Chilaw Finance Limited Intro..

1
CHILAW FINANCE LIMITED We understand People and Finance
CHILAW FINANCE LIMITED

44 A Kurunegala Road, CHILAW Tel: 032-2223273-032-2222055
Incorporated under The Companies ordinance No. 51 of 1938 and The Companies Act No. 17 of 1982 and Reregistered under The Companies Act No. 07 of 2007
INTRODUCTORY DOCUMENT
For the obtaining the listing of 28,083,948 Ordinary Shares ( Voting )
On the Diri Savi Board of the Colombo Stock Exchange
For further inquiries, please contact Finance Department of Chilaw Finance Ltd If you are in any doubt regarding the contents of this document you should consult your stock broker, bank manager, lawyer or any other professional advisor.
The delivery of this introductory document shall not under any circumstances constitute a representation or create any implication or suggestion, that there has been no material change in the affairs of the company since the date of this document.
Company Secretaries Consultants & Corporate Secretaries ( Pvt ) Ltd No:35 1/1 Devanampiyatissa Mawatha Colombo 10. Tel:2689618
Chilaw Finance Limited Introductory Document
DECLARATION The Directors of the Company, collectively and individually, having made all reasonable inquiries, confirm that to the best of their knowledge and belief, the information contained herein is true and
correct in all material respects and that there are no other material facts, the omission of which, would make any statement herein misleading.
The Board of Directors of Chilaw Finance Limited has taken reasonable care to ensure full and fair disclosure it does not assume any responsibility for any investment decision made by investors based on information contained herein. In making an investment decision, prospective investors must rely on their own examination and assessment of the company including the risks involved.
No person is authorized to give any information or to make any representations not contained in this Introductory Document and if given or made, any such information or representation must not be relied upon as having been authorized by the Company.
The Colombo Stock Exchange (CSE) has taken reasonable care to ensure full and fair disclosure of information in this Introductory Document. However, the CSE assumes no responsibility for the accuracy of the statements made, opinion expressed or reports included in this Introductory Document.
ABBREVIATIONS USED IN THIS INTRODUCTORY DOCUMENT
CDS CSE
Central Depository Systems (Pvt) Ltd Colombo Stock Exchange Chilaw Finance Limited Securities & Exchange Commission of Sri Lanka Central Bank of Sri Lanka Ordinary Voting Shares(s) of the Company. Extra Ordinary General Meeting
CFL or the Company SEC CBSL Ordinary Share(s) EGM -
4 TABLE OF CONTENTS
1. 2. CORPORATE INFORMATION INFORMATION RELEVANT TO THE INTRODUCTION
Page
05 06-08
2.1 Introduction of Ordinary Voting Shares for listing 2.2 Copies of Introductory Document
3. DETAILS OF THE BOARD OF DIRECTORS 3.1 Directors Profiles CAPITAL STRUCTURE 4.1 Stated Capital 4.2 Details of the Ordinary share issue 4.3 Details of the Preference Share Issue 4.4 History of New Share Issues ,Rights and Bonus Issues 4.5 Additional Information 4.6 History of Dividends THE FINANCE INDUSTRY IN SRI LANKA 5.1 Leasing and Hire Purchase Industry 5.2 Selected financial soundness indicators of RFCs 5.3 Assets & Liabilities of Finance Companies PROFILE OF THE ENTITY 6.1 Overview of the company and nature of the business 6.2 Details of the Ten Largest Shareholders 6.3 Degree of Dependence 6.4 Human Resources 6.5 Future Plans, Prospects and Associated Risks MANAGEMENT TEAM LITIGATION, DISPUTES, AND CONTINGENT LIABILITIES FINANCIAL INFORMATION 9.1 Ratios and Share Information 9.2 Receivables CORPORATE GOVERNANCE PRACTICES 10.1 Independent Non Executive Directors 10.2 Remuneration Committee 10.3 Audit Committee 10.4 Integrated Risk Management Committee DECLARATION BY THE DIRECTORS FINANCIAL STATEMENTS 12.1 Audited Financial Statements as at 31st March 2008 12.2 Audited Financial Statements as at 31st March 2009 12.3 Audited Financial Statements as at 31st March 2010 12.4 Disclosures to the Audited Financial Statements 2009/2010 12.5 Unaudited interim Financial Statements as at 31st December 2010 09-10
4.
11-16
5.
17-19
6.
20-26
7. 8. 9.
27-29 30 31-32
10.
33-36
11. 12.
38 40-113
1. CORPORATE INFORMATION Name & Address of the Company Chilaw Finance Limited No. 44A, Kurunegala Road Chilaw Under the Companies Act In 1980, the Company was incorporated under the name style of Chilaw Finance Enterprises (Pvt) Ltd under the Companies Ordinance No. 51 of 1938. In 1985 the name of the Company was changed to Chilaw Finance (Pvt) Ltd in terms of Section 20 (3) of the Companies Act No. 17 of 1982. In 1990 the Company was converted to a Public Limited Liability Company and the company was re-name as Chilaw Finance Limited in terms of Section 20 (3) of Companies Act No. 17 of 1982. Subsequently, in 2007 the Company was reregistered under the Companies Act No. 7 of 2007 and was issued the Registration No. PB 508 by the Registrar General of Companies, Sri Lanka. Under the Finance Companies Act The Company is registered in terms of Section 2 of the Finance Companies Act No. 78 of 1988. Under the Finance Leasing Act The Company is registered under the Finance Leasing Act. No 56 of 2000. Company Registration No. Company Secretary PB 508 Consultants & Corporate Secretaries (Pvt) Ltd No. 35 1/1, Devanampiyatissa Mawatha Colombo 10 D H P Munaweera & Company Chartered Accountants No. 5/6, Police Park Terrace Off Police Park Avenue Colombo 05
Legal Form
Name and address of the Auditors
Bankers to the Company
Seylan Bank PLC Sampath Bank PLC Peoples Bank Bank of Ceylon Commercial Bank of Ceylon PLC Pan Asia Bank PLC 2.INFORMATION RELEVANT TO THE INTRODUCTION DFCC Vardhana Bank 2. INFORMATION RELEVANT TO THE INTRODUCTION
6 2.INFORMATION RELEVANT TO THE INTRODUCTION 2.1 INTRODUCTION OF ORDINARY VOTING SHARES FOR LISTING. This introductory document dated 17-03.2011 is published for the purpose of obtaining a listing on a Colombo Stock Exchange for the ordinary voting shares of Chilaw Finance Limited. The shares are to be listed on the Diri Savi Board of the Colombo Stock Exchange. COPIES OF INTRODUCTORY DOCUMENT Copies of the introductory document may be obtained from the manager of any member firm and trading member firm of the Colombo Stock Exchange.
2.2
2.2.1 Members and trading member of the CSE Members of the CSE Acuity Stockbrokers (Pvt) Ltd Level 6, Acuity House 53, Dharmapala Mawatha Colombo 03 Tel: 2206206 Fax: 2206298/9 E-mail: sales@acuitystockbrokers.com Asia Securities (Pvt) Limited Level 21, West Tower World Trade Centre Echelon Square, Colombo 01 Tel: 2423905, 5320000 Fax: 2336018 E-mail: enquiry@asiacapital.lk Asha Phillip Securities Limited Level 4, MillenniumHouse 46/58, Navam Mawatha Colombo 02 Tel: 2429100 Fax: 2429199 E-mail: apsl@ashaphillip.net Bartleet Mallory Stockbrokers (Pvt) Ltd Level G, Bartleet House 65, Braybrooke Place Colombo 02 Tel: 5220200 Fax: 2434985 E-Mail: info@bartleetstock.com
Capital TRUST Securities (Pvt) Ltd Ceylinco Stockbrokers (Pvt) Ltd No. 42, Sir Mohammed Macan Markar Mw. Ceylinco House, Level 09 Colombo 03 69, Janadhipathi Mawatha Tel: 5-335225 Colombo 01 Fax: 5-365725 Tel:4-714300,4-714388,4-714389, 0777891871,0777-896064 E-Mail: inquiries@capitaltrust.lk Fax: 2387228 E-mail: info@ecsbl.com CT Smith Stockbrokers (Pvt) Ltd 4-14, Majestic City No. 10, Station Road Colombo 04 Tel: 2552290-4 Fax: 2552289 E-mail: ctssales@sltnet.lk Asset Line Securities (Pvt) Ltd 282, Kaduwela Road, Battaramulla. Tel: 4700111, 2307366 Fax: 4700112, E-mail: dpgsl@sltnet.lk
DNH Financial (Pvt) Ltd Level 16, West Tower World Trade Centre Colombo 01 Tel: 5732222 Fax: 5736264 E-mail: info@dnhfinancial.com
JB Securities (Pvt) Ltd 150, St. Joseph Street Colombo 14 Tel: 2490900, 077-2490900, 077-2490901 Fax: 2430070, 2446085, 2447875 E-mail: jbs@jb.lk
John Keells Stockbrokers (Pvt) Ltd 130, Glennie Street Colombo 02 Tel: 2306250, 2338066-7, 2342066-7 2446694/5, 2439047/8, 4710721/4 Fax: 4706767 E-mail: jkstock@keells.com NDB Stockbrokers (Pvt) Ltd 5th Floor, NDB Building 40, Navam Mawatha Colombo 02 Tel: 2314170-8 Fax: 2314180 E-Mail: mail@ndbs.lk Somerville Stockbrokers (Pvt) Ltd 137, Vauxhall Street Colombo 02 Tel: 2329201-5, 2332827, 2338292-3 Fax: 2338291 E-mail: ssb@web-lk.com
Lanka Securities (Pvt) Ltd 228/2, Galle Road Colombo 04 Tel: 4706757, 2554942 Fax: 2326863, 2342068 E-mail: lankasec@sltnet.lk SC Securities (Pvt) Ltd 2 nd Floor 55, D R Wijewardena Mawatha Colombo 10 Tel: 4711000 Fax: 2394405 E-mail: cscres@sltnet.lk
SOURCE: CSE Monthly- March 2011
8 Trading Members of the CSE TKS Secutiries (Pvt) Ltd No. 14, Reid Avenue Colombo 07 Tel: 2675200 Fax: 2682553 E-mail: ralph@tks.lk Capital Alliance Securities (Pvt) Ltd Level 5, Millennium House 46/58, Navam Mawatha Colombo 02 Tel: 2317777 Fax: 2317788
First Guardian Equities (Pvt) Ltd 32nd Floor, East Tower World Trade Centre Colombo 01 Tel: 5884400 Fax: 5884401 E-mail: info@firstguaradianequities.com
SKM Lanka Holdings (Pvt) Ltd 377/3, Galle Road Colombo 03 Tel: 2372413-4 Fax: 2372416 E-mail: info@skmlankaholdings.com
SMB Securities (Pvt) Ltd 47. Dharmapala Mawatha Colombo 03 ` Tel: 5539593 Fax: 2339292 E-mail: smbssecurities@gmail.com
Taprobane Securities (Pvt) Ltd 2 nd Floor No. 10, Gothami Road Colombo 08 Tel: 5328200 Fax: 5328277 E-mail: info@taprobane.lk dinal@taprobane.lk
Heraymila Securities Ltd Level 8 South Wing Millennium House 46/58, Navam Mawatha Colombo 02 Tel: 2359100 Fax: 2305522 Email: info-hasl@heraymila.com
IIFL Securities Ceylon (Pvt) Ltd 27th Floor East Tower World Trade Centre Colombo 01 Tel: 2333000 Fax: 2333383 Email: info.ceylon@iiflcap.com Claridge Stock brokers ( Pvt ) Ltd 10, Gnanartha Pradeepa Mw Colombo 08. Tel: 2697974 Fax : 2677576 Email : fonseka@mackwoods.com Arrenga Capital (Pvt) Ltd 410/115, Bauddhaloka Mw Colombo 07 Tel: 2689107 Fax: 2689106
Richard Pieris Securities (Pvt) Ltd No. 69, Hyde Park Corner Colombo 02 Tel: 0777-281281 Email: jayantha@rpsecurities.com
New World Securities ( Pvt ) Ltd. 2 nd Floor, 45/2 Braybrooke Street, Colombo 02 Tel:2358700/20 Fax :2358701 Email: info@nws.lk
SOURCE: CSE Monthly- March 2011

3. DETAILS OF THE BOARD OF DIRECTORS As at the date of the Introductory Document, the Board of Director of Chilaw Finance Limited constitutes of 07 Non Executive Directors and 03 Executive Directors. Name of Director Mr. N.M. Gnanalankara Mr. D.S. Weerasuriya Mr. S.C.O. Gunasekara Mr. D.W. De Silva Mr. R. H. Peethunanda Mr. J.A.D.N. Jayasuriya Mr. W.G.A. Fernando Mr. R.M.U. Rathnayake Mr. M.D.J.P.N. Perera Mr. R.W. Kulatunga Mr. L.J. Rubera (Alternate Director to Mr. R.W. Kulatunga) 3.1 DIRECTORS PROFILES Age 73 89 76 67 71 51 77 63 43 67 51 Address Navaratnapaya,Karavita, Illippadeniya Vijitha 42/1, Colombo Road, Chilaw Olidaluwa, Bandarawatta, Kakkaplliya No. 01, Colombo Road, Chilaw No. 24/4, Colombo Road, Chilaw Rajakadaluwa. Arachchikattuwa No. 18, Aluthwatta Road, Chilaw No. 43, Pahala Mahawewa, Mahawewa Dematapitiya., Kakkapalliya, Chilaw 20/82, Fairfield Garden, Colombo 08 Beddagana Road, Pitakotte
Mr. Navaratne Mudiyanselage Gnanalankara Chairman The Founder Chairman of the Chilaw Finance Limited. Mr. Gnanalankara has three decades of experience in the aspects of hire purchase and leasing in finance business. Mr. Gnanalankara does not hold a directorship in any other company. Mr. Don Sirisena Weerasuriya Managing Director The Founder Managing Director of the Chilaw Finance Limited. Presently Chief Executive Officer of the Company. Mr. Weerasuirya has over three decades of experience in the aspects of hire purchase, leasing in finance business with focus in credit management, legal, strategic and corporate planning. He is a veteran financier and one of the authorities in matters relating to hire purchase and leasing in the country. Mr.Weerasuriya does not hold a directorship in any other company.
Mr. Sembukuttiarachchige Collin Oswald Gunasekara Mr. Gunasekara functions as a Non Executive (Founder) Director of Chilaw Finance Limited. He holds three decades of experience in the field of finance. Mr. Gunasekara does not hold directorships of any other Company.
10 Mr. Dedumuni Wimalaratne De Silva Mr. De Silva functions as an Executive Director of Chilaw Finance Limited. He has over three decades of experience in the business of finance. Mr. De Silva does not hold directorships of any other company. Mr. Ranepura Hewage Peethunanda Mr. Peethunanda functions as a non Executive (Founder) Director of Chilaw Finance Limited .He has three decades of experience in the business of finance. Mr. Peethunanda is a Director of New Bright City (Pvt) Ltd, Chilaw. Mr. Jayasuriya Arachchige Don Noel Jayasuriya Mr. Jayasuriya was appointed to the Board of Chilaw Finance Ltd as an Executive Director in 2009. He has over 17 years experience in the aspects of hire purchase and leasing in the business of finance. Mr. Jayasuirya is the Managing Director of Wayamba Distributors (Pvt) Ltd. Mr. Warnakulasuriya Gregory Alfred Fernando Mr. Fernando functions as a Non Executive Director of Chilaw Finance Ltd. Mr. Fernando is an Associate Member of Institute of Electrical Engineers in London. He counts over 17 years experience in hire purchase and leasing in finance business. Mr. Fernando joined Ceylon Electricity Board in 1961 as an Engineer until he retired in 1988. Mr. Fernando does not hold directorships of any other company. Mr. Rathnayake Mudiyanselage Upali Rathnayake Mr. Rathnayake was appointed to the Board of Chilaw Finance Ltd as a Non Executive Director in 2008.Mr. Rathnayake holds a Certificate in Mechanical Engineering from City & Guilds in London. Mr. Rathnayake does not hold directorships of any other company
Mr. Madurawalage Don John Pradeep Nilantha Perera Mr. Perera was appointed to the Board of Chilaw Finance Ltd as a Non Executive Director in 2008. Mr. Perera is a graduate in Economics and also a Managing Director of Singhe Auto Services (Pvt) Ltd. Mr. Ranjith Wimal Kulatunga Mr. Kulatunga was appointed to the Board of Chilaw Finance Limited as a Non Executive Director in 2010. He is the Chairman of Ceylon Comany Group (Pvt) Ltd, Ceylon Comany Green Teas (Pvt) Ltd, Comany Management & Investment (Pvt) Ltd, Comany Imports & Exports (Pvt) Ltd, Comany Hotels (Pvt) Ltd, and South East Asia Constructions Company (Pvt) Ltd. He is also a Director of Quickshaws Travels Services (Pvt) Ltd. Mr. Kulatunga has over 35 years of management experience in commerce and industry in Japan.
Mr. Lalendra Jerome Rubera (Alternate Director to Mr. R W Kulatunga) Mr. Rubera is the Managing Director of Ceylon Comany Group (Pvt) Ltd, Ceylon Comany Green Teas (Pvt) Ltd, Comany Management & Investment (Pvt) Ltd, Comany Imports & Exports (Pvt) Ltd, Comany Hotels (Pvt) Ltd, and South East Asia Construction Company (Pvt) Ltd. He is also Director of Horana Plantations PLC, Ceytea Plantation Management Ltd, Uni-dil Packaging Ltd, Uni-dil Paper Sacks (Pvt) Ltd, Quickshaws Travel Services (Pvt) Ltd, and Thompson Associates (Ceylon) Ltd. Mr. Rubera has over 25 years experience in finance and commerce. Mr. Rubera is a fellow member of the Institute of Chartered Accountants of Sri Lanka and fellow member of the Institute of Certified Management Accountants of Sri Lanka.
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4. CAPITAL STRUCTURE 4.1 STATED CAPITAL (Voting) Ordinary Shareholders as at 17 th March 2011
Level of Shareholding Less than 5,000 Shares 5,001-10,000 10,001-20,000 20,001-30,000 30,001-40,000 40,001-50,000 50,001-100,000 100,001-300,000 300,001-500,000 500,001-700,000 700,001-900,000 900,001-1,100,000 1,100,001-1,600,000 1,600,001-1,900,000 1,900,001-3,000,000 Over 3,000,000 Total No. of Shareholders 10 28 43 7 9 3 10 11 9 2 4 2 2 1 2 1 145 TOTAL Holdings 40,994 242,182 679,478 170,453 315,588 131,956 771,261 1,989,170 3,837,548 1,171,309 3,063,284 2,076,744 2,940,697 1,806,875 5,740,199 3,106,210 28,083,948 % 0.15% 0.86% 2.42% 0.61% 1.12% 0.47% 2.75% 7.08% 13.66% 4.17% 10.91% 7.39% 10.47% 6.43% 20.44% 11.06% 100.00%
No. of Shareholders Individual Institutions Total 144 1 145
TOTAL Holdings 27,683,948 400,000 28,083,948 % 98.58% 1.42% 100.00%
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(Non Voting) Ordinary Shareholders as at 17 th March 2011

Level of Shareholding Less than 8,000 Shares 8,001-15,000 15,001-25,000 25,001-30,000 30,001-35,000 35,001-40,000 40,001-50,000 50,001-60,000 60,001-150,000 No. Of Shareholders 1 2 1 1 3 1 1 2 12 TOTAL Holdings 7,143 28,643 25,000 30,000 100,358 50,000 58,000 257,400 556,544 % 1% 5% 4% 5% 18% 0% 9% 10% 46% 100%
Total
No. of Shareholders Individual Institutions Total 12 12
TOTAL Holdings 556,544 556,544 % 100% 100%
Preference Shareholders as at 17 th March 2011 ( 16% Non Cumulative, Non Redeemable, Non Voting)
Level of Shareholding Less than 350,000 Shares 350,001-500,000 Total No. of Shareholders 1 1 2 TOTAL Holdings 328,459 500,000.00 828,459.00 % 40% 60% 100%
13 4.2 DETAILS OF THE ORDINARY SHARE ISSUE The company has issued Bonus Shares of 5,862,312 on the basis of 1:4 in accordance with the resolution passed at the Extra Ordinary General Meeting held on 30.07.2006. The Company had an issue of 4,887,609 (voting) ordinary shares at a consideration of Rupees fifteen (Rs.15/-) per share in accordance with the ordinary resolution passed at the Extra Ordinary General Meeting of the shareholders of Chilaw Finance Limited held on 23rd January 2008. Of the 4,887,609 ordinary shares authorized by the shareholders 4,403,065 shares have been issued. In accordance with an Ordinary Resolution passed at an Extra Ordinary General Meeting held on 23 rd January 2008, the company had a rights issue of 4,885,260 Ordinary Shares at a consideration of Rs.Ten (10/= ) per share to existing Ordinary Shareholders of the company in the proportion of one new ( 01 ) Ordinary Share for every three ( 03 ) shares held in the companys share register as at 23rd January 2008. As a result, total number of 2,836,926 ordinary shares have been issued. The issued ordinary shares as at 31.03.2007 have been subdivided on the basis of one share per one existing voting ordinary shares in accordance with the resolution passed at the Extra Ordinary General Meeting held on 23.01.2008. The total no of ordinary shares before the sub-division was 7,327,890 and after the sub-division it increased to 14,655,780. The company also had a rights issues of 5,239,000 ordinary shares offered by way of a right issue at a consideration of Rupees Ten (Rs., 10/-) per share to existing ordinary shares of the company in the proportion of one new (01) ordinary shares for every five (05) existing ordinary shares held in the companys register of members as at 31 st March 2009. Out of 5,239,000 Ordinary shares authorized by the shareholders 2,444,425 Ordinary Shares have been issued. In accordance with an Ordinary resolution passed at an Extra Ordinary General Meeting held on 23 rd January 2008 , the company authorized to issue 1,000,000 Non Voting Ordinary Shares at a consideration of Rupees Seven ( Rs.7/=) per share out of which 556,544 shares have been issued. The Non voting ordinary shares will not be listed on the Colombo Stock Exchange. In accordance with the resolution passed at the Extra Ordinary General Meeting held on 22.03.2008, Bonus Shares of 3,743,752 were issued on the basis of 4: 1. 4.3 DETAILS OF THE PREFERENCE SHARE ISSUE The Company had an issue of 2,000,000 non cumulative /non redeemable / non voting 16% preference shares at a consideration of Rupees ten (Rs.10/-) per preference share in accordance with the ordinary resolution passed at the Extraordinary General Meeting of the shareholders of Chilaw Finance Limited held on 14th June 2008. Of the 2,000,000 preference shares authorized by the shareholders 828,459 shares have been issued. The balance preference shares are unsubscribed and are no more available to be issued. These preference shares will not be listed on the Colombo Stock Exchange. The purpose of the rights issues and new share issue was to comply with Finance Companies (Minimum Core Capital) Direction No. 01 of 2006. The CFL has obtained the approval of Monetary Board of Central Bank of Sri Lanka for the above share issues in order to comply with Finance Companies (Structural Changes) Direction No. 5 of 2005.
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4.4 HISTORY OF NEW SHARE ISSUES , RIGHTS AND BONUS SHARE ISSUES
Type of issue New Share IssueNew Share Issue New Share IssueNew Share IssueNew Share Issue-New Share Issue Bonus Shares 1:4 No. of Shares 1,041,000 10,000 85,000 35,775 278,000 10,000 5,803 5,862,312 7,327,890 Share split 1:1 Rights IssueNew Share issueRights IssueBonus Shares 4:1 New Share Issue New Share Issue New Share Issue New Share Issue New Share Issue New Share Issue
Date of Allotment
Class of Shares
Consideration Rs. 10.00 Per Share Rs.10.00 Per Share Rs.10.00Per Share Rs.10.00Per Share Rs.10.00 Per Share Rs.10.00 per Share Rs.10.00 Per Share Rs.10.00 Per Share
2004- Feb 2004- Jan 2004- Aug 2005- Jan 2005- Apr 2006- Jan 2006TOTAL NO OF ORDINARY SHARES as at 31.03.2007 2008-Jan-23 2008-Feb-27 2008-Mar-31 2008-Mar-31 2008-July-04 2008-July-07 2008-July-07 2008-July-25
Ordinary Shares Ordinary Shares Ordinary Shares Ordinary Shares Ordinary Shares Ordinary Shares Ordinary Shares Ordinary Shares
Ordinary Shares Ordinary Shares Ordinary Shares Ordinary Shares Ordinary Shares Ordinary Shares Ordinary Shares Non voting Ordinary Shares
14,655,780 319,227 745,000 2,235,000 3,743,752 106,750 140,144 639,421 257,643
Rs.10.00 Per Share Rs.15.00 Per Share Rs.10.00 Per Share Rs.10.00 Per Share Rs.15.00 Per Share Rs.7.00 Per Share Rs.15.00 Per Share Rs.7.00 Per Share Rs.15.00 Per Share Rs.7.00 Per Share
2008-July-25
Ordinary Shares Non voting
2008-July-31 Ordinary Shares 2008-July-31 Ordinary Shares Non voting
1,295,384
44,357
15
2008-Aug-11 2008-Aug-11 2008-Sep-01 2008-Sep-01 2008-Sep-01 2008-Oct-13 2008-Nov-06 2008-Nov-06 2008-Nov-24 2008-Nov-24 2008-Dec-15 2008-Dec-15 2008-Dec-22 2009-Jan-05 2009-Jan-05 2009-Oct-19 Ordinary Shares Ordinary Shares Ordinary Shares Non voting Ordinary Shares Ordinary Shares Ordinary Shares Ordinary Shares Ordinary Shares Ordinary Shares Ordinary Shares Ordinary Shares Ordinary Shares Ordinary Shares Ordinary Shares Ordinary Shares Ordinary Shares 16% Pre. Shares (Non Cum./Non Red./Non Voting) Ordinary Shares Ordinary Shares 16%Pre.Shares (Non Cum/Non Red/Non Voting Ordinary Shares Rights Issue New Share Issue New Share Issue New Share Issue New Share Issue New Share Issue New Share Issue Rights Issue Rights Issue New Share Issue New Share Issue Rights Issue New Share Issue Rights Issue New Share Issue Rights Issue New Share Issue 45,876 13,350 114,400 10,000 55,290 15,000 91,703 22,300 5,000 10,000 17,000 10,000 10,000 199,523 1,387,167 2,235,262 Rs.10.00 Per Share Rs.15.00 Per Share Rs.7.00 Per Share Rs.15.00 Per Share Rs.15.00 Per Share Rs.15.00 Per Share Rs.15.00 Per Share Rs.10.00 Per Share Rs.10.00 Per Share Rs 15.00 Per Share Rs.15.00 per Share Rs.10.00 Per Share Rs.15.00 pet Share Rs.10.00 per Share Rs.15.00 Per Share Rs.10.00 Per Share Rs.10.00 Per Share Rs.10.00 Per Share Rs.15.00 Per Share Rs.10.00 Per Share Rs.10.00 Per Share
2009-Oct-19
328,459
2009-Nov-09 2009-Nov-09 2009-Nov-06 2009-Nov-16
Rights Issue New Share Issue New Share Issue Rights Issue
184,163 7,000 500,000
25,000
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4.5 ADDITIONAL INFORMATION

1. There are no statutory restrictions on the free transfer of Securities of the Company. 2. No shares were re-purchased / redeemed by the company in terms of section 63, 64, 66, 67, 68, 69, 93 and 100 of Companies Act. 3. There was no any reduction of stated capital in terms of section 59 of the Companies Act No of 7 of 2007. 4. There are no outstanding convertible Debt Securities. 5. The issued preference shares are non convertible.
4.6 HISTORY OF DIVIDENDS Financial Year

2001/2002 2002/2003 2003/2004 2004/2005 2005/2006 2006/2007 2007/2008 2008/2009
Dividend Rate
Not Declared Not Declared 10% 10% Not Declared 0.50 cents per share 0.30 cents per share Ordinary shareholders who have made investments during the F/Y 2008/2009- From the date of investments to 31.03.2009 - 15% p.a. Other Ordinary shareholders 0.30 cents per share. 0.75 Cents per Voting Ordinary Share. 0.65 Cents per Non Voting Ordinary Share. 16% p.a. Preference Shares ( Non Cumulative/ Non /Non Voting/ Non Redeemable )
Dividend Paid ( Rs. )

N/A N/A 1,533,600 1,313,797 Not Declared 3,487,484 4,492,502 15,411,502
2009/2010
21,985,542
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5. THE FINANCE INDUSTRY IN SRI LANKA 5.1 LEASING AND HIRE PURCHASE INDUSTRY The Finance Industry in Sri Lanka comprises major financial institutions namely, the Licensed Commercial Banks (LCBs), Licensed Specialized Banks (LSBs) Registered Finance Companies (RFCs) and Specialized Leasing Establishments. There were 36 registered finance companies (RFCs) as at 31.12.2010. RFCs, continue to provide significant contribution to the economy, by way of providing finance facilities to diverse strata of customers who are devoid of or have no easy access to bank credit lines especially in the areas of vehicle financing. Accordingly, Finance Leasing and Hire purchase businesses are core products of RFCs in Sri Lanka.. The central bank of Sri Lanka, in its annual report for 2009 stated that market share of the two largest RFCs which accounted for approximately 46% of the total assets of the industry in 2008, reduced to 37% as at end 2009. The largest nine (09) RFCs accounted for approximately 73% of the total assets of RFCs where as eighteen medium size RFCs accounted for only 24 % of total assets. According to the annual report for 2009 of Central Bank of Sri Lanka, Hire Purchase and Lease Facilities for vehicle financing accounted for about 63% of the RFC industrys assets as at end 2009. In view of the rising delinquent loans, most RFCs took steps to curtail lending and adopted a relatively conservative approach when expanding their accommodations. As a result, total accommodations granted by RFCs increased marginally by 3% as at end 2009 to 116 billion compared to the 17% increase recorded in 2008. Despite the slight increase in the accommodations portfolio, RFCs lease facilities decreased by 1.3%, while hire purchase facilities increased marginally by 0.3% in 2009. Furthermore, owing to the current depression in the real estate market, loans against real estate declined considerably by 22.4% to Rs 8.3 billion in 2009. The public deposits are main source of funds of the finance industry. Hence, it is noteworthy to state that the finance industry sector benefited by the reduction in interest rates recently by the regulators. As a result, the interest rate for public deposits declined considerably. The Board of Directors of CFL believes that the recovery of the global economic crisis and prevailing single digit rate of inflation and low interest rates will improve the prospects of the RFCs and extend the life line of the finance companies
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5.2 SELECTED FINANCIAL SOUNDNESS INDICATORS OF REGISTERED FINANCE COMPANIES. Per-cent 2009 (a) 9.8 8.6 32.3 10.2 -0.8 -13.6 3.3 17.4 29.9 47.8
Indicator Regulatory capital to Risk weighted assets Tier 1 capital to risk weighted assets Non-performing loans net of provision to Capital funds Non-performing loans to gross loans Return on assets (before tax) Return on equity (after tax) Net interest income to total assets Net interest income to gross income Non- interest expenses to gross to income Provision coverage ratio (total)
2008 (a) 14.0 12.3 15.9 6.7 1.8 8.4 2.4 20.6 28.0 46.5
Source: Central Bank of Sri Lanka (a) Revised (b) Provisional
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5.3ASSETS & LIABILITIES OF REGISTERED FINANCE COMPANIES
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6. PROFILE OF THE ENTITY

6.1 OVERVIEW OF THE COMPANY AND NATURE OF THE BUSINESS
Chilaw Finance Ltd is a small size Finance Company established 30 years ago in the heart of the coconut triangle in Chilaw. It offers financial assets products such as Finance Leasing, Hire Purchase, Pawn Brokering, Micro Financing and Financial Liabilities products such as Fixed Deposits and Savings Accounts. Chilaw Finance Ltd is registered under section 2 of the Finance Companies Act No.78 of 1988. It is also a registered as a Finance Leasing Establishment in terms of the Finance Leasing Act No. 56 of 2000. The company was incorporated on 05 th March 1980 as a Private Limited Company under the name of Chilaw Finance and Enterprises Limited and commenced business operations on 07 th March 1980. The name of the company was subsequently changed to Chilaw Finance (Private) Limited with effect from 06 th of December 1985. The Chilaw Finance Limited has been converted into a Public Unquoted Company with effect from 21 st of November 1990. The company has won the absolute confidence of its depositors, shareholders and other stakeholders thereby steadily growing into a leading and stable financial organization in the country. During its three decades of history, CFL has been in the forefront of the social and economic development of the Wayamba province long before other financial players realized the potential and importance of the catering to areas outside the capital and commercial cities of the Island. The Companys total management staff is 58 as at 31st March 2010 and includes three Executive Directors, Ten Managers, Four Executives, Twenty seven Officers and Two Management Trainees and Nine Office Assistants. The Companys main competitors are other RFCs , Licensed Commercial Banks (LCBs), Licensed Specialized Banks (LSBs) and Specialized Leasing Establishments. The CFL accepts term deposits and savings s from the General public which sustains the main source of funds of the organization. Its core liquid investments are Hire purchases, Finance leasing, and Mortgage loans.
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The following financial ratios as at 31-03-2010 and 31-12-2010 (unaudited) highlights the facts that its depositors are highly secure and in safe hands.
Total Loans and advance portfolio as a % of total public deposits Non Performing Accommodation (NPA) as a % of total assets Quality Loans to Public Deposits Public Deposits as a % of total assets Capital Funds to total Deposits NPAs to Capital funds
31-3-2010 122 % 6.83 % 92.86 % 49.39 % 88.36 % 15.51 %
31-12-2010 139 % 12.17 % 103.67 % 49.50 % 88.41 % 27.70 %
The CFLs shareholder funds are also well secured according to the following financial ratios as at 31-032010 and 31-12-2010 (unaudited). 31-03-2010 31-12-2010 (unaudited) Return on Equity 11.45% 8.45 % Total Equity to total assets 43.65% 43.76% NPAs to Equity 15.51% 27.70% Debt Ratio 49.39% 49.50% Cost to Income 66.27% 55.63% Performing Loans to Shareholders Funds 102.61% 116.46%
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6.2 DETAILS OF THE TEN LARGEST SHAREHOLDERS 6.2.1 DETAILS OF (VOTING) ORDINARY SHAREHOLDERS AS AT 17thMarch 2011
Ten Major Ordinary Shareholders as at 17-03-2011 1 2 3 4 5 6 7 8 9 10 Jayasuriya Arachchige Don Noel Jayasuriya Ranjith Wimal Kulathunga Disanayake, Subashini Samarasinghe (Mrs) De Silva, Sampatha Waduge Silvia Anne Merline (Mrs) Weerasuriya, Don Sirisena Ranjith Samarasekara Rathnayake Mudiyanselage Upali Rathnayake Seetha Raman Saththiweln Sujeewa Chandana Hiththetiyage Gunasekara Sembukuttiarachchige Collin Oswald Number of Shares 3,106,210 3,000,000 2,740,199 1,806,875 1,510,297 1,430,400 1,080,074 996,670 889,255 739,875 % 11.06 10.68 9.76 6.43 5.38 5.09 3.85 3.55 3.17 2.63
6.2.2 DETAILS OF (NON VOTING) ORDINARY SHAREHOLDERS AS AT 17TH March 2011

Major Ordinary Shareholders as at 17-03-2011 1 2 3 4 5 6 7 8 9 10 Wanniarachchilage Sherly Chinthaka Perera Jayamaha Hitihamilage Nalin Susantha Kumara Indrawathi Bopage Bopage Jinadasa Hewa Welgamage Sarath Balasuriya Mudiyanselage Dudula Nalani Senarath Rajaguru Ahdikarimudiyanselage Samarakoon Kulasinghe 32,143 30,000 25,000 14,357 5.78 5.39 4.49 2.58 Number of Shares 143,000 114,400 58,000 50,000 35,715 32,500 % 25.69 20.56 10.42 8.98 6.42 5.84
Mihindukulasuriya Chaminda Duglas Fernando Basnayake Appuhamilage Mahipala Mudalige Chandrawathi Siriseeli
23 6.2.3 DETAILS OF PREFERENCE SHARES (NON CUMMILATIVE, NON REDEEMEBLE, NON VOTING) AS AT 17TH March 2011
*Preference Shareholders as at 17.03.2011 1 2 Dr. Wilfred Rajendra Wanasinghe Mari Ajantha Wanasinghe
Number of Shares 500,000 328,459
% 60.35 39.65
*There were only two Preference Shareholders as at 17.03.2011

6.2.4 that the company has declared to the CSE that 36% of the public holding as at 17.03.2011 is held by a minimum number of 100 public shareholders holding not less than 100 shares each.
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6.3 DEGREE OF DEPENDENCE ON KEY CUSTOMERS AND SUPPLIERS.

There is no significant dependency by the company on either its customers or suppliers
6.4 HUMAN RESOURCES No of Employees

The following table indicates staff allocation for the last three years. As at 31st March Corporate Management Senior Management Executive Officers Customer Relation Assistants Management Trainees Office Assistants 2010 5 10 4 27 1 2 9 2009 5 9 2 25 1 2 7 2008 4 9 4 29 1 2 7
Please note that
The Company is a solitary entity as it does not have any subsidiaries or affiliations. CFLs workforce is not unionized and has no collective agreement with the management.
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6.5 FUTURE PLANS, PROSPECTS AND ASSOCIATED RISKS The Company has designed a strategy that addresses and cut across all core elements of the business operating system that goes in to making the company more viable and profitable. In the near future the company seeks to exploit on the low rate of inflation that is expected to prevail in the economy, the countrys political stability and investor friendly environment in the Eastern and Northern provinces. CFL objectives and targets are realistic and achievable.
FUTURE OPERATIONAL STRATEGY
Presently CFL operates its Head Office in Chilaw. It has a branch office in Kuliyapitiya. The company has plans to extend its channels of distributions through strategically located branches in the entire Wayamba Province which is a repository of natural, industrial and commercial wealth.
NEW PRODUCTS TO BE OFFERED
The Company plans to offer new products in line with Marketing Strategies. New fixed deposit and savings accounts have already been designed to attract small and medium savers. In order to compete with competitors, the company has designed HP and Leasing Facilities with novel features.
CONSOLIDATION STRATEGIES
The company intends in consolidating its outsourcing processes thereby it shall constitute its own legal and valuation procedures.
MARKETING STRATEGY
The company has designed its marketing strategy to increase the market share of the company. The Company also plans several promotional campaigns in association with strategic partners. In the future CFL plans to become a Marketing oriented company and for that purposes aggressive Marketing Strategies will be introduced. CFL expects to capitalize the new marketing opportunities within the favorable economic conditions in the future. The company will assess and explore the potential market segments in order to contribute to the new business targets.
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FINANCIING STRATEGY
The Companys main sources of funds are new fixed deposits and collection of recoveries. The Finance strategy of the company avoids the institutional borrowings due to its high cost of funds. The company also wishes to increase the low savings deposits base, because of the low cost of funds. The company believes that the prudent NPA management can be achieved by exercising effective credit management. The maintenance of the high deposits renewal rate, lower rate of pre-mature termination of leasing & Hire purchases, lower rate of pre-mature retirement of fixed deposits and effective fund management are also included in the companys Financial Strategy. In addition, the company has issued ordinary shares and preference shares in order to strengthen the core capital of the company. The following Capital Adequacy Ratios of CFL as at 31.12.2010 were above the regulatory minima and on par with well capitalized finance company in the country.
Core Capital to Risk Weighted Assets Ratio ( Minimum 5% ) = 36.32% Total Capital to Risk Weighted Assets Ratio ( Minimum 10% ) = 49.98% Capital Funds to Total Deposit Liabilities Ratio ( Minimum 10% ) = 89.03%
IT STRATEGY
The Company has outsourced its IT Management to Sampath IT Solutions - a benchmark company, providing most innovative advance technology in the IT Industry. The Company expects to minimize the operational costs by further developing and introducing modern IT.
Assumptions and Risks on future plans of the company. ASSUMTIONS CFL expects the continuity of single digit rate of inflation in the country For the next three years. CFL expects towards favourable public confidence towards financial Institutions In the country. CFL expects the recovery of global economic crisis which directly affects the financial Sector. RISKS The companys business and financial performance could get affected by unstable economic conditions in the country. Emergence of new competition , mergers and acquisitions will create high competition in the finance industry. Changes in the monetary policy, especially in the interest rates negatively affects the future plans of the company.
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7. MANAGEMENT TEAM
Mr. Don Sirisena Weerasuriya (CEO) Mr. Don Sirisena Weerasuriya of No: 42/1 Colombo Road, Chilaw is the founder Managing Director of the company. He is the most senior finance professional among the finance companies in Sri Lanka. He started his career as an English Training Teacher in 1960.Mr.Weerasuriya has over three decades of experience in the business of finance.
Mr. Cyril Nobel Mariyaseelon (General Manager) Mr. Cyril Noble Mariyaseelon of No.21 Aluthwatta Road Chilaw was appointed as the General Manager in January 1999. He is a retired banker with 33 years of experience in state and private banks during his tenure. He holds Diploma in Management.
Mr. K.E.K.Wijesinghe (Manager HP & Leasing) Counts 24 years of experience with the company. Joined in October 1986 as a Clerk. Promoted as Manager HP/ Leasing in 2008
Mr. H.P.M.M.Pushpa Kumara (Manager- Mortgage Loans) Counts 19 years of experience with the company. Joined in August 1991 as an Accounts Clerk. Promoted as Manager Loan in 2008 Appointed as Assistant Manager of CFL Kuliyapitiya Branch in 2010.
Mr. R.W.M.J.Wijewardana ( Manager-Marketing ) Counts 2 years of experience with the company Joined in May 2008 as Marketing Manager.
Mrs. P.A.N.A.Senevitathne (Manager- Anchor Division) Counts 14 years of experience with the company. Joined in September 1996 as Accounts Clerk. Promoted as Manager- Anchor Agency- CFL in 2008
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Mrs. M.R.A.L.Fernando (Manager- Fixed Deposits) Counts 15 years of experience with the company. Joined in October 1995 as clerk. Promoted as Manager- Fixed Deposits in August 2007. Completed National Diploma in Business Studies and followed the Higher National Diploma in Accountancy at Technical College- Kuliyapitiya.
Mrs. W.P.M.De.Silva (Accountant) Counts 15 years of experience with the company. Joined in August 1995 as Accounts Clerk. Promoted to the post of Internal Auditor in 2000 Promoted to the post of Assistant Accountant in March 2006. Promoted as Accountant in April 2007. Mrs. De Silva holds the Higher National Diploma in Accountancy and National Diploma in Business Studies of the Sri Lanka Technical College. She is also a passed finalist of Association of Accounting Technicians of Sri Lanka and Licentiate of Institute of Chartered Accountants of Sri Lanka.
Mr. U.S.T.De Silva (Internal Auditor) Counts 3 years of experience with the company. Joined in September 2007 as Internal Auditor. He is a Finalist of Institute of Chartered Accountants of Sri Lanka and completed Diploma in Accounting and Advanced Book keeping of International Association of Book Keepers (UK)
Mr. A.H.S.Weerakoon (Manager- Recovery) Counts 18 years of experience with the company. Joined in October 1992 as a Field Officer Promoted to the post of Recovery Manager in October 2007.
29
Mrs. S.M.S.P.Herath (Management Trainee) Counts 2 years of experience with the company. Joined in June 2008 as Management Trainee. Passed Finalist of Association of Accounting Technician of Sri Lanka and Finalist of Institute of Chartered Accountants of Sri Lanka. Reading for Bachelor of Business Administration at University of Sri Jayewardenepura.
Miss W.M.Ariyawathie (Manager Administration) Counts 17 years of experience with the company. Joined in May 1994 as Manager Sales Centre of Chilaw Finance Limited. Promoted to the post of Manager Administration in 2008.
Mr. Munasinghe Chandra Prema Mendis (Head of Legal affairs) Counts 13 years of experience with the company. Joined in 1997 as Head of Legal AffairsFormer Deputy Inspector General of Sri Lanka Police.
The Chief Executive Officer nor any person nominated to become the Chief Executive officer is or was involved in the following events. Petition under bankruptcy laws filed against such person or any partnership in which he was a partner or any corporation of which he was an Executive Officer. Convicted for fraud, misappropriation or breach of trust or any other similar offence which the Exchange considers a disqualifications
30
8. LITIGATION, DISPUTES AND CONTINGENT LIABILITIES
There are no material legal, arbitration or mediation proceedings which may have or have had in the recent past significant effects on the entitys financial position or profitably. No penalties have been imposed by regulatory and state authorities. There were no material contingent liabilities as per Note 24 of the Audited financial Statements as at the year ended 31-03-2010
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9. Financial Information
9.1 RATIOS AND SHARE INFORMATION
Year ended March 31 9 Months ended December31 3
Net interest income/total average assets (%) Non-interest income/total average assets (%) Personal and other non-interest expenses/net interest income & non-interest income (%) Gross NPA ratio Liquid assets/customer and short term funds Debt equity ratios Book value per share (Rs) Earnings per share (Rs) Diluted Earnings per share (Rs) Profit after tax/average equity (%) Return on Average Assets (%) Effective Tax Rate (Rs) Dividends /profit after tax
2010 10.79 1.62
2009 9.44 2.40
2010 8.15 1.31
2009 6.91 1.06
44.54 14.6
52.30 9.3 36.79
32.01 19.2 20.24
36.88 15.5 22.84
deposits 38.20
0.00 10.07 0.95 0.95 9.45 4.15 34.05 84.67
0.00 9.67 0.49 0.49 5.31 2.33 34.27 132.7
0.00 10.18 0.83 0.83 8.26 3.40 36.5 -
0.00 10.98 0.71 0.71 6.21 2.74 39.2 -
32 9.2 RECEIVABLES
a. Where receivable have gone into arrears of over six months, the company classifies the same as nonperforming receivables. b. The percentage composition of receivables are as follows;
31.03.2010 % Less than 3 months 3 6 months Total performing loans 612 months Above 12 months Total non-performing loans Total 62 23 85 6 9 15 100
31.03.2009 % 72 19 91 4 5 9 100
31.12.2010 % 60 21 81 7 12 19 100
31.12.2009 % 68 17 85 7 8 15 100
33
10. CORPORATE GOVERNANCE PRACTICES Corporate Governance is an essential safeguard for a stable finance company. Good Corporate governance should provide proper incentives for the Board and management to pursue objectives that are in the interests of the company and shareholders and should facilitate effective monitoring, thereby encouraging companies to use resources more efficiently. Good corporate Governance can reduce the cost of capital and enhance shareholder value. In a more direct sense, weaknesses in Corporate Governance in the finance companies, reduce their capacity to identify, monitor and manage their business risks, and can result in poor quality leading and excessive risk- taking by such companies. for example, inadequate corporate governance can lead to poor management of credit risks and insufficiently developed credit culture, excessive exposure concentration, poor management of interest rate risk and exchange rate risk and inadequacies in the management of connected exposures. In some cases, in adequacies in corporate governance and risk management have the potential to lead to finance company insolvency and financial instability. More than most other corporate entities, finance companies are critically reliant on maintaining the confidence of depositors and other creditors for their viability. The financial viability, and indeed survival, of a finance company are very much dependent on maintaining depositor and other counter-party confidence. Therefore, the directors and senior management of such companies could be said to have a special duty of care to their depositors who are extremely important stakeholders in a finance company. A finance companys corporate governance arrangements could be expected to reflect this duty of care to depositors and other creditors in a number of ways, such as in the management of conflicts of interest between shareholders and creditors, and in the nature of financial disclosures made to creditors (and others) and in the nature of risk management systems. Finance companies differ from most companies in terms of the nature and range of their business risks, and the adverse consequences that would follow if these risks are poorly managed. Finance companies face a wide range of risks, many of them complicated in nature, including credit risks, exposure concentration risks, connected exposure risk, interest rate risks and business continuity risks. Therefore, they need corporate governance structures that promote effective identification, monitoring and management of all material business risks. Finance Companies are required to comply with a large number of regulatory requirements, including prudential requirements, taxation rules, various reporting obligations and the like. There is, therefore, a need for the corporate governance framework to include systems for ensuring that all statutory and regulatory requirements are being complied with and to highlight potential or actual breaches if and when they occur.
The Board of Directors comprises of Ten members, out of which Seven (07) Non Executive Directors and Three (03) Executive Directors. All Directors are well experienced in credit management in Hire Purchase and Leasing .The Chairman provides leadership to the Board by running the Board and preserving order and facilitating the effective discharge of Board functions.
34
10.1 INDEPENDENT NON EXECUTIVE DIRECTORS
Independent, Non Executive Directors of Chilaw Finance Ltd are namely ( 1 ) Mr.N.M.Ganalankara ( 2 ) Mr.R.H.Peethunanda ( 3 ) Mr.W.G.A.Fernando Although in terms of criteria set out in rule 7.10.4 (e) of the listing rules of the Colombo Stock Exchange 1) Mr. N,M.Ganalankara 2) Mr. R.H.Peethunanda 3.) Mr.W.G.A.Fernando do not fall under the classification of an Independent Director as they have served the Board of Directors of Chilaw Finance Ltd for a period exceeding nine years from the date of the first appointment, the Board to determine, having taking into account all the circumstances 1) Mr. N.M.Ganalankara. 2) Mr.RH.Peethunanda 3.) Mr.W.G.A.Fernando to be Independent Directors as they have no significant shareholding in the company and the long standing finance business experience they possess ( Please refer Directors Profile in page 9 & 10-Section 3.1 )
The Company has three Board appointed Committees. (1) The Remuneration Committee (2) The Audit Committee (3) The Intergraded Risk Management Committee
10.2 REMUNERATION COMMITTEE The Remuneration Committee is led by Mr.Nilantha Perera ( Non Executive Director ) and includes the following Directors. Mr. M.D.J.P.Nilantha Perera- Non Executive Director. Mr. W.G.A.Fernando- Independent- Non Executive Director Mr. R.H.Peethunanda- Independent- Non Executive Director Mr. R.M.U.Rathnayake- Non Executive Director Mr.N.M.Ganalankara Independent Non Executive Director The Remuneration Committee shall recommend to the final determination of the Board, the remuneration payable to the Executive Directors and Chief Executive Officer of the company and/or equivalent position thereof, within the organization. The Remuneration packages is linked to individual performances and in line with the companys long term strategy. The term Remuneration shall make reference to cash and all non-cash benefits whatsoever paid in consideration of employment with the Company and (excludes statutory entitlements such as Employees Provident Fund and Employees Trust Fund.)
35
A Statement of the Remuneration Policy The Committee deliberates and determines the policies and criteria relevant to fees of Directors, emolument of Executive Directors, Salaries and perquisites of corporate management and the senior management. The aggregate Remuneration paid to Executive and Non Executive Directors Rs.293,656/=
10.3 AUDIT COMMITTEE The Audit Committee comprises of the following Directors and is headed by Mr. Lalindra Rubera(Alternate Director to Mr.R W.Kulathunga.) Mr. Lalindra Rubera ( Alternate Director to Mr.R.W.Kulathunga Non Executive Director ) Mr. Don Sirisena Weerasuriya-Chief Executive Officer Mr W.G.A.Fernando- Non Executive Director Mr.R.H.Peethunanda-Non Executive Director The Audit Committee is established for the purpose of assisting the Board in fulfilling their responsibilities with regard to the integrity of Financial Statements, Risk Management, Internal Control and compliance with legal and regulatory requirements. It also assess of the independence and performance of the external auditors and internal audit function, make recommendations to the Board pertaining to appointment, re-appointment and removal of external auditors and approve the remuneration and terms of engagement of the external auditors. The Audit Committee is formally constituted as a sub-committee of the Main Board, to which it is accountable. The Audit Committee reviews the independence and objectivity of the external auditors and conducts a formal review of effectiveness of the external audit process. The committee reviewed the non audit services and its impact on the independence of the external auditors.
36
10.4 INTEGRATED RISK MANAGEMENT COMMITTEE The Integrated Risk Management committee comprises of two non Executive Directors, CEO and key management personnel supervising credit, market, and liquidity, operational and strategic risks. 1.Mr.R.M.U.Rathnayake ( Non Executive Director ) 2.Mr.S.A.C.O.Gunasekara ( Non Executive Director ) 3.Mr.D.S.Weerasuriya ( CEO )
The committee work with key management personnel closely and make decisions on behalf of the Board within the frame work of the authority and responsibility assigned to the committee. The Board shall present a report on the performance, duties and functions of the Audit Committee and Integrated Risk Management Committee at the General Meeting of the company.
37
INSPECTION OF DOCUMENTS The Introductory Document and Articles of Association of Chilaw Finance Ltd. are also hosted on the CSE website-www.cse.lk for a period of not less than fourteen (14) days.
38 11. DECLARATION BY THE DIRECTORS We, the undersigned who are named in the Introductory Document as Directors of Chilaw Finance Limited, hereby declare and confirm that we have read the provisions of the Companies Act No. 07 of 2007 and the Colombo Stock Exchange Listing Rules and any amendments to it relating to the issue of this Introductory Document and that those provisions have been complied with. This Introductory Document has been seen and approved by us and we collectively and individually accept full responsibility for the accuracy of the information given and confirm that provisions of the CSE Listing Rules and of the Companies Act No. 07 of 2007 and any amendments to it from time to time have being complied with after making all reasonable enquiries and to the best of our knowledge and belief, there are no other facts, the omission of which would make any statement herein misleading or inaccurate. Furthermore, the Board of Directors and the Company Secretary hereby declare and confirm that ( a ) The shares which are to be listed are fully paid by shareholders. ( b ) The company has complied with all the applicable regulatory requirements and guidelines under the Central Bank of Sri Lanka and other relevant authorities. (c ) There are no restrictions on listing with Colombo Stock Exchange (d ) There are no restrictions on trading of shares by any parties. ( e ) The company adherers to the Corporate Governance practices set out under Rule 7.10 of the Listing Rules.
1. Mr Navarathne Mudiyanselage Gnanalankara 2. Mr Don Sirisena Weerasuriya 3. Mr Dadimuni Wimalaratne de Silva 4. Mr Sembukuttiarachchige Collin Oswald Gunasekara 5. Mr Ranepura Hewage Peethunanda 6. Mr Jayasuriya Arachchige Don Noel Jayasuriya 7. Mr Warnakulasuriya Gregory Alfred Fernando 8. Mr Rathnayake Mudiyanselage Upali Rathnayake 9. Mr Madurawalage Don John Pradeep Nilantha Perera 10. Mr Ranjith Wimal Kulatunga Sgd. Sgd. Sgd. Sgd. Sgd. Sgd. Sgd. Sgd. Sgd. Sgd. Sgd.
11 Mr Lalendra Jerome Rubera (Alternate Directors to Mr Ranjith Wimal Kulathunga) Consultants and Corporate Secretaries ( Pvt ) Ltd ( Company Secretary ) Sgd.
39
FINANCIAL STATEMENTS
40
FINANCIAL STATEMENTS FOR THE YEAR ENDED 31.03.2008
41
42
43
44
45
46
47
48
49
50
51
52
53
54
55
56
57
58
59
60
61
62
63
64
65
66
67
68
69
70
71
72
73
74
75
76
77
78
79
80
81
82
83
84
85
86
87
88
89
90
91
92
93
94
DISCLOSURES TO THE AUDITED FIANANCIAL STATEMENTS FOR THE YEAR ENDED 31.03.2010
1. Assets pledged as collaterals by the company.
No assets have been pledged as collateral by the Company.
2. Re- valuation of Property,Plant & Equipment The Land & Building were revalued during the financial year 2005/2006 by an independent Valuer. The results of such revaluation was incorporated in the financial Statements for the year ended 31.03.2006. Such assets were valued on an open market value for an existing use basis. The surplus arising from the re valuation was transferred to revaluation reserve. The company has obtained the prior approval from the Monetary Board of Central Bank of Sri Lanka , to revalue the Land & Building in accordance with the Guidelines issued under the Finance Companies( Risk Weighted Capital Adequacy Ratio ) Direction No 02 of 2003. Moreover, the company has issued Bonus shares by capitalizing the re-valuation reserves during the subsequent financial years 2006/2007 and 2008/2009 respectively. The company has obtained prior approval from Monetary Board of Central Bank of Sri Lanka in accordance with Finance Companies ( Structural Changes ) direction No: 05 of 2005.
The carrying amounts of revalued assets that would have been included in the financial statements, had the assets been carried at cost are as follows.
Cost Cumulative Depreciation Rs. Class of Assets Freehold Land 2,084,000 Rs.
Net Carrying Net Carrying Net Carrying Amount Amount Amount 2010 2009 2008 Rs. Rs. Rs
Net Carrying Amount 2007 Rs..
2,084,000
2,084,000
2,084,000
2,084,000
Free hold Buildings
12,823,253 1,602,906
11,220,347
11,540,928
11,861,509
12,182,090
95
3. Aggregate amount of Non Performing Loans As at 31.03.2010 Rs. Hire Purchase Leasing Mortgage Loans Sundry Loans Pawning 19,380,043 6,122,695 25,004,127 4,587,331 490,800
Within 1 year
1-5 Years Over 5 Years
4. Lease Rentals Receivables
7,323,132
50,358,013
Hire Purchase Rentals Receivables
20,108,207
118,148,785
5.
Segment Reporting
A segment is distinguishable component of the company that is engaged in providing services ( Business Segment ) or in providing services within a particular economic environment ( Geographical Segment ) , which is subject to risks and rewards that are different from those of other segments. In accordance with Sri Lanka Accounting Standards No:28 Segmental Reporting , segmental information is presented in respect of the company. The segments comprise Leasing, Hire purchase, Mortgage Loans , Sundry Loans ,Pawning , Investment in fixed deposits with Banks ,Investment in Government Securities. Segment results, assets and liabilities include items directly attributable to a segment as well as those that can be allocated on a reasonable basis.
96
Financial Reporting by Segments 2009/2010 ASSETS % 2008/2009 %
Leasing
57,681,145.00
10.99
48,145,800.00
11.37
Hire Purchase
138,256,992.00
26.34
145,783,702.00
34.42
Loans
197,704,947.00
37.66
128,281,619.00
30.29
Pawning
25,728,622.00
4.90
19,722,268.00
4.66
Investment in Deposits with Banks
88,390,468.00
16.84
65,468,272.00
15.46
Investment in Government Securities
17,227,799.00
3.28
16,174,921.00
3.82
TOTAL
524,989,973.00
100.00
423,576,582.00
100.00
GROSS INCOME
Leasing
13,184,241.00
10.85
6,327,588.00
6.87
Hire Purchase
46,441,704.00
38.22
40,694,373.00
44.17
Loans
43,724,506.00
35.98
31,000,959.00
33.65
Pawning
4,689,946.00
3.86
4,300,324.00
4.67
Investment in Deposits with Banks
10,644,473.00
8.76
7,778,310.00
8.44
Investment in Government Securities
2,825,079.00
2.32
2,027,969.00
2.20
121,509,949.00
100.00
92,129,523.00
100.00
97
6. The following new standards issued by the Institute of Chartered Accountants of Sri Lanka have not been applied in preparing these financial statements as they are not effective for the financial period ended 31.03.2010. SLAS 44: Financial Instruments-Disclosures (effective for accounting periods beginning on or after 1 st January2011); and SLAS 45: Financial Instruments Recognition and Measurement (effective for accounting periods Beginning on or after 1st January 2011) SLAS 39 Share based payments- effective for period beginning on or after 1st January 2010, will be adopted for the financial year commencing from 1st April 2010.
7. The directors are of the opinion that the company does not have an ultimate parent and controlling interest if not exercised by any other organization.
98
8. MATURITY ANALYSIS
99
100
101
102
103
104
105
106
107
108
109
110
111
112
113
DISCLOSURES TO THE INTERIM FINANCIAL STATEMENTS FOR THE NINE MONTHS ENDED 31.12.2010
1. Contingent Liabilities and Assets The Company does not anticipate any contingent liabilities to arise out of any contingent event since the last Balance Sheet date.
There are no contingent assets since the last Balance Sheet date.
2. Events after the Balance Sheet date
There have been no other events subsequent to the last Balance Sheet date which require disclosure in the interim financial Statements.

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1

CHILAW FINANCE LIMITED We understand People and Finance

CHILAW FINANCE LIMITED

On the Diri Savi Board of the Colombo Stock Exchange

Chilaw Finance Limited Introductory Document

ABBREVIATIONS USED IN THIS INTRODUCTORY DOCUMENT

CFL or the Company SEC CBSL Ordinary Share(s) EGM -

Chilaw Finance Limited Introductory Document

Chilaw Finance Limited Introductory Document

Name and address of the Auditors

Bankers to the Company

Chilaw Finance Limited Introductory Document

SOURCE: CSE Monthly- March 2011

Chilaw Finance Limited Introductory Document

SOURCE: CSE Monthly- March 2011

Chilaw Finance Limited Introductory Document

Chilaw Finance Limited Introductory Document

No. of Shareholders Individual Institutions Total 144 1 145

TOTAL Holdings 27,683,948 400,000 28,083,948 % 98.58% 1.42% 100.00%

Chilaw Finance Limited Introductory Document

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

No. of Shareholders Individual Institutions Total 12 12

TOTAL Holdings 556,544 556,544 % 100% 100%

Chilaw Finance Limited Introductory Document

14,655,780 319,227 745,000 2,235,000 3,743,752 106,750 140,144 639,421 257,643

Ordinary Shares Non voting

2008-July-31 Ordinary Shares 2008-July-31 Ordinary Shares Non voting

Chilaw Finance Limited Introductory Document

2009-Nov-09 2009-Nov-09 2009-Nov-06 2009-Nov-16

184,163 7,000 500,000

Chilaw Finance Limited Introductory Document

4.5 ADDITIONAL INFORMATION

4.6 HISTORY OF DIVIDENDS Financial Year

Dividend Paid ( Rs. )

Chilaw Finance Limited Introductory Document

Chilaw Finance Limited Introductory Document

Source: Central Bank of Sri Lanka (a) Revised (b) Provisional

Chilaw Finance Limited Introductory Document

5.3ASSETS & LIABILITIES OF REGISTERED FINANCE COMPANIES

Chilaw Finance Limited Introductory Document

6. PROFILE OF THE ENTITY

Chilaw Finance Limited Introductory Document

31-3-2010 122 % 6.83 % 92.86 % 49.39 % 88.36 % 15.51 %

31-12-2010 139 % 12.17 % 103.67 % 49.50 % 88.41 % 27.70 %

Chilaw Finance Limited Introductory Document

6.2.2 DETAILS OF (NON VOTING) ORDINARY SHAREHOLDERS AS AT 17TH March 2011

Chilaw Finance Limited Introductory Document

Number of Shares 500,000 328,459

*There were only two Preference Shareholders as at 17.03.2011

Chilaw Finance Limited Introductory Document

6.3 DEGREE OF DEPENDENCE ON KEY CUSTOMERS AND SUPPLIERS.

6.4 HUMAN RESOURCES No of Employees

Please note that

Chilaw Finance Limited Introductory Document

NEW PRODUCTS TO BE OFFERED

Chilaw Finance Limited Introductory Document

Chilaw Finance Limited Introductory Document

Chilaw Finance Limited Introductory Document

Chilaw Finance Limited Introductory Document

8. LITIGATION, DISPUTES AND CONTINGENT LIABILITIES

Chilaw Finance Limited Introductory Document

2010 10.79 1.62

2009 9.44 2.40