THE FINANCE COMPANY PLC CONTENTS · · 2012-09-07page 2 financial highlights annual report 2011-12 ... hatton national bank plc auditors ... the finance company plc page annual

THE FINANCE COMPANY PLC

ANNUAL REPORT 2011-121PAGE CONTENTS

PAGES

Financial Highlights 02Corporate Information 03Notice of Meeting 04Chairman's Message 05 - 06Director/Chief Executive Officer's Message 07 - 08Board of Directors 09 - 11Review of Operations 12 - 14Report of the Directors 15 - 20Corporate Governance 21 - 42Statement of Directors' Responsibilities 43Audit Committee Report 44Auditors' Report 45Income Statement 46Balance Sheet 47Statement of Changes in Equity 48Cash Flow Statement 49Notes to the Financial Statement 50 - 82Investment Properties 83Shareholders Information 84 - 86Ten Year Summary 87Branch Network/Service Centers/Divisions 88 - 91Form of Proxy 92 - 93


ANNUAL REPORT 2011-122PAGE FINANCIAL HIGHLIGHTS

RESULTS 2011/12 2010/11 2009/10 2008/09 2007/08Rs. Rs. Rs. Rs. Rs.

Net Revenue 4,689,361,695 2,985,939,406 5,203,999,903 10,640,478,022 11,306,845,221Profit/(Loss) before Taxation (353,399,712) (3,830,135,175) (4,285,937,283) (2,563,400,716) 503,725,805Net Profit/(Loss) for the year (353,399,712) (3,830,135,175) (4,285,937,283) (2,563,400,716) 662,618,527Dividends - - - - 36,754,857Total Assets 20,142,493,905 21,434,222,100 27,296,259,885 36,704,551,395 40,154,382,776Public Deposits 20,850,952,790 20,862,889,513 25,747,254,728 27,065,133,232 28,575,643,296Stated Capital 4,010,180,756 4,010,180,756 410,180,756 410,180,756 410,180,756Reserves (7,874,907,304) (7,871,223,622) (3,974,597,538) 1,067,825,144 3,616,636,545

Earnings/(Loss) per Share (Profit/(Loss) after Tax/ No. of Shares) (Rs.) (2.20) (87.54) (209.90) (125.54) 32.45Dividend per Share (Dividend/No of Shares) (Rs.) - - - - 1.80Net Assets Value per Share (Net Assets/ No. of Shares) (Rs.) (24.09) (24.07) (174.56) 72.38 197.21Current Ratio (Current Assets/ Current Liabilities) 0.45 0.58 0.64 0.67 0.72Debt Equity Ratio (Long-term Borrowings / Net Assets) % -14.47% -39.92% -34.87% 99.87% 41.76%Return on Average Shareholders’ Funds (Profit/(Loss) after Tax / Avg. Share holder’s Fund) % - - - - 19.11%Price Earning Ratio (Market Value per share / Earning/(Loss) per share ) (Times) - - - - 1.94Dividend Cover Profit/(Loss) after Tax / Dividends ) (Times) - - - - 18.03Dividend Yield (Dividend per share/ Market Value per Share) % - - - - 2.86%

Earning Yield (Earning/(Loss) per Share / Market Value per Share) % - - - - 51.51%

Market Value per Share Rs. Rs. Rs. Rs. Rs.Highest value recorded during the Financial Year - Voting 48.00 53.00 26.00 65.00 69.75

- Non Voting 19.00 18.40 - - -Lowest value recorded during the Financial Year - Voting 26.00 35.00 17.50 21.00 33.25

- Non Voting 11.30 16.50 - - -Value at the end of the Financial Year - Voting 30.10 37.00 17.50 22.00 63.00

- Non Voting 8.00 17.00 - - -


ANNUAL REPORT 2011-123PAGE CORPORATE INFORMATION

BOARD OF DIRECTORS

M P JayawardenaChairman/

Independent Non-Executive Director

K J YatawaraDirector/CEO

T B EkanayakeDirector/Chief Operating Officer

A L DevasurendraNon-Executive Director

Mrs V W DissanayakeExecutive - Director

A P LekamgeIndependent Non-Executive Director

R NadarajahNon-Executive Director

Ms Cherille RosaIndependent Non-Executive Director

Dr T SenthilverlNon-Executive Director

AUDIT COMMITTEEMs Cherille Rosa

R NadarajahDr T Senthilverl

A P Lekamge

COMPANY SECRETARYMiss P S Watson FCIS

COMPANY REGISTRATION NUMBERPQ - 1

REGISTERED OFFICENo. 97, Hyde Park Corner, Colombo 2

Tel No. 2682745

HEAD OFFICEThe Finance HouseNo. 55, (Lauries Place)R A De Mel MawathaColombo 4.Tel Nos. 2597613/2580210Web: www.thefinance.lk

LAWYERT B EkanayakeAttorney at Law & Notary Public

M/s Nithya PartnersAttorneys-at- Law and Notaries Public

BANKERSSeylan Bank PLCPeople’s BankCommercial Bank of Ceylon PLCHatton National Bank PLC

AUDITORSM/s Tudor V Perera & CoChartered Accountants

LEGAL STATUSIncorporated under the Companies OrdinanceNo 51 of 1938 and re-registered under theCompanies Act No 7 of 2007

Date of Incorporation – 30th May 1940

Registered under the Finance Business ActNo. 42 of 2011(formerly Finance CompaniesAct No 78 of 1988), Finance Leasing Act No56 of 2000.

Approved Credit Agency under the MortgageAct No 6 of 1949 and Inland Trust ReceiptsAct No. 14 of 1990

Public Company Listed on the Colombo StockExchange.


ANNUAL REPORT 2011-124PAGE NOTICE OF MEETING

NOTICE IS HEREBY GIVEN THAT the 72nd Annual General Meeting of the shareholders of TheFinance Company PLC will be held at Hotel Janaki No 43 Fife Road, Colombo 5 on 27th September2012 at 9.00 a m

AGENDA

1. To receive and adopt the Report of the Directors and the Statement of Accounts for the yearended 31st March 2012 and to receive the report of the auditors thereon.

2. To re-elect Ms Cherille Rosa, who retires in terms of Article 24(2) of the Articles of Association, asa Director.

3. To re-elect Mr A P Lekamge, who retires in terms of Article 24(2) of the Articles of Association, asa Director.

4. To re-elect Mr K J Yatawara, who will retire by rotation in terms of Article 24(6) of the Articles ofAssociation, as a Director.

5. To re-elect Mr T B Ekanayake, who will retire by rotation in terms of Article 24(6) of the Articlesof Association, as a Director.

6. To re-appoint the retiring Auditors and to authorize the Directors to determine their remunera-tion.

7. To authorize the Directors to determine contributions to charities and other donations for the year2012/2013.

8. To consider any other business of which due notice is given

By Order of the Board

THE FINANCE COMPANY PLC(Sgd,) Miss P S WatsonCompany Secretary15th August 2012

Notes:

A member entitled to appoint a proxy to attend and vote for him/her.

A proxy need not be a member of the Company.

A form of proxy is enclosed for this purpose.

The instrument appointing a proxy should be deposited at the Head office at No 55, R A De MelMawatha (Lauries Place) Colombo 4 not less than 48 hours before holding of the meeting.

Shareholders/Proxy holders attending the Annual General Meeting are kindly requested to bringwith them their National Identity Card or any other valid form of identification.


ANNUAL REPORT 2011-125PAGE CHAIRMAN'S MESSAGE

It is indeed with a great sense of hope and excitement that I pen down afew words in review of the past financial year as the Chairman of thisgreat organization. I believe that the rich tradition, heritage and culturethat are inherent within the organization have only been strengthenedduring these challenging times. Values of integrity, honesty and loyaltycontinue to be the foundations that this company has so steadfastly heldon to during its operations spanning close to 75 years.

With the cessation of hostilities that for over three decades hampered anydynamic growth that the country was to witness economically, today, ourisland nation is poised towards greater economic growth and sustainablestability. With the ongoing mega infrastructure development that is currently witnessed in the Northand East provinces it is expected that by the year 2016 the per capita income would exceed USD4000. The gradual reduction in the inequality of distribution due to the distribution of industriesthroughout the entire island could be viewed as the main catalyst for growth in the coming years.

I am of the belief that the results portrayed during the past financial year most certainly are intertwinedwith that of the countries, and the global economy. All major global power houses, the USA, Europeand the Middle East faced tumultuous times both politically and economically. The ripple effect ofthese unexpected times will most certainly be felt by smaller economies such as ours. Ourorganizations, together with many other finance companies are carrying out operations through thesetimes and it is indeed a challenge. A challenge we all look forward to and believe we have the powerto overcome.

However, it must be reiterated that, The Finance Company is on its journey towards greater andsustainable success. We possess in our arsenal an unparalleled network of branches located at themost strategic points spanning the length and breadth of our country. We also possess a very richand diverse real estate portfolio together with commercial properties, the value of which will onlyincrease given the current stability the country is experiencing.

The land bank that is spread across the country and the branch network owned by our company,adds the impetus for further growth and of course excitement in our journey towards achievinggreater heights.

During the past year, we invited an eminent consultancy firm to join hands with us in restructuringthe company’s operations. The process is currently in its final phase and we have implementedmany recommendations that we as a company believed were necessary in order to increase profitability.I believe the fruits of this process would be reaped in the years to come.

We have also invited two new Directors to the board to join hands with us in our journey. Both ofthem have an exceptional background and we believe that their wealth of knowledge and experiencewill help our company achieve greater and broader heights.

The only drawback the company has witnessed during the past year is the negative net-worth whichresulted from the heavy losses the company incurred in the past after the golden key debacle.

This was however resurrected to a certain extent through a new capital infusion of Rs. 1.6 billion anda deposit conversion of Rs. 2 billion which took place in January 2011 and all of us were committedin ensuring a complete and sustainable financial growth. We are now looking at a further infusion of


ANNUAL REPORT 2011-126PAGE CHAIRMAN'S MESSAGE

capital for the company to reach its full potential and we are doing everything possible in order toachieve these goals we have set for the future.

We also recently witnessed a highly publicized issue revolving around the share transaction betweenthe National Savings Bank and The Finance Company. Needless to say, the negative publicity thatwas generated due to the transaction stifled the gradual growth we were witnessing to a certainextent with public perception turned against us. However, the trust and confidence that was placedin us throughout the entirety of our existence by our clientele and the Lankan public at large stillcontinues to stay strong.

The dedicated and committed workforce that The Finance boasts of have taken all measures in orderto ensure that all our stakeholders, most importantly our clients are given nothing but their best interms of service, solutions and quality. To this end our commitment and passion to exceed and excelcontinues to grow. This in fact proves one of the major reasons for excitable times ahead.

I would be failing in my duty if I don’t use this opportunity, to thank the Board, shareholders,stakeholders and our valued customers for their unbridled trust and confidence placed in us, withoutwhom our journey would have been arduous. I look forward to the continued support from all ourstakeholders in the years ahead.

It is indeed excitable times and our passion and resolve to ensure that we as an organization toensure we achieve greater heights remains very strong.

Preethi JayawardenaChairman

15th August 2012


ANNUAL REPORT 2011-127PAGE DIRECTOR / CHIEF EXECUTIVEOFFICER'S MESSAGE

The Financial Year 2011/2012 which was the 72nd year of operation ofthe Organization was a year of restructuring and streamlining operationsto ensure sustainable growth, to be competitive and more focused in themarket place at a time many new players have entered the industry.

The key areas that we are focused on are the completion of centralizationof back office operation with the support of the technology to improve theefficiency in the branches so that the branch staff would be much morefocused on business and customer service. This will also contribute to afurther reduction of operational cost of the Organization. The disposal ofnon yielding assets of the Company is the other area we have focused ofwhich the cash inflows can be utilized to increase the volumes in loan disbursements and real estatebusiness.

The year 2011 was by far one of the most challenging years for the global economy. The Sri Lankaneconomy witnessed a growth in the year 2011 as well achieving over 8% for the second consecutiveyear. With strong macro & micro economic conditions, Sri Lanka continued to demonstrate a positiveeconomic trend.

All major products of the Company have shown Y-O-Y increases in inflows, the loan disbursementsin vehicle related products has improved by 123% and the pawning new investment by 237% in2011/2012 compared to the previous year. Pawning has also shown 100% growth in market shareamongst the RFC's. Nine new Pawning centres were opened during the financial year 2011/12,increasing the number of pawning centres to thirty nine.

The growth in the new intake of fixed deposits was 170% in the year 2011/2012 and the savingsdeposit intake of the company increased by 54% compared to the last financial year which is a clearindication of the public confidence that has been built up over the past two years.

On the Real Estate area of business the company is still the market leader and has had the privilegeof being positively contributing the country's land ownership. We have achieved over 350% growthin real estate stock movement during 2011/12 over the previous year. Taking these factors intoconsideration we have built the market strategy for real estate and established a product positioningthat would also enhance the corporate brand image. TFC was ranked 37 among the top 100 brandsin Sri Lanka in the 2011 by Brand Finance PLC - UK.

The company is in the process of restructuring its key operations in consultation with a reputedinternational restructuring organization. The company is focusing on relocating many of its brancheswhich commenced operations 30-40 years ago and are not in the best potential business areas in thecurrent market context, to more strategic locations for customer convenience and to harness thepotential. During the year 2011/12 the branches that were relocated to more strategic locations areAnuradhapura, Polonnaruwa, Batticaloa, Nelliady, Jaffna, Maharagama and Baduruliya.

Our customers particularly the deposit holders have stood by us for many decades and have trulydemonstrated the meaning of loyalty. We are very much grateful to all our customers and are proudand privileged to serve them.


ANNUAL REPORT 2011-128PAGE DIRECTOR / CHIEF EXECUTIVEOFFICER'S MESSAGE

My sincere appreciation should go to the valued employees at all levels for their continuous dedication,commitment and untiring contributions made by them.

We stay committed to serve all our stakeholders. On behalf of the Chairman and the Board of Directors,I pledge that we will make every effort to add value to the Organization through the execution ofprudent business strategies that are being implemented.

Kamal J YatawaraDirector/CEO

15th August 2012


ANNUAL REPORT 2011-129PAGE BOARD OF DIRECTORS

Mr Preethi Jayawardena FCA

Mr. Preethi Jayawardena accounts for more than 30 years post qualifying experience bothlocally and overseas in many senior positions specializing in Finance and Treasury Operations.

He is a Chartered Accountant by profession and currently serves as the Managing Director/CEO of Chemanex PLC. He is also a Non-Executive Director of CIC PLC and many otherPublic and Private Sri Lankan as well as overseas based Limited Companies.

He is a member of the Monetary Policy Consultative Committee of the Central Bank of Sri Lanka. He is also theDeputy Chairman of the National Chamber of Industries of Sri Lanka and a member of the Executive Council of theInstitute of Directors of Sri Lanka.

Mr Kamal J Yatawara

Mr. K J Yatawara joined the Company as a Sales Manager 24 years ago, after working fortwo Multinationals M/S Walker & Sons and Unilever, initially in the areas of Auditing andTraining and subsequently in Sales and Marketing. He was exposed to many fields anddiversified markets and has worked in many parts of the country. In recognition of hisachievements at The Finance, particularly the growth in performance of the branches managedby him during the first few years, he was elevated to senior management level as an AssistantGeneral Manager within a short period. He also had the opportunity of overlooking almost allthe branches in the organization, working in the capacity of Assistant General Manager,Deputy General Manager and General Manager.

Mr Yatawara has extensive exposure in overseas markets as well, as a result of being involved in several JointVenture Operations of the Company. He has also attended many career development and training programs bothlocally and overseas, in the areas of General Management, Marketing, Financial Management and HR Management,in prestigious Institutes and Universities.

In recognition of his performances, capabilities and dynamism he was later appointed to the Board, as DirectorOperations and subsequently as a Joint Deputy Chief Executive/Director.

Mr Yatawara was appointed as a Key Executive by the Central Bank of Sri Lanka soon after the crisis in thefinancial sector, which had an effect on the Company’s operations, to lead the team to resurrect the Organization.He was later appointed Director/CEO of the Organization with the concurrence of the Managing Agent and TheCentral Bank of Sri Lanka.

Mr Ajith L Devasurendra

Mr. Ajith Devasurendra is a veteran in the financial services industry in Sri Lanka andcounts more than 28 years work experience both in Sri Lanka and Overseas. He pioneered inMoney Broking and Government Securities markets and was able to bring new dimensions tothe Sri Lankan Money market industry. He is the former group CEO of First Capital Group.Mr. Devasurendra was a past president of the Sri Lanka Money Brokers Association and alsothe first president of the Sri Lanka Primary Dealers Association. He acted as a consultant toPrice Water House Coopers, Bombay, India on a USAID project.

At present he is a director of Seylan Bank PLC, the Group CEO of Taprobane Group of Companies and he servesin the capacity of Deputy Chairman of Brown and Company PLC as well as in many committees that focuses onthe development of the Financial Markets in Sri Lanka.


ANNUAL REPORT 2011-1210PA

GE

Mrs Violet W Dissanayake BA

Mrs Violet Dissanayake, a Graduate of University of Peradeniya holding a Degree in Bachelorof Arts joined TFC in 1976 as a General Clerk and held several positions such as AssistantManager, Manager, Assistant General Manager in the deposits area before she was appointedto the Board of The Finance Company PLC on 21st April 1997 as Director-Fixed Deposits.She was appointed as a Key Executive by the Central Bank during the financial crisis andcontributed towards the re-building of the Company. She accounts formore than three decadesin the Deposit field and was instrumental in contributing to the growth of the savings anddeposit fund base.

Mr Tissa B Ekanayake

Mr Tissa Ekanayake is an Attorney-at- Law & NP by profession and prior to joining theCompany was engaged in private practice. He joined the Company as a Legal officer of theKandy Branch in 1988. He held positions of Senior Legal Officer and Assistant GeneralManager – Legal and overlooked the legal functions of the Branches coming under his purview.He was then assigned recoveries function and was appointed General Manager – Collectionand he was responsible for the overall collections of the entire Company. Subsequently heheld the position of General Manager –Legal and was appointed to the Board on 21st June

2008. He was appointed as Key Executive Director by the Central Bank during the financial crisis and contributedimmensely to the revival of the Company.

He has extensive knowledge and experience in legal and also in recoveries field and exemplary negotiating skills. Heaccounts for over 24 years experience in the Company. Mr. Ekanayake was appointed Chief Operating Officer witheffect from 28th June 2012.

Mr A P Lekamge M.Sc in Risk Mgt.

He started his career as a teaching instructor and as a teacher at Ananda College, Colombowith having National Diploma in Education. He kept remarkable records at Finance &Management faculty at University of Colombo. Further he completed his post graduate studiesgaining specialized M.Sc. in Risk Management at Manchester Metropolitan University in UK.

He reserves acclaimed name in the field of Insurance and Risk management. His Excellencyand the Supreme Court has nominated Mr. Lekamge to the Board of Sri Lanka InsuranceCorporation as an Executive Director where he served till June 2010. Further he served as a Director at Ceylon AssetManagement Co.

His entrepreneurial ship record has made him one of the top business personalities in Sri Lanka and currently hechairs diversified group of companies which includes International Schools, International Trading, Transport andLogistic sectors.

Furthermore Mr. Lekamge has contributed his leadership skills, knowledge and experience to the effectiveness toaddress National needs. As Senior National Coordinator handling 52 Red Cross National Societies around the globehe still leads the team of experts being Head of Recoveries, Technical Support Services & Red Cross ConsultancyServices at the Sri Lanka Red Cross Society (SLRCS). Under his guidance & leadership so far SLRCS completed andhanded over 30,000 Houses, 77 Health Infrastructure facilities and large Water Supply projects to assist victims of allTsunami affected districts in Sri Lanka.

With the contribution to the nation he has developed strong links with the local professionals, local ministries andInternational organizations including United Nations, World Bank, International Federation of Red cross.

BOARD OF DIRECTORS



GE

Mr R Nadarajah BSc (Hons), MBA, FCIB (London)

Mr Ramanathan Nadarajah brings with him 43 years of banking experience in both state andprivate sector banks. He served as Managing Director/General Manager/CEO of Pan AsiaBank for six years and previously served at Bank of Ceylon in various capacities including asa Deputy General Manager. He was the inaugural President of the Primary Dealers Associationand has been a Past President of the Association of Professional Bankers of Sri Lanka.

Mr Nadarajah is a Director of Seylan Bank PLC and also functions as the Chairman of itsSubsidiary, Seylan Developments PLC.

Ms Cherille Rosa FCA, CFA, MBA

Cherille brings over 25 years of leadership and management experience in Finance, InternationalOperations, Risk Management and Information Technology as well as in start- up venturesand divisions within Fortune 1000 companies both in the US and Asia Pacific region. Sheheld the positions of, Vice President of Finance and Operations for Citibank’s Asia PacificTechnology and Operations group, Vice President of Operations, Asia Pacific Region for aCitibank subsidiary that specialized in Foreign Exchange Electronic Broking Service for Fortune1000 financial institutions, Vice President, Operational Risk Management at Irwin Home

Equity and Vice President, Compliance and Operational Risk Management at Macquarie Air Finance specializing inaircraft leasing services.

Cherille is a Chartered Accountant of Sri Lanka, a Chartered Financial Analyst (CFA) and has earned an MBA inFinance from New York University, Stern School of Business.

Dr T Senthilverl

Dr. T Senthilverl counts over four decades of active engagement in manufacturing, trading,land development, health, power & energy sectors, and industrial turnkey projects. Presentlyhe holds number of other directorships in leading listed and unlisted companies includingAmana Takaful PLC, MBSL Savings Bank Limited, Nawaloka Hospitals PLC, SMB LeasingPLC, C W Mackie PLC, Vidullanka PLC, Hydro Power Free Lanka PLC, Lanka Ceramics PLCand C T Land Developments PLC.

BOARD OF DIRECTORS



GE

REVIEW OF OPERATIONS

Economic Environment

The economy of Sri Lanka grew by 8.3 percent in 2011 (8 percent in year 2010), the highest in SriLanka’s post independence history. Improved macroeconomic conditions due to peace in the country,rapid expansion of infrastructure facilities in the Northern and Eastern Provinces which resulted inan increase in economic activity in the provinces had contributed mainly to this growth momentumof above 8 percent in two consecutive years. The industrial and service sectors were the main con-tributors for this growth while agriculture sector has recorded a marginal growth in the year.

Inflation maintained at single digit levels for the third consecutive year. Annual average inflationwas 6.7 percent while year on year inflation was 4.9 percent in December 2011.

The stability of the financial system was further improved due to macroeconomic conditions andstrengthening of supervision and regulation.

Regulatory Environment

During the year, a new Finance Business Act was introduced to combat the problem of unauthorizeddeposit taking and finance business activities. Further a series of new and revised directions wereissued to the Non Bank Financial (NBFs) sector in line with the Finance Business Act. The minimumcapital requirements for finance companies were enhanced and corporate governance provisionsrelating to fitness and propriety of directors and senior management were also strengthened.

Performances of the Non-Bank Financing (NBFs) Sector

NBFs sector consists of Licensed Finance Companies (LFCs) and Specialized Leasing Companies(SLCs).The performance of NBFs sector improved significantly while maintaining adequate capitallevels, liquidity levels and profit levels. The NBFs sector expanded their presence to Northern andEastern provinces facilitating easy access to financial services.

The assets base of the Non-Bank Financial (NBFs) sector grew to Rs. 490 billion recording a growth of26 percent in the year 2011. Accommodations grew by 46 percent to Rs. 388 billion in the same year.Increase in finance lease, hire purchase, other secured loans and pawning were the main contributorsfor the growth in accommodations.

Deposits which were the main source of funds for the NBFs sector grew to Rs. 186 billion recordinga growth of 27 percent in the year 2011.This growth reflects the regaining confidence of in the LFCs.Time deposits accounted about 97 percent of the total deposits.

Capital of NBFs sector increased by 60 percent to Rs. 77 billion in the year 2011. Sustained profitabil-ity and revival of distressed NBFs were the main contributors to this growth.

The Company PerformancesRevenue

The net revenue of the Company grew to Rs. 4.7 billion in year 2011/12 from Rs. 3.0 billion in year2010/11 recording an increase of 57 percent. This was mainly as a result of increase in real estateincome.

The interest income for the year 2011/12 declined to Rs. 2 billion from Rs. 2.1 billion recording anegative growth of 5 percent. This was due to decrease in lending rates in line with the market ratesduring the beginning of the year. However the rates were later increased in par with market rates.



GE


The interest expense declined 20 percentto Rs. 2.5 billion in the year 2011/12 com-pared with Rs. 3.1 billion in the year2010/11. The reduction in interest rateson deposits was due to the conversion offixed deposits to non-voting shares on09th February 2011.

The operating expenses reduced by 33percent to Rs. 1.16 billion in the year2011/12 compared with Rs. 1.75 billionin the year 2010/11.

Assets and Liabilities

The total assets of the Company decreased by 6 per-cent to Rs. 20.1 billion during the year under reviewfrom Rs. 21.4 billion in the previous year. This de-cline was mainly due to reduction in real estate in-vestments and investments in Government Securities.

The liabilities recorded a decline of 5 percent to Rs. 24billion during the year under review compared to Rs.25.2 billion recorded in the previous year. The redemp-tion of Debentures and part settlement of long termloans were the main contributors for the reduction.

Hire Purchase and Leasing

The loan portfolio on hire purchase and leasing as atcurrent year end showed an increase of 35 percent toRs. 4.8 billion compared to previous year end due toincrease in accommodations granted during the year2011/12.

Real Estate

The real estate and housing projects balance decreased34 percent during the year under review to Rs. 3.7billion from Rs.5.7 billion compared with previous yearend mainly due to the disposal of high value real es-tate investments.

0

5

10

15

20

25

30

35

40

45

31.0

3-20

12

31-0

3-20

11

31-0

3-20

10

31-0

3-20

09

31-0

3-20

08

Assets Liabili�es

(Rs. Bn.)

Year End

0

1

2

3

4

5

6

7

2011

/12

2010

/11

2009

/10

2008

/09

2007

/08

Year

Interest Income Interest Expense Opera�ng Expenses

(Rs. Bn.)

0

200

400

600

800

1000

1200

Hire

Pur

chas

e

Easy

Pay

men

t

Othe

r

Rela

ted

Co's

Depo

sits

2011/12

2010/11

(Rs. Mn.)

Leas

ing

Hou

sing

Loa

ns

Paw

n Br

okin

g

Gov

ernm

ent S

ecur

ities

Ove

r due

Ren

tals

Income Type



GE


0

5

10

15

20

25

30

31-0

3-20

12

31-0

3-20

11

31-0

3-20

10

31-0

3-20

09

31-0

3-20

08

Public Deposits (Rs. Bn.)

Year End

Public Deposits

The Company continued to have one of the largest publicdeposit base among non-bank financial (NBFs) sector in theyear under review. This reflects the customers’ continued con-fidence in the Company. During the finance year 2011/12 thepublic deposit balance declined by 0.1 percent to Rs. 20.8 bil-lion compared with Rs. 20.9 billion in previous year end.However the net-intake of Deposits improved during the lat-ter part of the year since the new Board of Directors took adecision to refund all deposits at maturity on demand.

Collections

The Company maintained a very low level of NPL ratio foraccommodations granted after 1st January 2011. The effective-ness of very strict customer credit evaluations adopted by theCompany was evident by this low NPL ratio. During the year,the Company made a reversal of bad and doubtful provisionof Rs. 265.2 million compared to Rs.11.6 million in the year2010/11.

Future Prospects

As the Company is gearing up for a fresh capital infusion, the Company would pay more attentionon hire purchase, leasing and pawning businesses. With the present upward trend in the real estatemarket, the Company intends to maintain leadership in real estate business but would be engagingonly in small and medium scale projects of which the time period would be less than six months.The credit evaluation criteria are strengthened and centralized to maintain a high quality investmentportfolio. The Company would focus on low cost funding in order to be more competitive.



GE

REPORT OF THE DIRECTORS

The Directors have pleasure in presenting to the shareholders their Report together with the AuditedFinancial Statements of the Company for the year ended 31st March 2012. The report contains thedisclosures required to be made by the Companies Act 7 of 2007 and the listing rules of the ColomboStock Exchange.

The Company was incorporated as a Public Limited Liability Company in Sri Lanka on 30th May1940 and was re-registered under the Companies Act No 7 of 2007 on 4th June 2007. The Company’sRe-Registration Number is PQ 1.

PRINCIPAL ACTIVITIESFinancing and Real Estate business continued to be the principal activities of the Company.

REVIEW OF OPERATIONSReview of operations is given on pages 12 to 14 of the Annual Report.

PROFITS AND APPROPRIATIONSThe following is an extract of the Profit and Loss Account for the year ended 31st March 2012 andits comparison with the previous year.

2011/2012 (Rs) 2010/2011 (Rs)

Net profit before Taxation (353,399,712) (3,830,135,175)

Less: Provision for Taxation on the profits for the year – –

Net Profit after Taxation (353,399,712) (3,830,135,175)

Less Unappropriated profit brought forward (11,451,455,636) (7,554,729,552)

Amount available for appropriation (11,804,755,348) (11,384,864,727)

Your Directors recommend the following appropriations

Transfer to Reserve Fund – –

Transfer to General Reserve – –

First and Final Dividend (Gross) – –

Total appropriation – –

Balance to be carried forward (11,804,755,438) (11,384,864,727)



GE

DIRECTORATEThe following were the directors as at 31st March 2012

Non- Executive Directors Executive DirectorsMr M P Jayawardena – Chairman* Mr K J Yatawara – Director/CEOMr A L Devasurendra Mr T B EkanayakeMr N A Fernando* Mrs. V.W. DissanayakeMr R NadarajahDr T Senthilverl

*Independent Directors

CHANGES IN THE DIRECTORATEAppointmentsThe following directors were appointed to the Board on the dates set opposite to their names.

Name of Director Effective DateMr A S R Silva 5th October 2011Mr D G Wijemanne 5th October 2011Ms Cherille Rosa 16th April 2012Mr A P Lekamge 23rd July 2012

ResignationsThe following directors tendered their resignations from the Board on the dates set opposite to theirnames.

Name of Director Effective DateMr A S R Silva 14th March 2012Mr D G Wijemanne 2nd May 2012Mr N A Fernando 12th June 2012

Further Mr Dinal Wijemanne was appointed as an Alternate to Mr N A Fernando and thereafterresigned from this position on 15th May 2012.

Mr T B Ekanayake was appointed the Chief Operating Officer with effect from 28th June 2012.

We regret to announce the demise of Mrs N C Rupasinghe on 30th March 2012.

RETIREMENT BY ROTATION OR OTHERWISEIn terms of Article 24(2) of the Company’s Articles of Association Ms Cherille Rosa and Mr ArunaPrasad Lekamge will retire and being eligible offer themselves for re-election at the forthcoming AnnualGeneral Meeting.

In terms of Article 24(6) of the Company’s Articles of Association Mr K J Yatawara and Mr T BEkanayake retires by rotation at the forthcoming Annual General Meeting and being eligible offersthemselves for re-election.




GE

DIRECTORS SHAREHOLDINGThe following are the shareholdings of the Directors of the Company as at 31st March 2012.

31st March 2012 31st March 2011Name Ordinary Worker Non Voting Ordinary Worker Non

Shares Shares Ord. Shares Shares Shares VotingShares

Mr M P Jayawardena 30,000 Nil Nil Nil Nil NilMr K J Yatawara 2,620 3,636 Nil 2,620 3,636 NilMr T B Ekanayake 167 3,388 Nil 167 3,388 NilMr A L Devasurendra Nil Nil Nil Nil Nil NilMrs V W Dissanayake 1,346 18,986 Nil 1,346 18,986 NilMr A P Lekamge 200,000 Nil 36,400 Nil Nil 36,400Mr R Nadarajah 1,000 Nil Nil 1,000 Nil NilMs C Rosa Nil Nil Nil Nil Nil NilDr T Senthilverl Nil Nil Nil 13,368,600 Nil NilNational DevelopmentBank/ Dr T Senthilverl 7,124,900 Nil Nil Nil Nil NilSeylan Bank PLC/Dr. T Senthilverl 5,374,700 Nil Nil 3,920,900 Nil Nil

DIRECTORS’ EMOLUMENTSThe Directors emoluments are disclosed in Note 16 to the Financial Statements found in Page 61 ofthe Annual report.

HUMAN RESOURCESThe Company has 975 employees engaged in the Head Office and the Branches islandwide as at 31st

March 2012 as against a staff strength of 1060 for previous year ended 31st March 2011. The Companyadopts a recruitment policy that offers equal career opportunities with non-discrimination on gender,race or religion. Thereby the Company has been able to retain the staff with the right Skill, Knowledgeand Attitude who have contributed towards overcoming the crisis situation faced during the financialyear, which is commendable.




GE

The employees who have completed five years in service are granted worker shares (unquoted) asdecided by the Board of Directors which can be en-cashed on retirement

PROPERTY PLANT AND EQUIPMENTThe capital expenditure on Property Plant and Equipment during the year under review is set out inNote 31 to the Financial Statements appearing on page 71 of the Annual Report.

STATED CAPITALThere was no change to the stated capital during the year under review.

SHAREHOLDINGThe number of shareholders and the percentage of shares held by the public as at 31st March 2012are given below:

Ordinary Shares Ordinary Shares(Voting) (Non-Voting)

Number of Shareholders 10,342 5,838

Percentage held by the Public 59.27% 100%

The analysis of Shareholders and the twenty Major Shareholders is disclosed on page 84 to 86 of theAnnual Report.

DIVIDENDSThe Company will not be paying a Dividend for the year ended 31st March 2012.

RESERVESThe movement of reserves is shown on Page 48 of the Annual Report.

INTEREST REGISTERThe Company maintains an Interest Register in Compliance with the Companies Act No. 7 of 2007.The details of the Shareholdings of Directors have been disclosed in this report. The following entrieswere made in the Interest Register during the year under review of the undermentioned directors:




GE

Other Directorships

Mr M P JayawardenaChairman/ Independent Non-Executive Director

Mr Jayawardena was appointed to the Board of Commercial Bank of Ceylon PLC

Mr A L DevasurendraNon-Executive Director

Mr Devasurendra had resigned from all other Companies except the following Companies:

Royal Fernwood Porcelain LtdBrown & Company PLCTaprobane Holdings LtdTaprobane Fund Management LtdAssociated Battery Manufacturers (Ceylon) LtdDiriya Investments (Pvt) LimitedSierra Constructions LtdSeylan Bank PLCCurler (Pvt) Limited

Dr T SenthilverlNon-Executive Director

Dr T Senthilverl was appointed to the Board of Nawaloka Hospitals PLC and had resigned from theBoard of Citizens Development Business Finance PLC

The Directors of Company has made general disclosures regarding related party disclosures andthese disclosures are appearing in Note 43 to the Financial Statements appearing on page 78 of theAnnual Report.

GOING CONCERNA statement relating to the going concern is disclosed in Note 46 to the Financial Statement appearingon page 79 of the Annual report.

CONTRIBUTION TO CHARITIESThe Company has not made any contributions to charities for the financial year ended 31st March2012

CORPORATE GOVERNANCEThe Corporate Governance practice followed by the Company is given on page 21 to the AnnualReport.

POST BALANCE SHEET EVENTSSubsequent to the date of the Balance Sheet no circumstances have occurred which would requireany disclosure in the Accounts.

ACCOUNTING POLICIESThere have been no changes in the Accounting Policies adopted by the Company since the lastBalance Sheet date except for change in the Accounting Policy in recording dealing securities whichis disclosed in Note No. 4.4.2 found on page 53 of the Annual Report.




GE

AUDITORSThe Accounts for the year have been audited by M/s Tudor V Perera & Company, Chartered Ac-countants, who offer themselves for re-appointment

The retiring auditors (an independent firm) have indicated their willingness to continue in office anda resolution to re-appoint them and to authorize the Board to determine their remuneration will beproposed at the forthcoming Annual General Meeting.

The Auditors have been paid a fee of Rs. 1,500,000 as Audit Fee for the financial year ended 31st

March 2012 which has been approved by the Board.

The Directors recommend their re appointment

By Order of the Board

Sgd. K J Yatawara Sgd. Mr T B Ekanayake (Sgd) Miss P S WatsonDirector/CEO Executive-Director Company Secretary

15th August 2012




GE

At TFC, we are committed towards having good Corporate Governance practices in place and applyinghighest standards of integrity in all our activities thereby gaining investor confidence and to maintainthe right balance of the interest of all stakeholders. In this section, we explain our CorporateGovernance practices and structure that were in practice during the last financial year.

The Board of Directors is committed to comply with the code on Corporate Governance and enforcesound Corporate Governance practices within the Company. The Board met regularly to discuss andreview/approve/make decision on important matters, which are listed below.

· The monthly performance of the Company and Branches/Divisions against Plans and budgets with specialconsideration on any deviations from the plan.

· Recovery Plans that are put forward by the Senior Management· Internal Control Report· Risk Management Report· Budgets and Plans· Interim and Financial Statements of Accounts· Special matters as and when required

The Board met on nine occasions during the year under review and the following is the attendance atsuch meetings.

Name of Director Position Executive/ Attendance at BoardNon-Executive Meetings

Mr M P Jayawardena Chairman INED* 9/9 Mr K J Yatawara Director/CEO Executive 9/9 Mr T B Ekanayake Director/COO Executive 9/9 Mr A L Devasurendra Director Non-Executive 8/9 Mrs V W Dissanayake Director Executive 8/9 Mr R Nadarajah Director Non-Executive 7/9 Dr T Senthilverl Director Non-Executive 7/9 Mr D G Wijemanne Director Non-Executive 4/4 Mrs N C Rupasinghe (Decd) Director Executive 7/9

*Independent Non-Executive Director

Apart from the normal scheduled meetings, special meetings are arranged if circumstances warrants.Both Executive and non-executive board members participate in these meetings.

In addition, monthly Senior Management Meetings are organized for covering areas such as Collection,Investments, Real Estate, Marketing, Information Technology and Administration which are held inorder to ensure compliance with set standards and procedures. These meetings are attended byExecutive Directors and the Senior Management staff where all issues at operational levels are dealtwith ensuring timely and accurate decision-making.

* Integrated Risk Management Committee (IRM) and Assets and Liability Committee (ALCO)

During the latter part of the Third quarter for the year under review, the Board set up the IntegratedRisk Management Committee and the Assets and Liability Committee (ALCO) which consisted ofthe following members:

CORPORATE GOVERNANCE REPORT



GE

IRM CommitteeMr D G Wijemanne - Non -Executive Director – Chairman of the Committee (Resigned w.e.f. 2nd May 2012)Mr K J Yatawara - Director/CEOMr T B Ekanayake - Director/Chief Operating OfficerMr N Rodrigo - ConsultantMr W M Kumarasinghe - Dy General Manager DepositsMr Minodh de Zylva - Head of MarketingMr Sanjeeva Jayasinghe - Senior Manager – Treasury

ALCOMr D G Wijemanne - Non -Executive Director - Chairman of the Committee (Resigned w.e.f.

2nd May 2012)Mr K J Yatawara - Director/CEOMr T B Ekanayake - Director/Chief Operating OfficerMr N Rodrigo - ConsultantMr W M Kumarasinghe - Dy General Manager DepositsMr Minodh de Zylva - Head of MarketingMr Sanjeeva Jayasinghe - Senior Manager – Treasury

In addition to the above the Head of Finance, Head of Internal Audit and Operational Deputy GeneralManager/Assistant General Manager attended these meetings.

Two meetings were held in the last quarter of the financial year ended 31st March 2012 which wereattended by the members mentioned above.

The Function of this committee is to:

a) Assess all risks, i.e., credit, market, liquidity, operational and strategic risks to the financecompany on a monthly basis through appropriate risk indicators and management information.

b) Review the adequacy and effectiveness of all management level committees such as thecredit committee and the asset-liability committee to address specific risks and to managethose risks within quantitative and qualitative risk limits as specified by the committee.

c) Take prompt corrective action to mitigate the effects of specific risks, in the case such risksare at levels beyond the prudent levels decided by the committee on the basis of the financecompany’s policies and regulatory and supervisory requirements.

d) Assess all aspects of risk management including updated business continuity plans.

e) Take appropriate actions against the officers responsible for failure to identify specific risksand take prompt corrective actions as recommended by the committee, and/or as directed bythe Director of the Department of Supervision of Non-Bank Financial Institutions of the CentralBank of Sri Lanka,

f) Establish a compliance function to assess the finance company’s compliance with laws,regulations, directions, rules, regulatory guidelines, internal controls and approved policieson all areas of business operations. A dedicated compliance officer selected from keymanagement personnel shall carry out the compliance function and report to the committeeperiodically.




GE

A finanace company is generally subject to the risks associated with maturity mismatch of its assetsand liabilities. The liabilities which consist mostly of public deposits carry maturities up to one yearwhilst the advances made are repaid over periods ranging up to four years. The ability of theorganization to attract new deposits and to renew a significant percentage of the maturing depositspermits it to manage the associated liquidity risk. The re-pricing of the liabilities ahead of the assetscarries significant interest rate risk and impact on profitability when interest rates are rising. Howeverthe margin on lending it expected to mitigate and absorb this risk.

The Executive Directors of the Company review the strategic and market risks impacting theorgnaization. The business portfolio of the Company includes land purchased for development andselling which carries significant business risks in the persent market.

Mr. A P Lekamge was appointed as the Chairman of the Integrated Risk Management Committeeand the Assets and Liability Committee on 26th July 2012 to fill in the vacancy created by theresignation of Mr D G Wijemanne.

* Credit CommitteeIn addition, a Credit Committee was established in November 2011 consisting of the followingmembers:

Mr R Nadarajah - Non-Executive Director – Chairman of the CommitteeDr T Senthilverl - Non Executive DirectorMr D G Wijemanne - Non Executive Director (Resigned w.e.f. 2nd May 2012)Mr A S R Silva - Non Executive Director (Resigned w.e.f. 14th March 2012)Mr K J Yatawara - Director/CEOMr T B Ekanayake - Director/Chief Operating OfficerMr N Rodrigo - ConsultantMr W M Kumarasinghe - Dy General Manager DepositsMr A O A Gunasekara - Assistant General Manager – PawningMr Sanjeeva Jayasinghe - Senior Manager – TreasuryMr M D Chandrasiri - Regional Collection ManagerMr M Thennakoon - Senior Manager- Internal Audit

There were two credit committee meetings and the attendance is as follows:

Name of the Member Attendance

Mr R Nadarajah - Non-Executive Director 2/2Dr T Senthilverl- Non-Executive Director 2/2Mr D G Wijemanne- Non-Executive Director* 1 /2Mr A S R Silva - Non-Executive Director* -Mr K J Yatawara - Director/CEO 1 /2Mr T B Ekanayake - Director/Chief Operating Officer 2/2Mr W M Kumarasinghe - Dy General Manager Deposits 1 /2Mr A O A Gunasekara - Assistant General Manager – Pawning 2/2Mr Sanjeeva Jayasinghe - Senior Manager – Treasury 2/2Mr M D Chandrasiri - Regional Collection Manager 2/2

*Resigned

In addition to the above the Head of Finance and Head of Internal Audit also attended these meetings.




GE

During the year under review the committee looked into the market sentiment and the financialinvestment patterns and formulated a revised credit policy in order to mitigate the risk of recoveryand recommended same to the Board for approval. The committee also looked into the delegatedauthority levels of Company in relation to recoveries/settlements/financial investments.

* Audit CommitteeThe rationale of having an Audit Committee is to assist the Board in ensuring that proper, presentationand preparation of the Financial Statements and adequate disclosures are made in accordance withthe Sri Lanka Accounting Standards and that proper internal control measures are in place and thatadequate assessment of risk management policies are adopted by the Company in keeping line withthe Sri Lanka Auditing Standards. Their functions include the following:

· Implementing effective Internal control system and reviewing internal and external auditplans

· Implementing Auditor’s significant recommendations and ensuring that sound financialreporting system exist within the Company.

· Ensure that the Company complies with all relevant statutory polices and requirements andfair and accurate information are provided to all stakeholders.

· To review and monitor the external auditors independence and objectivity and theeffectiveness of the audit process in accordance with applicable standards and best practices.

· To review the monthly, quarterly and annual financial statements of the Company beforethese are submitted to the Board of Directors and assess whether these are prepared inaccordance with the Sri Lanka Accounting Standards and the requirements of the CompaniesAct

Internal AuditsApart from the above meetings, the Internal Control Division continuously to assess the effectivenessof the financial and operational control systems and submits a report on the findings to the Chairmanof the Audit Committee.

External AuditsThe External Auditors are appointed by the shareholders at the Annual General Meetings and areresponsible for giving their opinion on the financial statements prepared by the Company.

The Central Bank also conducts its audits to ensure that the Company Complies with the regulations laid down bythe Central Bank of Sri Lanka. In addition, a reporting system is in place, which requires the Company to submitdetailed reports concerning key areas of operations on a weekly/monthly/quarterly/annually to the Non-bankingSupervision unit of Central Bank.

* Remuneration Committee

The following are the members of the Remuneration Committee

i. Mr. Ajith Devasurendra – Non-Executive Director – (Chairman of the Committee)ii. Mr. M P Jayawardena – Chairman / Independent Non-Executive Directoriii. Mr. Kamal Yatawara – Director / CEO (By Invitation)

The function of the remuneration committee shall be to recommend the remuneration payable tothe Executive Directors and Chief Executive Officer of the Company and/or equivalent position




GE

thereof to the Board and to ensure that the component parts of the directors remuneration are soarranged as to link rewards to corporate and individual performances.

* Nomination CommitteeThe following are the members of the Nomination Committee

i. Mr. Anura Fernando – Independent Non-Executive Director – (Chairman of theCommittee)(Resigned with effect from 12th June 2012)

ii. Mr. Ajith Devasurendra – Non-Executive Directoriii. Mr. R Nadarajah – Non-Executive Directoriv. Dr. T Senthilverl – Non-Executive Directorv. Mr. M P Jayawardena – Chairman / Independent Non-Executive Director (By

Invitation)The function of the nomination committee is to review the structure of the Board of Directorsrelating to its size and composition and recommend to the Directors the adjustments that aredeemed necessary and also to identify and nominate candidates to the Board to fill casual vacanciesas and when they arise and have a succession plan for Chairman and Chief Executive Officer.Further to recommend to the Board the re-election of a Director retiring by rotation.

The Company held one meeting during the year under review and Mr. N. A. Fernando, Mr. M. P.Jayawardena and Mr. A. L. Devasurendra attended this meeting.

Dr T Senthilverl was appointed Chairman of the Nomination Committee to fill in the vacancycreated by Mr N A Fernando on 28th June 2012.

Transparency and Compliance

The Board endeavors to ensure transparency of its operations by preparing and circulating to theirshareholders the Annual Reports and its quarterly financial statements of the Company.

The statutory compliance report is submitted to the Board at their meetings by the Head of Finance.The report indicates the conformance with the statutory regulations and any deviations thereof.




GE

Corporate Governance- Level of ComplianceThe Company follows the Corporate Governance practices laid down by the FinanceCompanies (Corporate Governance) Direction No 3 of 2008 and the Corporate Gover-nance rules laid down by Colombo Stock Exchange

CSE Rule Governance Requirement Level of Compliance

a. The board shall make a determination annually asto the independence or non-independence of eachnon-executive director based on such declarationand other information available to the board andshall set out in the annual report the names ofdirectors determined to be ‘independent’.

The Board has determined theindependence of each Non-Executive Director in accordance thecriteria laid down by the FinanceCompanies Corporate GovernanceDirection

7.10.3DisclosuresRelating toDirectors

b. In the event a director does not qualify as ‘inde-pendent’ against any of the criteria set out belowbut if the board, taking account all the circum-stances, is of the opinion that the director is nev-ertheless ‘independent’, the board shall specify thecriteria not met and the basis for its determinationin the annual report.

Compliant

The Board has adequate number In-dependent Non– Executive Directors

c. In addition to disclosures relating to theindependence of a director set out above, the boardshall publish in its annual report a brief resumeof each director on its board which includesinformation on the nature of his/her expertise inrelevant functional areas.

d. Upon appointment of a new director to its board,

Compliant

Please refer pages 9 to 11 of theAnnual Report

Compliant.The Company has provided the in-formation of the newly appointedDirectors to the Exchange for dis-semination to the public

the Entity shall forthwith provide to the Exchangea brief resume of such director for disseminationto the public. Such resume shall includeinformation on the matters itemized in paragraphs(a), (b) and (c) above.

7.10.5aRemunerationCommittee

COMPOSITIONThe remuneration committee shall comprise;

- of a minimum of two independent non-executive directors (in instances where an Entityhas only two directors on its Board);

or- of non-executive directors a majority of whom

shall be independent, whichever shall be higher.

FUNCTIONSThe Remuneration Committee shall recommend theremuneration payable to the Executive Directors andChief Executive Officer of the Listed Entity and/orequivalent position thereof, to the board of theListed Entity which will make the final determina-tion upon consideration of such recommendations.

The remuneration committee wasestablished on 28th February 2011and the names of the Members ofthis committee are disclosed in theCorporate Governance report.


7.10.5b



GE

Compliant

The names of Directors comprisingthe Remuneration Committee are dis-closed on Page No 24 of the AnnualReport and the aggregate remunera-tion paid to the Executive and NonExecutive Directors is disclosed inNote 16 to the Financial Statementson page 61 of the Annual Report.

Please refer the Audit Committeereport on page 44 of the AnnualReport.

Please refer the AuditCommittee report on page 44 ofthe Annual Report and CorporateGovernance Report on page 24 ofthe Annual Report.

7.10.5c

7.10.6b


The names of the Audit Commit-tee members after the restructuringof the Company are disclosed inthe Audit Committee Report.

7.10.6c

7.10.6aAuditCommittee

DISCLOSURE IN THE ANNUALREPORTThe annual report should set out the names ofdirectors (or persons in the parent company’scommittee in the case of a group company)comprising the remuneration committee, contain astatement of the remuneration policy and set outthe aggregate remuneration paid to Executive andNon-Executive Directors.

COMPOSITIONThe audit committee shall comprise;

- of a minimum of two independent non-executive directors (in instances where aEntity has only two directors on itsboard); or

- of non-executive directors a majority ofwhom shall be independent, whichevershall be higher.

FUNCTIONS(i) Overseeing of the preparation, presentation and

adequacy of disclosures in the financial state-ments of a Listed Entity, in accordance with SriLanka Accounting Standards.

(ii) Overseeing of the Entity’s compliance withfinancial reporting requirements, informationrequirements of the Companies Act and otherrelevant financial reporting related regulationsand requirements.

(iii) Overseeing the processes to ensure that theEntity’s internal controls and risk management,are adequate, to meet the requirements of theSri Lanka Auditing Standards.

(iv)Assessment of the independence and perfor-mance of the Entity’s external auditors.

(v) To make recommendations to the boardpertaining to appointment, re-appointmentand removal of external auditors and toapprove the remuneration and terms ofengagement of the external auditors.

DISCLOSURE IN THE ANNUAL REPORTThe names of the directors (or persons in theparent company’s committee in the case of a groupcompany) comprising the audit committee shouldbe disclosed in the annual report.



GE

The committee shall make a determination of theindependence of the auditors and shall disclose thebasis for such determination in the annual report.

The annual report shall contain a report by theaudit committee, setting out the manner of compli-ance by the Entity in relation to the above, duringthe period to which the annual report relates.

The Audit Committee has reviewedthe performance of the externalauditors during the year underreview and is of the view that theyare independent and do not haveany interest in contracts with theCompany or its subsidiaries.


Finance Companies (Corporate Governance) Direction No 3 of 2008 forRegistered Finance Companies

Direction No Governance Requirement Level of Compliance

2. Responsibilities of the Board

(1). The Board of Directors (hereinafter referred toas the Board) shall strengthen the safety andsoundness of the finance company by-

a) Approving and overseeing the financecompany’s strategic objectives and corporatevalues and ensuring that such objectives andvalues are communicated throughout thefinance company;

b) Approving the overall business strategy of thefinance company, including the overall riskpolicy and risk management procedures andmechanisms with measureable goals, for atleast immediate next three years;

c) Identifying the risks and ensuring implementa-tion of appropriate systems to manage therisks prudently;

d) Approving a policy of communication with allstakeholders, including depositors, creditors,shareholders and borrowers;

e) Reviewing the adequacy and the integrity ofthe finance company’s internal control systemsand management information system;

f) Identifying and designating key managementpersonnel who are in the position to (i)significantly influence policy; (ii) direct activi-ties; and (iii) exercise control over businessactivities, operations and risk management;

g) defining the areas of authority and keyresponsibilities for the Board and for the keymanagement personnel;

h) Ensuring that there is appropriate oversight ofthe affairs of the finance company by keymanagement personnel, that is consistent withthe finance company’s policy;

i) Periodically assessing the effectiveness of itsgovernance practices, including: (i) the selec-tion, nomination and election of Directors andappointment of key management personnel;(ii)the management of conflicts of interests; and(iii) the determination of weaknesses andimplementation of changes where necessary;

Compliant.

The Board approves the overall busi-ness strategy including the overall riskpolicy and risk management proce-dures and ensures that the strategicobjectives and corporate values arecommunicated.

In addition the Board has taken ap-propriate initiatives to cover the fol-lowing aspects:

- Ensuring the adequacy &integrity of the company’sinternal control system &MIS

- Key Management Personnelat Board level has beenidentified in the appropriatefields who are in a positionto significantly influence.policy, direct activities &exercise control over thebusiness operations and riskmanagement

- Ensuring that the Key Man-agement Personnel have anoversight of the affairs ofthe company that is consis-tent with the companypolicy.

- Reviewing of policies & es-tablish lines of communica-tion & monitoring progress& also understanding theregulatory environment.



GE

j) Ensuring that the finance company has anappropriate succession plan for key manage-ment personnel;

k) Meeting regularly with the key managementpersonnel to review policies, establish lines ofcommunication and monitoring progresstowards corporate objectives.

l) Understanding regulatory environment.m) Exercising due diligence in the hiring and

oversight of external auditors

(2). The Board shall appoint the chairman and chiefexecutive officer in line with paragraph 7 ofthis Direction

(3). There shall be a procedure determined by theBoard to enable directors, upon reasonablerequest, seek independent professional advice inappropriate circumstances, at the financecompany’s expense.The Board shall resolve to provide separateindependent professional advice to directors toassist the relevant director(s) to discharge theduties to the finance company.

(4) A director shall abstain from voting on anyBoard Resolution in relation to a matter inwhich he or any of his relatives or a concern,in which he has a substantial interest, isinterested, and he shall not be counted in thequorum for the relevant agenda item at theBoard meeting.

(5) The Board shall have a formal schedule ofmatters specifically reserved to it for decision toensure that the direction and control of thefinance company is firmly under its authority.

(6) The Board shall, if it considers that the financecompany is, or is likely to be, unable to meetits obligations or is about to become insolventor is about to suspend payments due todepositors and other creditors, forthwith informthe Director of the Department of Supervisionof Non-Bank Financial Institutions of thesituation of the finance company prior totaking any decision or action.

(7) The Board shall include in the financecompany’s Annual Report and annual corpo-rate governance report setting out the compli-ance with this Direction

(8) The Board shall adopt a self assessment to beundertaken by each Director annually andmaintain records of such assessments

(1) The Board shall meet at least twelve times afinancial year at approximately monthlyintervals. Obtaining the Board’s consentthrough the circulation of written or electronicresolutions/ papers shall be avoided as far aspossible.

3. Meetings of the Board


Compliant

The company has obtainedindependent professional advicewhen the circumstances warrants.

Compliant.Directors have abstained fromvoting in resolutions in which he isinterested.

Compliant

N/A

Compliant

The Board will consider this inthe forthcoming financial year

The Board met nine timesduring the financial year.



GE

(2) The Board shall ensure that arrangements arein place to enable all directors to includematters and proposals in the agenda forregular Board Meeting where such matters andproposals relate to the promotion of businessand the management of risks of the financecompany.

(3) A notice of at least 7 days shall be given of aregular Board Meeting to provide all directorsan opportunity to attend. For all other Boardmeetings, a reasonable notice shall be given.

(4) A director, who has not attended at least two-thirds of the meetings in the period of 12months immediately preceding or has notattended the immediately preceding threeconsecutive meetings held, shall cease to be adirector. Provided that participation at thedirectors’ meetings through an alternatedirector shall, however, be acceptable asattendance.

(5) The Board shall appoint a company secretarywhose primary responsibilities shall be tohandle the secretarial services to the Board andshareholder meetings and to carry out otherfunctions specified in the statutes and otherregulations.

(6) If the Chairman has delegated to the companysecretary the function of preparing the agendafor a Board meeting, the company secretaryshall be responsible for carrying out suchfunction.

(7) All directors shall have access to advice andservices of the company secretary with a viewto ensuring that Board procedures and allapplicable laws, directions, rules and regula-tions are followed.

(8) The company secretary shall maintain theminutes of Board Meetings and such minutesshall be open for inspection at any reasonabletime, on reasonable notice by any director.

(9) Minutes of Board meetings shall be recorded insufficient detail so that it is possible to gatherfrom the minutes, as to whether the Boardacted with due care and prudence in perform-ing its duties. The minutes of a Board meetingshall clearly contain or refer to the following:(a) a summary of data and information usedby the Board in its deliberations; (b) thematters considered by the Board; (c) the fact-finding discussions and the issues of conten-tion or dissent which may illustrate whetherthe Board was carrying out its duties with

Compliant

CompliantThe Company Secretary provides allnecessary assistance to the board.

CompliantThe minutes of Board Meetings aremaintained by Company Secretary &are available for inspection uponreasonable notice.

The Board meeting minutes containsufficient data, information, factfinding discussions and issues ofcontention or dissent which illus-trate that the Board has carried outits duties with due care & prudenceincluding mitigation of risk.


Arrangement are in place for all thedirectors to include matter /proposals in the agenda for regularBoard Meeting as Board Papersprepared by the relevant directorsare circulated prior to Boardmeetings

Compliant

The attendance at Board Meetingshas been disclosed in this report.Refer page no 21 of the AnnualReport

The agenda for Board Meeting isprepared by Company secretaryunder the advice of Director/CEO



GE

due care and prudence; (d) the explanationsand confirmations of relevant executives whichindicate compliance with the Board’s strategiesand policies and adherence to relevant lawsand regulations; (e) the Board’s knowledge andunderstanding of the risks to which thefinance company is exposed and an overviewof the risk management measures adopted;and (f) the decisions and Board resolutions.

(1) Subject to the transitional provisions containedherein, the number of directors on the Boardshall not be less than 5 and not more than13.

(2) Subject to the transitional provisions containedherein and subject to paragraph 5(1) of thisDirection the total period of service of adirector other than a director who holds theposition of chief executive officer or executivedirector shall not exceed nine years. The totalperiod in office of a non executive director shallbe inclusive of the total period of service servedby such director up to the date of this Direc-tion.

(3) Subject to the transitional provisions containedherein, an employee of a finance company maybe appointed, elected or nominated as adirector of the finance company (hereinafterreferred to as an “executive director”) providedthat the number of executive directors shall notexceed one-half of the number of directors ofthe Board. In such an event, one of theExecutive Directors shall be the Chief ExecutiveOfficer of the company.

(4) With effect from three years from the date ofthis Direction, the number of independent non-executive directors of the Board shall be at leastone fourth of the total numbers of directors.

5) In the event an alternate director is appointedto represent an independent non-executivedirector, the person so appointed shall alsomeet the criteria that apply to the independentnon-executive director

6) Non-Executive directors shall have necessaryskills and experience to bring an objectivejudgment to bear on issues of strategy,performance and resources.

7) With effect from three years from the date ofthis Direction, a meeting of the Board shall notbe duly constituted, although the number ofdirectors required to constitute the quorum at

CompliantThe Board consists of NineDirectors.

Compliant

Compliant.The number of Non-ExecutiveDirectors is six of whom two areindependent & the number ofExecutive Directors is three as at31st March 2012. Currently thenumber of Non-Executive Directorsremains at six of whom three areindependent and the number ofExecutive Directors remains asthree.

The Director/CEO is an employeeof the company appointed as adirector on 14.10.2005

Compliant

There are 3 independent NonExecutive Directors

No alternate Directors have beenappointed to the Board during theyear under review.

4. Composition of the Board

CompliantDirectors qualification andexperience is set out on page9 to 11 of the Annual Report


Compliant



GE

such meeting is present, unless at least onehalf of the number of directors that constitutethe quorum at such meeting are non-executivedirectors.

8) The independent non-executive directors shallbe expressly identified as such in all corporatecommunications that disclose the names ofdirectors of the finance company. The financecompany shall disclose the composition of theBoard, by category of directors, including thenames of the chairman, executive directors,non-executive directors and independent non-executive directors in the annual corporategovernance report which shall be an integralpart of its Annual Report.

9) There shall be a formal, considered andtransparent procedure for the appointment ofnew directors to the Board. There shall also beprocedures in place for the orderly successionof appointments to the Board.

10) All directors appointed to fill a casual vacancyshall be subject to election by shareholders atthe first general meeting after their appoint-ment.

11) If a director resigns or is removed from office,the Board shall announce to the shareholdersand notify the Director of the Department ofSupervision of Non-Bank Financial Institutionsof the Central Bank of Sri Lanka, regarding theresignation of the director or removal and thereasons for such resignation or removal,including but not limited to informationrelating to the relevant director’s disagreementwith the Board, if any.

(1) Subject to the transitional provisions containedherein, a person over the age of 70 years shallnot serve as a director of a finance company

(2) A director of a finance company shall not holdoffice as a director or any other equivalentposition in more than 20 companies/ societies/bodies corporate, including associate compa-nies and subsidiaries of the finance company.

Provided that ‘such director shall not holdoffice of a director or any other equivalentposition in more than 10 companies that areclassified as Specified Business Entities in termsof the Sri Lanka Accounting and AuditingStandards Act, No. 15 of 1995.

Compliant

CompliantThe Board has established aNomination committee for ensuringtransparent procedure to appoint-ments to the BoardCompliant.The newly appointed directors tothe Board subsequent to the balancesheet date have offered themselvesfor re-election at this AnnualGeneral Meeting.

Compliant

The resignation and removal ofDirectors are announced to theDirector of the Department ofSupervision of Non-Bank FinancialInstitutions of the Central Bank ofSri Lanka, and to public includingshareholder through the StockExchange and the shareholders arealso informed through the AnnualReport.

5. Criteria to assessthe fitness andpropriety ofdisectors

Compliant


Compliant



GE

(1) The Board shall not delegate any matters to aboard committee, chief executive officer,executive directors or key management person-nel, to an extent that such delegation wouldsignificantly hinder or reduce the ability of theBoard as a whole to discharge its functions.

(2) The Board shall review the delegation processesin place on a periodic basis to ensure that theyremain relevant to the needs of the financecompany.

(1) The roles of chairman and chief executive officershall be separated and shall not be performedby the one and the same person after 3 yearscommencing from January 1, 2009.

(2) The chairman shall be a non-executive director.In the case where the chairman is not anindependent non-executive director, the Boardshall designate an independent non-executivedirector as the Senior Director with suitablydocumented terms of reference to ensure agreater independent element. The designation ofthe Senior Director shall be disclosed in thefinance company’s Annual Report.

(3) The Board shall disclose in its corporate gover-nance report, which shall be an integral part ofits Annual Report, the name of the chairmanand the chief executive officer and the natureof any relationship [including financial,business, family or other material/relevantrelationship(s)], if any, between the chairmanand the chief executive officer and the relation-ships among members of the Board.

(4) The chairman shall: (a) provide leadership to theBoard; (b) ensure that the Board workseffectively and discharges its responsibilities;and (c) ensure that all key issues are discussedby the Board in a timely manner.

(5) The Chairman shall be primarily responsible forthe preparation of the agenda for each Boardmeeting. The chairman may delegate thefunction of preparing the agenda to thecompany secretary.

(6) The Chairman shall ensure that all directors areinformed adequately and in a timely manner ofthe issues arising at each Board meeting.

(7) The chairman shall encourage each director tomake a full and active contribution to theBoard’s affairs and take the lead to ensure thatthe Board acts in the best interests of thefinance company.

The Board delegates its authority ina manner which will not hinder orreduce the ability of the Board.


6. Delegation ofFunctions

Compliant

7. The Chairmanand ChiefExecutive Officer

Compliant.The Chairman is Mr M PJayawardena and Mr K J Yatawarais the Director/CEO

Compliant.The Chairman of the Companynamely, Mr M P Jayawardena is anIndependent Non-Executive Director.

CompliantThe names of the Chairman & CEOare disclosed in the CorporateGovernance Report. There is nofinancial, business or other material/relevant relationship between thechairman & the CEO and/or themembers of the Board

CompliantThe Chairman provides the neces-sary leadership which enables theBoard to discharge their duties andresponsibilities in a timely andeffective manner.

The agenda for Board meeting isprepared by Company secretaryunder the advice of Director/CEO

CompliantBoard papers are prepared andcirculated at least four days beforethe meeting

The Chairman enlightens thedirectors on matters of importanceat Board Meetings and encouragesthe directors to express their views.



GE

(8) The chairman shall facilitate the effectivecontribution of non-executive directors inparticular and ensure constructive relationshipsbetween executive and non-executive directors.

(9) Subject to the transitional provisions containedherein, the chairman, shall not engage inactivities involving direct supervision of keymanagement personnel or any other executiveduties whatsoever.

(10) The chairman shall ensure that appropriatesteps are taken to maintain effective communi-cation with shareholders and that the views ofshareholders are communicated to the Board.

(11) The chief executive officer shall function as theapex executive-in-charge of the day-to-day-management of the finance company’s opera-tions and business.

(1) Every finance company shall have at least thetwo Board committees set out in paragraphs8(2) and 8(3) hereof. Each committee shallreport directly to the Board. Each committeeshall appoint a secretary to arrange its meet-ings, maintain minutes, records and carry outsuch other secretarial functions under thesupervision of the chairman of the committee.The Board shall present a report on theperformance, duties and functions of eachcommittee, at the annual general meeting ofthe company.

(2). Audit CommitteeThe following shall apply in relation to the AuditCommittee:

a) The chairman of the committee shall be anon-executive director who possessesqualifications and experience in accoun-tancy and/or audit.

b) The Board members appointed to thecommittee shall be non-executive directors.

c) The committee shall make recommenda-tions on matters in connection with:

(i) the appointment, of the external auditorfor audit services to be provided incompliance with the relevant statutes;

(ii) the implementation of the Central Bankguidelines issued to auditors from time totime;

Compliant


The Chairman does not get involvedin executive functions.

Compliant

The Director/CEO is in-charge ofthe day to day operations.

CompliantThe Audit Committee, IntegratedRisk Management Committee,Nomination Committee, Remunera-tion Committee ALCO, CreditCommittee, are the Board appointedSub-Committees.

8. Board appointedCommittees

Please refer the Audit CommitteeReport on page 44 of the Annualreport

Compliant

Compliant

Compliant



GE

(iii) the application of the relevant accountingstandards; and

(iv) the service period, audit fee and anyresignation or dismissal of the auditor,provided that the engagement of an auditpartner shall not exceed five years, andthat the particular audit partner is not re-engaged for the audit before the expiry ofthree years from the date of the completionof the previous term.

d) The committee shall review and monitor theexternal auditor’s independence and objectivityand the effectiveness of the audit processes inaccordance with applicable standards and bestpractices.

e) The committee shall develop and implement apolicy with the approval of the Board on theengagement of an external auditor to providenon-audit services that are permitted under therelevant statutes, regulations, requirements andguidelines. In doing so, the committee shallensure that the provision by an external auditorof non-audit services does not impair theexternal auditor’s independence or objectivity.When assessing the external auditor’s indepen-dence or objectivity in relation to the provisionof non-audit services, the committee shallconsider:

(i) whether the skills and experience of theauditor make it a suitable provider ofthe non-audit services;

(ii) whether there are safeguards in place toensure that there is no threat to theobjectivity and/or independence in theconduct of the audit resulting from theprovision of such services by the externalauditor; and

(iii) whether the nature of the non-auditservices, the related fee levels and thefee levels individually and in aggregaterelative to the auditor, pose any threatto the objectivity and / or indepen-dence of the external auditor.

f) The committee shall, before the audit com-mences, discuss and finalize with the externalauditors the nature and scope of the audit,including:(i) an assessment of the finance company’s

compliance with Directions issued underthe Act and the management’s internalcontrols over financial reporting;


Compliant

The external auditors did notprovide non- audit services to theCompany

Compliant



GE

(ii) the preparation of financial statements inaccordance with relevant accountingprinciples and reporting obligations; and

(iii) the co-ordination between auditors wheremore than one auditor is involved.

g) The committee shall review the financialinformation of the finance company, in orderto monitor the integrity of the financialstatements of the finance company, its annualreport, accounts and periodical reports preparedfor disclosure, and the significant financialreporting judgments contained therein. Inreviewing the finance company’s annual reportand accounts and periodical reports beforesubmission to the Board, the committee shallfocus 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.

h) The committee shall discuss issues, problemsand reservations arising from the interim andfinal audits, and any matters the auditor maywish to discuss including those matters thatmay need to be discussed in the absence of keymanagement personnel, if necessary.

i) The committee shall review the external auditor’smanagement letter and the management’sresponse thereto.

j) The committee shall take the following stepswith regard to the internal audit function of thefinance company:

(i) Review the adequacy of the scope, functionsand resources of the internal audit depart-ment, and satisfy itself that the depart-ment has the necessary authority to carryout its work;

(ii) Review the internal audit program andresults of the internal audit process and,where necessary, ensure that appropriateactions are taken on the recommendationsof the internal audit department;


Compliant

The necessity has not arisen.

The letters submitted by theexternal auditors & the responsethereto has been considered by theAudit Committee

Refer page 44 of the Annual Reportrelating to the internal auditfunction of the Company.



GE

(iii) Review any appraisal or assessment of theperformance of the head and senior staffmembers of the internal audit department;

(iv) Recommend any appointment or termina-tion of the head, senior staff members andoutsourced service providers to the internalaudit function;

(v) Ensure that the committee is apprised ofresignations of senior staff members of theinternal audit department including thechief internal auditor and any outsourcedservice providers, and to provide anopportunity to the resigning senior staffmembers and outsourced service providersto submit reasons for resigning;

(vi) Ensure that the internal audit function isindependent of the activities it audits andthat it is performed with impartiality,proficiency and due professional care;

k) The committee shall consider the major findingsof internal investigations and management’sresponses thereto;

l) The chief finance officer, the chief internalauditor and a representative of the externalauditors may normally attend meetings. OtherBoard members and the chief executive officermay also attend meetings upon the invitation ofthe committee. However, at least once in sixmonths, the committee shall meet with theexternal auditors without the executive directorsbeing present.

m) The committee shall have: (i) explicit authorityto investigate into any matter within its termsof reference; (ii) the resources which it needs todo so; (iii) full access to information; and (iv)authority to obtain external professional adviceand to invite outsiders with relevant experienceto attend, if necessary.

n) The committee shall meet regularly, with duenotice of issues to be discussed and shall recordits conclusions in discharging its duties andresponsibilities.

o) The Board shall, in the Annual Report, disclosein an informative way, (i) details of the activi-ties of the audit committee; (ii) the number ofaudit committee meetings held in the year; and(iii) details of attendance of each individualmember at such meetings.


The committee follows up on anymajor findings of internal investiga-tions and the management re-sponses.

The Head of Finance, Head ofInternal Audit and the ExternalAuditors attend these meetings. Theother members of the Board attendonly on invitation.The external auditors were presentfor 4 meetings during the financialyear under review

Compliant

The committee met four timesduring the financial year underreview

CompliantRefer Audit Committee Report onPage 44 of Annual Report



GE

Compliant.

The Integrated Risk ManagementCommittee was formally constitutedin December 2011. Please referCorporate Governance Report pageNo 21 of the Annual Report.


CompliantThe Company Secretary records theminutes of Audit Committeemeeting.

CompliantAny improprieties reported byemployee regarding financialreporting internal control or othermatters are directed to InternalAudit Division to carrying outimmediate investigation and reportto the Director/CEO

p) The secretary to the committee (who may be thecompany secretary or the head of the internalaudit function) shall record and keep detailedminutes of the committee meetings.

q) The committee shall review arrangements bywhich employees of the finance company may,in confidence, raise concerns about possibleimproprieties in financial reporting, internalcontrol or other matters. Accordingly, thecommittee shall ensure that proper arrangementsare in place for the fair and independentinvestigation of such matters and for appropriatefollow-up action and to act as the key represen-tative body for overseeing the finance company’srelations with the external auditor.

(3) Integrated Risk Management Committee

The following shall apply in relation to the Inte-grated Risk Management Committee:

a) The committee shall consist of at least onenon-executive director, CEO and keymanagement personnel supervising broadrisk categories, i.e., credit, market, liquidity,operational and strategic risks.

b) The committee shall work with keymanagement personnel closely and makedecisions on behalf of the Board within theframework of the authority and responsibil-ity assigned to the committee

c) The committee shall assess all risks, i.e.,credit, market, liquidity, operational andstrategic risks to the finance company on amonthly basis through appropriate riskindicators and management information. Inthe case of subsidiary companies andassociate companies, risk management shallbe done, both on the finance companybasis and group basis.

d) The committee shall review the adequacyand effectiveness of all management levelcommittees such as the credit committeeand the asset-liability committee to addressspecific risks and to manage those riskswithin quantitative and qualitative risklimits as specified by the committee.

e) The committee shall take prompt correctiveaction to mitigate the effects of specificrisks in the case such risks are at levelsbeyond the prudent levels decided by thecommittee on the basis of the finance



GE

company’s policies and regulatory and supervi-sory requirements.

f) The committee shall meet at least quarterlyto assess all aspects of risk managementincluding updated business continuityplans.

g) The committee shall take appropriateactions against the officers responsible forfailure to identify specific risks and takeprompt corrective actions as recommendedby the committee, and/or as directed bythe Director of the Department of Supervi-sion of Non-Bank Financial Institutions ofthe Central Bank of Sri Lanka,

h) The committee shall establish a compliancefunction to assess the finance company’scompliance with laws, regulations, direc-tions, rules, regulatory guidelines, internalcontrols and approved policies on all areasof business operations. A dedicatedcompliance officer selected from keymanagement personnel shall carry out thecompliance function and report to thecommittee periodically.

6. The Board shall take the necessary steps toavoid any conflicts of interest that may arisefrom any transaction of the finance companywith any person, and particularly with thefollowing categories of persons who shall beconsidered as “related parties” for the purposesof this Direction:

a) A subsidiary of the finance company;b) Any associate company of the financecompany;c) A director of the finance company;d)A key management personnel of the finance

company;a) A relative of a director or a key management

personnel of the finance company;

f) A shareholder who owns shares exceeding 10% ofthe paid up capital of the finance company;

g) A concern in which a director of the financecompany or a relative of a director or a share-holder who owns shares exceeding 10% of thepaid up capital of the finance company, hassubstantial interest.

Necessary steps are being taken toavoid conflict of Interest withrelated parties.


9. Related PartyTransactions



GE

(3) The transactions with a related party that arecovered in this Direction shall be the following:a) Granting accommodation,b) Creating liabilities to the finance company in the form of deposits, borrowings and investments,c) providing financial or non-financial services to the finance company or obtaining those services from the finance company,d) creating or maintaining reporting lines and

information flows between the financecompany and any related party which maylead to share proprietary, confidential orotherwise sensitive information that may givebenefits to such related party.

(4) The Board shall ensure that the finance com-pany does not engage in transactions with arelated party in a manner that would grantsuch party “more favourable treatment” thanthat is accorded to other similar constituents ofthe finance company. For the purpose of thisparagraph, “more favourable treatment” shallmean:

a) Granting of “total net accommodation” toa related party, exceeding a prudentpercentage of the finance company’sregulatory capital, as determined by theBoard.

The “total net accommodation” shall be computedby deducting from the total accommodation, thecash collateral and investments made by suchrelated party in the finance company’s share capitaland debt instruments with a remaining maturity of5 years or more.

b) Charging of a lower rate of interest thanthe finance company’s best lending rate orpaying a rate of interest exceeding therate paid for a comparable transactionwith an unrelated comparablecounterparty;

c) Providing preferential treatment, such asfavourable terms, covering trade lossesand/or waiving fees/commissions, thatextends beyond the terms granted in thenormal course of business with unrelatedparties;

d) Providing or obtaining services to or froma related-party without a proper evaluationprocedure;


The Board has taken steps toavoid transactions withfavourable treatment to relatedparties.



GE

e) Maintaining reporting lines and informa-tion flows between the finance companyand any related party which may lead toshare proprietary, confidential or otherwisesensitive information that may givebenefits to such related party, except asrequired for the performance of legitimateduties and functions.

(1) The Board shall ensure that:

(a) annual audited financial statements andperiodical financial statements areprepared and published in accordancewith the formats prescribed by theregulatory and supervisoryauthorities and applicable accountingstandards, and that

(b) such statements are published in thenewspapers in an abridged form, inSinhala, Tamil and English.

(2). The Board shall ensure that at least thefollowing disclosures are made in the AnnualReport:

a) A statement to the effect that the annualaudited financial statements have beenprepared in line with applicable accountingstandards and regulatory requirements,inclusive of specific disclosures.

b) A report by the Board on the financecompany’s internal control mechanism thatconfirms that the financial reportingsystem has been designed to provide areasonable assurance regarding the reliabilityof financial reporting, and that the prepara-tion of financial statements has been donein accordance with relevant accountingprinciples and regulatory requirements.

c) The external auditor’s certification on theeffectiveness of the internal control mecha-nism in respect of any statements preparedor published after March 31, 2010.

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

e) Fees/remuneration paid by the financecompany to the directors in aggregate, inthe Annual Reports published afterJanuary 1, 2010 .


9. Disclosures Compliant.

The audited financial statement &quarterly statements are publishedin accordance with the prescribedregulatory & supervisory authori-ties & applicable accountingstandards.

Compliant.Please refer accounting policiesfound on pages 50 to 59 of theAnnual report.

Refer Page 43 of the AnnualReport- Statement of Directorsresponsibilities

Please refer page 45 of theAnnual Report





GE

f) Total net accommodation as defined inparagraph 9(4) outstanding in respect ofeach category of related parties and the netaccommodation outstanding in respect ofeach category of related parties as apercentage of the finance company’s capitalfunds.

g) The aggregate values of remuneration paidby the finance company to its key manage-ment personnel and the aggregate values ofthe transactions of the finance companywith its key management personnel duringthe financial year, set out by broad catego-ries such as remuneration paid, accommoda-tion granted and deposits or investmentsmade in the finance company.

h) A report setting out details of the compli-ance with prudential requirements, regula-tions, laws and internal controls andmeasures taken to rectify any non-compli-ance.

i) A statement of the regulatory and supervi-sory concerns on lapses in the financecompany’s risk management, or noncompliance with the Act, and rules anddirections that have been communicated bythe Director of the Department of Supervi-sion of Non-Bank Financial Institutions, ifso directed by the Monetary Board to bedisclosed to the public, together with themeasures taken by the finance company toaddress such concerns.

j) The external auditor’s certification of thecompliance with the Act and rules anddirections issued by the Monetary Board inthe annual corporate governance reportspublished after January 1,2011.


Please refer Note 43 under thenotes to the Financial statementon Page 78 of the AnnualReport

Please refer Note 16 under thenotes to the Financial statementon Page 61 of the AnnualReport

Refer Note 49 to the Financialstatements on page No 80 of theAnnual Report. A plan hasalready being submitted toCentral Bank




GE STATEMENT OF DIRECTORS RESPONSIBILITIES

IN RELATION OF FINANCIAL STATEMENTS

The Directors are required by the relevant statutory provisions to prepare financial statement for eachfinancial year, which gives a true and fair view of the State of Affairs of the Company for that period.For the period under review the statutory provisions are in the Companies Act No.7 of 2007, FinanceLeasing Act No.56 of 2000 and the Finance Business Act No. 42 of 2011. In preparing the financialstatements appropriate accounting policies have been selected and applied consistently and reason-able and prudent judgment and estimates have been made. The applicable Sri Lanka AccountingStandards have been followed and explained in the notes to the Financial Statement.

The Directors are responsible for ensuring that the Company keep sufficient Accounting records todisclose with reasonable accuracy of the financial position of the Company and to ensure that theCompany’s Financial Statement comply with the provisions of the Companies Act No. 7 of 2007,Financial Leasing Act No. 56 of 2000 the Finance Business Act No. 42 of 2011 and Sri Lanka Ac-counting Standards.

The Directors are also responsible to ensure that reasonable measures are taken to safe guard theassets of the Company at all times. In this context they have established appropriate system ofinternal controls with a view to preventing and detecting of frauds and other irregularities.

In preparing Accounts the Directors continue to adopt the going concern basis. The Directors afterreviewing the Company’s Budget and borrowing facilities consider that the Company has adequateresources to continue in operation.

By order of the BoardTHE FINANCE COMPANY PLC

(Sgd.)Miss. P S WatsonCompany Secretary

15TH August 2012



GE

AUDIT COMMITTEE REPORT

The Audit Committee which was reconstituted by the Board during the last financial year isresponsible to the Board and consists of the following members as at 31st March 2012.

Mr R Nadarajah – Non Executive DirectorDr T Senthilverl – Non-Executive Director

Mr R Nadarajah served as the Chairman of the Audit Committee for the period under review anduntil the appointment of Ms Cherille Rosa – Independent Non Executive Director as the Chairman ofthe Audit Committee from the current financial year 2012/2013. Ms Cherille Rosa is a member of theInstitute of Chartered Accountants and satisfies the requirements laid down by the CorporateGovernance Direction applicable for Finance Companies and the Regulations of the Colombo StockExchange.

The Board also appointed Mr A P Lekamge – Independent Non-Executive Director to the AuditCommittee on 26th July 2012. The brief resumes of the newly appointed members are found on pages9 to 11 of the Annual Report.

In addition the Head of Finance, Head of Internal Audit and the External Auditors and the Director/CEO attends these meetings by invitation.

The Audit Committee met four times during the 1st April 2011 to 31st March 2012 and their scope ofwork has been detailed in the Corporate Governance report.

The Attendance of the Audit Committee members is disclosed below for the period 1st April 2011 to31st March 2012:Name of Director Position Attendance at Audit Committee Meetings

Mr R Nadarajah Chairman of Audit Committee 4/4Dr T Senthilverl Non-Executive Director 3/4

The Audit Committee is empowered to evaluate the adequacy and effectiveness of the accountingand internal control systems of the Company and monitor compliance with the statutory requirements.At the meetings, Audit Committee reviews the Quarterly and Annual Financial Statements of theCompany prior to publication. During the year under review, the Audit committee also reviewed theperformance of the Internal Audit Division and approved the Internal Audit program for the currentfinancial year.

The Audit Committee also examines the findings and recommendations of the Internal Audit Reportsand ensures that corrective action is taken to overcome the noted deficiencies with a view of improvinginternal control and to mitigate business risk. The Audit Committee also looked into the resourcerequirement of the internal audit division and approved the recruitment of additional staff as requestedby Head of Internal Audit. In addition, M/s Ernst & Young, Chartered Accountant carries out internalaudit function of branches allocated to them to keep in line with the agreed Annual Audit Plan andtheir findings are reported to the management for corrective action to be taken and the Audit Committereviews these report to ensure that audit recommendations are acted upon.

The Committee also reviews the nature, approach and the scope of the external auditors andmanagement letters issued and the actions taken by the Company on the issues raised.

The Audit Committee has recommended to the Board the reappointment of Tudor V Perera, CharteredAccountants as the Auditors of the Company for the financial year 2012/13.

By Order of the BoardThe Finance Company PLC

Mr. R. NadarajahChairman of Audit Committee15th August 2012



GE INDEPENDENT AUDITORS REPORT TO THE

SHAREHOLDERS OF THE FINANCE CO. PLC

TUDOR V. PERERA & CO.,Chartered Accountants.Colombo.

Report on Financial StatementsWe have audited the accompanying financial statements of The Finance Company PLC which comprise the balancesheet as at 31st March 2012, the income statement, statement of changes in equity, cash flow statement for the yearthen ended, and a summary of significant accounting policies and other explanatory notes.

Management’s Responsibility for the Financial StatementsManagement is responsible for the preparation and fair presentation of these financial statements in accordance withSri Lanka Accounting Standards. This responsibility includes: designing, implementing and maintaining internalcontrol relevant to the preparation and fair presentation of financial statements that are free from material misstate-ment, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accountingestimates that are reasonable in the circumstances.

Scope of Audit and Basis of OpinionOur responsibility is to express an opinion on these financial statements based on our audit. We conducted ouraudit in accordance with Sri Lanka Auditing Standards. Those standards require that we plan and perform theaudit to obtain reasonable assurance whether the financial statements are free from material misstatement.

An audit includes examining on a test basis, evidence supporting the amounts and disclosures in the financialstatements. An audit also includes assessing the accounting principles used and significant estimates made by themanagement, as well as evaluating the overall financial statement presentation.

We have obtained all the information and explanations, which to the best of our knowledge and belief werenecessary for the purposes of our audit except for the matters mentioned in our opinion paragraph. We thereforebelieve that our audit provides a reasonable basis for our opinion.

Opinion1. The Company’s accumulated losses including the loss incurred during the year under review is

Rs.9,830,838,440/- as at 31st March 2012 and the net assets shows a negative balance of Rs.3,864,726,548/- asat that date; also there is a shortfall of quick assets required to settle the deposit liabilities falling due forpayment in 2012/2013, as set forth in note 50 to these financial statements. These matters raise doubt in theCompany’s ability to continue as a going concern.

2. Although the Company has applied fair value modle of accounting for Investment properties, the investmentproperties at a cost of Rs.1,456,305,522/- which are valued at Rs.1,123,045,000/- as at 31st March 2012, reflectan impairment loss of Rs.333,260,522/- but not provided for in these financial statements.

3. Direct confirmations which indicates acceptance of liabilities by third parties were not received in respect of therelated company receivables for Rs.886,277,927/- as at 31st March 2012.

4. The additional deferred tax asset of Rs. 2.18 bn. for the year ended 31st March 2012 (Rs. 2.13 bn. as at 31st

March 2011) has not been recognized since it is not expected that no taxable profits will be available immedi-ately to utilize such deductible temporary differences other than Rs.191,225,285/- recognized as at 31st March2012.

5. The Company has been unable to comply with the directions issued by the Central Bank of Sri Lanka underthe Finance Business Act No. 42 of 2011 as disclosed in note 49 to these financial statements.

6. The Company has not prepared consolidated financial statements of the subsidiaries and associate companiesas disclosed in note 30.2 to these financial statements.

7. In the absence of records pertaining to assets and liabilities held by TFC Homes Limited and TFC PropertyFund Company Limited the accuracy of assets and liabilities acquired from the two companies can not beestablished.

In our opinion, except for the effects of such adjustments, if any, as might have been determined to be necessarydue to the matters stated in (1) to (7) above, so far as appears from our examination, the company maintainedproper accounting records for the year ended 31st March 2012 and the financial statements give a true and fair viewof the Company’s state of affairs as at 31st March 2012 and its loss and cash flows for the year then ended inaccordance with Sri Lanka Accounting Standards.

Report on other Legal and Regulatory requirements

In our opinion, except for as referred to in the preceding paragraph, these financial statements also comply with therequirements of Section 151 (2) of the Companies Act No. 7 of 2007 and the Finance Business Act No. 42 of 2011.



GE

INCOME STATEMENT

For the year ended 31-03-2012 31-03-2011(Restated)

Notes Rs. Rs.

REVENUE 10 4,689,361,695 2,985,939,405Less : Revenue related Taxes - -

NET REVENUE 4,689,361,695 2,985,939,405

OPERATING INCOMEInterest Income 11 2,003,401,157 2,101,062,626Interest Expenses 12 (2,456,339,710) (3,080,449,152)

Net Interest Income/(Expenses) (452,938,553) (979,386,526)

Other Operating Income 13 698,046,407 202,016,399Other Income/(Expenses) 14 (24,998,300) 170,674,373

Net Income 220,109,554 (606,695,754)

Operating ExpensesPersonnel Cost (468,096,202) (527,927,770)Employee Retirement Benefit Expenses 15 158,273,346 (55,043,688)

Administration and General Expenses (853,345,907) (1,164,679,190)Provision for Change in Value of Investments,Assets and Doubtful Receivables 16.1 324,437,935 (1,487,382,587)

PROFIT/ (LOSS) BEFORE PROVISION FOR CREDIT LOSSES AND TAXATION 16 (618,621,274) (3,841,728,989)Reversal / (Provision) for Loan Losses 265,221,562 11,593,814

PROFIT/ (LOSS) BEFORE TAXATION (353,399,712) (3,830,135,175)Income Tax 17 - -

PROFIT / (LOSS) FOR THE YEAR (353,399,712) (3,830,135,175)

Earnings / (Loss) per Share 18 (2.20) (87.54)

Dividend per Share 19 - -

The figures in brackets indicate deductions.The Significant Accounting Policies and the Notes from pages 50 to 82 form an integral part ofthese financial statements.



GE

As at Notes 31-03-2012 31-03-2011Restated

Assets Rs. Rs.Cash in Hand and Balances with Banks 331,820,366 239,467,464Investments in Government Securities 20 - 730,000,000Investments in Deposits with Banks 137,139,686 111,410,810Investments in Dealing Securities 21 102,279,700 84,612,869Investments in Real Estate 1,912,399,148 3,771,527,266Investments in Housing Projects 1,834,116,130 1,880,911,786Investments in Hire Purchases 22 3,742,227,923 2,626,086,655Investment in Leases - Vehicles & Equipment 23.1 571,318,334 325,157,265Investment in Leases - Properties 23.2 493,679,383 601,665,760Easy Payment Loans on Lands 24 1,764,092,491 1,963,442,881Housing Loans 25 613,941,459 829,551,823Loans on Fixed Deposits 520,464,548 526,680,417Pawning 1,027,838,108 388,600,373Other Stocks 26 284,383,695 508,335,354Amount due from Customers 27 792,604,789 791,685,971Other Receivables 28 1,358,146,961 1,327,978,970Investment Properties 29 1,524,276,295 1,692,285,090Investments Securities 30 29,467,239 107,779,124Capital Work In Progress - Building 1,500,000 2,091,582Deferred Tax Asset 17.2 191,225,285 191,225,285Property, Plant and Equipment 31 2,909,572,365 2,733,725,356Total Assets 20,142,493,905 21,434,222,100

LiabilitiesDebentures 32 - 359,759,000Long-term Loans 33 559,107,526 1,181,389,930Public Deposits 34 20,850,952,790 20,862,889,513Interest Payable on Public Deposits 717,034,565 765,807,348Finance Leases 35 58,569,419 70,115,732Short-term Loans 20,350,000 178,426,607Trade and Other Payables 36 1,469,066,853 1,669,368,393Unclaimed Dividend 6,386,406 6,401,240Bank Overdrafts 325,752,893 201,107,203Total Liabilities 24,007,220,453 25,295,264,966

Shareholders’ fundsStated Capital 37 4,010,180,756 4,010,180,756Capital Reserves 1,296,021,136 946,305,106Statutory Reserve Fund 38 659,910,000 659,910,000Revenue Reserves (9,830,838,440) (9,477,438,728)

(3,864,726,548) (3,861,042,866)Total liabilities and shareholders’ Funds 20,142,493,905 21,434,222,100

Net Assets per Share 39 (24.09) (24.07)

The Significant Accounting Policies and the Notes from pages 50 to 82 form an integral part of these financialstatements.I certify that the Financial Statements comply with the requirements of Companies Act No. 07 of 2007.

The Board of Directors is responsible for the preparation and presentation of these financial statements.The financial statements have been approved by the Board on 28/06/2012.

Signed for and on behalf of the Board by:

K.J.Yatawara T.B.Ekanayake V.W. DissanayakeDirector/Chief Executive Officer Director Director

BALANCE SHEET

P. SaravanapavanHead of Finance



GE

Not

e 1

Unp

rovi

ded

liabi

lity

to In

com

e Ta

x re

latin

g to

Y/A

200

8/09

am

ount

ing

to R

s. 65

,000

,909

/- h

as b

een

adju

sted

aga

inst

the

Reta

ined

Ear

ning

s as

at 0

1st A

pril

2010

.

Not

e 2

Ove

r pr

ovis

ion

of d

epre

ciat

ion

amou

ntin

g to

Rs.

962,

375/

- has

bee

n ad

just

ed a

gain

st th

e Re

tain

ed E

arni

ngs

as a

t 01s

t Apr

il 20

11.

Not

e 3

Reta

ined

Ear

ning

s ba

lanc

e of

Rs.

2,45

2,37

4/- e

rron

eous

ly c

lass

ified

as

asse

t has

bee

n ad

just

ed a

gain

st th

e Re

tain

ed E

arni

ngs

as a

t 01s

t Apr

il 20

11.

Not

e 4

Thes

e am

ount

s ha

ve b

een

rese

rved

for

use

in fu

ture

dev

elop

men

t of t

he C

ompa

ny.

The

figur

es in

bra

cket

s in

dica

te d

educ

tions

.Th

e Si

gnifi

cant

Acc

ount

ing

Polic

ies

and

the

Not

es fr

om p

ages

50

to 8

2 fo

rm a

n in

tegr

al p

art o

f the

se fi

nanc

ial s

tate

men

ts.

STATEMENT OF CHANGES IN EQUITY

Inve

stm

ent

Secu

riti

esPr

oper

tyO

ther

Gen

eral

Rev

alua

tion

Rev

alua

tion

Res

erve

Res

erve

Ret

aine

d

Stat

ed C

apit

alR

eser

veR

eser

ve(N

ote

4)R

eser

ve F

und

(Not

e 4)

Ear

ning

sT

otal

Rs.

Rs.

Rs.

Rs.

Rs.

Rs.

Rs.

Rs.

Bala

nce

as a

t 01s

t Apr

il 20

10 (a

s pr

evio

usly

repo

rted

)41

0,180

,756

1,1

52,8

66

9

41,4

92,9

11

3,65

9,32

9

65

9,91

0,00

01,9

73,91

6,908

(7,55

4,729

,552)

(3,56

4,416

,782)

Prov

isio

n on

Inco

me

Tax

Liab

ilitie

s (N

ote

1)

--

--

--

(65,0

00,90

9)(6

5,000

,909)

Bala

nce

as a

t 01s

t Apr

il 20

10 (r

esta

ted)

410,1

80,75

6

1

,152

,866

941

,492

,911

3,

659,

329

659,

910,

000

1,973

,916,9

08(7

,619,7

30,46

2(3

,629,4

17,69

1)

Issu

e of

Sha

res

3,600

,000,0

00-

--

- -

- 3

,600,0

00,00

0

Net

Pro

fit /

(Los

s) fo

r th

e ye

ar-

--

--

-(3

,830,1

35,17

5)(3

,830,1

35,17

5)

Bala

nce

as a

t 31s

t Mar

ch 2

011

(rest

ated

)4,0

10,18

0,756

1,

152,

866

941

,492

,911

3,

659,

329

659,

910,

000

1,973

,916,9

08(1

1,449

,865,6

37)

(3,85

9,552

,866)

Dep

reci

atio

n ov

er p

rovi

sion

(N

ote

2)-

--

--

-96

2,375

962,3

75

Adj

ustm

ent r

elat

ing

to p

revi

ous

repo

rtin

g pe

riod

(Not

e 3)

--

--

--

(2,45

2,374

)(2

,452,3

74)

Bala

nce

as a

t 1st

Apr

il 20

11 (r

esta

ted)

4,01

0,180

,756

1,152

,866

941,4

92,91

13,6

59,32

965

9,910

,000

1,973

,916,9

08(1

1,451

,355,6

36)

(3,86

1,042

,866)

Reva

luat

ion

Surp

lus

--

349,7

16,03

0-

--

-34

9,716

,030

Net

Pro

fit /

(Los

s) fo

r th

e ye

ar-

--

--

-(3

53,39

9,712

)(3

53,39

9,712

)

Bala

nce

as a

t 31s

t Mar

ch 2

012

4,010

,180,7

561,1

52,86

61,2

91,20

8,941

3,659

,329

659,9

10,00

01,9

73,91

6,908

(11,8

04,75

5,348

)(3

,864,7

26,54

8)



GE

CASHFLOW STATEMENT

For the year ended 31-03-2012 31-03-2011CASH FLOW FROM OPERATING ACTIVITIES Rs. Rs.

Net Profit/(Loss) before Taxation (353,399,712) (3,830,135,175)Adjustments for:Dividend Received (3,561,181) (2,125,716)Interest Paid on Borrowings 100,002,941 150,725,773Provision for Fall in Value of Dealing Securities (1,432,469) (11,382,302)Provision for Fall in Value of Investment Securities (7,233,333) 151,418,158Provision for Doubtful Receivables of Related Companies (123,187,249) 143,286,949Provision for Falling Value of Properties - 628,634,969Provision for Impairment of Property, Plant and Equipment (87,900,000) 110,424,813Provision for Loan Losses (265,221,562) (8,640,989)Reversal on valuation of Investment Properties - 465,000,000(Profit) / Loss on Disposal of Investment Securities (2,199,400) (86,639,259)Depreciation 76,477,178 290,073,871(Profit)/ Loss on sale of Property, Plant & Equipment 44,724,047 (74,959,370)

(269,531,029) 1,755,816,897

Operating Profit/(Loss) before Working Capital Changes (622,930,741) (2,074,318,278)Changes in Working Capital(Increase)/ Decrease in Stocks - Leased (138,174,692) 392,495,020(Increase)/ Decrease in Stocks - Others 795,673,052 3,249,982,993(Increase)/ Decrease in Amount due from Customers 264,302,744 637,556,110(Increase)/ Decrease in Other Receivables 36,769,822 372,088,185(Increase)/ Decrease in Investments in Dealing Securities 97,267,869 (37,588,118)(Increase)/ Decrease in Government Securities 730,000,000 (730,000,000)(Increase)/ Decrease in Deposits with Bank 24,591,991 (79,791,207)Increase/ (Decrease) in Public Deposits (11,936,723) (4,884,365,215)Increase/ (Decrease) in Short-Term Loans (158,076,607) (73,505,474)Increase/ (Decrease) in Other Creditors (249,074,322) (424,516,741)

1,391,343,135 (1,577,644,447)

Cash generated from operations 768,412,394 (3,651,962,723)Less: Interest paid on Borrowings (100,002,941) (150,725,773)

Net cash from operating activities 668,409,453 (3,802,688,496)CASH FLOW FROM INVESTING ACTIVITIESAcquisition of Property, Plant and Equipment (18,779,291) (15,418,439)Proceeds from Disposal of Property, Plant & Equipment 159,938,668 193,829,282Settlement of Finance Leases (11,546,313) (88,365,044)Acquisition/ Improvements of Investment Properties - (10,994,000)Proceeds from Disposal of Investment Properties 117,687,927 -Proceeds from Disposal of Investment Securities 30,491,823 121,973,375Dividend received 3,561,181 2,125,716

Net Cash used in Investing Activities 281,353,996 203,150,890

CASH FLOW FROM FINANCING ACTIVITIESIssue of Shares - 3,600,000,000Issue/ (Redemption) of Debentures (359,759,000) (14,225,000)Proceeds from Long-term Loans 297,999,797 750,000,000Settlement of Long-term Loans (920,282,201) (437,375,472)Dividend Paid (14,834) -

Net Cash Generated from Financing Activities (982,056,238) 3,898,399,528

Net Increase/ (Decrease) in Cash and Cash Equivalents (32,292,789) 298,861,922Cash & Cash Equivalent at Beginning of the Year 38,360,261 (260,501,662)

Cash & Cash Equivalent at End of the Year 6,067,472 38,360,261

Cash and Cash Equivalents Comprise:Cash and Balances with Banks 331,820,366 239,467,464Bank Overdrafts (325,752,893) (201,107,203)

Cash and Cash Equivalent at End of Year 6,067,472 38,360,261

The figures in brackets indicate deductions.The Significant Accounting Policies and the Notes from pages 50 to 82 form an integral part of these financial statements.



GE

NOTES TO THE FINANCIAL STATEMENTS

1. GENERAL INFORMATION

The Finance Company PLC (“the Company”) is a public company incorporated and domiciled in SriLanka. The Company’s registered corporate office and principal place of business is located at No.97, Hyde Park Corner, Colombo 02.

The Company is a finance company registered under the Finance Business Act No. 42 of 2011.

The principal activity of the Company is providing financial services in Sri Lanka. During the year,the Company was also engaged in land sales and property development.

The Company does not have an identifiable parent of its own.

The financial statements are prepared for a financial year, which ends on 31st March.

2. ADOPTION OF NEW SET OF SRI LANKA ACCOUNTING STANDARDS

Following the convergence of Sri Lanka Accounting Standards with the International FinancialReporting Standards (IFRS), the ICASL of Sri Lanka has adopted a new set of financial reportingstandards that would apply for financial periods beginning on or after 01 January 2012. The applicationof these financial reporting standards is substantially different to the prevailing standards.

3. SIGNIFICANT ACCOUNTING POLICIES

3.1 Basis of preparation

The financial statements have been prepared on the historical cost basis except for the revaluation ofcertain non-current assets. Assets and liabilities are grouped by nature and listed in an order thatreflects their relative liquidity. Where appropriate the significant Accounting Policies are disclosed inthe succeeding notes.

3.2 Statement of compliance

The financial statements have been prepared in accordance with Sri Lanka Accounting Standardslaid down by the Institute of Chartered Accountants of Sri Lanka and in compliance with therequirements of the Companies Act No. 7 of 2007 and the Finance Business Act No. 42 of 2011.

3.3 Comparative figures

The accounting policies applied by the Company are, unless otherwise stated, consistent with thoseused in the previous year. Previous year’s figures and phrases have been re-arranged, wherevernecessary, to conform to the current year’s presentation.

3.4 Taxation

Income tax expense comprises of current and deferred income tax.

3.4.1 Current tax

The tax currently payable is based on profit for the year as adjusted for taxation purposes in accordancewith the provisions of the Inland Revenue Act No 10 of 2006 and amendments thereto. Taxable profit



GE

differs from profit as reported in the income statement because it excludes items of income or expensethat are taxable or deductible in other years, and it further excludes items that are never taxable ordeductible. The Company’s liability for current tax is calculated using tax rates that have been enactedor substantively enacted by the balance sheet date.

3.4.2 Deferred taxation

Deferred tax is recognised on differences between the carrying amounts of assets and liabilities in thefinancial statements and the corresponding tax bases used in the computation of taxable profit andare accounted for using the balance sheet liability method. Deferred tax liabilities are generallyrecognised for all taxable temporary differences, and deferred tax assets are generally recognised forall deductible temporary differences to the extent that it is probable that taxable profits will be availableagainst which those deductible temporary differences can be utilised. Such assets and liabilities arenot recognised if the temporary difference arises from goodwill or from the initial recognition (otherthan in a business combination) of other assets and liabilities in a transaction that affects neither thetaxable profit nor the accounting profit.

The carrying amount of deferred tax assets is reviewed at each balance sheet date and reduced to theextent that it is no longer probable that sufficient taxable profits will be available to allow all or partof the asset to be recovered.

Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in theperiod in which the liability is settled or the asset realised, based on tax rates (and tax laws) thathave been enacted or substantively enacted by the balance sheet date. The measurement of deferredtax liabilities and assets reflects the tax consequences that would follow from the manner in whichthe Company expects, at the reporting date, to recover or settle the carrying amount of its assets andliabilities.

Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off currenttax assets against current tax liabilities and when they relate to income taxes levied by the sametaxation authority and the Company intends to settle its current tax assets and liabilities on a netbasis.

3.5 VAT on Financial services

The Value Added Tax on financial services is charged in accordance with the provisions of the ValueAdded Tax (Amended) Act. No. 13 of 2004 with effect from January 2004 on the supply of financialservices. The value addition comprises profit before tax of the Company adjusted for book depreciation,prescribed components of the emoluments to the employees, and economic depreciation.

3.6 Value Added Tax on Taxable supplies

Value Added Tax on taxable supplies is paid according to the provisions of the Value Added TaxAct No. 14 of 2002 and the amendments thereto.

3.7 Foreign currencies

The financial statements of the Company are presented in Sri Lanka Rupees, which is the Company’sfunctional currency.

All transactions in currencies other than the functional currency are recorded in Sri Lanka Rupees,using the exchange rates prevailing at the time the transactions were effected. At each balance sheetdate, monetary assets and liabilities denominated in foreign currencies are retranslated to Sri Lanka




GE

Rupee equivalents at the exchange rate prevailing on the balance sheet date. Non-monetary assetsand liabilities denominated in foreign currencies are not retranslated. Exchange differences arising onsettlement of monetary items and retranslation of monetary items, are recognised in profit or loss inthe year in which they arise.

3.8 Borrowing costs

Borrowing costs directly attributable to the acquisition, construction, or production of qualifying assets,which are assets that necessarily take a substantial period of time to get ready for their intended useor sale, are added to the cost of those assets, until such time as the assets are substantially ready fortheir intended use or sale.

Investment income earned on the temporary investment of specific borrowings pending theirexpenditure on qualifying assets is deducted from the borrowing costs eligible for capitalization.

All other borrowing costs are recognised in profit or loss in the period in which they are incurred.

4. ASSETS AND BASES OF THEIR VALUATION

4.1 Amounts due from customers (Loans and Advances)

Amounts due from customers are stated in the balance sheet net of provision for bad and doubtfulloans. Interest is not accrued to revenue in the case of non-performing loans and advances.

4.1.1 Provision for loan losses

Specific provision for possible loan losses are made on the basis of continuous review of all advancesto customers in accordance with Sri Lanka Accounting Standard No. 33 “Revenue Recognition andDisclosures in the financial statements of Finance Companies”, and the requirement as stipulated bythe Central Bank of Sri Lanka (Direction No. 3 of 2006) based on an aged classification of advancesas shown below:

Period outstanding Provision madeArrears within 6 to 11 months 50%Arrears - 12 months and over 100%

In addition, as a matter of prudence, general provisions are made wherever necessary based on pastexperience and judgment, taking into account risks inherent in any portfolio.

Provisions are applied to write off advances, in part or in whole, when loans are considered partly orwholly irrecoverable.

4.2 Investment in real estate

Investments in real estate are carried at cost or net realisable value whichever is lower. Cost ofpurchase, costs of conversion and other costs including selling and distribution expenses that arenecessary to bring the asset to the saleable condition are included in the carrying value of the property.Net realisable value is the price at which inventories can be sold in the ordinary course of business,less the estimated cost of completion and the estimated cost necessary to make the sale.




GE

4.3 Leasing

Leases are classified as finance leases whenever the terms of the lease, substantially transfer all therisks and rewards of ownership to the lessee. All other leases are classified as operating leases.

4.3.1 The Company as lessor

Amounts due from lessees under finance leases are recorded as receivables at the amount of theCompany’s net investment in the leases.

Rental income from operating leases is recognised on a straight-line basis over the term of the relevantlease. Initial direct costs incurred in negotiating and arranging operating leases are added to thecarrying amount of the leased asset and recognised on a straight-line basis over the lease term.

4.3.2 The Company as lessee

Assets held under finance leases are initially recognised as assets of the Company at their fair valueat the inception of the lease or, if lower, at the present value of the minimum lease payments. Thecorresponding liability to the lessor is included in the balance sheet as a finance lease obligation.

Lease payments are apportioned between finance charges and reduction of the lease obligation so asto achieve a constant rate of interest on the remaining balance of the liability. Finance charges arecharged directly to profit or loss, unless they are directly attributable to qualifying assets, in whichcase they are capitalised in accordance with the Company’s general policy on borrowing costs.Contingent rentals are recognised as expenses in the periods in which they are incurred.

Operating lease payments are recognised as expenses on a straight-line basis over the lease term,except where another systematic basis is more representative of the time pattern in which economicbenefits from the leased asset are consumed. Contingent rentals arising under operating leases arerecognised as an expense in the period in which they are incurred.

In the event that lease incentives are received to enter into operating leases, such incentives arerecognised as liabilities. The aggregate benefit of incentives is recognised as a reduction of rentalexpense on a straight-line basis, except where another systematic basis is more representative of thetime pattern in which economic benefits from the leased asset are consumed.

4.4 Investments

4.4.1 Investment property

Investment property, which is property held to earn rentals and/or for capital appreciation, is measuredinitially at its cost, including transaction costs. Subsequent to initial recognition, investment propertyis measured at fair value. Gains and losses arising from changes in the fair value of investmentproperty are included in profit or loss in the period in which they arise. The fair value of theinvestment properties are determined periodically through valuation carried out by qualified externalvaluers.

4.4.2 Dealing securities

From the year 2011/12, the Company changed the accounting policy on recording Dealing Securitiesto market value on an individual investment basis at every month end to reflect market value fromrecording market value on an aggregate basis as at the balance sheet date. The change of accountingpolicy is applied prospectively to the financial statements.




GE

4.4.3 Investment securities

All quoted and unquoted securities, which are held on long-term and medium basis are valued atcost. The carrying amounts of long-term investments are reduced to recognise a decline, which isconsidered other than temporary, in the value of investments, determined on an individual investmentbasis.

4.4.4 Investments in Government Securities

Investments in Government Securities represent Sri Lanka Government Treasury bills, Sri LankaGovernment Securities and Central Bank of Sri Lanka Securities, which are accounted for, at cost plusa portion of discount/premium accrued thereon.

4.5 Property, Plant and Equipment

Land and buildings held for use in the supply of services, or for administrative purposes, are statedin the balance sheet at their revalued amounts, being the fair value at the date of revaluation, lessany subsequent accumulated depreciation and subsequent accumulated impairment losses.

Any revaluation increase arising on the revaluation of such land and buildings is credited in equityto the Property Revaluation Reserve, except to the extent that it reverses a revaluation decrease for thesame asset previously recognised in profit or loss, in which case the increase is credited to profit orloss to the extent of the decrease previously charged. A decrease in the carrying amount arising onthe revaluation of such land and buildings is charged to profit or loss to the extent that it exceeds thebalance, if any, held in the Property Revaluation Reserve relating to a previous revaluation of thatasset.

Depreciation on revalued buildings is charged to profit or loss. On the subsequent sale or retirementof a revalued property, the attributable revaluation surplus remaining in the Property RevaluationReserve is transferred directly to retained earnings.

Properties in the course of construction for production, rental, or administrative purposes, or forpurposes not yet determined, are carried at cost, less any recognised impairment loss. Cost includesprofessional fees and, for qualifying assets, borrowing costs capitalised in accordance with theCompany’s accounting policy. Depreciation of these assets, on the same basis as other propertyassets, commences when the assets are ready for their intended use.

Fixtures and equipment are stated at cost less accumulated depreciation and accumulated impairmentlosses.

4.5.1 Depreciation

Depreciation is charged so as to write off the cost or valuation of assets, other than freehold land andproperties under construction, over their estimated useful lives, using the reducing method. Theestimated useful lives, residual values, and depreciation method are reviewed at each year-end, withthe effect of any changes in estimate accounted for on a prospective basis.

Assets held under finance leases are depreciated over their expected useful lives on the same basis asowned assets or, where shorter, the term of the relevant lease.

No depreciation is charged on freehold lands. Depreciation is charged on all other property, plantand equipment including leased assets, on the reducing instalment basis consistent with that of theprevious year and is calculated at the rates specified below.




GE

Freehold Buildings 2.5% p.a.Furniture & Fittings 10% p.aOffice Equipment 10% p.a.Motor Vehicles 20% p.a.

4.6 Intangible assets

Intangible assets acquired separately are reported at cost less accumulated amortisation andaccumulated impairment losses. Amortisation is charged on a straight-line basis over their estimateduseful lives. The estimated useful life and amortisation method are reviewed at the end of eachannual reporting period, with the effect of any changes in estimate being accounted for on a prospectivebasis.

4.7 Other assets

Other assets are stated at amounts expected to be realised after making provisions for bad anddoubtful debts.

4.8 Cash and cash equivalents

Cash and cash equivalents are defined as cash in hand, demand deposits and short-term highlyliquid investments readily convertible to known amounts of cash, subject to insignificant risk ofchanges in value.

For the purpose of the Cash Flow Statement, cash and cash equivalents comprise cash in hand,deposits held at call with banks, and other demand deposits net of bank overdrafts.

4.9 Impairment of tangible and intangible assets

The Company assesses at each reporting date, or more frequently if events or changes in circumstancesindicate that the carrying value may be impaired, whether there is an indication that an asset may beimpaired. If such indication exists, or when an annual impairment testing for an asset is required,the Company makes an estimate of the asset’s recoverable amount. If the recoverable amount of anasset is estimated to be less than its carrying amount, the carrying amount of the asset is reduced toits recoverable amount. An impairment loss is recognised immediately in profit or loss, unless therelevant asset is carried at a revalued amount, in which case the impairment loss is treated as arevaluation decrease.

5. LIABILITIES AND PROVISIONS

5.1 Retirement benefit costs

Contributions to defined contribution retirement benefit plans are recognised as expenses whenemployees have rendered service entitling them to the contributions.

5.1.1 Defined benefit plan

Provision has been made for retirement gratuities from the completion of the first year of service forall employees, in conformity with SLAS 16. However, under the Payment of Gratuity Act No.12 of1983, the liability to an employee arises only on completion of 5 years of continued service.

An amount equivalent to the provision is invested in Gratuity Fund established outside the Company.The actual gratuity payments are charged to the Gratuity fund. The fund has been actuarially valuedby professionally qualified actuaries once in three years.




GE

5.1.2 Defined Contribution plan

Employees are eligible for Employees’ Provident Fund contributions and Employees’ Trust Fundcontributions in line with respective statutes and regulations. The Company contributes 15% and 3%of gross emoluments of employees to Employees’ Provident Fund and Employees’ Trust Fundrespectively.

5.1.3 Pension Plan

All employees who would complete 10 or more years of service by the age of 55 years have theoption of contributing to the pension scheme where the Company and the employee would contribute5 % each of the basic salary.

Amount equivalent to the contribution for the year is invested in a Pension Fund established outsidethe Company.

5.2 Provisions

Provisions are recognised when the Company has a present obligation (legal or constructive) as aresult of a past event, it is probable that the Company will be required to settle the obligation, and areliable estimate can be made of the amount of the obligation.

The amount recognised as a provision is the best estimate of the consideration required to settle thepresent obligation at the balance sheet date, taking into account the risks and uncertainties surroundingthe obligation. Where a provision is measured using the cash flows estimated to settle the presentobligation, its carrying amount is the present value of those cash flows.

When some or all of the economic benefits required to settle a provision are expected to be recoveredfrom a third party, the receivable is recognised as an asset if it is virtually certain that reimbursementwill be received and the amount of the receivable can be measured reliably.

6. REVENUE RECOGNITION

6.1 Interest income

Interest income from loans and advances is recognised on an accrual basis. However, incomerecognition from loans and advances ceases when the account is overdue for six month or more, incompliance with Direction No. 15 of 1991 (Accrued Interest), and thereafter recognised on a cashbasis.

6.2 Land sales income

Gross income of land sales represents the excess of sale value over the cost of land sold. Cost of landincludes the purchase cost, development expenses, selling expenses, and borrowing cost up to thecompletion of developments.

6.3 Profit on lands sold under easy payment facility

Profit on lands is recognized once the easy payment agreement is signed.




GE

6.4 Finance lease income

Finance lease income constitutes the excess of the total rental receivable from a lease agreement overthe cost of the leased asset. Such income is credited to the income statement over the primary periodof each lease so as to give a constant periodic rate of return on the Company’s net investmentoutstanding in the lease.

6.5 Interest income from Government securities

Interest income from Government of Sri Lanka Treasury bills is recognised on a time proportionbasis, and discounts on purchase are amortised to income on a straight-line basis over the investmentperiods through to maturity.

6.6 Interest on overdue rentals

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

6.7 Dividend income

Dividend income is recognised when the right to receive payments is established.

6.8 Finance charges

Full credit is taken for finance charges received on hire purchase, lease contracts, and other facilitiesat the inception of the contracts.

Income from all other interest bearing investments is recognised as revenue on an accrual basis.

7. EXPENSES RECOGNITION

Expenses are recognised in the income statement on the basis of a direct association between the costincurred and the earning of specific items of income. All expenditure incurred in the running of thebusiness and in maintaining the property, plant and equipment in a state of efficiency has beencharged to the income statement.

8. SEGMENT INFORMATION

8.1 Reporting segments

A segment is a distinguishable component of the company that is engaged in providing services(Business segment) or in providing services within a particular economic environment (Geographicalsegment), which is subject to risks and rewards that are different from those of other segments.

In accordance with the Sri Lanka Accounting Standard No. 28 “Segmental Reporting”, segmentalinformation is presented in respect of the Company. The segments comprise Leasing, Hire Purchase,Real Estate, Housing and Easy Payment on Real Estate.

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




GE

9. CRITICAL ACCOUNTING JUDGEMENTS, ASSUMPTIONS AND KEY SOURCES OFESTIMATION UNCERTAINTY

In the application of the Company’s accounting policies, which are described in Note 3, the directorsare required to make judgments, estimates and assumptions about the carrying amounts of assetsand liabilities that are not readily apparent from other sources. The estimates and associatedassumptions are based on historical experience and other factors that are considered to be relevant.Actual results may differ from these estimates.

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accountingestimates are recognised in the period in which the estimate is revised if the revision affects only thatperiod or in the period of the revision and future periods if the revision affects both current andfuture periods.

9.1 Key sources of estimation uncertainty

The following are the key assumptions concerning the future, and other key sources of estimationuncertainty at the balance sheet date, that have a significant risk of causing a material adjustment tothe carrying amounts of assets and liabilities within the next financial year.

9.1.1 Profit on lands sold under easy payment facility

Profit on lands sold under easy payment facility is recognised once the easy payment agreement issigned.

In making their judgement, the directors considered the detailed criteria for the recognition of revenuefrom the sale of goods set out in SLAS 29 “Revenue” and, in particular, whether the Company hadtransferred to the buyer the significant risks and rewards of ownership of the lands sold under theeasy payment facility. Following the detailed quantification of the Company’s loan losses in respectof lands sold under easy payment, and the agreed limitation on the customer’s ability to discontinuethe loan facility, the directors are satisfied that the significant risks and rewards have been transferredand that recognition of the profit on lands sold under easy payment facility in the current year isappropriate.

9.1.2 Fall in value of investment securities

The Company treats all equity investments as impaired when there has been a significant or prolongeddecline in the fair value below its cost or where other objective evidence of impairment exists. Thedetermination of what is ‘significant’ or ‘prolonged’ requires judgment.

9.1.3 Useful lives of Property, Plant and Equipment

The company reviews the residual values, useful lives and depreciation method at each reportingdate. Judgment by the management is required in the estimation of these values, rates and methodsand hence these are subject to uncertainty.

9.1.4 Review of Impairment of Assets

At each reporting date or more frequently if the changes in circumstances requires so the Companyassesses whether there are any indicators of impairment. This requires the Company to estimatefuture cash flows and discount rates and hence subject to uncertainty.




GE

9.1.5 Defined Benefit Plans

In using actuarial valuations to determine defined benefit obligations assumptions are made aboutdiscount rates, salary increases, mortality rates etc. which are subject to uncertainty due to long termnature of such obligations.

9.1.6 Real Estate and Housing Stocks

The Directors have estimated the recoverability of these assets based on the prevailing market pricesand other operating circumstances based on their judgment.

9.1.7 Impairment Losses on Leases, Hire Purchase and Other Loans and Advances

In addition to the possible loan losses provided as per the directives of Central Bank of Sri Lanka thecompany reviews the portfolio at each reporting date to determine whether further allowance forimpairment is required. Judgment by the management is required in such determination based onnumber of factors actual result of which may differ.




GE

10 TURNOVERThe revenue stated includes proceeds of land & property sold in addition to interest income,other operating income and other income excluding components of sundry income.

11 INTEREST INCOME 2011/12 2010/11Rs. Rs.

Hire Purchase 867,932,207 1,004,264,174Leasing 90,344,754 93,276,960Land Sales on Easy Payment Terms 357,174,462 183,645,865Housing Loans 117,576,745 144,353,324Other Products 234,561,642 352,419,743Overdue Rentals 139,575,778 232,937,261Related Company Lendings 1,215,654 1,633,317Pawn Brokering 172,306,073 63,411,551Deposits with Banks 19,010,261 11,225,224Government Securities 3,703,580 13,895,207

2,003,401,157 2,101,062,626

12 INTEREST EXPENSES 2011/12 2010/11Rs. Rs.

Fixed Deposits and Certificates of Deposit 2,171,816,870 2,511,682,760Savings Deposits 131,529,065 186,992,562Debenture 50,832,101 61,107,063Bank Loans and Overdrafts 116,226,403 178,405,307Short-Term Borrowings (15,899,648) 33,522,508Others 1,834,918 108,738,952

2,456,339,710 3,080,449,152

13 OTHER OPERATING INCOME 2011/12 2010/11Rs. Rs.

Income on Real Estate & Housing Projects 470,941,949 50,480,023Recovery of Bad Debts Written off 126,404,815 35,357,442Finance Charges 37,571,572 16,211,611Fees & Commission Income 46,156,014 67,848,027Repossessed and Others 16,972,057 32,119,296

698,046,407 202,016,399

14 OTHER INCOME/(EXPENSES) 2011/12 2010/11Rs. Rs.

Dividend Received 3,561,181 2,125,716Profit/(Loss) on Disposal of Property , Plant and Equipment (44,724,047) 74,959,370Profit on Disposal of Dealing Securities 5,982,741 1,474,576Profit on Disposal of Investments Securities 2,199,400 86,639,259Sundries 7,982,425 5,475,452

(24,998,300) 170,674,373




GE

15 EMPLOYEE RETIREMENT BENEFIT EXPENSES 2011/12 2010/11Rs. Rs.

Contribution to Staff Pension Scheme (30,627,203) 1,565,651Contribution to Staff Gratuity Fund (185,000,000) (7,682,707)Contribution to Provident Fund 47,663,378 50,826,316Contribution to Employees Trust Fund 9,690,479 10,334,429

(158,273,346) 55,043,688

16 PROFIT /(LOSS) BEFORE PROVISION FOR CREDIT 2011/12 2010/11LOSSES AND TAXATION Rs. Rs.Profit/(Loss) before Provision for Credit Losses & Taxationhas been arrived at after charging the following;

Directors’ Remuneration 9,600,000 10,084,800EPF & ETF on Directors’ Remuneration 1,220,616 1,242,216Directors Fees 1,800,000 300,000Audit Fees 1,500,000 1,500,000Depreciation 76,477,178 290,073,871

16.1 Provision for change in value of investments, assets and doubtful receivablesReversal on valuation of Investment Properties - 465,000,000Provision for fall in value of Properties - 628,634,969Provision made / (reversed) for fall in value of Investment Securities (7,233,333) 151,418,158Provision made/(reversed) for Doubtful Receivables of Related Companies (123,187,249) 143,286,949Provision made /(reversed) for fall in value of Dealing Securities (1,432,469) (11,382,302)(Profit)/Loss on adjustment to market value on Dealing Securities (104,684,884) -Provision made / (Reversed) for Impairment of Property, Plant &Equipment (87,900,000) 110,424,813

(324,437,935) 1,487,382,587

17 INCOME TAX 2011/12 2010/11Rs. Rs.

Current Income Tax Expense (Note 17.1) - -Deferred Tax (Note 17.2) - -

- -

Income tax on profits of the Company has been computed at rates stipulated in the InlandRevenue Act No. 10 of 2006 and subsequent amendments thereto.

17.1 Reconciliation of Accounting Profit / (Loss) with taxable income 2011/12 2010/11Rs. Rs.

Profit /(Loss) before tax (353,399,712) (3,830,135,175)Capital portion of lease rentals 177,486,041 378,594,049Disallowable expenses added back 219,973,839 1,943,907,113Tax deductible expenses (189,784,317) (315,555,864)Tax exempt income (261,438,221) (98,233,073)Non-Taxable other income (589,140,024) 96,393,827

Taxable Income/(Loss) (996,302,394) (1,825,029,123)

Income Tax - -Social Responsibility Levy - -

- -




GE

2011/12 2010/11Rs. Rs.

Movement of Tax LossesTax loss brought forward (6,901,738,391) (5,076,709,268)Tax loss incurred during the year (996,302,394) (1,825,029,123)

Tax loss carried forward (7,898,040,785) (6,901,738,391)

17.2 Deferred Tax Asset 31-03-2012 31-03-2011Rs. Rs.

Property Plant and Equipment (119,376,720) (194,204,478)Gratuity Liability - 108,439,988Unclaimed Tax Losses 2,490,940,105 2,402,849,330

2,371,563,385 2,317,084,841

Additional deferred tax asset not recognized (Note 17.3) (2,180,338,100) (2,125,859,556)

191,225,285 191,225,285

17.3 The above additional deferred tax asset of Rs. 2.18 bn. for the year ended 31st March 2012 ( Rs2.13 bn as at 31st March 2011) has not been recognized because of tax losses from financial year2008/09 to 2011/12 and hence taxable profit will not be available immediately to utilize suchdeductible temporary differences other than Rs. 191,225,285 recognized as at 31st March 2008.than Rs.191,225,285/- recognized as at 31st March 2008.

18 EARNING /(LOSS) PER SHAREThe calculation of basic earning / (loss) per share is based on the profit / (loss) attributable toordinary shareholders divided by the weighted average number of ordinary shares in issueduring the year.

2011/12 2010/11

Profit/(Loss) attributable to ordinary shareholders (Rs.) (353,399,712) (3,830,135,175)Weighted average number of Shares 160,419,365 43,752,698Earning / (Loss) per Share (Rs.) (2.20) (87.54)

19 DIVIDEND PER SHAREThe Board of Directors has not recommended a dividend for the year ended 31 March 2012because of accumulated losses brought forward.

20 INVESTMENT IN GOVERNMENT SECURITIES 31-03-2012 31-03-2011Rs. Rs.

Repurchase Agreements - 730,000,000

- 730,000,000




GE

21 INVESTMENTS IN DEALING SECURITIES 31.03.2012 31.03.2011

No of Book Market No of Book MarketShares Value (Rs.) Value (Rs.) Shares Value (Rs.) Value (Rs.)

Bank, Finance & Insurance SectorArpico Finance Company PLC - - - 100 5,500 11,470Aviva NDB Insurance PLC 400 39,437 84,600 450 2,240 134,595Pan Asia Banking Corporation PLC 10,000 231,005 235,000 - - -Ceylinco Insurance PLC 45 - 36,558 - - -Commercial Bank of Ceylon PLC - - - 100 13,500 26,580Hatton National Bank PLC - - - 12 1,332 4,560National Development Bank PLC - - - 15 2,475 4,800SMB Leasing PLC 117 90 152 57 46 46SMB Leasing PLC- W015 - - - 57 46 57Seylan Bank PLC - Non Voting 16,200 753,911 469,800 16,200 753,911 636,660

1,024,443 826,110 779,050 818,768

Beverage, Food & Tobacco SectorDistilleries Companyof Sri Lanka PLC 172,400 31,332,981 24,998,000 279,800 50,595,981 50,364,000Ceylon Brewery PLC - - - 200 3,900 70,400

31,332,981 24,998,000 50,599,881 50,434,400

Chemical & Pharmaceuticals SectorCIC Holdings PLC - - - 21 5,220 3,255CIC Holdings PLC - Non Voting - - - 16 380 1,728

- - - 5,600 4,983

Land & PropertyColombo Land & Development Company PLC - - - 5,050 57,700 109,080

- - 57,700 109,080

Diversified Holdings SectorRichard Peiris & Company PLC 1,651,900 23,397,380 12,389,250 2,379,000 33,741,651 32,354,400John Keells Holdings PLC - - - 155 13,640 44,268Free Lanka Capital Holdings PLC 1,420,900 7,904,500 2,841,800 - - -

31,301,880 15,231,050 33,755,291 32,398,668

Motors SectorUnited Motors Lanka PLC 16,200 2,397,418 1,749,600 - - -

2,397,418 1,749,600 - -

Trading SectorSinger Sri Lanka PLC - - - 4 44 897

- - 44 897

Hotels & Travels SectorHotel Services (Ceylon) PLC 15 309 261 75 1,547 1,733John Keells Hotels PLC - - - 59 1,185 1,015Tangerine Beach Hotels PLC 4,100 335,823 360,390 - - -

336,132 360,651 2,732 2,748




GE

21 INVESTMENTS IN DEALING SECURITIES (Contd) 31.03.2012 31.03.2011

No of Book Market No of Book MarketShares Value (Rs.) Value (Rs.) Shares Value (Rs.) Value (Rs.)

Land & Property SectorOn’ally Holdings PLC - - - 3,200 230,066 231,680City Housing & Real Estate Company PLC 3,298,950 21,584,473 48,164,670 - - -Seylan Developments PLC 204,000 14,239,142 1,611,600 - - -

35,823,615 49,776,270 230,066 231,680

Manufacturing SectorLanka Floortiles PLC - - - 21 284 2,753Central Industries PLC 50 - 3,500 50 5,700 4,805Dipped Products PLC - - - 67 5,327 7,779Royal Ceramics Lanka PLC - - - 20 23,704 3,140Blue Diamonds World Wide PLC - Non Voting 44 36 119 44 2,961 70Chevron Lubricants Lanka PLC 2,000 346,874 363,800 2,000 346,874 320,000Ceylon Oxygen PLC (Delisted) - - - 325 15,600 -

346,910 367,419 400,450 338,547

Plantation SectorUdapussellawa Plantations PLC 300 18,450 8,160 600 20,700 27,780Watawala Plantations PLC - - - 2,000 21,500 50,000

18,450 8,160 42,200 77,780

Power & Energy SectorPanasian Power PLC 51,400 154,200 133,640 51,400 154,200 195,320

154,200 133,640 154,200 195,320

Footwear and Textile SectorBata Shoe Co. of Ceylon PLC (Delisted) - - - 1,000 8,000 -Pugoda Textile Lanka PLC ( Delisted) - - - 2,250 10,125 -

- - 18,125 -

Eagle growth and Income fund 3,200,000 8,828,800 - -

Carrying Amount 105,936,029 102,279,700 86,045,338 84,612,869Less- Provision for fall in Value (Note) - - (1,432,469) -

105,936,029 102,279,700 84,612,869 84,612,889

Note:Please refer Accounting Policy 4.4.2 on Dealing Securities.




GE

22 INVESTMENT IN HIRE PURCHASE 31-03-2012 31-03-2011Rs. Rs.

Receivable within 1 year from Balance Sheet date 1,178,897,258 1,204,025,933Receivable between 1 and 5 years from Balance Sheet date 2,543,544,038 1,408,118,791Receivable after 5 years from Balance Sheet date 19,786,627 13,941,931

3,742,227,923 2,626,086,655

Stock Outstanding in respect of Non-Performing HirePurchase Contracts 56,129,604 158,156,893

23 INVESTMENT IN LEASES 31-03-2012 31-03-201123.1 VEHICLES AND EQUIPMENT Rs. Rs.

Total Lease Rentals Receivable 829,566,793 419,210,676Less :Lease Rentals Receivable after 1 year (597,637,792) (224,688,563)Lease Rentals Receivable within I year 231,929,001 194,522,113Less : Unearned Lease Income on above (107,180,921) (48,477,702)Net Lease Rentals Receivable on above 124,748,080 146,044,411

Lease Rentals Receivable between 1 to 5 years 581,931,288 204,962,044Less : Unearned Lease Income on above (150,967,087) (45,465,188)Net Lease Rentals Receivable on above 430,964,201 159,496,856

Lease Rentals Receivable after 5 years 15,706,504 19,726,518Less : Unearned lease income on above (100,451) (110,520)Net Lease Rentals Receivable on above 15,606,053 19,615,998

Total Net Lease Rentals Receivable 571,318,334 325,157,265

Stock Outstanding in respect of Non-Performing Lease Contracts 28,654,374 47,292,822

23.2 PROPERTIES 31-03-2012 31-03-2011Rs. Rs.

Total Lease Rentals Receivable 761,077,507 983,150,348Less :Lease Rentals Receivable after 1 year (565,628,233) (762,699,382)

Lease Rentals Receivable within I year 195,449,274 220,450,966Less : Unearned Lease Income on above (99,437,490) (122,068,294)

Net Lease Rentals Receivable on above 96,011,784 98,382,672

Lease Rentals Receivable between 1 to 5 years 521,771,792 666,611,539Less : Unearned Lease Income on above (167,267,320) (257,819,341)Net Lease Rentals Receivable on above 354,504,472 408,792,198

Lease Rentals Receivable after 5 years 43,856,441 96,087,842Less : Unearned Lease Income on above (693,314) (1,596,951)

Net Lease Rentals Receivable on above 43,163,127 94,490,890

Total Net Lease Rentals Receivable 493,679,383 601,665,760

Stock Outstanding in respect of Non-Performing Lease Contracts 249,181,469 333,153,860




GE

24 EASY PAYMENT LOANS ON LANDS 31-03-2012 31-03-2011Rs. Rs.

Receivable within 1 year from Balance Sheet date 535,242,297 547,901,006Receivable between 1 and 5 years from Balance Sheet date 846,795,683 1,019,718,008Receivable after 5 years from Balance Sheet date 382,054,511 395,823,867

1,764,092,491 1,963,442,881

Stock Outstanding in respect of Non-Performing EasyPayment Loans on Lands 236,687,419 357,736,758

25 HOUSING LOANS 31-03-2012 31-03-2011Rs. Rs.

Receivable within 1 year from Balance Sheet date 139,161,099 167,267,042Receivable between 1 and 5 years from Balance Sheet date 332,859,813 467,175,519Receivable after 5 years from Balance Sheet date 141,920,547 195,109,262

613,941,459 829,551,823

Stock Outstanding in respect of Non-Performing Housing Loans 287,181,469 389,551,126

26 OTHER STOCKS 31-03-2012 31-03-2011Rs. Rs.

Receivable within 1 year from Balance Sheet date 125,260,109 271,419,791Receivable between 1 and 5 years from Balance Sheet date 121,922,621 223,427,411Receivable after 5 years from Balance Sheet date 37,200,966 13,488,152

284,383,695 508,335,35426.1 OTHER STOCKS COMPRISES 31-03-2012 31-03-2011

Rs. Rs.Agreement to Sell 3,836,625 3,836,625Education Loan 46,228,185 90,052,980Stock in Trade 448,914 448,914Land Finance 83,514,238 74,895,405Agro Products 75,391,225 126,004,543Sundry Trading Stock 12,977,583 143,374,473Service Financing 36,568,415 44,325,920Rakshana Warama 25,418,509 25,396,493Total 284,383,695 508,335,354

Stock Outstanding in respect of Non-Performing Other Contracts 58,679,599 150,793,221

27 AMOUNTS DUE FROM CUSTOMERS 31-03-2012 31-03-2011Rs. Rs.

Hire Purchases 620,894,795 775,326,204Leasing 161,571,657 188,637,224Personal Loans 49,792,709 66,403,077Pawning 80,369,964 32,239,755Other Loans 708,321,145 734,911,569Housing Loans 396,694,960 384,099,555Rakshana Warama Loans 4,149,125 5,978,773Service Financing 85,445,428 89,356,092Lease Purchases - 208,942Land Easy Payments 354,332,187 465,226,552Repossessed Contracts 644,244,784 654,767,002

3,105,816,753 3,397,154,745Less: Interest in Suspense (943,436,848) (968,713,392)Provision for Loan Losses (Note 27.1) (1,369,775,116) (1,636,755,382)

792,604,789 791,685,971




GE

27.1 PROVISION FOR LOAN LOSSES 31-03-2012 31-03-2011Rs. Rs.

Balance at the end of the year 1,369,775,116 1,636,755,382Movement in the Loan Loss provisionBalance at beginning of the year 1,636,755,382 1,645,396,371Transfers during the year (1,758,704) 2,952,824Provision made /(reversed) during the year (265,221,562) (11,593,813)

Balance at end of the year 1,369,775,116 1,636,755,382

28 OTHER RECEIVABLES 31-03-2012 31-03-2011Rs. Rs.

Receivable within 1 year from Balance Sheet Date 211,368,276 179,495,405Receivable between 1 and 5 years from Balance Sheet Date 1,146,778,685 1,148,483,565Receivable after 5 years from Balance Sheet Date - -

1,358,146,961 1,327,978,970

28.1 OTHER RECEIVABLE COMPRISE: 31-03-2012 31-03-2011Rs. Rs.

Deposit & Prepayments 94,952,654 42,419,950Staff Loans 20,611,379 43,691,114Interest Receivable on Fixed Deposits 4,124,835 1,251,640Lease Rentals Paid in Advance 843,305 1,630,550Economic Service Charges 259,657,453 139,797,314Related Company Receivables (Note 28.2) 886,277,927 985,970,547Sundry Debtors 91,679,407 113,217,855

Total 1,358,146,961 1,327,978,970

28.2 RELATED COMPANY RECEIVABLES 31-03-2012 31-03-2011Rs. Rs.

Gross Receivable 3,082,776,297 3,102,547,303Interest in Suspense (823,508,231) (620,399,369)

Balance before Provision for Doubtful Receivables 2,259,268,065 2,482,147,934Provision for Doubtful Receivable (1,372,990,138) (1,496,177,387)

Balance at the end of the Year 886,277,927 985,970,547

29 INVESTMENT PROPERTIES 31-03-2012 31-03-2011Rs. Rs.

Balance at the beginning of the year 1,692,285,090 2,146,291,090Additions through subsequent expenditure/(transfers) (50,320,867) 10,994,000Reversal of Property Revaluation - (465,000,000)Disposal (117,687,927) -

Balance at end of the year 1,524,276,295 1,692,285,090

Investment Properties are recognized using the fair value model. All Investment Properties are owned by theCompany.

The fair value of the above properties as at 31st March 2012 has been determined at Rs. 1,199,045,000/-. Ofthis Rs. 1,123,045,000/- has been determined by qualified valuers.

Of the above investment properties two properties at a cost of Rs.67,970,773/- have been disposed ofsubsequent to the Balance Sheet date.




GE


30 INVESTMENT SECURITIES Cost

In Unquoted Company Shares No. of % of Nominal 31.03.2012 31.03.2011

Ceylinco Group Companies Shares Holding Value Rs. Rs.

Asian Finance Co. PLC 75,000 2.54 750,000 750,000 750,000Asian Investment & Factoring (Pvt) Ltd (Non voting) 75,000 - 750,000 750,000 750,000Ceylinco Education Group (Pvt.) Ltd. 1,000,000 25.00 10,000,000 5,000,000 5,000,000Ceycom - Global Communication Co. Ltd 1,000,000 8.95 10,000,000 5,000,000 5,000,000Cey-Energy Electronics Co. (Pvt) Ltd. 1,475,871 12.72 14,758,710 38,042,804 38,042,804Cey-Energy Electronics Co. (Pvt) Ltd. Pre. Shares 600,000 - 6,000,000 15,465,906 15,465,906Ceyhomes Credit & Investment Ltd. 1,000,000 30.30 10,000,000 10,000,000 10,000,000Ceylinco Bio Tech Ltd 150,000 4.54 1,500,000 1,500,000 1,500,000Nations Building Society Ltd. (Units) 8,000,000 21.89 80,000,000 6,000,000 6,000,000Ceylinco Capital Ltd. 250,000 27.53 2,500,000 2,500,000 2,500,000Ceylinco Capital Investment Co. (Pvt.) Ltd. 182,000 12.88 1,820,000 168,887 168,887Ceylinco Cellular Company (Pvt) Ltd 100,000 12.42 1,000,000 1,000,000 1,000,000Ceylinco CISCO Cash Management & Transit Company Ltd. 50,000 16.13 500,000 500,000 500,000Ceylinco Cisco Ranaviru Services (Pvt) Ltd 50,000 10.95 500,000 500,000 500,000Ceylinco Coloured Stones (Pvt) Ltd 800,000 9.52 8,000,000 8,000,000 8,000,000Ceylinco Consolidated InternationalProperty Development (Pvt) Ltd. 2,500,000 - 25,000,000 25,000,000 25,000,000Ceylinco Design & Project Management Co. (Pvt) Ltd 500,000 22.48 5,000,000 5,000,000 5,000,000Ceylinco Employees Sports Complex (Pvt) Ltd 200,000 25.00 2,000,000 2,000,000 2,000,000Ceylinco Fashion Trend Limited 100,000 21.28 1,000,000 1,000,000 1,000,000Ceylinco Financial & Consultancy Co.(Pvt).Ltd. 150,000 30.00 1,500,000 1,500,000 1,500,000Ceylinco Foliage Exports (Pvt) Ltd 550,000 5.12 5,500,000 3,500,000 3,500,000Ceylinco Freight International (Pvt) Ltd 400,000 - 4,000,000 4,000,000 4,000,000Ceylinco Grameen Credit Co. Ltd. 5,000 2.41 50,000 50,000 1,200,000Ceylinco Hairdressers Ltd. 1,000 25.63 10,000 1,009 1,009Ceylinco Home Nursing and Swiftcare (Pvt) Ltd 100,000 12.37 1,000,000 1,000,000 1,000,000Ceylinco Homes International Ltd. 850,000 21.05 8,500,000 10,000,000 10,000,000Ceylinco Hotels Ltd. (Ordinary Non Voting shares) 475,000 - 4,750,000 4,750,000 4,750,000Ceylinco Hotels Ltd. Ordinary Shares 25,000 10.61 250,000 250,000 250,000Ceylinco Hotels Ltd. Preference Shares 610,000 - 6,100,000 6,100,000 6,100,000Standard Credit Lanka Ltd. 1,300,000 4.38 13,000,000 1,000,000 1,000,000Ceylinco International Reality (Pvt). Ltd. 300,000 29.97 3,000,000 3,000,000 3,000,000Ceylinco International Trading Co. Ltd. 41,667 6.76 416,667 416,667 500,000Ceylinco Leasing Corporation Ltd. 2,785,714 0.43 2,785,714 1,411,110 1,411,110Ceylinco Ltd. 12,154 11.06 121,540 245,277 245,277Ceylinco Mgt. & Acc. Services Ltd. 320,000 20.00 3,200,000 5,812,480 5,812,480Ceylinco Net Assist (Pvt) Ltd 50,000 19.51 500,000 500,000 500,000Ceylinco Niranjan Invention (Pvt.) Ltd. 48,999 12.89 489,990 500,000 500,000Ceylinco Pensions (Private) Ltd. 24,999 50.00 249,990 250,000 250,000Ceylinco Pharmaceuticals Ltd 600,000 35.29 6,000,000 - 6,000,000Ceylinco PLC Technology (Pvt.) Ltd. 1,000,000 34.40 10,000,000 9,125,000 9,125,000Ceylinco Profit Sharing Investment Corp.Ltd. Class A (Voting) 100,000 13.77 1,000,000 1,000,000 1,000,000Ceylinco Prosperity (Pvt) Ltd 50,000 23.47 500,000 500,000 500,000Ceylinco Renewables (Pvt) Ltd 180,492 39.00 1,804,920 1,804,920 1,804,920Ceylinco Seylan Housing & Commercial Properties Ltd 101,080 6.32 1,010,800 200,000 200,000Entrust Ltd. 550,000 27.50 5,500,000 1,069,438 1,069,438Ceylinco Stock Brokers (Pvt.) Ltd. 23,800 0.58 238,000 - 500,000Ceylinco Tax & Financial Consultants (Pvt.) Ltd.Class B (Non Voting Shares) 10,335,000 - 103,350,00 99,050,000 99,050,000Ceylinco Travels & Tours Ltd. 250,000 10.87 2,500,000 2,500,000 2,500,000Ceylinco Universal Ltd. 600,010 24.90 6,000,100 6,000,100 6,000,100



GE

30 INVESTMENT SECURITIES (Contd.) Cost

In Unquoted Company Shares No. of % of Nominal 31.03.2012 31.03.2011

Ceylinco Group Companies Shares Holding Value Rs. Rs.

Ceylinco Venture Capital Co. Ltd. 1,640,000 35.09 16,400,000 6,030,000 6,030,000Ceylinco Vocational Training Pvt.Ltd. 120,000 25.00 1,200,000 1,482,000 1,482,000Ceylinco Worldwide Trading (Pvt) Ltd 61,750 5.84 6,175,000 6,175,000 6,175,000Ceywin Telemedical Services (Pvt) Ltd 500,000 16.67 5,000,000 5,000,000 5,000,000E Ceylinco . Com (Pvt.) Ltd. 50,000 9.87 500,000 750,000 750,000F & G Real Consultant & Brokers (Pvt) Ltd (Non Voting) 20,000 - 200,000 200,000 200,000Finance House Consortium (Pvt) Ltd 20,000 - 200,000 200,000 200,000Golden Key Credit Card Company Ltd. 500 0.02 5,000 630,000 630,000Green Agro Lanka (Pvt). Ltd.- Class A 369,200 15.70 3,692,000 2,713,141 2,713,141Green Agro Lanka (Pvt). Ltd.- Class B (Non Voting) 66,550 - 665,500 1,644,359 1,644,359IC & CS Software Solutions (Pvt) Ltd 25,000 9.43 250,000 250,000 250,000Independent Financial News & Views (Pvt.) Ltd. (ARATUWA) 4,900 16.54 49,000 49,000 49,000International College of Business & Technology Ltd 50,000 2.03 500,000 500,000 500,000International Consultancy & Corporate Services (Pvt) Ltd 20,000 4.94 200,000 1,000,000 1,000,000Knowle (Pvt.) Ltd. - 8% non Cumulative Preference Shares 5,000 35.71 500,000 500,000 500,000Middleway Ltd. Ord. Shares 3,571,002 29.42 35,710,020 35,563,848 35,563,848Middleway Ltd. Pre. Shares 2,950,000 - 29,500,000 29,379,247 29,379,247Ceylinco Developers Ltd. 200,000 2.02 2,000,000 2,000,000 2,000,000Premiums (Pvt) Ltd 100 7.94 10,000 10,000 10,000San Michele Ltd. 35,682 28.48 3,568,200 3,602,097 3,602,097Seilaani Ltd. 48,000 24.00 4,800,000 4,799,999 4,799,999Seraka Investments Ltd. 655,000 15.82 6,550,000 5,300,000 5,300,000South Asian Travels Ltd 500,000 - 5,000,000 5,000,000 5,000,000TFC Agro (Pvt.) Ltd - - - 3,900,000 3,900,000TFC Agricultural Credit Services Ltd 1,755,000 39.00 52,550,000 35,000,000 35,000,000TFC Homes (Pvt) Ltd (not in commercial operation) 10,040,000 99.00 10,400,000 5,400,000 5,400,000The Finance & Guarantee Co. Ltd. 48,643 4.09 4,864,300 4,864,300 4,864,300The Finance Property Fund Co. Ltd.(Non Voting) 40,000 - 400,000 400,000 400,000The Sitar (Pvt) Ltd 200,000 20.00 2,000,000 2,000,000 2,000,000The Sitar (Pvt) Ltd (Ordinary Non Voting Shares) 400,000 - 4,000,000 4,000,000 4,000,000Tropical Foliage Ltd 150,000 3.94 1,500,000 1,500,000 1,500,000

Other Companies

Credit Information Bureau 2,978 - 297,800 297,800 297,800Eagle Growth and Income Fund 320,000 - 3,000,000 - 3,000,000MBSL Savings Bank Ltd. 1,510,833 6.59 15,108,330 15,108,330 15,108,330

478,962,719 489,696,052

In Quoted Company Shares No. of % of Nominal

Shares Holding Value (Rs.) 31.03.2012 31.03.2011

Blue Diamond Jewellery World Wide PLC - Voting 1,909,234 3.23 19,092,340 - 672Ceylinco Insurance Company PLC 45 0.00 450 - 16,538City Housing & Real Estate Company PLC 3,298,950 24.66 32,989,500 - 21,584,472Seylan Bank PLC 2,463,086 1.13 24,630,860 - 24,454,735Nations Lanka Finance PLC (Former Ceylinco Finance PLC) 1,290,000 1.16 12,900,000 - 9,470,000Seylan Merchant Bank PLC 606,666 1.36 6,066,660 - 6,168,326Seylan Development PLC 102,000 0.14 1,020,000 - 13,117,142

- 74,811,885478,962,719 564,507,937

Provision for Permanent Dimunition in Value (449,495,480) (456,728,813)

Total - Investment Securities net of provision for fall in value 29,467,239 107,779,124

Quoted Company Shares -Cost - 74,811,885Quoted Company Shares -Market Value - 273,985,151


Cost

Rs. Rs.



GE

30.1 The above investments are carried at cost less permanent decline in value determined individu-ally for each investment.

30.2 The Finance Company PLC holds 99% and 50% of the shares of TFC Homes (Private) Limitedand Ceylinco Pensions (Private) Limited respectively, and holds 20% or more of the Shares of26 Companies other than in the two Companies referred to above. However, since the financialstatements of such companies are not available or there are no commercial operations or thereis no significant influence in the operations of such Companies, the provisions of the Sri LankaAccounting Standards No. 26, Consolidated and separate Financial Statements and No. 27 In-vestments in Associates have not been given effect to.




GE


31PR

OPE

RTY

, PL

AN

T A

ND

EQ

UIP

MEN

T

Fre

ehol

d

Lea

seho

ld

a)C

ost /

Val

uatio

nLa

nd B

uild

ings

Fur

nitu

re &

Offi

ceM

otor

Land

Build

ings

Mot

orTo

tal

Fitti

ngs

Equ

ipm

ent

Veh

icles

Veh

icles

Rs.

Rs.

Rs.

Rs.

Rs.

Rs.

Rs.

Rs.

Rs.

Bala

nce

at th

e be

ginn

ing

of th

e ye

ar1,4

56,85

6,740

1,08

6,726

,704

117

,825,1

60

7

70,80

7,478

107

,304,6

3349

,000,0

00

4

0,873

,453

58,78

1,122

3,688

,175,2

90Re

valu

atio

n Su

rplu

s / (d

efici

t)45

1,002

,093

(8

3,31

5,14

0) -

--

7,000

,000

(24,9

70,92

4)-

349,7

16,03

0Tr

ansf

erre

d fr

om C

apita

l Wor

k in

Pro

gres

s-

591,5

82-

--

--

-59

1,582

Add

ition

s dur

ing

the

year

-

10

,476

,620

1,89

4,66

1

6,3

63,0

10

45,00

0-

--

18,77

9,291

Tran

sfer

s-

- 52

,212

(52

,212

)

25,66

9,513

--

(25,6

69,51

3)-

Tran

sfer

red

from

Acc

umul

ated

Dep

recia

tion

(Not

e 1)

-

(

267,3

92,35

2)-

--

--

- (2

67,39

2,352

)

1,907

,858,8

33

747

,087,4

15

1

19,77

2,033

777

,118,2

76

1

33,01

9,146

56,00

0,000

15,9

02,53

033

,111,6

09 3,

789,8

69,84

1D

ispos

als

durin

g th

e ye

ar(1

52,66

4,000

)

(

52,5

56,8

06)

(33

6,260

)

(8

87,3

69)

(14,6

31,39

8)-

--

(221

,075,8

33)

Bala

nce

at th

e en

d of

the

year

1,755

,194,8

33

694

,530,6

08

1

19,43

5,773

776

,230,9

07

1

18,38

7,748

56,00

0,000

15,9

02,53

0 33

,111,6

09 3,

568,7

94,00

8

b)A

ccum

ulat

ed D

epre

ciatio

nLa

nd B

uild

ings

Fur

nitu

re &

Offi

ceM

otor

Land

Build

ings

Mot

orTo

tal

Fitti

ngs

Equ

ipm

ent

Veh

icles

Veh

icles

Rs.

Rs.

Rs.

Rs.

Rs.

Rs.

Rs.

Rs.

Rs.

Bala

nce

at th

e be

ginn

ing

of th

e ye

ar (a

s rep

orte

d pr

evio

usly

)-

3

34,91

9,149

5

6,626

,165

464

,388,2

08

69,02

8,717

-

3,9

36,6

0926

,513,4

6095

5,412

,308

Reve

rsal

of O

ver P

rovi

sion

--

(210

,921)

(674

,054

)(7

7,399

)-

--

(962

,375)

Bala

nce

at th

e be

ginn

ing

of th

e ye

ar (r

esta

ted)

-33

4,919

,149

5

6,415

,244

463

,714,1

54

68,95

1,318

- 3,

936,6

09 26

,513,4

60 95

4,449

,933

Dep

reci

atio

n fo

r the

yea

r-

24,69

0,809

6,11

9,99

9

30,64

1,927

7

,647

,488

-92

3,421

6,453

,532

76,47

7,178

Prov

ision

mad

e /

(reve

rsed

) for

Impa

irmen

t of F

ixed

Ass

ets

- (8

7,900

,000)

--

--

--

(87,9

00,00

0)Tr

ansf

ers

--

(128

,422)

128

,422

15

,800,9

41-

-(1

5,800

,941)

-

- 27

1,709

,958

6

2,406

,821

494

,484,5

03

92,39

9,747

- 4,

860,0

30 17

,166,0

51 94

3,027

,110

Disp

osal

s du

ring

the

year

-

(4

,317

,606

)

(59,2

58)

(917

,422

)

(1

1,118

,830)

--

-(1

6,413

,116)

Tran

sfer

red

to C

ost/

Val

uatio

n (N

ote

1) -

(26

7,392

,352)

--

--

--

(267

,392,3

52)

Bala

nce

at th

e en

d of

the

year

--

62,34

7,563

493

,567,0

81

81,28

0,917

- 4,

860,0

30

17,1

66,05

165

9,221

,642

Carr

ying

am

ount

as a

t 31-

03-2

012

1,755

,194,8

3369

4,530

,608

57,08

8,210

282,6

63,82

737

,106,8

3156

,000,0

00

11,0

42,50

015

,945,5

582,9

09,57

2,365

Carr

ying

am

ount

as a

t 31-

03-2

011

1,456

,856,7

40

751

,807,5

55

61,4

09,91

5

3

07,09

3,324

38

,353,3

16 49

,000,0

00

3

6,936

,844

32

,267,6

622,7

33,72

5,356

Prop

erty

, Pla

nt a

nd E

quip

men

t has

bee

n re

valu

ed b

y qu

alifi

ed v

alue

rs in

201

1/12

fina

ncia

l yea

r.N

ote

1

As

per

SLA

S 18

Pro

pert

y, P

lant

& E

quip

men

t th

e ac

cum

ulat

ed d

epre

ciat

ion

as a

t re

valu

ed d

ate

was

eli

min

ated

aga

inst

the

gro

ss c

arry

ing

amou

nt o

f th

e bu

ild

ings

and

the

carr

ying

am

ount

rest

ated

to th

e re

valu

ed a

mou

nt.



GE

32 DEBENTURES 31-03-2012 31-03-2011Rs. Rs.

Payable within 1 Year from Balance Sheet Date - 359,759,000Payable between 1 and 5 Years from Balance Sheet Date - -Payable after 5 Years from Balance Sheet Date - -

- 359,759,000Movement during the yearBalance at the Beginning of the Year 359,759,000 373,984,000Issued during the year - -Redemptions during the year (359,759,000) (14,225,000)

Balance at the End of the Year - 359,759,000

Type of Debenture Type Interest Rates Number ofDebentures

Issue 5 11 14.00% 104,100111 14.00% 2,012,0001V 21.25% 1,481,490

Total

33 LONG TERM LOANS 31-03-2012 31-03-2011Rs. Rs.

Payable within 1 Year from Balance Sheet Date 340,381,865 457,510,113Payable between 1 and 5 Years from Balance Sheet Date 218,725,662 723,879,817Payable after 5 Years from Balance Sheet Date - -

559,107,526 1,181,389,930Movement during the year

Balance at the Beginning of the Year 1,181,389,930 868,765,401Loans obtained during the Year 297,999,797 750,000,000Repayments made during the Year (920,282,201) (437,375,471)

Balance at the End of the Year 559,107,526 1,181,389,930

34 PUBLIC DEPOSITS 31-03-2012 31-03-2011Rs. Rs.

Payable within 1 Year from Balance Sheet Date 17,276,887,362 17,645,767,831Payable between 1 and 5 Years from Balance Sheet Date 3,574,065,428 3,217,121,682Payable after 5 Years from Balance Sheet Date - -

20,850,952,790 20,862,889,513

Public Deposits comprise:Fixed Deposits -Interest Payable - at Maturity 10,277,723,984 8,875,058,398Fixed Deposits - Interest Payable - Monthly 9,031,201,343 9,430,406,745Certificate of Deposits (Note 34.1) 8,103,673 229,331,066Savings Deposits 1,533,205,740 2,327,465,079Other Deposits 718,050 628,225

Balance at the End of the Year 20,850,952,790 20,862,889,513




GE

34.1 CERTIFICATES OF DEPOSIT 31-03-2012 31-03-2011Rs. Rs.

Certificate of Deposit - Face Value 8,200,000 238,360,000Less ; Interest in Suspense (96,327) (9,028,934)

8,103,673 229,331,066

35 FINANCE LEASES 31-03-2012 31-03-2011Rs. Rs.

Total Lease Rentals Payable 59,266,587 73,653,570Less :Lease Rentals Payable after 1 year - (5,097,702)Lease Rentals Payable within I year 59,266,587 68,555,868Less : Unamortized Finance Charges on above (697,168) (2,320,588)

Net Lease Rentals Payable on above 58,569,419 66,235,280

Lease Rentals Payable between 1 to 5 years - 5,097,702Less : Unamortized Finance Charges on above - (1,217,250)

Net Lease Rentals Payable on above - 3,880,452

Total Net Lease Rentals Payable 58,569,419 70,115,732

36 TRADE AND OTHER PAYABLES 31-03-2012 31-03-2011Rs. Rs.

Payable within 1 Year from Balance Sheet Date 1,469,066,853 1,669,368,393Payable between 1 and 5 Years from Balance Sheet Date - - Payable after 5 Years from Balance Sheet Date - -

1,469,066,853 1,669,368,393

Trade and Other Payables comprise:Staff Security Deposits 989,378 989,928Value Added Tax payable 23,176,676 85,894,186Accrued Expenses and Other Charges 1,303,720,601 1,237,452,083Payable to Suppliers 45,549,395 47,690,485Advances Received on Land Sales 88,210,814 127,592,016Interest Payable on Debentures & Long-term Loans 7,419,989 169,749,696

1,469,066,853 1,669,368,393

37 STATED CAPITAL 31-03-2012 31-03-2011Rs. Rs.

Issued and Fully Paid Share Capital 4,010,180,756 4,010,180,756

31-03-2012 31-03-2011The Stated Capital comprises of: Rs. Rs.57,966,232 Issued and Fully Paid Ordinary Shares (Quoted) 1,779,662,320 1,779,662,320100,000,000 Issued and Fully Paid Non Voting Ordinary Shares (Quoted) 2,000,000,000 2,000,000,0002,453,133 Issued and Fully Paid Worker Shares (Unquoted) 24,531,330 24,531,330Share Premium 205,987,106 205,987,106

4,010,180,756 4,010,180,756




GE

31-03-2012 31-03-2011Rs. Rs.

Movement in Stated Capital during the yearBalance at the Beginning of the Year 4,010,180,756 10,180,756Shares issued during the year - 3,600,000,000

Balance at the End of the Year 4,010,180,756 4,010,180,756

38 STATUTORY RESERVE FUNDIn accordance with the Direction No. 1 of 2003 (Capital Funds) issued by the Central Bank of SriLanka, registered finance companies (RFCs) have to maintain a Reserve Fund. So long as theCapital Funds are not less than twenty five (25) percent of total deposit liabilities, a sum equalto not less than five (5) percent of the net profits, if capital funds are less than twenty five (25)percent of the deposit liabilities, but not less than ten (10) percent thereof, a sum equal to notless than twenty (20) percent of the net profit and if the capital funds are less than ten (10)percent of the total deposit liabilities, a sum equal to not less than fifty (50) percent of the netprofits is required to be transferred to the Reserve Fund.

31-03-2012 31-03-2011Rs. Rs.

Deposits Liability 20,850,952,790 20,862,889,513Capital Funds (3,864,726,548) (3,861,042,866)Capital Funds to Deposit Liability ( %) -18.53% -18.51%

Net Profit/(Loss) for the year (353,399,712) (3,830,135,175)Percentage required as per Direction No. 1 of 2003 50.00% 50.00%Amount required to be transferred to Statutory Reserve Fund - -

Amount transferred during the year to Statutory Reserve Fund - -Balance at the Beginning of the Year 659,910,000 659,910,000

Balance at the End of the Year 659,910,000 659,910,000

39 NET ASSETS PER SHAREThe Net Assets Value per Share is based on the total Net Assets at the year end divided by thenumber of Ordinary Shares outstanding during the year and calculated as follows,

31-03-2012 31-03-2011

Total Net Assets at the year end (Rs.) (3,864,726,548) (3,861,042,866)Number of ordinary shares outstanding at the year end 160,419,365 160,419,365Net Asset per Share (Rs.) (24.09) (24.07)




GE


40M

ATU

RIT

Y A

NA

LYSI

SLe

ss t

han

Betw

een

Betw

een

Mor

e th

anT

otal

as

atT

otal

as

at1

Year

1 to

3 Y

ears

3 to

5 Y

ears

5 Ye

ars

31-0

3-20

1231

-03-

2011

(Res

tate

d)In

tere

st E

arni

ng A

sset

sR

s.R

s.R

s.R

s.R

s.R

s.

Inve

stm

ents

in

Gov

ernm

ent

Secu

ritie

s-

--

--

730,

000,

000

Inve

stm

ents

in

Dep

osits

with

Ban

ks13

7,13

9,68

6-

--

137,

139,

686

111,

410,

810

Inve

stm

ents

in

Hir

e Pu

rcha

se1,

178,

897,

258

2,1

14,4

57,2

28 4

29,0

86,8

1019

,786

,627

3,74

2,22

7,92

32,

626,

086,

655

Inve

stm

ent

in L

ease

s22

0,75

9,86

450

8,57

2,19

327

6,89

6,48

058

,769

,180

1,06

4,99

7,71

792

6,82

3,02

5Ea

sy P

aym

ents

Loa

ns o

n La

nds

535,

242,

297

542,

691,

730

304,

103,

954

382,

054,

510

1,76

4,09

2,49

11,

963,

442,

881

Hou

sing

Loa

ns13

9,16

1,09

920

6,63

7,23

012

6,22

2,58

314

1,92

0,54

761

3,94

1,45

982

9,55

1,82

3Lo

ans

on F

ixed

Dep

osits

520,

464,

548

--

-52

0,46

4,54

852

6,68

0,41

7R

elat

ed C

ompa

ny L

endi

ng -

886,

277,

927

--

886,

277,

927

985,

970,

547

Oth

er L

oans

and

adv

ance

s1,

153,

098,

217

93,8

93,7

2228

,028

,900

37,2

00,9

641,

312,

221,

803

1,68

8,62

1,69

7

3,88

4,76

2,96

94,

352,

530,

030

1,16

4,33

8,72

763

9,73

1,82

810

,041

,363

,554

10,3

88,5

87,8

55N

on-I

nter

est E

arni

ng A

sset

sC

ash

in H

and

19,8

26,1

02-

--

19,8

26,1

0217

,232

,949

Bala

nces

with

Ban

ks31

1,99

4,26

4-

--

311,

994,

264

222,

234,

515

Inve

stm

ents

in

Dea

ling

Secu

ritie

s10

2,27

9,70

0-

--

102,

279,

700

84,6

12,8

69In

vest

men

ts i

n R

eal

Esta

te1,

912,

399,

148

--

-1,

912,

399,

148

3,77

1,52

7,26

6H

ousi

ng P

roje

cts

1,83

4,11

6,13

0-

--

1,83

4,11

6,13

01,

880,

911,

786

Oth

er R

ecei

vabl

es1,

003,

973,

065

260,

500,

758

--

1,26

4,47

3,82

334

2,00

8,42

3In

vest

men

t Pr

oper

ties

--

-1,

524,

276,

295

1,52

4,27

6,29

51,

692,

285,

090

Inve

stm

ent

Secu

ritie

s-

--

29,4

67,2

3929

,467

,239

107,

779,

124

Def

erre

d Ta

x A

sset

s-

47,

806,

321

47,8

06,3

2195

,612

,643

191,

225,

285

191,

225,

285

Prop

erty

, Pl

ant

and

Equi

pmen

t -

--

2,90

9,57

2,36

52,

909,

572,

365

2,73

3,72

5,35

6C

apita

l W

ork

in P

rogr

ess

1,50

0,00

0-

--

1,50

0,00

02,

091,

582

5,18

6,08

8,40

830

8,30

7,07

947

,806

,321

4,55

8,92

8,54

210

,101

,130

,351

11,0

45,6

34,2

45T

otal

Ass

ets

9,07

0,85

1,37

74,

660,

837,

110

1,21

2,14

5,04

85,

198,

660,

370

20,1

42,4

93,9

0521

,434

,222

,100

Perc

enta

ge45

.03%

23.1

4%6.

02%

25.8

1%10

0.00

%10

0.00

%In

tere

st B

eari

ng L

iabi

liti

esD

eben

ture

s-

--

--

359,

759,

000

Long

-ter

m L

oans

340,

381,

865

164,

044,

246

54,6

81,4

1555

9,10

7,52

61,

181,

389,

930

Publ

ic D

epos

its17

,276

,887

,362

1,11

9,36

4,99

72,

454,

700,

431

-20

,850

,952

,790

20,8

62,8

89,5

13Le

ase

Cre

dito

rs58

,569

,419

--

-58

,569

,419

70,1

15,7

32Sh

ort-t

erm

Bor

row

ings

20,3

50,0

00-

--

20,3

50,0

0017

8,42

6,60

7Ba

nk O

verd

rafts

325,

752,

893

--

-32

5,75

2,89

320

1,10

7,20

318

,021

,941

,539

1,28

3,40

9,24

32,

509,

381,

846

-21

,814

,732

,629

22,8

53,6

87,9

85N

on-I

nter

est

Bea

ring

Lia

bili

ties

Inte

rest

Pay

able

on

Publ

ic D

epos

its44

9,91

3,39

347

,450

,213

219,

670,

959

-71

7,03

4,56

576

5,80

7,34

8Tr

ade

and

Oth

er P

ayab

les

1,46

9,06

6,85

3 -

--

1,46

9,06

6,85

31,

669,

368,

393

Unc

laim

ed D

ivid

end

6,38

6,40

6-

--

6,38

6,40

6 6

,401

,240

Shar

ehol

ders

’ Fu

nds

-(3

,864

,726

,548

)-

- (

3,86

4,72

6,54

8)(3

,861

,042

,866

)1,

925,

366,

653

(3,8

17,2

76,3

35)

219,

670,

959

-(1

,672

,238

,724

)(1

,419

,465

,885

)T

otal

Lia

bili

ties

19,9

47,3

08,1

92(2

,533

,867

,092

)2,

729,

052,

805

-20

,142

,493

,905

21,4

34,2

22,1

00

Perc

enta

ge99

.03%

-12.

58%

13.5

5%0.

00%

100.

00%

100.

00%



GE

41 SEGMENTAL INFORMATION Interest Incom Other Operating Income Other Income

2011/12 2010/2011 2011/12 2010/2011 2011/12 2010/2011

Rs. Rs. Rs. Rs. Rs. Rs.

Real Estate - 470,941,949 50,480,023 - -

Hire Purchase 867,932,207 1,004,264,174 - - - -

Leases -Vehicle & Properties 142,281,663 185,933,476 - - - -

Easy Payment Loans on Lands 357,174,462 183,645,865 - - - -

Housing Loans 117,576,745 144,353,324 - - - -

Non Segmental 518,436,080 582,865,787 227,104,458 151,536,376 (24,998,300) 170,674,373

Total 2,003,401,157 2,101,062,625 698,046,407 202,016,399 (24,998,300) 170,674,373

Assets

31-03-2012 31-03-2011

Real Estate 3,746,515,278 5,652,439,052

Hire Purchase 3,742,227,923 2,626,086,655

Leases -Vehicle & Properties 1,064,997,717 926,823,025

Easy Payment Loans on Lands 1,764,092,491 1,963,442,881

Housing Loans 613,941,459 829,551,823

Non Segmental 9,210,719,037 9,435,878,664

20,142,493,905 21,434,222,100

Note: Depreciation, Capital expenditure and Liabilities cannot be segmented




GE

42BA

NK

LO

AN

S A

ND

OV

ERD

RA

FTS

Bank

loan

s an

d ov

erdr

afts

are

sec

ured

by

land

s an

d bu

ildin

gs a

nd r

eal e

stat

e pr

ojec

ts o

f the

Com

pany

.

Ass

ets

pled

ged

as s

ecur

ity

for

the

faci

litie

s ob

tain

ed b

y th

e C

ompa

ny

Am

ount

utili

zed

Nat

ure

of F

acili

ty(R

s m

n)Le

ndin

g In

stitu

tion

Inte

rest

Rat

eN

atur

e of

Ass

et p

ledg

e as

sec

urity

Term

Loa

ns12

.25

Com

mer

cial

Ban

kA

WPL

R+2.5

%In

vest

men

t Pro

pert

y am

ount

ing

to R

s. 14

3.0

mill

ion.

Term

Loa

ns13

7.65

Seyl

an B

ank

16%

- 17

%Re

al E

stat

e Pr

ojec

ts a

mou

ntin

g to

Rs:

302.

8 m

illio

n.In

vest

men

t Pro

pert

ies

amou

ntin

g to

Rs:

55.5

mill

ion

Leas

ed P

rope

rtie

s am

ount

ing

to R

s: 10

1.0

mill

ion

Term

Loa

ns47

.06

DFC

C B

ank

AW

PLR+

2.5%

Free

hold

Lan

d &

Bui

ldin

g am

ount

ing

to R

s. 48

0.0

mill

ion

Term

Loa

ns70

.00

Way

amba

Co-

oper

ativ

e Ru

ral B

ank

Uni

on L

td.

21%

Real

Est

ate

Proj

ects

am

ount

ing

to R

s.80.

0 m

illio

n.In

vest

men

t Pro

pert

ies

amou

ntin

g to

Rs:

42.0

mill

ion.

Term

Loa

ns86

.69

Cen

tral

Ban

k of

Sri

Lan

ka4%

Non

eSe

curit

izat

ion

Loan

222.

48D

eusc

he B

ank

12.5

% -

13%

Hire

Pur

chas

e Pl

an (H

PP) R

ecei

vabl

esPe

rman

ent O

verd

rafts

-Ba

nk o

f Cey

lon

13%

Free

hold

Lan

d &

Bui

ldin

g am

ount

ing

to R

s. 43

.0 m

illio

n,Pe

rman

ent O

verd

rafts

49.7

8C

omm

erci

al B

ank

AW

PLR+

3.5%

Free

hold

Lan

d &

Bui

ldin

g am

ount

ing

to R

s. 34

4.7

mill

ion.

Perm

anen

t Ove

rdra

fts-

Hat

ton

Nat

iona

l Ban

kPL

R+2%

Free

hold

Lan

d &

Bui

ldin

g am

ount

ing

to 3

3.3

mn.

Real

est

ate

proj

ects

am

ount

ing

to R

s. 10

.6 m

illio

n.Pe

rman

ent O

verd

rafts

-Se

ylan

Ban

k16

%Fr

eeho

ld L

and

& B

uild

ing

amou

ntin

g to

Rs.

239.

2 m

illio

n.




GE

43 RELATED PARTY TRANSACTIONSThe Directors of the Company were also directors of the following companies. The Companyhas entered into the following transactions during the financial year.

Name of Company Names of Directors Nature of Transactions

Commercial Bank of Ceylon PLC M P Jayawardena Permanent overdraft facility - Rs. 169.5mn.Facility used at year end - Rs.49.8mn.Overdraft interest paid - Rs.5.7mn.Payment relating to disbursement of a Hirepurchase Investment - 0.8mn.

Brown & Company PLC A.L. Devasurendra Payments relating to disbursement ofinvestments - Rs.21.2mn.Payments relating to servicing, maintenanceof Generators, office equipments - Rs. 1.5mn.

Browns Investment PLC A.L. Devasurendra Proceeds from sale of land - Rs.32.2mn.Proceeds from sale of property - Rs.102mn.

Seylan Bank PLC R.Nadarajah Permanent overdraft facility - Rs. 110.95mn.Facility used at year end - Rs. Nil

A.L. Devasurendra Overdraft interest paid - Rs.2.4mn.Lease rentals paid amounting Rs.9.5mn.Loan obtained - Rs.350.0mn.Loans settlement - Rs.350.0mn.Loan interest paid - Rs.71.7mn.Call deposit as at the year end - Rs.116.0mn.Interest received on Call Deposit for the year- Rs.8.6 mn.

Ceylinco Leisure (Pvt) Limited K.J.Yatawara Advance paid to purchase Land - Rs: 3.0 mn.Deposit made - Rs. 0.67 mn.

Free Lanka Capital Holdings Ltd. A.L. Devasurendra Purchase of Ordinary shares by TFC-Rs. 7.1mn.

Taprobane Securities (Pvt) Ltd. D.G. Wijemanna Brokerage on share transactions paid by(Resigned) TFC -Rs. 0.7mn.

Transactions with Related Parties in the ordinary course of business were at arm’s length basis.

43.1 Transactions with Key Management Personnel (KMP)Key management personnel are those who have authority and responsibility directly orindirectly for planning, directing and controlling the activities of the company.The KMP comprise of the Board of Directors of the company.

43.1.1. The Compensation of KMPThe compensation of the KMP is disclosed in Note 16 to the financial statements.

43.1.2 There were no long term, post employment, terminal or share based paymentsmade to the KMPs’ during the year.

43.1.3 No loans were given to KMPs’ during the year.

43.1.4 The names of Directors of the company who are also Directors of other companies withwhich the company had transactions during the year are given above with details ofsuch transactions.




GE

43.2 Transactions with close family members of KMPSThere were no transactions with close family members of KMPs’ during the year.

43.3 Dealings with Subsidiaries, Associates and Joint VenturesThere were no transactions with subsidiaries, associates and joint ventures during the year.

44 EVENTS AFTER THE BALANCE SHEET DATEThere are no material transactions which took place during the period up to date of AuditorsReport which require disclosure in or adjustment to these financial statements.

45 COMMITMENTS AND CONTINGENT LIABILITIES

45.1 Litigation against the CompanyIn the opinion of the Directors, litigations which currently are against the Company, are relatedto the normal course of the business and will not have a significant impact on the reportedfinancial results or future operations of the Company.

45.2 Guarantees issuedAs at 31st March 2012 there were guarantees issued by the Company in the normal course ofbusiness on behalf of customers to third parties secured by the customer deposits amountingto Rs 28,875,000.

45.3 Penalty on late payment of taxesDue to inability to make correct assessment no provision is made for penalties if any on taxpayments made under payment plans which may arise after the settlement of the arrears.

46 GOING CONCERN ASSUMPTIONThe Directors resolved in November 2009 to continue the operations of the Company despitethe significant loss of capital and this was approved at a shareholders meeting held in thisregard in December 2009.

Accordingly these financial statements have been prepared under the going concernassumption.The Directors are confident of being able to obtain sufficient funding to continuethe business in the foreseeable future.

47 RETIREMENT BENEFIT OBLIGATIONS 2011/12 2010/11Rs. Rs.

47.1 Gratuity Trust Fund 325,704,244 570,466,544Company’s contribution to the Gratuity Fund for the year - -

The actuarial valuation of the gratuity liability was estimated as Rs. 313,443,560 as at 31stMarch 2012 (most recent valuation). The valuation was carried out by professionally qualifiedactuaries M/s. Actuarial & Management Consultants (Pvt) Ltd. The valuation method usedby the actuaries for the value the fund is the “Projected Unit Credit Method”, the benchmarkmethod recommended in SLAS 16 (Revised 2006).

The principle assumption used in the valuation are as follows:

* Mortality - A 67/70 Mortailty Table* Gross Interest Rates - 10.5%* Salary escalation rate - 10%* Withdrawal rate - 18% up to age 49 and thereafter zero.




GE


47.2 Contribution to Pension Fund 2011/12 2010/11Rs. Rs.

Annual Contribution (30,627,203) 1,565,651

The above fund was managed under the conditions of Trust Deed No.7358.

However, the management of the above Pension Fund has been handed over to The FinanceCompany PLC and the seven (07) beneficiaries of the fund have consented to receive a lump-sum payment totaling to Rs.18.8mn, hence the overprovision made in the previous years hasbeen reversed.

48 CAPITALIZATION OF BORROWING COSTThe Company capitalized its borrowing cost on land projects at the rate of 15% p.a. amountingto Rs. 7,664,451 (Rs. 738,105 for the year 2010/11).

49 The Company has been unable to comply with following directions issued by the CentralBank of Sri Lanka under the provisions of the Finance Business Act No. 42 of 2011.

Direction No. 01 of 2003

a). Every finance company shall maintain capital funds which shall not at anytime be lessthan ten (10%) percent of the total deposit liability. The company’s capital funds to totaldeposit liability as at 31st March 2012 was negative 18.53%.

b). A sum equal to not less than 50% of the profit should be transferred to the Reserve Fundwhere the capital funds are less than 10% of the deposit liability. As the Company hasincurred a net loss of Rs. 353,399,712/-, no transfer has been made during the year underreview, which is more fully described in Note 38 to the financial statement.


Every finance company is required to maintain its capital at a level not less than 10 percentof its risk weighted assets with core capital constituting not less than 5% of its risk weightedasset. The reference ratios of the Company were negative 30.81%and negative 30.92% res-pectively as at 31st March 2012.

Direction No. 1 of 2009a). Every finance company shall maintain a minimum holding of liquid assets equal to 10%

of the time deposit and certificate of deposit and 15% of the Savings deposit whereas theliquid assets of the Company as at 31st March 2012, was Rs. 338,944,859/- against therequirement of Rs. 2,161,765,199/-.

b). Every finance company shall maintain assets in the form of Sri Lanka GovernmentTreasury Bills, Sri Lanka Government Securities and Central Bank of Sri Lanka Securitiesequivalent to seven and half (7.5%) percent of the average of its month end total depositliabilities of the twelve months of the preceding financial year, but actual was Rs. Nilagainst the requirement of Rs. 1,563,821,459/-.

Direction No 3 of 2009

During the restructuring period a beneficiary finance company shall, recover at least 50%dues from related parties, which has not been complied with by the Company.



GE


Every finance company should continue to maintain an unimpaired core capital at a level notless than Rs. 200 million until end December 2012. The minimum core capital as at year endwas Rs. 3,864,726,548/- negative.

Central Bank Direction No: 24/02/005/0021/003

Absorbing investor liabilities of The Finance Property Fund Company Limited (TFPF) and TFCHomes (Pvt) Ltd (TFCH) to The Finance Company PLC (TFC)

One of the conditions stipulated by the Monetary Board of the Central Bank of Sri Lanka withregard to the above absorption is that the recovering of 75 percent of the total emolumentsreceived by each director of TFPF and TFCH from inception to date (8th September 2009) toTFC as a means of meeting the deficiency in assets to meet liabilities transferred to TFC, whichcondition has not been complied by the Directors.

50 QUICK ASSETS VS CURRENT DEPOSIT AND DEBT LIABILITIES

Receivable within one year Rs.

Hire purchases 1,178,897,258Leases - vehicles & property 220,759,864Easy payment loans on lands 535,242,297Housing Loans 139,161,099Cash & Bank Balances 468,960,052Loans on Fixed Deposits 520,464,548Other Loans and Advances 1,153,098,217Other Non Interest Earning Assets 4,854,268,042

9,070,851,377

Payable within one year

Long Term Loans 340,381,865Public Deposits 17,276,887,362Lease Creditors 58,569,419Short-term Borrowings 346,102,893Non Interest Bearing Liabilities 1,925,366,654

19,947,308,192

Shortfall (10,876,456,816)

In the opinion of the Directors more than 80% of the public deposits placed for a term of oneyear or less are renewed for a further term.




GE

51. List of ValuersThe Company has revalued its freehold lands and buildings as at 31st March 2012 by thefollowing professional qualified and independant valuers, applying the comparison and incomemethods.

Valuer's Name Qualification Registered Address

Mr. A.B.M. Gunadasa Chartered Real Estate "Udayanga", Elagawatta, BabuwitaConsultant Thihagoda.

Mr. A.V.U. Wasantha Incorporated Valuer Valuation Department,Eastern Regional OfficeBar Road, Baticaloa.

Mr. J.C. Weerakoon Incorporated Valuer No. 8C/2, Kailagoda Road,Badulla.

Mr. W. M. Punchibanda Incorporated Valuer No. 51/3, Pepiliyana Road,Gangodawila, Nugegoda.

Mr. M.A. Kumarakulasingham Incorporated Valuer No. 286, (86), KachcheriNallur Road, Jaffna.

Mr. L.H. Ranepura Chartered Real Estate No. 56, Welikadamulla Road,Consultant Mabole, Wattala.

Mr. Sarath G. Fernando Incorporated Valuer Franklands, Wattegama.

Mr. N.U.W. St. G. Perera Chartered Engineer 182/1, Enderamulla, Wattala.

Mr. D. Mudunkothge Licenced Valuer No. 9, Near Children's Home,New Town, Polonnaruwa.

M/s Daniel & Son Incorporated Valuer No. 6, Chithra Road,Kirula Road, ThimbirigasyayaColombo 5.

Mr. C. Wellappili Incorporated Valuer No. 55/4, Kossinnawatta Road,Katuwawala, Boralesgamuwa.

Mr. K.R.N. Jayawardana Incorporated Valuer Valuation DeparmentNo. 602/6, Colombo Road,Rathnapura.




GE

INVESTMENT PROPERTIES

Plan No. Lot Nos Extent Number of Land Buildings

Divulpitiya Road, Pepiliyana,Nugegoda 2007 A2-R0-P31.38

No. 42, Uyan Watte, Polgolla,Kandy 2521 1 A0-R0-P29.64 13 A1-R0-P37.6 16 A1-R1-P27.24 29 A0-R0-P25.68 1

Bandarawatte, Gampaha 3643 A2-R0-P6.9

Maholawe, Bopitiya, Pannala 3749 1 A14-R2-P33 12 A0-R1-P153 A0-R1-P15

395 A15-R3-P11

Bulugahatanne,Hewapola,Kurunegala 1109A Lot A A21-R1-P20.9 61109A Lot B A0-R0-P30.1

Aluthwatte, Kadirana ,Negombo 3821 A8-R0-P0 1

No.29/24,29/24 1/1,29/24 2/1,29/24 3/1, 909A Lot A A0-R0-P8.7Vishaka Road ,Colombo 4

3/3, Maragahawana, Thotawatta Rd. 1629 Lot A A1-R0-P25 3Paragahatota, Wellaboda,Ambalangoda

Juwananwatta,Watugedara, 1182 Lot A A0-R3-P32 2Wellaboda , Ambalangoda

Madinagewatta, Sapumal Pedesa, 4141 Lot A A0-R0-P16Kumbalwalla, Galle.

Wewelkanaththe Watta,Henegama,Horana 362/2005 A1-R2-P26.5Horana 125/2004 A0-R0-P5

Anwalaowita, Marapone, Kegalle 3958 Lot 1 A2-R1-P12 5

Godwilahena, Kanadulla, Kuliyapitiya 3379A A0-R3-P0 4

DambugahawattaNagahawatta, 2183 Lot 1 A0-R3-P29.25Hokandara North, Kaduwela Lot 3 A0-R3-P29.25

Muhandiramge Watta,Batugedera,Ratnapura 2878 A0-R0-P5.282352 A0-R0-P10.25

Kuruduhena, Batugedara,Ratnapura 1342 A4-R3-P30 5

Bowatta Eatate,Mudukotuwa,Warawila,Wenappuwa 520B A5-R0-P0 1

Wennappuwa 1164 Lot 9 A0-R0-P14.5 Lot 8 A0-R0-P15



GE

a) Shareholder Analysisi) Ordinary Voting Shares (Quoted)

31st March 2012 31st March 2011

Value Bands No of No of % No of No of %

holders Shares holders Shares

1-1000 shares 9376 1,743,170 3.007 10,357 2,285,147 3.94

1001-10000 shares 787 2,540,612 4.383 1,199 3,942,476 6.80

10001-100000 shares 141 3,855,883 6.652 204 5,478,967 9.45

100001-1000000 shares 27 6,616,996 11.415 24 6,062,634 10.46

over 1000001 shares 11 43,209,571 74.543 9 40,197,008 69.35

Total 10342 57,966,232 100.00 11,793 57,966,232 100.00

ii) Resident /Non-Resident – Ordinary Voting Shares(Quoted) 31st March 2012 31st March 2011

Type No of No of % No of No of %holders Shares holders Shares

Resident 10,281 57,449,480 99.11 11,722 57,377,405 98.98 Non-Resident 61 516,752 0.89 71 588,827 1.02 Total 10,342 57,966,232 100.00 11,793 57,966,232 100.00

iii)Individuals/Institutions – Ordinary Voting Shares (Quoted)

31st March 2012 31st March 2011 Type No of No of % No of No of %


Company 174 41,460,185 71.52 199 31,836,788 54.92

Individuals 10,168 16,506,047 28.48 11,594 26,129,444 45.08

Total 10,342 57,966,232 100.00 11,793 57,966,232 100.00

SHAREHOLDERS INFORMATION

b) Shareholder Analysisi) Ordinary Non-Voting Shares (Quoted)

31st March 2012 31st March 2011

Value Bands No of No of % No of No of %


1-1000 shares 1,181 696,729 0.697 912 548,200 0.55

1001-10000 shares 2926 12,761,579 12.762 2,736 12,108,700 12.11

10001-100000 shares 1586 49,372,859 49.373 1,618 50,151,700 50.15

100001-1000000 shares 140 30,118,683 30.119 149 33,270,700 33.27

Over 1000001 shares 5 7,050,150 7.050 3 3,920,700 3.92

Total 5838 100,000,000 100.00 5,418 100,000,000 100.00



GE

ii) Resident /Non-Resident – Ordinary Non Voting Shares



Resident 5,828 98,456,790 98.46 5,413 99,894,000 99.89

Non- Resident 10 1,543,210 1.54 5 106,000 0.11

Total 5,838 100,000,000 100.00 5,418 100,000,000 100.00

iii) Individuals/Institutions - Ordinary Non Voting Shares


holders Shares holders Shares Company 57 6,549,801 6.55 26 3,447,700 3.45 Individuals 5781 93,450,199 93.45 5,392 96,552,300 96.55 Total 5,838 100,000,000 100.00 5,418 100,000,000 100.00

c) Twenty Major Shareholders i) Ordinary Voting Shares (Quoted)

31st March 2012 31st March 2011No Name of Share Holder No of % on No of % on

Shares voting Shares votingShares Shares

1 National Development Bank/T. Senthilverl 7,124,900 11.79 — —2 Ceylinco Investment Company Ltd 6,670,230 11.04 6,670,230 11.043 Seylan Bank PLC / Thirugnanasambandar Senthiverl 5,374,700 8.90 3,920,900 6.494 Employee Provedent Fund 5,091,200 8.43 4,497,600 7.445 Seylan Bank PLC-Account No. 3 4,497,600 7.44 4,497,600 7.446 Bank of Ceylon A/C-Ceybank Unit Trust 3,445,463 5.70 — —7 Mr. D G Wijemanne 2,900,000 4.80 — —8 Mr. A S R Silva 2,900,000 4.80 — —9 Peoples Bank 2,080,400 3.44 2,500,000 4.1410 Ceylinco Insurance PLC A/C No.2 (General Fund) 1,875,078 3.10 1,875,078 3.1011 Browns Investments PLC 1,250,000 2.07 1,250,000 2.0712 Mr. N Perera 669,700 2.07 — —13 Mr. A A Y Perera 667,700 1.11 — —14 Mr. J L B Kotelawala 526,427 0.87 526,427 0.8715 Mr. J W M J P K Ratnayake 460,000 0.76 460,000 0.7616 Commercial Bank of Ceylon PLC/Devi Holdings (Pvt) Ltd. 456,940 0.76 50,300 —17 Mr. M M C J Fernandopulle 405,000 0.67 405,000 0.6718 Thurston Investments Limited 300,000 0.50 228,000 0.3819 Mr. A Sithampalam 228,492 0.38 332,592 0.5520 Life Insurance Corporation (Lanka) Ltd 215,000 0.36 212,400 0.35




GE

ii) Non-Voting Ordinary Shares (Quoted)

31st March 2012 31st March 2011No Name of Share Holder No of % on No of % on

Shares Non-voting Shares Non-votingShares Shares

1 M/s Bishop of Galle 1,974,800 1.97 1,974,800 1.972 T D R Karunaratne 1,645,900 1.65 1,645,900 1.653 Mrs A B Kundanmal 1,250,000 1.25 1,250,000 1.254 Mrs P S A V Perera 1,111,100 1.11 1,024,,800 1.025 Bank of Ceylon A/C-Ceybank Unit Trust 1,068,350 1.07 — —6 M Gunadasa 853,300 0.85 853,300 0.857 W N K Waduge 646,500 0.65 646,500 0.658 I H Jafferjee 645,400 0.65 634,100 0.639 S Ranaweera 579,800 0.58 579,800 0.5810 D Rajeshwaran 573,800 0.57 573,800 0.5711 H R Francis 568,500 0.57 — —12 C Siluvaithasan 537,500 0.54 537,500 0.5413 P Vishvalingam 500,000 0.50 500,000 0.5014 K B Wanigasekara 482,000 0.48 482,000 0.4815 R D Costa 475,000 0.48 475,000 0.4816 M R T Johar 440,900 0.44 440,900 0.4417 T A R Dayananda 422,700 0.42 422,700 0.4218 Rev. K D Joseph 404,200 0.40 — —19 K A Ediriweera 400,000 0.40 400,000 0.4020 W A A Silva 398,700 0.40 661,100 0.66




GE

Rs. ‘000BALANCE SHEET - AS AT 31-Mar-03 31-Mar-04 31-Mar-05 31-Mar-06 31-Mar-07 31-Mar-08 31-Mar-09 31-Mar-10 31-Mar-11 31-Mar-12

Assets

Bank and Cash Balances 208,709 213,748 401,379 593,844 896,559 868,260 502,889 398,665 239,467 331,820Inv. In T/Bills & FD’s 1,583,491 1,811,581 1,957,626 2,389,436 2,702,192 3,878,532 994,177 31,620 841,411 137,140Dealing Securities 4,855 5,814 7,034 2,312 2,312 556 141 35,642 84,613 102,280Inv. Real Estate & Houshng 1,934,405 1,822,602 2,113,603 2,957,778 3,351,647 5,766,999 6,342,426 6,860,313 5,652,439 3,746,515Loans & Advance 4,182,152 6,037,784 8,980,375 12,427,849 16,989,565 18,913,435 17,017,248 10,286,595 7,444,363 8,446,628Investment in Leases 3,395,947 3,828,518 3,047,557 2,605,626 2,138,855 1,633,490 1,049,765 546,164 325,157 571,318Amount due from Customers 1,084,647 1,020,816 953,177 662,493 1,202,545 1,421,712 1,639,334 1,420,601 791,686 792,605Other Receivable 649,687 605,459 721,824 1,044,200 1,055,171 2,755,560 3,539,059 1,910,806 1,327,979 1,358,147Investments Securities 374,521 384,052 390,966 398,966 436,751 479,600 371,390 229,531 107,779 29,467Investment Properties - - 290,397 437,286 774,353 1,293,945 1,414,119 2,146,291 1,692,285 1,524,276Capital Work in Progress 26,647 6,470 - - 62,934 58,127 67,070 42,867 2,092 1,500Deferred Tax Asset - - - - - 191,225 191,225 191,225 191,225 191,225Property, Plant and Equipment 1,070,472 1,226,355 1,311,750 1,563,516 1,861,807 2,892,942 3,575,709 3,195,938 2,733,725 2,909,572

Total Assets 14,515,535 16,963,200 20,175,688 25,083,306 31,474,690 40,154,383 36,704,551 27,296,260 21,434,222 20,142,494

Liabilities

Debentures 269,609 511,433 533,494 286,893 533,564 514,477 488,457 373,984 359,759 -Long-term Loans 617,737 592,735 778,550 1,640,158 1,269,430 1,167,113 987,639 868,765 1,181,390 559,108Public Deposits 10,170,871 11,661,049 13,486,676 17,190,235 21,824,382 28,575,643 27,065,133 25,747,255 20,862,890 20,850,953Creditors 1,733,664 2,333,439 3,022,178 3,288,395 4,123,113 5,024,024 4,689,572 3,205,103 2,683,718 2,265,021Taxation 65 65 65 20,065 95,065 51,851 - - - -Unclaimed Dividend 2,147 2,437 2,842 3,301 3,943 4,660 5,513 6,403 6,401 6,386Bank Overdraft 427,651 451,074 719,958 473,837 718,973 789,798 1,990,230 659,167 201,107 325,753

Total Liabilities 13,221,744 15,552,232 18,543,763 22,902,884 28,568,470 36,127,566 35,226,545 30,860,677 25,295,265 24,007,220

Shareholders’ funds

Stated Capital 410,181 410,181 410,181 410,181 410,181 410,181 410,181 410,181 4,010,181 4,010,181Capital Reserves 458,020 458,020 458,020 450,853 450,853 945,586 996,930 946,305 946,305 1,296,021Statutory Reserve Fund 168,960 192,260 242,760 359,760 527,310 659,910 659,910 659,910 659,910 659,910Revenue Reserves 257,730 350,507 520,964 959,628 1,517,876 2,011,140 (589,015) (5,580,813) (9,477,439) (9,830,838)Less: Deferred Revenue Expenses (1,100) - - - - - - - - -

1,293,791 1,410,968 1,631,925 2,180,422 2,906,220 4,026,817 1,478,006 (3,564,417) (3,861,043) (3,864,727)

Total Liabilities & Shareholders fund 14,515,535 16,963,200 20,175,688 25,083,306 31,474,690 40,154,383 36,704,551 27,296,260 21,434,222 20,142,494

Net Assets Value per Share (Rs.) 63.36 69.10 79.92 106.78 142.33 197.21 72.38 (174.56) (24.07) (24.09)

INCOME STATEMENT

For the year 2002/03 2003/04 2004/05 2005/06 2006/07 2007/08 2008/09 2009/10 2010/11 2011/12

TURNOVER - net 3,821,696 5,904,717 7,136,045 7,888,689 10,986,561 11,306,845 10,640,478 5,204,000 2,985,939 4,689,362

Interest Income 1,879,483 2,137,571 2,498,964 3,436,473 4,513,473 5,721,382 6,697,488 3,804,053 2,101,063 2,003,401Interest Expenses (1,601,872) (1,735,674) (1,804,115) (2,071,173) (2,744,422) (4,251,079) (6,623,611) (4,815,710) (3,080,449) (2,456,340)

Net Interest Income 277,611 401,897 694,849 1,365,300 1,769,052 1,470,303 73,877 (1,011,657) (979,387) (452,939)Other Operating Income 524,570 682,407 772,096 904,262 1,497,080 1,268,641 664,210 256,634 202,016 698,046Other Income / (Expense) 19,502 37,556 33,856 36,358 98,138 495,935 246,857 221,052 170,674 (24,998)Total Operating Income 821,683 1,121,860 1,500,801 2,305,920 3,364,270 3,234,879 984,944 (533,971) (606,696) 220,110Operating Expenses (644,109) (804,437) (946,840) (1,454,326) (2,065,563) (2,539,681) (2,913,302) (3,158,108) (3,235,033) (838,731)Net Profit/(Loss) before Prov. for Loan Losses 177,574 317,423 553,961 851,594 1,298,707 695,198 (1,928,358) (3,692,080) (3,841,729) (618,621)Provision for Loan Losses (104,862) (201,346) (302,098) (248,384) (461,153) (191,472) (635,043) (593,858) 11,594 265,222Net Profit/(Loss) before Prov. for Taxation 72,712 116,077 251,863 603,210 837,553 503,726 (2,563,401) (4,285,937) (3,830,135) (353,400)Provision for Income Taxation - - - (20,000) (75,000) 158,893 - - - -Profit/(Loss) for the year 72,712 116,077 251,863 583,210 762,553 662,619 (2,563,401) (4,285,937) (3,830,135) (353,400)

Earnings per Share (Rs.) 3.56 5.68 12.33 28.56 37.34 32.45 (125.54) (209.90) (87.54) (2.20)

TEN YEAR SUMMARY



GE

BANDARAWELANo.501, Badulla Road,Tel : No 057-2224866Fax No : 057-2232053Email :[email protected]

BATTICALOANo.211, Trincomalee Road,Tel : No 065-2222521Fax No : 065-2222896Email –[email protected]

CHILAWNo. 53A, Puttalam Road,Tel : No 032-2222269Fax No : 032-2223443Email –[email protected]

DAMBULLANo. 689, Anuradhapura Road,Tel : No 066-2283183Fax No : [email protected]

EMBILIPITIYANo. 59, Main Street,,Tel : No 047-2230159/2230990Fax No : [email protected]

GALEWELANo.59,Kalawewa Road,Tel No.066- 2288115Fax No: 066-2288115Email- [email protected]

GALLENo. 28, Havelock Road,Tel : No 091-2232166/2234166Fax No : [email protected]

GAMPAHANo. 99, Bauddhaloka MawathaTel : No 033-2226572/2227888/Fax No : [email protected]

ALAWATHUGODANo.809,Matale Road,Alawathugoda.Tel No.066 -2243308Fax No;066-2243308Email – [email protected]

AMBALANTOTANo. 123, Main Street,Tel : No 047-2223210/ 2223842/ 2223843Fax No : 047-2223136Email – [email protected]

AMPARANo. 120, D.S. Senanayaka Mawatha,Tel : No 063-2222326/2222669/ 2223070Fax No : 063-2223135Email – [email protected]

ANURADHAPURANo. 249/1A, Maithripala SenanayakeMawatha,Tel : No 025-2222443/0254-581107Fax No : 025-2221379Email – [email protected]

AVISSAWELLANo.73, Ratnapura RoadTel : No 036-2222216/2222820/2230117Fax No : 036-2231071Email –[email protected]

BADULLANo.7-9, Ward Street,Tel No.055-2222557/2222682/2223982Fax No : 055-2223149Email –[email protected]

BADURALIYANo 38 Rathnapura Road,Tel No -034-2241066Fax No: 034-2241066Email –[email protected]

BALANGODANo.119, Barnes Rathwatta Mawatha,Tel : No 045-2288877/045-4922600Fax No : 045-2286561Email –[email protected]

BRANCH NETWORK

HAPUTALENo. 166/1, 168/1,Dambethenna Road,Tel No. 057-2268344Fax No: [email protected]

HINGURAKGODANo.23,Air Port Road,Tel No.- 027-2245290Fax No: [email protected]

HOMAGAMANo 96/2, High level RoadTel : No 2893177/2893178/4541685/4541686/4541687Fax No : [email protected]

HORANANo. 141-D, Ratnapura Road,Tel : No 034-2261400/ 2260913/2260914/2260122Fax No : [email protected]

JA-ELANo.159/A, Colombo RoadTel : No 2232847/2236495/2244651Fax [email protected]

JAFFNANo. 249, Power House Road,Tel : No 021-2222310/2226256Fax No : [email protected]

KADAWATHANo. 1026,Kandy Road,Tel : No 2925305/2926259/2921325Fax No : [email protected]

KALUTARANo. 202, Main Street,Tel : No 034-2222623/2228900/2228901Fax No : [email protected]



GE

RATNAPURANo. 59F/A, Bandaranayake Mawatha,Tel : No 045-2223897/2222031Fax No : [email protected]

THAMBUTHHEGAMANo 59,1st Floor, Rajangana Junction,Tel No. 025 – 2275055Fax No 025 – [email protected]

TISSAMAHARAMANo.186,Hambantota Road,Tel No. - 047- 2239497FaxNo.: [email protected]

TRINCOMALEENo. 164/1, ThirugnanasampantharVeethi,Tel : No 026-2227722/3202081Fax No : [email protected]

VAVUNIYANo. 73B, 2nd Cross Street,Tel : No 024-2224690Fax No : [email protected]

MORATUWANo. 293, Galle Road,Tel : No 2647777/2648367/2644831/2647046/2647808Fax No : [email protected]

NEGOMBONo. 32, Ave Maria Road,Tel : No 031-2233003/22235024/2235025Fax No : [email protected]

NELUWANo. 21, Dambulu Building,Ambalangoda Road, ElpitiyaTel/Fax No. 091-5620625Email –[email protected]

NITTAMBUWANo. 195/1, Colombo Road,Tel : No 033-2295889Fax No : [email protected]

NIKAWERATIYANo. 81, Kurunegala Road,Tel : No 037-2260860Fax No : [email protected]

NUGEGODANo. 214, High Level Road,Tel : No 2815283/2815282/2815281Fax No : [email protected]

NUWARA ELIYANo. 158/1, Poddaramulla Building,Kandy Road,Tel : No 052-2235996Fax No : 052-2223551Email- [email protected]

POLONNARUWANo. 25, Batticaloa Road,Tel : No 027-2222296/ 2224851/2224852Fax No : [email protected]

BRANCH NETWORK

KANDYNo. 281,D S Senanayeke Veediya,Tel : No 081-2226170/2226160Fax No : [email protected]

KEGALLENo. 171, Colombo Road,Tel : No 035-2223082/2222734/2230975Fax No : [email protected]

KULIYAPITIYANo. 50, Madampe Road,Tel : No 037-2281122/2282015Fax No : [email protected]

KURUNEGALANo. 185/2, Puttalam Road,Tel : No 037-4690077/4690076Fax No : [email protected]

MAHIYANGANANo. 16, New Kandy RoadTel : No 055-2257558/2257559Fax No : [email protected]

MATALENo. 315, Main Street,Tel : No 066-2222189/2224172/Fax No : [email protected]

MATARANo. 169, Anagarika DharmapalaMawatha,Tel : No 041-2222533/2222766/2228224Fax No : [email protected]

METROPOLITANNo. 194, Galle Road,DehiwalaTel : No 2740400Fax No : 2740433/[email protected]



GE

MAHARAGAMANo. 120A, High Level Road,Maharagama.T.P. - 011-2745110E-Mail: [email protected] opened 20/12/2004Main Branch: Homagama.

MALABENo .766-1/2, Kaduwela Road,Malabe.T.P.011-2760988E-Mail: [email protected] opened 10/12/2004Main Branch: Nugegoda.

KIRIBATHGODANo. 145/1, Kandy Road,Dalugama, KelaniyaT.P.011-5540800E-Mail: [email protected] opened 21/12/2004Main Branch : Kadawatha

WELLAWATTENo. 97 Hyde Park Corner,Colombo 02.T.P. 011-2502725E-Mail: [email protected] opened 12/02/2004Main Branch : Hyde Park Corner

ELPITIYANo.21, Dambulu Building,Ambalangoda Road, Elpitiya.T.P.091-2290397E-Mail: [email protected] opened 22/01/2004Main Branch: Galle.

NAWALAPITIYANo 30,Ambagamuwa Road,NawalapitiyaT.P. 054-2224293Fax054-2224293E-Mail: [email protected] opened 21/04/2005Main Branch: Kegalle.

MATUGAMANo. 92, Agalawatte Road,Matugama.T.P.034-2248383E-Mail: [email protected] opened 12/11/2004Main Branch : Kalutara.

PILIYANDALANo. 32,1/1 Maharagama Road,Piliyandala .T.P.011-2606382/4933639Fax:011-2606382E-Mail: [email protected] opened 08/03/2005Main Branch : Moratuwa.

WELLAWAYANo. 76A, M.K.S BuildingNew Ella Road, WellawayaT.P. 055 2274314Fax: 055 2274315E-Mail: [email protected] opened 02/05/2005Main Branch: Badulla

NELLIADYNo. 136, Main Street,Nelliady.T.P.021-2264170E-Mail: [email protected] opened 24/03/2005Main Branch: Jaffna.

CHAVAKACHCHERINo.19, Kachchai Road,ChavakachcheriT.P.021-2270035E-Mail: [email protected] opened 24/03/2005Main Branch: Jaffna.

RUWANWELLANo.76, Main Street,Ruwanwella.T.P. 036-2267567Fax. 036-2266792E-Mail: [email protected] opened 15/03/2005Main Branch: Avissawella.

HATTONNo. 199B, Dimbulla Road, Hatton.T.P. 051-2225250Fax. 051-2225251E-Mail: [email protected] opened 21/04/2005Main Branch: Nuwara Eliya.

SERVICE CENTRES



GE

CORPORATE FINANCEAND TREASURYDIVISIONNo.194, Galle Road,DehiwalaTel : 2720800Fax : 2738918E-mail: [email protected]

HYDE PARK CORNERBRANCHNo.97, Hyde Park Corner,Colombo 2Tel : 2682745, 2684278, 5566300Fax : 2682746, 2682744Email: [email protected]

RMV DIVISIONNo. 05, R A De Mel Mawatha,Colombo 4.Tel : 2588671Fax: 2555755

INTERNAL AUDITDIVISIONNo. 194, Galle Road, Dehiwala.Tel : 4208801Fax : 4716402E-mail : [email protected]

FUNDS DIVISIONNo. 05, R A De Mel Mawatha,Colombo 4.Tel : 2554046Fax : 2555755E-mail : [email protected]

MARKETING DIVISIONNo. 55, R A De Mel Mawatha,Colombo 4.Tel : 2580210Fax : 2580085E-mail :[email protected]

MIS DIVISIONNo.194, Galle Road,Dehiwala.Tel : 2720800E-mail : [email protected]

STORESNo. 315, New Kandy Road,Pittugala, MalabeTel : 2412437/2413020Fax: 2413460/1E-mail –[email protected]

LEGAL SERVICESDIVISIONNo.55, R A De MelMawatha,Colombo 4.Tel : 2580036, 2580210Fax: [email protected]

ACCOUNTS DIVISION –HEAD OFFICENo.194, Galle Road,DehiwalaTel No.2720800Fax : [email protected]

DIVISIONS



GE

NOTES



GE

I/We .............................................................................................................................................................................

Of ................................................................ being a shareholder/s of The Finance Company PLC hereby

appoint Mr/Mrs/Miss .............................................................................................................................................

(N I C No.....................................) of ............................................................................................................................

failing him/her Mahinda Preethiraj Jayawardena of Colombo 7 whom failing, Mr. Kamal JayanthaYatawara of Nugegoda whom failing, Mr. Tissa Bandara Ekanayake of Nugegoda whom failing,Mr. Ajith Lasantha Devasurendra of Colombo 5 whom failing, Mrs. Violet Wimala Dissanayake ofMalabe whom failing , Mr Aruna Prasad Lekamge of Kelaniya whom failing, Mr. RamanathanNadarajah of Colombo 7, whom failing, Ms Cherille Rosa of Dehiwela whom failing, Dr.Thirugnanasambandar Senthilverl of Colombo 4 as my/our Proxy to represent me/us and to vote onmy/our behalf at the Annual General Meeting of the Company to be held on 27th September 2012and at any adjournment thereof. I/We the undersigned hereby authorize my/our Proxy to vote forme/us and on my/our behalf in accordance with the preferences indicated below

For Against

1. To receive and adopt the report of the Directors and theStatement of Accounts for the year ended 31st March 2012and to receive the report of the auditors thereon.

2. To re-elect Ms Cherille Rosa as a Director in terms ofArticle 24(2) of the Articles of Association.

3. To re-elect Mr A P Lekamge as a Director who retiresin terms of Article 24(2) of the Articles of Association.

4. To re-elect Mr K J Yatawara, who will retire by rotationas per Article 24(6) of the Articles of Association, as a Director.

5. To re-elect Mr T B Ekanayake, who will retire by rotationas per Article 24(6) of the Articles of Association, as a Director.

6. To re-appoint the retiring Auditors M/s Tudor V Perera & CoChartered Accountants and to authorize the Directorsto determine their remuneration.

7. To authorize the Directors to determine contributions to charitiesand other donations for the year 2012/2013.

Signed this …………………… day of ………………2012

Notes and Instructions as to the completion of the form of Proxy are noted on the reverse hereof.

FORM OF PROXY

…….……………………………

Signature of Shareholder

…….…………………….........………

Shareholder's NIC/Co. Reg. No.



GE

INSTRUCTIONS AS TO COMPLETION

Kindly perfect the form of proxy, after filling in legibly your full name and address, by signing in thespace provided and filling in the date of signature.

If the proxy is signed by an Attorney, the relative power of Attorney should also accompany theproxy form for registration if such power of Attorney has not already been registered with theCompany.

The Completed form of proxy should be deposited at the Head Office at No.55, (Lauries Place) R ADe Mel Mawatha, Colombo 4, not later than 48 hours before the holding of the Meeting.

In the case of a company/ Corporation the proxy must be under its Common Seal which should beaffixed and attested in the manner prescribed by its Articles of Association or Constitution.

Documents

THE FINANCE COMPANY PLC CONTENTS · · 2012-09-07page 2 financial highlights annual report 2011-12 ... hatton national bank plc auditors ... the finance company plc page annual