ANNL RPRT - CAL [2012] Inner Pages 02 FINAL COPY CORRECTION · Lanka Tea Board, Sri Lanka Insurance Corporation Ltd., Public Enterprises Reform Commission and Bank of Ceylon. He presently

Trust built upon

tradition

FINANCE

Capital Alliance Finance PLCCo.Reg.No. PB 765 PQ

A n n u a l R e p o r t 2 0 1 2

Vision

Mission

To be a force in the financial

services industry by providing

dependable and innovative total

financial solutions.

To provide innovative financial

solutions with differentiated value

added customer services whilst

maintaining service excellence.

A n n u a l R e p o r t 2 0 1 2

The age-old traditions based

on trust still prevail in our country.

They give us the strength and

stability to progress,

ensuring security, success and prosperity.

These are also the core values of

Capital Alliance Finance PLC.

040506081012141618

34

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ContentsCorporate Information

Corporate Profile

Financial Highlights

Board of Directors

Chairman’s Review

CEO's Report

Management Discussion & Analysis

Risk Management

Corporate Governance

Annual Report of the Board of Directors on the Affairs of the Company

Directors' Responsibility for Financial Reporting

Audit Committee Report

Directors’ Statement on Internal Controls

Integrated Risk Management Committee Report

Remuneration Committee Report

Independent Auditors Report

Balance Sheet

Income Statement

Statement of Changes in Equity

Cash Flow Statement

Notes to the Financial Statements

Share Information

Distribution of Shareholders

Value Added Statement

Notice of Meeting

Form of Proxy

Instructions as to Completion of Proxy

C a p i t a l A l l i a n c e F i n a n c e

Corporate Information

Name of the Company : CAPITAL ALLIANCE FINANCE PLC

Legal Form : A Public Quoted Company with Limited LiabilityShares were quoted on the Colombo Stock Exchange on 4th October 2011

Date of Incorporation : 25th November 1981

Company Registration No. : PB 765 PQ

Directors : Mr. C P R Perera

Registered Office : No. 21, Kumara Veediya, Kandy

Colombo Office : 123, Hunupitiya Lake Road, Colombo 2

Tel : + 94 11 2389389Fax : + 94 11 2389411E-mail : [email protected] : www.capitalalliance.lk

Secretaries and Registrars : S S P Corporate Services (Private) LimitedNo. 101, Inner Flower Road, Colombo 3

Tel : + 94 11 4369778Fax : + 94 11 2573609

Bankers : Bank of CeylonPeople’s BankSeylan BankCommercial BankDFCC Vardhana BankNations Trust Bank Ltd.

Lawyers : Shyamala Bootawatte (LLB) Attorney - at - Law, Notary Public, Commissioner for Oaths & Company Secretary

Auditors : M/s. Ernst & YoungChartered Accountants839/2, Peradeniya Road, Kandy, Sri Lanka.

Tel : + 94 81 2232056+ 94 81 4471354+ 94 81 4471356

Fax : + 94 81 2232056

Mr. W A T FernandoMs. N T M S CoorayMr. R J ArasaratnamMr. E R G C G HemachandraMr. C S R S Anthony

A n n u a l R e p o r t 2 0 1 2

04

Corporate Profile

Capital Alliance Finance PLC is a subsidiary of Capital Alliance Holdings Limited, one of Sri Lanka's emerging investment banks with extensive interests in financial services.

The firm's operations are limited to its head office in Kandy and a branch office in Colombo.

Formed in 1981 as Silvereen Finance Company Limited, the finance company has deep roots in Kandy. The company was owned by a reputed family in Kandy, which focused on lending to help clients in the area.

In March 2009, Silvereen was acquired along with ABC Credit Card Company by the state-run People's Merchant Bank PLC. The name was changed to Peoples Merchant Finance Company Limited thereafter.

Capital Alliance bought the 99 percent stake of the company for Rs. 430 million in May 2011, and changed the name to the present one in September 2011.

The company is primarily involved in the business of accepting deposits and also offers finance leasing, hire purchase facilities and personal loans to customers. Rates are competitive to ensure customers get the best rate.

Currently, the leasing and hire purchase portfolios account for about 30 percent of our lending portfolio, followed by loans borrowed against property mortgages.

We are nearly three-decades old and registered with the Central Bank of Sri Lanka.

Capital Alliance Holdings Limited Capital Alliance Holdings Limited is the group holding company and strategic investment arm of the Capital Alliance group – one of the few financial institutions in the country offering fully-fledged investment banking solutions including corporate advisory, stock broking, bond trading and asset management.

Since inception, Capital Alliance has established itself as a leading player in the financial services sector of Sri Lanka specializing in the origination, trading and investment in debt, and equity securities; operating both on the buy side as well as the sell side. Capital Alliance strives to provide clients with unique insights and comprehensive expertise into Sri Lanka's capital markets through their trading and research operations. Their reputation is based on excellence in execution, research and product innovation.

Capital Alliance Holdings was incorporated on March 20, 2003, under the Companies Act No. 17 of 1982 and reregistered on September 8, 2010 under the Companies Act No. 7 of 2007.


05

Financial Highlights

Financial Performance

Gross Income

Interest Income

Net Interest Income

Profit for the year

Financial Position

Lease Portfolio

Margin Trading

Total Assets

Shareholders Funds

Total Deposits

Information Per Ordinary Share

Earning (Rs.)

Net Asset (Rs.)

Market Value at the End of the Period (Rs.)

Price Earning Ratio

Ratios

Return on Average Assets

Return on Equity

Interest Spread

Net Interest Margin

Compliance Ratio

Core Capital to Risk Weighted Assets (Required Minimum – 5%)

Total Capital to Risk Weighted Assets (Required Minimum – 10%)

Liquid Assets to Total Assets

Liquid Assets to Deposits (Required Minimum – 10%)

Equity to Assets

2012

LKR '000

98,577,140

83,953,843

45,978,707

16,559,844

138,035,564

216,909,529

638,148,317

233,482,935

303,368,409

0.49

6.88

37.80

77.14

3.26%

7.09%

7.08%

9.98%

42.76%

42.76%

14%

29%

37%

2011

LKR '000

67,070,528

47,507,993

37,746,520

9,366,841

119,599,556

-

378,825,156

216,923,092

136,750,096

0.28

6.40

N/A

N/A

2.47%

4.32%

8.02%

17.55%

80.28%

80.28%

24%

67%

57%

Change %

47%

77%

22%

77%

15%

100%

68%

8%

122%

75%

7%

N/A

N/A

32%

64%

(12%)

(43%)

(47%)

(47%)

(43%)

(57%)

(36%)

A n n u a l R e p o r t 2 0 1 2

06

Net Profit

12,631

6,805

3,118

9,367

16,560

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

18,000

2008 2009 2010 2011 2012

Net Profit

Year

Rs. (000)

Reap a bountiful harvest...

Mr. C P R Perera

Chairman / Independent Non-Executive Director

Mr. Perera has been associated with the tea industry for 50 years. He

retired as Chairman/CEO of Forbes & Walker Limited in 2005 after

serving this company for 44 years. He is a former Chairman of the Sri

Lanka Tea Board, Sri Lanka Insurance Corporation Ltd., Public

Enterprises Reform Commission and Bank of Ceylon. He presently

serves on the Boards of two plantation companies and their respective

holding companies as well as a number of other public listed and

private companies. He is a Director of the Sri Lankan Business

Development Centre.

Mr. W A T Fernando

Non-Executive Director

Mr. Fernando is a Fellow Member of the Chartered Institute of

Management Accountants (UK) and holds an MA in Financial

Economics from the University of Colombo. He counts over 20 years of

experience in the capital markets of Sri Lanka. His main areas of

specialization are fixed income markets including government

securities and securitization.

Board of Directors

A n n u a l R e p o r t 2 0 1 2

08

Seated from left to right:

Mr. C S R S Anthony, Mr. E R G C G Hemachandra,

Mr. C P R Perera, Ms. N T M S Cooray

Standing from left to right:

Mr. W A T Fernando, Mr. R J Arasaratnam

Ms. N T M S Cooray


Ms. Cooray is the Managing Director of Jetwing Hotels Limited - an

inbound / outbound travel agent in Sri Lanka, and is also a Director of

Jetwing Hotels Ltd., a hotel management company that owns and

manages twelve hotels in Sri Lanka. She is also the past President of

the Sri Lanka Association of Inbound Tour Operators (SLAITO) in Sri

Lanka. Having completed her higher studies in the United Kingdom

she embarked on a career in accountancy and is an Associate Member

of the Chartered Institute of Management Accountants, United

Kingdom. She also holds a Masters Degree in Business Management

from the University of Colombo. Prior to joining the travel and tourism

trade, she worked as the Finance Director of J Walter Thompson Ltd.

for 5 years and held a similar position at Mojo Hong Kong Ltd. for 2

years.

Mr. R J Arasaratnam


Mr. Arasaratnam is a Director of Jetwing Travels (Pvt) Limited and

counts over 19 years of experience in the field of travel and tour

operations.

Mr. E R G C G Hemachandra

Executive Director / Acting CEO

Mr. C S R S Anthony

Independent Non-Executive Director

Mr. Anthony is an Attorney-at-Law, Notary Public, Commissioner for

Oaths and a Registered Company Secretary. He is also a Fellow

Member of the Chartered Institute of Management Accountants, UK, a

Chartered Global Management Accountant and a Fellow Member of

The Institute of Certified Management Accountants of Sri Lanka. He

commenced his career at PricewaterhouseCoopers, prior to joining

Jetwing Hotels Limited as Finance Manager in 1996 and is currently

the Executive Director. He is also serving on several directorates

including three publicly quoted companies. He is a Life Member of the

Bar Association of Sri Lanka (BASL) and a Delegate of the Bar Council

of the BASL; he is also the Convener of the Finance Committee of

BASL. He is an Executive Committee Member of the Association of

Corporate Lawyers of Sri Lanka as well.

Mr. E R G C G Hemachandra holds a Bachelors Degree in Business

Administration with Honours in Finance from the University of

Colombo and is an Associate Member of the Chartered Institute of

Management Accountants UK. He has wide experience in the fields of

corporate investments, dealing and treasury operations. He

commenced his career at Union Assurance Ltd. in 1999 and

subsequently joined Ceylinco Shriram Securities Ltd. and Ceylinco

Shriram Asset Management Ltd. in 2003 as Head of Dealing. He has

been with Capital Alliance Ltd. since 2005 as the Head of Treasury and

counts over 12 years of experience in the field of financial services.


09

Chairman’s Review

Dear Shareholders, It is with great pleasure that I present the annual report of your company for the year ended 31st March 2012. It is the first year of operation under the new management after the company was bought over by Capital Alliance Holdings Limited in 2011. I wish to acknowledge my appreciation for the efforts, hard work and dedication of our Board of Directors, managerial and other members of the staff in making our achievements a reality.

Financial PerformanceAmong numerous parameters of performance, I wish to specifically mention the significant growth achieved in profit after tax, which amounted to approximately Rs.17 Mn, a 77% surge from the previous year’s figure, and the significant growth recorded in our lending operation.

The company was able to generate a net interest income of Rs. 46 Mn for the year under review, which was a 22% growth from the previous year. The portfolio of advances reached up to Rs. 461 Mn, whilst maintaining an attractive non-performing loans ratio. Net assets recorded a sum of approximately Rs. 233 Mn.

We also retained the trust of our depositors, which we have built over a period of 30 years, concluding the year with a very successful campaign to attract new deposits. Our total deposits grew from Rs.137 Mn. to Rs. 303 Mn. during the year.

The EconomyOn the economic front, the financial year began on a favourable note, where we witnessed a GDP growth of over 8% and also an extremely favourable environment for the financial sector, benefiting from lower duty on vehicle imports, encouragement on granting capital allowances on equipment and machinery and lower interest rates.

Under this backdrop the specialized leasing companies and the finance companies grew rapidly, aided by the foresight of the government in developing the non-bank financial sector, strengthening the sector as a whole, whilst availing funding for even smaller entrepreneurs.

A n n u a l R e p o r t 2 0 1 2

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Chairman’s Review Contd...

In this favourable environment we marked a steady growth during the year. The outlook for the future was hopeful and our business prospered. However the favourable environment changed during the latter part of the year, with the escalation of interest rates and duties on vehicle imports.

Further, certain policy adjustments aimed at improving the economy in the long run presently affected the financial industry as a whole. Therefore amidst these macro-economic influences, our positive achievements for the year were indeed commendable.

Stock Market ListingDuring the financial year under review the company made several initiatives to strengthen its strategic positioning. Changeover of the ownership of the company to Capital Alliance Group and listing of the company in the Colombo Stock Exchange were some of the most significant events that took place during the year.

Team BuildingFurthermore with the change of management we recruited some experienced and able individuals from the banking and financial sectors to fill in key positions of the company, so as to steer the company to new heights.

With the recruitment of new officials and revamping of the company’s strategy, we introduced new thinking to our organisation.

We now have a strong strategy in place to overcome the challenges that lie ahead and to build upon our achievements so far. We intend to grow our business by catering to the constantly changing requirements of our customers by providing innovative solutions.

DividendsNo dividend is recommended by your Board in an effort to strengthen our reserves and consolidate the company for future development.

Future OutlookWe are in the process of further strengthening the structure of our team. Simultaneously we will be implementing a state-of-the-art IT system to enhance our efficiency and offer a speedier, more convenient and superior service to our customers.

As future strategies, we will be expanding our operations by opening new branches in strategic locations in the country and enhancing our product line by introducing innovative instruments. We also hope to expand our lending operations and further increase our deposit base in the coming year.

AcknowledgementsIt is noteworthy to mention the timely and prudent measures taken by the Central Bank to restore confidence amongst the public in registered finance companies. The professional approach by the Director and the staff of the Department of the Non-Banking Financial Institutions is acknowledged with gratefulness.

I take this opportunity to thank the Board of Directors for their continuous direction and guidance. I would also like to express my gratitude to our valued shareholders for the trust and confidence placed in us.

I must also thank the dynamic team at Capital Alliance Finance PLC. All of them have contributed towards the success of the company with great dedication. Finally, I must thank our loyal customers who have steadfastly stood by us and given us the strength to aim higher.

Chrisantha Perera

Chairman

25th June 2012


11

CEO's Report

It is with great pleasure that I present the annual report for the year ended March 31st 2012.

I must start with the acquisition of the company by the Capital Alliance Group, a move that will transform it to become a prominent player in the financial services market in Sri Lanka.

It was in May 2011 that the Capital Alliance Group signed the share purchase agreement to acquire this company, formerly known as People's Merchant Finance, from People's Merchant Bank, a subsidiary of the state-owned People's Bank. It was a very challenging task to transform it into a successful company as it had not performed particularly well and was mainly operating in Kandy. The transition from government to private ownership took some time to adjust to (in the case of both the staff and customers).

We had a very short timeframe to comply with the requirements and list the company on the Colombo Stock Exchange; shares began trading in early October.

During the year, the market conditions changed from positive in the first six months to unfavourable in the latter part. Despite this, we achieved some notable successes, giving us the confidence to overcome all challenges and have an optimistic outlook.

We prospered under the regime of lower duties on vehicle imports and lower interest rates, but subsequently business declined when these were raised in the second half of the year. Despite this, we increased our net interest income, post-tax profit, the deposit base and the asset base, among other achievements.

The net interest income of the company reached nearly Rs.46 million during the year, a notable increase from the previous year's figure of Rs.37 million. The post-tax profit rose from Rs.9.4 million to Rs.16.6 million. Total deposits more than doubled, from Rs.136.8 million to Rs.303.4 million, revealing the trust and confidence customers have placed in us. Our total assets also increased significantly, from Rs.378.8 million to Rs.638.1 million.

A n n u a l R e p o r t 2 0 1 2

12

We have also enhanced our infrastructure to offer our customers a superior service. A notable initiative in this regard is the installation of a state-of-the-art IT system that will boost efficiency and meet our customers' requirements in a speedy and convenient manner.

In order to give our company a clear strategic direction, we enhanced our expertise at the top management level through a recruitment drive. We also recruited professional marketing personnel and greatly strengthened our marketing division to build our brand image. We now have a strong team to drive the company to greater heights.

At present, we are engaged in four areas of business - leasing, hire purchase, fixed deposits and margin trading. We have performed well in all these areas. Margin trading is currently our leading income earner. At present, our margin trading activities are confined to customers of the Capital Alliance Group, but in the near future we hope to extend it to the entire market.

We have ambitious plans for the future. We will shift our head office to our own premises in Kandy, and open new branches in some prominent cities to broaden our customer base.

We will also expand our lending and deposit bases, and introduce new services such as savings accounts and pawn broking in the near future.

With a focused strategy, we have made some impressive strides. We will continue to expand our business in line with our vision, to become a highly reputed player in the country's financial sector. We will do so by laying absolute emphasis on customer satisfaction.

CEO's Report Contd...

Let me take this opportunity to thank our Chairman and the Board of Directors for all their expertise and guidance. I must also acknowledge our valued shareholders for having faith in us.

I must also express my gratitude to the management team and staff of Capital Alliance Finance PLC. It is largely due to their efforts that we have achieved what we have during the year. Finally, I must thank our customers who have placed their trust and confidence in us, giving us the strength and courage to fly to greater heights.

Gihan Hemachandra

Director / Acting CEO

25th June 2012


13

Management Discussion& Analysis

Industry OverviewAccording to the Central Bank, the non-bank financial sector (comprising licensed finance companies and specialized leasing companies) continued its growth momentum during the year. Impressive increases were recorded in the main indicators in respect of capital, profitability, asset quality, credit growth and deposit base. However, the overall performance of the sector was somewhat affected as a few licensed finance companies continued to experience deterioration of capital and shortage of liquidity. The total asset base of the non-bank financial sector rose to Rs.490 billion, growing by 26 % during 2011. This was largely driven by the growth of the accommodations portfolio, which grew by 46% to Rs.388 billion as at end 2011. The major sources of the increase in accommodations were finance leases, hire purchases and other secured advances.

The Central Bank stated that deposits grew by 27% to Rs.186 billion as at end 2011, compared with the 22% growth in 2010, reflecting the regaining of confidence in the licensed finance companies sector. It added that deposit mobilization was mainly through time deposits, which accounted for nearly 97% of the total deposits.

OPERATIONS REVIEW

Leasing, Hire Purchase and Margin Trading Leasing, hire purchase and margin trading are the company’s three main products in the financial accommodation portfolio. Our performance in all these three areas has been significant, with margin trading being the leading income earner.

At present, the company offers these facilities through its head office based in Kandy and branch office in Colombo. Our reach will gradually expand as we open new branches in strategic locations around the country in the near future.

We provide leasing and hire purchase facilities for all types of motor vehicles and equipment. Our margin trading operations, which commenced in the financial year 2011/2012, will in the near future be extended to cover the entire market rather than being limited to customers of the Capital Alliance Group as at present.

Together, leasing, hire purchase and margin trading generated an income of Rs.69 million accounting for 70% of the total revenue. This is an increase of 113% over the previous financial year. This is largely attributable to margin trading. During the first half of the year, we operated in a positive environment. The lower duties on vehicle imports and lower interest rates, among other things, benefited us and the financial industry as a whole. However, in the latter half of the year, the environment was less favourable largely due to the increase on vehicle import duties as well as interest rates. Our lending portfolio recorded a substantial increase during the year, growing by 114% from Rs.215 million to Rs.461 million.

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14

Total Income / Turnover

20

40

60

80

100

120

2007/08

2008/09

2009/10

2010/11

2011/12

Total Income / Turnover

Rs. Mn

Year

Total Advance

50100150200250300350400450500

2007/08

2008/09

2009/10

2010/11

2011/12

Total Advance

Year

Rs. Mn

Total Expenditure

5

10

15

20

25

30

35

40

2007/08

2008/09

2009/10

2010/11

2011/12

Total Expenditure

Year

Rs. Mn

Management Discussion& Analysis Contd...

Total Deposit

50

100

150

200

250

300

350

2007/08

2008/09

2009/10

2010/11

2011/12

Total Deposit

Rs. Mn

Year

Shareholders Fund

50

100

150

200

250

2007/08

2008/09

2009/10

2010/11

2011/12

Shareholders Fund

Rs. Mn

Year

DepositsWe carried out an aggressive deposits drive during the year. We succeeded in increasing our deposit base from Rs.137 million to Rs.303 million, a growth of 122%. We not only retained the trust of our deposit holders, but also attracted new deposits. Our fixed deposits portfolio consists of both institutional investors as well as individuals. Institutional investors account for 5.29% of the portfolio, while individuals account for the balance.

Financial AchievementsThere were several notable achievements by the company during the year. The profit after tax grew significantly from Rs.9 million to Rs.17 million, an increase of 77%. The gross income increased by 47%, from Rs.67 million to Rs.99 million. The net interest income grew by 22%, from Rs.38 million to Rs.46 million. The company’s assets grew by an impressive 68%, while shareholder funds recorded a compound 8% growth.

Operating ExpensesOur operating expenses increased by 22%. The personnel cost increased by 53% due to the strengthening of human resources. Through a recruitment drive, we have recruited professionals with much experience and expertise to take the company forward. Provisioning for bad and doubtful debts declined by 61%, from Rs.14 million to Rs.5 million.

We have focused on maintaining a healthy portfolio while increasing disbursements. As mentioned earlier, our lending portfolio grew by 114 % during the year.

Information TechnologyWe continued to enhance our infrastructure by installing a state- of-the-art IT system to provide a speedier, more efficient and convenient service to customers.

Shareholders FundThe shareholders fund has increased from Rs.216.9 Mn to Rs. 233.5 Mn


15

Net Profit

2

4

6

8

10

12

14

16

18

20

2007/08

2008/09

2009/10

2010/11

2011/12

Net Profit

Year

Rs. Mn

Net Interest Income

5101520253035404550

2007/08

2008/09

2009/10

2010/11

2011/12

Net Interest Income

Rs. Mn

Year

Risk Management

The highly competitive business environment in Sri Lanka's financial sector exposes the company to a number of business risks.

�To minimize sector or industry specific risk, Capital Alliance Finance PLC operations are diversified across many product lines, industries and sectors.

�A range of products to suit different customer needs have been developed. This enables the company to identify the opportunities even under challenging market conditions.

�Competitor threats on current and future business operations are evaluated on an ongoing basis.

�Products and services are evaluated against competitor offerings and are revised to retain competitiveness.

�The performances of each business division and employees are monitored regularly and communicated via regular business reviews.

Operational risksOperational risk includes the possibility of breakdown in an operational process (e.g. human error or employee misconduct), a malfunction of systems or any external events beyond its control (such as natural disaster).

�A crises action plan has been developed in the event of major crises. The action plan was formulated under the direction of a risk management committee.

�An IT security system is in operation; in addition the company plans to facilitate further improvements to the IT security system with a reputed company.

�Internal audits are conducted by an independent audit firm M/s B R De Silva and Co. at regular intervals. The scope of internal audits extends to efficiency of operations in compliance with laws and regulators.

�A disaster recovery plan has been developed with data backups stored in external locations.

Compliance riskRegulatory changes could significantly impact the company's business (including costs, capital requirements, and products)

�The Board of Directors closely monitors regulatory developments and compliance of all requirements.

�The Audit Committee supplements this function by reviewing and discussing compliance declarations and compliance matters relevant to the company.

Legal riskLegal risk arises when companies enter into transactions which are non-complaint with the legal/governance framework set out by various regulatory bodies. Such legal risk may lead to further reputational and financial risk.

�When entering into new transactions, contractual documentation is thoroughly evaluated for compliance with the legal requirements.

�Adoption of changes in law and regulations on a periodic basis to meet compliance.

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Build on a heritage of security...

Corporate Governance

Corporate Governance is popularly understood as the system by which Companies are directed and controlled. The Board of Directors is responsible for the governance of the Company. Your Board has placed considerable emphasis on developing rules, structures and processes to ensure integrity and transparency in all of the Company’s dealings and on making the best effort in achieving performance and quality profits. We have continuously refined our structure and systems to ensure governance on the lines as defined, aware all the time that we are accountable to our stakeholders and the general public.

This statement describes the application of the Corporate Governance practices within the Company during the year under review.

Compliance with the Code of Best PracticeThe Company currently complies with the requirements set out in the Code of Best Practice for Corporate Governance issued by the Institute of Chartered Accountants of Sri Lanka and the Rules on Corporate Governance contained in the Listing Rules of the Colombo Stock Exchange.

Board of DirectorsThe Board is the topmost body of Capital Alliance Finance PLC that carries the responsibilities of directing the Company and of supervision. The responsibilities of the Board include making an accurate assessment of the Company’s position, making strategic decisions, attending Board meetings and Board sub committees, ensuring good governance and overseeing the risk management of the Company.

Board Sub-CommitteesAn Audit Committee, Integrated Risk Management Committee, and Remuneration Committee function as Sub-Committees of the Board. The above Committees consist of a majority of Non-Executive Directors and their names are given on pages 37, 39 and 40. The Financial Controller functions as the Compliance Officer to ensure compliance with the regulatory and statutory requirements and the laws and regulations governing Finance Companies, Public Listed Companies and, generally, in business activities undertaken by the Company. Besides, the Company had identified Committees in-house for recoveries, credit and asset and liability management to regulate the relevant areas thereby ensuring that decision-making is on a participatory basis. The Reports of the Audit Committee and Remuneration Committee are given on pages 37 and 40.

CompositionThe Board comprises six (6) members, five (5) of whom including the Chairman are Non Executive Directors with a balance of skills and experience which is appropriate for the business carried out by the Company. The Board has determined that two (2) Non Executive Directors are ‘independent’ as per the criteria set out in the Listing Rules of the Colombo Stock Exchange.

The names of the Directors who served during the year under review are disclosed in the Annual Report of the Board of Directors on the Affairs of the Company on pages 34 and 35.

Board MeetingsThe results of the Company are regularly considered and monitored against the budgets at Board meetings at which a standard agenda is discussed together with any other matters that require the attention of the Board. The Board meets once a month, and wherever necessary Special Meetings of the Board are held. During the year ended 31st March 2012, eight (8) meetings of the Board were held. The attendance at the meetings were:

The ManagementThe day-to-day operations of the Company are entrusted to the Corporate and Senior Management headed by the Acting Chief Executive Officer. They ensure that risks and opportunities are identified and steps are taken to achieve targets within defined time frames and budgets.

Financial Disclosures and TransparencyFinancial Statements are prepared in accordance with the Sri Lanka Accounting Standards, the Companies Act, the Finance Business Act and the directions and rules issued thereunder. The unaudited provisional quarterly statements of accounts are released to the Colombo Stock Exchange (CSE) in compliance with the Listing Rules of the CSE. Messrs Ernst & Young act as external Auditors of the Company. The Auditors are allowed to act independently and without intervention from the Management or the Board of the Company to express an opinion on the Financial Statements of the Company. All the required information is provided for examination to the Auditors.

Ethical StandardsThe Company requires that all its employees maintain the highest standards of integrity in the performance of their duties and dealings on behalf of the Company. The Company focuses on the training and career development of employees for the creation of an empowered and committed group of employees, who will drive the Company to higher levels of achievement in keeping with its mission, vision, goals and values.

Mr. P A A PanditharatneMr. A WickremasingheMr. A Sabry IbrahimMr. J P AmaratungaMr. M HaradasaMr. C P R PereraMr. W A T FernandoMs. N T M S CoorayMr. E R G C G HemachandraMr. R J ArasaratnamMr. C S R S Anthony

Chairman (Resigned)Managing Director (Resigned)Director (Resigned)Director (Resigned)Director (Resigned)Independent Non ExecutiveNon ExecutiveNon ExecutiveExecutiveNon ExecutiveIndependent Non Executive

0202020201060606060306

Name of DirectorExecutive / Non Executive /Independent Non Executive Attendance

A n n u a l R e p o r t 2 0 1 2

18

Statutory PaymentsAll statutory payments due to the Government, which have fallen due, have been made or where relevant provided. Retirement gratuities have been provided for in accordance with the Sri Lanka Accounting Standards, No. 16, Employee Benefits (Revised 2006).

Compliance with Central Bank RegulationsAs a registered Finance Company and a registered Finance Leasing Establishment, the Company is governed by the Non-Bank Financial Institutions Directions & Rules issued by the Monetary Board of the Central Bank of Sri Lanka. Accordingly, the Company has to carry out and maintain business activities in compliance with the Directions from time to time issued by the Central Bank of Sri Lanka.

Accountability and DisclosureIn the year ended 31st March 2012, the members of the Board of Directors have reviewed in detail the Quarterly Financial Statements and Annual Financial Statements in order to satisfy themselves that they present a true and fair view of the Company’s affairs, and these practices have been further strengthened as per the Code of Best Practices on Corporate Governance, Listing Rules of the Colombo Stock Exchange and Directions issued under the Finance Companies Act. A summary of Directors’ Responsibilities in respect of Financial Statements is given on page 36.

Corporate Governance Contd...

Investor Rights and RelationsThe Company is bound to safeguard the rights of all shareholders and secure equal treatment for all shareholders. The Company provides its Annual Financial Statements within the mandatory period to all shareholders and debenture holders and the unaudited provisional Financial Statements are released to the Colombo Stock Exchange (CSE) in accordance with the Listing Rules of CSE. All shares carry equal voting rights and the shareholders are informed of the Annual General Meeting before the mandatory period. The Board, Senior Management and the Auditors attend the Annual General Meeting to answer the questions of shareholders.

By Order of the Board.


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E R G C G HemachandraDirector / Acting CEO

25th June 2012


Finance Companies Direction No.03 of 2008 (Corporate Governance)

2. The Responsibilities of The Board of Directors

Rule Reference Rule Description Compliance Status

2. (1) Strengthening the safety and soundness of the company CompliedThe Board formulates the business strategy and ensures that the CEO and management team possesses the skills, experience and knowledge to implement the strategy. It also ensures that effective systems are in place to secure integrity of the information, internal controls and risk management and compliance with all applicable laws and regulations.

2. (2) Chairman and CEO CompliedThe Board has appointed the Chairman and the Chief Executive and the roles of the Chairman and the Chief Executive are separate.

2. (3) Independent professional advice to Board Members CompliedThe Board members are permitted to obtain independent professional advice from a third party including the Company’s external auditors and lawyers, at the expense of the Company since the Board collectively, and Directors individually, must act in accordance with the laws of the Country, as applicable to the business enterprise.

2. (4) Conflict of interests CompliedThe Directors where necessary have made every effort to ensure that they abstain from voting on any matter that may be regarded as them being interested in that particular matter.

2. (5) Formal schedule of matters CompliedThe Board has a formal schedule of matters reserved to it.

2. (6) Situation of insolvency CompliedNo such situation has arisen during the year.

2. (7) Corporate Governance Report CompliedThis report addresses this requirement.

2. (8) Annual self assessment by the Directors Complied

3. Meeting of the Board

3. (1) Board Meeting CompliedBoard Meetings were held in monthly intervals.

3. (2) Inclusion of proposals by all Directors in the agenda CompliedThe Company Secretary facilitates any requests made by the Directors at the meetings or otherwise and ensures that the said matters and proposals are included in the agenda for the next meeting for discussion.

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3. (3) Notice of Meetings CompliedDirectors are given adequate time and at least 7 days of notice for regular Board Meetings. For all other meetings a reasonable notice period is given.

4. The Board’s Composition

4. (1) Number of Directors CompliedThe Board comprises of six Directors

3. (5) Board Secretary CompliedPlease refer section A.1.4. of the ICASL Code compliance table.

3. (6) Agenda and minutes of the Meetings Complied The Secretary prepares the agenda.

3. (7) Access to Secretary by Directors CompliedAll the Directors have access to the Secretary.

3. (8) The Company Secretary shall maintain the minutes of Board Meetings and such minutes shall be open for inspection at any reasonable time, on reasonable notice by any Director

CompliedThe Company Secretary maintains the minutes of Board Meetings, which are available for inspection by any Director.

3. (9) Minutes of Board Meetings shall be recorded in sufficientdetail so that it is possible to gather from the minutes, asto whether the Board acted with due care and prudence in performing its duties.

CompliedThe Company Secretary records the proceedings of the meetings and the decisions taken thereon in sufficient detail.

4. (2) Period of service of a Director Complied

4. (3) Appointment of an employee as a Director CompliedThe Company has only one Executive Director.

4. (4) Independent Non Executive Director CompliedTwo out of six Directors are Independent Non Executive Directors

4. (5) Alternate Director CompliedThis situation has not arisen

4. (6) Credibility, skills and experience of Non Executive Directors

CompliedProfiles of the Non Executive Directors describe the required qualities.

4. (7) Presence of Non Executive Directors in Board Meetings CompliedOne half of the quorum were Non Executive Directors in all meetings held

4. (8) Details of Directors CompliedDetails of Directors are included in this Annual Report.

4. (9) Appointment of new Directors CompliedThe Board collectively assesses the composition of the Board and makes appointments as necessary.

4. (10) Appointment to fill a casual vacancy N/A

4. (11) Resignation/removal of a Director Complied



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5. (2)

6. (1) & 6. (2)

CompliedNo Director holds such number of positions.

CompliedThe Board evaluates the delegated authority process to ensure that the delegation of work does not materially affect the ability of the Board as a whole in discharging its functions.

CompliedThe Board does not consist of any Directors over the age of 70 years.

6. Management function delegated by the Board

Holding in office in more than 20 companies

Delegation of work to the management and review ofdelegation process

Directors over 70 years of age

5. Criteria to assess the fitness and propriety of Directors

5. (1)

7. The Chairman and Chief Executive Officer

7. (1) CompliedThe roles of Chairman and Chief Executive Officer are separated.

Division of responsibilities of the Chairman and MD/CEO

7. (2) CompliedChairman is an Independent Non Executive Director.

Chairman shall be an Independent Non Executive Director, and if not designate a Senior Director

7. (3) CompliedThere are no material relationships between the Chairman / CEO and / or other members of the Board which will impair their respective roles.

Relationship between Chairman and CEO and other Directors

7. (4) CompliedPlease refer section A.3 of the ICASL Code compliance table.

Role of the Chairman

8. Board appointed Committees

8. (1) CompliedAudit Committee, Remuneration Committee and Integrated Risk Management Committee have been appointed as required by the direction.

Board appointed three Sub Committees

8. (2) Audit Committee

8.2.a CompliedThe Chairman of the Committee shall be a Non Executive Director who possesses qualifications and experience in accountancy and/or audit.

8.2.b CompliedThe Board members appointed to the Committee shall be Non Executive Directors.

CompliedCommittee recommendations8.2.c

Complied The Committee has met three times during the year.

External and Internal Auditors8.2.d,e,f,g,h,i,j,k,l


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8.3 Integrated Risk Management Committee

CompliedDisclosure of Audit Committee in Annual Report8.2.o

CompliedMeeting minutes of the Audit Committee8.2.p

Noted for ComplianceAt present the company is in the process of setting a proper whistle blowing policy by which employees of the finance company may, in confidence, raise concerns about possible improprieties in financial reporting, internal control or other matters.

Whistle blowing policy8.2.q

CompliedIntegrated Risk Management Committee8.3.a to h

9. Related Party Transactions

CompliedCompliance steps have been taken by the Board to avoid any conflict of interests that may arise in transacting with related parties as per the definition of this Direction. Further, the Board ensures that no related party benefits from favourable treatment.

Avoiding conflict of interest in related party transactions and favourable treatment

9. (1) to 9. (4)

10. Disclosures

CompliedFinancial reporting, statutory and regulatory reporting10. (1)

Partially CompliedThe company is in the process of complying with section 10. (2).c and 10. (2).j. All other required disclosures have been made in the Annual Report.

Minimum disclosure in the Annual Report10. (2)

11. Transitional Provisions

CompliedThe company has complied with transitional provisions when applicable.

Transitional and other general provisions11. (1) to 11. (6)



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ICASL Code Compliance StatusRule Description


Section 11:

Adherence with the principles of Finance Companies(Corporate Governance) Direction No. 3 of 2008 issued under Section 9 of the Finance Companies Act No. 78 of 1988 which is now repealed and replaced by Finance Business Act No. 42 of 2011 and the Code of Best Practice on Corporate Governance issued jointly by the ICASL and the SEC is tabulated below.

A. DirectorsA.1. The BoardBoard should direct, lead and control the company

A.1.1 CompliedBoard meetings were held in monthly intervals.

MeetingsThe Board should meet regularly. Board meetings should be held at least once every quarter of a financial year.

A.1.2 CompliedThe Board collectively is responsible for the success of the company. The Board formulates the business strategy and ensures that the CEO and management team possess the skills, experience and knowledge to implement the strategy. It also ensures that effective systems are in place to secure integrity of the information, internal controls and risk management and compliance with all applicable laws and regulations. The Independent Directors are responsible for bringing independent judgment to decisions made by the Board.

The Board ResponsibilityThe Board should be responsible for the following�Ensuring the formulation and implementation of a

sound business strategy.�Ensuring that the Chief Executive Officer (CEO) and

management team possess the skills, experience and knowledge to implement the strategy.

�Ensuring the adoption of an effective CEO and senior management succession strategy.

�Ensuring effective systems to secure integrity of information, internal controls and risk management ensuring compliance with laws, regulations and ethical standards.

�Ensuring all stakeholder interests are considered in corporate decisions.

�Ensuring that the company’s values and standards are set with emphasis on adopting appropriate accounting policies and fostering compliance with financial regulations.

A.1.3 CompliedThe Board members are permitted to obtain independent professional advice from a third party including the company’s external auditors and lawyers at the expense of the company since the Board collectively, and Directors individually, must act in accordance with the laws of the country, as applicable to the business enterprise.

Access to Independent Professional AdviceThere should be a procedure agreed to by the Board of Directors to obtain independent professional advice, where necessary, at the company’s expense.

A.1.4 CompliedAll Directors have access to the Company Secretary. The Secretary ensures that all Board procedures as per the Board Terms of Reference are followed and applicable rules and regulations are adhered to. The Secretary possesses the required qualifications as set out in the Companies Act. Consent of all Board members is required for the removal of the Company Secretary.

Company SecretaryAll Directors should have access to the advice and services of the Company Secretary.

A.1.5 CompliedDirectors bring independent judgment to bear on issues of strategy, performance, resources (including key appointments) and standards of business conduct.

Independent Judgment of DirectorsAll Directors should bring Independent judgments.

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A.1.6 CompliedThe Board members dedicate adequate time for the affairs of the company by attending Board meetings, Board sub-committee meetings, making decisions and adopting resolutions via circular. Additional meetings and discussions are held with the management whenever the need arises.

Adequate Time and Effort of Directors

A.1.7 CompliedAdequate knowledge sharing opportunities are available to new and existing members of the Board on company and industry related matters on a continuous basis, and the experience of the Directors further guides the continuous training and an expansion of the knowledge and skills required to effectively perform their duties.

Training of DirectorsEvery Director should receive appropriate training when first appointed to the Board of a company, and subsequently as necessary.

A.2. Chairman & Chief Executive Officer (CEO)There are two key tasks at the top of every public company – conducting of the business of the Board, and facilitating executive responsibility for management of the company’s business.

CompliedThe Chairman and CEO roles are conducted separately and there is a clear division of duties of the Chairman and CEO. The Chairman is responsible for the leadership of the Board, the management of Board meetings and the business undertaken. It is also the duty of the Chairman, together with the Company Secretary, to ensure that all relevant issues are on the Board agenda, that Directors receive all appropriate and timely documentation and are enabled and encouraged to play their full part in relevant discussions and debate. The CEO is responsible for the day-to-day functioning of the company’s operations in accordance with the policies and objectives laid down by the Board. He is also accountable for the achievement of the financial and non-financial objectives agreed annually by the Board and contained within the company’s Business Plan. This ensures the balance of power in strategic and operational decisions.

Separation of Duties of Chairman & CEOThere should be a clear division of responsibilities at the head of the company, which will ensure a balance of power and authority, such that no one individual has unfettered powers of decision.

A.2.1.

A.3 Chairman’s RoleThe Chairman’s role in preserving good corporate governance is crucial. As the person responsible for running the Board, the Chairman should preserve order and facilitate the effective discharge of Board functions.

CompliedThe Chairman’s main role is to lead and manage the Board, ensuring that it discharges its legal and regulatory responsibilities effectively and fully and all Directors are encouraged to make an effective contribution, within their respective capabilities, for the benefit of the company; a balance of power between Executive and Non-Executive Directors is maintained.

Role of ChairmanThe Chairman should conduct Board proceedings in a proper manner and ensure, inter-alia, that the effective participation of both Executive and Non-Executive Directors is secured.

A.3.1

A.4. Financial Acumen



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CompliedThe Board includes four members of the Char te red Ins t i tu te o f Management Accountants. This blend of members enables the Board to provide proper guidance on financial matters of the company.

Availability of Sufficient Financial Acumen and Knowledge.

A.4.

A.5. Board BalanceIt is preferable for the Board to have a balance of Executive and Non Executive Directors such that no individual or small group of individuals can dominate the Board’s decision- taking.

CompliedFive of the six Directors are Non Executives.All Non Executive Directors have the necessary skill and experience to give objective judgment towards the overall performance of the company.

Non Executive DirectorsThe Board should include at least two Non Executive Directors or such number of Non Executive Directors equivalent to one third of the total number of Directors, whichever is higher.

A.5.1

CompliedThe Board considers Non Executive Directors' independence on an annual basis.

Independence Evaluation ReviewDirector should be independent of management and free of any business or other relationship that could materially interfere with or could reasonably be perceived to materially interfere with the exercise of their unfettered and independent judgment.

A.5.3

CompliedAll Non Executive Directors of the company have made written submission of their independence.

Signed Declaration of IndependenceEach Non Executive Director should submit a signed and dated declaration annually of their independence.

A.5.4

CompliedThe Board has determined the submission of declaration by the Non Executive Directors to their independence.The following Directors are Independent Non Executive Directors.Mr. C P R PereraMr. C S R S Anthony

The Determination of Independence of the Directors by the BoardThe Board should make a determination annually as to the independence or non independence of each Non Executive Director and should set out in the Annual Report the names of Directors determined to be ‘independent.’

A.5.5

CompliedThe Chairman and CEO are two separate persons.

CEO & Chairman is the Same PersonIn the event the Chairman and CEO is the same person, the Board should appoint one of the Independent Non Executive Directors to be the “Senior Independent Director.”

A.5.6A.5.7

CompliedThe Chairman meets with the Non Executive Directors without the presence of the MD/CEO, on a need basis.

Meeting of Non Executive DirectorsThe Chairman should hold meetings with the Non Executive Directors only, without the Executive Directors being present, as necessary and at least once each year.

A.5.8

CompliedNo such matters have been reported.

Recording of Concern in Board MinutesWhere Directors have concerns about the matters of the company which cannot be unanimously resolved, they should ensure their concerns are recorded in the Board Minutes

A.5.9

A.6 Supply of InformationThe Board should be provided with timely information in a form and of a quality appropriate to enable it to discharge its duties.

CompliedThe Directors receive a comprehensive report of all Board papers and any other additional information requested by the members of the Board well in advance of the meeting. The Chairman ensures that all Directors are properly briefed on issues arising at Board meetings.

Provision of Timely and Quality InformationThe management has an obligation to provide the Board with appropriate and timely information.

A.6.1


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A.7. Appointments to the BoardThere should be a formal and transparent procedure for the appointment of new Directors to the Board.

CompliedThe Board has a transparent procedure set out in making new appointments to the Board which is done in consultation with the entire Board.

Nomination Committee, assessment of Board composition and disclosure of details of new Directors to shareholders.

A.7.1A.7.2A.7.3

A.8 Re-electionAll Directors should be required to submit themselves for re-election at regular intervals and at least once every three years.

CompliedAppointment of Non Executive Directors & otherDirectorsNon Executive Directors should be appointed for specified terms subject to re-election and to the provisions in the Companies Act relating to the removal of a Director, and their re-appointment should not be automatic.

A.8.1

A.9. Appraisal of Board PerformanceBoards should periodically appraise their own performance in order to ensure that Board responsibilities are satisfactorily discharged.

CompliedThe Board annually evaluated its performances against the annual objectives set at the beginning of the year. The performances of Board committees were evaluated against the objectives of the respective committees.

Annual appraisal of Board performance and that of its committees.

A.9.1

A.10. Disclosure of Information in Respect of DirectorsShareholders should be kept advised of relevant details in respect of Directors.

CompliedRelevant details of each Director are given under each member’s profile in the Annual Report.

Details in respect of DirectorsThe Annual Report of the company should be set out in a manner which includes information relevant to the Directors.

A.10.1

A.11. Appraisal of Chief Executive Officer (CEO)The Board should be required, at least annually, to assess the performance of the CEO.

CompliedAt the commencement of every year, financial targets are set by approving the annual budget and non-financial targets are set in consultation with the CEO by the Board and at the end of each financial year the performance of the CEO is evaluated to ascertain whether the targets have been achieved.

Financial and non-financial targets for the CEO and annual evaluation of the performance of the CEO

A.11.1

B. Directors RemunerationB.1. Remuneration ProcedureCompanies should establish a formal and transparent procedure for developing policy on executive remuneration and for fixing the remuneration packages of individual Directors. No Director should be involved in deciding his/her own remuneration.



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Creation of a Remuneration CommitteeThe Board of Directors should set up a Remuneration Committee to make recommendations to the Board, within agreed terms of reference, on the company’s framework of remunerating Executive Directors.

B.1.1

B.2. The Level & Make-up of RemunerationLevels of remuneration of both Executive and Non Executive Directors should be sufficient to attract and retain the Directors needed to run the company successfully. A proportion of Executive Directors’ remuneration should be structured to link rewards to corporate and individual performance.

Composition of Remuneration CommitteeRemuneration Committees should consist exclusively of Non Executive Directors, and should have a Chairman, who should be appointed by the Board.

B.1.2

Disclosure of Remuneration Committee in the Annual ReportThe Chairman and members of the Remuneration Committee should be listed in the Annual Report each year.

B.1.3

Remuneration of Non Executive DirectorsThe Board as a whole, or where required by the Articles of Association, the shareholders, should determine the remuneration of Non Executive Directors, including members of the Remuneration Committee, within the limits set in the Articles of Association. Where permitted by the Articles, the Board may delegate this responsibility to a sub-committee of the Board, which might include the CEO.

B.1.4

Consultation of the Chairman and Access to Professional AdviceThe Remuneration Committee should consult the Chairman and/or CEO about its proposals relating to the remuneration of other Executive Directors and have access to professional advice from within and outside the company in discharging their responsibilities.

B.1.5

CompliedThe Remuneration Committee is responsible for assisting the Board with regard to the remuneration policy for the Executive Director and the corporate management, and for making all relevant disclosures. The Committee determines and agrees with the Board, the broad policy framework for the remuneration of the CEO & DGM. The CEO & DGM participate in meetings by invitation in deciding the remuneration of the corporate management in order to recruit, retain and motivate the corporate management team.

CompliedThe Remuneration Committee consists of three Non Executive Directors of CALF - Mr. C P R Perera, Mr. W A T Fernando and Mr. C S R S Anthony, Mr. C P R Perera is the Chairman of the Remuneration Committee.

CompliedThe composition of the Remuneration Committee is described in the Annual Report, page 40.

CompliedThe Board as a whole decides the remuneration of the Non Executive Directors. The Non Executive Directors receive a fee for being a Director on the Board.

CompliedThe input of the Chairman is obtained by his involvement as a member of the said Subcommittee. External professional advice is sought by the Remuneration Committee on a need basis through the Board Secretary.

CompliedThe Remuneration Committee is mindful of the fact that the remuneration of Executive Directors should reflect the expectation of the company and be sufficient enough to attract and retain the quality of Directors needed to run the company. The remuneration package of the DGM and CEO is structured to link rewards to corporate and individual performance. The company’s remuneration framework for the CEO is designed to create and enhance value for all stakeholders and to ensure there is strong alignment between the short-term and long-term interest of the company.

The Remuneration Committee should provide the packages needed to attract, retain and motivate Executive Directors of the quality required but should avoid paying more than is necessary for this purpose.

B.2.1


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N/AThe company does not have any executive share options at present.

Executive share options should not be offered at a discount(i.e. less than the market price prevailing at the time the exercise price is determined), save as permitted by the Listing Rules of the Stock Exchange.

B.2.5

CompliedWhere the initial contract does not explicitly provide for compensation commitments, Remuneration Committees should, within legal constraints, tailor their approach in early termination cases to the relevant circumstances. The broad aim should be to avoid rewarding poor performance while dealing fairly with cases where departure is not due to poor performance.

B.2.8

CompliedNon Executive Directors receive a nominal fee in line with the market practices as disclosed in this Annual Report.

Remuneration of the Non Executive DirectorsB.2.9

B.3. Disclosure of RemunerationThe company’s Annual Report should contain a Statement of Remuneration Policy and details of remuneration of the Board as a whole.

CompliedThe fees paid to the Directors for attending meetings is disclosed in the Annual Report.

The Annual Report should set out the names of Directors comprising the Remuneration Committee, contain a statement of remuneration policy and set out the aggregate remuneration paid to Executive and Non Executive Directors.

B.3.1

C. Relations with ShareholdersC.1. Constructive use of the Annual General Meeting (AGM) and conduct of general meetingsBoards should use the AGM to communicate with shareholders and should encourage their participation.

CompliedConsideration of proxy votesC.1.1

CompliedSeparate resolution for all separate issuesC.1.2

CompliedCirculation of Notice of AGM and Other DocumentsCompanies should arrange for the Notice of the AGM and related papers to be sent to shareholders at least 15 working days or other period determined by statute before the meeting.

C.1.4

CompliedCompanies should circulate with every Notice of General Meeting, a summary of the procedures governing voting at general meetings.

C.1.5

C.2. Major TransactionsFurther to compliance with the requirements under the Companies Act, Directors should disclose to shareholders all proposed corporate transactions, which if entered into, would materially alter/vary the company’s net asset base or in the case of a company with subsidiaries, the consolidated group net asset base.

CompliedDuring the year there were no major transactions as defined by Section 185 of the Companies Act No.7 of 2007 which materially affected the net asset base.

Disclosure of major transactions prior to a company engaging in or committing to a ‘Major Transaction’, involving the acquisition, sale or disposition of greater than half of the net value of the company’s assets or that of a subsidiary which has a material bearing on the consolidated net assets of the company. Directors should disclose to shareholders all material facts of such transactions.

C.2.1

D. Accountability & AuditD.1. Financial ReportingThe Board should present a balanced and understandable assessment of the company’s financial position, performance and prospects.



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Reports to Public, Regulatory & Statutory ReportingThe Board’s responsibility to present a balanced and understandable assessment extends to interim and other price-sensitive public reports and reports to regulators, as well as to information required to be presented by statutory requirements.

D.1.1

Directors Report in the Annual ReportD.1.2

Statement of Directors’ Responsibility for the Financial Statements

D.1.3

Management Discussion and Analysis

Declaration of Going Concern by the Directors

In the event the net assets of the company fall below 50% of the value of the company’s shareholders’ funds, the Directors shall forthwith summon an Extraordinary General Meeting of the company to notify shareholders of the position and of remedial action being taken.

D.1.4

D.1.5

D.1.6

D.2. Internal ControlThe Board should maintain a sound system of internal control to safeguard shareholders’ investments and the company’s assets.

CompliedCALF has reported a true and fair view of its position and performance for the year ended 31st March, 2012. In the preparation of financial statements, CALF had strictly complied with the requirements of the Companies Act No.7 of 2007, the Finance Business Act No. 42 of 2011 and amendments thereto and Directions issued under the same Act. They were prepared and presented in conformity with SLASs.

CompliedDeclarations by the Directors as required by the Code of Best Practice on Corporate Governance are presented in pages 18 to 33.

CompliedThe statement of Directors’ responsibility for financial reporting is given in page 36 as required by the direction.

CompliedA detailed management discussion and analysis is presented in pages 14 to 15.

CompliedThis information is provided in page 34.

CompliedCompany maintained healthy net assets position.

CompliedThe company has established a comprehensive framework of policies and procedures, which are regularly reviewed and updated. The company’s Audit Committee ensures that there is an effective internal control and financial reporting system by adopting the following measures:(i) Audits are conducted by the internal auditors in areas involving high risks as identified in the annual internal audit plan.(ii) The Audit Committee follows up on the status of implementation of all audit recommendations.

The Board of Directors expects to obtain an independent assurance report on internal controls over the financial reporting of the company as required by Direction No.3 of 2008 issued by Central bank of Sri Lanka, and auditors are in the process of carrying out the assignment.

Maintain a sound system of Internal ControlD.2.1


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CompliedThe company has outsourced the internal audit function to B R De Silva & Co.

Companies which do not have an internal audit function should from time to time review the need for one.

D.2.2

CompliedThe company’s Audit Committee consists of three members all of whom are Non Executive Directors; out of three, two are Independent. The Committee operates within clearly defined terms of reference.

Composition of the Audit CommitteeThe Audit Committee should be comprised of a minimum of two Independent Non Executive Directors or exclusively by Non Executive Directors, a majority of whom should be independent, whichever is higher.

D.3.1

D.3. Audit CommitteeThe Board should establish formal and transparent arrangements for considering how they should select and apply accounting policies, financial reporting and internal control principles and maintaining an appropriate relationship with the company’s auditors.

CompliedThe Committee maintains an appropriate relationship with the external auditors E&Y to ensure their objectivity and independence. The payment to the external auditors for audit and non audit services is disclosed in the Directors’ Report of this Annual Report.

The Duties of the Audit CommitteeD.3.2

CompliedThe Audit Committee is guided by clearly defined terms and references.

Terms and reference of the Audit CommitteeD.3.3

D.3.4 Disclosures

CompliedNames of the members of the Audit Committee are given in the Audit Committee Report.

Disclosure of the Audit CommitteeD.3.4

D.4. Code of Business Conduct & EthicsCompanies must adopt a Code of Business Conduct & Ethics for Directors and members of the senior management team and must promptly disclose any waivers of the Code for Directors or others.

CompliedThe company has developed a code of business conduct and ethics for all employees, which addresses conflict of interest, corporate opportunities, confidentiality of information, fair dealing, protecting and proper use of the company’s assets, compliance with applicable laws and regulations and encouraging the reporting of any illegal or unethical behaviour, etc.

Adoption of a Code of Business Conduct & EthicsD.4.1

CompliedThere is no violation of the company’s code of ethics during the year.

The Chairman must affirm in the company’s Annual Report that he is not aware of any violation of any of the provisions of the Code of Business Conduct & Ethics.

D.4.2

D.5. Corporate Governance DisclosureDirectors should be required to disclose the extent to which the company adheres to established principles and practices of good corporate governance.

CompliedThis report addresses this requirement.

Disclosure of corporate governanceD.5.1

Section 2 ShareholdersE. Institutional InvestorsE.1 Shareholder VotingInstitutional shareholders have a responsibility to make considered use of their votes and should be encouraged to ensure their voting intentions are translated into practice.



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CompliedThe primary mode of communication between the company and the shareholders is through the Annual General Meeting. The Chairman ensures the views of shareholders are communicated to the Board as a whole.

Regular and structured dialogue with shareholdersE.1.1

F. Other InvestorsF.1 Investing/Divesting Decision

CompliedIndividual shareholders are encouraged to participate in general meetings and exercise their voting rights.

Individual Shareholder and votingF.1 & F.2


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Section III

Continuing Listing Rules Section 7.10 on Corporate Governance of the Colombo Stock Exchange

Compliance StatusCSE Rule Reference

CompliedFive Directors of the Board are Non Executives, which is more than the requirement of the rule.

7.10.1 (a)Non Executive Directors

7.10.2 (a) CompliedMore than one third of the Non Executive Directors are Independent.

CompliedDeclarations of Independence by the Directors were assessed by the full Board. The Directors who are Independent are disclosed on page 34.

7.10.3 (a)Disclosures Relating to Directors

7.10.3 (b) Complied

7.10.3 (c)

7.10.3.(d)

CompliedPlease refer page 8 for the brief biography of each Director.

CompliedInformation relating to new appointments to the Board is disclosed to the Colombo Stock Exchange, when appointments are made.

CompliedThe Remuneration Committee comprises of Non Executive Directors and the majority of the members are Independent.

7.10.5 (a) CompositionRemuneration Committee

7.10.5 (b) Function

7.10.5 (c) Disclosure in the Annual Report

CompliedPlease refer the Remuneration Committee report on page 40 for details of the functions of the Committee.

CompliedThe report of the Remuneration Committee is given on page 40 and the remuneration paid to Directors is given in note No.23 to the financial statements on page 57.

CompliedThe Audit Committee comprises of three Non Executive Directors; out of three, two are Independent.

7.10.6 (a) CompositionAudit Committee

7.10.6 (b) Function CompliedFunctions of the Audit Committee are given in detail in the Audit Committee Report on page 37.

7.10.6 (c) Disclosure in the Annual Report CompliedThe names of the Directors comprising the Audit Committee and the basis of determination of independence of the Auditor are given in the Audit Committee report on page 37.


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Annual Report of the Board of Directors on the Affairs of the CompanyThe Directors present their Report and the Audited Financial Statements of the Company for the year ended 31 March, 2012.

REVIEW OF THE YEARReview of the Company business and its performance during the year, with comments on financial results and future strategic developments are contained in the Chairman’s statement (Page 10). THE PRINCIPAL ACTIVITYThe Company is carrying on finance business.

FINANCIAL STATEMENTThe Financial Statements of the Company are given on pages 43 to 62.

GOING CONCERNThe Directors are satisfied that the Company has adequate resources to continue its operations in the foreseeable future. The Financial Statements of the Company have accordingly been prepared on a going concern basis.

AUDITORS REPORTThe Auditors Report on the Financial Statements of the Company is given on page 42.

ACCOUNTING POLICYThe significant accounting policies adopted in the preparation of the Financial Statements are given in Note No. 47 on page 50. The accounting policies adopted are consistent with those of the previous financial year.

TAXATIONProvision for taxation has been computed at the rates given in Note 24 to the Financial Statements.

DIVIDENDSThe Directors do not recommend a dividend on ordinary shares for the year ended 31 March 2012.

BOARD OF DIRECTORSThe Directors of the Company as at 31 March 2012 were:

Mr. C P R Perera (Chairman) Non ExecutiveIndependent Director

Non Executive Director

Non Executive Director

Executive Director / Acting CEO

Non ExecutiveIndependent Director

Mr. W A T Fernando

Ms. N T M S Cooray

Mr. R J Arasaratnam Non Executive Director


Mr. C S R S Anthony

RESIGNATIONS, NEW APPOINTMENTS TO THE BOARDMr. P A A Panditharatne, Mr. A S Ibrahim, Mr. M P Haradasa and Mr. J P Amaratunga resigned from the Board of Directors on 12th May 2011 and Mr. C P R Perera, Mr. W A T Fernando, Ms. N T M S Cooray and Mr. E R G C G Hemachandra were appointed as Directors on the same day. Mr. A R Wickremasinghe resigned as a Director on 22nd June 2011. Mr. R J Arasaratnam and Mr. C S R S Anthony were appointed as Directors on 22nd June 2011 and 8th July 2011 respectively.

DIRECTORS INTEREST IN CONTRACTSThere are no other interests in contracts or proposed contracts with the Company by the Directors other than those specified in note 30 to the Financial Statements.

CORPORATE GOVERNANCEThe Company has put in place systems and procedures to ensure the implementation of sound corporate governance principles. An overview of such practices adopted within the Company is given on pages 18 to 33 of the Annual Report.

AUDIT COMMITTEEThe Audit Committee of the Company during the year comprised the following members:

Mr. C S R S Anthony - ChairmanMr. C P R PereraMr. W A T Fernando

The report of the Audit Committee is given on page 37 of the Annual Report.

REMUNERATION COMMITTEEThe Remuneration Committee comprised the following members:

Mr. C P R Perera - ChairmanMr. C S R S AnthonyMr. W A T Fernando

PROPERTY, PLANT AND EQUIPMENTThe details of the property, plant and equipment are given in Note 10 to the Accounts. DONATIONSDuring the year, the Company made donations amounting to Rs.5,540/-

STATED CAPITALThe stated capital of the Company is Rs.120,904,256/- representing 33,920,282 ordinary shares.

SHAREHOLDINGSAn analysis of the distribution of the ordinary shareholders is given on page 64 of the Annual Report. The list of 20 largest ordinary shareholders of the Company is given on page 63 of the Annual Report.

A n n u a l R e p o r t 2 0 1 2

34

Annual Report of the Board of Directors on the Affairs

of the Company Contd...

DIRECTORS’ HOLDINGS OF SECURITIES OF THE COMPANYDetails of Directors’ shareholdings in the Company are given on page 63 of the Annual Report.

DIRECTORS’ RESPONSIBILITY FOR FINANCIAL REPORTINGThe Directors are responsible for the preparation of the Financial Statements of the Company to reflect a true and fair view of its state of affairs. The Directors are of the view that these Financial Statements have been prepared in conformity with the Sri Lanka Accounting Standards and the Companies Act No.7 of 2007. The Directors are accordingly satisfied that the Financial Statements presented herein give a true and fair view of the state of affairs of the Company and the group as at 31st March 2012 and the profit for the year then ended.

STATUTORY PAYMENTSThe Directors are satisfied that to the best of their knowledge and belief, all statutory payments due to the Government and to the employees of the Company have been made up to date.

POST BALANCE SHEET EVENTSNo events have occurred after the balance sheet date which would require adjustments to or disclosure in the Accounts, other than those given in Note 31 to the Accounts.

AUDITORSMessrs. Ernst & Young Chartered Accountants are the Company’s Auditors during the period under review. A sum of Rs. 290,000/- payable as professional fees for the year under review and Rs. 50, 510/-was paid for non-audit related work such as agreed upon engagements. Based on the declaration made by Messrs. Ernst & Young and as far as the Directors are aware, the Auditors do not have any relationship or interest other than statutory auditor and tax consultant.

As part of a rotation policy, the Board of Directors recommend that Messrs. KPMG, Chartered Accountants be appointed as the Auditors of the Company for the ensuing year. A resolution relating to their appointment and authorizing the Directors to determine their remuneration will be proposed at the forthcoming Annual General Meeting.

Further Messrs. Ernst & Young Chartered Accountants were appointed as Internal Auditors for the year 2012/2013.

EMPLOYMENT POLICYModern Human Resource Management practices are adopted respecting each and every individual and providing equitable opportunity for career advancement for all employees. The Company complies with its policy of non-discrimination in terms of gender, race or religion in the matter of employment.

NOTICE OF MEETINGNotice of Meeting relating to the 31st Annual General Meeting of the Company is given on page 65 of the Annual Report.

For and on behalf of the Board,

W A T Fernando E R G C G HemachandraDirector Director/ Acting CEO

S S P CORPORATE SERVICES (PRIVATE) LIMITED SECRETARIES

25th June 2012


35

Directors' Responsibility for Financial Reporting

The Directors of the Company are responsible for the preparation and presentation of the Financial Statements to the shareholders in accordance with the relevant provisions of the Companies Act No.7 of 2007 and other statutes which are applicable to the preparation of the Financial Statements.

Accordingly, the Directors confirm that the Financial Statements of the Company for the year ended 31st March 2012 incorporated in this Annual Report have been prepared in accordance with the Sri Lanka Accounting Standards and comply with the requirements of Companies Act No.7 of 2007 and Finance Business Act No.42 of 2011 (Repealed and replaced the Finance Companies Act No.78 of 1988) and other applicable standards and statutes.

The Financial Statements of the Company have been approved by the Board of Directors. The Board is responsible for the preparation of the Financial Statements in compliance with the provisions of the Companies Act.

In terms of the provisions of the Companies Act, the Directors are also responsible to keep accounting records which correctly record and explain the Company’s transactions.

In preparing these Financial Statements, the Directors have also ensured that appropriate accounting policies have been applied in a consistent manner and material departures, if any, have been disclosed and explained.

The Directors are also satisfied that the Company possesses adequate resources to continue its operations and the Financial Statements are continued to be prepared on that basis.

The Directors are also responsible for taking reasonable steps to safeguard the assets of the Company and in this regard to give proper consideration to the establishment of appropriate internal control systems with a view to preventing and detecting possible frauds and other irregularities.

The Directors are required to prepare the Financial Statements and provide the Auditors with every opportunity to take whatever steps and undertake whatever inspections they may consider to be appropriate to enable them to give their audit opinion. The Directors are of the view that they have discharged their responsibilities as set out in this statement.

The Directors confirm that to the best of their knowledge, all taxes, duties and levies payable by the Company, all contributions, levies and taxes payable on behalf of and in respect of the employees of the Company, and all other known statutory dues as were due and payable by the Company as at the balance sheet date have been paid or where relevant provided for in the Financial Statements.

On behalf of the Board,

A n n u a l R e p o r t 2 0 1 2

36

Gihan HemachandraDirector / Acting CEO

25th June 2012

Audit Committee Report

The Audit Committee comprises two Non Executive Independent Directors and one Non Executive Director (as shown on page 34 of the Annual Report). The Chairman of the Audit Committee is a Fellow Member of the Chartered Institute of Management Accountants, UK.

This was a transitory year where the Company became a Public Company. The Audit Committee was constituted in the latter part of the financial year.

The Audit Committee met on three occasions during the financial year. The attendance of Committee members at meetings is as follows:

Internal AuditThe Committee also monitors the effectiveness of the internal and financial control procedures on the basis of the reports and findings submitted by the Internal Auditors of the Company, M/s B R De Silva & Co., Chartered Accountants. As a part of a rotation method, with effect from 1st April, 2012, M/s Ernst & Young were appointed to replace M/s B R De Silva & Co.

External Audit�The Committee held meetings with the External Auditors to

review their report on audit results.�The Committee has reviewed the other services provided by the

External Auditors to the Company to ensure their independence as Auditors has not been compromised.

As far as the Directors are aware, the Auditor does not have any relationship (other than that of an Auditor) with the Company other than those disclosed above. The Auditors also do not have any interest in the Company. For the said reasons the Committee determined that the Auditors are independent.

The Audit Committee has recommended to the Board of Directors as a part of the rotation to appoint M/s KPMG, Chartered Accountants as External Auditors for the financial year ending 31st March, 2013.

C S R S AnthonyChairmanAudit Committee

25th June 2012

C S R S Anthony - Chairman (w.e.f. 15th August 2011)C P R PereraW A T Fernando

3

33

Member No. ofmeetings

held

No. of meetings attended

3

33

The Chief Executive Officer, Financial Controller and Internal Auditor / External Auditor attend the meetings of the Committee by invitation when necessary. Proceedings of the Committee meetings are reported regularly to the Board of Directors.

The Audit Committee has written terms of reference and is empowered to examine any matters relating to the financial affairs of the Company and its internal and external audits. Its duties include detailed reviews of financial statements, internal control procedures and risk management, accounting policies and compliance with Sri Lanka Accounting Standards. It also reviews the adequacy of systems for compliance with the Companies Act No.7 of 2007, Central Bank Directions and other relevant legal, regulatory and ethical requirements and company policies. The Committee endeavours to assist the Directors to discharge their duties and responsibilities in respect of regulatory compliance and risk management.

The following activities were carried out by the Committee

Financial Reporting and Internal Control System�The Committee reviewed the Interim and Annual Financial

Statements of the Company and has recommended same to the Board for approval and publication.

�Review of the preparation of the Annual Report to ensure the reliability of the process, consistency of the accounting policies and methods and compliance with Sri Lanka Accounting Standards.

�The Committee is satisfied that the control environment prevailing in the Company provides reasonable but not absolute assurance that the financial position of the Company is adequately monitored and that the systems are in place to minimize the impact of identifiable risks.

�The Committee also monitors the timely payments of all statutory obligations.

�The Company’s budget proposals are also reviewed by the Committee.


37

Directors’ Statement on Internal Controls

ResponsibilityIn line with Finance Companies Direction No.3 of 2008, Section 10(2) b, the Board of Directors presents this Report on Internal Control. The Board of Directors (Board) is responsible for the adequacy and effectiveness of The Capital Alliance Finance PLC (‘the Company’) system of internal controls. However, such a system is designed to manage the Company’s key areas of risk within an acceptable risk profile, rather than eliminate the risk of failure to achieve the policies and business objectives of the Company. Accordingly, the system of internal controls can only provide reasonable but not absolute assurance against material misstatement of management and financial information and records or against financial losses or fraud.

The Board has established an ongoing process for identifying, evaluating and managing the significant risks faced by the Company and this process includes enhancing the system of internal controls as and when there are changes to the business environment or regulatory guidelines. The process is regularly reviewed by the Board and Board-appointed sub committees. The Board is of the view that the system of internal controls in place is sound and adequate to provide reasonable assurance regarding the reliability of financial reporting, and that the preparation of Financial Statements for external purposes is in accordance with relevant accounting principles and regulatory requirements.The management assists the Board in the implementation of the policies and procedures on risk and control by identifying and assessing the risks faced, and in the design, operation and monitoring of suitable internal controls to mitigate and control these risks.

Key Features of the Process Adopted in Applying and Reviewing the Design and Effectiveness of the Internal Control System on Financial Reporting

The Board has adopted key processes in reviewing the design and operating effectiveness of the system of internal controls with respect to financial reporting, including the following; Various management committees are established by the Board to assist the Board in ensuring the effectiveness of the Company’s daily operations and that the Company’s operations are in accordance with the corporate objectives, strategies and the annual budget as well as the policies and business directions that have been approved.

The Internal Auditors of the Company checks for compliance with policies and procedures and the effectiveness of the internal control systems on an ongoing basis using samples and rotational procedures and highlights significant findings in respect of any non-compliance. Audits are carried out on all units and branches, the frequency of which is determined by the level of risk assessed, to provide an independent and objective report. The annual audit plan is reviewed and approved by the Board Audit Committee. Findings of the internal audit are submitted to the Board Audit Committee for review at their periodic meetings.

The Audit Committee of the Company reviews internal control issues identified by the Internal Auditors, regulatory authorities and management, and evaluates the adequacy and effectiveness of the risk management and internal control systems. They also review the internal audit functions with particular emphasis on the scope of audits and quality of internal audits. The minutes of the Board Audit Committee meetings are tabled at the meetings of the Board of Directors of the Company.

In assessing the Internal control system, identified officers of the Company continued to review and update all procedures and controls that are connected with significant accounts and disclosures of the Financial Statements of the Company. The Internal Audit Department continued to verify the suitability of design and effectiveness of these procedures and controls on an ongoing basis.

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

The Board of Directors expects to obtain an assurance report on the Directors’ Statement on Internal Controls as required by Direction No. 3 of 2008 issued by the Central bank of Sri Lanka and auditors are in the process of carrying out the assignment.

By order of the Board,

ChairmanAudit Committee

25th June 2012

C S R S Anthony

Acting CEOE R G C G Hemachandra

Director /

A n n u a l R e p o r t 2 0 1 2

38

Integrated Risk Management Committee Report

The Integrated Risk Management Committee (IRMC) as at the end of the financial year comprised of the following members:

Mr. (Chairman)(IND/NED)

Brief profiles of the Directors representing the Committee are given on page 8 of the Annual Report.

Terms of Reference

The Terms of Reference set out by the Board of Directors include the following

• Examine the principal risks in achieving the business strategy of Capital Alliance Finance PLC and its Business Plan.

• Establish and communicate the risk management framework including responsibilities, authorities and key controls throughout the Company.

• Agree and implement measurement and reporting standards and methodologies.

• Assess all risks, i.e. credit, market, liquidity, operational and strategic risks to the Company though appropriate risk indicators and management information.

W A T FernandoMr. E R G C G Hemachandra (Acting CEO/ED)Mr. P Jayasundera (DGM)Mr. M Nawathna (AGM)Mr. M Sivakumaran (Manager Compliance)

• Ensure that risk management practices and conditions are appropriate for the changing environment.

• Review and oversee the risk and compliance profile of the Company within the context of the Board determined risk parameters.

• Make recommendations to the Board concerning the Company’s risk appetite and particular risk or compliance management practice of the Company.

• Review and oversee the management’s plan for mitigating of the material risks faced by the various business units of the Company.

MeetingsThe Committee meets on a quarterly basis and the discussion and conclusions reached at the meeting are recorded in minutes and circulated to the Board of Directors for information and advice. A risk assessment report is also submitted quarterly.

Non Executive DirectorIntegrated Risk Management Committee

25th June 2012

W A T Fernando


39

Remuneration Committee Report

The Remuneration Committee appointed by the Board of Directors comprises the following members

Mr. C P R Perera (Chairman)Mr. W A T FernandoMr. C S R S Anthony

PolicyThe Company remuneration policy aims to attract, motivate and retain talent with the appropriate professional, managerial and operational expertise necessary to achieve the objectives of the Company. The Company remuneration framework for the Executive Directors and Corporate Management Team is designed to ensure alignment between short and long term interests of the Company and thereby create and enhance value for all stakeholders of the Company.

The Committee reviews all significant Human Resource policies and initiatives. The Committee deliberates and recommends to the Board of Directors annual increments and bonuses of the Executive Directors and Members of the Corporate Management based on individual and corporate performance. The committee also reviews salary structures and terms and conditions of service to ensure compatibility with the market. The CEO and DGM who are responsible for the overall management of the Company attend meetings by invitation and participate in the deliberations except when their own interest, performance and compensation are discussed.

C P R Perera ChairmanRemuneration Committee

25th June 2012

A n n u a l R e p o r t 2 0 1 2

40

Drive along the road to success...

Report on the Financial Statements We have audited the accompanying financial statements of Capital Alliance Finance PLC which comprise the Balance Sheet as at March 31, 2012 and the Income Statement, Cash Flow Statement and the Statement Of Changes in Equity for the year then ended, and a summary of significant accounting policies and other explanatory notes.

Management's Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with Sri Lanka Accounting Standards. This responsibility includes: designing, implementing and maintaining internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error: selecting and applying appropriate accounting policies: and making accounting estimates that are reasonable in the circumstances.

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

An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by Management, 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 were necessary for the purpose of our audit. We therefore believe that our audit provides a reasonable basis for our opinion.

Opinion In our opinion, so far as appears from our examination, the Company maintained proper accounting records for the year ended March 31, 2012 and the financial statements give a true and fair view of the Company's state of affairs as at March 31, 2012 and its profit and cash flows for the year then ended in accordance with Sri Lanka Accounting Standards.

Report on other legal and regulatory requirements In our opinion, these financial statements also comply with the requirements of section 151(2) of the Companies Act No. 7 of 2007.

Chartered Accountants

25th June 2012 Kandy

RND / SW / UPWINDEPENDENT AUDITORS’ REPORTTO THE SHAREHOLDERS OF CAPITAL ALLIANCE FINANCE PLC

A D B Talwatte FCA FCMA Ms. L C G Nanayakkara FCA FCMA W R H Fernando FCA FCMA M P D Cooray FCA FCMAH M A Jayesinghe FCA FCMA D K Hulangamuwa FCA FCMA LLB (Lond) A P A Gunasekera FCA FCMAA Herath FCA Ms. Y A De Silva ACA

R N De Saram ACA FCMA

A G J Perera

Partners:

Resident Partner :

Director:

Chartered Accountants

839 /2Peradeniya RoadKandySri Lanka

Tel

Fax

: (0) 81 2232056: (0) 81 4471354: (0) 81 4471356: (0) 81 2232056

A n n u a l R e p o r t 2 0 1 2

42


43

Balance SheetAs at 31 March

Assets

Cash and Bank Balances

Treasury Bills

Investment Securities

Loans and Advances

Net Investment in Leases

Margin Trading Receivables

Assets Held For Sale

Vehicle Stock

Trade and Other Receivables

Income Tax Receivables

Property, Plant and Equipment

Total Assets

Liabilities

Fixed Deposits

Income Tax Liabilities

Rental Received in Advance

Trade and Other Payables

Amounts Due to Related Parties

Deferred Tax Liabilities

Defined Benefit Liabilities

Borrowings

Total Liabilities

Shareholders' funds

Stated Capital

Reserves

Retained Earnings

Total Shareholders' Fund

Total Liabilities & Shareholders' Funds

Net Assets Per Share (Rs)

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

76,749,144

15,230,307

13,175,041

95,458,005

119,599,556

-

7,048,401

-

36,308,861

-

15,255,841

378,825,156

136,750,096

967,752

3,847,740

11,212,551

-

6,667,208

929,786

1,526,931

161,902,064

120,904,256

69,720,078

26,298,758

216,923,092

378,825,156

6.40

2011Rs.

2012 Rs.

Note

61,957,668

26,218,825

8,240,842

105,731,519

138,035,564

216,909,529

2,569,506

5,991,900

46,288,271

2,492,409

23,712,284

638,148,317

303,368,409

-

3,569,041

44,731,100

45,339,914

6,241,057

990,172

425,689

404,665,382

120,904,256

70,684,868

41,893,811

233,482,935

638,148,317

6.88

These Financial Statements are in compliance with the requirements of the Companies Act No. 7 of 2007.

D S Pushpakumara

Chief Financial Officer

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

Signed for and on behalf of the Board by

W A T Fernando E R G C G Hemachandra

Director Director / Acting CEO

The accounting policies and notes on pages 47 through 62 form an integral part of these Financial Statements.

25th June 2012

Kandy

A n n u a l R e p o r t 2 0 1 2

44

Income

Interest Income

Interest Expenses

Net Interest Income

Other Operating Income

Net Income from Operations

Less: Operating Expenses

Personnel Costs

Provision for Staff Retirement Benefits

General & Administration Expenses

Provision for Fall in Value of Investments

Depreciation

Provision for Bad and Doubtful Debts

Profit from Operations

Value Added Tax on Financial Services

Profit Before Taxation

Provision for Income Taxation

Profit for the Year

Earnings Per Share (Rs)

67,070,528

47,507,993

(9,761,473)

37,746,520

19,562,535

57,309,055

(6,890,870)

(180,815)

(12,621,714)

-

(559,972)

(14,345,783)

22,709,901

(2,037,191)

20,672,710

(11,305,869)

9,366,841

0.28

2011Rs.

2012 Rs.

Note

98,577,140

83,953,843

(37,975,136)

45,978,707

14,623,298

60,602,005

(10,539,697)

(179,186)

(22,339,748)

(2,603,965)

(1,114,821)

(5,552,464)

18,272,124

(1,709,977)

16,562,147

(2,303)

16,559,844

0.49

Income StatementYear ended 31 March

18

19

20

21

22

23

24

25



45

Balance as at 01 April 2010

Profit for the Year

Transfer During the Year


Balance as at 31 March 2011

Profit for the Year

Transfer During the Year ( Note: 17.1)

Transfer During the Year (Note: 17.2)

Balance as at 31 March 2012

207,556,250

9,366,841

-

-

216,923,091

16,559,844

-

-

233,482,935

Total

Rs.

Statement of Changes in EquityYear ended 31 March 2012

Retained Earnings

Rs.

General Reserve

Rs.

Statutory Fund Rs.

Investment Fund Reserve

Rs.

Stated Capital

Rs.

17,617,798

9,366,841

(217,540)

(468,342)

26,298,758

16,559,844

(136,798)

(827,992)

41,893,811

60,000,000

-

-

-

60,000,000

-

-

-

60,000,000

9,034,196

-

-

468,342

9,502,538

-

-

827,992

10,330,530

-

-

217,540

-

217,540

-

136,798

-

354,338

120,904,256

-

-

-

120,904,256

-

-

-

120,904,256


A n n u a l R e p o r t 2 0 1 2

46

Cash Flow From Operating Activities

Profit Before Income Taxation

Adjustment For,

Depreciation

Investment Income

(Profit)/Loss on Disposal of Assets

Provision for Gratuity

Provision for Fall in Value of Investments

Provision for Doubtful Debts

Operating Profit Before Working Capital Changes

(Increase)/ Decrease in Loans and Advances

(Increase)/ Decrease in Vehicle Stock

(Increase)/ Decrease in Investment in Leases

(Increase) / Decrease in Trade and Other Receivables

(Increase) / Decrease in Margin Trading Receivable

(Increase) / Decrease in Other Assets

Increase / (Decrease) in Fixed Deposits

Increase / (Decrease) in Trade and Other Payable

Increase / (Decrease) in Amounts Due to Related Parties

Increase/ (Decrease) in Other Liabilities

Cash Generated from Operations

Gratuity Paid

Income Tax Paid

Net Cash Flows from Operating Activities

Cash Flows from Investing Activities

Proceeds from Sale of Investment Securities

Acquisition of Property Plant & Equipment

Acquisition of Treasury Bills

Investment Income Received

Proceeds from Sale of Property Plant & Equipment

Net Cash Flows from Investing Activities

Cash Flows from Financing Activities

Net Cash Flows from Financing Activities

Net Increase/(Decrease) in Cash and Cash Equivalents

Cash and Cash Equivalents at the Beginning of the Year

Cash Equivalents at the End of the Year

Analysis of Cash and Cash equivalents at the end of the Year


Bank Overdraft

20,672,710

559,972

(4,666,576)

-

180,815

-

14,345,783

31,092,704

(25,022,158)

-

(47,538,114)

(11,199,021)

-

4,775,127

73,275,233

-

-

5,539,106

30,922,876

(446,250)

(5,207,647)

25,268,979

10,191,415

(3,002,252)

7,352,244

4,666,576

-

19,207,983

-

-

44,476,962

30,745,251

75,222,213

76,749,144

(1,526,931)

75,222,213

2011Rs.

2012 Rs.

16,562,147

1,114,821

(7,346,905)

(211,044)

179,186

2,603,965

5,552,464

18,454,634

(10,273,514)

(5,991,900)

(18,436,008)

(18,135,838)

(216,909,529)

4,478,895

166,618,313

33,518,549

45,339,914

(278,699)

(1,615,183)

(118,800)

(3,888,615)

(5,622,598)

4,934,199

(9,660,221)

(10,988,518)

7,346,904

300,000

(8,067,636)

-

-

(13,690,234)

75,222,213

61,531,979

61,957,668

(425,689)

61,531,979


Cash Flow StatementYear ended 31 March

1.0 CORPORATE INFORMATION 1.1 General

Capital Alliance Finance PLC, is a Public limited liability company incorporated and domiciled in Sri Lanka. The registered office of the Company is located at No. 21, Kumara Veediya, Kandy and the principal place of business is situated at the same place.

1.2 Principal Activities and Nature of OperationsDuring the year, the principal activities of the Company were acceptance of Deposits, granting Lease facilities, Hire Purchase, Margin Trading, Mortgage Loans, Demand Loans and other credit facilities.

1.3 Parent Enterprise and Ultimate Parent EnterpriseThe Company’s parent entity is Capital Alliance Holdings Limited In the opinion of the directors, the Company’s ultimate parent undertaking and controlling party is Capital Alliance Holdings Limited with effect from 16th September 2011.

1.4 Date of Authorization for IssueThe financial statements of Capital Alliance Finance PLC, for the year ended 31 March 2012 were authorized for issue in accordance with a resolution of the Board of Directors on June 25, 2012.

2.1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

2.1.1 Basis of Preparation The Financial Statements have been prepared on a historical cost basis. The Financial Statements are presented in Sri Lankan Rupees except when other wise stated.

The preparation and presentation of financial statements is in compliance with the Companies Act No.7 of 2007 and Finance Business Act No.42 of 2011.

2.1.2 Statement of complianceThe Financial Statements of Capital Alliance Finance PLC has been prepared in accordance with Sri Lanka Accounting Standards. These Financial Statements are presented in accordance with Sri Lanka Accounting Standard No. 33 Revenue Recognition and Disclosures in Financial Statements of Finance Companies.

2.1.3 Going ConcernThe Directors have made an assessment of the Company's ability to continue as a going concern and they do not intend either to liquidate or to cease trading.

2.1.4 Changes in Accounting PoliciesThe accounting policies adopted are consistent with those of the previous financial year.

2.1.5 Comparative InformationThe accounting policies have been consistently applied by the Company, and are consistent with those used in the previous year.

2.2 SIGNIFICANT ACCOUNTING ESTIMATES AND ASSUMPTIONSIn the process of applying the Company’s Accounting Policies, management is required to make judgments, apart from those involving estimations, which may have a significant effect on the amounts recognized in the Financial Statements. Further, the management is required to consider, key assumptions concerning the future and other key sources of estimation of uncertainty at the Balance Sheet date that may have a significant risk of causing material adjustments to the carrying amounts of assets and liabilities. The respective carrying amounts of assets and liabilities are given in the related Notes to the Financial Statements. The key items which involve these judgments, estimates and assumptions are discussed below:

a) Impairment Losses on Leases Stock out on Hire and Loans and Advances In addition to the provisions made for possible loan losses based on the parameters and directives for specific provisions on Leases Stock out on Hire and Loans and Advances by the Central Bank of Sri Lanka, the Company reviews its Loans and Advances portfolio at each reporting date to assess whether a further allowance for impairment should be provided in the Income Statement. The judgments by the management is required in the estimation of these amounts and such estimations are based on assumptions about a number of factors and actual results may differ, resulting in future changes to the allowances.

b) Defined Benefit Plans The Defined Benefit Obligation and the related charge for the year is determined using actuarial valuation. The actuarial valuation involves making assumptions about discount rates, future salary increase, mortality rates etc. Due to the long term nature of such obligation these estimates are subject to significant uncertainty. Further details are given in Note 14 to these financial statements.

c) Assets held for sale Assets held for sale have been accounted at cost and the directors have evaluated the recoverability considering the current market prices of respective assets.

Notes to the Financial Statements


47

Year ended 31 March 2012

2.3 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

2.3.1 Taxation

a) Current TaxesIncome tax assets and liabilities for the current and prior periods are measured at the amount expected to be recovered from or paid to the Commissioner General of Inland Revenue. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted by the balance sheet date.

The provision for income tax is based on the elements of income and expenditure as reported in the financial statements and computed in accordance with the provisions of the Inland Revenue Act. No 10 of 2006 and amendments there to.

b) Deferred TaxationDeferred taxation is provided using the liability method on temporary differences at the balance sheet date between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes.

Deferred tax assets and liabilities are recognized for all temporary differences. Deferred tax assets are recognized for all deductible temporary differences, carry-forward of unused tax credits and unused tax losses, to the extent that it is probable that taxable profit will be available against which the deductible temporary differences, and the carry-forward of unused tax credits and unused tax losses can be utilized.

The carrying amount of deferred tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred tax asset to be utilised. Unrecognized deferred tax assets are reassessed at each balance sheet date and are recognized to the extent that it has become probable that future taxable profit will allow the deferred tax asset to be recovered.

Deferred tax assets and liabilities are measured at tax rates that are expected to apply to the year when the asset is realized or liability is settled, based on the tax rates and tax laws that have been enacted or substantively enacted as at the balance sheet date.

Income tax relating to items recognized directly in equity is recognized in equity.

Deferred tax assets and deferred tax liabilities are offset, if a legally enforceable right exists to set off current tax assets against current tax liabilities and the deferred taxes relate to the same taxable entity and the same taxation authority.

Notes to the Financial Statements Contd...

2.3.2 Loans and AdvancesLoans and advances to customers are stated net of provision for bad and doubtful loans and interest not accrued to revenue.

2.3.3 Lease Rentals Receivable & Stock Out on HireAssets leased to customers under agreements, which transfer substantially all the risks and rewards associated with ownership other than legal title, are classified as finance leases. Lease rentals receivable represents the total minimum lease payments due net of unearned income and allowance for doubtful recoveries.

Assets sold to customers under fixed rate hire agreements, which transfer all the risks and rewards as well as the legal title at the end of such contractual period are classified as stock out on hire. Such assets are accounted for in a similar manner as finance leases.

2.3.4 Provisions for Bad and Doubtful DebtsAmounts are set aside with regard to possible losses on loans, advances hire purchase, finance leases and operating leases in line with Finance Companies (Provision for Bad and Doubtful Debts) Direction No. 3 of 2006 issued by the Central Bank of Sri Lanka.

Provisions are made as follows:

Period Outstanding Pledge Loans Lease Facilities

06-12 Months 50% 50%12 Months Over 100% 100%

2.3.5 Vehicle StockVehicle stock comprises all costs of purchase and other costs incurred in bringing the asset to its saleable condition.

Vehicle Stock is stated at cost.

2.3.6 Cash and Cash EquivalentsCash and cash equivalents are defined as cash in hand, demand deposits and short-term highly liquid investments, readily convertible to known amounts of cash and subject to insignificant risk of changes in value.

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

A n n u a l R e p o r t 2 0 1 2

48



2.3.7 Property, Plant and Equipmenta) Cost and ValuationProperty, Plant and Equipment are recorded at cost of purchase together with any incidental expenses thereon. The assets are stated at cost less accumulated depreciation which is provided for, on the basis specified in (c) below.

b) Restoration CostExpenditure incurred on repairs or maintenance of Property, Plant and Equipment in order to restore or maintain the future economic benefits expected from the originally assessed standard of performance, is recognized as an expense when incurred.

c) DepreciationThe provision for depreciation is calculated by using the reducing balance method on the cost of all property, plant and equipment other than freehold land, in order to write off such amounts over the following estimated useful lives by equal installments. The principal annual rates used are,

Building - 4% P.AAir Conditioner - 25% P.AOffice Equipment - 8% P.AOffice Furniture and Fittings - 12.5% P.APlant and Machinery - 25% P.AComputer Software - 25% P.AMotor Vehicles - 25% P.A

2.3.8 Investmentsa) Current Investments – Government SecuritiesCurrent investments include Government of Sri Lanka Treasury Bills which is stated at cost plus a portion of discount or premium. The cost of an investment is the cost of acquisition inclusive of brokerages, fees, duties and bank fees.

b) Long Term Investments – Investment SecuritiesLong term investments are stated at cost. The cost of the investment is the cost of acquisition inclusive of brokerage fees, duties and bank fees.

The carrying amount of long-term investments is reduced to recognise a decline other than temporary in the value of investments, determined on an individual investment basis.

2.3.9 Employment Benefit Obligationsa) Defined Benefit Plan – GratuityThe Company measures the present value of the promised retirement benefits for gratuity, which is a defined benefit plan with the advice of an independent professional actuary using the Projected Unit credit Method (PUC) as required by Sri Lanka Accounting Standards No.16, Employee Benefit (Revised 2006). The item stated under Retirement Benefit Liability in the Balance Sheet.

Funding Arrangement The Gratuity liability is not externally funded.

b) Defined Contribution Plans – Employees’ Provident Fund & Employees’ Trust FundEmployees are eligible for Employees’ Provident Fund Contributions and Employees’ Trust Fund Contributions 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 Fund respectively.

2.3.10 ProvisionsProvisions are recognized when the company has a present obligation (legal or constructive) as a result of a past event, where it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation

2.3.11 Revenue RecognitionRevenue is recognised to the extent that it is probable that the economic benefits will flow to the Company and the revenue and associated costs incurred or to be incurred can be reliably measured. Revenue is measured at the fair value of the consideration received or receivable net of trade discounts and sales taxes. The following specific criteria are used for the purpose of recognition of revenue.


49



a) Income from leasing activities and hire purchase agreementsIncome from Finance leases is recognised on the basis of the financing method. The excess of aggregate rental receivable over the cost of the leased assets constitute the total unearned income at the commencement of the contract. The earned income is taken into revenue over the term of the lease, commencing from the month in which the lease is executed, in proportion to the declining receivable balance of the lease.

Income arising from the residual interest in hire purchase agreements is credited to the profit and loss account as it accrues in proportion to the declining receivable balance of the agreement.

However, accrual of income both from leases and hire purchase agreements ceases when the account is overdue for more than six months in compliance with Direction No. 15 of 1991 (Accrued Interest) and thereafter recognised on a cash basis.

b) Interest Income from Loans and AdvancesInterest income from loans and advances is recognised on an accrual basis. However, income from loans and advances ceases when the account is overdue for more than six months in compliance with Direction No. 15 of 1991 (Accrued Interest) and thereafter recognised on a cash basis.

c) Interest income from other sourcesInterest income from Government of Sri Lanka Treasury Bills is recognized on a time proportion basis.

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

d) Overdue InterestsOverdue interest income from leasing and other loans have been accounted for on a cash received basis.

e) OthersOther income is recognized on an accrual basisNet Gains and losses of a revenue nature on the disposal of property, plant & equipment and other noncurrent assets including investments have been accounted for in the income statement, having deducted from proceeds on disposal, the carrying amount of the assets and related selling expenses.

2.3.12 Expenditure RecognitionExpenses are recognised in the income statement on the basis of a direct association between the cost incurred and the earning of specific items of income. All expenditure incurred in the running of the business and in maintaining the property, plant & equipment in a state of efficiency has been charged to income in arriving at the profit for the year.

2.3.13 Segmental ReportingA segment is a distinguishable component of the Company that is engaged either in providing related products or services (business segment), or in providing products and services within a particular economic environment (geographical segment), which is subject to risks and returns different from those of other business segments. For the purpose of segment reporting disclosures, the information is presented in respect of the Company’s business segment which is based on the Company’s management and internal reporting structure. The Company comprises the following major Business segments; lending, leasing, investments and others.

2.4 New Accounting Standards Issued But Not Effective As At Balance Sheet Date

2.4.1 The Institute of Chartered Accountants of Sri Lanka issued a new volume of Sri Lanka Accounting Standards, which are applicable for accounting periods beginning on or after 01st January 2012. Accordingly these Standards have not been applied in preparing these financial statements as they are not applicable for the year ended 31st March 2012.

2.4.2 These new Sri Lanka Accounting Standards comprise Accounting Standards pref ixed both SLFRS (corresponding to IFRS) and LKAS (corresponding to IAS) and are commonly referred to by the term SLFRSs. Application of the Sri Lanka Accounting Standards prefixed SLFRS and LKAS for the first time is deemed to be an adoption of SLFRSs for the first time. The Council of the Institute of Chartered Accountants of Sri Lanka has also adopted the Interpretation Guidelines issued by the International Financial Reporting Interpretation Committee (guidelines referred to as IFRICs) and Standing Interpretation Committee (guidelines referred to as SICs).

A n n u a l R e p o r t 2 0 1 2

50



51

3 INVESTMENT SECURITIES

Credit Information Bureau of Sri Lanka

Investment in Dealing Securities (Note 3.1)

Investment in Commercial Papers

Investment in Repurchase Agreements - ( Capital Alliance Limited)

2,500

5,842,306

7,330,235

-

13,175,041

2011Rs.

2012 Rs.

2,500

3,238,341

-

5,000,001

8,240,842

Notes to the Financial Statements Contd...Year ended 31 March

1,681,283

1,471,372

419,435

505,619

552,361

177,296

437,395

597,545

5,842,306

-

5,842,306

1,681,283

1,471,372

419,435

505,619

552,361

177,296

437,395

597,545

5,842,306

(2,603,965)

3,238,341

778,100

536,800

320,000

540,000

362,500

103,500

232,500

364,941

3,238,341

31,000

22,000

8,000

67,500

5,800

4,500

15,000

32,584

31,000

22,000

8,000

67,500

5,800

4,500

15,000

32,584

No. of Shares

2012 2011

Market Value2012Rs.

Cost2012Rs.

Cost2011Rs.

3.1DEALING SECURITIES

-Quoted

Sunshine Holdings PLC

Balangoda Plantations PLC

Tokyo Cement Company (Lanka) PLC

Richard Pieris & Company PLC

ACL Cables PLC

Ceylon Hotel Corporation PLC

Hotel Services (Ceylon) PLC

John Keells Hotels PLC

Less: Provision for Fall in Value of Investment

Net Investment in Quoted Shares

3.2 Trading portfolio is stated in the balance sheet at the lower of cost and market value determined as per cost and market value at the balance sheet date.

4 LOANS AND ADVANCES

Mortgage Loans

Demand Loans

Fixed Deposits Loans

Hire Purchases

Consumer Credits

17,874,119

3,511,135

3,094,015

70,976,744

1,992

95,458,005

2011Rs.

2012 Rs.

11,432,794

377,576

4,010,431

89,908,726

1,992

105,731,519

5 NET INVESTMENT IN LEASES

Gross Investment in Leases

Less: Unearned Lease Income

6 MARGIN TRADING RECEIVABLES

Balance as at 1st April

Advance Granted During the Year

Interest Charged During the Year

Settlement Made During the Year

Balance as at 31st March

7 ASSETS HELD FOR SALE

Re-Possessed Mortgage Land

159,316,678

(39,717,122)

119,599,556

-

-

-

-

-

7,048,401

7,048,401

180,605,317

(42,569,753)

138,035,564

-

398,238,717

25,609,954

(206,939,142)

216,909,529

2,569,506

2,569,506

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8 VEHICLE STOCK

Three Wheeler Stock

9 TRADE AND OTHER RECEIVABLES

Rental In Arrears ( Note 9.1)

Deposit, Advance & Pre- Payments

Contract Under Legal

VAT on Financial Service Over Payment

Sundry Debtors & Other Receivables

9.1 RENTAL IN ARREARS

Amount Due from Leases

Amount Due from Hirers

Amount Due from Mortgage Loans

Amount Due from Demand Loans

Amount Due from Consumer Credits

Provision for Bad and Doubtful Debts (Note 9.1.1)

Interest In Suspense

9.1.1 MOVEMENT IN PROVISION FOR BAD AND DOUBTFUL DEBTS

Provision at the Beginning of the Year

Provision Made During the Year

Written off During the Year

Reversal of Provision During the Year

Provision at the End of the Year

9.1.2 RECEIVABLE LESS THAN 6 MONTHS

Gross Rentals Receivable

Interest in Suspense

Provision for Credit Losses

9.1.3 RECEIVABLE MORE THAN 6 MONTHS

Gross Rentals Receivable

Interest in Suspense

Provision for Credit Losses

-

-

16,505,851

1,427,732

8,221,671

231,764

9,921,843

36,308,861

19,053,444

4,185,592

8,903,833

7,332,676

3,957

39,479,502

(14,429,463)

(8,544,188)

16,505,851

9,755,789

14,345,783

24,101,572

(3,902,613)

(5,769,496)

14,429,463

13,746,184

-

-

13,746,184

25,733,318

(8,544,188)

(14,429,463)

2,759,667

2011Rs.

2012 Rs.

5,991,900

5,991,900

22,271,858

8,617,136

10,087,262

-

5,312,015

46,288,271

24,313,097

4,933,618

9,032,104

5,639,709

3,957

43,922,484

(12,724,458)

(8,926,168)

22,271,858

14,429,463

5,552,464

19,981,927

-

(7,257,469)

12,724,458

18,574,309

-

-

18,574,309

25,348,175

(8,926,168)

(12,724,458)

3,697,549


53


10.3 Depreciation

Buildings on Free Hold Land

Plant & Machinery

Motor Vehicles

Furniture and Fittings

Office Equipment

Total Depreciation

10.4 Net Book Values

Free Hold Land


Plant & Machinery

Motor Vehicles

Furniture & Fittings

Office Equipment

In the Course of Construction

Building Work in Progress

Total Carrying Amount of Property, Plant & Equipment

10.2 In the Course of Construction

Building Work in Progress

Total Gross Carrying Amount

10 PROPERTY, PLANT & EQUIPMENT

10.1 Gross Carrying Amounts

At Cost

Free Hold Land


Plant and Machinery

Motor Vehicles

Furniture and Fittings

Office Equipment

Total Value of Depreciable Assets

8,312,500

3,661,595

5,900,593

755,676

1,608,573

4,025,583

24,264,519

BalanceAs at

31.03.2012Rs.

Disposal/Transfers

Rs.

Additions

Rs.

BalanceAs at

01.04.2011Rs.

-

-

-

(675,844 )

-

-

(675,844)

-

-

1,825,026

2,800

94,000

1,815,500

3,737,326

8,312,500

3,661,595

4,075,567

1,428,720

1,514,573

2,210,083

21,203,038

5,922,895

5,922,895

BalanceAs at

31.03.2012Rs.

Disposal/Transfers

Rs.

Incurred During the Year

Rs.

BalanceAs at

01.04.2011Rs.

-

-

5,922,895

5,922,895

-

-

1,245,808

3,333,557

405,999

625,538

864,228

6,475,130

BalanceAs at

31.03.2012Rs.

Depreciation on Disposal

Rs.

Change for the Year

Rs.

BalanceAs at

01.04.2011Rs.

-

-

(586,885)

-

-

(586,885)

100,658

512,417

115,875

133,830

252,041

1,114,821

1,145,150

2,821,140

877,009

491,708

612,187

5,947,194

8,312,500

2,516,444

1,254,425

551,711

1,022,865

1,597,896

15,255,841

-

15,255,841

8,312,500

2,415,786

2,567,036

349,677

983,035

3,161,355

17,789,389

5,922,895

23,712,284

2011Rs.

2012 Rs.

10.5 During the financial year, the Company acquired Property, Plant and Equipment for cash to the aggregate value of Rs.9,660,221/-(2011- Rs. 3,002,249/-)

A n n u a l R e p o r t 2 0 1 2

54


Location

1,722,000/-

847,000/-

Net Book Value

Revalued amount/

Extent(Perches)

Type

5,150,000/-

3,000,000/-

90.24P

20.00P

Land

Land

10.6 (As required by Rule No 7.6 (viii) of the Listing Rules of the Colombo Stock Exchange)

Dezen City, Kadugannawa

Heerassagala,Kandy

11 TRADE AND OTHER PAYABLES

Sundry Creditors Including Accrued Expenses

Other Payables

12 AMOUNTS DUE TO RELATED COMPANIES

Capital Alliance Holdings Limited

13 DEFERRED TAX

Balance as at Beginning of the Year

Provision/(Reversal) Made During the Year

Balance as at the End of the Year

14 DEFINED BENEFIT LIABILITIES

As at the Beginning of the Year

Current Service Cost

Interest Cost

Benefits Paid or Payable

Actuarial (Gains)/Losses

As at the End of the Year

7,135,768

4,076,783

11,212,551

-

-

757,213

5,909,995

6,667,208

1,195,221

98,609

131,474

(446,250)

(49,268)

929,786

2011Rs.

2012 Rs.

41,239,939

3,491,161

44,731,100

45,339,914

45,339,914

6,667,208

(426,151)

6,241,057

929,786

121,793

102,276

(118,800)

(44,883)

990,172

"Messrs. Actuarial & Management Consultants (Private) Limited., Actuaries, carried out an actuarial valuation of the defined benefit plan gratuity on 31 March 2012. Appropriate and compatible assumptions were used in determining the cost of retirement benefits. The principal assumptions used are as follows:"

Discount Rate Assumed (%)

Future Salary Increase (%)

Retirement Age

2012

11 %

10 %

55 Years

2011

11 %

10 %

55 Years

In addition to the above, demographic assumptions such as mortality, withdrawal and disability, and retirement age were considered for the actuarial valuation. “A 67/70 mortality table” issued by the Institute of Actuaries, London was used to estimate the gratuity liability of the Company.

Relationship

Parent


55


1,526,931

1,526,931

-

-

1,526,931

1,526,931

425,689

425,689

2012 Total

Rs.

2011 Amount

Repayable With in 1 Year

Rs.

2011 Amount

Repayable After 1 Year

Rs.

2011 Total

Rs.

15 BORROWINGS

Bank Overdraft -

-

425,689

425,689

2012 Amount

Repayable After 1 Year

Rs.

2012 Amount

Repayable With in 1 Year

Rs.

16 STATED CAPITAL

Fully Paid Ordinary Shares at the Beginning of the Year

Sub Division of Shares During the Year (Note 16.1)

Balance at the End of the Year

120,904,256

-

120,904,256

6,167,324

-

6,167,324

120,904,256

-

120,904,256

6,167,324

27,752,958

33,920,282

2012 2011

(No:)ValueRs. (No:)

ValueRs.

16.1 Share Split

At an extraordinary General Meeting held on 6 July 2011, the shareholders approved a sub division of the company shares, whereby two (2) existing shares were sub divided to eleven (11), thereby increasing the ordinary shares in issue from 6,167,324 to 33,920,282 ordinary shares. The shares arising from such sub-division carries the same rights vis a vis the existing shares from which such increase arose.

16.2 Shares Held by the Parent Company and its Subsidiaries & Associate Companies.

The ordinary shares of the Company held by the parent company is as follows.

Held by Parent Company

(Capital Alliance Holdings Limited)

69,720,078

964,790

70,684,868

217,540

136,798

354,338

TotalRs.

17 RESERVES

As at the Beginning of the Year


As at the End of the Year

Investment Fund

ReserveRs.

Holding%

2012 Number of

Shares

2011 Number of

Shares

68.06 23,086,144 -

60,000,000

-

60,000,000

9,502,538

827,992

10,330,530

General Reserve

Rs.

Statutory

Reserve

Rs.

17.1 The investment fund reserve is accounted in accordance with the Central Bank guidelines issued to create and investment fund reserve 8% of value addition calculated for VAT on financial services.

17.2 The reserve was created according to Direction No. 1 of 2003 issued under the Finance Business Act No.42 of 2011. The company transfers 5% of its annual net profit after tax to this reserve in compliance with this direction.

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18 INCOME

18.1 Gross Income (Note 18.2)

18.2 Segment Analysis of Gross Income

Interest Income

Fees & Commission Income

Others

19 INTEREST INCOME

Interest on Finance Leases

Interest on Hire Purchase

Interest on Commercial Papers

Interest on Loans

Interest on Treasury Bills

Interest on Bank Deposits

Interest on Margin Trading

67,070,528

67,070,528

47,507,993

625,656

18,936,879

67,070,528

20,329,906

12,184,234

2,131,988

10,338,005

1,669,704

854,156

-

47,507,993

2011Rs.

2012 Rs.

98,577,140

98,577,140

83,953,843

655,397

13,967,900

98,577,140

26,686,645

16,809,315

3,536,401

7,501,025

1,274,571

2,535,932

25,609,954

83,953,843

19.1 Notional Tax Credit for Withholding Tax on Government Securities on Secondary Market Transactions.

The Inland Revenue Act No.10 of 2006, provided that a company which derives interest income from the secondary market transactions in Government Securities ( on or after April 1, 2002 ) would be entitled to a notional tax credit (being one ninth of the net interest income) provided such interest income forms part of the statutory income of the Company for that year of assessment.

Accordingly the net interest income earned from the secondary market transactions in Government Securities for the year, has been grossed up in the Financial Statement & the resulting notional Tax credit amounts to Rs.127,457/- (2011 - Rs.166,970/-).

20 INTEREST EXPENSES

Interest Expenses on Fixed Deposits

Interest Expenses on Short Term Borrowings

9,709,000

52,473

9,761,473

2011Rs.

2012 Rs.

24,035,428

13,939,708

37,975,136


57


21 OTHER OPERATING INCOME

Finance Charges

Default Charges

Documentation Charges

Other Charges

Commission Income

Bad Debts Recoveries

Reversal of Provision

Profit on Disposal On Marketable Securities

Profit on Sale of Vehicles

Sundry Income

22 PROVISION FOR BAD AND DOUBTFUL DEBTS

Specific Provision for,

Finance Leases & Hire Purchase

Contract Under Legal

23 PROFIT FROM OPERATION STATED AFTER CHARGING THE FOLLOWING EXPENSES

Directors' Remuneration

Auditors' Remuneration -External

Auditors' Remuneration -Internal

Depreciation

Staff Costs Includes

- Defined Contribution Plan Costs - EPF & ETF

- Defined Contribution Plan Costs - Gratuity

- Staff Salaries

- Other Staff Costs

Legal Expenses

Advertisement

Donations

24 PROVISION FOR INCOME TAX

Current Income Tax

Current Tax Expenses on Ordinary Activities For the Year (Note 24.1)

Under/(Over) Provision of Current Taxes in Respect of Previous Years

Deferred Income Tax

Deferred Taxation Charge/(Reversal) (Note 24.2)

Total

874,078

3,489,843

128,684

210,036

496,972

272,100

8,370,074

5,496,647

127,702

96,399

19,562,535

13,627,117

718,666

14,345,783

241,000

280,000

120,000

559,972

965,836

180,815

5,021,940

662,094

437,388

2,289,183

210,050

5,395,874

-

5,395,874

5,909,995

11,305,869

2011Rs.

2012 Rs.

900,970

4,813,391

85,678

344,543

569,719

440,484

7,257,469

-

211,044

-

14,623,298

3,202,239

2,350,225

5,552,464

668,500

290,000

245,000

1,114,821

1,307,658

179,186

7,975,023

767,702

653,484

2,123,839

5,540

1,441,770

(1,013,316)

428,454

(426,151)

2,303

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24.1 RECONCILIATION OF ACCOUNTING PROFIT TO TAX EXPENSE

Reconciliation between tax expense and the product of accounting profit multiplied by the statutory tax

rate is as follows:

Accounting Profit

Aggregate Disallowed Items

Aggregate Allowable Expenses

Taxable Profit

Statutory Tax Rate

Current Income Tax Expenses

24.2 DEFERRED TAXATION

Deferred Tax Expense/ (Income) Arising Due to

- Origination and Reversal of Timing Differences

20,672,710

17,391,835

(22,647,762)

15,416,783

35%

5,395,874

5,909,995

5,909,995

16,562,147

44,161,796

(46,306,242)

14,417,701

10%

1,441,770

(426,151)

(426,151)

2011Rs.

2012 Rs.

25 BASIC EARNINGS PER SHARE

25.1 Basic earnings per share is calculated by dividing the net profit for the year attributable to ordinary shareholders by the weighted average number of ordinary shares outstanding during the year. The weighted average number of ordinary shares outstanding during the year and the previous year are adjusted for events, that have change the number of ordinary shares outstanding.

25.2 The following reflects the income and share data used in the basic earnings per share computations.

Amounts used as the Numerator :

Net Profit Applicable to Ordinary Shareholders for Basic Earnings Per Share

Amounts used as the denominator :

Weighted Average Number of Ordinary Shares at the Beginning of the Year

Number of Shares Issues Due to Sub Division of Shares During the Year (Refer Note 16.1)

Weighted Average Number of Ordinary Shares Applicable to Basic Earnings Per Share

Earnings Per Share

9,366,841

6,167,324

27,752,958

33,920,282

0.28

16,559,844

6,167,324

27,752,958

33,920,282

0.49

2011Rs.

2012 Rs.


59


26 CASH AND CASH EQUIVALENTS IN THE CASH FLOW STATEMENT

Components of Cash and Cash Equivalents

Favourable Cash & Cash Equivalents Balance

Bank Balances

Cash In Hand

Unfavourable Cash & Cash Equivalents Balance

Bank Overdrafts

Total Cash and Equivalents for the Purpose of Cash Flow Statement

27 COMPARATIVE INFORMATION

27.1 The presentation and classification of the following items in the financial statements were amended to ensure comparability with the current year.

(a) Interest Income

(b) Other Operating Income

(c) Other Income

75,743,760

1,005,384

76,749,144

(1,526,931)

75,222,213

47,870,807

14,086,861

61,957,668

(425,689)

61,531,979

2011Rs.

Change

2012Rs.

As Reported Previously

27.2 Reasons for Changes in the Presentations and Classifications

(a) An amount Rs.10,387,324 previously classified under other income was reclassified as Interest Income and Other Operating Income.

28 COMMITMENTS AND CONTINGENCIES

28.1 Contingent Liabilities

The company does not have significant contingencies as at balance sheet date.

29 ASSETS PLEDGED

The company has not pledged any of its assets included in the balance sheet as security.

4,666,576

5,720,748

10,387,324

42,841,417

13,841,787

10,387,324

47,507,993

19,562,535

-

2011Change

Rs.

2011As Reported Previously

Rs.

2011Current

PresentationRs.

A n n u a l R e p o r t 2 0 1 2

60


Nature of the Company


Capital Alliance Limited

Capital Alliance Securities Limited

398,238,717

352,898,803

26,218,825

5,000,000

398,238,717

181,329,189

2012Rs.

Relationship

Parent

Related Company

Related Company

Nature of transaction

Margin Trading Business


Treasury Bill Purchases

Treasury Bill Purchases



-

-

-

-

-

-

2011Rs.

30.2 Transactions with Key Managerial persons

The Key Managerial personnel of the Company are the members of its Board of Directors and Corporate Management. Following transactions are entered between the company and its Key Management Personnel and their close family members.

30.2.1Compensation to Key Managerial Personnel

Short Term Employment Benefits Paid

30.2.2 Other transactions with Key Managerial Personnel

Fixed Deposits Accepted during the year

Fixed Deposits Held at the end of the year

Interest Paid on Fixed Deposits

31 EVENTS OCCURRING AFTER THE BALANCE SHEET DATE

There have been no material events occurring after the balance sheet date that require adjustments or disclosure in the financial statements.

668,500

50,100,000

50,100,000

-

241,000

-

-

-

2012Rs.

2011Rs.

30 RELATED PARTY DISCLOSURE

Details of significant related party disclosures are as follows:

30.1 Transactions with the Parent and Related Entities


61


32 FINANCIAL REPORTING BY SEGMENT

Hire PurchaseFinance Lease Term Loan Margin Trading Short Term Investments Unallocated Total

A n n u a l R e p o r t 2 0 1 2

62


Assets


Treasury Bills

Investment Securities

Loans and Advances

Net Investment in Leases

Margin Trading Receivables

Asset Held For Sale

Vehicle Stock

Trade and Other Receivables

Income Tax Receivables

Property, Plant and Equipment

As at 31.03.2012

Liabilities

Fixed Deposits

Income Tax Liabilities

Rental Received in Advance

Trade and Other Payables

Amounts Due to Related Parties

Deferred Tax Liabilities

Defined Benefit Liabilities

Borrowings

As at 31.03.2012

61,957,668

500,000

5,000,000

6,572,008

403,856

216,909,529

-

5,991,900

36,201,009

2,492,407

-

136,595,026

-

40,442

39,950,925

45,339,914

-

-

425,689

Less than 3

Months

Rs.

-

25,718,825

3,240,842

25,463,492

10,278,352

-

2,569,506

-

10,087,262

-

-

159,066,135

-

665,756

4,559,265

-

-

-

-

3-12

Months

Rs.

-

-

-

64,132,687

100,771,196

-

-

-

-

-

-

4,706,748

-

2,862,843

134,908

-

-

-

-

1-3

Years

Rs.

-

-

-

9,563,333

26,582,160

-

-

-

-

-

23,712,286

3,000,500

-

-

86,003

-

6,241,057

990,172

-

Over 3

Years

Rs.

61,957,668

26,218,825

8,240,842

105,731,520

138,035,564

216,909,529

2,569,506

5,991,900

46,288,271

2,492,407

23,712,286

638,148,317

303,368,409

-

3,569,041

44,731,101

45,339,914

6,241,057

990,172

425,689

404,665,382

Total

2012

Rs.

76,749,144

15,230,307

13,175,041

95,458,005

119,599,556

-

7,048,401

36,308,861

-

15,255,841

378,825,156

136,750,096

967,752

3,847,740

11,212,551

-

6,667,208

929,786

1,526,931

161,902,064

Total

2011

Rs.

33 MATURITY ANALYSIS

An Analysis of the Total Assets Employed and Total Liabilities at the Year Ended, Based on the Remaining at the Balance Sheet Date to the Respective Contractual Maturity Dates are Given Below.


63

Share Information


Pan Asia Banking Corporation PLC/ Lankem Ceylon PLC

Pan Asia Banking Corporation PLC/ Divasa Equity (Private) Limited

Seylan Bank PLC/ HVA Lanka Exports (Private) Limited

Seylan Bank PLC/ Divasa Equity (Private) Limited

Opulant Fund (Private) Limited

Mr. C P R Perera

Mr. C C D Mathew

Lankem Ceylon PLC

Mr. K G D S R Kulatunga

Richard Pieris Financial Services (Private) Limited / Fortune One (Private) Limited

Merchant Bank of Sri Lanka PLC/ K R W Ranasinghe

Pan Asia Banking Corporation/ Mr. R E Sellamuttu

Mr.J H Liyanage

Mr. S W S A B Bulankulame

Mr. J A Liyanage

Mrs. C O F David

Capt. M A L Ratnayake

Cohort Capital (Private) Limited

Mr. D O De Silva

68.06

11.70

3.15

3.07

1.77

0.97

0.88

0.75

0.61

0.60

0.59

0.52

0.42

0.31

0.30

0.29

0.29

0.28

0.24

0.22

Top 20 Shareholders as at 31st March, 2012

Name of Shareholder No. of Shares %

23,085,037

3,968,348

1,067,000

1,041,988

601,600

330,000

300,000

255,999

206,700

203,460

200,000

175,300

143,851

105,919

102,100

100,001

100,000

95,010

80,002

75,800

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

Public Share Holdings

As per Rule No.7.6 (iv) of the Colombo Stock Exchange, the percentage of public holding as at 31st March 2012 was 19.36%

Directors’ Share Holdings as at 31.03.2012

Name of the Director Share Holding

Mr. C P R PereraMr. W A T FernandoMs. N T M S CoorayMr. R J ArasaratnamMr. E R G C G HemachandraMr. C S R S Anthony

300,000 Nil Nil Nil Nil Nil

Close Rs. 37.80 30/03/2012

Highest Rs. 39.40 21/03/2012

Lowest Rs. 20.00 24/02/2012

Share Price Movement

Price Date

A n n u a l R e p o r t 2 0 1 2

64

Distribution of Share Holders

As at 31st March 2012Shares

Residence Non Residence Total

No of Share

Holders

No of Shares

% No of Share

Holders

No of Shares

% No of Share

Holders

%No of Shares

Up to 1,000

1,001 - 10,000

10,001 - 100,000100,001 – 1,000,000Over 1,000,000

Total

238

100

41

11

4

394

76,149

446,092

1,427,438

2,624,929

29,162,373

33,736,981

0.22

1.32

4.21

7.74

85.97

99.46

1

1

2

1

0

5

300

10,000

73,000

100,001

-

183,301

0

0.03

0.22

0.29

0

0.54

239

101

43

12

4

399

76,449

456,092

1,500,438

2,724,930

29,162,373

33,920,282

0.22

1.35

4.43

8.03

85.97

100

Share Holding - Individual Vs Institutions

As at 31st March 2012

No of Share Holders No of Shares %

Categories of Share Holders

IndividualsInstitutionsTotal

36237

399

2,627,85131,292,43133,920,282

8.0092.00

100.00


65

Value Added Statement

Value Added

Interest Income

Interest expenses

Value Added

Other income

Provision for Bad and Doubtful Debts

Wealth Created

Distribution of Value Added

To Service Providers

Overhead and support services

To the Government

Value Added Tax on Financial Services

Tax Expense

To Employees

Salaries, wages and other benefits

To Expansion & Growth

Retained earnings

Depreciation

%

43%

17%

16%

23%

43%

6%

19%

32%

% 2010/11

47,507,993

(9,761,473)

37,746,520

19,562,535

(14,345,783)

42,963,272

18,531,709

2,037,191

5,395,874

7,433,065

7,071,685

9,366,841

559,972

9,926,813

42,963,272

2011/12

83,953,843

(37,975,136)

45,978,707

14,623,298

(5,552,464)

55,049,541

23,504,246

1,709,977

1,441,770

3,151,747

10,718,883

16,559,844

1,114,821

17,674,665

55,049,541

2011/12

43%

6%

19%

32%

Service ProvidersExpansion & GrowthEmployeesGovrnment

2010/11

17%

17%

23%

43%

Service ProvidersExpansion & GrowthEmployeesGovrnment

Notice of Meeting

NOTICE is hereby given that the THIRTY FIRST ANNUAL GENERAL MEETING of CAPITAL ALLIANCE FINANCE PLC will be held at the Auditorium of the Ceylon Chamber of Commerce, No. 50, Navam Mawatha, Colombo 2 on Friday, 21st September 2012 at 3.30 p.m. to transact the following business:-

1. To receive and consider the Report of the Directors and the Statements of Accounts for the year ended 31st March 2012 together with the Report of the Auditors thereon.

2. To appoint Messrs KPMG Chartered Accountants as the Auditors of the Company for the ensuing year and authorize the Directors to determine their remuneration.

3. To authorize the Board of Directors to determine contributions to charities and other donations for the year 2012/ 2013.

By Order of the Board ofCAPITAL ALLIANCE FINANCE PLC

S S P CORPORATE SERVICES (PRIVATE) LIMITEDSECRETARIESColombo.15th August 2012

NOTE:A member of the Company is entitled to appoint a Proxy to attend and vote on his or her behalf.A Proxy need not be a member.A Proxy form which is enclosed should be deposited at the Registered Office of the Company not less than 48 hours before the meeting.

A n n u a l R e p o r t 2 0 1 2

66

Form of Proxy


67

I/We ........................................................................................................................................................................

of .................................................................................................................... being a member/members of Capital

Alliance Finance PLC hereby appoint: ................................................................................................................... of

.............................................................................................................. or failing him/her

Mr. C P R Perera of Colombo failing him

of Colombo failing him

of Colombo failing her



as my/our proxy to represent me/us to vote for me/us and on my/our behalf at the Thirty First Annual General Meeting of the Company to be held on the 21st September 2012 and at any adjournment thereof and at every poll which may be taken in consequence thereof.

Mr. W A T Fernando

Ms. N T M S Cooray

Mr. R J Arasaratnam


Mr. C S R S Anthony

Signed this ……………………………… day of …………………………. 2012.

Agenda Item AgainstFor

1. To receive and consider the Report of the Directors and the Statements of Accounts for the year ended 31st March 2012 together with the Report of the Auditors thereon.

2. To appoint the Auditors and authorize the Directors to determine their remuneration

3. To authorize the Board of Directors to determine contributions to charities and other donations for the year 2012/ 2013.

KPMG as

……………………………….Signature of the Shareholder

Note: Instructions as to completion are noted on the reverse hereof.

Instructions as to Completion of Proxy

1. Kindly perfect the Form of Proxy by legibly filling your full name and address, signing in the space provided, and filling in the date of signature.

2. If the Proxy Form is signed by an Attorney, the relative Power of Attorney should also accompany the Proxy Form for registration, if such Power of Attorney has not already been registered with the Company.

3. In the case of Company/Corporation, the Proxy must be filled and attested in the legally prescribed manner.

4. The completed Form of Proxy should be deposited at the office of the Secretaries, S S P Corporate Services (Private) Limited, No. 101, Inner Flower Road, Colombo 3, not less than 48 hours before the meeting.

5. A shareholder appointing a Proxy (other than a Director of the Company) to attend the meeting should indicate the Proxy holder’s National Identity Card (NIC) number on the Form of Proxy and request the Proxy holder to bring his/her National Identity Card with him/her.

Shareholder's NIC No.

No. of Shares held

Proxy holder's NIC No. (If not a Director of the Company)

Please provide the following details

A n n u a l R e p o r t 2 0 1 2

68

Let the milk of prosperity overflow...

Registered Office: No. 21, Kumara Veediya, Kandy. Tel : 081 2 22 46 19Branch: No.123, Hunupitiya Lake Road, Colombo 2. Tel : 011 2 389 389E-mail: [email protected]: www.capitalalliance.lk

Capital Alliance Finance PLC

FINANCE

Licenced by the Monetary Board of the Central Bank of Sri Lanka under the Finance Business Act No. 42 of 2011

Date of Incorporation - 25th November 1981.

RAM Rating B+

Co.Reg.No. PB 765 PQ