computer Equipment and Software -15% - 33.33%

Office Equipment -15% - 33.33%

Other Equipments - 20%

Depreciation methods, useful lives and residual values are reviewed at each reporting date and adjusted if appropriate.

3.9 Intangible Assets and Goodwill

Goodwill that arises on the acquisition of subsidiaries is presented with intangible assets. For the measurement of goodwill at initial recognition, See note 3.1 (a).Subsequently Goodwill is measured at cost less accumulated impairment losses.

3.10 Investment Property

Investment Property, principally comprise freehold land and building held either to earn rental income or for capital appreciation or for both, but not for sale in the ordinary course of business, use in the production or supply of goods or services or for administrative purposes. Investment property is measured at cost on initial recognition and subsequently at fair value with any change therein recognized in profit or loss.

Cost includes expenditure that is directly attributable to the acquisition of the investment property. The cost of self-constructed investments property includes the cost of materials and direct labour, any other costs directly


85


attributable to bring the investment property to a working condition for their intended use and capitalized borrowing costs.

Any gain or loss on disposal of an investment property (calculated as the difference between the net proceeds from disposal and the carrying amount of the item) is recognized in profit or loss. When an investment property that was previously classified as property, plant and equipment is sold, any related amount included in the revaluation reserve is transferred to retained earnings.

When the use of a property changes such that it is reclassified as property, plant and equipment, its fair value at the date of reclassification becomes its cost for subsequent accounting.

Investment Property is carried at fair value determined annually by an independent valuer. A gain or loss arising from a change in the fair value of investment property is recognized in profit or loss for the period in which it arises.

3.11 Leased Assets

Assets funded through finance leases are capitalized and the resulting lease obligations are included in creditors’ net of finance charges. Lease payments are treated as consisting of capital and interest elements and the interest is charged to the income statement.

Assets held under finance leases are depreciated over the shorter of lease term or the useful lives of equivalent owned assets.

3.12 Employee Benefits

(a) Defined contribution plans

A defined contribution plan is a post-employment plan under which an entity pays fixed contribution into a separate entity and will have no legal or constructive obligation to pay a further amount. Obligations for contributions to defined contribution plans are recognized as expense in the profit and loss in the period during which related services are rendered by employees.

Employees’ Provident Fund

The Group and Employees’ contribute 12% & 8% respectively on the salary of each employee respectively to the Employees Provident Fund.

Employees Trust Fund

The Group contributes 3% of the salary of each employee to the Employees’ Trust Fund contributions to defined contribution plans are recognized as an expense in the income statement as incurred.

(b) Defined benefit plans -Retiring Gratuity

A defined benefit plan is a post-employment benefit plan other than a defined contribution plan.

In accordance with LKAS 19 - “Employee Benefits”, the group has adopted the actuarial valuation method and

the valuation method used by the actuary is “Projected Unit Credit Method”. The assumptions based on which the results of the actuarial valuation was determined, are included in Note 31 to the financial statements.

However, under the Payment of Gratuity Act No. 12 of 1983, the liability to an employee arises only on completion of 5 years of continues service.

Any actuarial gains or losses arising are recognized immediately in the statement of comprehensive income.

The liability is externally funded.

3.13 Liabilities and Provisions

3.13.1 Liabilities

Liabilities classified as current liabilities on the balance sheet are those, which fall due for payment on demand or within one year from the reporting date.

Non-current liabilities are those balances that fall due for payment after one year from the balance sheet date.

3.13.2 Provisions

A provision is recognized if, as a result of a past event, the Group has a present legal or constructive obligation that can be estimated reliably, and it is probable that an outflow of economic benefits will be required to settle the obligation.

3.14 Capital Commitments and Contingencies

Contingent liabilities are possible obligations whose existence will be confirmed only by uncertain future events or present obligations where the transfer of economic benefits is not probable or cannot be reliably measured.

Capital commitment and contingent liabilities of the Company are disclosed in the respective notes to the financial statements.

4. STATEMENT OF PROFIT AND LOSS AND OTHER COMPREHENSIVE INCOME

4.1 Revenue Recognition

Revenue represents the amounts derived from the provision of goods and services which fall within the Company’s ordinary activities net of trade discounts and turnover related taxes.

4.1.1 Interest Income

Interest income from loan, lease, hire purchases, and pawning advances is recognized on an accrual basis.

4.1.2 Interest on Bills

Interest income from bills is recognized proportionately over the period of the bill discounted commencing from the date of discounting.

86

4.1.3 Income from Fee-Based Activities

Commission from underwriting, management of funds and all other commissions and fees are recognized in the period in which such transactions were effected based on the conditions stipulated in the respective agreements and contracts.

4.1.4 Overdue Charges

Overdue charges of leasing, hire purchase, loans and advances have been accounted for on a cash basis.

4.1.5 Profit on Sale of Shares

Profit earned on the sale of shares has been accounted for in the Statement of comprehensive income on the basis of realised net profit.

4.1.6 Dividend Income

The dividend income is recognised when the Company’s right to receive payment is established.

4.1.7 Real Estate Income

Income is recognized when the property is sold and the risks and rewards of the property is passed on to the buyer. For this purpose the property is deemed to be sold once 30% of the outright sales price has been received.

However, when there is insufficient assurance as to the receipt of the total consideration, income is accounted on a cash received basis.

4.1.8 Profit on Sale of Property, Plant and Equipment

Profits or losses of a revenue nature on the disposal of Property, Plant & Equipment have been accounted for in the Income Statement.

4.1.9 Income on Sale of Houses

The income sale of houses is recognized when the significant risks and rewards incidental to the ownership are transferred to the buyer. It’s deemed to have been transferred when 85% or more of the construction of structure of the house is completed and the ales agreement is signed between the buyer and the Company.

4.1.10 Interest on Overdue Rentals

Interest from overdue rentals have been accounted for on a cash received basis.

4.1.11 Accounting for Recovery of Bad and Doubtful Debt Written off

Recovery of amounts written off as bad and doubtful debts is recognized on a cash basis.

4.1.12 Other Income

All other income is recognised on an accrual basis.

4.2 Expenditure Recognition

All the expenditure incurred in the running of the business and in maintaining the Property, Plant Equipment in a state of efficiency has been charged to Proft or Loss.

4.2.1 Interest Expense on Borrowings and Deposits

The interest expenses on deposits and borrowings are recognized on an accrual basis in the Statement of Comprehensive Income and Other Comprehensive Income Statement.

4.2.2 Income Taxation

The Group’s liability to taxation has been computed in accordance with the Inland Revenue Act No.10 of 2006 and amendments thereto.

4.2.3 Economic Service Charge

As per the provisions of Economic Service Charge Act No. 13 of 2006 amendments thereto, ESC is payable on the liable turnover at specified rates. ESC is deductible from the income tax liability.

Any unclaimed liability can be carried forward and set off against the income tax payable in the five subsequent years as per the relevant provision in the Act.

4.2.4 Deferred Taxation

Deferred tax is recognized using the Statement of Financial Position liability method, providing for temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred tax is not recognized for the following temporary differences; the initial recognition of goodwill, the initial recognition of assets or liabilities in a transaction that is not a business combination and that affects neither accounting nor taxable profits, and differences relating to investment in subsidiaries to the extent that they probably will not reverse in the foreseeable future. Deferred tax is measured at the tax rates that are expected to be applied to the temporary differences when they reverse, based on the laws that have been enacted or substantively enacted by the reporting date.

A deferred tax asset is recognized to the extent that it is probable that future taxable profits will be available against which the temporary differences can be utilized.

4.2.5 VAT on Financial Services

VAT on Financial Services is calculated in accordance with the amended VAT Act No. 7 of 2003.

4.3 Borrowing Cost

Borrowing costs are interest and other costs that an entity incurs in connection with the borrowing of funds.

Borrowing costs may include:

a) Interest expense calculated using the effective interest method as described in LKAS 39 Financial Instruments: Recognition and Measurement;


87


b) Finance charges in respect of finance leases recognised in accordance with LKAS 17 Leases; and

c) Exchange differences arising from foreign currency borrowings to the extent that they are regarded as an adjustment to interest costs.

Group capitalizes borrowing costs that are directly attributable to the acquisition, construction or production of a qualifying asset as part of the cost of that asset. Then the Company recognizes other borrowing costs as an expense in the period in which it is incured.

The Group presents basic and diluted earnings per share (EPS) 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.

5 STATEMENT OF CASH FLOWS - CASH AND CASH EQUIVALENTS

Cash and Cash Equivalents are defined as cash in hand and short term highly liquid investments readily convertible to known amounts of cash and subject to insignificant risk of changes in value.

For the purpose of Cash Flow Statement, cash and cash equivalent consists of cash in hand and deposits in banks net of outstanding bank overdrafts, investment in gold coins and lending against government securities.

For the purpose of cash flow statement, cash and cash equivalents consist of cash in hand and deposits in banks net of outstanding bank overdrafts. Investments with short maturities i.e. three months or less from the date of acquisition are also treated as cash equivalents.

The Cash Flows Statements has been prepared using the “indirect method”.

Interest paid are classified as operating cash flows, interest and dividend received are classified as investing cash flows while dividends paid are classified as financing cash flows for the purpose of presenting of cash flow statement.

6 SEGMENTAL REPORTING An operating segment is a component of the Group that

engages in business activities from which it may earn revenue and incur expenses, including revenue and expenses relating to transactions with any of the Company’s other components. All operating segments operating results are reviewed regularly by the Company’s operating decision marker to make decisions about the resources to each segment and to assess its performance, and for which discrete financial information is available.

Assets and liabilities directly attributable to each segment are allocated to the respective segments. Assets and liabilities, which are not directly attributable to a segment, are allocated on a reasonable basis wherever possible.

7 ACCOUNTING STANDARDS ISSUED BUT NOT EFFECTIVE AS AT THE REPORTING DATE

The Institute of Chartered Accountants of Sri Lanka has issued the following new Sri Lanka Accounting Standards which is not applicable for the current financial period.

Accordingly, these Standards have not been applied in preparing these financial statements.

SLFRS 9 - Financial Instruments: Classification and Measurement

SLFRS 9, as issued reflects the first phase of work on replacement of LKAS 39 and applies to classification and measurement of financial assets and liabilities.

SLFRS 9 will be effective for financial periods beginning on or after 01st January 2018.

SLFRS 15 – Revenue from Contracts with Customers

The objective of this SLFRS is to establish a comprehensive framework for determining whether, how much and when revenue is recognized. This SLFRS will supersede existing revenue recognition guidance LKAS 18 Revenue, LKAS 11 Construction Contracts.

SLFRS 15 will become effective rom 1st January 2018 for the Group with early adoption permitted.

The following new or amended standards are not expected to have significant impact of the Group’s Consolidated Financial Statements which are effective for annual periods beginning on or after 1st January 2016.

88



8 REVENUEInterest Income 1,164,900,861 860,919,754 1,158,012,211 860,027,430Other Income 50,439,979 749,260,650 837,089 1,044,609

1,215,340,840 1,610,180,404 1,158,849,300 861,072,039

9 INTEREST INCOMEFinance Leases 76,846,275 55,046,728 76,846,275 55,046,728Pawning 10,954,783 42,217,392 10,954,783 42,217,392Term Loans 278,735,506 206,027,676 278,735,506 208,052,921 Term Loans - Micro Finance 660,448,438 449,664,423 660,448,438 449,664,423 Hire Purchase 99,859,895 90,469,604 99,859,895 90,469,604Short Term Lending 38,055,964 17,493,931 31,167,314 14,576,362

1,164,900,861 860,919,754 1,158,012,211 860,027,430

10 DIRECT INTEREST COSTInterest on Borrowings 590,054,468 477,961,928 595,285,412 480,723,471

590,054,468 477,961,928 595,285,412 480,723,471

11 OTHER OPERATING INCOME/ (COSTS)Dividend Income 1,908,722 4,058,450 1,510,664 29,602,294Net Change in Fair Value of Investment Properties (19,813,600) 63,776,953 (19,813,600) 63,776,953Gain on Disposal of Property, Plant & Equipment 342,815 9,421,789 195,500 9,421,789Loss on Disposal of Investment Properties (1,444,590) - (1,444,590) -Gain on Liquidation - Ceylinco Housing Corporation Ltd - 206,834 - -Impairment of Intangible Assets (IT System) (5,599,747) - (5,599,747) - Rent Income 1,588,367 3,565,347 1,588,367 4,265,347Miscellaneous Income 2,882,222 6,094,273 4,563,336 6,097,311Interest Income on Fixed Deposit 4,810,109 9,456,715 4,810,109 9,456,715Ground Fees, Sponsorship and Advertisements 7,044,280 17,031,500 - -

(8,281,422) 113,611,861 (14,189,961) 122,620,409

12 PROFIT / (LOSS) BEFORE INCOME TAX EXPENSE IS STATED AFTER CHARGING THE FOLLOWING Directors' Fees and Emoluments 12,917,746 27,172,104 3,564,874 4,800,000 Auditors' Remuneration - Audit 2,226,340 2,963,340 1,625,000 1,500,000 Auditors' Remuneration - Non Audit - 560,000 - 560,000 Depreciation & Amortisation 72,413,954 68,377,790 58,854,244 54,987,623Salaries and Other Staff Costs 234,801,567 275,370,140 207,358,401 190,597,449Defined Contribution Plans - EPF & ETF 29,183,237 32,728,493 25,466,078 21,948,957Provision for Impairment of Loans & Advances 242,620,691 (180,029,227) 242,620,691 (192,412,322)Provision for Impairment of Other Receivables 41,031,524 (1,642,816) 41,031,524 289,351


89




13 INCOME TAX EXPENSE

13.1 Recognized in Profit & LossCurrent Income Tax Expense 812,932 7,273,633 - 4,535,409Under/(Over) Provision in respect of previous years 2,684,835 - 2,696,103 -Deferred Tax provision/(reversal) - (2,097,061) - -

3,497,767 5,176,572 2,696,103 4,535,409Recognized in Other Comprehensive IncomeDeferred Tax provision/(reversal) - 4,001 - -

- 4,001 - - 3,497,767 5,172,572 2,696,103 4,535,409

13.2 Reconciliation of Accounting Profit with Taxable ProfitProfit / (Loss) before Income Tax Expense (592,440,261) (79,092,683) (277,337,329) 20,246,008Profit not liable for Taxation (1,510,664) (29,609,294) (1,510,664) (29,609,294)Aggregate Disallowed Items 566,644,410 327,609,276 549,813,112 295,167,835Allowable Expenses (536,082,645) (270,872,273) (521,201,787) (260,884,721)Statutory Income from Business (563,389,160) (51,964,973) (250,236,668) 24,919,829Other Statutory Income 4,466,658 (13,992,807) - -Tax Loss utilised during the year (1,563,330) (9,743,608) - (8,721,940)Taxable Profit/( Loss) (560,485,832) (75,701,388) (250,236,668) 16,197,889

Other Income 812,932 5,266,589 - -Business Income - 2,007,044 - 4,535,409Current Income Tax Expense 812,932 7,273,633 - 4,535,409

Reconciliation of Accumulated Tax LossesTax Loss Brought Forward 1,927,447,090 1,881,867,828 1,745,617,199 1,754,339,139Tax Loss for the Period 301,874,496 55,322,870 250,236,668 -Tax Loss utilised during the year (1,563,330) (9,743,608) - (8,721,940)Adjustment to tax loss in respect of previous years (2,211,599) - (2,211,599) -Tax Loss Carried Forward 2,225,546,657 1,927,447,090 1,993,642,268 1,745,617,199

13.3 Company(a) In terms of the Inland Revenue Act No. 10 of 2006 and subsequent amendments thereto, the Company is liable for income tax

at 28% on its taxable income.

13.4 Subsidiaries(a) In accordance with the provisions of the Inland Revenue Act No. 10 of 2006 and subsequent amendments thereto the

subsidiaries of the Company are liable for income tax as follows :

Tax Rate 2015 2014 Rs. Rs

Millennium Housing Developers PLCOther Income Liable for tax 28% - 4,735,321Business Income liable for tax 20% & 28% - 39,894,364Nation Lanka Capital 28% - 1,274,615Nation Lanka Equities (Pvt) Ltd 28% 812,932 531,268First Lanka Treasuries 28% - -

812,932 46,435,568

90

14 BASIC EARNINGS / (LOSS) PER SHARE

Basic Earnings / (Loss) per ordinary share has been calculated based on the Profit /(Loss) attributable to the ordinary shareholders divided by the weighted average number of ordinary shares outstanding during the year.

Group Company2015 2014 2015 2014

Profit / (Loss) attributable to Ordinary Shareholders (Rs.) (547,349,717) 41,956,328 (280,033,432) 15,710,599Weighted Average No. of Share 250,652,005 249,940,808 250,652,005 249,940,808Basic Earnings / (Loss) Per Share (Rs.) (2.18) 0.17 (1.12) 0.06

15 DISCONTINUED OPERATION

The group discontinued the operations of its "Property Development" operating segment during the year. Property Development segment includes Millennium Housing Developers PLC and its Subsidiaries.

The Property Development segment was not presented as a discontinued operation as at 31 March 2014 thus the comparative statement of profit or loss and other comprehensive income has been represented to show the discontinued operation from continuing operations .

The results of discontinued operations after intercompany eliminations are presented below.

15.1 Results of Discontinued Operations

FOR THE YEAR ENDED 31ST MARCH 2015 2014Rs. Rs.

Revenue 134,683,136 729,338,879Cost of Sales (78,635,000) (440,237,960)Gross Profit 56,048,136 289,100,919

Other operating income 13,000 3,933,636Administration expenses (57,050,188) (110,546,400)Selling and marketing expenses (13,302,000) (23,872,538)Results from operating activities (14,291,052) 158,615,617

Finance income 7,587,056 25,241,040Finance costs (3,166,437) (9,857,267)

Profit / (Loss) before tax from discontinued operaations (9,870,433) 173,999,390

Income tax (3,162,619) (43,697,344)Profit / (Loss) for the year from discontinued operaations (13,033,052) 130,302,046

Other comprehensive incomeActuarial gain / (loss) on defined benefit plans, net of tax 14,265 54,176Deferred tax on actuarial gain of retirement benefit obligations (3,994) (4,001)Results from Operating Activities, net of tax 10,271 50,175Gain on disposal of discontinued operation 38,312,560 -Profit / (Loss) for the Year 25,289,779 130,352,221

15.2 Cash Flows from / (used in) Discontinued OperationsNet cash generated from / (used in) operating activities (85,576,997) 26,768,935Net cash from / (used in) investing activities 11,511,000 (14,014281)Net cash from / (used in) financing activities 36,429,985 64,026,257Net cash inflow / (outflow) (37,636,012) (76,780,911)


91


15.3 Effect of Disposal on the Financial Position of the GroupThe carrying amount of the assets and liabilities in the disposal group are analysed as follows

AssetsCash and Cash Equivalents 142,743,072Loans and Receivables from Other Customers 71,463,432Amounts Due From Related Companies 53,713,910Investment Properties 36,399,000Intangible Assets 375,000Property, Plant & Equipment 8,507,359Trade & Other Receivables 247,591,166Inventories 519,873,138Deferred Tax Asset 6,169,639Other Assets 898,368

1,087,734,084LiabilitiesDebentures 3,250,000Due to Banks 7,185,358Other Borrowings 65,697,846Current Tax Liabilities 42,208,890Amounts Due to Related Companies 27,790,663Retirement Benefit Obligations 21,731,936Other Payables 266,799,954

434,664,647Net Assets Directly Associated with the Disposal Group 653,069,437Consideration received, satisfied in cash 487,535,437Cash and cash equivalants disposed of (135,557,714)Net Cash Inflow 351,977,723

Group CompanyAS AT 31ST MARCH 2015 2014 2015 2014

Rs. Rs. Rs. Rs.

16 CASH AND CASH EQUIVALENTSCash in Hand 76,097,376 8,835,942 76,071,278 1,724,000Pawning Float - 11,131,710 - 11,131,710Cash at Bank 56,212,802 89,805,876 43,476,053 35,399,380Call Deposits 19,508,009 4,977,683 - -Fixed Deposits 500,000 - - -

152,318,187 114,751,211 119,547,331 48,255,090

17 DEPOSITS IN LICENSED COMMERCIAL BANKS

Seylan Bank PLC 69,190,739 54,943,686 69,190,739 54,943,686NDB Bank 65,000,000 - - -Pan Asia Bank Corporation PLC 65,000,000 - - -

199,190,739 54,943,686 69,190,739 54,943,686

18 FINANCIAL ASSETS - HELD FOR TRADINGTrading Securities - Quoted Shares 18.1 91,190,715 4,850,995 91,190,715 4,850,995

91,190,715 4,850,995 91,190,715 4,850,995

92

Group / CompanyAS AT 31ST MARCH 2015 2014

No. of Shares Fair Value No. of Shares Fair ValueRs. Rs.

18.1 TRADING SECURITIES - QUOTED SHARESDIVERSIFIED HOLDINGSSoftlogic PLC 19,201 253,453 19,201 199,690Lanka Century Investment PLC - 101,000 1,237,928Sunshine Holding PLC 15,000 720,000 - -Vallibel One PLC 80,000 1,624,000 - -

2,597,453 1,437,618

HOTELS AND TRAVELSGaladari Hotel PLC 89,849 1,123,113 89,854 943,467Anilana Hotels & Properties Plc 13,907,348 77,881,149 350,000 2,469,909

79,004,262 3,413,376BANK AND FINANCECommercial Credit 70,000 3,563,000 - -

3,563,000 -TELECOMDialog Axiata PLC 250,000 2,600,000 - -

2,600,000 -MANUFACTURINGPiramal Glass Ceylon PLC 500,000 2,850,000 - -

2,850,000 -CONSTRUCTION AND ENGINEERINGAccess Engineering PLC 30,000 576,000 - -

576,000 -TOTAL 91,190,715 4,850,995


Cost CostRs. Rs.

19 FINANCIAL ASSETS - AVAILABLE FOR SALEUnquoted Investments 19.1-19.3 103,694,268 103,694,268

103,694,268 103,694,268Provision for Diminution in Value of Shares (103,670,968) (103,670,968)

23,300 23,300


93



No. of Shares Cost No. of Shares CostRs. Rs.

19.1 INVESTMENTS IN UNQUOTED SHARES Asian Finance Ltd 2,636,402 26,239,020 2,636,402 26,239,020 Cey Homes Credit & Investments Ltd. 100,000 1,000,000 100,000 1,000,000 Ceycom Global Communication Ltd. 50,000 250,000 50,000 250,000 Ceylinco Capital Ltd 25,000 250,000 25,000 250,000 Ceylinco Cellular Company (Pvt) Ltd 20,000 200,000 20,000 200,000 Ceylinco CISCO Ranaviru Services (Pvt) Ltd. 12,500 125,000 12,500 125,000 Ceylinco CISCO Cash Management &Transit Co.Ltd 12,500 125,000 12,500 125,000 Ceylinco Design & Project Management Co.(Pvt) Ltd. 37,500 375,000 37,500 375,000 Ceylinco Diamond Trading Co (Pvt). Ltd. 616,037 7,186,830 616,037 7,186,830 Ceylinco Fashion Trends Co. Ltd. 30,000 300,000 30,000 300,000 Ceylinco Foliage Export (Pvt) Ltd. 1,784,534 17,919,235 1,784,534 17,919,235 Ceylinco Freight International (Pvt) Ltd. 10,200 102,000 10,200 102,000 Ceylinco Grameen Credit Co. Ltd. 15,000 150,000 15,000 150,000 Ceylinco Holding (Pvt) Ltd. 1,000 10,000 1,000 10,000 Ceylinco Homes International Ltd. 500,000 5,000,000 500,000 5,000,000 Ceylinco Hotels Ltd. 47,000 470,000 47,000 470,000 Ceylinco Investment & Reality Ltd. 25,000 250,000 25,000 250,000 Ceylinco Management & Accountancy Services Ltd. 100,000 1,000,000 100,000 1,000,000 Ceylinco Net Assist (Pvt) Ltd. 12,500 125,000 12,500 125,000 Ceylinco Niranjan Invention (Pvt) Ltd. 9,875 61,250 9,875 61,250 Ceylinco Packaging Co. Ltd. 50,000 500,000 50,000 500,000 Ceylinco Pharmaceuticals Ltd 25,000 250,000 25,000 250,000 Ceylinco Profit Sharing Investment Corporation Ltd. 12,500 125,000 12,500 125,000 Ceylinco Seylan Housing & Commercial Properties Ltd. 40,540 405,400 40,540 405,400 Ceylinco Shriram Capital Management Services Co.(Pvt) Ltd. 2,500 25,000 2,500 25,000 Ceylinco Tax & Financial Consultants (Pvt) Ltd. 23,000 230,000 23,000 230,000 Ceylinco Travels & Tours Ltd. 20,000 200,000 20,000 200,000 Ceylinco Universal Ltd. 5,000 50,000 5,000 50,000 Ceylinco Venture Capital Co. Ltd. 145,000 1,450,000 145,000 1,450,000 Ceylinco Worldwide Trading (Pvt) Ltd. 150 7,572 150 7,572 Ceynergy Electronic Co.(Pvt) Ltd. 30,000 300,000 30,000 300,000 eceylinco.com (Pvt) Ltd. 10,000 100,000 10,000 100,000 Economic Resurgence Association (Pvt) Ltd 200,000 1,000,000 200,000 1,000,000 IC & CS Software Solution Co. (Pvt) Ltd 10,000 100,000 10,000 100,000 Independent Financial News & Views (Pvt) Ltd 14,290 142,900 14,290 142,900 International College of Business Technology Ltd. 40,000 400,000 40,000 400,000 International Consultancy & Corporate Services (Pvt) Ltd. 20,000 200,000 20,000 200,000 Knoelt (Pvt) Ltd. 3,000 312,500 3,000 312,500 MBSL Savings Bank Ltd 10,833 108,330 10,833 108,330 Middleway Ltd. 416 5,437 416 5,437 Middleway Printing (Pvt) Ltd. 20,000 200,000 20,000 200,000 Peoples Reality Ltd 18,244,504 18,246,718 18,244,504 18,246,718 San Michele Ltd. 1,750 175,000 1,750 175,000 Seraka Investments Ltd. 410,000 4,100,000 410,000 4,100,000 South Asian Travels Ltd 25,000 250,000 25,000 250,000 The Finance & Guarantee Company Ltd 2,500 250,000 2,500 250,000 The Golden Key Credit Card Co. Ltd. 55,030 669,804 55,030 669,804 Tropical Foliage Ltd 100,000 890,932 100,000 890,932 Credit Information Bureau of Sri Lanka 100 23,300 100 23,300 Equity Investment Lanka Ltd. 50,000 600,000 50,000 600,000 Lanka Tractors Ltd. 36,000 518,040 36,000 518,040

92,974,268 92,974,268

94


No. of Shares Cost No. of Shares CostRs. Rs.

19.2 INVESTMENT IN PREFERENCE SHARESCeylinco Hotels Ltd 820,000 8,200,000 820,000 8,200,000Tropical Foliage Ltd 250,000 2,500,000 250,000 2,500,000

10,700,000 10,700,000

19.3 INVESTMENT IN OTHERSCeylinco Building Society Ltd 40 20,000 40 20,000

20,000 20,000TOTAL 103,694,268 103,819,268


Rs. Rs. Rs. Rs.

20 LOANS AND ADVANCES TO OTHER CUSTOMERSLoan Receivables 20.1 3,756,427,911 1,944,401,017 3,776,383,171 1,912,663,895 Pawning Advance Receivables 20.2 135,932,956 169,122,767 135,932,956 169,122,767 Hire Purchase Receivables 20.3 265,685,092 324,062,852 265,685,092 324,062,852 Lease Receivables 20.4 216,195,856 234,846,077 216,195,856 234,846,077 Loans & Receivables (Repossessed Collaterals) 20.5 14,801,788 - 14,801,788 -

4,389,043,603 2,672,432,713 4,408,998,863 2,640,695,591

20.1 LOAN RECEIVABLESTerm Loans 20.1.1 1,552,527,201 797,868,279 1,572,482,461 837,594,590 Easy Payment Loans 20.1.2 21,710,707 24,547,656 21,710,707 24,547,656 Micro Finance Receivables 20.1.3 2,169,241,261 1,042,644,212 2,169,241,261 1,042,644,212 Margin Trading Loans - 73,667,741 - 2,204,309 Staff Loans 12,948,742 5,673,128 12,948,742 5,673,128

3,756,427,911 1,944,401,017 3,776,383,171 1,912,663,895

20.1.1 TERM LOANSTerm Loans 1,778,206,943 982,227,320 1,798,162,203 889,368,173

1,778,206,943 982,227,320 1,798,162,203 889,368,173 Provision for Impairment - Individually Assessed 20.1.1.A (71,230,564) (179,754,248) (71,230,564) (47,168,790)Provision for Impairment - Collectively Assessed 20.1.1.B (154,449,178) (4,604,793) (154,449,178) (4,604,793)

1,552,527,201 797,868,279 1,572,482,461 837,594,590

20.1.1.A Provision for Impairment - Individually AssessedBalance as at beginning of the year 179,754,248 245,791,982 47,168,790 125,589,619 Write off during the year - 12,383,095 - - Reversal due to disposal of Discontinued Operations (132,585,458) - - - Impairment Charge/(Reversal) for the year 24,061,774 (78,420,829) 24,061,774 (78,420,829)Balance as at end of the year 71,230,564 179,754,248 71,230,564 47,168,790

20.1.1.B Provision for Impairment - Collectively AssessedBalance as at beginning of the year 4,604,793 105,878,746 4,604,793 105,878,746 Impairment Charge/(Reversal) for the year 149,844,385 (101,273,953) 149,844,385 (101,273,953)Balance as at end of the year 154,449,178 4,604,793 154,449,178 4,604,793


95



Rs. Rs. Rs. Rs.

20.1.2 Easy Payment LoansEasy Payment Loans 21,710,707 29,617,702 21,710,707 29,617,702

21,710,707 29,617,702 21,710,707 29,617,702 Provision for Impairment - Individually Assessed 20.1.2A - (1,794,711) - (1,794,711)Provision for Impairment - Collectively Assessed 20.1.2B - (3,275,335) - (3,275,335)

21,710,707 24,547,656 21,710,707 24,547,656

20.1.2A Movement in Collective Impairment allowance for Easy Payment Loan ReceivablesBalance as at beginning of the year 1,794,711 - 1,794,711 - Charge for the year (1,794,711) 1,794,711 (1,794,711) 1,794,711 Balance as at end of the year - 1,794,711 - 1,794,711

20.1.2B Movement in Collective Impairment allowance for Easy Payment Loan ReceivablesBalance as at beginning of the year 3,275,335 10,132,513 3,275,335 10,132,513 Charge for the year (3,275,335) (6,857,178) (3,275,335) (6,857,178)Balance as at end of the year - 3,275,335 - 3,275,335

20.1.3 Micro Finance ReceivablesMicro Finance Receivables 2,214,843,239 1,059,095,915 2,214,843,239 1,059,095,915

2,214,843,239 1,059,095,915 2,214,843,239 1,059,095,915 Provision for Impairment 20.1.3.A (45,601,978) (16,451,703) (45,601,978) (16,451,703)

2,169,241,261 1,042,644,212 2,169,241,261 1,042,644,212

20.1.3.A Movement in Provision for Micro Finance ReceivablesBalance as at beginning of the year 16,451,703 - 16,451,703 - Charge for the year 29,150,275 16,451,703 29,150,275 16,451,703 Balance as at end of the year 45,601,978 16,451,703 45,601,978 16,451,703

20.2 PAWNING ADVANCE RECEIVABLESGross Pawning Advance Receivables 149,126,203 219,845,277 149,126,203 219,845,277Provision for Impairment (13,193,247) (50,722,511) (13,193,247) (50,722,511)

135,932,956 169,122,767 135,932,956 169,122,767

20.3 HIRE PURCHASE RECIVEABLESHire Purchase Stock 443,319,172 469,231,970 443,319,172 469,231,970Deferred Interest (105,805,055) (115,243,613) (105,805,055) (115,243,613)

337,514,117 353,988,357 337,514,117 353,988,357Provision for Impairment - Individually Assessed 20.3.1 (25,654,156) (16,455,108) (25,654,156) (16,455,108)Provision for Impairment - Collectively Assessed 20.3.2 (46,174,869) (13,470,396) (46,174,869) (13,470,396)

265,685,092 324,062,852 265,685,092 324,062,852

20.3.1 Movement in Individual Impairment Allowance for Hire Purchase ReceivablesBalance as at beginning of the year 16,455,108 10,122,493 16,455,108 10,122,493Charge/(Reversal) for the year 9,199,048 6,332,616 9,199,048 6,332,616Balance as at end of the year 25,654,156 16,455,108 25,654,156 16,455,108

20.3.2 Movement in Collective Impairment allowance for Hire Purchase ReceivablesBalance as at beginning of the year 13,470,396 53,366,391 13,470,396 53,366,391Charge/(Reversal) for the year 32,704,473 (39,895,995) 32,704,473 (39,895,995)Balance as at end of the year 46,174,869 13,470,396 46,174,869 13,470,396

96


Rs. Rs. Rs. Rs.

20.4 LEASE RECEIVABLESGross Investment 304,086,850 343,686,167 304,086,850 343,686,167

304,086,850 343,686,167 304,086,850 343,686,167Unearned Income (70,043,580) (99,045,465) (70,043,580) (99,045,465)

234,043,270 244,640,702 234,043,270 244,640,702

Provision for Impairment - Individually Assessed 20.4.1 (2,353,901) (6,526,618) (2,353,901) (6,526,618)Provision for Impairment - Collectively Assessed 20.4.2 (15,493,513) (3,268,007) (15,493,513) (3,268,007)Net Lease Rental receivables 216,195,856 234,846,077 216,195,856 234,846,077

20.4.1 Movement in Individual Impairment allowance for Lease ReceivablesBalance as at beginning of the year 6,526,618 13,306,649 6,526,618 13,306,649Charge/(Reversal) for the year (4,172,717) (6,780,031) (4,172,717) (6,780,031)Balance as at end of the year 2,353,901 6,526,618 2,353,901 6,526,618

20.4.2 Movement in Collective Impairment allowance for Lease ReceivablesBalance as at beginning of the year 3,268,007 35,510,564 3,268,007 35,510,564Charge/(Reversal) for the year 12,225,506 (32,242,558) 12,225,506 (32,242,558)Balance as at end of the year 15,493,513 3,268,007 15,493,513 3,268,007

20.5 Loans & Receivables (Repossessed Collaterals)20.5.1 Loans

Capital Outstanding (Net) 886,826 - 886,826 - 886,826 - 886,826 -

20.5.2 Hire PurchaseCapital Outstanding (Net) 12,860,708 - 12,860,708 -Impairment charge for the year (2,588,644) - (2,588,644) -

10,272,064 - 10,272,064 -

20.5.3 LeasingCapital Outstanding (Net) 7,252,975 - 7,252,975 -Impairment charge for the year (3,610,077) - (3,610,077) -

3,642,898 - 3,642,898 - 14,801,788 - 14,801,788 -

21 FINANCIAL ASSETS - HELD TO MATURITYTreasury Bills issued by Government of Sri Lanka 884,469,391 197,430,580 884,469,391 197,430,580Investment in Commercial Papers 390,276 64,390,276 - -

884,859,667 261,820,856 884,469,391 197,430,580


97


CompanyAS AT 31ST MARCH 2015 2014

No. of Shares Holding Cost No. of Shares Holding Cost % Rs % Rs

22 INVESTMENTS IN SUBSIDIARIES

22.1 COMPANY INVESTMENT IN SUBSIDIARYMillennium Housing Developers Ltd. - - - 91,754,028 68.13 152,923,380Nation Lanka Equities (Pvt) Ltd 20,676,379 66.05 282,487,448 17,426,379 67.47 256,487,448First Lanka Treasuries Ltd. 100,000 99.93 1,000,000 100,000 99.93 1,000,000Nation Lanka Capital Limited - - - 3,000,000 75.00 30,000,000Ceylinco Towers Ltd 500,000 100.00 5,000,000 500,000 100.00 5,000,000Nation Lanka Promotions Ltd 1,000,000 10.53 10,000,000 1,000,000 10,000,000

298,487,448 455,410,828Provision for Impairment (31,000,000) (6,000,000)

267,487,448 449,410,828

22.2 GROUP HOLDING IN SUBSIDIARY

2015 2014Name of Subsidiary Principal

ActivityReporting date No. of Shares Effective

Holding %No. of Shares Effective

Holding %

Millennium Housing Developers Ltd. Propoery Developers

31-Mar-15 - - 91,754,028 68.13

Nation Lanka Equities (Pvt) Ltd Share Trading 31-Mar-15 20,676,379 66.05 17,426,379 67.47First Lanka Treasuries Ltd. 31-Mar-15 100,000 99.93 100,000 100.00Nation Lanka Capital Limited Marging Trading 31-Mar-15 - - 3,000,000 81.82Ceylinco Towers Ltd 31-Mar-15 500,000 100.00 500,000 100.00Nation Lanka Promotions Ltd 31-Mar-15 1,000,000 52.25 8,300,000 62.46

Significant judgements and assumptions made in determining whether the group has control

Subsidiaries are those entities controlled by the Group. Control is achieved when the Group is exposed, or has rights to variable returns from its investment with the investee and has the ability to affect those returns through power over the investee. The group has more than half of the voting rights in each of its subsidiaries and the management has determined that group has control over all of the above subsidiaries.

Disclosure of the interest that non-controlling interest have in the group’s activitiesNature of interest in subsidiaries with material non controlling interests.

Name of the subsidiary Nation Lanka Equities (Pvt) Ltd

Principal place of business No: 44, Guildford Crescent, Colombo 07

Proportion of ownership interest held by non-controlling interests 33.95%

Profit/(loss) allocated to non-controlling interests (18,016,327)

Summary financial information for subsidiaries that have non-controlling interests that are material to the Group.

The following table summarises the information related to Nation Lanka Equities Limited which has a material non controlling interests before any inter company eliminations.

98

Nation Lanka Equities (Pvt) Ltd.As at / for ther year ended 31st March 2015 2014

Revenue 56,647,170 50,884,148Loss after tax (59,027,529) (80,062,337)- attributable to non-controlling interests (1,694,558) 556,820- attributable to Equity Holders of the parent (57,332,971) (80,619,157)Other comprehensive income 1,360,780 3,249,411Total comprehensive income (57,666,749) (76,812,926)Non-current assets 110,448,153 120,570,321Current assets 291,196,679 117,739,058Current liabilities (306,749,162) (129,458,886)Non-current liabilities (6,260,202) (6,348,275)Net assets 88,635,468 102,502,218- attributable to non-controlling interests 32,830,780 34,525,338- attributable to Equity Holders of the parent 55,804,689 67,976,880

23 INVESTMENT IN ASSOCIATE

CompanyAS AT 31ST MARCH 2015 2014

No. of Shares Holding Cost No. of Shares Holding Cost% % Rs

Investment in Ordinary SharesE Futures (Pvt) Ltd 2,980,483 24.84% 33,294,060 2,980,483 24.84% 33,294,060Provision for Impairment of Investment (14,997,819) -

18,296,241 33,294,060

GroupAS AT 31ST MARCH 2015 2014

No of Shares Holding Carrying Value No of Shares Holding Carrying Value % Rs % Rs

Investment in Ordinary SharesE Futures (Pvt) Ltd 3,600,000 28.32% 58,232,634 3,600,000 28.32% 40,214,060Group Share of Associate Company Retained Earnings 5,699,391 21,133,774Less : Dividend Received (2,235,362) (3,115,200)

61,696,663 58,232,634

Summarized Financial Information of Associate

E Futures (Pvt) Ltd

For the year ended 31st March 2015 2014 Rs. Rs.

Income 203,665,316 256,782,134Expenses (183,096,715) (239,512,359)Profit 20,568,601 17,269,775


99


Summarized Financial Information of Associate (Continued)

AS AT 31ST MARCH 2015 2014 Rs. Rs.

Current Assets 86,288,823 104,484,747Non Current Assets 6,850,450 7,615,982Total Assets 93,139,273 112,100,729Current Liabilities 11,940,020 25,257,217Non Current Liabilities 7,535,056 7,354,150Total Liabilities 19,475,076 32,611,367


Rs. Rs. Rs. Rs.

24 AMOUNTS DUE FROM RELATED COMPANIESNation Lanka Capital Ltd 8,000,000 - 8,000,000 -Anilana Collection (Private) Limited 22,000,000 80,000,000 22,000,000 80,000,000Investor Access Equities (Private) Limited 5,500,000 - 5,500,000 -Asia Fort Asset Management (Private) Limited 3,000,000 - 3,000,000 -

38,500,000 80,000,000 38,500,000 80,000,000

Nation Lanka Equities (Pvt) Ltd - - 26,028,264 10,303,160Ceylinco Real Estate Developers Ltd - 200,460 - -Ceylinco Towers(Pvt) Ltd - - - 111,100People's Realty Ltd - 15,387,210 - -Millennium Housing Developers Ltd 910,576 - 910,576 23,459,725Ceylinco Constructions Company Ltd 830,937 - 830,937 876,868First Lanka Treasuries Ltd - - 23,196,077 14,581,948MC Urban Developers Ltd - 1,214,931 - -Investor Access (Pvt) Ltd - 28,156,317 - -Anilana Hotels and Properties Limited 4,960,114 22,962,544 - -Asia Financial management Consultants (Pvt) Ltd 24,752 - - -Leader Holding (Pvt) Ltd 5,600 - - -Queens Club Colombo 22,725 - - -AIO Investments (Private) Limited 66,742 - - -Nawaloka Hospital PLC 59,185,228 98,649,633 59,185,228 98,649,633

104,586,446 246,571,095 148,651,082 227,982,434Provision for Impairment (9,946,930) (15,387,210) (10,401,933) (10,401,933)

94,639,516 231,183,885 138,249,149 217,580,501

25 REAL ESTATE STOCKNet Investment In Real Estate & Property Development 180,702,136 181,414,417 180,702,136 181,414,417Acquired Land Stock 1,480,500 1,480,500 1,480,500 1,480,500

182,182,636 182,894,917 182,182,636 182,894,917Impairment for Fall in Value of Real Estate Stock (21,221,607) (2,420,500) (21,221,607) (2,420,500)

160,961,029 180,474,417 160,961,029 180,474,417

26 INVESTMENT PROPERTIESBalance at the beginning of the year 488,229,315 329,191,553 451,830,315 329,191,553Disposed during the year (2,164,590) (35,000,000) (2,164,590) (35,000,000)Purchased / Transferred during the year 108,160,000 144,224,669 108,160,000 93,861,809Change in Fair Value (19,813,600) 49,813,093 (19,813,600) 63,776,953Reversal due to disposal of discontinued operations (36,399,000) - - -Balance at the end of the year 538,012,125 488,229,315 538,012,125 451,830,315

Investment properties are stated at fair value. The fair value of investment properties was determined by external, independent property valuers, Mr. P W Senaratne and Mr. Sunil Fernando who are Fellow members of the Royal Institute of Chartered Surveyors of the United Kingdom (RICS) and they have recent experience in the location and category of the property being valued.

100

The Investment Property of the Company/Group includes the following:

Buildings 31/03/2015 31/03/2014Owning Company Location Sq. Ft Rs. Rs.

Nation Lanka Finance PLC Athurugiriya - - -Nation Lanka Finance PLC Athurugiriya 5,000 55,475,200 55,475,200Nation Lanka Finance PLC Kalkuda - 118,450,000 108,974,000Nation Lanka Finance PLC Puttalam - - 2,164,590Nation Lanka Finance PLC Wennappuwa - 33,400,000 33,400,000Nation Lanka Finance PLC Kurunegala 13,500 100,000,000 89,000,000Nation Lanka Finance PLC Bagatale 3000 39,321,925 39,321,925Nation Lanka Finance PLC Foliage - 102,280,000 123,494,600Millennium Housinng Developers Limited Athurugiriya - - 36,399,000Nation Lanka Finance PLC Katukenda 65,925,000 -Nation Lanka Finance PLC Muthuwal, Colombo 15 18,000,000 -Nation Lanka Finance PLC Korathota, Colombo 3,860,000 -Nation Lanka Finance PLC Ranwala Kegalle 800,000 -Nation Lanka Finance PLC Thanthimulla, Kalutara” 500,000 -

538,012,125 488,229,315


Rs. Rs. Rs. Rs.

27 INTANGIBLE ASSETSComputer SoftwareCostBalance at the beginning of the year 97,049,076 65,652,047 87,481,481 56,484,452Additions during the year - 31,397,029 - 30,997,029Impairment - IT System discontinued (18,303,650) - (18,303,650) -Disposal due to disposal of subsidiary during the year (400,000) - - -Balance at the end of the year 78,345,426 97,049,076 69,177,831 87,481,481

AmortisationBalance at the beginning of the year 55,384,720 41,974,058 46,843,864 33,861,428Charge during the year 10,228,817 13,410,662 9,835,590 12,982,436Impairment - IT System discontinued (12,703,903) - (12,703,903) -Disposal due to disposal of subsidiary during the year (25,000) - - -Balance at the end of the year 52,884,634 55,384,720 43,975,551 46,843,864

Net Book Value 25,460,792 41,664,356 25,202,280 40,637,617

CompanyIntangible assets include software licenses purchased and the new information technology system that was implemented during 2014/15. The Company discontinued the use .of "fusion" the previous IT system used and this amount has been charged to profit or loss during the year. The loss recognised as a result of discontinuing the use of the previous IT system (Rs. 18,303,650 - Rs. 12,703,903) Rs. 5,599,747 has been recognised in profit or loss during the current year.


101


28PR

OPE

RTY,

PLA

NT

& E

QU

IPM

ENT

28.1

Com

pany

DES

CRIP

TIO

N O

ffice

Fur

nitu

re M

otor

Com

pute

r L

ease

d 2

015

201

4 E

quip

men

t &

Fitt

ings

Veh

icle

s E

quip

men

t & A

sset

s T

otal

Tot

al R

s. R

s. R

s. R

s. R

s. R

s. R

s.

COST

Bala

nce

at th

e be

ginn

ing

of th

e ye

ar 7

2,60

7,79

0 8

3,49

1,07

5 1

2,49

4,57

5 7

7,79

6,40

5 2

,240

,000

248

,629

,845

331

,442

,020

Addi

tions

dur

ing

the

year

8,9

68,8

41 1

1,75

7,57

1 -

14,

549,

666

- 3

5,27

6,07

8 9

5,10

7,22

7D

ispo

sals

dur

ing

the

year

- -

(950

,480

) -

- (9

50,4

80)

(177

,919

,402

)Ba

lanc

e at

the

end

of th

e ye

ar 8

1,57

6,63

1 9

5,24

8,64

6 1

1,54

4,09

5 9

2,34

6,07

1 2

,240

,000

282

,955

,443

248

,629

,845

DEP

RECI

ATIO

NBa

lanc

e at

the

begi

nnin

g of

the

year

47,

648,

258

28,

956,

237

5,9

68,5

90 5

5,19

4,54

1 2

94,5

76 1

38,0

62,2

03 1

32,6

55,6

14D

epre

ciat

ion

for t

he y

ear

18,

612,

358

12,

293,

234

1,5

95,5

76 1

5,86

9,01

1 6

48,4

74 4

9,01

8,65

3 4

2,00

5,18

7D

ispo

sal d

urin

g th

e ye

ar -

- (9

50,4

80)

- -

(950

,480

) (3

6,59

8,59

9)Ba

lanc

e at

the

end

of th

e ye

ar 6

6,26

0,61

6 4

1,24

9,47

1 6

,613

,686

71,

063,

552

943

,050

186

,130

,376

138

,062

,202

Tota

l Car

ryin

g Am

ount

of P

rope

rty,

Pla

nt &

Equ

ipm

ent a

s at

31.

03.2

015

15,

316,

015

53,

999,

175

4,9

30,4

09 2

1,28

2,51

8 1

,296

,950

96,

825,

067

Tota

l Car

ryin

g Am

ount

of P

rope

rty,

Pla

nt &

Equ

ipm

ent a

s at

31.

03.2

014

24,

959,

532

54,

534,

838

6,5

25,9

85 2

2,60

1,86

3 1

,945

,424

110

,567

,643

Com

pute

r eq

uipm

ent

incl

udes

ass

ets

amou

ntin

g Rs

, 8,2

07,5

00 w

hich

are

not

yet

rea

dy fo

r us

e, t

here

fore

no

depr

ecia

tion

has

been

cha

rged

on

thes

e as

sets

dur

ing

the

curr

ent

year

. Pr

oper

ty p

lant

and

equ

ipm

ent i

nclu

des

fully

dep

reci

ated

ass

ets

whi

ch a

re s

till i

n us

e of

Rs.

51.5

01,0

60 a

s at

31

Mar

ch 2

015

(201

4- R

s. 5

1,04

5,80

7).

102

28.2

Gro

up

Lan

d &

Site

Offi

ces

Offi

ce F

urni

ture

Mot

or C

ompu

ter

Lea

sed

Asse

ts20

1520

14 B

uild

ings

& O

ther

Equ

ipm

ent

& F

ittin

gs V

ehic

les

Equ

ipm

ent &

Mot

or C

onst

ruct

ion

Tota

l T

otal

Sof

twar

e V

ehic

les

Equ

ipm

ent

Rs.

Rs.

Rs.

Rs.

Rs.

Rs.

Rs.

Rs.

Rs.

Rs.

COST

Bala

nce

at a

t the

beg

inni

ng o

f the

yea

r 9

,168

,570

118

,355

,118

109

,995

,959

105

,375

,543

21,

849,

243

96,

710,

183

2,2

40,0

00 5

,802

,039

469

,496

,656

539

,592

,780

Ad

ditio

ns d

urin

g th

e ye

ar -

3,9

94,7

53 9

,161

,764

10,

648,

840

559

,980

14,

720,

666

- -

39,

086,

003

112

,172

,943

Im

pairm

ent d

urin

g th

e ye

ar-

--

--

--

--

(22,

942)

Dis

posa

l Dur

ing

the

year

- -

(157

,600

) (1

30,6

01)

(1,3

22,2

80)

(640

,000

) -

- (2

,250

,481

)(1

82,2

46,1

25)

Dis

posa

l of S

ubsi

diar

y (9

,168

,570

) (5

7,10

7,15

7) (8

4,22

3) (8

5,00

0) (8

,378

,768

) -

- -

(74,

823,

718)

- Ba

lanc

e at

the

end

of th

e ye

ar -

65,

242,

715

118

,915

,900

115

,808

,782

12,

708,

175

110

,790

,849

2,2

40,0

00 5

,802

,039

431

,508

,460

469

,496

,656

DEP

RECI

ATIO

NBa

lanc

e at

at t

he b

egin

ning

of t

he y

ear

5,1

34,3

24 5

1,43

0,40

6 5

4,01

7,83

2 3

5,69

2,64

6 1

5,17

3,07

6 7

0,55

8,32

4 2

94,5

76 5

,802

,039

238

,103

,222

219

,362

,846

Ch

arge

for t

he y

ear

- 4

,084

,950

22,

720,

541

14,

905,

771

1,7

59,0

61 1

8,04

1,34

0 6

48,4

74 -

62,

160,

137

55,

395,

354

Dis

posa

l dur

ing

the

year

- -

(101

,368

) (3

3,13

3) (1

,322

,280

) (3

92,7

16)

- -

(1,8

49,4

97)

(36,

651,

868)

Impa

irmen

t dur

ing

the

year

--

--

--

--

--

Dis

posa

l of S

ubsi

diar

y (5

,134

,323

) (5

2,76

2,44

5) (1

6,74

0) (2

4,08

3) (8

,378

,768

) -

- -

(66,

316,

359)

- Ba

lanc

e at

the

end

of th

e ye

ar-

2,7

52,9

11 7

6,62

0,26

5 5

0,54

1,20

1 7

,231

,089

88,

206,

948

943

,050

5,8

02,0

39 2

32,0

97,5

04 2

38,1

03,2

22

Tota

l Car

ryin

g Am

ount

of P

rope

rty,

Pla

nt

& E

quip

men

t as

at 3

1.03

.201

5 -

62,

845,

399

42,

295,

635

65,

267,

581

5,4

77,0

86 2

2,58

3,90

1 1

,296

,950

- 1

99,4

10,9

56

Tota

l Car

ryin

g Am

ount

of P

rope

rty,

Pla

nt

& E

quip

men

t as

at 3

1.03

.201

4 4

,034

,246

66,

924,

713

55,

978,

127

69,

682,

897

6,6

76,1

67 2

6,15

1,85

9 1

,945

,424

- 2

31,3

93,4

33


103



Rs. Rs. Rs. Rs.

29 TRADE & OTHER RECEIVABLESTrade Receivables 150,856,321 312,082,496 6,016,955 28,284,929Provision for Impairment 29.1 (35,141,708) (47,545,343) (1,947,143) -

115,714,613 264,537,153 4,069,812 28,284,929Other Receivables 38,379,574 63,752,211 24,636,625 19,850,803Provision for Impairment 29.2 (6,235,794) - (6,235,795) -

32,143,780 63,752,211 18,400,831 19,850,803 147,858,393 328,289,364 22,470,642 48,135,732

29.1 Provision for Impairment - Trade ReceivablesBalance at the beginning of the year 47,545,343 52,509,199 - -Reversal due to disposal of Discontinued Operations (17,394,730) - - -Provision/(Reversal) during the year 4,991,095 (2,997,192) 1,947,143 -Write off during the year - (1,966,664) - -Balance at the end of the year 35,141,708 47,545,343 1,947,143 -

29.2 Provision for Impairment - Other ReceivablesBalance at the beginning of the year - - - -Provision/(Reversal) during the year 6,235,794 - 6,235,794 -Write off during the year - - - -Balance at the end of the year 6,235,794 - 6,235,794 -

30 INVENTORIESRaw Materials - 45,094,430 - -Work in Progress - 262,376,778 - -Finished Goods - Houses - 10,284,863 - -Land Stock - 206,074,728 - -

- 523,830,799 - -Provision for Slow Moving Inventories 30.1 - (3,957,661) - -

- 519,873,138 - -

30.1 Provision for Slow Moving InventoriesBalance at the beginning of the year 3,957,661 3,957,661 - -Reversal during the year due to disposal of subsidiaries (3,957,661) - - -Balance at the end of the year - 3,957,661 - -

104



Rs. Rs. Rs. Rs.

31 DEFERRED TAX ASSETSBalance at the beginning of the year 6,169,639 4,076,578 - -Recognized in Profit & LossCharge/(Reversal) for the year - 2,097,061 - -Recognized in Other Comprehensive IncomeCharge/(Reversal) for the year - (4,001) - -Reversal due to disposal of subsidiaries (6,169,639)Balance at the end of the year - 6,169,639 - -

The provision for deferred tax of the Group and Company is attributable to the following :

GROUP2015 2014

Temporary Tax Effect Temporary Tax Effect Difference Difference

Rs. Rs. Rs. Rs.

Deferred Tax AssetOn Property, plant and equipments - - 677,388 84,696 On Retirement Benefit Obligation - - 21,731,937 6,084,943

- - 22,409,325 6,169,639 Deferred Tax LiabilityOn Property, plant and equipments - - - -

- - - - Net Deferred Tax Asset / (Liability) - - 22,409,325

COMPANYUnrecognized Deferred Tax (Asset)/LiabilityDeferred tax asset has not been recognized in respect of the following items because it is not probable that future taxable profits will be available against which the Company can utilize the benefits thereon.

2015 2014 Temporary Tax Effect Temporary Tax Effect Difference Difference

Rs. Rs. Rs. Rs.

Deferred Tax AssetOn Tax Losses Carried Forward 1,993,642,268 558,219,835 1,745,617,199 488,772,816

1,993,642,268 558,219,835 1,745,617,199 488,772,816

Deferred Tax LiabilityOn Property, Plant and Equipment 74,493,879 20,858,286 38,473,295 10,772,523 On Retairment benefit Obligations 42,395,036 11,870,610 42,495,121 11,898,634 On Lease Stock Receivables 115,985,720 32,476,002 106,188,402 29,732,753

232,874,635 65,204,898 187,156,818 52,403,910 Net Deferred Tax Asset / (Liability) 1,760,767,633 493,014,937 1,558,460,380 436,368,905

105


33 DEBENTURESBalance at the beginning of the year 3,250,000 3,250,000 - -Redeemed during the year - - - -Disposal of Subsidiary (3,250,000) - - -Balance at the end of the year - 3,250,000 - -

34 DUE TO BANKS AND FINANCIAL INSTITUTIONSBank Overdrafts 409,492,463 140,352,357 239,883,129 108,401,754Bank Borrowings - Securitised (Note 34.1) 132,104,492 33,560,014 132,104,492 33,560,014

541,596,955 173,912,371 371,987,621 141,961,768

34.1 Bank Borrowings - Securitised

AS AT 31ST MARCH 2015 2014Borrowing Company Lending Institution Security Rs. Rs.

Nation Lanka Finance PLC Seylan Bank PLC Mortgage Kurunegala Building

- 10,000,000

Nation Lanka Finance PLC Bank Of Ceylon Pledge the CR Books - 23,560,014Nation Lanka Finance PLC Sri Lanka Co-Operative Rural Bank

Federation Ltd.Micro Finance Loan Portfolio worth of 200M

132,104,492 -

132,104,492 33,560,014

A loan of Rs. 150 Mn was obtained during the year from Sri Lanka Co-Operative Rural Bank Federation Ltd. An interest rate of 12.5% p.a. is payable on this facility.

Group Company2015 2014 2015 2014

Rs. Rs. Rs. Rs.

35 DUE TO CUSTOMERSFixed Deposits 5,251,785,208 3,385,267,512 5,251,785,208 3,385,267,512Promissory Notes - 87,734,861 - 87,734,861Other Short Term Borrowings 121,634,812 127,047,719 121,634,812 127,047,719Customer Savings - Micro Finance 244,565,471 205,992,073 244,565,471 205,992,073

5,617,985,491 3,806,042,165 5,617,985,491 3,806,042,165

36 AMOUNTS DUE TO RELATED COMPANIESMillennium Housing Developers Ltd 10,988,670 - 10,988,670 55,047,855Millennium Villa Housing Developers Ltd - - - 38,729,447Ceylinco Towers Ltd - - 1,064,016 1,260,256Protege Investment (Private) Limited - 3,500,000 - -

10,988,670 3,500,000 12,052,686 95,037,558


Rs. Rs. Rs. Rs.

32 OTHER ASSETSDeposits, Advances and Prepayments 62,816,450 34,579,637 59,316,450 31,079,638Others 60,820,610 47,879,993 60,820,610 46,981,625

123,637,060 82,459,630 120,137,060 78,061,263

106

Group CompanyAS AT 2015 2014 2015 2014

Rs. Rs. Rs. Rs.

37 RETIREMENT BENEFIT OBLIGATIONS37.1 Provision for Defined Benefit Obligations (Net)

Present Value of Defined benefit Obligations 34.2 24,275,058 43,729,609 18,014,856 15,649,398Plan Assets 34.3 (60,409,892) (58,144,519) (60,409,892) (58,144,519)Provision for Defined Benefit Obligations (36,134,834) (14,414,910) (42,395,036) (42,495,121)

37.2 Present Value of Defined benefit ObligationsBalance as at 1st April 43,729,609 46,254,818 15,649,398 23,060,074Current Service Cost 3,963,204 9,551,181 3,017,310 2,906,168Interest Cost 2,171,249 3,716,472 1,643,186 1,512,321Transferred from Gratuity Trust Fund 952,000 4,601,743 952,000 4,601,743Actuarial (Gain) / Loss (2,703,818) (10,442,657) (1,343,038) (7,227,422)Transferred to Gratuity Trust Fund (952,000) (4,601,743) (952,000) (4,601,743)Payments made (including benefits paid by the plan) (1,153,250) (5,370,206) (952,000) (4,601,743)Disposal of Subsidiary (21,731,936) - - -Balance as at 31st March 24,275,058 43,729,609 18,014,856 15,649,398

37.3 Movement in Plan AssetsBalance as at 1st April 58,144,519 52,465,429 58,144,519 52,465,429Expected return on Plan Assets 6,051,026 4,997,266 6,051,026 4,997,266Contribution paid into the Plan 952,000 4,601,743 952,000 4,601,743Benefits paid by the Plan (952,000) (4,601,743) (952,000) (4,601,743)Actuarial (Gain) / Loss on Plan Assets (3,785,653) 681,824 (3,785,653) 681,824Balance as at 31st March 60,409,892 58,144,519 60,409,892 58,144,519

37.4 Actuarial (Gain) / LossActuarial (Gain)/ Loss for year- Obligation (2,703,818) (10,422,657) (1,343,038) (7,227,422)Actuarial (Gain)/ Loss for year- Plan Assets 3,785,653 (681,824) 3,785,653 (681,824)Recognized in Other Comprehensive Income 1,081,835 (11,104,481) 2,442,615 (7,909,246)

37.5 Amount Recognized in the Comprehensive IncomeCurrent Service Cost 3,963,204 9,551,181 3,017,310 2,906,168Interest Cost 2,171,249 3,716,472 1,643,186 1,512,321Expected Return on Plan Assets (6,051,026) (4,997,266) (6,051,026) (4,997,266)

83,427 8,270,387 (1,390,530) (578,777)

An actuarial valuation of the gratuity liability of the Company was carried out as at 31st March 2015 by Mr. Piyal S.Goonetilleke. Fellow of the Society of Actuaries (USA), Member of the American Academy of Actuaries. The valuation method used by the actuaries to value the fund is the ‘Projected Unit Credit Method’ recommended by the Sri Lanka Accounting Standard LKAS - 19 ‘Employee Benefits’. The liability is externally funded.

The group applied the Projected Unit Credit (PUC) method in order to determine the present value of the employee benefit liability. The following key assumptions were made in arriving at the employee benefit liability as at 31st March 2015.


Nation Lanka Equities (Pvt)

Ltd

Rate of Interest (Net of Tax) 10% 10%Rate of Salary Increase 10% 10.67%Staff Turnover Factor 15% 47.36%Retirement Age 55 years 55 years


107


37.6 Sensitivity of Assumptions Used in Acturial Valuation

The following table demonstrates the sensitivity to a reasonably possible change in the key assumptions employed with all other variables held constant in the employment benefit liability measurement for the Company.

+/-1% on discount rate and salary increase-Effect on PVDBO at 31st March 2015

Present Value of the Defined Benefit Obligation (PVDBO)

Discount Rate 9% 10% 11%Total PVDBO (Rs.) 19,279,115 18,014,856 16,896,255

Present Value of the Defined Benefit Obligation (PVDBO)

Basic Salary Scale 9% 10% 11%Total PVDBO (Rs.) 16,923,180 18,014,856 19,225,840


Rs. Rs. Rs. Rs.

38 FINANCE LEASE OBLIGATIONSBalance at the beginning of the year 2,151,819 - 2,151,819 -Obtained during the year - 2,596,440 - 2,596,440Repayment during the year (1,333,864) (444,621) (1,333,864) (444,621)Balance at the end of the year 817,955 2,151,819 817,955 2,151,819Finance charges unamortised (71,288) (285,152) (71,288) (285,152)Balance at the end of the year 746,667 1,866,667 746,667 1,866,667

39 OTHER PAYABLESTrade Payables 104,701,873 130,128,552 21,680,993 47,592,299Creditors & Other Payables 71,388,927 386,318,800 58,973,084 153,661,940Dividend Payable 45,338 45,338 - -

176,136,138 516,492,690 80,654,077 201,254,238

40 OTHER BORROWINGSBalance at the beginning of the year 199,106,019 215,632,304 34,997,067 13,372,755 Obtained during the year 1,029,985,664 24,485,258 1,029,985,664 24,485,258 Interest expense 8,033,409 667,413 8,033,409 667,413 Repayments during the year (271,422,843) (41,678,956) (191,802,527) (3,528,359)Balance at the end of the year 965,702,248 199,106,019 881,213,613 34,997,067

During the year, Company obtained loans amounting to Rs. 730,000,000 from Wealth Trust Securities Ltd, Rs. 299,894,164 from First Capital Holdings PLC and Rs. 91,500 from Mr. Victor Ramanan.

41 STATED CAPITAL

31/03/2015 31/03/2014 No. of Shares Rs. No. of Shares Rs.

Balance at the beginning of the year 249,951,518 1,818,416,802 249,912,812 1,817,952,330Shares issued during the year 1,211,743 8,300,440 38,706 464,472Balance at the end of the year 251,163,261 1,826,717,242 249,951,518 1,818,416,802

The Company offered 1,211,743 Ordinary Shares at Rs. 6.85/- per share and thereby raised a sum of Rs. 8,300,440/- on 01st September 2014.

108

42

RELA

TED

PAR

TY D

ISCL

OSU

RE 4

2.1

Tran

sact

ions

wit

h/be

twee

n Su

bsid

iari

es

Net

O

utst

andi

ng N

et

Out

stan

ding

Nam

e of

the

rela

ted

part

yD

irect

orRe

latio

nshi

pN

atur

e of

Tra

nsac

tion

Val

ue a

s at

31

.03.

2015

Val

ue a

s at

31

.03.

2014

Rs.

000

' R

s. 0

00'

Rs.

000

' R

s. 0

00'

Nat

ion

Lank

a Eq

uitie

s (P

vt) L

tdM

r Asa

nga

Sene

vira

tne

Dire

ctor

Loan

Rep

aym

ent

(10,

733)

(11,

857)

Loan

& O

ther

Rec

eiva

bles

455

16,

000

Loan

Inte

rest

(3,9

16)

3,7

26Sh

are

Trad

ing

Rece

ivab

le 2

,699

- A

dvan

ce 7

,451

45,

984

- 5

0,02

8

Firs

t Lan

ka T

reas

urie

s Lt

dRe

ceiv

able

s 8

,614

23,

196

- 1

4,58

2

Ceyl

inco

Tow

ers

Ltd

Serv

ices

rend

erd

85

(1,0

64)

39

(1,1

49)


109


42.2

Sub

sidi

ary

Tran

sact

ions

wit

h/be

twee

n ot

her

rela

ted

part

ies

Net

O

utst

andi

ng N

et

Out

stan

ding

Nam

e of

the

rela

ted

part

y D

irect

or R

elat

ions

hip

Nat

ure

of T

rans

actio

n V

alue

as

at

31.0

3.20

15 V

alue

as

at

31.0

3.20

14 R

s. 0

00'

Rs.

000

' R

s. 0

00'

Rs.

000

'

Mill

enni

um H

ousi

ng D

evel

oper

s Lt

d M

r. H

arsh

ith D

harm

adas

a D

irect

or R

ecei

vabl

es (6

,452

) 6

,358

Div

iden

d Re

ceiv

able

(22,

938)

22,

938

Fix

ed D

epos

it 4

7,56

1 (6

,397

) F

ixed

Dep

osit

Inte

rest

3,3

40 (1

0,07

8) (1

,615

) (3

1,58

9)

Mill

eniu

m V

illa

Hou

sing

Dev

elop

men

t Ltd

Mr.

Har

shith

Dha

rmad

asa

Cha

irman

FD

Cap

ital

37,

569

8,4

20 F

D In

tere

st 1

,161

- (1

,825

) (3

8,73

0)

Cey

linco

Con

stru

ctio

n Co

. Ltd

Ser

vice

s re

nder

d (4

5) 8

31 4

5 8

76

Nat

ion

Lank

a Ca

pita

l Ltd

Mr A

sang

a Se

nevi

ratn

e C

hairm

an D

ivid

end

Rece

ived

(900

) M

r. H

arsh

ith D

harm

adas

a D

irect

or A

dvan

ce 8

,000

8,0

00 -

-

Ani

lana

Hot

els

& P

rope

rtie

s Lt

d M

r. As

anga

Sen

evira

tne

Dire

ctor

Loa

n Re

paym

ents

- Le

ase

(49)

- L

oan

Repa

ymen

ts -

Loan

51,

184

(1,1

84)

Loa

n G

rant

ed (1

35,5

98)

80,

000

Inte

rest

on

Loan

(11,

238)

11,

238

Com

mer

cial

Pap

ers

Inte

rest

(17,

377)

136

17,

377

113

,214

Ani

lana

Col

lect

ion

(Pvt

) Ltd

Mr.

Asan

ga S

enev

iratn

e D

irect

or A

dvan

ces

Giv

en (5

8,00

0) 2

2,00

0 -

80,

000

Naw

alok

a AB

C Pe

trol

eum

(Pvt

) Ltd

Mr.

H K

J D

harm

adas

a C

hairm

an L

ease

Gra

nted

(2,1

96)

4,5

65 M

r. H

arsh

ith D

harm

adas

a D

irect

or L

oan

Repa

ymen

ts -

(1,8

62)

Mr.

Har

shith

Dha

rmad

asa

Dire

ctor

Lea

se In

tere

st R

ecei

vabl

e 1

,418

2,5

61 -

3,3

39

Mel

vin

Wire

Nai

l Ind

ustr

ies

Mr.

H.K

.J. D

harm

adas

a C

hairm

an L

oan

Gra

nted

(892

) 2

46 (7

95)

1,1

38 M

r. H

arsh

ith D

harm

adas

a D

irect

or

110

Notes to the Financial Statements N

et

Out

stan

ding

Net

O

utst

andi

ng N

ame

of th

e re

late

d pa

rty

Dire

ctor

Rel

atio

nshi

p N

atur

e of

Tra

nsac

tion

Val

ue a

s at

31

.03.

2015

Val

ue a

s at

31

.03.

2014

Rs.

000

' R

s. 0

00'

Rs.

000

' R

s. 0

00'

Asi

a Fo

rt A

sset

Man

agem

ent (

Priv

ate)

Ltd

Mr.

Asan

ga S

enev

iratn

e D

irect

or L

oan

Gra

nted

(312

) A

dvan

ce 3

,000

14,

231

11,

061

11,

543

M/S

Cey

quar

tz M

BI (P

vt) L

imite

d M

r. H

K J

Dha

rmad

asa

Cha

irman

Lea

se G

rant

ed -

- 1

,419

Loa

n re

paym

ent

(6,4

91)

8,2

70 (1

1,01

5) 1

4,76

1

M/S

Sah

as W

ear (

Pvt)

Ltd

Mr.

H K

J D

harm

adas

a C

hairm

an L

ease

Gra

nted

(230

) -

230

230

Naw

alok

a H

ospi

tals

PLC

Mr.

H K

J D

harm

adas

a C

hairm

an S

ales

of L

and

& B

uild

ings

- 1

55,0

00 S

ettle

men

t (3

9,46

5) (5

0,50

0) A

dvan

ce A

mm

ortiz

atio

n Ad

just

men

t -

59,

185

(5,8

50)

98,

650

Inve

stor

Acc

ess

Eqitt

ies

(Pvt

) Ltd

Mr.

Asan

ga S

enev

iratn

e D

irect

or A

dvan

ce 1

,500

4,0

00 M

argi

ng T

radi

ng (1

,000

) 1

,000

Inte

rest

Cha

rge

(171

) 1

71 P

aym

ent R

ecei

ved

131

(131

) L

oan

& In

tere

st (2

3,11

6) 5

,500

23,

117

28,

156

Cey

oka

(Pvt

) Ltd

Mr.

Har

shith

Dha

rmad

asa

Dire

ctor

Veh

icle

Yar

d Re

nt (3

47)

- -

-

Idea

l Con

cept

s (P

vt) L

td M

r. J R

udra

Dire

ctor

Veh

icle

Yar

d Re

nt (6

00)

- -

- M

r. V

R Ra

man

an D

irect

or

Idea

l Gat

eway

s (P

vt) L

td M

r. J R

udra

Dire

ctor

Veh

icle

Ren

t (1

00)

- -

- M

r. V

R Ra

man

an D

irect

or

111


42.3 Transactions with Key Management PersonnelAccording to the Sri Lanka Accounting Standard 24 (LKAS 24), "Related Party Disclosure", Key Management Personnel are those having responsibility for planning, directing and controlling the activities of the entity. Accordingly, the Board of Directors (including Non Executive and Executive Directors) have been classified as Key Management Personnel.

Immediate family members are defined as spouse or dependent. Dependent is defined as anyone who depends on the respective Key Management Personnel for more than 50% of his/her financial needs.

Compensation of Key Management Personnel and other transactions of KMPs.

Non-Executive Executive Total Total Name of the Related Party Directors Directors 2014/15 2013/14

Rs. Rs. Rs. Rs.

Short-term employment benefits 5,874,787 4,924,643 10,799,430 4,800,000

Total 5,874,787 4,924,643 10,799,430 4,800,000

Deposits and Advances from Key Management Personnel

Amount (received)/

paid

Outstanding Amount Outstanding

Name of the Related Party

Relationship Nature of Transaction

2015 31st March 2015

2014 31st March 2014

Rs. 000' Rs. 000' Rs. 000' Rs. 000'

J Rudra Director Fixed Deposit 13,988 (17,209) (17,597) (31,197)

K M S Kandegedara Director Fixed Deposit (76)Loan Granted 754 (1,498) (1,476) (2,176)

H K J Dharmadasa Chairman Fixed Deposit (166) (1,639) (353) (1,473)

V R Ramanan Non Executive Director Fixed Deposit 492 (2,085) Advances (75) (38,915) (19,747) (39,332)

112

43 CLASSIFICATION OF FINANCIAL ASSETS AND FINANCIAL LIABILITIES

Financial instruments are measured on an ongoing basis either at fair value or at amortised cost. The summary of Significant Accounting Policies describes how each category of financial instruments is measured and how income and expenses, including fair value gains and losses, are recognised. The following table analyses the carrying amounts of the financial instruments by category as defined in Sri Lanka Accounting Standard - LKAS 39 (Financial Instruments: Recognition & Measurement) under the headings of the Statement of Financial Position.

43.1 Company Fair Value Available Loans & Held TotalThrough For Sale Receivables To Maturity

Profit or LossRs. Rs. Rs. Rs. Rs.

AssetsAs at 31st March 2015Cash and cash equivalents - - 119,547,331 - 119,547,331 Deposits with Licensed Commercial Banks - - 69,190,739 - 69,190,739 Loans and Receiables from Customers - - 4,408,998,863 - 4,408,998,863 Financial Assets 91,190,715 23,300 - - 91,214,015 Financial Assets - Held to Maturity - - - 884,469,391 884,469,391 Other Financial Assets - - 160,719,791 - 160,719,791 Total Financial Assets 91,190,715 23,300 4,758,456,724 884,469,391 5,734,140,130 Other Non - Financial assets - - - - 1,287,331,142 Total Assets 91,190,715 23,300 4,758,456,724 884,469,391 7,021,471,272

As at 31st March 2014Cash and cash equivalents - - 48,255,090 - 48,255,090 Deposits with Licensed Commercial Banks - - 54,943,686 - 54,943,686 Loans and Receiables from Customers - - 2,640,695,592 - 2,640,695,592 Financial Assets 4,850,995 23,299 - - 4,874,294 Financial Assets - Held to Maturity - - - 197,430,580 197,430,580 Other Financial Assets - - 265,716,233 - 265,716,233 Total Financial Assets 4,850,995 23,299 3,009,610,601 197,430,580 3,211,915,474 Other Non - Financial assets - - - - 1,402,420,662 Total Assets 4,850,995 23,299 3,009,610,601 197,430,580 4,614,336,137

LiabilitiesAs at 31st March 2015Deposits From Customers - - 5,617,985,491 - 5,617,985,491 Bank Overdrafts - - 239,883,129 - 239,883,129 Bank Borrowings - - 132,104,492 - 132,104,492 Other borrowings - - 881,213,613 - 881,213,613 Total Financial Liabilities - - 6,871,186,725 - 6,871,186,725 Other Non-financial Liabilities - - 111,468,286 - 111,468,286 Total Liabilities - - 6,982,655,011 - 6,982,655,011

As at 31st March 2014Deposits from customers - - 3,806,042,165 - 3,806,042,165 Bank Overdrafts - - 108,401,754 - 108,401,754 Bank Borrowings - - 33,560,014 - 33,560,014 Other borrowings - - 34,997,067 - 34,997,067 Other Financial Liabilities - - 298,158,463 - 298,158,463 Total Financial Liabilities - - 4,281,159,462 - 4,281,159,462 Other Non-Financial Liabilities - - - - 20,184,807 Total Liabilities - - 4,281,159,462 - 4,301,344,269


113


43.2 Group Fair Value Available Loans & Held TotalThrough For Sale Receivables To Maturity

Profit or LossRs. Rs. Rs. Rs. Rs.

AssetsAs at 31 st March 2015Cash and cash equivalents - - 152,318,187 - 152,318,187Deposits with Licensed Commercial Banks - - 199,190,739 - 199,190,739Loans and Receiables from Customers - - 4,389,043,603 - 4,389,043,603Financial Assets 91,190,715 23,300 - - 91,214,015Financial Assets - Held to Maturity - - 884,859,667 - 884,859,667Other Financial assets - - 242,497,909 - 242,497,909Total Financial assets 91,190,715 23,300 5,867,910,105 - 5,959,124,120Other non - Financial assets - - - - 1,169,588,517Total assets 91,190,715 23,300 5,867,910,105 - 7,128,712,637

As at 31 st March 2014Cash and cash equivalents - - 114,751,211 - 114,751,211Deposits with Licensed Commercial Banks - - 54,943,686 - 54,943,686Loans and Receiables from Customers - - 2,672,432,713 - 2,672,432,713Financial Assets 4,850,995 23,299 - - 4,874,294Financial Assets - Held to Maturity - - - 197,430,580 197,430,580Other Financial assets - - 617,705,883 64,390,276 682,096,159Total Financial assets 4,850,995 23,299 3,459,833,494 261,820,856 3,726,528,643Other non - Financial assets 1,608,408,447Total assets 4,850,995 23,299 3,459,833,494 261,820,856 5,334,937,090

LiabilitiesAs at 31 st March 2014Deposits From Customers - - 5,617,985,492 - 5,617,985,492Bank Overdrafts - - 409,492,463 - 409,492,463Bank Borrowings - - 132,104,492 - 132,104,492Other borrowings - - 965,702,248 - 965,702,248Total financial liabilities - - 7,125,284,695 - 7,125,284,695Other Financial Liabilities - - - - 214,083,891Total Liabilities 7,339,368,586As at 31 st March 2013Deposits from customers - - 3,806,042,165 - 3,806,042,165Bank Overdrafts - - 140,352,357 - 140,352,357Bank Borrowings - - 33,560,014 - 33,560,014Other borrowings - - 202,356,019 - 202,356,019Other Financial liabilities - - 521,859,357 - 521,859,357Total financial liabilities - - 4,704,169,912 - 4,704,169,912Other non-financial liabilities - - - - 91,969,705Total liabilities - - 4,704,169,912 - 4,796,139,616

114

43.3 Valuation of Financial Instruments

43.3.1 Financial Instruments Recorded at Fair valueThe following is a description of how fair values are determined for financial instruments that are recorded at fair value using valuation techniques. These incorporate the Group’s estimate of assumptions that a market participant would make when valuing the instruments.

43.3.1.1. Financial Assets - Fair Value Through Profit and LossThe Group has classified the investment in quoted ordinary shares as fair value through profit and loss financial instruments.

This investment is held by the Group as a investment acquired for the trading purpose. Accordingly this investment was classified under the category of Faire Value Through Profit and Loss.

Fair value of the investment was obtained by reference to market prices in the active market as at the reporting date.

Determination of Fair value HierarchyThe Group uses the following hierarchy for determining and disclosing the fair value of financial instruments by valuation technique.

Level 1 : quoted (unadjusted) prices in active markets for identical assets or liabilities.Level 2 : other techniques for which all inputs which have a significant effect on the recorded fair value are observable, either

directly or indirectly.Level 3 : techniques which use inputs that have a significant effect on the recorded fair value that are not based on observable

market data.

Fair value through profit and loss financial assets of the Group has been valued using the Level 1 techniques of the valuation hierarchy and fair value as at 31st March 2015 is Rs. 91,190,715/- (2014:Rs.4,850,995/).

The Group has not valued any of its financial instruments at fair value using level 2 techniques or level 3 techniques of the valuation hierarchy.

43.3.2 Fair value of Financial Assets not carried at Fair valueThe fair values of financial assets and liabilities, together with the carrying amounts shown in the Statement of Financial Position of the Company and Group, are as follows;

Group Company2015 2015

Carrying Value Fair value Carrying Value Fair valueRs. Rs. Rs. Rs.

AssetsCash and cash equivalents 152,318,187 152,318,187 119,547,331 119,547,331Deposits with Licensed Commercial Banks 199,190,739 199,190,739 69,190,739 69,190,739Loans and Receiables from Customers 4,389,043,603 4,389,043,603 4,408,998,863 4,408,998,863Financial Assets 91,214,015 91,214,015 91,214,015 91,214,015Financial Assets - Held to Maturity 884,859,667 884,859,667 884,469,391 884,469,391Other financial assets 242,497,909 242,497,909 160,719,791 160,719,791Total financial assets 5,959,124,120 5,959,124,120 5,734,140,130 5,734,140,130

LiabilitiesDeposits from customers 5,617,985,492 5,617,985,492 5,617,985,491 5,617,985,491Bank Overdrafts 409,492,463 409,492,463 239,883,129 239,883,129Bank Borrowings 132,104,492 132,104,492 132,104,492 132,104,492Other Borrowings 965,702,248 965,702,248 881,213,613 881,213,613Total financial liabilities 7,125,284,695 7,125,284,695 6,871,186,725 6,871,186,725


115


44 Financial Risk Management

OverviewThe group has exposure to the following risk arising from financial instruments

- Credit risk - Liquidity risk - Market risk - Operational risk

The note presents information about the Group's exposure to each of the above risks, the Group's risk management objectives, policies and processes for measuring and managing risk, and the Group's management of capital. Further quantitative disclosures are included throughout these consolidated financial statements.

Risk management FrameworkIn order to maintain the equitable balance between risk and return, as well as to ensure the soundness of the Company, Nation Lanka Finance PLC has deployed an effective risk management framework, which encompasses the scope of risks to be managed, the process/systems and procedures to manage risk and the roles and responsibilities of individuals involved in risk management based on the Risk Management Strategy.

44.1 Credit RiskCredit risk is the risk that arises due to inability or unwilling to meet a financial obligation by borrower, which can lead an asset to lose value or become worthless.

44.1.1 Management of Credit RiskThe approach towards managing credit risk is to accept any credit risks which are within the boundary approved by the board of directors. The Group credit policy provides direction to deal with credit risks. Apart from the Group credit policy, Group conducts periodic credit risk stress testing analysis, portfolio monitoring, identifying problem facilities and maintaining exposure limits to manage the credit risk. Credit Risk Management approach adopted by Nation Lanka Finance PLC is described as follows;

· Credit appraisal· Credit approval· Credit administration· Monitoring credit portfolio· Managing problem facilities

44.1.2 The maximum exposure to credit riskThe Group's exposure to credit risk is influenced mainly by the individual characteristics of each customer. However, management also considers the demographics of the Group’s customer base, as these factors may have an influence on credit risk. During 2014 the majority of the Group’s revenue was attributable to sales transactions .However there is no concentration on credit risk attributable to a single customer.

Properties are sold subject to retention of title causes, so that in the event of non payment the Group have a secured claim. Hence the Group does not keep an additional collateral in respect of trade receivable.

When granting easy payment loan facility the Group has established a credit policy under which each new customer is analysed individually for creditworthiness before the Group’s standard payment and delivery terms and conditions are offered. The Group’s review includes earning patterns of individuals and bank references.

116

Exposure to credit riskThe carrying amount of financial assets represents the maximum credit exposure. The maximum exposure to credit risk at the end of the reporting period was as follows :

Group CompanyAs At 31st March 2015 2014 2015 2014

Rs. Rs. Rs. Rs.

Cash & Current Accounts with Banks 152,318,187 114,751,211 119,547,331 48,255,090Deposits with Licensed Commercial Banks 199,190,739 54,943,686 69,190,739 54,943,686Other Loans and Advances 4,389,043,603 2,672,432,713 4,408,998,863 2,640,695,592Other Investments 976,050,382 266,695,149 975,660,106 202,304,873Amounts Due From Related Companies 94,639,516 231,183,885 138,249,149 217,580,501Trade & Other Receivables 147,858,393 328,289,364 22,470,642 48,135,732

5,959,100,820 3,668,296,008 5,734,116,830 3,211,915,474

44.1.3 Loans and Advances to Customers and Trade ReceivablesWith the adoption of LKAS 32 and 39 with effect from 1st April 2012, impairment of loans and advances are assessed based on incurred loss model. The approach adopted was to classify loans into individually significant exposures and other loans into homogenous portfolios by segment / product for impairment assessment.

Group CompanyAs At 31st March 2015 2014 2015 2014

Rs. Rs. Rs. Rs.

Carrying amount at amortized cost - Individually significant portfolio 241,915,823 540,015,969 241,915,823 272,026,624 - Individually not significant portfolio 4,147,127,780 2,132,416,744 4,167,083,040 2,368,668,968

4,389,043,603 2,672,432,713 4,408,998,863 2,640,695,592

44.1.3.1 Individually significant impairment

Group CompanyBalance as at 31st March 2015 2014 2015 2014

Rs. Rs. Rs. Rs.

Gross Receivable 341,154,445 792,091,997 341,154,445 343,971,851Less: Allowance for impairment 99,238,622 252,076,028 99,238,622 71,945,227

241,915,823 540,015,969 241,915,823 272,026,624

Individually not significant portfolio include loans that are individually significant but not impaired. These loans are assessed for impairment collectively.

The Company holds collateral against loans and advances to customers in the form of mortgage interests over properties and other registered securities over assets and guarantees. Estimates of fair value are based on the value of collateral assessed at the time of borrowing and generally are not updated except when a loan is individually assessed as impaired.

44.1.3.2 Collective impairment

Group / Company 2015 2014Rs. Rs.

Gross Receivable 4,446,010,160 2,466,373,454Less: Allowance for impairment 278,927,120 97,704,486

4,167,083,040 2,368,668,968


117


Group / CompanyCollective impairment comprises

Balance as at 31st March 2015 2014Gross Loan Impairment Gross Loan Impairment

amount Provision amount ProvisionRs. Rs. Rs. Rs.

Lease/HP0 - 300,000 357,170,068 23,801,235 153,029,999 4,285,821300,000-600,000 266,197,337 17,738,960 72,434,609 2,028,634600,000-1,000,000 164,308,758 10,949,270 76,133,428 2,132,2241,000,000-3,000,000 262,486,173 17,491,654 168,588,455 4,721,558Above 3,000,000 144,207,393 9,609,748 127,476,706 3,570,165Loan0 - 300,000 257,853,713 15,807,281 1,354,936,095 74,225,802300,000-600,000 852,920,395 52,286,826 65,482,051 983,044600,000-1,000,000 545,461,354 33,438,574 56,554,194 849,0151,000,000-3,000,000 1,230,795,388 75,451,805 114,082,706 1,712,657Above 3,000,000 364,609,581 22,351,766 277,655,209 3,195,565

4,446,010,160 278,927,120 2,466,373,453 97,704,486

Allowance for ImpairmentThe Group established an allowance for impairment losses on assets carried at amortized cost/available for sale that represents its estimate of incurred losses in its loan and investment debt/equity security portfolio. The main components of this allowance are a specific loss component that relates to individually significant exposures and for assets measured at amortized cost, a collective subject to individual assessment for impairment but not found to be individually impaired. Assets carried at fair value through profit or loss are not subject to impairment testing as the measure of fair value reflects the credit quality of each asset.

Write- off policyThe Company writes off a loan or an investment debt/equity security balance, and any related allowances for impairment losses, when it determines that the loan or security is uncollectible. This determination is made after considering information such as the occurrence of significant changes in the borrower’s/issuer’s financial position such that the borrower/issuer can no longer pay the obligation, or that proceeds from collateral will not be sufficient to pay back the entire exposure. For smaller balance standardized loans, write-off decisions generally are based on a product-specific past due status.

The Company’ s policy is to pursue timely realization of the collateral in an orderly manner. The Company generally does not use the non cash collateral for its own operation.

44.1.4 Credit concentration riskGroup monitors credit concentration risk under product portfolio.

GroupProduct Concentration 2015 2014

Rs. % Rs. %

Leasing 216,195,856 4.93 234,846,077 8.79 Hire Purchase 265,685,092 6.05 324,062,852 12.13 Loan 3,604,196,343 82.12 1,686,409,588 63.10 Loans Against deposits 139,282,826 3.17 252,318,301 9.44 Staff Loans 12,948,742 0.30 5,673,128 0.21 Pawning 135,932,956 3.10 169,122,767 6.33 Loans & Receivables (Repossessed Collaterals) 14,801,788 0.34 - - Total 4,389,043,603 100 2,672,432,713 100

118

CompanyProduct Concentration 2015 2014

Rs. % Rs. %

Leasing 216,195,856 4.93 234,846,077 9.03Hire Purchase 265,685,092 6.05 324,062,852 12.46Loan 3,624,151,603 82.57 1,654,672,467 62.09Loans Against deposits 139,282,826 3.17 252,318,301 9.70Staff Loans 12,948,742 0.30 5,673,127 0.22Pawning 135,932,956 3.10 169,122,767 6.50Loans & Receivables (Repossessed Collaterals) 14,801,788 0.34 - -Total 4,408,998,863 100 2,640,695,591 100

Financial InvestmentsGroup Company

2015 2014 2015 2014Rs. Rs. Rs. Rs.

Deposits in Commercial Banks 199,190,739 54,943,686 69,190,739 54,943,686Investments in Government Securities 884,859,667 261,820,856 884,469,391 197,430,580Investments in equity securities at Available for Sale 23,300 23,299 23,300 23,299Trade and other receivables 147,858,393 328,289,364 22,470,642 48,135,732Amounts due from related companies 94,639,516 231,183,885 138,249,149 217,580,501Total 1,326,571,615 876,261,090 1,114,403,221 518,113,798

44.2 Liquidity RiskLiquidity risk arises due to mismatch between assets and liabilities of the Company; and as a result, inability to honor the liabilities when fallen due. Managing the liquidity risk is utmost important to a Company like NLF since the breach of liquidity requirements will expose to other risks such as reputation and compliance. Hence, breach of liquidity requirements will directly affect on Company’s going concern and credibility among stakeholders.

The objective of liquidity risk management is to bridge the gap between asset-liability maturity mismatch and ultimately it’s important for the Company the correct combination of liquidity and profitability.

Treasury is responsible for the management of liquidity and it has been continuously monitored and reviewed at the ALCO. Further the Integrated Risk Management reporting has been done on quarterly basis to further evaluate the risks on liquid.

Exposure to Liquidity RiskGroup Company

2015 2014 2015 2014

Net loans/Total assets 0.63 0.50 0.65 0.57Gross Loans/Customer deposits 0.86 0.36 0.88 0.38Liquid Asset Ratio (LAR)Average for the year 0.18:1 0.98:1 0.17:1 0.76:1

Contractual maturities of the assets and liabilities of the Group is given on the Maturity Analysis on page 123.


119


44.3 Market RiskMarket risk is the risk that changes in market prices, such as interest rates and equity prices will affect the Company’s income or the value of its holdings of financial instruments. The objective of market risk management is to manage and control market risk exposures within acceptable parameters, while optimising the return.

44.3.1 Interest Rate RiskInterest rate risk is a key constituent of the market risk exposure of the Company due to adverse and unanticipated movements in future interest rate which arises from core business activities; granting of credit facilities, accepting deposits. Due to the nature of operations of the Comapny, the impact of interest rate risk is mainly on the earnings of the Company rather than the market value of portfolios.

Several factors give rise to interest rate risk; among these are term structure risk, which arises due to the mismatches in the maturities of assets and liabilities; basis risk which is the threat to income arising due to differences in the bases of interest rates.

Excessive movements in market interest rate could result in severe volatility to Company’s net interest income and net interest margin.

44.3.1.1 Company’s exposure to interest rate risk is primarily associated with factors such as;Reprising risk arising from a fixed rate borrowing portfolio where reprising frequency is different to that of the lending portfolio.

Yield curve risk arising from unanticipated shifts of the market yield curve Interest Rate risk is managed principally through minimizing interest rate sensitive asset liability gaps. In order to ensure interest rate margins andJ spreads are maintained, the Company conducts periodic reviews and re-prices its assets accordingly.

44.3.1.2 Interest Rate Risk Exposure on Financial Assets & LiabilitiesThe table below analyses the Company's interest rate risk exposure on financial assets & liabilities. The Company's assets & liabilities are included at carrying amount and categorized by the earlier of contractual reprising or maturity dates.

Up to 03 03-12 01-05 Non interest Total as atMonths Months Years bearing 31.03.2015

Rs Rs Rs Rs Rs

AssetsCash and Balances Due from Banks - - - 119,547,331 119,547,331 Due from Banks and Other Financial Institutions - 69,190,739 - - 69,190,739 Loans and Advances to Customers 1,212,987,680 2,481,035,562 714,975,621 - 4,408,998,863 Financial Investments - Available for Sale 23,300 - - - 23,300 Financial Investments - Held to Maturity 659,230,391 225,239,000 - - 884,469,391 Total Financial Assets 1,872,241,371 2,775,465,301 714,975,619 119,547,331 5,482,229,624

LiabilitiesBalances Due to Banks 371,987,621 - - - 371,987,621 Due to Customers 1,474,678,442 3,111,346,503 1,031,960,546 - 5,617,985,491 Debt Issued and Other Borrowed Funds 225,860,000 655,353,613 - - 881,213,613 Total Financial Liabilities 2,072,526,063 3,766,700,116 1,031,960,546 - 6,871,186,725 Interest Sensitivity Gap (200,284,692) (991,234,815) (316,984,925) 119,547,331 (1,388,957,101)

44.4 Operational RiskOperational risk arises due to internal process failures, human capital losses, inadequate internal process, technological breakdowns and adverse impact from external events. Operational risk act as a bottleneck for many companies, due to an inadequate awareness on companies with no operational risk indicators or insufficient internal controls. Purpose of managing operational risk is to minimize the normal losses incurred due to internal activities, restoring any disruption without impacting the core business of the Company and mitigating replication of such events in the future. Managing operational risk is prime responsibility of all Nations Lanka Finance PLC employees and Company has executed a well defined operational risk policy framework. Internal controls and strict system audit functions are kept in order to enhance the operational risk mitigating process.

120

44.5 Capital managementThe Board's policy is to maintain a strong capital base so as to maintain investor, creditor and market confidence and sustain future development of the business. Capital consist of ordinary shares, retained earnings and non controlling interests of the Company. The board of directors monitor the return on capital as well as the level of dividends to ordinary share holders.

The Company's main objective when managing capital are:01) to safeguard the Company's ability to continue as a going concern, so that it can continue to provide returns for shareholders

and benefits for other stakeholders

02) to provide an adequate return to shareholders by pricing products commensurately with the level of risk; and

Further, the Board seeks to maintain a balance between higher targeted returns that might be possible with higher level of borrowing, and the advantages and security afforded by the strong capital position of the Company.

The Company’s net debt to adjusted equity ratio at the reporting date is as follows

Group Company2015 2014 2015 2014

Rs. Rs. Rs. Rs.

Total liabilities 7,339,368,585 4,796,139,616 6,982,655,011 4,301,344,270 Less: cash and cash equivalents 1,263,368,593 114,751,211 1,073,207,461 48,255,090 Net debt 6,103,011,260 4,681,388,405 5,909,447,549 4,253,089,179

Total equity (210,655,948) 538,797,474 38,816,261 312,991,867

Net debt to adjusted equity ratio at 31st March (29) 9 152 14

Total Risk Weighted Assets Computation (Company)As At 31st March 2015 2014 2015 2014

Rs '000 Rs '000 Rs '000 Rs '000Assets Amount Amount Risk Weight

Factor%Risk weighted

BalanceRisk weighted

Balance

Cash & Current Accounts with Banks 119,547 48,255 0% - - Deposits with Banks 69,191 54,944 20% 13,838 10,989 Sri Lanka Govt Treasury Bills 884,469 197,430 0% - - Against Deposits with the Company 139,283 230,401 0% - - Lease Receivables 216,196 234,846 50% 108,098 117,423 Loans and Advances to Related Companies 138,249 147,030 100% 138,249 147,030 Loans against Gold and gold Jewellery 135,933 169,123 0% - - Retirement Benefit Plan Asset (FD & TB) 60,410 58,145 0% - - Loans against Real Estates (Performing) - 24,548 50% - 12,274 Other Loans and Advances 3,917,587 1,834,749 100% 3,917,587 1,834,749 Other Investments 1,075,971 1,119,884 100% 1,075,971 1,119,884 Fixed Assets 122,027 151,205 100% 122,027 151,205 Amounts Due From Related Companies - 217,581 100% - 217,581 Other Assets 142,608 126,198 100% 142,608 126,198 Total Risk Weighted Assets 7,021,471 4,614,336 5,518,378 3,737,331


121


Total Capital Base ComputationAs At 31st March 2015 2014

Rs '000 Rs '000

Core Capital (Tier 1 Capital)Issued and Paid-up Ordinary Shares/Common Stock (Cash)

1,826,717 1,818,417

Statutory Reserve Fund 7,550 7,550 Published Retained Profits/(Accumulated Losses) (1,558,102) (1,707,795)General and Other Reserves 14,342 14,342 Published Current Year's Profits/Losses (282,476) 23,620 Total Core Capital 8,031 156,134 Supplementary Capital (Tier 2 capital) - - Eligible Revaluation Reserves - - Eligible Approved Unsecured Subordinated Term Debt (Within the meaning of limit i)

- -

Eligible Tier 2 Capital - - Total Capital 8,031 156,134 Deductions - - Equity Investments in unconsolidated banking and financial subsidiaries

- -

Investments in capital of other banks/financial associates

- -

CAPITAL BASE 8,031 156,134

44.6 Capital Adequacy Ratio

As At 31st March 2015 2014% %

Core Capital Ratio (Minimum 5%)Core Capital Ratio Core Capital X 100 0.15 4.18

Risk Weighted Assets

Total Risk Weighted Capital Ratio (Minimum 10%)Total Risk Weighted Capital Ratio Capital Base X 100 0.15 4.18

Risk Weighted Assets

44.7 Fair Value Hierarchy

Group CompanyLevel 1 Level 2 Level 3 Level 1 Level 2 Level 3

Rs. Rs. Rs. Rs. Rs. Rs.

As at 31st March 2015Recurring Fair Value MeasurementsAssets measured at fair value:Financial Assets Held for Trading 91,190,715 - 91,190,715 - - Financial Assets Available For Sale - - 23,300 - - 23,300 Financial Assets Held to Maturity 884,859,667 - - 884,469,391 - - Investment Properties 538,012,125 - - 538,012,125 - -

As at 31st March 2014Recurring Fair Value MeasurementsAssets measured at fair value:Financial Assets Held for Trading 4,850,995 - - 4,850,995 - - Financial Assets Available For Sale - - 23,300 - - 23,300 Financial Assets Held to Maturity 261,820,856 - - 197,430,580 - - Investment Properties 488,229,315 - - 451,830,315 - -

122

45 GOING CONCERN

45.1 GroupFor the year ended 31 March 2015, the Group has recorded a loss attributable to Equity Holders amounting to Rs. 547,349,717 and the Group’s accumulated losses as at 31 March 2015 amounted to Rs. 2,193,778,886. Shareholders’ funds as at 31 March 2015 amounted to negative Rs. 274,971,171. In addition, the Company has only maintained a core capital ratio of 0.15% and a risk weighted capital ratio of 0.15% as at 31st March 2015 against the minimum requirement of 5% and 10% respectively as per the guidelines issued by the Central Bank of Sri Lanka.

These factors raise doubts whether the Company will be able to continue as a going concern in the future. However, the directors of Nation Lanka Finance are confident that the financial position of the Company will significantly improve in the near future as a result of the additional funding the Company has planned to raise. The Company has obtained clearance from the Central Bank of Sri Lanka and are awaiting permission from the CSE for a rights issue of ordinary shares amounting to Rs. 502,326,522 as well as has plans to raise a further Rs. 500,000,000 by way of subordinated debentures.

The Company subsequent to the current financial year end has shown positive operational profits. In addition, the Company is vigorously working on reducing the non-performing portfolio and have set targets internally to ensure that the non-performing ratio is brought down to be in par with industry standards.

In addition to the Capital infusion by way of the proposed rights issue and the positive performance during the Current Financial year 2015/16 will strengthen the Core-Capital adequately to be compliant with the Central Bank’s stipulated rates for the Tier 1 Capital adequacy ratio whilst having the minimum capital requirements too satiated. The proposed subordinated debenture subsequent to the rights issue will no doubt augur well to be even compliant with the Tier 1 + 2 capital requirements; amply supported by the operational profits for the current financial year to be in compliant with the Central Bank’s stipulated rates. Both these issuances and the retaining position of profitability will assist the company to have a significant rise in liquidity; thereby satiating the requirements of the Central Bank and also making the company operationally stronger and more competitive with its peers.

45.2 SubsidiaryThe Nation Lanka Equities group incurred a net loss of Rs. 59,027,529/- during the year ended March 31, 2015 and as of that date; the Nation Lanka Equitie Group’s current liabilities exceeded its current assets by Rs. 15,552,484/-. However, the company is currently in discussion with foreign broker dealers in UK and USA for a brokering partnership and company has restructured the research division focusing more foreign deals .Other than that the proposed private placement will boost the company’s ability of extending credit facilities to clients , which will ultimately result in more brokerage for the company. Considering above factors the Board of Directors are confident that the Company and the Nation Lanka Equities Group will continue as a going concern for the foreseeable future.

46 CAPITAL COMMITMENTS & CONTINGENT LIABILITIES

46.1 Capital CommitmentsThere were no material capital commitments as at the reporting date that require adjustment to or disclosure in the Financial Statements.

46.2 Contingent LiabilitiesS.M.B Leasing PLC has filed a case against Nation Lanka Finance PLC claiming Rs 1,991,001 as at 09.10.2013 and further 7% per annum on Rs. 1,371,381 from 10.10.2013 and further cost of action.These dues were created on the loan that was granted to Ceylinco Investments Corporation Limited by the plaintiff company and thereafter transferred the liability to Nation Lanka Finance PLC.

47 COMPARATIVE INFORMATIONComparative figures have been reclassified to confirm to the current year presentation

48 EVENTS OCCURING AFTER THE REPORTING DATESubsequent to the reporting date ,no circumstances have arisen which would require adjustments to or disclosure in the Financial Statements.


123


49 MATURITY ANALYSIS - Group

As at 31st March 2015 Total Less than 3 to 12 1 to 3 years More than3 Months Months 3 years

Rs. Rs. Rs. Rs.

AssetsCash and Cash Equivalents 152,318,187 152,318,187 - - - Deposits with Licensed Commercial Banks 199,190,739 - 199,190,739 - - Financial Assets Held for Trading 91,190,715 36,476,286 54,714,429 - - Financial asets - available for sale 23,300 - - - 23,300 Loans and Receiables from Customers 4,389,043,603 2,476,836,376 1,417,798,477 275,160,585 219,248,165 Financial Assets Held to Maturity 884,859,667 653,567,999 231,291,668 Investments in Equity Accounted Investees 61,696,663 - - - 61,696,663 Investments in Associate 94,639,516 - 94,639,516 - - Real Estate Stock 160,961,029 - - 160,961,029 Investment Properties 538,012,125 - - - 538,012,125 Intangible Assets 25,460,792 - - - 25,460,792 Property, Plant & Equipment 199,410,956 - - - 199,410,956 Trade & Other Receivables 147,858,393 59,143,357 88,715,036 - - Retirement Benefit Plan Asset 60,409,892 - 60,409,892 Inventories - - - - - Deferred Tax Asset - - - - - Other Assets 123,637,060 - - 123,637,060 - Total 7,128,712,637 3,378,342,206 2,086,349,864 559,758,674 1,104,261,893

Liabilities & Shareholders FundsDebentures - - - - - Due to Banks and Financial Institutions 541,596,955 409,492,463 132,104,492 - - Due to Customers 5,617,985,492 1,576,489,989 3,067,204,726 974,290,777 - Other Borrowings 965,702,248 225,860,000 655,353,613 84,488,635 - Current Tax Liabilities 1,937,358 - 1,937,358 - - Deferred Tax Liabilities - - - - - Amounts Due to Related Companies 10,988,670 - 10,988,670 - - Directors Current Account - - - - - Retirement Benefit Obligations 24,275,058 - - - 24,275,058 Retirement Benefit Obligations -Group - - - - - Finance Lease Obligations 746,667 746,667 - - - Other Payables 176,136,138 70,454,455 105,681,683 - - Stated Capital 1,826,717,242 - - - 1,826,717,242 Statutory Reserve Fund 8,335,530 - - - 8,335,530 Other Reserves 83,754,943 - - - 83,754,943 Investment Fund Reserve - - - - - Retained Earnings (2,193,778,886) - - - (2,193,778,886)Non-Controlling Interest 64,315,223 - - - 64,315,223 Total 7,128,712,637 2,283,043,574 3,973,270,542 1,058,779,412 (186,380,890)Maturity gap 1,095,298,632 (1,886,920,678) (499,020,737) 1,290,642,783 Cumulative gap 1,095,298,632 (791,622,046) (1,290,642,783) -

124

50

OPE

RATI

NG

SEG

MEN

TS (G

roup

)

Lend

ing

Prop

erty

Dev

elop

men

tSe

rvic

esO

ther

sG

roup

Tot

alAs

At 3

1st M

arch

2015

2014

2015

2014

2015

2014

2015

2014

2015

2014

R S.

RS.

RS.

RS.

RS.

RS.

RS.

RS.

RS.

RS.

Tota

l Rev

enue

1,1

64,9

00,8

61

906

,352

,126

1

5,32

7,99

1 7

51,9

00,2

23

40,

253,

873

22,

265,

848

123

,516

,318

1

,220

,482

,725

1

,804

,034

,516

In

ter S

egm

ent

(5,2

30,9

44)

(5,2

15,8

45)

(24,

330,

666)

(62,

783)

(5,2

30,9

44)

(29,

609,

294)

Segm

ent R

even

ue (N

et)

1,1

59,6

69,9

17

901

,136

,281

1

5,32

7,99

1 7

27,5

69,5

57

40,

253,

873

22,

265,

848

- 1

23,4

53,5

35

1,2

15,2

51,7

81

1,7

74,4

25,2

21

Segm

ent I

ncom

e 1

,164

,900

,861

4

41,3

20,0

67

15,

327,

991

276

,618

,902

4

0,25

3,87

3 2

8,91

9,71

6 -

125

,767

,864

1

,220

,482

,725

8

72,6

26,5

49

Segm

ent E

xpen

ses

Dep

reci

atio

n (5

8,85

4,24

4) (5

1,31

2,54

6) (1

,310

,617

) (1

,507

,118

) (7

,181

,061

) (1

4,75

1) (4

,649

,806

) (2

,153

,208

) (7

1,99

5,72

8) (5

4,98

7,62

3)O

ther

Ope

ratin

g Ex

pens

es (8

49,2

51,1

29)

(452

,998

,612

) (2

6,00

5,48

5) (3

62,2

73,3

25)

(51,

047,

709)

(29,

685,

012)

(498

,157

,822

) (1

09,4

13,2

45)

(1,4

24,4

62,1

45)

(954

,370

,194

)O

pera

ting

Profi

t/(Lo

ss)

256

,795

,488

(6

2,99

1,09

2) (1

1,98

8,11

1) (8

7,16

1,54

1) (1

7,97

4,89

7) (7

80,0

47)

(502

,807

,628

) 1

4,20

1,41

1 (2

75,9

75,1

48)

(136

,731

,268

)Im

pairm

ent f

or fa

ll In

Val

ue o

f In

vest

men

ts -

- (1

8,80

1,10

7) -

- (2

0,62

3,53

9) (3

9,42

4,64

6) -

Impa

irmen

ts fo

r Obs

olet

e In

vent

orie

s -

- 7

8,33

4,32

4 -

- -

78,

334,

324

Impa

irmen

ts c

harg

es fo

r Loa

n an

d ot

her L

osse

s (2

83,6

52,2

16)

191

,957

,319

-

- -

(12,

093,

744)

(283

,652

,216

) 1

79,8

63,5

75

(26,

856,

728)

128

,966

,227

(3

0,78

9,21

8) (8

,827

,217

) (1

7,97

4,89

7) (7

80,0

47)

(523

,431

,167

) 2

,107

,667

(5

99,0

52,0

10)

121

,466

,631

Loss

on

Dis

posa

l of S

ubsi

diar

y -

- -

- -

- -

- -

Amor

tizat

ion

of S

urpl

us o

n Ac

quis

ition

- -

Vat o

n Fi

nanc

ial S

ervi

ces

(169

,477

) (1

3,78

4,56

6) (1

69,4

77)

(13,

784,

566)

Inco

me

Tax

(3,3

38,1

84)

(5,4

51,8

77)

(44,

009)

(42,

578,

398)

(115

,574

) (1

,217

) (8

42,4

24)

(3,4

97,7

67)

(48,

873,

916)

Shar

e of

Pro

fit o

f Equ

ity A

ccou

nted

In

vest

ees

5,6

99,3

91

4,8

90,8

00

5,6

99,3

91

4,8

90,8

00

Min

ority

Inte

rest

(6,5

65,6

78)

- (6

,565

,678

)Pr

ofit /

(Los

s) fr

om d

isco

ntin

uing

op

erat

ions

,net

of T

ax 2

5,28

9,77

9 2

5,28

9,77

9 Se

gmen

t Res

ult A

fter T

ax

(30,

194,

912)

123

,514

,350

(3

0,83

3,22

7) (5

1,40

5,61

5) (1

8,09

0,47

1) (7

81,2

63)

(492

,611

,474

) (1

4,19

4,20

1) (5

71,7

30,0

84)

57,

133,

271

Segm

ent A

sset

s 4

,389

,043

,603

2

,759

,692

,853

9

23,8

44,9

02

1,2

31,0

60,2

04

184

,046

,952

2

99,1

56,3

48

1,6

31,7

77,1

80

1,0

45,0

28,2

11

7,1

28,7

12,6

37

5,33

4,93

7,09

0

Segm

ent L

iabi

litie

s 5

,617

,985

,491

3

,637

,737

,934

2

4,27

5,05

8 3

02,8

17,5

35

719

,670

,451

2

68,5

11,5

50

977

,437

,585

5

87,0

72,5

96

7,3

39,3

68,5

85

4,79

6,13

9,61

6


125


50

OPE

RATI

NG

SEG

MEN

TS (C

ompa

ny)

Lend

ing

Prop

erty

Dev

elop

men

tSe

rvic

esO

ther

sG

roup

Tot

alAs

At 3

1st M

arch

2015

2015

2015

2015

2015

Rs.

Rs.

Rs.

Rs.

Rs.

Tota

l Rev

enue

1,1

58,0

12,2

11

15,

327,

991

837

,089

2

96,0

21,8

43

1,4

70,1

99,1

35

Inte

r Seg

men

t (5

,230

,944

)-

- (1

,510

,664

) (6

,741

,608

)Se

gmen

t Rev

enue

(Net

) 1

,152

,781

,267

1

5,32

7,99

1 8

37,0

89

294

,511

,179

1

,463

,457

,526

Segm

ent I

ncom

e 1

,158

,012

,211

1

5,32

7,99

2 8

37,0

89

296

,021

,843

1

,470

,199

,135

Segm

ent E

xpen

ses

(559

,763

,996

) (1

3,65

8,05

1)-

- (5

73,4

22,0

47)

Dep

reci

atio

n-

--

(59,

228,

741)

(59,

228,

741)

Oth

er O

pera

ting

Expe

nses

(342

,212

,512

)-

(44,

724,

845)

(364

,228

,702

) (7

51,1

66,0

59)

Ope

ratin

g Pr

ofit/(

Loss

) 2

56,0

35,7

03

1,6

69,9

40

(43,

887,

756)

(127

,435

,600

) 8

6,38

2,28

7 Im

pairm

ent f

or fa

ll In

Val

ue o

f Inv

estm

ents

- (1

8,80

1,10

7)-

(17,

941,

864)

(36,

742,

971)

Impa

irmen

ts c

harg

es fo

r Loa

n an

d ot

her L

osse

s (2

83,6

52,2

16)

- (5

,599

,747

) (3

9,99

7,81

9) (3

29,2

49,7

82)

(27,

616,

512)

(17,

131,

167)

(49,

487,

503)

(185

,375

,283

) (2

79,6

10,4

66)

Vat o

n Fi

nanc

ial S

ervi

ces

--

- (1

69,4

77)

(169

,477

)In

com

e Ta

x-

--

(2,6

96,1

03)

(2,6

96,1

03)

Seg

men

t Res

ult A

fter T

ax

(27,

616,

512)

(17,

131,

167)

(49,

487,

503)

(188

,240

,864

) (2

82,4

76,0

47)

Segm

ent A

sset

s 4

,408

,998

,861

8

21,0

00,5

01

180

,546

,951

1

,610

,924

,957

7

,021

,471

,272

Segm

ent L

iabi

litie

s 5

,617

,985

,491

8

0,65

4,07

7 3

71,9

87,6

21

912

,027

,822

6

,982

,655

,011

126

Statement of Value Added


Rs. '000 Rs. '000 Rs. '000 Rs. '000

Value AddedValue Added Income earned byKey Business Activities 1,188,035 1,200,021 1,141,718 863,567

Cost of Services bought from outside (1,144,827) (1,028,210) (1,077,428) (887,402) 43,207 171,811 64,290 (23,835)

Other Income (26,223) 136,685 272,480 138,752 (Provision)/Reversal for Leases, Loans & Advances (283,652) 179,864 (323,650) 191,957 Provision for fall in value of Investments - 2,022 - 2,022

(266,668) 490,382 13,120 308,896

2015 2014 % 2015 2014 % Rs. '000 Rs. '000 Rs. '000 Rs. '000

Distribution of Value AddedTo Employees 258,877 320,215 65 231,434 211,968 69

To Providers of CapitalMinority Interest (23,299) 684 0 - - -

To Government revenueIncome Tax (21,781) 48,874 10 2,696 4,535 1 VAT on Financial Services 169 13,785 3 169 13,785 4

To Expansion & GrowthRetained Income (547,350) 43,627 9 (280,033) 23,620 8 Accounted Investment (5,699) (5,181) (1) - - Depreciation 72,414 68,378 14 58,854 54,988 18

(266,668) 490,382 100 13,120 308,896 100

127


Ten Year Summary - Group

For the Year ended 31st March 2015 2014 2013 2012 2011 2010 2009 2008 2007 2006Statement of Income (Rs.000) (Rs.000) (Rs.000) (Rs.000) (Rs.000) (Rs.000) (Rs.000) (Rs.000) (Rs.000) (Rs.000)

Revenue 1,215,341 1,610,180 1,148,520 895,571 1,412,857 1,727,833 3,118,259 3,837,256 4,064,492 3,664,970

Profit/(Loss) before provision & taxation& share of associate co. profit/(loss) (314,318) (250,228) 37,731 (127,574) (132,143) (551,730) (639,168) 17,589 178,178 258,848 Impairment For fall In Value of Investments - - (2,017) (9,857) - - - - - -Impairments Charges for Loan and other Losses (283,652) 180,029 10,517 (321) - - - - - -Provision for diminution in value of share - - - - 22,840 (38,216) (62,959) 52,479 (13,673) (22,029)Impairments for Obsolete Inventories - - - 4,418 - - - - - -Extraordinary items/(provisions) - - (7,102) (214,661) (465,234) (253,484) (34,008) 24,886 (15,136)

Profit/(Loss) before taxation & associated profit/(Loss) (597,970) (70,199) 36,611 (140,435) (323,964) (1,055,180) (955,611) 36,060 189,391 221,683 Share of associate co. profit/(loss) 5,699 4,891 11,637 13,681 - - - - - -

Profit/(Loss) before taxation (592,271) (65,308) 48,248 (126,754) (323,964) (1,055,180) (955,611) 36,060 189,391 221,683

VAT on financial services (169) (13,785) (918.89) - - - - - - -Income tax expenses (3,498) (5,177) (51,251) (22,206) (36,447) (16,073) (5,536) (20,568) (32,979) (30,844)

Profit/(Loss) after taxation (595,938) (84,269) (3,922) (148,960) (360,411) (1,071,253) (961,147) 15,492 156,412 190,839

Other Comprehensive Income (1,082) 11,100 (9,148) - - - - - - -Profit / (Loss) from discontinuing operations 25,290 130,302 - - - - - - - - Non Controlling Interest (22,837) 5,112 15,663 6,062 (19,809) 12,024 50,929 (3,182) 344 (26,750)

Profit/(Loss) attributable to share holders (548,894) 52,021 (28,733) (155,022) (380,220) (1,059,229) (910,218) 12,310 156,756 164,089

Retained Profit/(Loss) brought forward (1,640,320) (1,760,037) (1,722,654) (1,466,275) 1,299,650 (293,379) 504,787 469,727 352,455 192,778 Direct Cost on Right Issue - - - (4,358) - - - - - -Effects due to changes in accounting policy - - - 1,296 (176,805) - 38,757 - - -

Profit available for appropriation (2,189,214) (1,708,017) (1,751,387) (1,624,360) 742,625 (1,352,608) (366,673) 482,037 509,211 356,867 AppropriationsEffect of Acquisitions, Disposals & Change in percentage Holdings in Subsidiaries (9,907) - (8,651) (98,294) - - - - - - Change in the Holdings - 23,277 - Transfer to reserves/adjustments 5,342 44,419 - 466,624 18,963 73,294 24,295 (9,309) 24,260 Preference dividends - - - - - - - (1,545) (2,494) (9,154)Ordinary dividends - - - - - - - - (27,681) (19,518)

Retained profit carried forward (2,193,779) (1,640,320) (1,760,037) (1,722,654) 1,209,249 (1,333,645) (293,379) 504,787 469,727 352,455

Basic Earnings/(Loss) per share (2.18) 0.17 (0.08) (0.70) (5.94) (42.89) (45.54) 0.54 7.72 7.75 Dividends per share - - - (0.31) - - - - 1.00 0.85

As at 31st March 2015 2014 2013 2012 2011 2010 2009 2008 2007 2006Statement of Financial Position (Rs.000) (Rs.000) (Rs.000) (Rs.000) (Rs.000) (Rs.000) (Rs.000) (Rs.000) (Rs.000) (Rs.000)

AssetsGoodwill on Consolidation - - - - - - - - 277 Property ,Plant & Equipment 199,411 231,393 342,853 301,722 196,421 255,782 303,784 569,905 866,253 576,282 Long Term Investments 91,191 4,851 4,586 40,373 123,785 193,087 314,591 455,676 480,800 439,071 Non Current Assets 5,330,224 2,391,383 2,403,398 1,790,921 732,663 2,822,918 1,514,423 3,052,661 3,084,165 2,238,912 Net Current Assets/(Liabilities) (189,221) 44,429 516,816 590,076 40,622 (2,643,197) (1,364,824) (1,383,467) (1,468,906) 31,922

Total Asset less Current Liabilities 5,431,605 2,672,057 3,267,653 2,723,092 1,093,491 628,590 767,974 2,694,775 2,962,312 3,286,464 Non Current Liabilities (5,642,261) (2,133,260) (2,871,722) (2,386,062) (987,897) (1,103,684) (484,912) (1,494,297) (1,739,841) (2,176,414)

(210,656) 538,797 395,931 337,031 105,594 (475,094) 283,062 1,200,478 1,222,471 1,110,050

Financed byStated Capital 1,826,717 1,818,417 1,817,952 1,817,952 1,018,336 518,336 278,503 278,503 199,861 199,861 Preference shares - - - - - - - 61,814 61,814 61,814 Share premium - - - - - - - - 78,643 79,162 Statutory Reserve Fund 8,336 7,550 7,550 7,550 - - - - - - Other Reserves 83,755 83,755 134,301 89,546 - - - - - Retained Earnings (2,193,779) (1,639,535) (1,760,037) (1,677,899) (1,089,583) (1,130,039) (89,774) 708,394 687,064 530,041 Investment Fund Reserve - 5,342 - - - - - - - -Non-Controlling Interest 64,315 263,269 196,164 99,881 176,841 136,609 94,333 151,767 195,089 239,172

(210,656) 538,797 395,931 337,031 105,594 (475,094) 283,062 1,200,478 1,222,471 1,110,050 Net Assets/(Liability) per share (1.10) 1.10 0.80 1.69 (0.51) (15.30) 9.44 49.38 48.31 40.48

128

Shareholders & Investor Information

1. Twenty Largest Shareholders

NAME

NO OF SHARES AS AT

31/03/2015 %

NO OF SHARES AS AT

31/03/2014 %

1 HATTON NATIONAL BANK/INVESTOR ACCESS EQUITIES (PVT) LTD 42,400,000 32.82 38,700,000 34.47SEYLAN BANK PLC/INVESTOR ACCESS EQUITIES (PVT) LTD 19,325,000 28,155,000INVESTOR ACCESS EQUITIES (PVT) LTD 14,718,644 19,325,000NATION LANKA CAPITAL LTD/INVESTOR ACCESS EQUITIES (PVT) LTD 6,000,000

2 MR. J RUDRA 19,060,625 7.59 19,060,625 07.633 PAN ASIA BANKING CORPORATION PLC / NAWALOKA CONSTRUCTIONS (PVT) LTD 17,862,425 7.11 17,862,425 07.25

NAWALOKA CONSTRUCTION COMPANY (PRIVATE) LIMITED 249,700 0.10 249,7004 MR. W A S P DE SARAM 13,883,761 5.53 1,378,763 0.555 MR. V R RAMANAN 12,809,259 5.10 12,809,259 5.126 PAN ASIA BANKING CORPORATION PLC/ MR. M N RANASINGHE 4,295,466 1.71 5,750,000 2.307 NATION LANKA CAPITAL LTD/MR JEROME RADLEY JUDE EPHRAUMS 3,553,760 1.41 2,255,215 0.908 CEYLINCO SECURITIES SHARE OWNERSHIP TRUST (PVT) LTD 2,475,600 0.99 2,475,600 0.999 PAN ASIA BANKING CORPORATION PLC / MR. R E RAMBUKWELLA 2,350,000 0.94 2,350,000 0.9410 MR. P P THEVARAJAH 2,062,952 0.82 1,351,834 0.5411 PAN ASIA BANKING CORPORATION PLC / MR. H H A CHANDRASIRI 1,874,224 0.75 3,137,966 1.2612 SEYLAN MERCHANT BANK/MR.W G B M RANAWEERA 1,750,500 0.70 1,750,500 0.7013 MR. H R S WIJERATNE 1,702,041 0.68 1,702,041 0.6814 MR. S H AMARASEKERA 1,646,990 0.66 2,001,168 0.8015 FIRST CAPITAL MARKETS LIMITED/ASIA FORT ASSET MANAGEMENT (PVT) LTD 1,626,119 0.65 - -16 MRS. N MULJIE 1,340,000 0.53 1,340,000 0.5417 SEYLAN BANK PLC / MR H T WIJESINGHE 1,269,579 0.51 1,269,579 0.50 18 MR. P P ANANDARAJA 1,265,000 0.50 1,265,000 0.5019 MR. H K J DHARMADASA 1,262,000 0.50 1,262,000 0.5020 PEOPLE’S LEASING & FINANCE PLC/ MR.M.A.U.GNANATHILAKE 1,216,553 0.48 490,239 0.20

Total 176,000,198 70.08 165,941,914 66.37

2. Stock Exchange Listing

Nation Lanka Finance PLC is a Public Quoted Company. Its issued ordinary shares were listed with the Colombo Stock Exchange on 30th June 1994.

3. Distribution of Shareholdings - 31st March 2015

Resident Non – Resident TotalValue Band No of Share

HoldersNo of Shares % No of Share

HoldersNo of

Shares% No of Share

HoldersNo of Shares %

1 - 1,000 11,335 2,142,895 0.85 22 11,300 0.00 11,357 2,154,195 0.851,001 - 5,000 1,529 4,089,806 1.63 6 14,761 0.01 1,535 4,104,567 1.645,001 - 10,000 528 4,205,060 1.67 7 62,900 0.03 535 4,267,960 1.70

10,001 - 50,000 728 16,630,382 6.62 7 211,600 0.08 735 16,841,982 6.7050,001 - 100,000 108 7,922,194 3.15 2 200,000 0.08 110 8,122,194 3.23

100,001 - 500,000 107 22,875,743 9.11 4 1,251,091 0.50 111 24,126,834 9.61500,001 - 1,000,000 17 12,128,514 4.83 1 600,000 0.24 18 12,728,514 5.07

1,000,001 - 50,000,000 26 169,277,421 67.40 1 9,539,594 3.80 27 178,817,015 71.2050,000,001 - & Above 0 0 0.00 0 0 0.00 0 0 0.00

Total 14,378 239,272,015 95.27 50 11,891,246 4.73 14,428 251,163,261 100.00

129



5. Categories of Shareholders

2014 / 2015 2013 / 2014Categories of Shareholders No of Shares Shareholders No of % No of Shares Shareholders No of %

Individuals 115,622,155 14,151 46.03 98,682,304 14,133 39.48Institutions 135,541,106 277 53.97 151,269,214 294 60.52Total 251,163,261 14,428 100.00 249,951,518 14,427 100.00


6. Share Information

14 / 15 13 / 14

BOOK VALUE (Group) Net Assets Per Share Rs. -1.10 1.10SHARE PRICEHighest Rs. 8.10 12.10Lowest Rs 4.00 06.10Value as at last trading date - 31st March Rs. 4.40 07.80EARNINGS (Group)Earnings Per Share Rs. -1.12 0.06Price Earnings Ratio (times) -3.93 130.00DIVIDENDDividend Per Share Rs. - -Dividend Rate (%) - -PUBLIC HOLDINGThe percentage of Public Holding - as at 31st March 40.80% 44.20%

FINANCIAL CALENDAR

INTERIM FINANCIAL STATEMENTS 2014/2015

1st Quarter ended 30-06-2014 (unaudited) on 15-08-2014

2nd Quarter ended 30-09-2014 (unaudited) on 15-11-2014

3rd Quarter ended 31-12-2014 (unaudited) on 23-01-2015

4th Quarter ended 31-03-2015 (unaudited) on 10-06-2015

130

Notice of Meeting

Notice is hereby given that the twenty eighth Annual General Meeting of the shareholders of Nation Lanka Pinance PLC will

be held on 30th September 2015, at 10.00 a.m. at the “Committee Room D” of the Bandaranaike Memorial International

Conference Hall (B.M.I.C.H.), situated at Bauddhaloka Mawatha, Colombo 07, for the following purposes:

AGENDA

1. To receive and consider the Report of the Board of Directors and the Audited Financial Statements for the year ended 31st March 2015 together with the Report of the Auditors thereon.

2. To re-elect Mr. K M S Kandegedara, who retires by rotation in terms of Article 88 of the Articles of Association of the Company.

3. To elect Mr. H J C Perera, who retires in terms of Article 95 of the Articles of Association of the Company.

4. To re-appoint M/S KPMG, Chartered Accountants, Auditors of the Company, for the ensuing financial year 2015/2016 and to authorize the Board of Directors to determine their remuneration.

5. To authorize the Board of Directors to determine contributions to charities and other donations for the financial year 2015/2016

6. To transact any other business of which due notice has been given.

BY ORDER OF THE BOARD

Corporate Arcade LtdCompany Secretaries

28th August 2015

Note:

1. A member entitled to attend and vote at the meeting is entitled to appoint a proxy to attend and vote instead of him/her. A proxy need not be a member of the Company. The form of proxy is enclosed for this purpose.

2. To be valid, the instrument appointing a proxy should be deposited with the Company Secretaries, Corporate Arcade Ltd, No.122/37, Kirulapone Avenue, (Baseline Road), Kirulapone, not less than 48 hours before the time fixed for the Annual General Meeting.

3. Shareholders appointing proxies (other than Directors of the Company) to attend the Meeting are requested to indicate the number of the National Identity Card of the Proxy holder on the form of proxy. Only registered Proxy holders will be permitted to attend the Annual General Meeting.

4. Shareholders / Proxy holders are requested when attending the Annual General Meeting to bring with them the National Identity Card or any other form of valid identification.

131


Form of Proxy

I/We…………………………………….……………………………………………… of .................................…………................…………………………………………………

….......................................................................................................…… being a Member/Members of Nation Lanka Finance PLC hereby

appoint ………………………………………………………………………. holder of NIC No ………………………….. of ……………………………………………………

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

Hewa Komanage jayantha Dharmadasa of Colombo – 02 whom failing

Victor Rajamanner Ramanan of Colombo – 06 whom failing

Jayapraksha Rudra of Colombo - 06 whom failing

Ugitha harshith Dharmadasa of Colombo – 03 whom failing

Hettiarachige Jayantha Christoper Perera of Malabe whom failing

Peduru Merenna Lalith Kirethie Karunaratne of Colombo – 07 whom failing

Kande Mohottalalage Sunil Kandegedara of Colombo - 05

as my / * our proxy to represent me / * us on my/ * our behalf as indicated below at the Twenty Eighth Annual General Meeting of the Company to be held on the 30th day of September 2015 and at any adjournment thereof.

Please indicate your preference by placing a ü against the Resolution No.

For Against

1) To receive and consider the Report of the Board of Directors and the Audited Financial Statements for the Year ended 31st March 2015 together with the Report of the Auditors thereon.

2) To re-elect Mr K M S Kandegedara, who retires by rotation in terms of Article 88 of the Articles of Association of the Company.

3) To elect Mr H J C Perera, who retires by rotation in terms of Article 95 of the Articles of Association of the Company.

4) To re-appoint M/S KPMG, Chartered Accountants, Auditors of the Company for the ensuing Financial year 2015/2016 and to authorize the Board of Directors to determine their remuneration.

5) To authorize the Directors to determine contributions to charities and other donations for the year 2015/2016.

As witness my/ our hand/s this ..............………....................... day of ....…….......................... 2015.

.............................................. ..............................................NIC / REG. NO SIGNATURE

132

INSTRUCTIONS FOR THE COMPLETION OF PROXY

1) Please perfect the form of proxy overleaf, by signing in the space provided and filling in the date of signature, after filling in legibly your full name and address.

2) Please return the completed Form of Proxy after deleting one or other of the alternative words indicated by asterisks in the body of the form

3) To be valid, completed form of Proxy should be deposited with the Company Secretaries at No.122/37, Kirulapone Avenue (Baseline Road), Kirulapone, not less than 48 hours before the time appointed for the holding of the meeting.

4) If the form of Proxy has been signed by an attorney, the relative Power of Attorney should also accompany the completed form of Proxy for registration, if such Power of Attorney has not already been registered with the Company.

5) If the shareholder is a Company or a corporate body, the Proxy should be executed under its Common Seal(where applicable) in accordance with its Articles of Association or Constitution.

6) If there is any doubt as to how the vote is to be exercised by reason of the manner in which the Form of Proxy has been completed, no vote will be recorded.

Form of Proxy



NAME OF THE COMPANY




LEGAL STATUS


REGISTRATION NUMBER

PQ 33

ACCOUNTING YEAR END

31st March


134001518



SUBSIDIARIES


BANKERS


BOARD OF DIRECTORS




AUDITORS


LAWYERS




Life Photography





NAME OF THE COMPANY




LEGAL STATUS


REGISTRATION NUMBER

PQ 33

ACCOUNTING YEAR END

31st March


134001518



SUBSIDIARIES


BANKERS


BOARD OF DIRECTORS




AUDITORS


LAWYERS




Life Photography




Nation Lanka Finance PLCNo.28, Dickman’s Road, (Sir Lester James Peiris Mawatha),

Colombo 05.www.nlfplc.com



Annual Report 2014/15

Nation Lanka Finance PLC Annual Report 2014/15

for the nation people · 2018-11-26 · we look forward to the future with the new found strength...

Documents