19...Annual Report 2019-20 2 | FINANCIAL HIGHLIGHTS Group Company 2019/20 2018/19 2019/20 2018/19...

CENTRAL FINANCE COMPANY PLC

19ANNUAL REPORT

VISION Central Finance shall be the first choice for progressive customers in delivering innovative financial solutions.

MISSIONTo be the leader in our industry, conducting business with responsibility, using our expertise in helping customers grow and prosper whilst creating lasting value for our shareholders.

CORPORATE VALUES ³ Customer Centered – We aim to build long term relationships with our customers,

We believe in providing consistently high standards of service and integrity

³ Unyielding Integrity – We have a hard earned reputation of integrity and reliability which we shall safeguard at all times. Therefore trust, confidence, prudence and fairness in dealing with our customers, members of the public will be absolute and will form an integral part of our business philosophy

³ Superior Service – We believe in providing fast, quality service that earn customer satisfaction which results in customer retention

³ Exceptional Performance – We set ambitious goals, yet we understand accountability to achieve these goals. We are committed to perform exceptionally well on behalf of our stakeholders

³ Our People are our company – The ability and commitment of our people are central to the success of the company. Therefore, we help them enhance their skills, recognise and reward accomplishment, treat them with fairness and consideration. In return we expect every individual to take responsibility for his/her actions

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CONTENTSFinancial Highlights 2

Chairman’s Statement 3

Managing Director’s Report 6

Board of Directors 10

Corporate Management Team 13

Management Discussion and Analysis 14

Financial Review 17

Branch Network 22

Risk Management Report 26

Corporate Governance 36

Corporate Social Responsibility 75

Financial Calendar 2019/20 80

Annual Report of the Board of Directors 82

Nomination Committee Report 89

Related Party Transactions Review Committee Report 90

Directors’ Responsibility for Financial Reporting 91

Remuneration Committee Report 92

Integrated Risk Management Committee Report 93

Audit Committee Report 94

Directors’ Statement on Internal Control 97

Independent Assurance Report 98

Independent Auditor’s Report 99

Statement of Income 102

Statement of Comprehensive Income 103

Statement of Financial Position 104

Statement of Changes In Equity 105

Cash Flow Statement 107

Accounting Policies 108

Notes to the Financial Statements 128

Directors’ Interest in Contracts with the Company 186

Group Companies 187

Group Value Added Statement 190

Quarterly Statistics - Company 191

Information on Shares and Debentures 192

Decade at a Glance 196

Income Statement in US Dollars 198

Statement of Financial Position in US Dollars 199

Employees of the Year 200

Glossary of Financial Terms 202

Notice of Meeting 204

Form of Proxy 205

Investor Feedback Form 207

Corporate Information - Inner Back Cover

Central Finance Company PLC Annual Report 2019-20 |2

FINANCIALHIGHLIGHTS

Group Company

2019/20 2018/19 2019/20 2018/19

Rs.Mn. Rs.Mn. Rs.Mn. Rs.Mn.

Financial performance

Income 25,759 23,566 22,064 20,288

Profit before income tax 5,837 7,349 4,421 6,137

Income tax 1,728 2,220 1,526 2,054

Profit after income tax 4,109 5,129 2,895 4,083

Net profit attributable to ordinary shareholders 3,990 5,041 2,895 4,083

Gross dividends - - 530 787

Financial position

Total assets 117,795 110,258 107,185 101,132

Gross loans and advances to customers 78,510 81,747 78,511 81,738

Deposits 52,913 45,149 53,391 45,670

Funds attributable to equity holders of the parent 44,326 40,741 35,633 33,308

Non-controlling interest 1,197 1,119 - -

Information per ordinary share

Earnings Rs. 18.08 22.85 13.12 18.50

Dividends Rs. 2.40 3.60 2.40 3.60

Market value Rs. - - 81.00 84.50

Net assets Rs. 200.86 184.62 161.47 150.94

Ratios

Dividend cover (times) - - 5.47 5.14

Dividend pay out (%) - - 18.31 19.28

Shareholders’ funds to deposits - - 66.74 72.93

Core capital ratio % (Tier 1) - - 27.73 26.00

Total risk weighted capital ratio % (Tier 1 & 11) - - 27.68 25.87

EMPLOYEES

18/19: 1,896

17/18: 1,790

18/19: 98

17/18: 97

18/19: 156,185 17/18: 150,175

1,892

CUSTOMERS

139,862

BRANCHES

103

27,8

95

35,6

33

33,3

08

Shareholders' FundsRs.Mn +6.98%

17/18 18/19 19/20

92,3

76

117,

795

110,

258

17/18 18/19 19/20

Total AssetsRs.Mn +6.84%

40,

570

52,

913

45,

149

Total DepositsRs.Mn +17.20%

17/18 18/19 19/20

Central Finance Company PLCAnnual Report 2019-20 | 3

CHAIRMAN’S STATEMENT

“Just as the policy measures taken to revive the economy and improve business sentiments finally began to materialise at the beginning of 2020, the country was forced into a total lockdown in March 2020 due to COVID-19 pandemic, which left the economy in a state of suspense for several weeks thereafter.”

It is with great pleasure that I present

to you Central Finance Company PLC’s

Annual Report for the financial year ended

31st March 2020 and welcome you to the

Company’s 62nd Annual General Meeting.

MACRO-ECONOMIC OVERVIEW

With 2019 dominated by political and

economic uncertainty, economic activities

remained sluggish for much of the year.

The Easter Sunday terrorist attacks in April

2019 and the general uncertainty in the

lead up to the Presidential elections were

the key factors responsible for the sluggish

economic activities and despite the

Central Bank of Sri Lanka’s efforts to lower

policy interest rates in a bid to stimulate

the economy, most sectors reported

muted growth in 2019. The Agriculture

sector recorded just 0.6% growth. In the

Service sector, which was the hardest

hit by the Easter Sunday attacks, growth

decelerated to 2.3% in 2019 from the

growth of 4.6% in 2018. The Industry

sector meanwhile having benefited

somewhat from the fallout of US-China

trade relations, recorded a growth of 2.7%

in 2019, up from 1.2% in the previous

year. Nonetheless, as a whole Sri Lanka’s

GDP expanded by a modest 2.3% in

2019 driven largely by higher domestic

consumption. Notably, however, inflation

pressures appeared to be well contained

with both headline and core inflation

moving broadly in the Central Bank’s

desired range of 4%-6% during 2019.

The country’s trade and current account

balances too improved mainly as a result

of tighter macro prudential policy measures

to curtail import expenditure and stabilize

the exchange rate. Expenditure on imports

declined by 10.3% to US Dollars 19,937

Million in 2019 from US Dollars 22,233

Million in 2018. The Rupee remained

broadly stable during 2019, despite some

pressure in the immediate aftermath of the

Easter Sunday attacks and again towards

the latter part of 2019 due to heightened

uncertainties in global capital markets.

Meanwhile, just as the policy measures

taken to revive the economy and improve

business sentiments finally began to

materialize at the beginning of 2020, the

country was forced into a total lockdown in

March 2020 due to COVID-19 pandemic,

which left the economy in a state of

suspense for several weeks thereafter.

NON-BANK FINANCIAL SERVICE SECTOR (NBFI SECTOR)

The NBFI sector performance contracted

further in 2019 as lending activities slowed

down, primarily due to the challenging

macroeconomic environment. Moreover,

macro prudential policy measures such

as the LTV ratio for credit facilities granted

in respect of motor vehicles further

dampened the demand for credit from

the market. Consequently, the sector asset

base did not expand in 2019 compared to

the 5.6% expansion reported at the end of

the previous year.

A substantial increase in Non-performing

Assets (NPAs) was also noted as Gross

NPAs shot up to 10.6% at end-December

2019, from 7.7% an year ago, reflecting

deterioration in the asset quality of the

sector. Several factors, including the

economic downturn were responsible for

this. The Government’s decision to grant

a debt moratorium to the tourism sector

businesses affected by the Easter Sunday

attacks at the beginning of the year and to

clients who were affected by the COVID-19

at the end of the year was another key

reason for the increase in portfolio quality

deterioration.

The lack of viable lending opportunities

combined with higher NPAs had a bearing

on the profitability of the NBFI sector in

2019, as evidenced by the steep decline in

sector profits for the year. Stemming from


this, Return on Assets also decreased to

2.2%, while Return on Equity decreased to

7.5% from 2.7% and 12.1% respectively

in 2018.

It is however encouraging to see ongoing

efforts by the authorities to strengthen

and reform the NBFI sector on par

with global standards. One of the most

notable developments for the year

was the Direction issued in February

2020 regarding the Classification and

Measurement of Credit Facilities, which

sets out the minimum requirements for

LFCs in line with the Sri Lanka Accounting

Standard (SLFRS 9) - Financial Instruments

and prudential requirement of the Central

Bank of Sri Lanka.

OUR STRATEGIC PRIORITIES

In light of the challenging operating

environment in the year under review, CF

had to curtail many of its growth plans

set out for the year and instead focus on

minimising the adverse effect on revenue

and profitability indicators as well as reduce

the stress on the Company’s balance

sheet. Stemming from this, we shifted to a

more prudent lending strategy which would

help to consolidate CF’s overall portfolio.

Meanwhile amidst growing NPA pressure,

we also took some important steps to

strengthen the recovery framework through

tighter monitoring and proactive reporting.

However, regardless of the challenges in

our immediate operating environment,

we continued to prioritise our customers

above all else. We started the year by

reconceptualising our branch model and

began transitioning out of our existing

two-tier branch system in favour of a

single standardized branch which would

offer the Company’s complete range of

services. On this basis, all CF branches

across the Country were converted into

fully-fledged branches. We also opened

another five fully-fledged branches in the

current financial year, thus expanding CF’s

footprint in Ratnapura, Colombo, Puttalam

Hambantota and Kurunegala Districts, thus

enabling people in these regions to benefit

from CF’s value proposition.

To further reiterate our commitment to our

customers, all CF branches were kept open

to allow customers to perform essential

transactions throughout the COVID-19

period, wherever authorities allowed us to

open branches.

FINANCIAL HIGHLIGHTS

Income grew by 9.3% to Rs. 25.76 Billion

over last year’s Rs. 23.57 Billion. Interest

expense grew by a faster pace at 13.25%.

Reflecting the challenging economic

conditions that prevailed during most part

of the year, the impairment charges for the

year was recorded at Rs. 4.78 Billion - a

substantial increase over the last year’s

amount of Rs. 2.21 Billion.

The loan book contracted to Rs.78.51

Billion from last year’s figure of Rs. 81.75

Billion. However, the total assets of the

Group grew to Rs. 117.79 Billion from

the last year’s Rs. 110.26 Billion mainly

due to the increase in short term liquid

assets. The Deposit base growth was at

a commendable level and the year-end

deposit liabilities stood at Rs. 52.91 Billion

from the previous year’s Rs. 45.15 Billion,

a reflection of customer loyalty and stability

of the company.

CHAIRMAN’S STATEMENT

“Regardless of the challenges in our immediate operating environment, we continued to prioritise our customers above all else. We started the year by reconceptualising our branch model and began transitioning out of our existing two-tier branch system in favour of a single standardized branch which would offer the Company’s complete range of services.”

TOTAL ASSETS

Rs. 118 Billion 4

0,57

0

52,

913

45,

149

Total DepositsRs.Mn +17.20%

17/18 18/19 19/20


Funds attributable to equityholders at the

group level increased to Rs. 44.32 Billion

from last year’s Rs. 40.74 Billion - a growth

of 8.8%.

PERFORMANCE OF SUBSIDIARIES AND ASSOCIATES

As in the last year our main Subsidiaries,

Central Industries PLC and CF Insurance

Brokers (Pvt.) Ltd. generated their best

ever performance to date. However, the

performance of Associate Companies,

Nations Trust Bank PLC and Tea

Smallholders Factories PLC were at

a muted level. More details of the

performance of the major Subsidiaries and

Associates are available in the Managing

Director’s report on pages 6 to 9.

DIVIDENDS

The Company paid an interim dividend

of Rs. 1.20 per share and another Rs.

1.20 per share has been proposed as the

final dividend by way of a scrip issue for

the approval of the shareholders at the

upcoming Annual General Meeting.

FUTURE PLANS

As we enter a new era defined by the

COVID-19 pandemic, I am conscious

that our operating environment will

remain quite unpredictable and extremely

demanding over the next 12 to 18 months.

In this scenario, our success will no doubt

depend on our ability to respond and adapt

to the new demands of CF’s customers

through an agile business model, process,

efficiency and risk management. I believe

that therein lies a strong opportunity for

CF to differentiate itself by making financial

services simpler and more accessible for all

Sri Lankans in the years ahead. In doing so,

it is vital that we keep our cost structures

under control to enable CF to stay ahead of

competition.

Equally important is that we will need to

remain fully focused on maintaining stable

capital and liquidity buffers to enhance the

Company’s resilience to externalities in the

long term.

BOARD CHANGES

The Board, Management and Staff are

immensely grateful to Mr. C. L. K. P.

Jayasuriya, for his leadership, guidance

and contribution during the period of his

stewardship spanning nine years, three of

which he served as Chairman. He retired

on 30th June 2020 in compliance with

the Corporate Governance Direction of the

CBSL. I would like to take this opportunity

to place on record our gratitude and

appreciation to him. I also welcome Mr. M.

H. de Silva to the Board as an Independent

Non-Executive Director. I am confident that

the company will benefit tremendously

from Mr. de Silva’s extensive experience in

the sphere of financial services.

ACKNOWLEDGEMENTS

I wish to acknowledge with pleasure and

gratitude the deep commitment, loyalty

and dedication of our staff at all levels in

contributing to the results achieved by the

CF Group.

I am most indebted to my colleagues

on the Board of the Parent Company,

Subsidiaries and Associate Companies for

their wise counsel, valuable advice and

cooperation extended at all times.

I take this opportunity to record my

thanks to the Governor and Deputy

Governors of the Central Bank of Sri Lanka,

Director together with his Officers in the

Department of Supervision of Non-Bank

Financial Institutions for their assistance

and guidance at all times.

Our appreciation and gratitude is also due

to our depositors, customers, shareholders

and numerous well-wishers for their

continued confidence and patronage,

our Bankers, our Auditor, Messrs. SJMS

Associates, our Lawyers, Messrs. F J & G

de Saram and our Company Secretaries,

Corporate Services (Pvt.) Ltd.

A. D. B. Talwatte

Chairman

Colombo

23rd July 2020


MANAGING DIRECTOR’S REPORT

“The year 2019 was undoubtedly a challenging one for the Non-Bank Financial Institutions (NBFI) sector. The appetite for credit remained sluggish for much of the year on the back of the economic downturn triggered by the Easter Sunday terror attacks as well as the political uncertainty surrounding the elections.”

I am pleased to present to you the

annual report and financial statements

of Central Finance Company PLC for

the year ended 31st March 2020. The

economic conditions were very challenging

throughout the current financial year, and

in that context I believe the Company’s

financial performance for 2019/20 can be

regarded as stable.

INDUSTRY OVERVIEW

The year 2019 was undoubtedly a

challenging one for the Non-Bank Financial

Institutions (NBFI) sector. The appetite

for credit remained sluggish for much of

the year on the back of the economic

downturn triggered by the Easter Sunday

terror attacks as well as the political

uncertainty surrounding the elections.

Amidst this backdrop, credit provided by

the NBFI sector declined by 3% in 2019

compared to the robust growth of 7.6%

reported at the end of 2018. The decline

was reflected in several lending categories

including; finance leases and secured loans

and advances, all of which have reported

a significant contraction over the previous

year.

The sector came under further stress

primarily due to elevated credit risk levels

resulting from the economic downturn,

which affected most key sectors of the

economy. Consequently, asset quality

deteriorated as sector-wide gross non-

performing advances (NPA) ratio rose from

7.7% in the previous year to 10.6% by

end-December 2019.

Encouragingly though, the sector stability

improved, thanks to additional capital

infusion by many industry participants

to meet the regulatory minimum capital

requirements by January 2020. Meanwhile

in contrast to the trend seen in 2018, it is

apparent that customer deposits were the

key source of funding for the NBFI sector

as deposit growth accelerated to 5.6%,

while borrowings declined by 12.6% in

2019.

Sector profitability however suffered in

2019. Despite a slight increase in Net

Interest Margins, the sector bottom line

remained under pressure largely due to

higher loan impairment provisions resulting

from the subdued economic climate

prevailing during the year. Consequently,

the NBFI sector profit after tax dropped to

Rs. 14.5 Billion, a decrease of 31.9% from

the figure reported in 2018.

Leaving behind the troubles of 2019, it

was clear that the NBFI sector was on

the rebound as a definite uptick in credit

demand began to emerge in the early part

of 2020. This momentum was, however,

short-lived and came to an abrupt end

in the face of the lockdown measures

declared by the government in a bid to

contain the spread of COVID-19.

FINANCIAL HIGHLIGHTS

Amidst the challenging market conditions,

the performance of the Company was

lower than expected levels. Despite the

slight portfolio contraction, the group

recorded an income of Rs. 25.76 Billion

as at 31st March 2020, up 9.3% from the

Rs.23.57 Billion recorded in the previous

year. Underpinned by a clear strategic

focus, effective spread management

helped boost the interest margins, with

net interest income growing by 5.98%

year on year, from Rs. 12.59 Billion in the

preceding year to Rs. 13.35 Billion for the

current year.

92,3

76

117,

795

110,

258

17/18 18/19 19/20

Total AssetsRs.Mn +6.84%


CF’s operating expenses were well

managed in the year under review and

increased only marginally by 6.19%.

However, the sluggish economic condition

that prevailed during the year, proved to

be a severe drawback in managing the

bottom line, resulting in an increased

impairment charge of Rs.4.78 Billion for the

year, as compared to Rs. 2.21 Billion in the

previous year.

Having notable implications for the

group’s bottom line, these factors led to a

decline in the group’s profit after tax from

Rs.5.13 Billion in the previous year, to

Rs. 4.11 Billion for the year under review.

Shareholders’ funds stood at Rs. 44.32

Billion, compared to Rs. 40.74 Billion in

the previous year, a year on year increase

of 8.8%.

REVIEW OF OPERATIONS

Credit and Lending

With depressed market conditions affecting

the demand for several of CF’s core lending

products, especially the unregistered

vehicle category, the company expanded

its opportunities in the registered vehicle

market, which has been showing steady

growth since the Loan-to-value (LTV)

regulations were first imposed in 2015.

Throughout the year focused efforts

were made to grow CF’s market share

in this category and this was further

complemented by, the launch of the first

phase of the new CRM system in the latter

part of 2019. Furthermore, the “careka.lk”

e-commerce platform has also worked in

our favour especially to increase our market

reach in this segment. However, lower

lending volumes in other categories meant

CF’s overall loan book contracted marginally

year-on-year.

Asset Quality

As the economic woes of 2019 pushed

industry-wide NPAs to unprecedented

levels across the NBFI sector, we at CF took

strict action to safeguard our loan book and

minimize the deterioration in asset quality.

Following a risk horizon scan, we started by

limiting the exposure to selected high-risk

sectors alongside ongoing efforts to tighten

screening protocols and strengthen overall

credit risk management processes in order

to reduce default risk.

Thanks to these measures, CF was able

to contain its NPL ratio to 9.28 % as at

31st March 2020, which is below the

industry average of 10.6% as at the end of

December 2019.

Deposits

Notwithstanding the low-interest rate

environment, deposits continued to flow in

throughout much of the current financial

year, which I believe, is a testament to

CF’s iconic reputation and long-standing

credibility in the NBFI sector. Given the

steady stream of deposits coming in,

we did not see the need for any general

deposit mobilization campaigns and

instead capitalized on the opportunity to

attract mainly longer tenure deposits, to

help increase the synergy between our

funding and lending models.

In the current financial year, we also

made significant progress in the customer

servicing model with some notable

improvements to give deposit customers

greater flexibility and easier access to their

funds. Backed by these efforts CF’s Deposit

portfolio grew from Rs. 45.15 Billion as at

31st March 2019 to Rs.52.91 Billion as at

31st March 2020, denoting an increase of

17.19%. Furthermore, the customer base

too grew year-on-year, while our deposit

renewal ratio remained above 90%.

Liquidity and Capital Adequacy

CF remained well capitalised throughout

the year, supported by strong liquidity

buffers. Liquid Assets at the year-end

comfortably surpassed the regulatory

minimum requirements and the Company

also maintained short term financial assets

as complementary liquid assets.

As at 31st March 2020 our Core and Total

Capital Adequacy Ratios were 27.73%

and 27.68% significantly higher than the

required statutory minimum of 7% and

11%.

Credit Rating

Strong performances across all fronts,

despite challenges, prompted Fitch Ratings

Lanka Limited to reaffirm CF’s National

Long Term Rating at A+ (lka) for the 14th

consecutive year. As in the past, the senior

debts of the Company were also rated at

one notch below the Company’s rating, at

A (lka).

Dividend

CF declared an interim dividend of Rs. 1.20

per share, which was paid in December

2019. The Board further recommended a

final dividend of Rs. 1.20 per share by way

of a scrip dividend, subject to all regulatory

approvals and shareholders’ approval at

the Annual General Meeting to be held on

the 28th August 2020. The total annual

dividend per share paid and proposed for

TOTAL SHAREHOLDERS’ FUNDS

Rs. 44 Billion


2019/20 therefore, amounts to Rs. 529.62

Million representing a payout ratio of

18.31% on profit after tax.

PERFORMANCE OF THE GROUP COMPANIES

Central Industries PLC

Central Industries PLC demonstrated its

best ever revenue and profitability since

its inception. Despite many challenges,

the Company saw notable gains in both

the retail market and the construction

contractor sectors. During the year under

review, the Company widened its customer

base and improved brand visibility. Thanks

to these efforts, the Company was able

to achieve a revenue of Rs. 3.6 Billion, a

growth of 12% over the previous year,

while profits before tax amounted to

Rs. 262.9 Million for the financial year

compared to Rs.177 Million reported in the

previous year. The Profit after Tax increased

to Rs.193.9 Million compared to Rs.129.4

Million in the previous year. The company

has proposed a Rs. 4/- as a first and final

dividend partly in scrip.

CF Insurance Brokers (Pvt.) Ltd (CFIB)

Our insurance broking arm, CFIB also

produced its best ever results in 2019.

CFIB recorded a gross premium turnover

of Rs.3.38 Billion as compared to Rs.3.11

Billion in the previous year, an increase

of 8.72%, whilst commission income

increased by 7.99% from Rs.346.94 Million

in 2018 to Rs.374.67 Million in 2019.

Consequently, the pre-tax profit increased

by 16.85% over the previous year to Rs.

341.34 Million. Profit after tax was Rs.

253.29 Million in 2019 in comparison

to Rs. 222.11 Million reported in the

previous year, a growth of 14.04 %. Other

income which mainly consists of dividends

and interest income from investment in

corporate debt securities and fixed income

securities increased to 119.75 Million in

2019, an increase of 36.91% over Rs.87.47

Million recorded in 2018.

Nations Trust Bank PLC (NTB)

Nations Trust Bank PLC group reported a

profit after tax of Rs.3.7 Billion during the

financial year ended 31st December 2019,

compared to Rs.3.7 Billion reported during

the year ended 31st December 2018. The

performance was mainly driven by the

selective growth opportunities particularly

in the corporate and consumer segments

and continued focus on increasing

non-fund based income and strategic

emphasis on driving cost efficiencies by

leveraging on the agility of the bank’s

digital infrastructure. Despite a muted

growth in loans and advances, the group

net interest income increased by 6.5% to

Rs. 16.1 Billion during the year. Non-fund

based income, comprising of net fees and

commissions as well as net trading and

other income, grew by 4.4%. Consequently

total operating income increased by 5.8%

to Rs.22.5 Billion compared to Rs.21.3

Billion over the previous year.

Operating expenses increased marginally

by 4.8% to Rs.10.8 Billion reflecting the

efforts and investments over the last few

years to bring productivity and efficiency to

the bank’s operations, through technology

and lean practices. The cost-to-income ratio

improved slightly from 48.4% in 2018 to

47.9% in 2019.

Impairment charges remained at the last

year’s figure of Rs.3.3 Billion, thanks to the

added emphasis placed on underwriting

and recoveries during 2019. Both the SME

and Consumer segments saw a decline in

impairment charges for the year compared

to 2018, while the increase resulted

predominantly from the Leasing portfolio.

Accordingly, the Group’s gross NPA ratio

increased from 4.58% in 2018 to 6.17%

in 2019.

Total asset base of the group remains

relatively unchanged at Rs.325.4 Billion

at year end. Loan growth was curtailed

at 2.4%, as the Group pursued only

selective lending opportunities primarily in

the Corporate and Consumer segments

while the Leasing and SME portfolios

recorded contraction during the year. The

capital position strengthened following

a scrip dividend and Basel III compliant

debenture issue during the year, resulting

in the Group’s core capital and total capital

ratios improving to 13.30% and 17.96%

from 12.15% and 15.59% in the previous

year. The bank paid a first and final cash

dividend of Rs. 2.30 per share compared

to the scrip dividend of Rs. 2.10 per share

in 2018.

Tea Smallholders Factories PLC (TSFL)

The Sri Lankan tea industry continued to be

challenged during the year under review,

particularly as unprecedented weather

patterns negatively impacted production

and quality of the tea leaf. This situation

was exacerbated by inadequate fertilizer

supply. These conditions impacted all

elevations of tea, particularly the lowgrown

which recorded a decline in production for

the third consecutive year. Lowgrown tea

production contracted by 1.1% to 189.9

Million Kilograms in 2019 compared to the

191.9 Million Kilograms of production in

2018.

MANAGING DIRECTOR’S REPORT


Adverse weather patterns, with excessive

rainfall followed by drought conditions,

impacted the quality and quantity of tea

leaf production thus negatively impacting

the company’s production levels.

Amidst these challenging conditions the

Company’s total tea production declined

by 8.3% to 3.4 Million Kilograms in the

financial year under review compared

to 3.7 Million Kilograms in the previous

financial year. A significant increase in

infilling of tea was achieved, recording an

increase of 50,030 plants in comparison

to the previous year. Revenue of the

Company declined to Rs.2.1 Billion from

Rs.2.2 Billion recorded in the previous

year. The profit before tax also declined to

Rs.30.9 Million from Rs.37.8 Million. Profit

after tax was Rs.104.1 Million, mainly due

to the reversal of deferred tax expenses by

Rs.83.58 Million. The profit before tax for

the year under review includes an increase

in the fair value of investment property

of Rs.39.3 Million compared to Rs.38.7

Million recorded in the previous year.

BOARD CHANGES

In compliance with the Corporate

Governance Directions of CBSL, Mr. C.L.K.P.

Jayasuriya retired from the Board, upon

completion of nine years of service, three

of which he served as the Chairman.

On behalf of the management and staff I

wish record our gratitude to Mr. Jayasuriya

for his leadership through what has

been an exciting and challenging three

years for the Company and the many

contributions over the nine-year period of

his directorship. Personally, I have greatly

valued his advice and wise counsel and

we will all miss these qualities, as well as

his sound business sense and acumen.

We are pleased to welcome Mr. A. D. B.

Talwatte whose appointment as Chairman

ensures a seamless transition at the Head

of our Board. Mr. Talwatte’s experience and

senior leadership positions as the former

Precedent Partner and Country Head of

Ernst and Young, along with numerous

Board and consultancy positions on behalf

of local and international organisations

bring stature to our Board.

We also welcome Mr. M. H. de Silva who

joined the Board as an Independent

Non-Executive Director in July 2020. Mr.

de Silva’s broad business experience with

his financial services background will lend

further strength to our Board.

As a further step in the process of

leadership growth and succession that has

been underway for a number of years,

Mr. A. K. Gunaratne was appointed the

Deputy Managing Director and Mr. D. P.

de Silva as the Chief Operating Officer

of the Company in July 2020. They are

both well experienced leaders who work

tirelessly and with great focus not only in

the organisation, but also as Directors in

our associate companies.

APPRECIATIONS

I would like to take the opportunity to

acknowledge and thank all the members

of the Board who collectively make a

significant contribution to our Board

debates, while also serving on the Board’s

vitally important committees. I must

acknowledge the continuing commitment

of the entire Central Finance team and

commend them for their ready support,

perseverance and hard work in these

exceptional times.

I also take this opportunity to thank the

Director and Officials at the Department

of Supervision of Non-bank Financial

Institutions of the Central Bank of Sri Lanka

and to Ms. SJMS Associates, our External

Auditor for their support during the year.

In conclusion, I wish to thank our

shareholders, depositors, customers and

other stakeholders for their continuing

support, confidence and above all, for their

trust.

E. H. Wijenaike

Managing Director

Colombo

23rd July 2020


BOARD OF DIRECTORS

ASITE DRUPATH BANDARA TALWATTE

Independent Non-executive Chairman

Asite Talwatte, an Independent Non-executive Director of

the Board of Central Finance Company PLC since 30th

June 2016 was appointed as Chairman of the Company

on 01st July 2020. He is a fellow member of the Institute

of Chartered Accountants of Sri Lanka (ICASL) and the

Chartered Institute of Management Accountants of the

United Kingdom. He has a Post Graduate Diploma in

Business and Financial Administration awarded by the ICASL

and the University of Wageningen, Holand and a MBA from

the University of Sri Jayawardenapura, Sri Lanka. He has also

participated in a Kellogg Executive Programme at the Kellogg

Graduate School of Management, Northwestern University,

Evanston, Illinois. He has worked with Ernst & Young for over

37 years, during which period he functioned as the Country

Managing Partner for over a decade. He has worked with

Ernst & Young‘s Far East Area Executive Committee, the

Area Advisory Council and served on the ASEAN Leadership

Committee.

He has served as a former President of the Institute of

Chartered Accountants of Sri Lanka (2002/2003) and the

Chartered Institute of Management Accountants, Sri Lanka

(1995/1996) and has also served as the Chairman of the

Statutory Accounting Standards Committee, the Auditing

Standards Committee, the Urgent Issues Task Force and

the Examinations Committee of the Institute of Chartered

Accountants of Sri Lanka. Mr. Talwatte has been closely

associated with the development of Corporate Governance

in Sri Lanka. He was actively involved in the development of

the Code of Best Practice on Corporate Governance of 2013

of ICASL. In 2012 Mr. Talwatte co-chaired a Committee

on Corporate Governance jointly set up by the ICASL and

the Securities and Exchange Commission of Sri Lanka to

review and revise the Code of Best Practice on Corporate

Governance 2013. He chaired the Committee set up by the

Institute of Chartered Accountants of Sri Lanka to review

and revise the Code of Corporate Governance issued in

2017. He also represents ICASL and chairs the Integrated

Reporting Council of Sri Lanka.

He has served as a Director of People’s Bank and the

SME Bank and functions as the Chairman of Management

Systems (Pvt) Ltd. and serves on the Boards of several

other companies including Diesel & Motor Engineering

PLC, Sunshine Holdings PLC, Tokyo Cement Lanka PLC, CT

Holdings PLC, Chevron Lubricants Lanka PLC and Ceylon

Hospitals PLC.

ERANJITH HARENDRA WIJENAIKE

Executive Director

Eranjith Wijenaike is the Managing Director of Central

Finance Company PLC and has been a member of

the Board since 1st April 1983. He is a Director of Tea

Smallholders Factories PLC, Trans Asia Hotels PLC, Equity

One Ltd., Central Industries PLC and served as a founder

Director of Nations Trust Bank PLC. He holds a Bachelor’s

Degree in Commerce and a Postgraduate Diploma in

Finance and Management.

GERARD SHAMIL NIRANJAN PEIRIS

Executive Director

Shamil Peiris is the Director (Finance) of Central Finance

Company PLC and has been a member of the Board

since 1st April 1983. He serves on the Boards of many

companies within and outside the group. He possesses over

42 years of post-qualifying experience. He is a Fellow of

the Institute of Chartered Accountants of Sri Lanka, Institute

of Credit Management & Society of Certified Management

Accountants of Sri Lanka, Chartered Institute of Management

Accountants – UK, British Institute of Management and

Association of Corporate Treasurers – UK. He is also a

Chartered Global Management Accountant.


ARJUNA KAPILA GUNARATNE

Executive Director

Arjuna Gunaratne, an Executive Director since 20th February

2002 was appointed as Deputy Managing Director /

Deputy CEO with effect from 01st July 2020. He oversees

the functions of Strategic Planning, Marketing, Deposits,

Branches, Risk Management and Information Technology

operations of the Company. He is a Fellow of the Institute

of Chartered Accountants of Sri Lanka and the Chartered

Institute of Management Accountants of UK. He is also a

Chartered Global Management Accountant. He also serves

on the Boards of Tea Smallholders Factories PLC and Central

Industries PLC.

DHAMMIKA PRASANNA DE SILVA

Executive Director

Prasanna de Silva, Director (Credit) of Central Finance

Company PLC since 01st July 2011was appointed as

Director/Chief Operating Officer with effect from 01st July

2020. He oversees the functions of Credit, Recoveries,

Vehicle Hire & Sales and Corporate Social Responsibility of

the Company. He served as the Chairman of the Leasing

Association of Sri Lanka from 2007-2009. He also serves as

a Director of Nations Trust Bank PLC. He is a Fellow of the

Chartered Institute of Management Accountants - UK and has

completed all examinations of Chartered Financial Analyst

(CFA) programme.

DR. (MRS.) AGAMPODI DAMITHA NANDANIE DE ZOYSA

Independent Non-executive Director

Dr. (Mrs.) de Zoysa has been a member of the Board of

Central Finance Company PLC since 15th February 2017.

She was the former Secretary to the Ministry of Plantation

Industries from 2014 to 2015, the former Secretary to the

Ministry of Productivity Promotion from 2013 to 2014, the

former Secretary to the Ministry of Fisheries and Aquatic

Resources Development from 2010 to 2013, the Director

General of the Department of Development Finance of the

Ministry of Finance and Planning & the Treasury from 2006

to 2010 and the Director General of the Department of Fiscal

Policy of the Ministry of Finance and Planning & the Treasury

from 2005 to 2006.

Dr. (Mrs.) de Zoysa holds a B. A (Hons.) Degree in

Economics (Statistics) from the University of Peradeniya, M.

Sc. Degree in Agricultural Development Economics from the

Australian National University, Canberra, Australia, M.A. Degree

in Economics from the Ohio State University, Columbus,

Ohio, USA and Ph.D. Degree in Agricultural Economics from

the Ohio State University, Columbus, Ohio USA.

Dr (Mrs.) de Zoysa currently serves as a Director of AgStar

PLC and has served as a Director of DFCC Bank PLC,

Lankaputhra Development Bank and Sri Lanka Savings Bank.

ARJUN RISHYA FERNANDO Non-executive Director

Arjun Rishya Fernando has been a member of the Board of

Central Finance Company PLC since 16th August 2017. Arjun

Fernando possesses over 34 years of experience in banking

and financial services, both locally and overseas at senior

positions, including directorships at large banking institutions.

He holds a B.Sc. in Engineering from Southern Illinois

University, USA and an M.Sc. in Management from Clemson

University, USA. He is also an Associate of the Institute of

Financial Studies (Chartered Institute of Bankers), U.K.

He currently serves as a Director of Nations Trust Bank PLC,

HFC Bank – Fiji, NDB Capital Holdings Ltd., NDB Securities

(Pvt) Ltd., NDB Zephyr Partners Ltd. and Durdans Medical

& Surgical Hospital (Pvt) Ltd. He has served as the Chief

Executive Officer of DFCC Bank PLC, Chairman of DFCC

Consulting (Pvt) Limited, Lanka Industrial Estate Limited,

Synapsys Limited, Acuity Partners (Pvt) Limited and a Director

of Acuity Stockbrokers (Pvt) Limited.


BOARD OF DIRECTORS

CHANDIKA KUSHAN HETTIARACHCHI

Executive Director

Chandika Kushan Hettiarachchi was appointed as Director

Marketing on 17th July 2018. Chandika joined Central Finance

in November 2000 as Manager (Credit) and held several

senior managerial positions prior to his appointment as an

Executive Director.

He is an Associate Member of the Chartered Institute of

Management Accountants of UK (ACMA), Chartered Global

Management Accountant (CGMA) and holds a Master of

Business Administration Degree from the University of Wales,

UK.

Chandika Hettiarachchi counts over 22 years of experience in

the Non-banking Financial Services sector, which includes over

19 years at Central Finance Company PLC. He has carried out

many assignments as a Consultant to numerous International

Development Agencies including the International Finance

Corporation (IFC). He is also a Board member of CF Insurance

Brokers (Pvt), Ltd, a fully owned subsidiary of Central Finance

and served as a Board member of the Leasing Association of

Sri Lanka from 2017 to 2019.

KUDA BANDA HERATH

Independent Non-Executive Director

Kuda Herath was appointed to the Board of Central Finance

Company PLC on 16th February 2019. He holds a bachelor’s

degree in applied chemistry from the University of Kingston,

London. He has served as an Executive Director at A. Baur

& Co. (Pvt.) Ltd. and currently serves as the Chief Operating

Officer of Watawala Tea Ceylon Ltd. Kuda Herath possess

over 26 years experience in the fast moving consumer goods

industry, having held middle management positions in the

areas of sales and marketing at Nestle Lanka PLC previously.

MANJULA HIRANYA DE SILVA

Independent Non-executive Director

Manjula de Silva was appointed to the Board of Central

Finance Company PLC on 01st July 2020. He holds a BA

Hons (First Class) degree in Economics from the University

of Colombo and a MBA from London Business School,

UK. He is also a FCMA (UK) and a CGMA. Further, he has

pursued executive education at INSEAD Business School,

France and Harvard Business School, USA.

He was recently appointed as the Secretary General and CEO

of the Ceylon Chamber of Commerce with effect from 1st

February 2020. Prior to that, he served as Chairman of the

State owned National Insurance Trust Fund (NITF) during

2015 - 2019. He also served as a Commission Member

of the Securities and Exchange Commission (SEC) of Sri

Lanka during 2018 - 19 and as a Consultant to the Ministry

of Public Enterprise Development during 2017 - 18. Prior to

2015, he served as the Managing Director of HNB Assurance

PLC for 9 years and as its CEO for 2 more years. He has also

held leadership positions as General Manager, Eagle NDB

Fund Management Company Ltd (currently NDB Wealth

Management), General Manager – Corporate Lines and

Human Resources, Eagle Insurance Co. Ltd (currently AIA

Insurance) and Director General, Public Enterprises Reform

Commission (PERC).

In his capacity as Chairman – NITF, he served on the

Governing Council of Asian Reinsurance Corporation based in

Bangkok representing the Government of Sri Lanka. Currently,

he is an independent non - executive director and Chairman

– Audit Committee of BPPL Holdings PLC.

He also served as the Chairman of CIMA (Chartered Institute

of Management Accountants) Sri Lanka Board in 2016

and was subsequently appointed to its Regional Board for

MESANA (Middle East, South Asia and North Africa) Region.

He was a Committee Member of the Ceylon Chamber of

Commerce for a long period of time and has served as the

Chairman of its Steering Committee on Insurance. He is a

Past President of both Insurance Association of Sri Lanka

(IASL) and Unit Trust Association of Sri Lanka (UTASL).


CORPORATE MANAGEMENT TEAM

S. RAGUNANTHAN

MBA (Sikkim Manipal University, India)

General Manager – Internal Audit

C. S. HETTIARACHCHI

MBA (University of Sri Jayawardenapura),

L.L.B (University of Colombo), Attorney-

at-Law

General Manager – Legal

W. K. B. SENANAYAKE

BBA (Newport University - UK),

MBA (University of Kent - UK)

General Manager – Human Resources

K. O. V. S. M. S. WIJESINGHE

FCA (Sri Lanka), FCMA (UK)

Chief Strategy Officer

A. K. KALUHENDIWELA

MBA – (University of Wolverhampton – UK)

General Manager – Branches

K. KANDEEPAN IHSAN

FCA, ACMA (UK), CGMA

General Manager – Finance/

Chief Financial Officer

G.A. BANDARANAYAKE

Deputy General Manager –Credit

M. A. M. FAROOK

BSc (Hons) (University of London Guildhall

- UK), Dip. in Computer System Design -

NIBM

Head of Information Technology

L. L .D PRASANGA

BSc (University of Peradeniya)

MBA – (University of Wolverhampton – UK)

Deputy General Manager – Recoveries

A. F. GOONETILLAKE

Dip. in Marketing (UK), MCIM (UK), Dip.

in IDPM (UK)

Senior Assistant General Manager –

Marketing Services

S. EKANAYAKE

Senior Assistant General Manager – Fleet

Management

A. P. B. RAJANAYAKE


Deposits

D. M. WARNAKULASURIYA


Recoveries

C. M. MENDIS

Assistant General Manager – Sales

L. R. DE. SILVA

BA (University of Kelaniya)

MBA – (University of Wolverhampton - UK)

Assistant General Manager – Branch

Operations

M. S. HABARAKADA

BSc (University of Peradeniya),

PgD in IT (University of Moratuwa)

Assistant General Manager – Information

Technology

W. M. T. W. WEERASINGHE

ACA, BSc (University of Sri

Jayawardenapura)

Assistant General Manager – Internal Audit


MANAGEMENT DISCUSSION AND ANALYSIS

CREDIT AND LENDINGIsland-wide marketing and channel management activities were accelerated enabling CF to record improved volumes in the registered vehicle category. CF’s “careka.lk”, the dedicated web portal for vehicles launched in the previous year, also proved to be a key enabler in this regard.

BRANCH NETWORKFurthermore as part of ongoing improvements to CF’s branch concept, it was decided to replace the existing two-tier branch system with a single standardised branch model where all branches would offer the company’s complete range of services.

INFORMATION TECHNOLOGYAs part of CF’s ongoing improvements to customer interfaces, the mobile app upgrade was expedited with the functional suite being expanded to include, fund transfer extension for the direct settlement of lease contracts, online opening of new FD / Savings accounts, online loan application for leases / loans / quick loans, budget hire vehicle reservations, fleet management services etc.

VEHICLE HIREIn an attempt to further diversify the portfolio, a special initiative was launched to promote selected commercial vehicle fleets to both state and private sector institutions. Aggressive campaigning to secure fleet renewals also continued throughout the year.

CREDIT AND LENDING

The year under review was a challenging time for CF’s credit and lending business as demand for credit from the market remained sluggish on account of weak economic activities. The impact was felt across CF’s major lending lines, where a distinct lack of demand led to lower volumes generated in the period under review. However, moving quickly to leverage on any viable opportunities in the market, CF redoubled efforts to capitalize on what appeared to be a strong demand for registered motor cars. Island-wide marketing and channel management activities were accelerated enabling CF to record improved volumes in the registered vehicle category. CF’s “careka.lk”, the dedicated web portal for vehicles launched in the previous year, also proved to be a key enabler in this regard.

Meanwhile asset quality deterioration was another key concern for CF, where it was found that the customers’ debt servicing capacity was made considerably weaker due to the economic downturn. Under these circumstances CF took immediate action to reduce portfolio stress, which led to a conscious decision to limit the exposure to selected sectors that appeared to be more sensitive to economic uncertainty. In parallel, the existing credit management process was revamped with stricter pre-credit evaluation procedures being put in place along with more proactive follow up and recovery action to minimise default risk. Work on the new Customer Relationship Management system was also expedited with the intention of supporting lead generation as well as further streamlining end-to-end customer relationship.

VEHICLE HIRE

CF’s Vehicle Hire business performed reasonably well in 2019/20, thanks to a broad based approach to achieve Revenue targets. The main market thrust for the year was centered on the Western Province, which continues to be CF’s key stronghold in this space.

“Extensive cross selling and special promotional activities for existing deposit customers continued throughout the year, which enabled CF to maintain its deposit renewal ratio at an average of 91.27%.”

DEPOSITSCF’s deposit mobilization reflected good performance supported by the Company’s solid reputation and long standing credibility in the market. Consequently fixed deposits registered a base growth of 16.88% in 2019/20


Given the high duty structures associated with larger motor cars, CF’s new customer acquisition strategies were focused primarily on promoting small and mid-range vehicles to the corporate sector. In an attempt to further diversify the portfolio, a special initiative was launched to promote selected commercial vehicle fleets to both state and private sector institutions. Aggressive campaigning to secure fleet renewals also continued throughout the year. While these efforts did deliver good results, it should be noted that a number of new contracts as well as a significant portion of renewals that were in the pipeline in March 2020, could not be converted in 2019/20 due to the COVID-19 lockdown, which forced businesses to shut down for several weeks. Despite this drawback however, CF’s Vehicle Hire unit managed to achieve a considerable portion of the revenue targets for current financial year, a commendable achievement given the challenges faced earlier in the year due to the Easter Sunday attack and its resulting economic slowdown.

Meanwhile given the competitive pressures in the market, strict margin management measures were applied throughout the year, with key initiatives aimed at streamlining procurement. Steps were also taken to broaden the supply chain in order to augment CF’s capability to provide a dynamic range of end-to-end vehicle solutions to meet the evolving needs of customers.

DEPOSITS

Despite the downward trend in interest rates in the current financial year, CF’s deposit mobilization reflected good performance supported by the Company’s solid reputation and long standing credibility in the market. Consequently fixed deposits registered a base growth of 16.88% in 2019/20 in comparison to the previous year. The customer base too grew by 4.39% year-on-year.

With a steady stream of new deposits coming in throughout the year, all general deposit mobilization campaigns were halted and only focused campaigns were rolled out targeting specific product categories. In this regard special emphasis was placed on promoting medium & longer tenure FD’s to improve the synergy between the Company’s funding base and lending strategy.

At the same time, extensive cross selling and special promotional activities for existing deposit customers continued throughout the year, which enabled CF to maintain its deposit renewal ratio at an average of 91.27%.

Efforts to boost savings also delivered good results. CF’s total savings base increased by 17.87% year-on-year.

Meanwhile ongoing service improvements continued during the year with a notable step taken to ensure that customers receive their deposit certificate within a shorter period of time after placing the deposit. A series of advanced system integration protocols were also implemented to permit customers to withdraw their FD funds from any CF branch across the island, regardless of which branch the original deposit was placed. However, the most significant development for the year was the launch of the CF Mobile App in early 2020, which places CF among the few NBFI’s in the Country to offer such a platform. The CF Mobile App is a secure online tool that allows users to conveniently access account information and perform a range of transactions at any time from any location, essentially giving customers the opportunity to manage their financial needs remotely without having to physically present themselves at their respective CF branch.

BRANCH NETWORK

CF’s branch network has been the key channel that has enabled the Company to deliver its products to the market. Premised on this, the Company has continued to invest in strengthening its island-wide branch footprint in order to reach out to more and more Sri Lankans across the country. In this regard, the focus has been to establish CF’s presence in areas with a high population density. Accordingly in the current financial year five new branches were opened in Walasmulla, Nattandiya, Hettipola, Eheliyagoda and Padukka, bringing CF’s total branch network to 103 by end-March 2020.

Furthermore as part of ongoing improvements to CF’s branch concept, it was decided to replace the existing two-tier branch system with a single standardised branch model where all branches would offer the company’s complete range of services. Based on this, several branches were relocated in the current financial year, while the existing branch management structure was also changed to ensure stricter governance and oversight across the network.

In testimony to CF’s customer-centric approach, all branches were kept open for a period of six hours on all days allowed by the authorities, throughout the COVID-19 lockdown to enable customers to perform routine transactions during this challenging time.


INFORMATION TECHNOLOGY

It was an eventful year for CF’s IT department with several major projects being integrated with cloud-based platforms such as Google, AWS and Oracle. A standard messaging engine equipped to support data integration across multiple platforms, the ESB has since eliminated the need to use separate data servers when integrating various models.

Following the infrastructure upgrade, CF was able to implement the ISO 9001:2015 Quality Management System standards. Furthermore leveraging on the advanced capability of the new infrastructure upgrade, CF’s IT department evaluated a series of experimental projects to introduce Robotic Process Automation (RPA) to improve the efficiency of several backend administrative processes with the intention of pursuing machine learning solutions in the years to come.

Further the IT department commenced work on implementing an analytical solution to detect transaction outliers, an ambitious project aimed at supporting CF’s operational risk management strategy and fraud prevention measures. The first phase of the project was successfully implemented for the Company’s deposit mobilization unit to enable the immediate detection of any unusual transactions in that section.

As part of CF’s ongoing improvements to customer interfaces, the mobile app upgrade was expedited with the functional suite being expanded to include, fund transfer extension for the direct settlement of lease contracts, online opening of new FD / Savings accounts, online loan application for leases / loans / quick loans, budget hire vehicle reservations, fleet management services etc. Several new features were incorporated to enhance the customers’ digital experience as well. These include; seamless customer on-boarding process (including completion of the digital KYC), a digital communication box to provide real time feedback in response to simple queries and a more robust complaint and service module for customers to submit and receive more detailed feedback.

Signaling yet another milestone in the Company’s digital journey, the IT department began the groundwork to integrate the “Just Pay” platform to enable CF customers to benefit from the service. “Just Pay”, a payment product by LankaPay allows customers to make retail payments using smart mobile devices by directly transferring funds from their CF savings account to the merchant’s account. With much of the work already completed, CF’s “Just Pay” solution is expected to be rolled out to customers by mid-2020.

MANAGEMENT DISCUSSION AND ANALYSIS


FINANCIAL REVIEW

INDUSTRY OVERVIEW

The performance of the Licensed Finance

Companies (LFCs) and Specialised Leasing

Companies (SLCs) sector deteriorated

during the year under review due to several

factors - subdued economic activities,

uncertainty caused by the Easter Sunday

attacks, lack of investor confidence and

political instability in the country.

With a total asset base of Rs.1, 432.7

Billion as at 31.12.2019, the sector

represents 7.6% of the country’s financial

system. The asset base of the sector mainly

consists of loans and advances which

accounted for 77% of the total assets.

Finance Leases accounted for 53% of

loans and advances, while other secured

and unsecured loans represented the

remaining 47%.

Customer deposits continue to dominate

the sector funding, accounting for 52.8%

of the total liabilities. In 2019, the sector

reported a 5.6% increase in customer

deposits, while sector borrowings declined

by 12.6%.

Credit growth of the sector slowed

down considerably in 2019 owing to the

macroeconomic policy measures taken by

the Central Bank of Sri Lanka (CBSL) to

curtail the importation of motor vehicles.

Additionally, the LTV ratios were revised

again in 2019 to discourage credit facilities

offered for importation of certain vehicle

classes. Also, the low level of business

confidence, political volatility and the

negative business sentiment created by the

Easter Sunday attacks further dampened

the credit appetite in the market

throughout 2019. As a result, the total

credit provided by LFCs and SLCs sector

declined by 3% to Rs.1, 102.7 Billion

in 2019 compared to the 7.6% growth

reported in the previous year.

Due to the lower volume of credit

disbursement, the investment portfolio of

the LFCs and SLCs sector which consists of

investments in equities, capital market debt

instruments, government securities and

investment properties registered a sharp

increase of 20.5% (Rs.22.5 Billion) in

2019 compared to the previous year.

The sector managed to maintain healthy

capital levels in 2019 and recorded an

improvement in the total regulatory capital

levels of Rs.22.3 Billion during the year

compared to the figure reported in the

previous year. This was mainly due to

the CBSL’s capital augmentation plan

aimed at enhancing the sector’s minimum

capital requirement of Rs.2 Billion by

01st of January 2020 and Rs.2.5 Billion

by 01st of January 2021. Consequently

the sector’s core capital and risk weighed

capital adequacy ratios stood at 11.1% and

12.5% respectively as at 31st December

2019.

The sector’s liquidity position was also

well above the minimum regulatory levels

indicating a surplus of Rs.41.6 Billion as at

31st December 2019.

The net interest income of the sector

surpassed the Rs.100 Billion level to reach

Rs.117.4 Billion for the twelve months

ending 31st December 2019. However,

the profit after tax recorded by the sector

for the year was Rs.14.5 Billion which is a

decline of 31.9% compared to the profit

recorded in the previous year. This was

mainly due to the increased non-interest

expenses and higher loan loss provisions

resulting from the increase in non-

performing assets (NPA’s). The sector NPA

ratio shot up to 10.6% by end-December

2019 amidst a clear deterioration in the

asset quality. The slowdown in economic

activities due to the Easter Sunday

attacks, lower demand for credit and the

spillover effect of the Debt Relief Program

were some of the main reasons for the

increased NPA ratios across the industry.

With the sector profitability under pressure

due to these reasons, the sector Return on

Assets (ROA) and Return on Equity (ROE)

declined by 56 (0.56%) and 463 (4.63%)

basis points, respectively compared to the

previous year.

COMPANY PERFORMANCE

INCOME

The company recorded an income of

Rs.22.06 Billion for the year under review.

Even though this was an 8.76% growth

compared to the previous year it is

considerably lower than the income growth

of 13.99% recorded in the previous year.

The slowdown in economic activities in

the country due to the Easter Sunday

attacks and the political uncertainty ahead

of the elections had a major impact on

the company’s income. The COVID-19

outbreak made matters worse in the latter

part of the financial year. Consequently, the

company’s interest income grew only by

8.35% while the interest expense grew at

a faster pace of 13.53% compared to the

previous year.


Income(Rs.Mn)

17/18 18/19 19/20

17,7

97

20,2

88

22,0

64

Interest Income vs Interest Expense(Rs.Mn)

6,0

12

16,0

41

5,22

6

18,4

94

6,82

5

20,0

38

Interest Income Interest Expense 17/18 18/19 19/20

OPERATING EXPENSES

Thanks to stringent cost management

efforts put in place in the past, the total

operating expenses showed only a

marginal 6% increase to Rs.4.77 Billion

in 2019/20. Employee retirement benefit

expenses had a larger bearing on the

increase in operating expenses, as this

recorded a 24.97% increase compared to

the previous year.

Operating Expenses(Rs.Mn)

4,35

9

4,49

7

4,76

7 17/18 18/19 19/20

4%

43%

53%

Personnel expensesPremises, equipment and establishment expensesEmployee retirement benefit expenses

Composition of Operating Expenses 2019/20

COST TO INCOME

The company’s income for the year

2019/20 increased by 8.76%, while

operating expenses stood at Rs.4.77

Billion an increase of 6% compared to the

previous year. Accordingly, the company

was able to retain a similar Cost to Income

ratio as in the last year at 31.30%.

Operating Income Vs Operating Expenses (Rs.Mn)

4,35

9

12,5

71

4,7

67

15,

239

4,49

7

14,2

76

Operating Income Operating Expense

17/18 18/19 19/20

LOAN BOOK

The company’s loan book mainly

comprised of leases, hire purchases, term

loans and loans against fixed deposits.

The loan book showed a decline of 3.95%

compared to the previous year with the

total loan portfolio at Rs.78.51 Billion as

at 31.03.2020. This reduction is mainly

due to weak credit demand resulting

from the policy measures taken to curtail

importation of motor vehicles and lending

towards vehicles being restricted due to

the LTV ratios. Slowdown in economic

and commercial activities due to the

Easter Sunday attacks in April 2019 and

the political instability in the run-up to the

Presidential election in November 2019,

were also partly responsible for the weak

demand for credit.

FINANCIAL REVIEW


ASSET QUALITY AND IMPAIRMENT

The gross non-performing advances

ratio (NPA) increased to 9.28% from the

previous year’s ratio of 5.61% reflecting

a deterioration in the asset quality of the

company. The industry NPA ratio stood at

10.6% as at the end of December 2019.

The Company’s impairment figure stood at

Rs.4.78 Billion at end of the financial year

2019/20. A substantial increase over the

Rs. 2.21 Billion reported in the previous

year.

NPL(%)

3.65

5.61

9.28

17/18 18/19 19/20

FUNDING MIX

The company’s funding mix consisted of

bank overdrafts, term (short & long) bank

and non-bank loans, debentures and

deposits. Deposits remained the main

funding source representing 83.16% of

the total funding mix. The company’s total

deposit base as at 31st March 2020 stood

at Rs.53.4 Billion, indicating an year-on-year

growth of 16.91%. A debenture of Rs.

500 Million was settled at maturity during

the year and another for Rs.1,750 Million in

June 2020.

1.91%1.01%

2.79%

83.16%

ODSTLDebenturesDepositsLTL

Funding Mix 2019/20

11.13%

LIQUIDITY

The company continued to maintain a

strong liquidity position throughout the

year. The liquid assets of the company

consist of investments in reverse

repos, fixed deposits, savings & current

account balances and cash in hand. The

company’s total liquid assets and other

short term financial instruments rose

to Rs.7.4 Billion by end of March 2020,

well above the required level of Rs.3.26

Billion. The relaxation of the statutory

liquid requirement by CBSL at the end

of March 2020 further enhanced the

company’s liquidity position. Apart from

this regulatory liquidity requirement, the

company also maintained nearly Rs.8

Billion in investments as at 31st March

2020 by diversifying its portfolio through

open-ended unit trust funds, securitised

and commercial papers, fixed deposits and

overnight repos.

Liquid Assets as a % of Total Deposits (%)

11.5

4

11.7

5

13.8

5

17/18 18/19 19/20

7.28%

60.04%

Reverse REPOsFixed DepositsSavings AccountsCash in Hand

Liquid Assets 2019/20

32.48%

0.20%


RETURN ON EQUITY AND RETURN ON ASSETS

Challenged by the operating environment,

the company’s Return on Equity (ROE) and

Return on Assets (ROA) stood at 8.4% and

2.78% respectively as at 31st March 2020,

reflecting reductions of 4.94% and 1.61%

respectively from the figures reported in

2018/19. The main reason for the lower

ROE and ROA was the significant drop in

the profitability due to high impairment

charges.

RoE (%)

17.2

5

13.3

0

8.40

17/18 18/19 19/20

RoA(%)

2.78

5.61

4.39

17/18 18/19 19/20

SHAREHOLDERS FUNDS

Shareholders’ funds increased by 8.8%

and 6.98% year on year at Group and

Company level respectively to reach

Rs.44.32 Billion and Rs.35.63 Billion

respectively as at 31st March 2020.

The company had a total of 2,753

shareholders as at 31st March 2020.

The company’s shares traded at the

Colombo Stock Exchange during the year

recording highest and lowest market prices

of Rs.110/- and Rs.81/- respectively.

The net asset value per share (NAV) was

Rs.161.47 in the year under review as

against Rs.150.94 in the previous year.

The Earning per Share (EPS) declined to

Rs.18.08 as against Rs.22.85. Reduction

of the group profitability due to macro-

economic factors was the main reason for

this declined EPS ratio. However, despite

the challenging business environment,

the Company paid an interim dividend of

Rs.1.20 per share during the year under

review and a final dividend of Rs.1.20 per

share by way of a Scrip issue has been

proposed for the approval of shareholders

at the Annual General Meeting subject to

all regulatory approvals. Therefore the total

dividends paid and proposed for the year

2019/20 amounts to Rs.2.40 per share.

18.08

24.88

22.85

EPS(%)

17/18 18/19 19/20

DPS(Rs.)

4.003.60

2.40

17/18 18/19 19/20

CAPITAL ADEQUACY

In terms of Capital Adequacy, CF remained

well above its regulatory minimum

requirements and industry average,

throughout the year. The company’s core

capital ratio for the year 2019/20 was

27.73% and its total risk weighted capital

ratio was 27.68% against the regulatory

requirements of 7% and 11% respectively.

FINANCIAL REVIEW


FUTURE OUTLOOK

The entire industry is going through

a very challenging period due to the

economic slowdown in the country.

The COVID-19 pandemic in mid-March

2020 has worsened the situation. In this

context, Central Finance Company PLC

(CF) remains committed to executing its

responsibility to the community and the

Country by providing relief and extending

moratoriums to those customers who were

affected by the pandemic. CF understands

that operating with the pandemic situation

is the “new normal” and will continue to

review and refine its operating model in

order to respond to the challenges that

may lie ahead. Further as a well-established

finance company with a solid reputation,

CF is confident of its ability to overcome

these challenges.

Capital Adequacy (%)

26.0

0

32.8

932

.09

25.8

7

27.7

327

.68

Core Capital Ratio Risk Weighted Total Capital Ratio

17/18 18/19 19/20


BRANCH NETWORK

CENTRALPROVINCE

NORTHERN PROVINCE

UVA PROVINCE

SABARAGAMUWA PROVINCE

SOUTHERN PROVINCE

NORTH WESTERNPROVINCE

WESTERNPROVINCE

EASTERNPROVINCE

Jaffna

Mannar

MahoHiripitiya

Wariyapola

Vavuniya

Thambuttegama

Anuradhapura

Kekirawa

Dambulla

Kantale

Trincomalee

Puttalam

Nikaweratiya

Nochchiyagama

Galewela Bakamuna

Hingurakgoda

Polonnaruwa

Batticaloa

MelsiripuraChilaw

Alawwa Rambukkana

MawathagamaKuliyapitiyaKurunegala

Narammala

GiriullaWennappuwa

Nattandiya

Eheliyagoda

Matale

Dehiattakandiya

Aralaganwila

Ampara

Pottuvil

Tissamaharama

Hambantota

Embilipitiya

Balangoda

Godakawela

Ratnapura

Matara

AkuressaGalle

WalasmullaAmbalangoda

Hettipola

Hettipola

Elpitiya

MonaragalaWellawaya

Badulla

Bandarawela

Welimada

Nuwara Eliya

Hatton

Mawanella Pilimathalawa

Mahiyanganaya

Nawalapitiya

Gampola

Digana

Rikillagaskada

KandyKatugastota Kalmunai

Kilinochchi

Kegalle

Warakapola

WESTERN PROVINCE

DivulapitiyaNegombo

Matugama

Horana

Kalutara

Aluthgama

Wattala

Minuwangoda

Panadura

Bandaragama

Mirigama

Nittambuwa

GampahaRagama

Ja-ela

ColomboMaradana Kiribathgoda

RatmalanaMaharagama

Nugegoda

Piliyandala

MalabeRajagiriya

Thalawathugoda

HanwellaAturugiriya

Kaduwela

Homagama

NORTH CENTRALPROVINCE

Avissawella

KirindiwelaKadawatha

Padukka

KANDY - Head Office COLOMBO - City Office KATUGASTOTA - Showroom

No. 84, Raja Veediya, Kandy, Sri Lanka. Tel : 94-81-2227000Fax : 94-81-2232047

No. 270, Vauxhall Street, Colombo 02, Sri Lanka. Tel : 94-11-2300555 Fax : 94-11-2300441, 94-11-2541212

No. 254, Katugastota Road, Kandy.Tel : 94-81-2234309, 94-81-2234234-5 Fax : 94-81-2228468


WESTERN PROVINCE - 31

Aluthgama No. 371/1, Galle Road, Aluthgama Tel: 034-4941220, 034-4941221

Kaduwela No. 180/12/G, Avissawella Road, Hewagama, Kaduwela Tel: 011-4385334, 011-4385335

Negombo No. 367, Main Street, Negombo Tel: 031-2222579, 031-4871200, 031-2233456, 031-2235111

Athurugiriya No. 308, Godagama Road, Athurugiriya Tel: 011-2074040, 011-2053082

Kalutara No. 46, Sri Sarananda Mawatha, Kalutara South Tel: 034-2226041, 034-4940068, 034-4940067

Nittambuwa No. 43, Kandy Road, Nittambuwa Tel: 033-2296615, 033-4927106

Avissawella No. 1/79, Ratnapura Road, Avissawella Tel: 036-2232750, 036-2233650, 036-2232950

Kiribathgoda No. 541, New Hunupitiya Road, Dalugama, Kelaniya Tel: 011-4967530, 011-4888301 011-4821442, 011-4821441

Nugegoda No. 312, High Level Road, Colombo 06 Tel: 011-2815800, 011-2815801, 011-2815803, 011-2815804

Bandaragama No. 37/A/6, Horana Road, Bandaragama Tel: 038-4933015, 038-4933016

Kirindiwela No. 68, Veyangoda Road, Kirindiwela Tel: 033-4944327 033-4944328

PanaduraNo. 292, Galle Road, PanaduraTel: 038-4281010, 038-2241533

Divulapitiya No. 96, Colombo Road, Divulapitiya, Tel: 031-2246180, 033-4944246, 033-4944247

Maharagama No. 132, High Level Road, Maharagama Tel: 011-4319961, 011-2845855 Tel: 011-2845855, 011-4888482

PiliyandalaNo. 329/4, Colombo Road, PiliyandalaTel: 011-2609000, 011-2609001 011-4888305, 011-4896844

Gampaha No.259, Colombo Road, Gampaha Tel: 033-2227621, 033-2234132, 033- 2225289, 033-4670442

Malabe No. 418, Athurugiriya Road, Malabe Tel : 011-4413916, 011-2760893, 011-4888303

RajagiriyaNo. 41, Rajagiriya Road, RajagiriyaTel : 011-2865161, 011- 2865162

Hanwella No.131/1/B, Pahala Hanwella, Hanwella Tel: 036-2253945, 036-2253966, 036-4925821

Maradana No. 215, Maradana Road, Colombo 10 Tel: 011-2038000, 011-4384020

RagamaNo. 63, Mahabage Road, RagamaTel : 011-4387742, 011- 4387743

Homagama No.138/1, High level Road, Homagama Tel: 011-2892334, 011-4376101

Matugama No. 1/17, Pasqual Street, MatugamaTel: 034-2248790, 034-2248795, 034-4942101

RatmalanaNo. 259/1/1, Galle Road, Ratmalana Tel: 011-2715617, 011-4323098

Horana No.165, Ratnapura Road, Horana Tel: 034-2265065, 034-2265066, 034-4944128

Minuwangoda No. 152/A, Galloluwa Junction, Minuwangoda Tel: 011-2294525, 011- 4384228

Thalawatugoda No. 688/A, 688/A/1, Madiwela Road, Thalawatugoda Tel: 011-4387538, 011-4387539 011-22774916

Ja-Ela No.171, Negombo Road, Ja-Ela Tel: 011-2229180, 011-2229181, 011-4335408

Mirigama No. 122, Werellawatta, Giriulla Road, Mirigama Tel: 033-4944198, 033-4944199

Wattala No. 628, Negombo Road, Mabola, Wattala Tel: 011-4345520, 011-2949890, 011-4345521

PadukkaNo.79/1, Hanwella Road, Padukka.Tel: 011-2830923

EASTERN PROVINCE - 6

AmparaNo. 106, Pandukabhaya Mawatha, AmparaTel : 063-4890117, 063-4976000 063-4922678, 063-2222238

Dehiattakandiya No. 18E, New Town Complex, Dehiattakandiya Tel : 027-2250189, 027-4923577, 027-2250067

Kantale No. 57, Trincomalee Road, Kantale Tel: 026-2234574, 026-2234447, 026-4924295

BatticaloaNo. 570 H, 570 J, 570K, Trincomali Road,Sinnaurani, Batticaloa.Tel : 065-2227823, 065-2227824

Kalmunai No. 263, Batticaloa Road, Kalmunai Tel: 067-2226132, 067-2226133

TrincomaleeNo. 272, 4th Mile Post, Kandy Road, Trincomalee Tel: 026-2242422, 026-4976001 026-2242423


NORTHERN PROVINCE - 4

JAFFNANo. 364, Main Street, JaffnaTel: 021-2221608, 021-2221942

KillinochchiNo. KN/23/475, A9 Road, KillinochchiTel: 021-2280133, 021-2280134, 021-4923870

MannarNo. 45, Thalvupadu Road, MannarTel: 023-4920727, 023-4920728

VavuniyaNo. 166, Station Road, VavuniyaTel: 024-2225813, 024- 2225814, 024-2227192

NORTH CENTRAL PROVINCE - 8

AnuradhapuraNo. 62, Maithreepala Senanayake Mawatha, AnuradhapuraTel: 025-2223560, 025-4930501, 025-4928402, 025-4976000

HingurakgodaNo. 20, Airport Road, HingurakgodaTel: 027-2247214, 027- 2245224, 027-4923574, 027- 4976001

PolonnaruwaNo. 13, Hospital Junction, PolonnaruwaTel: 027-4599210, 027-2225176, 027-4976002, 027-4599210

AralaganwilaNo. 14/36, Kolongas Junction, AralaganwilaTel: 027-4924815, 027-4924816

KekirawaNo. 33, Yakalla Road, Kekirawa

Tel: 025-4976002, 025-4928868

ThambuttegamaNo. 146B, Anuradhapura Road, TambuttegamaTel: 025-2275151, 025-2276978, 025-4976001, 025-4930460

BakamunaNo. 11, Elehera Road, BakamunaTel: 066-2256000, 066-2256001, 066-4929030

NochchiyagamaNo. 25C, Puttalam Road, NochchiyagamaTel: 025-4929053, 025-4929054

SOUTHERN PROVINCE - 8

AkuressaNo. 129 A, Deniyaya Road, AkuressaTel: 041-4938107, 041-4938108

Galle No. 151A, Matara Road, GalleTel: 091-2223315, 091-4385676, 0914381184

TissamaharamaNo. 173, Hambantota Road, Kachcheriyagama, TissamaharamaTel: 047-2239145, 047-2239593, 047-4932444

AmbalangodaNo. 21B, Wickramasooriya Road, AmbalangodaTel: 091-2255802, 091-2255799, 091-4977333

HambantotaNo. 1/3, New Tangalle Road, HambantotaTel: 047-2222651, 047-2222652, 047-4929743

WalasmullaNo. 115A,Beliatta Road, Walasmulla.Tel: 047-2245007

ElpitiyaNo. 109, Ambalangoda Road, Igala, ElpitiyaTel: 091-4943533, 091-4943534

MataraNo. 78, Kumaratunga Mawatha, MataraTel: 041-2227314, 041-4390477, 041-2222914

NORTH WESTERN PROVINCE - 15

ChilawNo. 54, Kurunegala Road, ChilawTel: 032-2220636, 032-2221660, 032-4925592

MahoNo. 163, Moonamalegama, MahoTel: 037-4944951, 037-4944952

PuttalamNo. 628, Colombo Road, PuttalamTel: 032-4976004, 032-4976003, 032-2269328

GiriullaNo. 137/A, Negombo Road, GiriullaTel: 037-2289512, 037-2289513

Mawatagama7th Mile Post, Kandy Road, MawatagamaTel: 037-4947258, 037-4947259

WariyapolaNo. 200 “Awasa Watta”, HorombuwaWariyapolaTel : 037-4947240, 037-4947241

HiripitiyaNo. 51, Wariyapola Road, Hiripitiya, NikadalupothaTel: 037-4945128, 037-4945129

MelsiripuraNo. 227, Dambulla Road, MelsiripuraTel: 037-2250014, 037-4935300, 037-4935066

WennappuwaNo. 262/A, Chilaw Road, Dummaladeniya East, WennappuwaTel: 031-2245260, 031-4929846, 031-4976001, 031-2255261

KuliyapitiyaNo. 107, Kurunegala Road, KuliyapitiyaTel: 037-2284553, 037-2283725

NarammalaNo. 40, Kuliyapitiya Road, NarammalaTel: 037-4947689, 037-4947688

HettipolaNo. 242A, Kurunegala Road, Hettipola.Tel: 037-2291428

Kurunegala No. 38, Mihindu Mawatha, Kurunegala Tel: 037-2232313, 037-2222200, 037-2228020

NikaweratiyaNo. 200, Puttalam Road, NikaweratiyaTel: 037-2260871, 037-2260872, 037-4935067, 037-4940152

NattandiyaNo. 82C, Marawilla Road, Nattandiya.Tel. 032-2250042

BRANCH NETWORK


UVA PROVINCE - 6

BadullaNo. 04, Udayarajah Mawatha, Badulla Tel: 055-2230541, 055- 2229701, 055-4499643, 055-2224666

MahiyanganayaNo. 112, Girandurukotte Road, MahiyanganayaTel: 055-2258335, 055-2258100, 055-4927631

WelimadaNo. 8/1/A & 8/1/B, Wattegedara, Divithotawela, WelimadaTel: 057-4926923, 057-4926922

BandarawelaNo. 03, Thanthiriya,Badulla Road, Bandarawela Tel: 057-2233241, 057- 2233240, 057-4929004

MoneragalaNo. 150 A, Wellawaya Road, MoneragalaTel: 055-2277374, 055-4927689, 055-2277346

WellawayaNo. 208, Monaragala Road, WellawayaTel: 055-4929301, 055-4929302

SABARAGAMUWA PROVINCE - 10

AlawwaNo. 27, Colombo Road, Wariyagoda, AlawwaTel: 037-4940886, 037- 4940887

GodakawelaNo. 65 A, Main Street, GodakawelaTel: 045-4935105, 045-4935106

RambukkanaNo. 73, Kurunegala Road, RambukkanaTel: 035-4935008, 035-493500

BalangodaNo. 149 E, Barnes Ratwatta Road, BalangodaTel: 045-4928326, 045-4928327, 045-2289232

KegalleNo. 311G, Colombo Road, Ranwala, KegalleTel: 035-2221083, 035-2232956, 035-4927502

RatnapuraNo. 143, Colombo Road, Moragahayata, RatnapuraTel: 045-2231409, 045- 2222028, 045-4360447, 045-4927353

EmbilipitiyaRasika Building, Pallegama, EmbilipitiyaTel: 047-2261923, 047-4379332 047-4927806

MawanellaNo. 187, Kandy Road, Mawanella.Tel: 035-4930047, 035-4930048

WarakapolaNo. 211 E & 211 F, Colombo Road, WarakapolaTel: 035-2267010, 035-2268941, 035-4976001, 035-4932382

EheliyagodaNo. 388, Main Street, Eheliyagoda.Tel. 036-2256380

CENTRAL PROVINCE - 10

DambullaNo. 25E, Kurunegala Road, DambullaTel: 066-2283021, 066-4925374, 066-2284093

HattonNo. 66, Dunbar Road, HattonTel: 051-2222760, 051- 4924250

Nuwara EliyaNo. 76, Kandy Road, Nuwara eliyaTel: 052-2235422, 052-2235433, 052-2235951

DiganaNo 40, Pallekele Bazzar, KengallaTel: 081-4951144, 081-4951155

MataleNo. 622, Trincomalee Street, MataleTel: 066-2231225, 066-2223005, 066-4927739

PilimathalawaNo 202/ B, Colombo Road , PilimathalawaTel: 081-4951313, 081-4951717

GalewelaNo. 334/B, Dambulla Road, GalewelaTel: 066-4929890, 066-4929891

NawalapitiyaNo. 125, Ambagamuwa Road, NawalapitiyaTel: 054-4922792, 054-4976001

RikillagaskadaNo. 21, Rathmetiya Road, RikillagaskadaTel: 081-4945112, 081-4945113

GampolaNo. 6B, Nidahas Mawatha, GampolaTel: 081-4945114, 081-4945115


RISK MANAGEMENT REPORT

Effective risk management is fundamental to being able to generate sustainable profits and is thus an important aspect of the financial and operational management of Central Finance. We are well positioned to identify and adopt new initiatives, while remaining vigilant for any new threats that may arise and improvements needed. The level of risk across our business and uncertainties we face are key areas of focus for the Board. Financial strength and resilience are at the heart of our strategic intent. We are committed to achieving the highest standards of corporate governance in every aspect of the business, including risk management. In discharging the governance responsibility, the Board of Central Finance is conscious of the need to manage risk within the preset parameters, which ensures that risk oversight is a critical focus. The overall adequacy and effectiveness of the risk management framework is managed through the Integrated Risk Management Committee (IRMC), the Board Audit Committee (BAC), which comprises solely of Non-executive Directors and the Assets and Liabilities Management Committee (ALCO) which comprises of the Executive Directors and senior level staff members in charge of key business functions. Acting within the authority delegated by the Board, these committees review specific risk areas and receive regular reports

Our Risk Governance Structure

Committee Board Audit Committee Integrated Risk ManagementCommittee

Assets and LiabilitiesManagement Committee

Role The Audit Committee reviews the

accounting policies and practices,

controls and procedures established

by management for compliance with

regulatory and financial reporting

requirements. It operates under

delegated authority from the Board.

The Integrated Risk Management

Committee operates primarily as an

oversight committee monitoring risk

types, concentrating particularly on

Credit, Market, Operational, Strategic

and Reputational risks and related

issues.

The Assets and LiabilitiesManagement Committee isresponsible for identifying,managing and controlling risks in executing the business strategy of CF.

Membership Solely comprised of Non-executive Directors, the majority of them being Independent. Details of the members are given in the Audit Committee Report on pages 94 to 96.

Comprised of Non-executive and Executive Directors and senior level staff, who are in charge of key business functions. The committee is chaired by a Non-executive Director. Details of the members are given in the Integrated Risk Management Committee Report on Page 93.

Comprised of Executive Directors and senior level staff who are in charge of Finance, Branch Network Management, Recoveries, Marketing and Treasury.

“Financial strength and resilience are at the heart of our strategic intent. We are committed to achieving the highest standards of corporate governance in every aspect of the business, including risk management.”

on internal controls, risk management, portfolio trends, policies, limits and standards. We focus on setting clear risk parameters and embedding a strong culture of risk management and control designed to ensure proactive identification of risks which in turn will enable the company to be resilient and respond effectively to any unforeseen shocks. We continue to build on the company’s culture of risk management discipline. Our risk management framework is designed for the continuous monitoring of the environment and an integrated evaluation of risks and their impact to CF. A formal governance structure, with a clear, well designed framework of risk ownership, standards and policies is in place. Our statement of financial position is dominated by credit to customers through our lending operations. Beyond credit risk, we are also exposed to a range of other risk types such as liquidity risks, market risk which includes interest rate risk, operational, strategic and other risks which are inherent in our business strategy, product range and geographical coverage. In 2019/20, we continued to strengthen our approach to risk management amidst a challenging and ever changing external environment. We have responded to changing market conditions by re-deploying risk capacity towards sectors offering better returns on risk.


Board of Directors

RISK OWNERSHIP

Business line operations

Managing Director

Board of Management (BoM)

Business Units

(Marketing, Credit, Vehicle Hire, Fleet

Management Services, Deposit, Treasury)

RISK ASSURANCE

Audit & Assurance

Board Audit Committee

Independent External Auditor

(Reporting directly to the shareholders)

Internal Audit Division

RISK CONTROL

Risk Management

Integrated Risk Management Committee

Assets and Liability Management

Committee

Risk Management Division1st l

ine

of D

efen

ce

2nd

Line

of D

efen

ce

3rd

Line

of D

efen

ce

RISK MANAGEMENT FRAMEWORK

Roles and responsibilities for risk management are structured

within a three lines of defence model. Each line of defence

describes a specific set of responsibilities for risk management

and control. Our risk management framework, which is set out in

the grid below encompasses structures that are strategically linked

with performance management, enabling us to focus on the areas

that drive our risk strategy.

CREDIT RISK

THE DISCLOSURES IN THIS SECTION WHICH ARE AUDITED ARE MARKED ACCORDINGLY.

Credit risk is the risks that counter parties to a financial instrument

will cause a financial loss to CF by failing to discharge their

obligations. Credit risk is managed through a framework that

sets out policies and procedures covering the measurement

and management of credit risk. A well-defined hierarchy of

delegated approval supported by high ethical standards and well

established policies and procedures provide a robust framework

for the management of credit risk. There is a clear segregation

of duties between transaction originators in the business units

and approvers in the credit function. All credit exposure limits are

approved within a delegated credit approval authority framework.

Risk indicators are also set by the company and monitored through

the ALCO, BoM and IRMC on a monthly and quarterly basis.

CREDIT POLICIES (AUDITED)

Company-wide credit policies and procedures are considered and

approved by the Board and the BoM, with inputs from Credit and

Recoveries Departments. The BoM also oversees the delegation of

credit approvals and the loan impairment assessment processes

through regular reviews. These policies are adequate to reflect

the different risk environments and portfolio characteristics of the

company. The Board approves changes to the delegated authority

levels pertaining to credit as considered necessary.

CREDIT APPROVAL (AUDITED)

Major credit exposures to individual counter parties, groups of

counter parties and product categories are reviewed and approved

by the designated officers under the delegated approving limits set

by the Board, with input from BoM. The credit approving limits in

place are structured based on the need of delegation required to

manage the network of branches, without compromising the risk

appetite of the company.

CREDIT CONCENTRATION (AUDITED)

The risk of loss due to the concentration of credit risk to a specific

product, asset class, sector or counter party. Credit concentration

risk is managed within limits set for counter party or groups of

connected counterparties, asset type, industry sectors, etc. Credit

concentrations are monitored by IRMC and ALCO in each of

the product type categories and such limits as material to the

company are reviewed accordingly. Diversification is an important

aspect of our management of risk to ensure that we are not overly

dependent upon a particular region or asset type. The IRMC and

ALCO review the top 20 lending exposures at their quarterly and

monthly meetings. Performance of large lending exposures too is

reviewed periodically.


TOP 20 CONCENTRATION OF THE LENDING PORTFOLIO (AUDITED)

Amount as at % Amount as at %

31.03.2020 31.03.2019(Rs.’000) (Rs.’000)

Group Group

Top 20 1,435,392 1.83% 2,602,855 3.18%

Balance Portfolio 77,074,972 98.17% 79,144,481 96.82%

Total Portfolio 78,510,364 100% 81,747,336 100%

Top 20Balance Portfolio

Top 20 Concentration

1.83%98.17%

2019/120

3.18%96.82%

2018/19

GEOGRAPHICAL ANALYSIS OF THE LENDING PORTFOLIO (AUDITED)

Province Amount as at % Amount as at %

31.03.2020 31.03.2019

(Rs.’000) (Rs.’000)

Central 10,724,250 13.66% 11,384,864 13.93%

Eastern 2,783,160 3.54% 3,130,667 3.83%

North Central 4,572,509 5.82% 4,995,557 6.11%

North Western 9,895,787 12.60% 10,529,626 12.88%

Northern 1,596,870 2.03% 1,677,962 2.05%

Sabaragamuwa 6,428,401 8.19% 6,552,422 8.02%

Southern 6,101,200 7.77% 6,531,846 7.99%

Uva 3,966,056 5.05% 4,123,407 5.04%

Western 32,442,132 41.32% 32,820,985 40.15%

Total 78,510,364 100% 81,747,336 100%

CREDIT MONITORING AND MEASUREMENT (AUDITED)

We regularly monitor credit exposures,

portfolio performance and external trends

which may impact risk management

outcomes. Internal management reports

are presented to various committees,

containing information on key industry and

economic trends. Portfolio delinquency

and loan impairments as well as portfolio

quality are constantly monitored by the

management. The principal objective of

credit risk measurement is to produce

the most accurate possible quantitative

assessment of credit risk to which CF

is exposed, from the level of individual

facilities up to the total portfolio. Integral to

this is the use of a model. The model we

use comprises of three core elements;

° Probability of default (PD) – the

likelihood of a borrower not being

able to honour his obligations.

° Exposure at default (EAD) – the

exposure to a borrower who is

unable to honour his obligations, at

the point of default.

° Loss given default (LGD) – the

historical loss associated with

a delinquent loan or defaulted

borrower.

In addition to the above three elements,

the company also uses forward looking

information including macro-economic

information to arrive at the expected credit

losses. SLFRS - 9 proposes that Significant

increase in credit risk is presumed to have

occurred when contractual payments are

more than 30 days past due and default is



presumed at 90 days past due. For leases and other loans we have rebutted the significant

increase in credit risk presumption to 60 days and default presumption to 120 days to align

these parameters to the internal risk management practices of the company. For Term loans

the company has adopted 30 days past due as the point in which significant increase in

credit risk occurs and 90 days as the point in which default occurs in

NPL(%)

3.65

5.61

9.28

17/18 18/19 19/20

line with the internal risk management

practices of the company. Financial assets

are assessed as credit impaired when one

or more events that have a detrimental

impact on the estimated future cash flows

of that asset have occurred, usually at the

point of default or individually assessed as

impaired.

The methodology adopted was used at

each reporting date. An increase in overall

impairment was noted in line with subdued

economic conditions that prevailed

throughout the year. The impairment

based on the expected credit loss model

computed for individually significant

loans and individually not significant

loans for identified risk categories is

given in notes 32 and 33 to the financial

statements on pages 140 to 142. The

total interest income on impaired financial

assets accrued for the year 2019/20

amounts to Rs. 266,518,668 (2018/19

- Rs.50,215,569). The carrying amount of

loans that would otherwise be past due or

impaired, whose terms have been modified

amounts to Rs.2,298,640,017(2018/19

- Rs. 559,343,279). Life time impairment

of such modified loans amounts to

Rs.67,524,367. The loss allowance for

modified contracts previously measured

life time impairments which have been

now measured at 12 months impairment

SECTOR-WISE CONCENTRATION OF THE LENDING PORTFOLIO (AUDITED)

Sector Amount as at % Amount as at %

31.03.2020 31.03.2019

(Rs.’000) (Rs.’000)

Agriculture 2,250,387 2.87% 2,392,003 2.93%

Construction 959,041 1.22% 1,219,240 1.49%

Industry 1,067,878 1.36% 1,938,425 2.37%

Services 6,486,193 8.26% 8,077,846 9.88%

Tourism 1,000,017 1.27% 1,082,323 1.32%

Trading 2,633,844 3.35% 3,278,906 4.01%

Transport 55,352,241 70.50% 56,110,215 68.64%

Others 8,760,764 11.16% 7,648,378 9.36%

Total Portfolio 78,510,364 100% 81,747,336 100%

Geographical Analysis of the Lending Portfolio

CentralEasternNorth CentralNorth WesternNorthernSabaragamuwaSouthernUvaWestern

13.66%

3.54%

5.82%

12.60%

41.32%

5.05% 7.77%8.19%

2.03%

2019/20

13.93%

3.83%

6.11%

12.88%

40.15%

5.04% 7.99%8.02%

2.05%

2018/19

Sector-wise concentration of the Lending Portfolio

AgricultureConstructionIndustryServicesTourismTradingTransportOthers

2.87%1.22%

1.36%8.26%

11.16%

70.50%

3.35%1.27%

2019/20

2.93%1.49%

2.37%

9.88%

9.36%

68.64%

4.01%1.32%

2018/19



amounts is nil. On such loans, life time impairment is computed

considering them as having significant increase in credit risk and

at subsequent reporting periods if those loans are no longer

considered to have experienced a significant increase in credit

risk, impairment on such loans is assessed for 12 months. There

were no gains or losses recognised during the year in modifying

these contracts. The company groups the individually significant

loans into two broad categories and the following factors were

considered in determining the impairment of those assets;

° loan servicing history of the borrower

° financial standing of the borrower

° borrower’s compliance with Legal and Regulatory

requirements

° other general economic conditions affecting the borrower’s

repayment ability

Individually not significant leases and loans are grouped based on

the collateral type as this grouping better represents the shared

credit risks.

COLLATERALS (AUDITED)

Most of our lending activities are secured by tangible assets

with the majority being motor vehicles and equipment. Hence,

the company has a fall back in the event of default. Collaterals

obtained are supported by enforceable documentation. The main

types of collaterals obtained are Vehicles, Equipment, Properties,

Machinery, Treasury bills and Bonds, Deposits, Trade receivables

and Corporate and Personal Guarantees. The company does not

hold any collateral where it is permitted to sell or re-pledge the

collateral in the absence of default by the owner of the collateral.

There have not been any change to the quality of collaterals

obtained due to change in the policy of collaterals. We have not

assessed impairment on Securities bought under repurchase

agreements due to the fact these are secured by sovereign bills

and bonds. Loans which are collateralised by deposits with netting

agreements are given below under maximum exposure to credit

risk as Loans and Receivables - Cash Backed. The total amount

of cash backed collateral is Rs. 1,908 Mn. Collateral value of credit

impaired contracts amounts to Rs. 316 Mn.

CREDIT PORTFOLIO

Maximum exposure to credit risk (Audited)

The table below represents the company’s maximum exposure to

credit risk for its recognised and contingent financial instruments

as at 31st March 2020, before taking into account any collateral

held or other credit risk mitigation. For recognised instruments, the

maximum exposure to credit risk is the carrying amount reported

in the Statement of Financial Position. For contingent instruments,

the maximum exposure to credit risk generally represents the

contractual notional amounts.

GROUP

On Balance sheet exposure Collateral Type-wise Amortised cost Net Exposure Amortised cost Net Exposure

as at 31st as at 31st as at 31st as at 31stMarch 2020 March 2020 March 2019 March 2019

(Rs.’000) (Rs.’000) (Rs.’000) (Rs.000)

Cash at banks (Clean) 221,523 221,523 127,052 127,052

Securities bought under repurchase agreements (Collateralised by Government Securities) 4,440,427 - 3,289,551 -

Loans and receivables from banks (Clean) 2,403,532 2,403,532 1,447,867 1,447,867

Loans and receivables from others 2,616,233 2,269,042 593,140 593,140

Loans and receivables - Cash Backed 984,392 - 1,225,029 -

Loans and receivables - Equipment 476,809 - 850,764 -

Loans and receivables - Others 2,253,780 2,154,352 2,825,485 2,825,485

Loans and receivables - Properties 381,257 - 363,711 -

Loans and receivables - Vehicles 74,414,126 - 76,482,346 -

Trade & Other receivables (Clean) 1,499,363 1,499,363 1,272,695 1,272,695

Total on-balance sheet exposure 89,691,441 8,547,812 88,477,140 6,266,239


CONTINGENT & COMMITMENTS RELATED EXPOSURE- COLLATERAL-WISE.

Collateral type Instrument As at 31st As at 31st

March 2020 March 2019(Rs.000) (Rs.000)

Group Group

Lease receivables Letters of Credit - 83,251

Cash backed Guarantees 46,692 30,555

Corporate Guarantee Other Guarantees - 10,897

Total off balance sheet exposure 46,692 125,703

CREDIT QUALITY ANALYSIS (AUDITED)

The table below sets out an analysis of the lease, loan and other receivables portfolio between those that are neither past due nor impaired,

those that are past due but not individually impaired and those that are individually impaired.

As at 31st As at 31st

March 2020 March 2019(Rs.000) (Rs.000)

Group Group

Neither past due nor individually impaired loans and leases 14,906,492 36,444,450

Past due but not individually

impaired loans

- Up to 30 days past due 25,672,910 22,161,042

- 31-60 days past due 16,606,825 15,725,975

- 61-90 days past due 11,530,464 6,923,239

- 91-120 days past due 5,177,869 3,043,550

- Over 120 days 10,080,378 7,270,553

Individually impaired loans 813,789 627,850

Provision for Individually significant impairment (549,919) (434,628)

Provision for Individually not significant impairment (5,728,445) (3,284,890)

Total loans and advances & leases 78,510,364 88,477,140

Of which held at fair value through profit or loss amounts to; None None



CREDIT RISK EXPOSURE IMPAIRMENT STAGE WISE

Amortized Cost Impairment Amortized Cost Impairment

as at 31st as at 31st as at 31st as at 31st31.03.2020 March 2020 31.03.2019 March 2019

(Rs.’000) (Rs. ‘000) (Rs.’000) (Rs. ‘000)

Group Group Group Group

Stage 1 66,042,234 680,636 70,080,896 344,226

Stage 2 16,699,091 648,535 10,530,016 274,922

Stage 3 7,501,906 4,981,831 8,479,732 3,100,370 Total 90,243,231 6,311,002 89,090,644 3,719,518

Stage 1- Loans which do not have significant increase in credit risk

Stage 2- Loans which have significant increase in credit risk but not impaired

Stage 3- Loans which are credit impaired

GROSS AMORTISED COST MOVEMENT

2020 Stage 01 Stage 02 Stage 03 Total

Rs'000 Rs'000 Rs'000 Rs'000

As at the beginning of the year 65,888,933 10,542,059 8,997,485 85,428,477

Transfer to stage 01 1,218,446 (1,072,058) (146,388) -

Transfer to stage 02 (9,531,306) 9,651,690 (120,384) -

Transfer to stage 03 (3,651,920) (2,325,617) 5,977,537 -

New assets originated or purchased 27,167,450 5,420,902 2,284,823 34,873,175

Financial assets derecognised or repaid (26,126,878) (4,863,730) (3,940,492) (34,931,100)

Write-offs - - (580,963) (580,963)

As at the end of the year 54,964,724 17,353,247 12,471,619 84,789,590

IMPAIRMENT PROVISION BY CLASS OF FINANCIAL INSTRUMENTS OF THE GROUP

Class of financial instruments Impairment as 12 months ECL Life time ECL Life time ECL Impairment as

at 01.04.2019 for the year -not credit impaired credit impaired at 31.03.2020

(Rs.000) (Rs.000) (Rs.000) (Rs.000) (Rs.000)

Cash and cash equivalents 13 57 - - 70

Loans and receivables from banks 304 3,465 - - 3,769

Loans and receivables from others 1,841 11,240 - - 13,081 Loans and receivables from Customers 806,760 66,625 18,322 336,645 1,228,352 Net Investment in leases and Hire Purchase 2,883,635 233,331 355,461 1,577,584 5,050,011 Trade & Other receivables 26,967 12,205 - - 39,172 Total 3,719,520 326,923 373,783 1,914,229 6,334,455


WRITE–OFF

Uncollectible loans are written off against the related allowance

for loan impairment on completion of the company’s internal

processes and when all reasonably expected recoverable amounts

have been collected. The timing and extent of write-offs may

involve some element of subjective judgment. Nevertheless, a

write-off will often be prompted by a specific event, such as the

inception of insolvency proceedings or other formal recovery

action, which makes it possible to establish that part or the entire

advance, is beyond realistic prospect of recovery. Unlikely to pay

factors include objective conditions such as bankruptcy, debt

restructuring, fraud or death of the borrower. It also includes credit

related modifications of contractual cash flows due to significant

financial difficulty. Assets that are written off may be subject to

enforcement activity and if there is any recovery on such assets

that is recognized as other income in the income statement. The

balances relating to Assets that are written off but may be subject

to enforcement activity as at 31st March 2020 is Rs. 2.7 billion.

MARKET RISK

The risk of loss arising from potential adverse changes in the

value of the company’s assets and liabilities from fluctuation in

market variables including, but not limited to, interest rates, foreign

exchange, equity prices, commodity prices, credit spreads, implied

volatilities and asset correlations. The objective of our market risk

management is to obtain the best balance of risk and return whilst

meeting customer requirements. The primary categories of market

risk for CF are interest rate risk arising from changes in yield curves

and credit spreads and to a lesser extent, changes in equity prices.

ORGANISATION AND STRUCTURE

The Board approves the appetite for market risks and the

framework of limits applicable for same. The company has a strong

control environment facilitated by a well-structured organization

which has enabled it to strengthen segregation of duties in respect

of critical functions.

° interest rate risk: arising from changes in yield curves and

credit spreads

° equity price risk: arising from changes in the prices of

equities and equity indices

Market risk arising from interest rate volatility is managed with

direction from the IRMC and ALCO which continuously monitor the

cost of funds of the company and initiate necessary action to ensure

that required margins are maintained by the company. The carrying

value of all financial assets and liabilities are in Sri Lankan Rupees

and the company did not have any foreign currency denominated

assets and liabilities as at 31st March 2019 and 2020.

Financial Assets/ (Liabilities) Carried at FVtPL

Amount (Rs. ‘000)

Likelihood of change in fair

value or future cash flows due

to change in market interest

rate

Financial Assets - Group

Fair Value through Profit or Loss Investments

5,599,847 None

Financial Assets - CompanyFair Value through Profit or Loss Investments

5,320,028 None

EQUITY PRICE RISK

Central Finance is exposed to market movements in equity

price fluctuations through the quoted Fair Value through Profit

or Loss Investments portfolio and FVtPL financial assets. The

IRMC and ALCO continually review the relevant exposure limits.

A comprehensive evaluation process is also carried out prior to

investment decisions. Regular monitoring of price levels is done

through the Investment function to mitigate adverse movements in

the stock market. The policy related to Fair Value through Profit or

Loss Investments is given under accounting policies on page 115.

SENSITIVITY ANALYSIS (AUDITED)

Sensitivity analysis measures the sensitivity of the current portfolio

to defined market risk factor movements. The table below

gives the sensitivity analysis of the market risks, the company

is exposed to. The table below shows a sensitivity analysis on

pre-tax net interest income for non-trading financial assets and

financial liabilities. This sensitivity analysis was performed on the

net interest margin for the year and the methodology adopted is

consistent with the previous years’ methodologies.



NET INTEREST INCOME SENSITIVITY

Assumption Impact to Profit and Equity

(Rs. ‘000)

Increase/ decrease in Interest margin by 1% 875,242

Increase/ decrease in Interest margin by 2% 1,750,485

Equity price Impact to Profit and Equity

(Rs. ‘000)

Increase/ decrease in equity price by 10% 17,454

Increase/ decrease in equity price by 20% 34,908

OPERATIONAL RISK

The risks of direct or indirect impacts resulting from human factors,

inadequate or failed internal processes and systems or external

events comprise Operational Risks. We seek to minimise exposure

to operational risk, subject to cost trade-offs. Operational risk

exposures are managed through a consistent set of management

processes that drive risk identification, assessment, control and

monitoring. The Board appointed Audit and Integrated Risk

Management Committees oversee the management of operational

risks including those arising from information technology and legal

issues, across the network and at the centre, with the support of

the Internal Audit Department which is separate from the business

functions. In addition, the Audit Committee also receives and

reviews the management letter of the external auditor. This formal

structure of governance provides the Board with assurance that

operational risks are being proactively identified and effectively

managed. All business units are responsible for setting and

maintaining standards for operational risk management. Possible

losses to the company’s assets due to unforeseen events have

been covered with comprehensive insurance policies.

LIQUIDITY RISK

The risk that the Company is unable to meet its contractual or

contingent obligations or that it does not have the appropriate

amount, tenor and composition of funding and liquidity to support

its assets. Liquidity and funding risk is the possibility that the

company does not have sufficient financial resources or stable

sources of funding in the medium or long term, to meet its

obligations as they fall due, or can access these financial resources

only at excessive cost.

POLICY, FRAMEWORK AND GOVERNANCE (AUDITED)

The company has in place a robust and comprehensive set of

policies and procedures for assessing, measuring and controlling

the liquidity risk. This ensures that the company always maintains

sufficient, eligible and appropriate financial resources to meet

its future financial commitments as they fall due. Our Statement

of Financial Position and liquidity have remained strong and we

surpass the regulatory liquidity thresholds comfortably. It is our

policy to maintain adequate liquidity at all times and be in a

position to meet all obligations as they fall due. Diversification

of the company’s funding base is central to our management

strategy. Customer deposits provide stable funding to support the

majority of our lending. We access a diversified funding base by

way of debt issuances on an unsecured and secured basis. These

sources of funding are complementary to the company’s customer

deposit mobilising activities. We have a substantial portfolio of

liquid assets that can be realised if liquidity stress occurs. We also

have a contingency funding plan by way of undrawn approved

bank lines. The analysis of maturing contractual financial liabilities

is given in note no. 61 to the financial statements on pages 182

and 183.

LIQUIDITY MEASUREMENT AND MONITORING

Liquidity risk is measured and assessed on a daily basis at the

centre. The company uses a set of internal and regulatory metrics

and analysis to assess liquidity risk. We manage liquidity risk, taking

both short and medium-term requirements into consideration.

In the short-term, our focus is on ensuring that the cash flow

demands can be met through asset maturities, customer deposits

and bank funding where required. In the medium-term, the focus

is on ensuring a structurally sound statement of financial position.

ALCO is the monitoring body responsible for overseeing our

liquidity management policies. The Treasury Department receives

direction from ALCO and is responsible for managing liquidity

limits. Liquidity risk is a standing agenda item at our monthly ALCO

meetings. The pricing of deposit maturities are done in a way to

curb the maturity mismatches between our lending and borrowing

portfolios.

Management is closely monitoring the developments related

to the COVID-19 pandemic, it has continued to keep its risk

management measures under review to readily respond to

changing circumstances. The Company is comfortable with its

existing buffer of liquid assets and other short term financial

instruments.


LIQUID ASSETS

The significant level of liquid assets in the Statement of Financial

Position reflects the application of our liquidity management

policies and practices.

STRATEGIC RISK

Strategic risk is the potential for losses from failure to optimize

the earning potential of the company. The company continuously

follows developments taking place in the business environment

and formulates its strategies to optimize the opportunities available

whilst attempting to manage risks associated with such strategies.

Business strategies are adopted after evaluating the overall risks

associated with such strategies. A comprehensive strategic plan for

the next three years is in place with quantitative targets. Risks in

achieving such targets have also been mapped and are monitored

continuously.

REPUTATIONAL RISK

Reputational risk is the potential damage to the company,

resulting in loss of earnings or adverse impact on market

capitalisation as a result of stakeholders taking a negative view

of the company or its actions. Reputational risk could arise from

the failure of the company to effectively mitigate the risks in its

businesses including credit, liquidity, market, regulatory, legal or

other operational risks. Damage to the company’s reputation

could cause existing clients to reduce or cease to do business

with the company and prospective clients to be reluctant to do

business with the company. All employees are responsible for

day-to-day identification and management of reputational risk.

Reputational risk may also arise from a failure to comply with

environmental and social standards. Our primary social impacts

arise through our relationship with our clients and customers and

the financing decisions we take. We have mechanisms in our

origination and credit processes to identify and assess social risks.

We have also consciously not engaged in certain business lines

to avoid social risks. A comprehensive list of legal and regulatory

compliance is tabled at monthly board meetings. Compliance to

rules and regulations by the subsidiary companies are obtained

on a quarterly basis and tabled at IRMC meetings to manage

reputational risk, which could arise from the activities of other

group companies.

CAPITAL RISK (AUDITED)

Our approach to capital management is driven by our strategic and

organisational requirements, taking into account the regulatory,

economic and commercial environment in which we operate. We

aim to maintain a strong capital base to support the risks inherent

in our business. For regulatory purposes, our capital base is divided

into two main categories, namely Core Capital (Tier 1) and Total

Risk Weighted Capital. The composition of capital under the

current regulatory requirement for 31st March 2020 is provided

in the table below. The figures reported here may differ from the

figures reported in the financial statements as the above are based

on the prudential regulatory requirements. It is the regulatory

Statement of Financial Position, and not the financial accounting

Statement of Financial Position, which forms the basis for the

calculation of regulatory capital requirements.

Capital Adequacy 31.03.2020

Item Amount Rs. ‘000

Tier I capital 33,025,384

Stated capital 1,696,899

Reserve fund 2,213,000

Audited retained earnings/(losses) 3,844,216

(less) Revaluation gains/surplus of investment property (12,921)General and other disclosed reserves 25,284,191

Adjustments to Tier I capital 864,196

Other intangible assets (net) 131,751

50% of investment in banking and financial subsidiary companies 24,750 50% of investment in other banking and financial institutions 707,694 Tier I Capital (after adjustments) 32,161,188

Tier 2 Capital 672,485

Instruments qualified as Tier 2 capital

Revaluation gains 672,485

Eligible Tier 2 Capital 672,485

Total Adjustments to eligible Tier 2 Capital 732,444

50% of investment in banking and financial subsidiary companies 24,750 50% of investment in other banking and financial institutions 707,694 Eligible Tier 2 Capital after adjustments (59,960)

Total Capital 32,101,229

Tier 1 Capital Ratio % (Minimum 7%) 27.73

Total Capital Ratio % (Minimum 11%) 27.68


CORPORATE GOVERNANCE

“Corporate Governance is the system of principles, policies, procedures and clearly defined responsibilities and accountabilities used by stakeholders to overcome the conflicts of interest inherent in the corporate form”

Corporate governance is the system and processes by which

quality decision making is optimised and actioned to increase

the probability of enhanced corporate performance and effective

management of risk.

Good corporate governance creates a transparent set of rules

and controls in which shareholders, directors and officers have

aligned objectives. The corporate governance framework guides

the company in formulating, communicating and achieving its

corporate strategies and objectives. The Board of Directors is

responsible for the governance of the company and developing

and establishing an effective governance framework in reviewing

and streamlining systems and controls to provide transparency and

accountability and, in ensuring adoption of best practices focusing

on its stakeholders and in creating shareholder value.

The failure of a company to establish an effective system of

corporate governance represents a major risk to the company and

its investors. For shareholders, it is not enough for a company to

merely be profitable; it also needs to demonstrate good corporate

citizenship through environmental awareness, ethical behavior and

sound corporate governance practices. As the highest decision

making body and representative of stakeholders of Central

Finance, the Board of Directors, takes the view that it requires

a proactive approach to identify areas for improvement and a

questioning of the current status quo to ensure that all elements

of our governance framework are fit for purpose, enabling value

creation and growth, whilst acknowledging the legitimate rights

and responsibilities of key groups of stakeholders and preserving

accountability.

The corporate governance framework of Central Finance (CF)

is specifically structured to facilitate effective and prudent

management in enhancing and achieving sustainable shareholder

value and the success of the Company. We have established an

exemplary corporate governance model to enable the Company

to embed procedures, policies and control environments to

mitigate identified or anticipated operational, business, strategic

and reputational risks. A well-structured corporate governance

framework is presently in place to align business practices in

the best interest of all our stakeholders ensuring transparency

in business dealings, disclosure of information and proper

financial reporting in compliance with voluntary and mandatory

practices and applicable regulatory requirements. The Corporate

Governance model adopted by CF is continuously reviewed and

evaluated by the Board to achieve dynamic business performance

and unfettered integrity.

In our endeavour to strengthen governance at CF, for the year

ended 31st March 2020, we have embraced and adopted

selective aspects of voluntary requirements outlined in the Code

of Best Practice on Corporate Governance 2017, issued by the

Institute of Chartered Accountants of Sri Lanka. The company

has also complied with the mandatory requirements of Direction

No. 03 of 2008 of the Finance Business Act No. 42 of 2011 and

amendments thereto on Corporate Governance for Licensed

Finance Companies issued by the Central Bank of Sri Lanka and

the Listing Rules of Colombo Stock Exchange.

We recognise that our strategy to be a consistent, stable and a

strong financial service provider relies entirely on a foundation

of good corporate Governance as we endeavour to be at the

forefront of the non-bank financial service sector.

In this year’s report, we outline the ways in which our Corporate

Governance framework operates, including the role and

responsibilities of the Board and five of its Committees. The level

of adoption and conformity with the rules and best practices

embraced by your company are disclosed in this report.


CORPORATE GOVERNANCE FRAMEWORK

The Central Finance operates within an integrated governance framework formulated after taking into consideration the Corporate

Governance direction issued by Central Bank of Sri Lanka (CBSL) and the Code of best Practice on Corporate Governance 2017 issued by

the Institute of Chartered Accountants of Sri Lanka (CA Sri Lanka) and the listing rules of the Colombo Stock Exchange (CSE) on corporate

governance. The diagram below illustrates our approach to Corporate Governance and depicts the interactive nature of the elements we

view as being fundamental in embracing the spirit of best practice of Corporate Governance principles.

As in the past, this year too we report our governance practices and initiatives in three sections.

SECTION ONECovers the level of adoption of the Code of Best Practice on Corporate Governance 2017, issued by the Institute of

Chartered Accountants of Sri Lanka.

SECTION TWO

Covers the level of compliance with Direction No. 03 of 2008 of the Finance Business Act No. 42 of 2011 and

subsequent amendments thereto on Corporate Governance for Licensed Finance Companies issued by the Central

Bank of Sri Lanka.

SECTION THREECovers the level of conformity with the Continuing Listing Rules - Section 7.10 on Corporate Governance for Listed

Companies issued by the Colombo Stock Exchange.

BOARD APPOINTED COMMITTEES

Executive Committees

Integrated Risk Management Committee

Remuneration Committee

Risk Management & Control Functions

° Credit Risk

° Market Risk

° Operational Risk

° Information Systems Risk

° Reputational Risk

° Internal Controls

° Compliance Monitoring

° Legal and regulatory requirements

° Human resource management

° Code of Conduct

° Sustainability Practices

Related Party

Transactions Review

Committee

Internal Audit

Audit Committee

Nomination Committee

° Assets & Liabilities Management Committee

° Credit Committee

° IT Steering Committee

° Deposits & Savings Steering Committee

° Fleet Management Services Steering Committee

THE BOARD OF DIRECTORS

Board of Management

Steering Committees



SECTION ONECODE OF BEST PRACTICE ON CORPORATE GOVERNANCE ISSUED BY THE INSTITUTE OF CHARTERED ACCOUNTANTS OF SRI LANKA.

STATEMENT OF COMPLIANCE

The level of adoption of the above voluntary code which comprises of eight fundamental principles and conformance of the said principles

by CF in summary form is disclosed below.

The Company

Directors The Company is led, directed and controlled by a Board of Directors with the skills, experience and knowledge complemented with a highest level of integrity and independent judgment. The Board is equipped with members having sufficient financial acumen and knowledge. CF has established a clear division of responsibilities between the Chairman & CEO/MD to ensure balance of power and authority, in such a way that no individual has unfettered powers of decision.

Directors’ Remuneration CF has a well-established, formal and transparent procedure for executive remuneration and fixing the

remuneration packages of individual Directors. The level of remuneration of both Executive and Non-

executive Directors is sufficient to attract and retain the Directors needed to manage the company

successfully.

Relations with Shareholders Central Finance uses the Annual General Meeting to communicate with its shareholders and the company focuses on open communication and fair disclosure, with emphasis on the integrity, timeliness and relevance of the information provided. Further during 2019/20, the company had not engaged in or committed to any major and material transactions where the materially affected CF’s net asset base.

Accountability and Audit The CF Board has presented a balanced and understandable assessment of the Company’s financial position and performance during 2019/20. The Board has established a sound framework of risk management and internal controls. The company has developed a Policy on Code of Conduct & Ethics applicable to all employees, and has also addressed conflicts of interest, financial irregularities, IT system controls, receiving entertainment and gifts and confidentiality of information.

Shareholders

Institutional Investors The Board has encouraged the institutional shareholders to make considered use of their votes,

ensure that their voting intentions are translated into practice and to give due weightage to all relevant

factors drawn to their attention when evaluating the Governance arrangements of the Company.

Other Investors The Company has encouraged individual shareholders to carry out adequate analysis or obtain

independent advice in investing and divesting decisions and to participate and exercise their voting

rights at the General Meeting.

Internet of Things and

Cybersecurity

Prevailing risks related to information security has been taken in to consideration by the Board in

formulating the IT risk management policy.

Environment, Society and

Governance (ESG)

The Company has created long-term stakeholder value by embracing opportunities, managing risks

and impact on business activities from economic, environmental and social developments through

ESG reporting.


CORPORATE GOVERNANCE PRINCIPLES

CASL CODE REFERENCE/ADOPTION STATUS

EXTENT OF ADOPTION BY CF

THE COMPANY

A. DIRECTORS

A.1 The Board

Central Finance is headed by a well-balanced Board of Directors with local & multinational experience drawn from different backgrounds

inter alia banking, insurance, accounting, management, marketing & economics. All Directors possess the skills, experience and

knowledge complemented with a high degree of integrity and independent judgment. The Board provides leadership in setting strategic

direction and a sound control framework to successfully achieve the objectives of CF set out in the corporate plan and the annual budget

to satisfy the expectations of stakeholders. The Board has also appointed Board Sub Committees to assist its collective responsibilities.

Board Meetings A 1.1 Adopted The regularity of the board meetings and the structure and process of

submitting information have been pre- agreed by the Board. The Board

meets at monthly intervals, but meets more frequently whenever it is

necessary.

During the year, the Board met 13 times, at approximately monthly

intervals.

A monthly Board pack is presented to the Board members comprising

financial & operational performance compared to previous periods,

prevailing risks & mitigation factors, forecasts, regulatory compliances and

any other matters that the board should be aware of.

Circulation of Board papers to obtain Board’s consent was minimised and

confirmations ratified at the subsequent Board meeting.

Details of the Board meetings and individual attendance are given on

page 74.





Board responsibilities A 1.2

Adopted

The Board of Directors is responsible for setting sound business strategy,

ensuring the execution of strategies, monitoring performance and

oversight of the company’s affairs.

The Board is chaired by an Independent Non-executive Director and

the Board has put in place a Corporate Management team led by the

MD/ CEO equipped with the required skills, experience and knowledge

to implement the business strategy of the company. A comprehensive

succession planning for the MD/CEO, executive directors & key

management personnel has been documented for a seamless operation.

The non-executive directors possess experience from a number of

industries and business sectors, including the leadership of large

multinational enterprises.

The Board determined the matters expressly reserved to the board and

the aspects delegated to the management including limits of authority

and financial delegations.

The Board takes necessary steps towards safeguarding the depositors,

securing integrity of information, prudent management of risks,

implementing an effective internal control system, ensuring good

governance and compliance with rules and regulations.

Processes have been established to monitor the progress on strategy

implementation, budgets, plans and related risks and to ensure the

corporate reporting, on a quarterly basis, through the board appointed

subcommittees.

The Board is responsible to ensure that the interest of all stakeholders

is taken into consideration in the corporate decision making process

and that the company’s values and standards are set with emphasis

on adopting appropriate accounting policies & complying with laws,

regulations and ethical standards.

Compliance with laws of

the country and access to

independent professional

advice

A 1.3

Adopted

Procedures and processes are in place to ensure compliance with all

applicable laws and regulations of the country.

A procedure is in place for Directors to seek independent and collective

professional advice, in furtherance of their duties, at the Company’s

expense, as and when it is necessary.






Access to the Services of

the Company Secretary

Insurance cover for the

Board/KMPs

A 1.4

Adopted

Access to the services of the Company Secretary, M/s Corporate Services

(Pvt) Ltd is available for all Board Members, including Non-executive

Directors, as and when required.

The Company Secretary provides support and advise to the Chairman

and the Board on all Corporate Governance matters, duties &

responsibilities, Board procedures and in particular, compliance with

company law and other applicable laws and regulations including but not

limited to CBSL, CSE & SEC regulations.

Removal of the Company Secretary, if it arises, would be a matter that

would be considered by the Board as a whole.

The company has obtained a comprehensive insurance cover for CF

board members and its KMPs for 2019/20.

Independent judgment of

Directors

A 1.5

Adopted

All Directors including Non-executive Directors, in discharging their

responsibilities and duties, bring to bear independent judgment and

scrutiny on decisions taken by the Board on matters relating to strategy,

performance, resources, risk management, internal controls and

standards of business conduct.

Dedication of adequate

time and effort by Directors

A 1.6

Adopted

All Directors dedicate adequate time for the fulfillment of their duties

as Directors of the Company, to execute and discharge their duties &

responsibilities satisfactorily. In addition to attending Board Meetings, they

attend Sub-committee Meetings and contribute effectively to decisions

made. Adequate time has been allocated by Directors for familiarisation

with business operations, risks and controls to effectively discharge their

duties.

Board papers are made available to the Directors providing sufficient

time for review and to request additional information & clarification for

effective participation. Any issues arising consequent to a meeting are

also followed up. Approvals obtained through circulation of resolutions

are ratified at the subsequent Board Meeting.





Calling for resolution by one

third of Directors

A 1.7

Not applicableNo such incidents had arisen during the year.

Training for Directors A 1.8

Adopted

Directors have recognised the need for continuous training and

expansion of knowledge for professional development which would

assist them in the discharge of their duties. Training and development

needs for directors are regularly reviewed and agreed on by the Board.

All Directors have undergone necessary training, both in the general

aspects of directorship and matters specific to the financial services

industry.

A.2 Chairman & Chief Executive Officer (CEO/MD)

Clear division of responsibilities between the Chairman & CEO/MD has been established to ensure the balance of power and authority,

in such a way that no individual has unfettered powers of decision. The Chairman is responsible for leading the Board effectively to

discharge all responsibilities and CEO/MD is responsible for management of the Company’s business operation with the assistance of

the Corporate Management Team.

Division of responsibilities of

Chairman and MD/CEO

A 2.1

Adopted

The roles of the Chairman and MD/CEO are separated in line with best

practices to ensure that no individual is vested with unfettered powers of

decision making. The Chairman leads and guides the Board to effectively

discharge board’s responsibilities and CEO/MD leads the Company’s

business operation effectively with the assistance of the Corporate

Management Team.






A.3 Chairman’s Role

The Chairman is responsible for providing effective leadership to the Board in preserving sound Corporate Governance and orders, and

facilitating effective discharge of Board functions.

Role of the Chairman A 3.1

Adopted

The Chairman is responsible for leading the Board and creating

conditions for the effectiveness of the overall Board and the individual

directors. The Chairman is not responsible for the executive matters of

the Company and the direct supervision of the management.

The Chairman shall be responsible for:

° Providing leadership to the board

° Ensuring that the Board works effectively and discharges its

responsibilities and the key issues are discussed by the Board in a

timely manner.

° The Chairman is not responsible for executive matters of the

Company and the direct supervision of management

° Running the board and ensuring its effectiveness in all aspects of

its role, including regularity and frequency of meetings

° Setting the board agenda, in consultation with CEO/MD, Directors

and Company Secretary taking into account the issues and

concerns of all Board members.

° Ensuring that the Directors receive accurate, timely and clear

information, on the company’s performance, to enable the board

to take sound decisions and provide advice to ensure that the

Board acts in the best interests of the company.

° Managing the board to allow adequate time for discussion of all

agenda items.

° Promote a culture of openness and debate by facilitating the

effective contribution of non-executive directors and encouraging

active engagement by all members of the board.

° Ensuring the performance of the board, its committees and

directors is evaluated at least once a year and acting on the results

of such evaluation by recognising the strengths and addressing the

weaknesses of the board

° Maintaining effective communication with shareholders and

conveying their views to the Board.





A.4 Financial Acumen

Board should ensure the availability of members with sufficient financial acumen and knowledge to offer guidance on matters of finance.

CF’s Board is equipped with members having sufficient financial acumen and knowledge.

Availability of sufficient

financial acumen and

knowledge

A 4

Adopted

The Board comprises of members with academic & professional

qualifications in Accounting, Business Finance & Management with

experience gained in different enterprises.

The Board includes three Fellow Members of the Institute of Chartered

Accountants of Sri Lanka and all of them are also Fellow Members of the

Chartered Institute of Management Accountants of UK. In addition, the

Board also includes three members who are Members of the Chartered

Institute of Management Accountants of UK. These Members of the

Board have the ability to offer guidance on matters of finance to the

Board.

The details of their qualifications and experience have been set out in

pages 10 to 12.

A.5 Board Balance

Maintaining a balanced Board between Executive Directors and Non-executive Directors is required as per the Code to ensure that

no individual or small group of individuals can dominate the Board’s decision making. Half the CF Board members are Non-executive

Directors and each of them bring wide experience to the Board and ability to exercise independent judgment when taking informed

decisions.

Presence of a strong team

of Non-executive Directors

on the Board

A 5.1

Adopted

The Board includes a strong presence of Non-executive Directors and no

individual or small group of individuals can dominate its decision making.

The roles of the Chairman and CEO/MD are not vested in one person.

As per the criteria defined to determine an independent Director in A.5.5

of CA Sri Lanka code, Chairman is determined as Independent Non-

executive Director.

Half the Board Members are Non-executive Directors which is more than

the requirement of the code and majority of them are independent.

Independent

Directors

A 5.2

Adopted

More than two third of the Non-executive Directors are Independent

which is above the minimum requirement prescribed by this Code.

Evaluation of independence

of Non-executive Directors

A 5.3

Adopted

The Board considers Non-executive Directors’ independence on the basis

that an independent Director is independent of management and hence

free of any business or other relationship that could materially interfere

with the exercise of unfettered and independent judgment which could

impair their independence. Using the self-evaluations of Directors, the

Board reviews the independence of each Non-executive Director.






Annual declaration of the

Non-executive Directors

A 5.4

Adopted

Non-executive Directors have made written submissions annually as to

their Independence or non-independence against the specified criteria as

set out by the company in line with requirements specified in schedule

K of the code. Circumstances did not arise for the Board to decide a

Director as Independent beyond the criteria set by this Code.

Determination of

Independence of the

Directors by the Board

A 5.5

Adopted

The Board has reviewed the independence of each Non-executive

Director in 2019/20 and has determined that the submission of the

declaration by the Non-executive Directors, as to their independence is a

fair representation and will continue to evaluate this annually. All criteria

set out in the code in determining independence, were met.

The names of the Independent Non-executive Directors are given on

pages 10 to 12.

Alternate Director A 5.6

Adopted

The alternate director appointment has not been taken place during

2019/20.

Requirement of Senior

Independent Director &

availability for confidential

discussions

A 5.7 & A 5.8

Not Applicable

The requirement to appoint a Senior Independent Director does not arise

under this code as the roles of Chairman and CEO /MD are separated

and the Chairman is determined as an independent Non-executive

Director as per this Code.

Meetings with Non-

executive Directors

A 5.9

Adopted

The Chairman meets with the Non-executive Directors without the

presence of the Executive Directors as and when it is necessary.

Recording of concerns in

Board minutes

A 5.10

Not Applicable

Circumstances have not arisen where Directors have had concerns

on matters that were not unanimously resolved for such instances to

be recorded in the minutes. All matters taken up for discussion were

resolved through consensus at Board Meetings.

A.6 Supply of Information

The Board should be provided appropriate and timely information in a form and of a quality appropriate to enable them to discharge

their duties effectively. Financial and non-financial information are analysed and presented to the Board for accurate and effective

decision making.

Appropriate & timely

information to the Board by

the Management

A 6.1

Adopted

The Management provides timely and appropriate information to the

Board by way of Board Papers and Proposals. The Directors are free to

raise inquiries for additional information as and when necessary.

Presentations have been made to the Directors on important matters

relating to strategy, risk management, recoveries, IT infrastructure

developments, key updates in financial reporting and new legal

developments.

The Chairman ensures that all Directors are briefed on issues arising at

Board Meetings.





Adequate time for Board

Meetings

A 6.2

Adopted

The Board Papers are sent to the Directors well in advance of, at least

seven days before, the respective Board Meetings, giving adequate time

for Directors to study the related papers and prepare for a meaningful

discussion at Board Meetings.

A.7 Appointment to the Board

A Formal and transparent procedure is in place for the appointment of new Directors to the Board as required by this code.

Nomination Committee A 7.1

Adopted

The Board constituted the Nominations Committee this year for

recommending selection of new Directors for the approval of the

Board. Details of the committee members are given in the Nomination

Committee Report on page 89.

Biographic details of the Directors are given on pages 10 to 12.

Assessment of Board

composition

A 7.2

Adopted

The Board carries out continuous reviews of the structure, size,

composition, skills and knowledge of the Board, to ascertain whether

the combined knowledge and experience of the Board matches the

strategic demands and key risks faced by the Company. Findings of

the assessment of the Board are considered for new appointments

& re-election of Directors. Also a process has been established to

determine that the proposed Board appointees are fit and proper for the

requirement.

Disclosure of details of new

Directors to shareholders

A 7.3

Adopted

Appointment of new Directors are disclosed to the Shareholders, with a

brief resume of each such Director including their expertise in relevant

functional areas and names of companies in which the Director holds

directorships, by way of public announcements as well as in the Annual

Report. Approval for appointment of new Directors is obtained from

the CBSL and notice on new appointments is given to CSE for public

information. All new appointments and continuing directorships are

reviewed by the Board as a whole.

A.8 Re-election

Code requires all Directors to submit themselves for re-election at regular intervals of at least once in three years.

Appointment of Non-

executive Directors

A 8.1

Adopted

The Company’s Articles of Association provides that at every Annual

General Meeting of the Company, one-third of the Non-executive

Directors shall retire from office. These Directors are eligible to stand for

re-election by the shareholders at the annual general meeting. Period of

service of Non-executive Directors shall not exceed nine years. Directors

retire from the Board prior to reaching the age of 70 years.






Election of Directors

by the shareholders

A 8.2

Adopted

Re-appointment of all Non-executive Directors including the Chairman of

the Board is subject to election by shareholders at the Annual General

Meeting.

Re-election of Directors is at three year intervals and details as per code

A 7.3 are submitted for shareholders to make informed decisions on their

election. Proposed re-election is subject to prior review by the Board as

defined in code A.7.2.

Resignation of directors A 8.3

Not applicable

Circumstances have not been arisen where directors have tendered their

resignation prior to completion of appointed term.

A.9 Appraisal of Board Performance

Board should appraise its own performance periodically to ensure that its responsibilities are satisfactorily discharged. The Board has

periodically reviewed its performance against the pre-set criteria ensuring adherence to the code.

Appraisal of Board

performance and annual

self-evaluation of the Board

and its Committees

A 9.1 & A 9.2

Adopted

The Self Evaluation of the Board and its committees has been concluded

for the year 2019/20. The outcome of such assessments was discussed

at both, board and committee level, and action taken as required.

The Sub-committees carry out an assessment process annually, in

accordance with the pre-set criteria, to ensure that the committees

function effectively and efficiently with the objective of facilitating

continuous improvement individually and collectively in the performance

of the Board.

Process of reviewing the

Directors at the re-election

A 9.3

Adopted

Participation, contribution and engagement of each Director is taken into

consideration when each Directors are recommended for re-election by

the Board.

Method of Board and Sub-

committee Performance

appraisal

A 9.4

Adopted

Method of evaluating the Board and its Sub-committee performance are

stated in Section A 9.1 & A 9.2 above and Annual report of the Board of

Directors on pages 82 to 88.

A.10 Disclosure of Information in respect of Directors

Details of all Directors should be disclosed in the Annual Report for Shareholder’s information

Details in respect of

Directors

A 10.1

Adopted

The details pertaining to each Director is disclosed as follows.

a) Brief profile with expertise and experience – pages 10 to 12.

b) Status of independence – pages 10 to 12.

c) Other business interests – page 186.

d) Attendance at Board Meetings and Sub-committee Meetings –

page 74.





A.11 Appraisal of the Chief Executive Officer (CEO/MD)

The Code requires the Board to assess the performance of MD /CEO at least annually to ascertain the achievement of pre-set Financial &

Non-financial targets.

Financial & Non-financial

targets for MD /CEO

A 11.1

Adopted

At the commencement of the financial year, reasonable financial and

non-financial targets for MD /CEO are set by the Board in consultation

with MD/ CEO in line with the short, medium & long term objectives of

the Company.

Evaluation of the

Performance of the MD/

CEO

A 11.2

Adopted

There is an ongoing process to evaluate the performance of MD/CEO to

assess whether the financial and non-financial targets set by the Board

have been achieved during the financial year.

B. DIRECTORS’ REMUNERATION

B.1 Remuneration Procedure

The code requires that the company should establish a formal & transparent procedure for developing an effective policy on executive

remuneration & remuneration packages for individual Directors where no Director is involved in deciding his/her own remuneration.

Remuneration Committee B 1.1

Adopted

The Remuneration Committee is responsible for;

° Assisting the Board with regard to the remuneration policy for the

Executive Directors and other senior level staff members.

° Reviewing strategic human resource policies that can impact the

business and recommending appropriate measures.

° Determining and agreeing with the Board, the broad policy

framework for the remuneration of the Executive Directors.

° Deciding remuneration of the senior level staff members in order

to recruit, retain and motivate them.

° Reviewing/monitoring evaluation of performance of KMPs and

their management developments and succession planning.

° Communicating with shareholders on the remuneration policy

and the committee’s work on behalf of the board through

remuneration committee report.

Composition of the

Remuneration Committee

B 1.2 & B 1.3

AdoptedMajority of the members including the Chairman of the Remuneration

Committee are Independent Non-executive Directors. The Chairman

of the Committee is appointed by the Board. Committee meetings,

composition, scope, policy and other details given in the remuneration

committee report given on page 92 for details.

Remuneration of the


B 1.4

Adopted

The Board as a whole decides on the remuneration of the Non-executive

Directors. The Non-executive Directors receive a fee for serving on the

Board and its Sub-Committees. The Non-executive Directors fee structure

is reviewed and revised by the Board as a whole, as and when necessary.






Consultation of the

Chairman and / or CEO

/MD and access to

professional advice

B 1.5

Adopted

Chairman of the Board is also the Chairman of the Remuneration

Committee. External professional advice is obtained where necessary

in determining the remuneration of the Executive Directors and senior

level staff members. MD’s (CEO) input is obtained in determining

the remuneration of other Executive Directors and senior level staff

members.

B.2 Level and make-up of the Remuneration

The Code requires the Board to establish the levels of remunerations for both Executive & Non-executive Directors which should

be sufficient to attract & retain the Directors needed to manage the company successfully. A proportion of the Executive Directors

remuneration should be structured to link rewards to corporate & individual performance.

Level and make-up of the

remuneration of Executive

Directors for long-term

success of the company

B 2.1 & B 2.2

Adopted

The Board is mindful of the fact that remuneration of Executive Directors

should reflect the market expectations and is sufficient to attract & retain

the eminence of Directors needed to achieve the company’s objectives.

The remuneration framework of the Executive Directors is designed

by the Remuneration committee to create and enhance value for all

stakeholders and to ensure that there is strong alignment between them

for the long term success of the company.

Comparison of

remuneration with other

companies

B 2.3

Adopted

The Remuneration Committee in deciding the remuneration of the

Directors and senior level staff takes into consideration the level of

remuneration paid by other comparable companies and is also mindful

of the performance and risk factors entailed.

Comparison of

Remuneration with other

companies in the Group

B 2.4

Not Adopted

The size and scale of Central Finance is not comparable with other

Companies in the Group.

Performance related

elements of remuneration

to Executive Directors

B 2.5

Adopted

Please refer code B 2.1 & B 2.2 above.

Executive share options B 2.6

Not Applicable

There are no share option plans available for executives.

Designing the Executive

Directors remuneration

B 2.7

Adopted

The Remuneration Committee considered Schedule E to this code in

deciding performance-related remuneration schemes of the Executive

Directors.

Early termination of

Directors

B 2.8

Adopted

Executive Directors are employees of the Company and their

terms of reference are governed by the contract of employment.

The Remuneration Committee has considered the compensation

commitments given in the contracts of employment of Executive

Directors, if any. Such instances did not arise during the year.





Early termination not

included in the initial

contract

B 2.9

Adopted

Refer the code B 2.8 above.

Remuneration of the


B 2.10

Adopted

Non-executive Directors receive fees in line with market practices taking

into consideration the time commitment & responsibilities of their roles.

No share option plans were offered as remuneration of Non-executive

Directors for their service to the company.

B.3 Disclosure of Remuneration

The Company should disclose the remuneration policy and the details of remuneration of the Board as a whole in the Annual Report.

Disclosure of remuneration B 3.1

Adopted

The Remuneration Committee’s Report setting out the policy and

composition of the Committee is given on page 92.

The remuneration paid to the Board of Directors is disclosed in aggregate

in note no 16 to the financial statements on page 129.

C. RELATIONS WITH SHAREHOLDERS

C.1 Constructive use of the Annual General Meeting (AGM) and Conduct of General Meetings.

The Code requires the Board to use the Annual General Meeting to communicate with Shareholders and encourage their active

participation.

Notice of the AGM C 1.1

Adopted

Notice of the meeting and related papers are sent to the shareholders as

determined by the Companies Act No. 7 of 2007 and other statutes.

Separate resolution for all

substantially separate issues

C 1.2

Adopted

The Company proposes a separate resolution for all substantially

separate issues to provide shareholders with the opportunity to vote

on each issue separately. This mechanism assures transparency in all

activities of the company.

Adoption of annual report and financial statements is considered as a

separate resolution.

Proxy appointment forms are provided to shareholders for each

resolution with the option to direct their proxy accordingly. The company

is mindful to disregard the votes withheld at the calculation of the

proportion of the votes for and against the resolution.

Use of proxy votes C 1.3

Adopted

The Company has in place an effective mechanism to record all proxy

votes and proxy votes lodged on each resolution.






Availability of all Board Sub

Committee Chairmen at the

AGM

C 1.4

Adopted

The Chairman of the Board ensures that Chairmen (or Alternate) of all

Sub Committees namely, Audit Committee, Remuneration Committee,

Nomination Committee, Integrated Risk Management Committee and

Related Party Transactions Review Committee are present at the Annual

General Meeting (AGM) to respond to any questions of shareholders.

Requirement of Senior Independent Director does not arise as Chairman

of the Board is independent according to the code.

Adequate notice of the

AGM & procedures of voting

at General Meeting

C 1. 5

Adopted

All shareholders irrespective of their voting status are encouraged to

attend the AGM.

Notice of the meeting is given as per the requirements of the Companies

Act No. 7 of 2007. The Annual Report including financial statements

and the Notice of the Meeting detailing the summary of procedures

governing the voting at the AGM and business to be transacted at

General Meetings are sent to shareholders at least 15 workings days prior

to the date of the AGM for effective participation.

C.2 Communication with Shareholders

The Code requires the Board to establish effective communication with shareholders.

Channel to reach all

shareholders of the

company

C 2.1

Adopted

The primary modes of communication are the Annual Report and AGM.

Information provided to the shareholders well in advance of the AGM to

give them an opportunity to raise any issues relating to the business of

the Company.

CF also publishes Annual Reports, interim reports, stock exchange

announcement, general meetings & other notices to the holders of its

securities in the CF web-site to enable effective communication with the

stakeholders.

Policy and Methodology

for communication with

Shareholders

C 2.2

Adopted

The Company focuses on open communication and fair disclosure,

with emphasis on the integrity, timeliness and relevance of information

provided.

A Board approved communication policy is in place to communicate

with all stakeholders including shareholders, borrowers, depositors and

creditors.

Implementation of the

Policy and Methodology

C 2.3

Adopted

As defined in the Board approved communication policy, the company

adopts open communication with shareholders. Chairman, MD/CEO and

the Company Secretary are contactable with short notice.





Contact person in relation

to Shareholders matters

C 2.4 & C 2.6

Adopted

Shareholders may at any time, direct questions, request for publicly

available information and provide comments and suggestions to

Directors or senior management of the company. Such questions,

requests & comments shall be addressed to the Company Secretary.

Authorised spokespersons of CF are identified in the company

communication policy.

Process to make all

Directors aware of major

issues and concerns of

shareholders

C 2.5

AdoptedThe Company Secretary maintains all correspondence received and will

deliver as soon as practicable, such correspondence to the Board or

individual Director/s as applicable.

The process for responding

to shareholder matters

C 2.7

Adopted

Appropriate response will be provided to all validly received shareholder

correspondence by the Board or individual Directors, as applicable, and

Company Secretary will be directed to send immediate responses to the

particular shareholder.

Disclosure process of responding to shareholders is specified in the

company communication policy.

C.3 Major and Material Transactions

Further to complying with the requirements under statutes and regulators, Directors should disclose to shareholders all proposed material

transactions which would materially alter/ vary the net assets position of the Company/Group, if entered into

Major transactions C 3.1

AdoptedThere were no major transactions during 2019/20.

Disclosure requirements &

shareholder approvals for

special resolutions in PLCs

C 3.2

Adopted

CF has complied with all required disclosures and shareholder approvals

has also obtained for special resolutions as required by the rules and

regulations which have been established for public listed companies by

the SEC / CSE.

D. ACCOUNTABILITY AND AUDIT

D.1 Financial and Business Reporting (The Annual Report)

The Code requires the Board to present a balanced and understandable assessment of the Company’s financial position, performance,

business model, governance structure, risk management, internal controls and challenges, opportunities and prospects.

Statutory and Regulatory

Reporting

D 1.1 & D 1.2

Adopted

The Board is aware of its responsibility to present balanced and

understandable financial statements in compliance with statutory and

regulatory requirements.

In the preparation of quarterly and annual financial statements for

the year ended 31st March 2020, Central Finance has complied with

the requirements of the Companies Act No. 07 of 2007, the Finance

Business Act No. 42 of 2011, and presented in conformity with Sri Lanka

Accounting Standards and complied with the reporting requirements

prescribed by the Regulatory Authorities such as the Central Bank of

Sri Lanka and Colombo Stock Exchange.






Declaration on financial

Statements

D 1.3

Adopted

Prior to obtaining the Board approval for financial statements, Director

Finance submits a declaration for quarterly and annual financial

statements confirming that financial records of the company have been

properly maintained and financial statements/ disclosures comply with

appropriate & required Sri Lanka Accounting Standards and give a true &

fair view of the financial position and performance of the company and

effectiveness of the internal controls established by the management.

Directors’ report in the

Annual Report

D 1.4

Adopted

The Directors have made all declarations in the “Annual Report of the

Board of Directors” as given on pages 82 to 88 which includes the

following;

° the company has not involved in any activity which contravenes

the laws & regulations.

° the Directors have placed great emphasis on instituting and

maintaining effective corporate governance practices

° the property, plant & equipment of the company are reflected at

fair value and deviations have been properly disclosed.

° the Board is satisfied that the company has adequate resources to

continue its operations in the foreseeable future.

° instituting of an effective and comprehensive internal controls

covering financial operations, compliances and risk management

° the company has made all endeavours to ensure the equitable

treatment of shareholders.

Statement of Directors’, and

Auditor's responsibility for

financial statements and

report on Internal Controls

D 1.5

Adopted

The Statement setting out the responsibilities of the Board for preparation

and presentation of financial statements is included in “Directors’

Responsibility for Financial Reporting” and given on page 91 of the

Annual Report.

Auditor’s reporting responsibility is given in their report on the financial

statements on pages 99 to 101.

The Directors’ Statement on Internal Controls is given on page 97 and

Auditor’s report on "The Directors’ Statement on Internal Controls" is

given on page 98.

Management Discussion

and Analysis

D 1.6

Adopted

The “Management Discussion and Analysis” report discussing the key

aspects identified in this code is given on pages 14 to 16.

Summoning an EGM to

notify serious loss of capital

D 1.7

Not Applicable

Likelihood of such occurrence is remote. However, should the situation

arise, an EGM will be called for and shareholders will be notified.





Disclosure of Related Party

Transactions

D 1.8

Adopted

The Board has established an effective and comprehensive process for

identifying, recording and disclosure of Related Party Transactions. Steps

have been taken by the Board to avoid any conflicts of interest that may

arise, in transacting with related parties. The Board ensures that any

financial transaction is on terms that are reasonable if the Company and

the related party were dealing at arm’s length in the ordinary course of

business.

As an effort to strengthen the monitoring mechanism of related party

transactions, Board has established a Related Party Transaction Review

Committee (RPTRC). All Related Party Transactions as defined in Sri

Lanka Accounting Standard, Sri Lanka Auditing Standards, Securities

and Exchange Commission and similar regulations on “Related Party

Transactions” are disclosed in note 60 to the Financial Statements on

pages 178 to 181.

D.2 Risk Management and Internal Control

The Board is responsible for determining the nature and extent of the principal risks that will be taken in achieving the strategic

objectives. The Board should have a process of risk management and a sound system of internal controls to safeguard shareholders’

investments and company’s assets.

Annual evaluation of risk

management systems and

the effectiveness of the

internal control system

D 2.1 & D 2.2

Adopted

The Board is responsible for establishing a sound framework of risk

management & internal controls and monitoring its’ effectiveness on a

continuous basis. Through such an effective framework, CF manages

business risks and ensures that the Company’s assets are safeguarded.

Potential risks of the company and effectiveness of the system of internal

controls related to financial, operational and compliance are reviewed at

least annually by the company.

Robust assessment of the principal risks face by the company including

the factors that would threaten the business model, future performance.

The Directors’ Statement on internal controls is given on page 97. The

Auditor’s report on same is given on page 98.

Internal audit function D 2.3

Adopted

The Internal Audit function is carried out by the Internal Audit

Department of the Company.






Review of process and

effectiveness of risk

management & internal

controls

D 2.4

Adopted

CF Internal Audit Division carries out regular reviews on the internal

control system including internal control over financial reporting.

The Audit Committee monitors & reviews the Internal Control issues

and risk management measures identified by the internal Audit Division

and evaluate the adequacy and effectiveness of risk management and

internal control system of the Company.

The Board was satisfied with the effectiveness of the internal control

system as referred to in the “Directors’ Statement on Internal Control” on

page 97.

Responsibilities of Directors

in maintaining a sound


D 2.5

Adopted

The Directors' responsibilities for maintaining a sound system of internal

control are given in the “Directors' Statement on Internal Controls” on

page 97.

The External Auditor has independently reviewed the report as indicated

on page 98 of the Annual Report.

D.3 Audit Committee

The Code requires the Board to have a formal and transparent arrangement in selecting and applying Accounting policies for financial

reporting, determining the structure and content of the corporate reporting, implementing internal control and risk management

principles and maintaining an appropriate relationship with the Company’s Auditor

Composition of the Audit

Committee

D 3.1

Adopted

The Audit Committee comprises of three Independent Non-executive

Directors according to this code. The Chairman of the Audit Committee

is also an Independent Non-executive Director. The said Committee met

17 times during the year 2019/20.

The General Manager - Internal Audit functions as the Secretary to the

Audit Committee. Chairman, Managing Director, Director (Finance),

Director (Group Co-ordination) GM-Finance, Assistant General Manger-

Internal Audit and the External Auditor attend meetings by invitation.





Terms of reference of the

Audit Committee

D 3.2

Adopted

The Audit Committee is guided by the Committee Charter which sets

out authority and responsibility of the Audit Committee. The Charter was

reviewed in 2019/20 in line with the Code of Best Practices on Audit

Committees of CA Sri Lanka.

The Duties and Responsibilities of the Committee include, inter alia;

° Assisting the Board to ensure preparation and presentation of

Financial Statements in conformity with Sri Lanka Accounting

Standards and other laws and regulations. The committee reviews

the annual and quarterly financial statements with management

and the External Auditor.

° Assessing the compliance of regulatory requirements and

Company’s ability to continue as a going concern in the

foreseeable future.

° Monitoring and reviewing the effectiveness of the Internal Audit

function.

° Reviewing the internal control system.

° Making recommendations to the Board on the appointment, re

appointment or removal of the External Auditor and to approve the

remuneration and terms of engagement of the external auditor.

° Discussion of external audit plan, key audit issues and

management responses with management and the Auditor.

° Assisting the Board in assessing the independence and objectivity

and effectiveness of the audit process.

° The Committee has set out the policy for the engagement of the

External Auditor for non-audit services taking into account, relevant

ethical and regulatory guidance regarding the provision of non-

audit services by the external audit firm.

The Audit Committee reviewed and approved the policy for engagement

of the External Auditor to provide non-audit services during 2019/20

° Separate periodic meetings with management, external auditor

and the internal auditors

° Reporting regularly to the Board of Directors.

Disclosures of the Audit

Committee

D 3.3

Adopted

A review of the scope of the Audit Committee, results of the Audit and

the effectiveness in discharging its duties during 2019/20 are described

in the Audit Committee report on pages 94 to 96.






D.4 Related party transaction review committee

The code requires the board to ensure that a procedure has been established to avoid any conflicts of interest that may arise, in

transacting with related parties.

Related parties & related

party transactions

D 4.1

Adopted

All related parties and related party transactions are identified in

conformity with LKAS 24.

Related party transaction

review committee

D 4.2

Adopted

The board has established a related party transaction review committee

which comprises independent Non-executive directors and executive

directors, with the majority being Non-executive directors and chaired

by an independent Non-executive director. Executive directors are also

included in the membership of the committee in line with the CSE’s

listing rule requirements.

RPT Review committee

terms of reference

D 4.3

Adopted

The RPT Review committee is directed by the Board approved terms of

reference which sets out authority and responsibility of the Committee. It

has addressed:

1. Ensuring that policies and procedures are in place to review the

related parties and related party transactions of the Company in

line with LKAS 24 and CSE listing rules and periodic review of the

same

2. Procedure to identify and for Directors to report recurrent and non-

recurrent related party transactions as defined in the CSE listing

rules.

3. Ensuring that interested Director or KMPs shall not participate in

any discussion of proposed related party transactions unless such

person is requested to do so by the Committee for the purpose of

providing information concerning the related party transaction.

4. Procedures to be followed in a situation where conflicts are arisen.

5. Reviewing the availability of procedures in making disclosures

related to financial reporting and ensuring that it is in accordance

with the Code and Sri Lanka Accounting standards.

6. Reviewing and recommending to the board the related party

disclosures to be made in the annual report.





D.5 Code of business conduct & ethics

The Company should develop a Code of Business Conduct and Ethics to be adhered to by all Directors, Key Management Personnel

and all other employees including but not limited to: dealing with shares of the company; compliance with listing rules; bribery and

corruption; confidentiality; encouraging that any illegal, fraudulent and unethical behavior be promptly reported to those charged with

governance.

Code of business conduct

and ethics

D 5.1

Adopted

Central Finance has developed a Code of Business Conduct for all Staff

Members, which addresses conflict of interest, receiving gifts or any other

benefit, accurate accounting and record keeping, corporate opportunities,

confidentiality of information, fair dealing, protection and proper use

of the Company’s assets including information assets and compliance

with applicable laws and regulations including insider trading laws and,

encouraging the reporting of any illegal or unethical behavior.

The code of business conduct and ethics has been adhered to in all

respects by the Directors and Key Management Personnel.

Price sensitive information D 5.2

Adopted

Communication policy is in place defining the procedure to identify and

report material and price sensitive information in accordance with the

relevant regulations.

A process of monitoring

& disclosing of share

purchases

D 5.3

Adopted

A process is in place to monitor and disclose the purchasing and selling

of shares by Directors and Key Management Personnel.

Affirmation of the code of

conduct & ethics

D 5.4

Adopted

The communication policy which includes code of conduct and ethics

and the procedure for disseminating, monitoring and compliance with

the code have been introduced company wide and the Chairman

confirms that he is not aware of any material violations of the Code of

Conduct.

D.6 Corporate Governance Disclosures

The Company should disclose the extent of adoption of best practices in Corporate Governance

Corporate Governance

Report

D 6.1

Adopted

This report satisfies the requirement of this code.

SHAREHOLDER

E. INSTITUTIONAL INVESTORS

E.1 Shareholder voting

The Code requires the institutional shareholders to make considered use of their votes and encouraged to ensure that their voting

intentions are translated into practice.






Communication with

Institutional shareholders

E 1.1

Adopted

The Annual General Meeting is used for effective dialogue with the

shareholders on matters which are relevant and of concern to the general

membership. The Chairman communicates the views and queries of the

shareholders to the Board and Senior Management, in order to ensure

that the views are properly communicated and acted upon.

E.2 Evaluation of Governance Disclosures

The Company should encourage institutional investors to give due weightage to all relevant factors drawn to their attention when

evaluating the Governance arrangements of the Company.

Evaluation of the Corporate

Governance initiatives

E 2

Adopted

When evaluating the Company’s Corporate Governance arrangements,

institutional investors are encouraged to give due weightage to all

relevant factors particularly in the Board structure and composition.

F. OTHER INVESTORS

F.1 Investing/Divesting Decisions

The Code requires individual shareholders to carry out adequate analysis or obtain independent advice in investing and divesting

decisions.

Other Investors F 1

Adopted

Individual shareholders are encouraged to carry out adequate analysis or

seek independent advice on investing or divesting decisions.

F.2 Shareholder Voting

Individual shareholders should be encouraged to participate and exercise their voting rights in General Meetings

Individual shareholders

voting

F 2

Adopted

Individual shareholders are encouraged to participate at General

Meetings and exercise their voting rights. The Company communicates

with all shareholders by ensuring that they are duly informed by

dispatching necessary Notices.

G. INTERNET OF THINGS AND CYBERSECURITY

Prevailing risks related to information security has been taken in to consideration by the Board in formulating a cyber-security risk

management policy.

Effective cyber-security risk

management process

Principle G.1 – Principle G.5 Prevailing risks related to information security has been taken in to

consideration in developing the Information Security Management

System policy which includes a robust cyber-security risk management

process, incident response system, disaster recovery plan and

governance structure to monitor effective implementation and reporting.





H. ENVIRONMENT, SOCIETY AND GOVERNANCE (ESG)

H.1 ESG Reporting

ESG factors create long-term stakeholder value by embracing opportunities, managing risks derived from economic, environmental and

social developments and their potential implications and impacts on the business activities of the entity.

ESG reporting is the practice of recognizing, measuring, disclosing and being accountable to all stakeholders for organisational

performance towards the goals of sustainable development in the context of the overall business activities and strategy of the entity.

Hence, the Code requires to maintain Policies and Procedures to develop a sustainable business environment and make adequate

disclosures on this regard in the annual report.

Information on ESG reporting H 1.1

Adopted

Please refer the “Corporate Social Responsibility Report” on pages 75 to

79 for details.

Environment factors H 1.2

Adopted

Social factors H 1.3

Adopted

Governance H 1.4

Adopted

Board’s role on ESG factors H 1.5

Adopted



SECTION TWO

FINANCE COMPANIES DIRECTION NO. 03 OF 2008 (AND SUBSEQUENT AMENDMENTS THERETO) ON CORPORATE GOVERNANCE FOR

LICENSED FINANCE COMPANIES IN SRI LANKA

The Central Bank of Sri Lanka issued the Direction on Corporate Governance (Finance Companies Direction No. 03 of 2008 and

subsequent amendments thereto), in order to improve and sustain the Corporate Governance processes and practices of the Licensed

Finance Companies in Sri Lanka.

The above Direction comprises of nine (9) fundamental principles, namely:

1. The responsibilities of the Board of Directors

2. Meetings of the Board

3. Composition of the Board

4. Criteria to assess the fitness and propriety of Directors

5. Delegation of functions

6. The Chairman and the Chief Executive Officer

7. Board appointed Committees

8. Related party transactions

9. Disclosures

The structures in place and the conformity with the requirements are tabulated below under the said nine fundamental principles.


Principles

CBSL Rule Compliance status / Level of Compliance

2. The responsibilities of the Board of Directors

2 (1) Strengthening the safety and soundness of the Company

Approving & overseeing

the strategic objectives

& corporate values /

communication

2.1 (a) Complied with

Strategic objectives, corporate values, overall business strategy and policies of the Company

set by the Board are regularly overseen by the Board and are communicated to all levels of

the Company.

The Company has developed a policy on Code of Conduct and Ethics for all employees, in

line with strategic objectives & corporate values of the company. The corporate values are

posted on the intranet and all employees are guided by these values.




Principles


Approving overall

business strategy

including risk policy

& risk management

procedures

2.1 (b) Complied with

Overall risk parameters have been set up with regular reviews in place through Board of

Management (BoM), Integrated Risk management Committee (IRMC) and Assets and

Liabilities Committee (ALCO).

The Board has provided direction in the development of short, medium and long term

strategy of the Company with the objective of promoting sustainability and profitable

growth of the Company.

The Board approved Strategic plan for 2020 - 2022 at the meeting held on 30 September

2019.

Further, the overall risk policy and risk management procedures and mechanism which

have been outlined in line with overall business strategy are regularly monitored by the

Board Integrated Risk Management Committee.

Identifying risks and

risk management

procedures

2.1 (c) Complied with

Assets and Liabilities Management Committee (ALCO), Board of Management (BOM) and

Integrated Risk Management Committee (IRMC) review risks and systems that have been

developed to manage and mitigate risks. ALCO and BOM review performance monthly and

the IRMC meets every quarter or earlier if required.

Minutes of all three committees are tabled at monthly Board Meetings for their review and

further action, if required.

Policy on

communication with

stakeholders

2.1 (d) Complied with

The Board is responsible for ensuring effective communication with all stakeholders

including depositors, creditors, shareholders and borrowers.

A Board approved communication policy is in place and reviewed, as and when required.

The Annual General Meeting is used to have an effective dialogue with the shareholders on

matters which are relevant and of concern to the general membership.

Reviewing Company’s


and management

information system

2.1 (e) Complied with

Continuous and ongoing reviews are effected on the adequacy and integrity of the Internal

Control and Management Information Systems by Board Sub-committees and suggestions

are made to the Board where necessary.

Company’s internal control systems over financial reporting and management information

systems are reviewed periodically by the Audit Committee. The Audit Committee

reports are submitted to the Board for further action. Periodic External Reviews are also

commissioned, as and when necessary, on specific areas by Specialists.



Principles


Identifying &

designating Key

Management

Personnel

2.1 (f) Complied with

Identification and designation of Key Management Personnel (KMP) is in place and

periodically reviewed and updated by the Board and BoM. All Executive Directors and

General Mangers other than General Manager-Internal Audit have been identified as KMPs.

Defining the areas

of authority and

key responsibilities

of Board and Key

Management

Personnel

2.1 (g) Complied with

The Board has defined the areas of authority and key responsibilities of the Board

Members. In addition, Non-executive Directors have specific areas of responsibility through

the various Sub Committees of the Board. Similarly, Key Management Personnel have

specific areas of responsibility assigned to them through their employment contracts and

exigencies of evolving business needs. The delegated authority limits for KMPs have been

reviewed and approved by the Board regularly.

Ensuring appropriate

oversight of the affairs

by Key Management

Personnel

2.1 (h) Complied with

The Board of Management (BoM) at its detailed monthly review ensures that there

is appropriate oversight of the Company’s affairs by Key Management Personnel and

consistent with its strategic objectives and corporate values of the company.

Periodically assess the

effectiveness of Board’s

governance practices

2.1 (i) Complied with

The Board ensures that effectiveness of governance practices are periodically assessed.

A Board approved transparent procedure is in place for selection, nomination and election

of Directors and Key Management Personnel.

Directors make declarations on areas of interest when joining the Company’s Board and

subsequently on a quarterly basis.

Implementation of changes required are discussed and determined by the Board at year

end through submission of annual self-evaluations. Conflicts of interest are managed

through a balanced Board of Directors and a Board approved Related Party Transactions

Review Committee.

Ensuring an appropriate

succession plan for

Key Management

Personnel

2.1 (j) Complied with

A documented Succession Plan is in place for all Key Management positions and training

programmes are being continuously reviewed and formulated to ensure that there is

adequate succession capacity at all levels.

Regular meeting with

the Key Management

Personnel

2.1 (k) Complied with

The Board meets with Key Management Personnel in reviewing policies, monitoring

progress towards corporate objectives and ensuring lines of communication. In addition,

KMPs make presentations to the Board as a whole or to individual Directors on matters of

interest.

The Board of Management (BOM), a committee comprising Executive Directors and Key

Management Personnel, review policies, and monitor progress towards corporate objectives

at their monthly meetings. Further, KMPs attend Board sub-committee meetings on

invitation for effective decision making.




Principles


Understanding the

regulatory environment

2.1 (l) Complied with

Compliance Officer and Company Secretary update the Board Members on changes

to the regulatory environment. Regular discussions, training and seminars are arranged

for Directors and Key Management Personnel to facilitate understanding the regulatory

environment.

Exercising Due

diligence in hiring and

oversight of External

Auditor

2.1 (m) Complied with

The Board appointed Audit Committee reviews and makes recommendations to the

Board on the appointment, re-appointment or removal of the External Auditor in line with

professional standards and regulatory requirements. The Audit Committee sets out the

policy for the engagement of the External Auditor to provide non-audit services. The Audit

Committee reviewed and approved the policy during 2019/20

Appointing Chairman &

Chief Executive Officer

(MD)

2 (2) Complied with

The Board has appointed the Chairman and Chief Executive Officer (CEO/MD). The roles of

Chairman and Chief Executive Officer (CEO/MD) are separated and the board has defined

and approved the functions and responsibilities of the Chairman and the MD (CEO) in line

with rule 7 of the CBSL direction.

Please refer Section A.2 and A.3 of CA Sri Lanka Code table on pages 42 to 43 and rule 7

of CBSL direction on pages 73 for details.

Seeking independent

advice

2 (3) Complied with

The Company has a procedure for Directors to seek independent professional advice,

in furtherance of their duties, at the Company’s expense. This procedure is coordinated

through the company secretary, as and when it is requested.

Please refer section A 1.3 of the CASL Code table on page 40 for details.

Avoiding conflicts of

interest

2 (4) Complied with

The Board is mindful of its obligation to ensure that Directors avoid conflicts of interests.

The Directors make declarations on areas of interest at the time of applying to the Board

and subsequently as and when changes occur. Appropriate procedure is in place to

ensure that conflicts and potential conflicts of interests are properly disclosed to the Board.

Procedure is in place for Directors to abstain from voting on any Board Resolution when the

Director or any of his/her relatives or a concern, in which he/she has substantial interest, is

interested.

A director shall not participate in any discussion on a Related Party Transaction for which

he/she or any of his/her immediate family members are associated with and is required to

provide all material information concerning the Related Party Transactions to the Board.

Formal Schedule of

Matters to ensure

proper direction &

control

2 (5) Complied with

The Board has a formal schedule of matters specifically reserved for it. Pre-set agenda

of meetings ensures that the direction & control of the company is firmly under Board’s

control and authority.



Principles


Informing Director NBFI

Supervision in possible

situations of insolvency

2 (6) This situation has not arisen.

Publishing a Corporate

Governance Report

2 (7) Complied with

This report addresses the requirement of this rule

Adopting a Self-

assessment by

Directors

2 (8) Complied with

Each Director performs an annual self-assessment of his own effectiveness as well as the

effectiveness of the Board based on the predefined criteria set by the Board and maintains

records of such assessments.

Last assessment was carried out in November 2019.

Please refer Section A.9.1 of CA Sri Lanka Code table on page 47 for details.

3. Meetings of the Board

Board Meetings 3 (1) Complied with

The Board meets at monthly intervals, but meets more frequently whenever it is necessary.

Circulation of written or electronic resolutions / Board papers to obtain Board’s consent was

minimized and approvals obtained through the circulation of resolutions / Board papers are

subsequently ratified at the next Board Meeting.

Please refer section A 1.1 of the CA Sri Lanka code table on page 39 for details.

Inclusion of proposals

by all Directors in the

agenda

3 (2) Complied with

Proposals from all Directors on promotion of business and management of risk and other

areas relevant to the progress of the company are included in the agenda for regular

meetings as and when they arise.

Adequate notice of

Board meetings

3 (3) Complied with

Directors are given adequate time and at least 7 days of notice for Board Meetings and a

reasonable time period for other meetings to study the relevant papers and proposals for

meaningful discussions.

Action taken for not

attending Board

Meetings

3 (4) Complied with

All Directors have attended at least two-thirds of the meetings held during the year.

No Director has been absent from three consecutive regular meetings held in 2019/20.

Appointing and setting

responsibilities for

Board Secretary

3 (5) Complied with

The Board has appointed Corporate Services (Pvt) Ltd., to handle the secretarial services to

the Board to ensure that proper Board proceedings and other functions are followed in line

with rules & regulations enforced by Statutes.


Agenda for Board

Meetings

3 (6) Complied with

The Board Secretary prepares the Agenda, which has been delegated by the Chairman.



Principles


Access to the Board

Secretary

3 (7) Complied with

Service of the Board Secretary is available for all Directors in discharging their duties to the

Company. The Board Secretary has provided the Board with support and advise relating

to corporate governance matters, Board procedures and applicable rules and regulations

during the year.


Maintaining minutes

of the Board Meetings

and accessible to the

Directors

3 (8) Complied with

The Company Secretary maintains the minutes of the Board Meetings and Directors have

full access to inspect the Minutes of the Board Meetings at any reasonable time, at short

notice.

Details of Minutes 3 (9) Complied with

Minutes of the Board Meetings are maintained in sufficient detail by the Board Secretary as

defined in the direction.

4. Composition of the Board

Number of Directors 4 (1) Complied with

During the year the Board comprised of ten (10) Directors.

Period of service

of Non-executive

Directors

4 (2) Complied with

Non-executive Directors serving on the Board have not served on the board for more than

nine years.

Appointment of an

employee as a Director

4 (3) Complied with

No employee of the company was appointed as a director during 2019/20.

The Executive Directors of the Company have not exceeded one-half of the number of

Directors of the Board.

Independent Non-

executive

Directors

4 (4) Complied with

The company has satisfied the requirement for independent directors, which is in excess of

one fourth of the total number of Directors.

The Board reviews the independence of Non-executive Directors on an annual basis and

as and when circumstances change, based on the self-declaration and as a part of each

Director’s performance assessment.

Alternate Director 4 (5) Complied with

There were no instances of appointing Alternate Directors for Independent Non-executive

Directors during the year.

Credibility, skills &

experience of

Non-executive

Directors

4 (6) Complied with

The Non-executive Directors possess skills & experience from a number of industries and

business sectors, including the leadership of large multinational enterprises.

Biographic details of the Directors are given on pages 10 to 12.




Principles


Meetings of the Board

with at least one half

of Non-executive

Directors in the

quorum

4 (7) Complied with

As per the Articles of Association of the Company, the quorum to constitute a Meeting of

the Board is two Directors of which one Director should be a Non-executive Director.

As per the attendance of the Board Meetings during the year ended 31.03.2020, the

required quorum has been maintained at all Board Meetings.

Details of the meetings and individual attendance are given on page 74.

Details of Directors 4 (8) Complied with

Please refer pages 10 to 12 for the biographic details of the Directors and the categories.

Appointment of new

Directors

4 (9) Complied with

The Board has a formal and transparent procedure in place when appointing Directors to

the Board. Further, the Board approved succession plan is in place for the Members of the

Board and KMPs.

Subsequent to the Financial year, Mr. C. L. K. P. Jayasuriya retired from the Board on

completion of nine years on 30.06.2020 and Mr. Manjula de Silva was appointed to the

Board.


Appointment to

fill a casual vacancy

4 (10) Complied with

As per the Articles of Association of the Company, a Director who was appointed during the

year to fill a casual vacancy will stand for-re-election by shareholders at the very next Annual

General Meeting.

There were no new director appointments during 2019/20. Subsequent to the Financial

year, Mr. C. L. K. P. Jayasuriya retired from the Board on completion of nine years on

30.06.2020 and Mr. Manjula de Silva was appointed to the Board.

Procedure to be

followed for resignation

/ removal of a Director


Notifications of removal & resignation of Directors of the Company are given to the

shareholders by way of the Annual Report, Quarterly Financial Statements and Newspaper

announcements and to the Director – DSNBFI of the CBSL.

There were no resignation/removal of director during 2019/20.

5. Criteria to assess the Fitness and Propriety of Directors

Directors over 70 Years

of age

5 (1) Complied with

Directors serving on the Board as at 31.03.2020 have not reached the age of seventy (70)

years.

Holding of office in

more than 20 entities

5 (2) Complied with

As at 31.03.2020, none of the Directors on the Board hold Directorships in more than 20

companies including the subsidiary and associates companies of Central Finance Company

PLC.



Principles


6. Delegation of Functions

Delegation of work to

the management

6 (1) Complied with

Article 127 of the Articles of Association of the Company empowers the Board to delegate

its powers and the Board has established a formal procedure for delegation of powers,

retaining the ability to discharge its functions as required.

The Board of Central Finance periodically 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.

Evaluation of the

delegated process

6 (2) Complied with

Please refer comments above.

7. The Chairman and the Chief Executive Officer

Division of

Responsibilities of

the Chairman & the

CEO(MD)

7 (1) Complied with

The roles of the Chairman and the Chief Executive Officer / Managing Director are

Separate.

Chairman Preferably

be an Independent

Director and if not

appoint a Senior

Director

7 (2) Complied with

Chairman of the Board is an Independent Non-executive Director. Hence, requirement of

appointing a Senior Director did not arise, as per the definition set out in the Corporate

Governance Direction.

Relationship between

Chairman and CEO

(MD) & other Directors

7 (3) Complied with

As declared by the Directors, there are no material relationships between the Chairman and

CEO (MD) and other members of the Board which will impair their respective roles.

Role of the Chairman 7(4)

to

7(10)

Complied with

The Chairman is responsible to lead, direct and manage the Board to ensure that it

operates effectively and fully discharges its legal & regulatory requirements.

Detailed information of the role of the Independent Non-executive Chairman is given in the

CASL Code table section A 2 & A 3 on pages 42 and 43.

Role of the CEO (MD) 7 (11) Complied with

The Chief Executive Officer (MD) shall function as the apex executive in charge of the day-

to-day management of the Company’s operations and business.




Principles


8. Board appointed committees

Board appointed

Sub-committees

8 (1) Complied with

There are five Board appointed Sub-committees namely, Audit Committee, Remuneration

Committee, Nomination Committee, Integrated Risk Management Committee and Related

Party Transactions Review Committee.

Minutes of the Sub-committee Meetings and matters arising from the minutes as well as

reports that require Board’s attention and/ or decisions were circulated to the Board by

respective Secretaries of the Committees.

Audit Committee 8 (2) (a) to 8

(2) (q)Complied with

The Audit Committee comprises of three Non-executive Directors of whom two members

are independent. Chairman of the committee is also an Independent Non-executive

Director. Please refer the Audit Committee Report given on pages 94 to 96 and section

D 3 of the CA Sri Lanka code table on pages 55 to 56 in respect of composition, role and

responsibilities of the Board appointed Audit Committee covering;

a. the Chairman of the Committee

b. composition of the Audit Committee

c. recommendation to the Board on appointment, re-appointment and removal of

External Auditor

d. monitoring & review of the External Auditor’s independence, objectivity and

effectiveness.

e. policy of engagement of External Auditor in non-audit services

f. discussing & finalising the nature and scope of the audit with external auditor

g. reviewing financial information of the company

h. meeting with External Auditor with & without the presence of Executive Directors/

KMPs

i. review of External Auditor’s Management Letter

j. steps taken to review the Internal Audit functions and review major findings of

internal audit & management responses thereto.



Principles


Integrated Risk

Management

Committee

8 (3) (a) to 8

(3) (h)Complied with

The Integrated Risk Management Committee (IRMC) comprises five Non-executive

Directors and management representatives including CEO/MD, Executive Directors and

other Management Representatives.

The IRMC has established quantitative & qualitative risk indicators and prompt corrective

action is taken against the risk indicators, if any, such limit is exceeded.

The IRMC met quarterly. Minutes of IRMC meeting including discussions and conclusions

reached at such meetings and risk assessment report are circulated electronically within

7 days of each meeting to the Board of Directors seeking their views, concurrence and

specific directions.

Head of Compliance – Anti Money Laundering / Customer Due Diligence reports the

compliance status of the company. A Compliance Statement covering Directions, Rules and

Regulations issued under the Finance Business Act No. 42 of 2011, Rules and Regulations

of the Securities and Exchange Commission of Sri Lanka and Colombo Stock Exchange,

Provisions contained in the Companies Act No. 07 of 2007, Inland Revenue Act No. 10 of

2006 and other various statutory requirements is submitted to the Board monthly.

Please refer the Integrated Risk Management Committee Report given on page 93 for

details.

9. Related Party Transactions

Avoiding conflicts of

interest in related

party transactions and

favourable treatment

9 (2) to 9 (4) Complied with

Board members are required to make declarations in respect of related parties at the time

of appointment and subsequently on a quarterly basis.

Each Director and KMP will notify the Board of Directors and the Company Secretary of

any interests that such person or an immediate family member of such person has or may

have in a Related Party Transaction and shall include a description of the transaction and

the amount.

To further strengthen the monitoring mechanism of related party transactions, a Board

approved Related Party Transaction Policy and a Related Party Transactions Review

Committee are in place. The objectives of which are to:

1. encourage transparency with a view to facilitating informed decisions

2. conform to disclosure requirements and exercise good governance on related party

transactions, and

3. ensure that any financial transaction / benefit is on terms that are reasonable in the

circumstances if the entity and the related party were dealing at arm’s length.

Please refer section D 1.8 of the CA Sri Lanka code table on page 54 for details.




Principles


10. Disclosures

Financial reporting,

Statutory and

Regulatory reporting


The financial statements for the year ended 31st March 2020 and the bi-annual financial

statements are in conformity with all rules and regulatory requirements and applicable

accounting standards and have been published in all three languages in the newspapers.

Minimum disclosure in

the Annual Report


a. A statement to the effect that the 2019/20 annual audited financial statements

have been prepared in line with applicable accounting standards and regulatory

requirements has been given in the Directors’ Responsibility Statement for Financial

Reporting on page 91.

b. Directors Report on effectiveness of the internal control system over financial reporting

is given under the “Directors’ Statement of Internal Control” on page 97.

c. Independent Assurance Report is issued by the External Auditor on effectiveness of

Internal Controls over Financial Reporting based on “SLSAE 3050 – Assurance Report

for Banks on Directors’ Statement on Internal Controls” issued by CA Sri Lanka. Please

refer External Auditor’s Independent Assurance Report on the Directors’ Statement on

Internal Control on page 98.

d. Details of the Directors are given on pages 10 to 12 Directors’ remuneration is

disclosed on page 129 Deposits made by the Directors are given in note no. 44 of the

financial statements on page 163.

e. Fees and Remuneration paid to the Directors in total is given in note no. 16 of the

financial statements on page 129.

f. The net accommodation outstanding from the related parties is given below as a

percentage of capital funds

Related Party Category Amount (Rs. Mn.) As a % of Capital Funds

1. Subsidiaries 10.72 0.03%

2. Associates 3,405.43 10.59%

3. Key Management Personnel Nil Nil



Principles


Minimum disclosure in

the Annual Report10 (2) g. Transactions with Key Management Personnel such as remuneration paid,

accommodation granted, deposits made are given in note no. 60 of the financial

statements on pages 178 to 181. Investment made by the KMPs in the Company

amounts to 45,186,836 ordinary shares.

h. There were no instances of non-compliance to prudential requirements, regulations

and laws. There was no material non-compliance with internal controls.

i. There were no supervisory concerns on lapses in risk management, noncompliance

with the Act and rules and directions that have been pointed out by the Director -

SNBFI and requested by the Monetary Board to be disclosed to the public.

j. The external auditor has performed procedures set out in “Sri Lanka Related Services

Practice Statement 4752” issued by the Institute of Chartered Accountants of Sri

Lanka to meet the compliance requirement of the Corporate Governance directive.

External auditor’s findings presented in their report addressed to the Board are

consistent with the matters disclosed above and did not identify any inconsistencies

to those reported above by the Board.



SECTION THREE

CONTINUING LISTING RULES SECTION 7.10 ON CORPORATE GOVERNANCE OF THE COLOMBO STOCK EXCHANGE

The Continuing Listing Rule Section 7.10 of the Colombo Stock Exchange (CSE) mandates companies listed on the Colombo Stock Exchange to publish a Table in the Annual Report, confirming that as at the date of the Annual Report they comply with the Corporate Governance rules. The rule addresses the following areas;

° Non-executive Directors,

° Independent Directors,

° Disclosures relating to Directors,

° Remuneration Committee,

° Audit Committee.

Corporate

Governance

Principles

CSE Rule

Reference

Compliant

status

Level of Compliance

Non-executive

Directors

7.10.1 (a)

CompositionCompliant Half the Board Members are Non-executives, which is more than the

requirement of the rule.7.10.2 (a)

Independent

Directors

Compliant Half the Board Members are Non-executives and more than one third of

them are independent as per the Listing Rule.

7.10.2 (b)

DeclarationCompliant All Non-executive Directors have submitted their independence declaration

as per the requirements.

Disclosures relating to

Directors

7.10.3 (a)

Determining

independence

Compliant Declarations of Independence by the Directors were assessed by the full

Board. The Directors who are independent are disclosed on pages 10 to 12.

7.10.3 (b) Compliant Circumstances did not arise for the Board to decide a Director as

Independent beyond the criteria set by this rule.7.10.3 (c)

BiographyCompliant Please refer pages 10 to 12 for the brief biography of each Director.

7.10.3 (d)

New

appointments

Compliant Information relating to new appointments to the Board is disclosed to the

Colombo Stock Exchange, when appointments are made.

Remuneration

Committee

7.10.5 (a)

CompositionCompliant The Remuneration Committee solely comprises of Non-executive Directors.

7.10.5 (b)

FunctionCompliant Please refer to the Remuneration Committee report on page 92 for details

of the functions of the Committee.7.10.5 (c)

Disclosure in the

annual report

Compliant The report of the Remuneration Committee is given on page 92 and the

remuneration paid to Directors is given in note no. 16 to the financial

statements on page 129.

Audit Committee 7.10.6 (a)

CompositionCompliant The Audit Committee comprises of three Non-executive Directors and

majority of them are independent.7.10.6 (b)

FunctionCompliant Functions of the Audit Committee are given in detail in the Audit

Committee Report on pages 94 to 96.7.10.6 (c)

Disclosures in the

annual report

Compliant The 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 pages 94 to 96.



MEETINGS

In 2019/20, thirteen (13) Board Meetings were scheduled and individual attendance by Directors at these meetings and sub-committee

Attendance is shown in the following table.

Names Directorship Status Board Audit

Committee

Integrated

Risk

Management

Committee

Remuneration

Committee

Nomination

Committee

Related

Party

Transactions

Review

Committee

Number of meetings held 13 17 4 1 1 4

C.L.K.P. Jayasuriya * Chairman/Independent

Non-executive Director

13/13 - 3/4 1/1 1 -

E.H. Wijenaike Managing Director 13/13 - 4/4 - 1*** 3/4

G.S.N. Peiris Director (Finance) 13/13 - 4/4 - - -

A.K. Gunaratne Director (Group Co-ordination) 13/13 - 4/4 - - 4/4

D.P. de Silva Director (Credit) 13/13 - 4/4 - - -

Mr. A. D. B. Talwatte * Chairman/ Independent

Non-executive Director

13/13 17/17 4/4 1/1 1 4/4

Dr. (Mrs.) A.D.N. de

Zoysa

Independent Non-executive

Director

12/13 17/17 4/4 1/1 1 4/4

A. R. Fernando Non-executive Director 13/13 16/17 4/4 - - 4/4

C.K. Hettiarachchi Director (Marketing) 12/13 - 4/4 - - -

K.B. Herath Independent Non-executive

Director

12/13 - - - 1 -

* C.L.K.P. Jayasuriya retired from the Board and A.D.B. Talwatte was appointed as Chairman of the Board on 1st July 2020.

**Remuneration Committee Meeting was held on 01 June 2020.

***Attended by invitation

**** March 2020 Board Meeting was held on 01 April 2020.


CORPORATE SOCIAL RESPONSIBILITY

“Launched in 2015, the “Sisu Athwela”educational support programme continues to fund the much needed educational requirements of students from rural areas. The students selected for the programme receive an annual supply of stationery, books, uniforms and shoes as well as a monthly financial grant for the entirety of their schooling period.”

Corporate Social Responsibility (CSR) is an integral part of the

Corporate Plan of Central Finance Company PLC. The Company

strives to deliver its commitment to CSR by working to ensure

socioeconomic progress of communities across Sri Lanka.

EDUCATIONAL DEVELOPMENT

Launched in 2015, the “Sisu Athwela”educational support

programme continues to fund the much needed educational

requirements of students from rural areas. The students selected

for the programme receive an annual supply of stationery, books,

uniforms and shoes as well as a monthly financial grant for the

entirety of their schooling period.

Currently CF is supporting a total of 188 students from 162

Schools Island wide, under this programme, ranging from Grade 6

to Advanced Level. The project has been a tremendous success,

enabling CF to foster relationships with not only the children and

their families but also to form strong bonds with the surrounding

community.

CF continued to provide support in the fight against cancer by

extending considerable aid to the Sri Lanka Cancer Society in their

annual fund raising campaign.

CF has also worked closely with the Health Officials of the “Hope

Hospital” Maharagama and extended support to meet urgent

funding needs.


With the outbreak of Covid-19 placing significant pressure on our

health services sector,. CF has responded to the urgent medical

requirements sought by the Ministry of Health & Indigenous

Medical Services by providing over 1,500 personal protection kits

(PPE Kits) for the use of the hospital staff.

EMPLOYEE WELLBEING

Wellbeing of employees has always been a key priority for the

Company. Our corporate values embody the welfare of our

employees. CF continues to maintain a robust event calendar

to foster employee engagement, coupled with training and

development, leisure and entertainment activities.

At CF, we believe in creating an environment where our

employees can align their efforts with the Company’s vision

to deliver its promise to customers and thereby enhancing

shareholder value. Therefore, we strive to provide a robust

work environment for our employees, where they can find the

opportunity to realize their potential for personal and professional

growth.

Our efforts are based on six key pillars;

COMPETITIVE REMUNERATION

We provide market competitive rewards through a flexible and fair

compensation and benefits programs designed to attract, retain

and motivate employees. Our approach to compensation ensures

that salaries are determined independently of gender, with pay

based solely on key elements, including market and business

alignment, job value and demands, individual competence, and

performance.

As part of our ongoing efforts to improve the benefits offered to

our employees in line with the market, we grant annual increases

and cost of living allowances. Beyond this we also reward staff

for good performance and overall Company results. These rewards

are in the form of bonuses or incentive schemes.

DIVERSITY AND INCLUSION

We encourage the success of our employees by providing them

with equal opportunities in a safe and nurturing work environment.

On this basis we aim to foster a culture that supports females in

the workplace, where they are given equal opportunity to utilize

their skills and talent and grow in the Company. As at 31st March

2020, CF’s total workforce reached 1,892 employees of which

26% were female.

Gender Distribution 2019/2020

GenderNo. of

employees%

Male 1408 74.4

Female 484 25.6

Total Staff 1892 100

PERFORMANCE MANAGEMENT

CF’s approach to performance management aims to motivate and

reward employees for their efforts towards driving the Company’s

strategic objectives. Annual target setting is the first step of our

performance management mechanism, followed by the year-end

performance appraisal to evaluate employee performance against

pre-determined targets. This process applies to all CF’s employees

without exception. The success of CF’s performance management

system is based on regular constructive feedback and open

communication between managers and team members.

TRAINING AND DEVELOPMENT

We operate in a dynamic and fast moving industry where our

strongest competitive advantage lies in the knowledge and skills

of our employees. Therefore, we understand the importance of

creating a culture of life-long learning to help our employees learn

new skills throughout their career in order to be able to address

the continuous changes that take place in the financial services



sector. Our training activities are therefore designed to provide

employees with skills and capacity building opportunities that

meet the needs and expectations of our operations. Meanwhile

all training activities are undertaken as per the Company’s annual

training plan, which is aligned to CF’s performance targets for

the year and development needs of each unit. Our approach

combines both internal and external training solutions. More

recently we have also begun to leverage technology to implement

e-learning programmes, which are considered to be a more

effective and efficient medium to promote continuous learning.

In collaboration with the Post Graduate Institute of Management

(PIM) the Company continued the classroom-based training

programme focusing the development of targeting prospective

Branch Managers, Branch Executives and Marketing Staff.

The participants of this programme were handpicked based on

their current positions and upon an assessment of their skills.

The objectives of this program is to improve staff capabilities and

equip them with the necessary knowledge and skills to allow them

to fulfill the diverse needs of their clientele, while at the same

time meeting the objectives of the Company. Each programme

was customized as per the need of each group and focused on

providing participants with a strong grounding on conceptual and

theoretical aspects of management via Group work and practical

applications with special focus on time management, developing

leadership qualities, customer engagement and project

management skills. The program series also serves as the basis of

building CF’s talent pipeline for the future.

During the year a 12-Day training programme was conducted

for Managerial staff with the view engaging them to develop and

implement 17 projects that would improve business opportunities,

process efficiency and customer satisfaction.

A comprehensive residential Customer Relationship Management

training program was held for Executives, Managers and Senior

Managers alongside the implementation of a new CRM system to

enhance customer service and process improvements in Credit

Management and Deposits.

A training program planned specifically for the Call Centre team

focused on improving voice quality, message content, customer

and dispute handling which proved especially beneficial for the

newly recruited staff.

EMPLOYEE ENGAGEMENT

We believe that proactive engagement with all employees ensures

they remain committed to our goals and values and sufficiently

motivated to contribute to our success. As such we work on

engaging our employees by creating open and transparent

two-way dialogue. We use different channels to engage

and communicate with our employees including the annual

performance review discussion, our internal Newsletter, and

intranet platforms. In the year under review, we introduced a range

of new communication tools to enable us to regularly touch-base

with our employees during the COVID-19 lockdown period and

keep them appraised of changes in operations, company policy

and health guidelines.

EMPLOYEE WELLBEING

We are committed to providing a working environment that is

safe, secure and productive, where all employees are treated fairly

and with respect; upholding the highest standards of integrity

and trust, with the ultimate objective of achieving high levels of

employee satisfaction. Accordingly a team with cross functional

representation from different departments provide oversight for

ensuring that health and safety standards are maintained across

the Company.



In the year under review, a special task force was set up to plan

and execute the “new normal” health guidelines issued by the

authorities in the wake of the COVID-19 pandemic. Stemming

from this, strict protocols were put in place to enable employees

in selected departments to continue working during the lockdown

period, while a comprehensive “back-to-work” health guideline was

developed to allow all CF employees to safely return to work once

lockdown restrictions were lifted.

EMPLOYEE BENEFIT SCHEMES

CF continued to extend various support initiatives for staff and

their families throughout the year. The benefits include providing

assistance for Grade 1 admissions, grants for top achievers

of Year 5 Scholarship and G.C.E. Ordinary Level Examinations

and also grants and scholarships for children who have gained

entrance to Universities after completion of G.C.E. Advanced Level

Examinations

EDUCATIONAL GRANT

In order to encourage continuous professional development of

staff members, the Company introduced an educational grant,

which is available for employees who wish to pursue higher

education, receive membership from a recognised professional

body or to obtain a masters qualification from both local and

overseas institutions. These initiatives result in mutual benefits

to both the organization and the staff members on their career

progression.

THE CHAIRMAN’S RELIEF FUND

While CF staff members are provided with a comprehensive

insurance cover for illnesses leading to hospitalisation, the

Chairman’s Relief fund further extends a helping hand to

compensate any expenses that go beyond the limits of the

insurance cover. This fund is also available to employees who seek

financial assistance for critical illnesses. Over the years, the fund

has assisted many CF employees and their family members to

manage their major medical expenses with minimum impact on

their personal finances.

LONG SERVICE AWARDS

Long Service Awards are aimed at recognising those employees

with 25 years of dedicated service with the company. This is

an important event in CF’s annual calendar and to date, 210

employees have received this award.

AGE DISTRIBUTION OF STAFF - 2019/ 2020

Age (Yr)No. of

employees%

18-20 37 2

21-25 342 18.1

26-30 447 23.6

31-35 358 18.9

36-40 281 14.9

41-45 153 8.1

46-50 106 5.6

51-55 96 5.1

56-60 49 2.6

Above 60 23 1.2

Total 1,892 100

ENVIRONMENTAL SUSTAINABILITY

Installation of a fully-fledged solar panel system at the Vauxhall

Street office premises has resulted in the generation of 24 Mw

of electricity contributing to a reduction of 13.5 Tons of Carbon

Dioxide being released into the atmosphere.


19,844 Liters of Oil 45,228 Kw of

Electricity

192 Fully grown Trees

691,056 Liters of Water

34 Cubic meters of Landfill

Reduced Green House Gas Emission by 11,307 Kgs of Carbon Equivalent

21,745 Kgs of Waste Paper - Recycled

Recycling paper waste is another green initiative that CF has been pursuing over the years. During the year, 21,745 Kg of waste paper

has been collected and recycled from branches located island-wide. Business processes have also been streamlined over time to ensure

reduction in the usage of paper forms and documents by switching to electronic documentation.

FINANCIAL CALENDAR 2019/20First Quarter Results 2019/20 15th August 2019

Second & Final Dividend 2018/19 - paid 04th July 2019

Second Quarter Results 2019/20 15th November 2019

First Interim Dividend 2019/20 - paid 20th December 2019

Third Quarter Results 2019/20 10th February 2020

Fourth Quarter Results 2019/20 15th July 2020

Annual Report 2019/20 06th August 2020

62nd Annual General Meeting 28th August 2020

Final Dividend 2019/20 - proposed and to be paid 09th September 2020

FINANCIAL REPORTSAnnual Report of the Board of Directors 82

Nomination Committee Report 89

Related Party Transactions Review Committee Report 90

Directors’ Responsibility for Financial Reporting 91

Remuneration Committee Report 92

Integrated Risk Management Committee Report 93

Audit Committee Report 94

Directors’ Statement on Internal Control 97

Independent Assurance Report 98

Independent Auditor’s Report 99

Statement of Income 102

Statement of Comprehensive Income 103

Statement of Financial Position 104

Statement of Changes In Equity 105

Cash Flow Statement 107

Accounting Policies 108

Notes to the Financial Statements 128


ANNUAL REPORT OF THE BOARD OF DIRECTORS

The directors have pleasure in presenting to the members their report together with the audited financial statements of Central Finance Company PLC, and the audited consolidated financial statements of the group for the year ended 31st March 2020.

Central Finance Company PLC (the “Company”) is a public limited liability company, incorporated in Sri Lanka on 05th December 1957, quoted on the Colombo Stock Exchange in 1969, registered as a finance company under the Finance Business Act No. 42 of 2011, registered under the Finance Leasing Act No. 56 of 2000, and the Companies Act No. 07 of 2007.

The ordinary shares of the Company are listed on the Colombo Stock Exchange.

The Board of Directors approved these financial statements on 23rd July 2020.

PRINCIPAL BUSINESS ACTIVITIES AND REVIEW OF OPERATIONS

COMPANY

The principal business activities of the company are leasing, loans, vehicle hire, deposit mobilization, vehicle trading, and provision of other financial services.

SUBSIDIARIES

Name of the company Principal business activities

Central Industries PLC Manufacture and distribution of PVC pipes and fittings.

Central Mineral Industries (Pvt) Ltd. Manufacture of mineral products

Central Construction and Development (Pvt) Ltd. Investment company

Expanded Plastic Products Ltd. Investment company

Central Homes (Pvt) Ltd. Property development and sale of real estate

Mark Marine Services (Pvt) Ltd. Hydro power generation

Central Developments Ltd. Investment company

CF Insurance Brokers (Pvt) Ltd. Insurance broking

Central Transport and Travels Ltd. Hiring of vehicles

Hedges Court Residencies (Pvt) Ltd. Construction and sale of apartments

Dehigama Hotels Company Ltd. Renting of commercial property

CF Growth Fund Ltd. Investment company

Kandy Private Hospitals Ltd. Provision of healthcare services

ASSOCIATES


Nations Trust Bank PLC Licensed commercial bank

Tea Smallholders Factories PLC Processing green leaf purchased from tea smallholders

and the sale of processed black tea

Capital Suisse Asia Ltd. Investment company

There were no significant changes in the nature of the principal business activities of the company and the group during the financial year under review.

REVIEW OF BUSINESS

A review of the company and group operations during the year, with comments on the financial results and future developments is contained in the managing director’s report on pages 6 to 9 and the management discussion and analysis on pages 14 to 16 of the annual report, which form an integral part of the directors’ report.

FINANCIAL STATEMENTS

The financial statements of the group and the Company are given on pages 102 to 185 of the annual report.

DIRECTORS’ RESPONSIBILITY FOR FINANCIAL REPORTING

The directors are responsible for the preparation of financial statements of the company to reflect a true and fair view of the state of its affairs. The directors are of the view that these financial statements have been prepared in conformity with the requirements of the Sri Lanka Accounting Standards, Companies


A detailed description of the results and appropriations are given below:

2019/20 2018/19

(Rs.’000) (Rs.’000)

Group profit for the year before income tax after payment of all

expenses, provision for depreciation, VAT on financial services, NBT debt repayment levy and impairment on loans and other credit losses 5,837,184 7,348,758Provision for taxation (1,727,880) (2,220,004)Group profit after taxation 4,109,304 5,128,754Other comprehensive income net of income tax Actuarial gains/(losses) on defined benefit plans (127,808) (76,493) Net gain on revaluation of land and buildings - 2,667,329 Share of other comprehensive income of associates 169,788 9,742Total comprehensive income for the year 4,151,284 7,729,332Non-controlling interest (119,336) (303,773)Attributable to equity holders of the company 4,031,948 7,425,559Other comprehensive income net of tax relating to :Revaluation reserve (86,032) (2,458,574)OCI reserve (93,774) 1,644

3,852,142 4,968,629Un-appropriated profit brought forward at the beginning of the year 8,089,048 4,118,121Effect arising out of buy-back of shares by a subsidiary company (1,449) -Effect due to disposal of a subsidiary owned by an associate company - (5,363)Unclaimed dividends written back 98 135Transfer from revaluation reserve 8,033 4,662Balance available for appropriation 11,947,872 9,086,184AppropriationsTransfer to reserve fund (176,000) (213,000)Dividends distributed during the year (614,667) (784,136)Un-appropriated profit to be carried forward 11,157,205 8,089,048

Act No. 07 of 2007, Finance Business Act No. 42 of 2011, Inland Revenue Act No.24 of 2017 and amendments thereto and the Listing Rules of the Colombo Stock Exchange.

The detailed report is given on page 91 of the annual report.

AUDITOR’S REPORT

The auditor’s report on the financial statements is given on pages 99 to 101 of the annual report.

SIGNIFICANT ACCOUNTING POLICIES

The group and the Company prepare the financial statements in accordance with Sri Lanka Accounting Standards (LKAS/SLFRS). Significant accounting policies adopted in the preparation of the financial statements are given on pages 108 to 127 of the annual report.

CHANGES TO ACCOUNTING POLICIES

The group has adopted Sri Lanka Accounting Standard SLFRS 16 - Leases which became effective for the annual reporting periods beginning on or after 01st January 2019 for the first time.

The group has adopted SLFRS 16 using the modified retrospective method from 1st April 2019, without restating comparatives for the 2018/19 reporting period, as permitted under the specific transitional provisions in the standard.

GOING CONCERN

The board of directors is satisfied that the company has adequate resources to continue its operations in the foreseeable future. Accordingly, the financial statements are prepared based on the going concern concept.

INCOME

Income of the group excluding associates during the year was Rs. 25,758.68 million (2018/19 – Rs. 23,566.45 million), an analysis of which is given in note no. 11 to the financial statements.

RESULTS AND APPROPRIATIONS

Total comprehensive income of the Company was Rs.2,770.82 million (2018/19 - Rs.6,006.35 million) whilst the group comprehensive income attributable to equity holders of the parent was Rs. 4,031.95 million (2018/19 - Rs. 7,425.56 million).



RESERVES

The total group reserves as at 31st March 2020 amounted to Rs. 42,628.79 million (31st March 2019 - Rs. 39,212.86 million) details of which are given in notes 49 to 53 to the financial statements.

CORPORATE DONATIONS

During the year, the Company made donations amounting to Rs. 0.49 million (2018/19 Rs. 2.09 million) in terms of the resolution passed at the last annual general meeting. This includes donations of Rs.0.29 million made to the Government approved charities (2018/19 Rs.1.19 million to the Government and Rs.0.51 million to Government approved charities). Total donations of the group during the year amounted to Rs. 0.59 Million (2018/19 – Rs. 2.55 million) of which Rs.0.29 million was made to Government approved charities. (2018/19 Rs.1.19 million to the Government and Rs.0.51 million to Government approved charities).

STATUTORY PAYMENTS

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

DIVIDENDS

The directors recommend the payment of a final dividend of Rs. 1.20 per share by way of a scrip dividend through the allotment of new shares for the year ended 31st March 2020 (2018/19 - Rs. 1.60 per share of which Rs.0.70 per share paid in cash and Rs.0.90 per share by way of a scrip dividend through the allotment of new shares) subject to obtaining the approval of the shareholders at the forthcoming annual general meeting. This dividend, together with an interim cash dividend of Rs. 1.20 per share paid on 20th December 2019 amount to a total dividend pay-out of Rs. 529.62 million for the year (2018/19 - Rs. 787.18 million).

The directors have confirmed that the Company satisfies the solvency test requirement under Section 56 of the Companies Act No.07 of 2007 for both the interim dividend paid in December 2019 and the final dividend proposed.

Finance Companies are required to obtain prior approval of the Central Bank of Sri Lanka for the payment of dividends. The directors confirm that they have obtained the approval of the Central Bank of Sri Lanka prior to declaring the interim dividend and recommending the final dividend of Rs. 1.20 per share for the year ended 31st March 2020.

PROPERTY, PLANT AND EQUIPMENT

The total capital expenditure in regard to property, plant and equipment, intangible assets and capital work-in-progress of the company and the group amounted to Rs. 725.96 million and Rs.781.17 million respectively. (2018/19 - Company Rs. 1,158.17 million and group Rs. 1,249.36 million) details of which are given in notes 40 and 41 to the financial statements. The value of capital commitments as at year end is disclosed in note no. 56 to the financial statements.

MARKET VALUE OF FREEHOLD PROPERTIES

The value of freehold properties owned by the group as at 31st March 2020 is included in the accounts at Rs. 7,501.11 million (31st March 2019 - Rs. 7,532.43 million) based on valuations carried out by Chartered Valuers /Licensed Surveyors in March 2019. The directors are of the opinion that this value is not in excess of the current market value. Details are provided in note no. 40 to the financial statements.

EVENTS AFTER THE REPORTING DATE

No events of a material nature have occurred subsequent to the date of the statement of financial position requiring adjustments to the financial statements, other than those disclosed in note no. 59 to the financial statements.

STATED CAPITAL AND DEBENTURES

The company did not raise funds through a public issue, rights issue or a public placement during the year ended 31st March 2020. The stated capital of the company as at 31st March 2020 was Rs. 1,696.89 million (Rs. 1,527.78 million as at 31st March 2019) consisting of 220,674,367 ordinary voting shares (218,661,027 ordinary voting shares as at 31st March 2019). The number of shares in issue increased from 218,661,027 ordinary voting shares to 220,674,367 ordinary voting shares as a result of the payment of a scrip dividend in July 2019.

The company did not make any debenture issues during the year ended 31st March 2020. The Company had issued Rs. 1,000/- par valued 2,000,000 rated, unsecured, redeemable debentures to the value of Rs. 2 billion in June 2013, Rs.100/- par valued 20,000,000 rated, secured, redeemable debentures to the value of Rs. 2 billion in December 2013 and Rs.100/- par valued 25,000,000 rated, secured, redeemable debentures to the value of Rs.2.5 billion in June 2015. Redemption of debentures during the year ended 31st March 2020 amounted to Rs. 0.50 billion (Rs. 3.25 billion during the year ended 31st March 2019) and the total redemption up to 31.03.2020 amounted to Rs. 4.75 billion.


The last tranche of debentures amounting to Rs.1.75 billion was redeemed in June 2020. All these debentures had been listed on the Colombo Stock Exchange and the details are given in note no. 46 to the financial statements.

SHAREHOLDINGS

As at 31st March 2020, there were 2,753 registered shareholders and the distribution of shareholding is indicated on page 192.

INFORMATION ON SHARES AND DEBENTURES

Information relating to earnings, dividends, net assets and market value per share is given under financial highlights on page 02.

Information pertaining to trading in the company’s shares and debentures is given on pages 193 to 195 of the annual report.

MAJOR SHAREHOLDERS

The twenty largest shareholders of the company as at 31st March 2020 together with an analysis of the shareholdings are given on page 193.

THE BOARD OF DIRECTORS

The board of directors of the company consists of ten directors with wide financial and commercial knowledge and experience. The qualifications and experience of the directors are given on pages 10 to 12 of the annual report.

The following were the directors of the company as at the financial year ended 31st March 2020:

C. L. K. P. Jayasuriya (Independent Non-executive Chairman)

E. H. Wijenaike (Managing Director)

G. S. N. Peiris (Executive Director)

A. K. Gunaratne (Executive Director)

D. P. de Silva (Executive Director)

A. D. B. Talwatte (Independent Non-executive Director)

Dr. (Mrs) A. D. N. de Zoysa (Independent Non-executive Director)

A. R. Fernando (Non-executive Director)

C. K. Hettiarachchi (Executive Director)

K. B. Herath (Independent Non-executive Director)

RETIREMENTS / NEW APPOINTMENTS DURING THE FINANCIAL YEAR

There was no change in the composition of the board of directors during the year ended 31st March 2020.

RETIREMENTS / NEW APPOINTMENTS/CHANGE OF DESIGNATIONS SUBSEQUENT TO THE FINANCIAL YEAR END

C.L.K.P. Jayasuriya, the Chairman of the board of directors from 14.07.2017 retired from office on 30.06.2020 upon the completion of a term of nine years in keeping with the provisions contained in Section 4 (2) of the Corporate Governance Direction No. 03 of 2008 of the Central Bank of Sri Lanka.

Pursuant to the retirement of C.L.K.P. Jayasuriya, A.D.B. Talwatte an existing Independent Non-executive Director on the board of directors since 30.06.2016 was appointed Chairman with effect from 01.07.2020.

In order to fill the casual vacancy arising from the retirement of C.L.K.P. Jayasuriya, M. H. de Silva was appointed to the board of directors as an Independent Non-executive Director with effect from 01.07.2020.

The designation of A. K. Gunaratne, an Executive director, has been changed from Director – Group Coordination to Deputy Managing Director / Deputy Chief Executive Officer with effect from 01.07.2020.

The designation of D.P. de Silva, an Executive director has been changed from Director – Credit to Director/ Chief Operating Officer with effect from 01.07.2020.

The Company has obtained the approval of the Central Bank of Sri Lanka for the above mentioned retirement/appointments/designation changes in terms of the provisions of the Finance Business Act No. 42 of 2011.

RECOMMENDATIONS FOR RE-ELECTION

Dr.(Mrs.) A.D.N. de Zoysa retires by rotation in terms of Article 105 of the Articles of Association and being eligible has offered herself for re-election at the forthcoming annual general meeting.

M.H.de Silva retires in terms of Article 111 of the Articles of Association and being eligible has offered himself for re-election at the forthcoming annual general meeting.

The Company has obtained the approval of the Central Bank of Sri Lanka for the re-election of the above mentioned directors in terms of the provisions of the Finance Business Act No. 42 of 2011.

LIST OF DIRECTORATES OF SUBSIDIARIES AND ASSOCIATES

Details of the directors of the subsidiaries and associates of the company are given on the pages 187 to 189 of the annual report.



BOARD SUB-COMMITTEES

The board of directors of the company has formed the following sub committees;

AUDIT COMMITTEE

M.H. de Silva (Chairman) - Independent Non-executive Director

Dr. (Mrs) A.D.N. de Zoysa - Independent Non-executive Director

A.R. Fernando - Non-executive Director

The report of the audit committee is given on pages 94 to 96 of the annual report.

REMUNERATION COMMITTEE

A.D.B. Talwatte (Chairman) - Independent Non-executive Director



The report of the remuneration committee is given on page 92 of the annual report.

INTEGRATED RISK MANAGEMENT COMMITTEE

A.R. Fernando (Chairman) - Non-executive Director

A D. B. Talwatte - Independent Non-executive Director

Dr. (Mrs) A. D. N. de Zoysa - Independent Non-executive Director

K.B. Herath - Independent Non-executive Director

M.H. de Silva - Independent Non-executive Director

E.H. Wijenaike - Managing Director

G.S.N. Peiris - Executive Director

A.K. Gunaratne - Executive Director

D.P. de Silva - Executive Director

C.K. Hettiarachchi - Executive Director

The report of the integrated risk management committee is given on page 93 of the annual report.

RELATED PARTY TRANSACTIONS REVIEW COMMITTEE


K.B. Herath - Independent Non-executive Director


E H. Wijeanike - Managing Director

A.K. Gunaratne - Executive Director

The report of the related party transaction review committee is given on page 90 of the annual report.

NOMINATION COMMITTEE





The report of the nomination committee is given on page 89 of the annual report.

INTERESTS REGISTER

The interests register is maintained by the company, as required under the Companies Act No. 07 of 2007. All directors have made declarations as provided for in Section 192 (1) and (2) of the Companies Act No. 07 of 2007. The related entries were made in the interests register during the year under review.

DIRECTORS’ INTERESTS IN SHARES

The directors of the Company and its subsidiaries who have relevant interest in the shares of the respective companies have disclosed their shareholdings and any acquisitions/disposals to their respective boards in compliance with Section 200 of the Companies Act No. 7 of 2007. The shareholdings of the directors and their spouses who own shares of the Company at the beginning and at the end of the year were as follows:

31st March 31st March

2020 2019

E.H. Wijenaike 34,009,737 33,699,223

G.S.N. Peiris 309,148 306,326

A.K. Gunaratne 1,757,437 1,741,392D.P. de Silva 218,501 216,507C.K. Hettiarachchi 130,449 129,258SpousesA.J. Wijenaike 6,883,020 6,820,177


Given below are the directors’ shareholdings in group companies.

31.03.2020 31.03.2019


E.H. Wijenaike 36,012 36,012

G.S.N. Peiris 6 6

Nations Trust Bank PLC

Voting shares

E.H. Wijenaike 11,108 11,108

A.K. Gunaratne 20,369 20,369

Convertible non-voting shares

E.H. Wijenaike 1,934 1,934

A.K. Gunaratne 3,548 3,548

Tea Smallholders Factories PLC

E.H. Wijenaike 10,000 10,000

Kandy Private Hospitals Ltd

E.H. Wijenaike 7,000 7,000

RELATED PARTY TRANSACTIONS

The directors have disclosed such transactions in terms of Sri Lanka Accounting Standard 24, Related Party Disclosures, and details of the transactions are given in note no. 60 to the financial statements forming part of the annual report of the board of directors.

The directors confirms that the transactions carried out with the related parties during the year ended 31.03.2020 are in line with the provision contained in Section 9 of the Listing Rules of the Colombo Stock Exchange and such transactions have been reviewed by the Related Party Transactions Review Committee of the company and observations of the Committee have been communicated to the Board. The directors further confirms that there were no non-current related party transactions exceeding 10% of the equity or 5% of the total assets of the company, whichever is lower, as per the latest audited financial statements of the company, which need to be disclosed in the annual report. Details of the recurrent related party transactions which exceed 10% of the consolidated gross revenue/income of the group as per the latest audited financial statements of the company are given in note no. 60 of the financial statements.

TRANSFER PRICING REGULATIONS

It is certified that the company has complied with the transfer pricing regulations issued under Section 104 of the Inland Revenue Act No. 10 of 2006. The information pursuant to these regulations is given under certificate produced under Section 107 (2) (a) of the said Act. The directors believe that the transactions entered into with related parties during the period 01.04.2019 to

31.03.2020 are at arm’s length and not prejudicial to the interests of the company and the related party. The transactions are entered into on the basis of a transfer pricing policy adopted by the company.

DIRECTORS’ REMUNERATION

Directors’ remuneration in respect of the group and the company for the financial year ended 31st March 2020 is given in Note no. 16 to the financial statements.

APPRAISAL OF BOARD PERFORMANCE

The Company has established an annual self-assessment scheme for the appraisal of the board of directors. Responses to the self-assessment questionnaire are evaluated by the chairman and recommendations or concerns are discussed with the board of directors and actions taken accordingly where deemed appropriate.

DIRECTORS’ INTERESTS IN TRANSACTIONS

The directors of the company have made the general disclosures provided for in Section 192 (1) and (2) of the Companies Act No. 07 of 2007. Particulars of those transactions are set out on page 186 of the annual report.

INSURANCE AND INDEMNITY

The company has a directors’ and officers’ liability insurance policy from Fairfirst Insurance Limited up to a limit of Rs. 350 million.


The directors place great emphasis on instituting and maintaining effective corporate governance practices and principles in respect of the management and operations of the company. Accordingly, systems and structures have been introduced and improved from time to time to enhance risk management measures and to improve accountability and transparency. The corporate governance report is given on pages 36 to 74 of the annual report.

INTERNAL CONTROLS

The directors have instituted an effective and comprehensive system of internal controls covering financial operations, compliance, control and risk management required to carry on the business of the company in an orderly manner, safeguard its assets and secure as far as possible the accuracy and reliability of the records.

DIRECTORS STATEMENT OF INTERNAL CONTROL

The directors have issued a report on the internal control mechanism of the company as per Section 10 of the Direction No. 03 of 2008 issued by the Central Bank of Sri Lanka on Corporate Governance. The directors have confirmed that the financial reporting system has been designed to provide a reasonable



assurance regarding the reliability of financial reporting, and that the preparation of financial statements has been done in accordance with relevant accounting principles and regulatory requirements.

The above report is given on page 97 of the annual report. The directors have also obtained an assurance report from the external auditor on directors’ statement of internal control which is given on page 98 of the annual report.

ENVIRONMENT

The company has not engaged in any activities detrimental to the environment. The company has used its best efforts to comply with the environmental laws and regulations.

HUMAN RESOURCES

Employment policies of the company are based on recruiting the best available people, training them to enhance their skills and offering equal career opportunities regardless of gender, race or religion. There were no material issues pertaining to employees and industrial relations pertaining to the company that occurred during the year under review which needs to be disclosed.

COMPLIANCE WITH LAWS AND REGULATIONS

The company has not engaged in any activities contravening laws and regulations. All officers responsible for ensuring compliance with the provisions of various laws and regulations confirm their compliance to the board of directors on a monthly basis.

AUDITOR

The Audit Committee reviews the appointment of the auditor, its effectiveness, independence and relationship with the group. SJMS associates, auditor of the company for last 13 years has tendered their resignation at the conclusion of the audit.

The Audit Committee of the company has recommended the appointment of KPMG, Chartered Accountants as auditor of the Company for the ensuing financial year and a resolution relating to their appointment and authorising the directors to fix their remuneration as recommended by the audit committee will be proposed at the annual general meeting.

The auditor, SJMS Associates, was paid Rs. 2.49 million (2018/19 - Rs. 2.98 million) as audit fees. In addition, they were paid Rs. 0.26 million (2018/19 - Rs. 0.25 million) for permitted non-audit related services.

Audits of the group companies are handled by SJMS Associates, KPMG Ford, Rhodes Thornton & Company, and Ernst & Young. Total fees paid to them during the year for audit and permitted non-audit related services amounted to Rs. 1.65 million (2018/19 – Rs. 1.67 million) and Rs. 0.78 million (2018/19 – Rs. 0.66 million) respectively.

The auditors have confirmed that they do not have any relationships with or interests in the company or subsidiaries other than with regard to audit and permitted non-audit services.

ANNUAL GENERAL MEETING

The sixty second annual general meeting of the company will be held at Grand Kandyan Hotel, No. 89/10, Lady Gordon’s Drive, Kandy on 28th August 2020. The relevant notice of meeting is given on page 204.

For and on behalf of the Board

A. D. B. TalwatteChairman

G. S. N. PeirisDirector

Corporate Services (Pvt) Ltd.Company Secretary

23rd July 2020


NOMINATION COMMITTEE REPORT

The Nomination Committee appointed by the Board of Directors is

responsible for making recommendations to the Board on all new

Board, Board Sub-committee and Key Management Personnel

appointments. The Committee also reviews the Board and Key

Management Succession Plan to ensure its adequacy to meet the

Company’s requirements.

COMPOSITION

The Nomination Committee, appointed by the Board of Directors,

comprises of 3 Independent Non-Executive Directors.

Mr. C. L. K. P. Jayasuriya Chairman/Independent Non-Executive

Director (Retired with effect from 30.06.2020)

Mr. A. D. B. Talwatte (Chairman)/(Independent Non-Executive

Director) (Appointed as Chairman with effect from 01.07.2020)

Dr. (Mrs.) A. D. N. de Zoysa (Independent Non-Executive Director)

A.R. Fernando (Non-executive Director)

M. H. de Silva (Independent Non-executive Director)

COMMITTEE MEETINGS

The Committee met once during the year under review on the

28th of February 2020.

The Committee reviewed and recommended the appointment of

a new Chairman of the Company with effect from 1st July 2020,

consequent to the retirement of the incumbent Chairman from the

Board of Directors upon completion of his nine year term of office.

The Committee reviewed and recommended the appointment

of a new independent Non-Executive Director to fill the Board

vacancy arising therefrom.

The committee also reviewed the Board and Key Management

Succession Plan, and recommended the appointments of the

Deputy Managing Director/Deputy Chief Executive Officer, the

Director / Chief Operating Office, and the General Manager-

Finance.

The Committee further recommended that the Board appointed

sub-committees be reconstituted with effect from 1st July 2020.

The recommendations made by the committee were duly

approved the Board Meeting held on 1st April 2020.

Individual committee member attendance at the meeting is given

on page 74.

SCOPE

The functions of the committee are:

° Ensuring the board approved process is followed for the

appointment and re-election of Directors to the Board.

° Regular review of the skills, competency and experience

of the Board and Key Management positions to ensure

that adequate expertise is available at the Corporate

Management Level

° Ensuring that Board and Key Management are fit and proper

persons to hold office as required by the Central Bank of Sri

Lanka

° Regular review of the succession plan for the Board and

Key Management Positions with a view of providing

recommendations and advice to the Board regarding such

appointments

° No member of the Nomination Committee participates in

deliberations relating to his/her own appointment

A. D. B. Talwatte

Chairman - Nomination Committee

Colombo

23rd July 2020


RELATED PARTY TRANSACTIONS REVIEW COMMITTEE REPORT

Related Party Transactions Review Committee (RPTRC) is a board appointed Sub-Committee. The Committee has been established in compliance with the Section 9 of the Continuing Listing Rules of the Colombo Stock Exchange. The objective of the Committee is to review all related party transactions other than those transactions explicitly exempted by the rule.

COMPOSITION OF THE COMMITTEE

The Committee is comprised of a combination of non-executive and executive directors.

The members of the RPTRC are as follows:

A.D.B. Talwatte (Independent Non-executive Director) / (Chairman of the Committee)

Dr. (Mrs.) A. D. N. de Zoysa (Independent Non-executive Director) (Functioned as a member up until 30.06.2020)

A. R. Fernando (Non-executive Director) (Functioned as a member up until 30.06.2020)

K. B. Herath (Independent Non-executive Director) (Appointed w.e.f 30.06.2020)

M. H. de. Silva (Independent Non-executive Director) (Appointed w.e.f 30.06.2020)

E. H. Wijenaike (Managing Director)

A. K. Gunaratne (Executive Director)

COMMITTEE MEETINGS

The Committee met four times in the financial year at quarterly intervals to review related party transactions and the proceedings of the Committee meetings are reported to the Board. Details of individual member attendance at the meetings is given on page 74.

Policies and Procedures adopted by the Committee.

° The Committee identified the Key Management Personnel

(KMPs) and entities that are related to the reporting entity.

° The Committee requested statements of compliance from

the KMPs to ensure all related parties are reported and

reviewed in accordance with the rule.

° The Committee reviews inter-company transactions with

related entities for compliance with the rules.

° The Committee ensures that written policies and procedures

of the company are in conformity with rules and regulations

governing related party transactions. The Committee also

reviews these policies and procedures on an annual basis or

more frequently when need arises.

° The Committee ensures that any director or key

management personnel who is a related party, does not

participate in any discussion of proposed related party

transactions unless such person is requested to do so by

the Committee for the purpose of providing information

concerning the related party transaction.

° The Committee also ensures that immediate market

disclosure, shareholder approval and annual report

disclosure of any related party transactions are made in

accordance with the applicable rules of the Colombo Stock

Exchange.

DECLARATION BY THE BOARD OF DIRECTORS

During the year, the company did not have any related party transactions which required the approval of the shareholders or immediate market disclosure under the Listing Rules. The related party transactions and details are disclosed in note no. 60 on pages 178 to 181 of the financial statements.

A. D. B. TalwatteChairman - Related Party Transactions Review Committee

Colombo

23rd July 2020


DIRECTORS’ RESPONSIBILITY FOR FINANCIAL REPORTING

The directors of Central Finance Company PLC (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.07 of 2007(the “Companies Act”), Finance Business Act No.42 of 2011(the “Finance Business Act”) and other statutes, which are applicable in the preparation of financial statements. The financial statements comprise of the statement of financial position as at 31.03.2020, statement of income, statement of comprehensive income, statement of changes in equity and statement of cash flows for the year then ended together with notes thereto.

The financial statements of the Company and its subsidiaries for the year ended 31st March 2020 incorporated in this report have been prepared in accordance with the Companies Act, Finance Business Act, Sri Lanka Accounting Standards (SLFRS/LKAS) and the Listing Rules of the Colombo Stock Exchange and certified by the Chief Financial Officer of the Company and signed by two (02) directors as required by the Companies Act.

The directors consider that, in preparing the financial statements exhibited on pages 102 to 185 they have adopted appropriate accounting policies on a consistent basis, supported by reasonable and prudent judgments and estimates.

The directors are responsible for ensuring that the Company keeps sufficient accounting records, which disclose the financial position of the Company with reasonable accuracy and enable them to ensure that the financial statements have been prepared and presented as aforesaid. They are also responsible for taking measures to safeguard the assets of the Company and to prevent and detect frauds and other irregularities. In this regard, the directors have instituted an effective and comprehensive system of internal controls comprising of internal checks, internal audit and financial and other controls required to carry on the Company’s business in an orderly manner and to safeguard its assets and ensure as far as practicable the accuracy and reliability of the records.

The directors are of the view that the Company and its subsidiaries have adequate resources to continue operations in the foreseeable future and have applied the going concern basis in the preparation of these financial statements.

To the best of the knowledge and belief of the directors, the Company’s auditor SJMS Associates has carried out reviews and sample checks on the effectiveness of the system of internal controls, as they consider appropriate and necessary in providing

their opinion on the financial statements. SJMS Associates has examined the financial statements made available together with all other financial records, minutes of shareholders’ and directors’ meetings and related information, and have expressed their opinion which appears on pages 99 to 101 of the annual report.

The directors have provided the auditor with every opportunity to carry out any reviews and tests that they consider appropriate and necessary for the discharge of their responsibilities.

Further, as per the provisions of the Guideline No. 01 of 2013 issued by the Central Bank of Sri Lanka, the Company has obtained the approval of the Director, Department of Supervision of Non-bank Financial Institutions prior to distribution of dividends to the shareholders during the year. The board of directors confirms that they have authorised distribution of dividends upon being satisfied that the Company satisfies the solvency test immediately after such distributions are made in accordance with Section 57 of the Companies Act , and, as required by Section 56(2) of the Companies Act, have obtained solvency certificates from the auditor, prior to authorising interim dividends and recommends a final scrip dividend of Rs.1.20 per share for this year which is to be approved by the shareholders at the Annual General Meeting to be held on 28th August 2020.

The directors confirm that, to the best of their knowledge, all taxes, levies and financial obligations of the group have been either paid or adequately provided for in the financial statements.

The directors are of the view that they have discharged their responsibilities as set out in this statement.

By Order of the Board

Corporate Services (Pvt) LimitedSecretaries

Colombo.23rd July 2020


REMUNERATION COMMITTEE REPORTThe Remuneration Committee appointed by the Board of Directors is responsible for setting the company’s compensation policy for the senior management and overseeing its implementation. The Committee reviews performance and makes recommendations to the Board in respect of the remuneration of the Chief Executive Officer/Managing Director, Executive Directors, Non-Executive Directors and Senior Members of the management. The proposals relating to remuneration of Executive Directors and members of the corporate management are arrived at based on market information and in consultation with the Managing Director. No Director is involved in deciding his own remuneration.

The Committee also reviews significant Human Resources policies that could influence the company’s performance.

COMMITTEE MEETINGS

The Committee met once during the relevant period and subsequent to the COVID-19 outbreak reviewed the impact of COVID-19 on the economy and business activities of the Company. In light of the situation the Committee reconsidered the decisions related to remuneration proposals as well as succession planning made previously. All salary revisions and staff promotions were deferred for the financial year 2020/21, with a reduction in Directors’ fees and senior executive staff remuneration ranging from 30 to 60 percent. The proposals of the committee were ratified by the Board of Directors.

Individual committee member attendance at the meeting is given on page 74.

COMPOSITION

The Remuneration Committee, appointed by the Board of Directors, comprises of three Independent Non-Executive Directors.

Mr C. L. K. P. Jayasuriya - Chairman/Independent Non-Executive Director (Retired with effect from 30.06.2020)

Mr A. D. B. Talwatte - Chairman/Independent Non-Executive Director (Appointed as Chairman with effect from 01.07.2020)

Dr. (Mrs.) A. D. N. de Zoysa - Independent Non-Executive Director

Mr. Arjun Fernando - Non-Executive Director (Appointed with effect from 01.07.2020)

POLICY

The policies on compensation and benefits are formulated to ensure that members of the executive management of the company are provided with appropriate compensation to encourage superior performance. The policy is designed to recognise and reward individual contributions based on its impact

on the performance of the company and to ensure that the whole basis of rewards is fair and equitable. The policy aims to attract, motivate and retain talent with the appropriate professional managerial and operational expertise necessary to achieve the objectives of the company over the foreseeable future. The company’s remuneration framework for the Executive Directors and the senior management team is aligned with the long term interests of the company and thereby create and enhance value for all stakeholders of the company.

SCOPE

The Committee reviews all significant strategic policies and initiatives relating to human resources. The Committee deliberates and recommends to the Board of Directors, annual increments, bonuses and incentives of Executive Directors and the senior management team 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 Managing Director / Chief Executive Officer who is responsible for the overall management of the company attends meetings by invitation and participates in the deliberations except when his own interest, performance and compensation are discussed. As done annually, a market survey was commissioned through Ernst and Young, in order to obtain information on compensation and benefits in comparable companies, to aid in determining remuneration of Directors and other senior management.

FEES AND REMUNERATION

All Non-Executive Directors receive a fee for attending meetings and serving on sub-committees. The Non-Executive Director fee structure is reviewed and revised as necessary.

Aggregate remuneration paid to Non-Executive Directors and Executive Directors is disclosed in note no.16 to the financial statements on page 129 as per the requirements of section 10 (2) (e) of the Corporate Governance Direction No. 3 of 2008 (And Amendments Thereto) issued under the Finance Business Act No. 42 of 2011.

A. D. B. TalwatteChairman - Remuneration Committee

Colombo 23rd July 2020


INTEGRATED RISK MANAGEMENT COMMITTEE REPORT

The Integrated Risk Management Committee is a Sub-Committee of the board of directors established to oversee the risk management aspects of the company. The committee during the financial year comprised of the following members:

A. D. B. Talwatte – Chairman/Independent Non-executive director (Chairman until 30.06.2020)

A. R. Fernando – Non-executive director (Chairman with effect from 01.07.2020)

C. L. K. P. Jayasuriya – Independent Non-executive director (Retired with effect from 30.06.2020)

Dr. (Mrs.) A. D. N. de Zoysa – Independent Non-executive director

K.B. Herath – Independent Non-executive director (Appointed with effect from 01.07.2020)

M.H. de Silva – Independent Non-executive director (Appointed with effect from 01.07.2020)

Management representatives are;

E. H. Wijenaike – Managing Director

G. S. N. Peiris – Director (Finance)

A. K. Gunaratne – Deputy Managing Director/ Deputy Chief Executive Officer

D. P. de Silva – Director/ Chief Operating Officer

C. K. Hettiarachchi – Director (Marketing)

S. Ragunanthan – General Manager (Internal Audit)

C. S. Hettiarachchi – General Manager (Legal)

K. O. V. S. M. S. Wijesinghe – Chief Strategy Officer

A. K. Kaluhendiwela – General Manager (Branches)

K. Kandeepan Ihsan – General Manager (Finance)/Chief Financial Officer

Brief profiles of the directors representing the committee are given on pages 10 to 12 of the Annual Report

TERMS OF REFERENCE

The Terms of Reference set out by the board of directors, include the following;

° the primary responsibility of the Committee is to assist the

board of directors in understanding and exercising regular

oversight on risk identification and management, adopted

by the management in operating the company’s business.

° to consider and recommend to the Board for approval of

the Company’s Risk Appetite and Risk Type Limits.

° to ensure that the company has overall risk guidelines and

risk management procedures which are monitored regularly.

° to review management’s assessment of all risk types,

including but not limited to credit, market, liquidity,

operational, Information and communication technology

related risk and strategic risks of the company through

appropriate risk indicators and management information.

° review the risk under stress scenarios and the capacity of

the company’s capital to with stand such risks.

° ensure that the board of directors is continuously informed

of the group’s risk exposures and risk indicators.

The committee determines the adequacy and effectiveness of measures taken by the management in order to ensure that the overall risk of the company conforms to parameters approved by the board.

EXTERNAL PROFESSIONAL ADVICE

The Committee engages an economic research firm to advice on the risks arising from changes in the macroeconomic environment.

MEETINGS

The Committee met four times during the year and the attendance of the directors at the meetings is given on page 74 of the Annual Report. Only the Non-executive directors carry voting rights. The discussions and conclusions reached at the meetings are recorded in minutes and circulated to the board of directors for information and advice.

A. R. Fernando Chairman - Integrated Risk Management Committee

Colombo23rd July 2020


The Board appointed Audit Committee is delegated with the authority from the Board to provide oversight of the Company’s financial reporting, internal control systems, and the adequacy of the external and internal audits.

COMMITTEE COMPOSITION

The Board appointed Audit Committee comprises three Non-Executive Directors of whom two are Independent. The Committee was chaired by A. D. B. Talwatte,(until 30th June 2020) a Fellow Member of the Institute of Chartered Accountants of Sri Lanka with considerable experience in the field of Auditing and Finance.

C. L. K. P Jayasuriya retired from the Board and A. D. B Talwatte was appointed as Chairman of the company on 1st July 2020. M. H. de Silva, a Fellow Member of the Chartered Institute of Management Accountants, United Kingdom was appointed as the Chairman of the Audit Committee with effect from 1st July 2020.

The following members served in the Board appointed Audit Committee during the twelve months period ended 31st March 2020.

Mr. A. D. B. Talwatte (IND/NED)

Dr.(Mrs). A. D. N. de Zoysa (IND/NED)

Mr. A. R. Fernando (NED)(IND - Independent Director, NED - Non-Executive Director)

Brief Profiles of the members are given on pages 10 to 12 of the Annual Report. The General Manager-Internal Audit functions as Secretary to the Audit Committee.

MEETINGS

The Audit Committee held 17 meetings during the financial year ended 31st March 2020.

The attendance of the members at Audit Committee Meetings is as follows:

Member No. of Meetings

Mr. A. D. B. Talwatte 17/17

Dr. (Mrs.). A. D. N. de Zoysa 17/17

Mr. A. R. Fernando 16/17

The Chairman, Managing Director, Director (Finance), Director (Group Co-ordination), GM (Finance) and other senior management team members also attended these meetings by

invitation as and when required. On the invitation of the Audit Committee, Company’s External Auditor, M/s. SJMS Associates attended four Committee meetings during the year. Proceedings of the Audit Committee meetings are reported regularly to the Board of Directors.

AUDIT COMMITTEE CHARTER

The terms of reference of the Audit Committee are clearly defined in the Audit Committee Charter which is reviewed and revised annually. The Charter was last reviewed and updated in March 2020. This process ensures that new developments and concerns are adequately addressed.

ROLE OF THE AUDIT COMMITTEE:

The functions of the Committee are geared to assist the Board of Directors in fulfilling effectively its oversight responsibility on financial reporting, internal controls, internal audit & external audit related affairs of the Company. The Committee has been empowered to:

° Examine internally any matter within the scope of the charter

relating to the financial and other related affairs of the

Company

° Make recommendations on matters connected with

engagement, re-engagement, removal of external auditors,

service period and audit fees. The Committee periodically

reviews the independence, objectivity and effectiveness of

the audit process in conformity with applicable standards and

best practices.

° Monitor and follow-up the Internal Audit programme and

External audit plan, review the External Auditors management

letter and Internal Audit reports, and follow up on findings

and recommendations.

° Review risk management measures and examine the

adequacy, efficiency and effectiveness of the Internal Control

System over financial reporting.

° Ensure that efficient and sound financial reporting system

is in place to provide accurate, appropriate and timely

information to the Board and other stakeholders.

° Review the quality and appropriateness of Accounting

Policies, emerging accounting issues and disclosures

according to Sri Lanka Accounting Standards.

AUDIT COMMITTEE REPORT


° Review the compliance of financial reporting obligations

under Finance Business Act No. 42 of 2011, Rules

and Directions issued by the Central Bank of Sri Lanka,

Companies Act No. 7 of 2007, Sri Lanka Accounting

& Auditing Standards Monitoring Board Act No. 15 of

1995, Colombo Stock Exchange Listing Rules and Rules/

Regulations of the Securities and Exchange Commission of

Sri Lanka.

° Review and recommend Interim and Annual Financial

Statements prepared for approval of the Board and

submission to shareholders.

° Review the policy on the engagement of an external auditor

to provide non-audit services that are permitted under the

relevant statutes, regulations, requirements and guidelines.

Audit committee has discharged its duties during 2019/20 within the scope of the charter as stated below,

FINANCIAL REPORTING

The Audit Committee assisted the Board of Directors to discharge its responsibility for the preparation of the quarterly and annual Financial Statements to reflect true and fair view of the affairs of the Company in accordance with the Company’s accounting records and in conformity with the Sri Lanka Accounting Standards, the Sri Lanka Financial Reporting Standards, Finance Business Act no 42 of 2011, the Companies Act No.7 of 2007, Sri Lanka Accounting & Auditing Standards Monitoring Board Act no.15 of 1995, rules and regulations of CSE and SEC and CBSL Directions.

The Committee reviewed the Company’s interim and annual financial statements prior to submission to the Board and recommended their issue to shareholders.

The Committee reviewed the profit reconciliation based on CBSL directions and LKAS/SLFRS and impact to the prudential ratios with regard to dividend declarations, in compliance with relevant regulations.

The Committee reviewed the internal controls on financial reporting system to ensure the reliability and integrity of information provided. The review included the extent of compliance with LKAS/SLFRS and applicable laws & regulations, review of critical accounting policies and practices and any changes thereto, going concern assumptions, major judgmental areas and material audit judgments.

The Committee reviewed the implementation of SLFRS 9 “Financial Instruments” that has been issued with effective date being January 1, 2018. The Committee reviewed the “Impairment Procedure” on principles, methodologies and related internal controls adopted for Expected Credit Losses (ECL) computation under SLFRS 9. The internal audit performed an independent validation of the expected credit loss model while the Company has obtained service of a leading accounting advisory services firm in revalidating specific model assumptions.

The Committee has taken into consideration the requirements of the SLFRS 16 - Leases which was effective from January 1, 2019 and reviewed its impact on financial statements.

The Committee reviewed the implementation of the recommendations made in the Statutory Examination Report of Central Bank of Sri Lanka (CBSL) through follow up reports tabled by the management at the Audit Committee meetings.

The Committee, reviewed the circulars, directions and guidelines issued by CBSL/CSE/ SEC and CA – Sri Lanka in relations to Covid- 19 pandemic and evaluated the forecast presented by the management on Liquidity, Profitability and the continuity of the business operations.

EXTERNAL AUDIT

The Audit Committee is empowered by the Board to recommend the appointment of the External Auditor in compliance with the relevant statutes issued by the CSE and CBSL, and the best practice of Corporate Governance, the service period, Audit fee and any resignation or dismissal of the auditor. The committee was satisfied that there was no conflict of interests between the Company and the Auditor. The Committee was thus satisfied that there was no cause to compromise the independence and objectivity of the Auditor. The Committee reviewed the effectiveness of the audit process in accordance with applicable standards and best practices. The Audit Committee ensured that the engagement of an audit partner did not exceed five years and that the audit partner was not re-engaged for the audit before the expiry of three years from the date of the completion of the previous term as per section 8 (2) c) of Direction No. 3 of 2008 issued under the Finance Business Act no 42 of 2011.

The annual financial statements 2019/20 was reviewed and recommended for the approval of the Board. The External Auditor’s Engagement and Management Letters and Management’s responses thereto were also reviewed. The Committee also met with the External Auditor at two meetings without the presence of management to discuss whether there have been any irregularities,


constraints, reservations or any other unsatisfactory matters arising from the audit which the auditor wished to discuss with the Audit Committee.

The letter of representation issued by the Board to the External Auditor and Independence confirmation letter issued by the External Auditor have been reviewed by the Audit Committee.

The Committee assisted the Board of Directors in engaging the External Auditor for non-audit services in compliance with the statutes and ensured that engagement in non-audit services does not impair the external auditor’s independence and objectivity. Policy on engagement of the external auditor to provide non-audit services had been reviewed and approved by the Committee.

The Audit Committee considered the best practice of appointment and reappointment of external auditors and placed before the board for their due consideration whether a firm rotation should be implemented.

Based on the Audit Committee recommendation, the Board of Directors invited Messrs KPMG Sri Lanka, Chartered Accountants to offer their services as the Company’s Auditor for the financial year 2020/21. The Committee, having evaluated the proposal submitted, has recommended to the Board of Directors to appoint KPMG Sri Lanka as the External Auditor for the financial year 2020/21 and obtain shareholder approval at the Company’s Annual General Meeting to be held on 28th August 2020.

INTERNAL CONTROL

The Audit Committee, through the internal audit process, had reviewed the effectiveness of internal controls and procedures and is of the view that adequate controls and procedures are in place to provide reasonable assurance to the Board that the assets of the Company are safeguarded and the financial statements present a true and fair view.

Additionally, the Committee reviewed the effectiveness of the company’s internal controls over financial reporting as at 31st March 2020 which was validated by internal audit, as required by Finance Companies (Corporate Governance) Direction 03 of 2008, based on the “Guidance for Directors of Banks on the

Directors’ Statement on Internal Controls” issued by Institute of Chartered Accountants of Sri Lanka. The result of the assessment is given on page 97 “Directors’ Statement on Internal Control” in the Annual Report.

The External Auditor has issued an Independent Assurance Report on the Directors’ Statement on Internal Controls on page 98.

INTERNAL AUDIT

The committee ensured that the internal audit function is independent of the activities it audits and that it is performed with impartiality, proficiency and due professional care. During the year, the Audit Committee reviewed the adequacy of the scope, functions and resources of the internal audit division, the results of the internal audit process and their evaluation of the company’s internal control system. The Audit Committee also reviewed and approved the adequacy of coverage of the internal audit programme.

REGULATORY COMPLIANCE

The Audit Committee closely scrutinizes the compliance of mandatory statutory requirements and systems and procedures in place to ensure the compliance of such requirements.

Audit Committee reviewed the information requirement of Companies Act No 07 of 2007, Finance Business Act No.42 of 2011 and other reporting requirements under SEC, CSE and CBSL regulations.

COMMITTEE EVALUATION

An annual evaluation of the Committee was carried out by the Board with contributions from individual Committee Members.

M. H. de SilvaChairman - Audit Committee

Colombo 23rd July 2020

AUDIT COMMITTEE REPORT


RESPONSIBILITY

The Board of Directors presents this Statement of Internal Control in compliance with paragraph 10 (2) (b) of Direction No. 03 of 2008 issued by the Central Bank of Sri Lanka under the Finance Business Act No. 42 of 2011. The Board of Directors (“Board”) is responsible for the adequacy and effectiveness of Central Finance Company PLC’s (“the company”) System of Internal Controls. Such a system is designed to manage the company’s key areas of risk within an acceptable risk profile in achieving the policies and business objectives of the company, rather than eliminating the risk of failure. 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. The Management assists the Board in the implementation of the Board’s policies and procedures on risk and control by identifying and assessing the risks faced by the company and in the design, operation and monitoring of suitable Internal Controls to mitigate and control these risks. Based on this process 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.

KEY FEATURES OF THE PROCESS ADOPTED IN REVIEWING THE DESIGN AND EFFECTIVENESS OF THE INTERNAL CONTROL SYSTEM OVER FINANCIAL REPORTING

The key processes that have been established in reviewing the adequacy and integrity of the System of Internal Controls in regard to financial reporting include the following:

° the Board has introduced policies and procedures for adoption within the company.

° sub-committees are established to assist the Board in ensuring the effectiveness of the company’s daily operations in accordance with the corporate objectives, strategies, annual budget, policies and procedures and the business directions that have been approved by the Board.

° the Internal Audit Division of the company checks for compliance with policies and procedures and the effectiveness of the Internal Control System on an ongoing basis using samples and rotational procedures and highlight significant findings in respect of any noncompliance. 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 reporting. The annual audit plan is reviewed and approved by the Audit Committee. Findings of the Internal Audit Division are submitted to the Audit Committee for review at their periodic meetings.

° the Audit Committee of the company reviews Internal Control issues identified by the Internal Audit Division, Regulatory Authorities and Management, and evaluates the adequacy and effectiveness of the Internal Control System. They also review the Internal Audit function with particular emphasis on scope, findings and the quality of audits performed. The minutes of the Audit Committee Meetings are tabled for the information of the Board at the subsequent Board Meeting.

° in assessing the Internal Control System, identified officers of the company update all procedures and controls that are connected with significant accounts and disclosures in the financial statements. The Internal Audit division checks for suitability of design and effectiveness of these procedures and

controls on an ongoing basis during their audit process.

CONFIRMATION

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

REVIEW OF THE STATEMENT BY EXTERNAL AUDITOR

The External Auditor has reviewed the above Directors’ Statement on Internal Control included in the Annual Report of the company for the year ended 31st March 2020 and reported to the Board that nothing has come to their attention that causes them to believe that the statement is inconsistent with their understanding of the process adopted by the Board in the review of the design and effectiveness of the Internal Control System over Financial Reporting of the company.

For and on behalf of the Board

A. D. B. TalwatteChairman

M. H. de. SilvaChairman - Audit Committee

E. H. WijenaikeManaging Director / Chief Executive Officer

Colombo

23rd July 2020

DIRECTORS’ STATEMENT ON INTERNAL CONTROL


INDEPENDENT ASSURANCE REPORT

P. E. A. Jayewickreme, M. B. Ismail, Ms. S. L. Jayasuriya, G. J. David, Ms. F. M. Marikkar, Ms. M. S. J. Henry, R. H. M. Minfaz, Ms. S. Y. Kodagoda

SJMS AssociatesChartered AccountantsNo.11, Castle LaneColombo 04Sri Lanka

Tel: +94 11 2580409, 5444400Fax: +94 11 2582452www.deloitte.com

TO THE BOARD OF DIRECTORS OF CENTRAL FINANCE COMPANY PLC

Introduction

We were engaged by the Board of Directors of Central Finance Company PLC (the “Company”) to provide assurance on the Directors’ Statement on Internal Control (the “Statement”) included in the annual report for the year ended 31st March 2020.

Management’s responsibility for the statement of internal control

Management is responsible for the sufficiency and reliability of internal controls in place at the company as specified in the Finance Companies (Corporate Governance) Direction No. 03 of 2008 and subsequent amendments thereto (“direction), and to prepare and present the statement as required by section 10 (2) (b) in accordance with the direction.

Our Independence and Quality Control

We have complied with the Independence and other ethical requirement of the Code of Ethics for Professional Accountants issued by the Institute of Chartered Accountants of Sri Lanka, which is founded on fundamental principles of integrity, objectivity, professional competence and due care, confidentiality and professional behavior.

The firm applies Sri Lanka Standard on Quality Control 1 and accordingly maintains a comprehensive system of quality control including documented policies and procedures regarding compliance with ethical requirements, professional standards and applicable legal and regulatory requirements.

Our responsibilities and compliance with SLSAE 3051

Our responsibility is to assess whether the Statement is both supported by the documentation prepared by or for directors and appropriately reflects the process the directors have adopted in reviewing the design and effectiveness of the internal control of the company.

We conducted our engagement in accordance with Sri Lanka Standard on Assurance Engagements (SLSAE) 3051 Assurance Report for Banks on Directors’ Statement on Internal Control, issued by the Institute of Chartered Accountants of Sri Lanka.

The standard requires that the practitioner plan and perform procedures to obtain limited assurance about whether Management has prepared, in all material respects, the Statement on Internal Control.

For purposes of this engagement, we are not responsible for updating or reissuing any reports, nor have we, in the course of this engagement, performed an audit or review of the financial information.

Summary of work performed

We conducted our engagement to assess whether the Statement is supported by the documentation prepared by or for Directors; and appropriately reflected the process the Directors have adopted in reviewing the system of internal control over financial reporting of the Company.

The procedures performed were limited primarily to inquiries of Company personnel and the existence of documentation on a sample basis that supported the process adopted by the Board of Directors.

SLSAE 3051 does not require us to consider whether the Statement covers all risks and controls, or to form an opinion on the effectiveness of the Company’s risk and control procedures. SLSAE 3051 also does not require us to consider whether the processes described to deal with material internal control aspects of any significant problems disclosed in the annual report will, in fact, remedy the problems.

The procedures selected depend on the practitioner’s judgment, having regard to the practitioner’s understanding of the nature of the Company, the event or transaction in respect of which the Statement has been prepared.

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

Our conclusion

Based on the procedures performed, nothing has come to our attention that causes us to believe that the Statement included in the annual report is inconsistent with our understanding of the process the Board of Directors have adopted in the review of the design and effectiveness of internal control of the Company.

SJMS ASSOCIATESChartered Accountants

Colombo23rd July 2020








INDEPENDENT AUDITOR’S REPORT




TO THE SHAREHOLDERS OF CENTRAL FINANCE COMPANY PLC

Report on the Audit of the Financial Statements

Opinion

We have audited the financial statements of Central Finance Company PLC (“the Company”) and the consolidated financial statements of the Company and its subsidiaries (“the Group”), which comprise the statement of financial position as at 31st March 2020, and the statement of income and statement of comprehensive income, statement of changes in equity and statement of cash flows for the year then ended, and notes to the financial statements, including a summary of significant accounting policies.

In our opinion, the accompanying financial statements of the Company and the Group give a true and fair view of the financial position of the Company and the Group as at 31st March 2020, and of their financial performance and cash flows for the year then ended in accordance with Sri Lanka Accounting Standards.

Basis for Opinion

We conducted our audit in accordance with Sri Lanka Auditing Standards (SLAuSs). Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of

the financial statements section of our report. We are independent of the Group in accordance with the Code of Ethics issued by CA Sri Lanka (Code of Ethics), and we have fulfilled our other ethical responsibilities in accordance with the Code of Ethics. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Key Audit Matters

Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial statements of the current period. These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.

We have fulfilled the responsibilities described in the Auditor’s responsibilities for the audit of the financial statements section of our report, including in relation to these matters. Accordingly, our audit included the performance of procedures designed to respond to our assessment of the risks of material misstatement of the financial statements. The results of our audit procedures, including the procedures performed to address the matters below, provide the basis for our audit opinion on the accompanying financial statements.

KEY AUDIT MATTER IN THE AUDIT OF THE GROUP

Allowance for impairment of leases, loans and receivables Our Responses

As at 31 March 2020, 66% of its total assets of the Group consisted of Net investment in leases and hire purchase and Loans and receivables from customers amounting to LKR 78.5 Bn (Note 32 and 33), net of impairment allowance of LKR 6.2 Bn (Note 32 and 33).

Our audit procedures to assess impairment of leases and hire purchase and Loans and receivables from customers included the following:

Obtaining an understanding and testing the design and operating effectiveness of key controls within the management process of determination of impairment of financial assets under ECL model.

Recognition of expected credit loss (ECL) under SLFRS 9, is a complex accounting policy which requires considerable judgement in its implementation. ECL is dependent on management judgements in assessing the level of credit risk and classification of credit facilities in to various stages, determine when a default has occurred, determining probability of default (PD) of customers, estimating cash flows from recovery procedures or realisation of collateral and the impact of outbreak of COVID- 19 pandemic on the economically impacted customers and key assumptions used in ECL model.

Challenging and evaluating the key assumptions and management judgements used in the ECL models, including staging, PD and Loss given in default (LGD) etc.

Testing the arithmetical accuracy of the underlying calculation in the ECL model.

Testing the accuracy and completeness of the data inputs including the testing of reconciliations between source systems and the ECL model.





INDEPENDENT AUDITOR’S REPORT

Allowance for impairment of leases, loans and receivables Our Responses

Due to the significance of Financing facilities and the related estimation uncertainty and judgement in the impairment calculation, this was considered as a key audit matter.

Verifying the economic factor inputs, used in the models to compute the forward looking scenarios and management overlays (including the impact of COVID- 19), against the market information and economic statistics to assess whether they were aligned with the current macro-economic scenario.

In addition to above , the following focused procedures were performed ;

For contracts individually assessed for impairment;

° We assessed the main criteria used by the management for

determining whether an impairment event had occurred.

° Where impairment indicator’s existed, we assessed the

reasonableness of management’s estimated future cash

flows, discount rates and the valuation of collateral held.

Assessing the disclosures with reference to the requirements of SLFRS 7.

OTHER INFORMATION

Management is responsible for the other information. The other information comprises the information included in the annual report, but does not include the financial statements and our auditor’s report thereon.

Our opinion on the financial statements does not cover the other information and we do not express any form of assurance conclusion thereon.

In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard.

RESPONSIBILITIES OF MANAGEMENT AND THOSE CHARGED WITH GOVERNANCE FOR THE FINANCIAL STATEMENTS

Management is responsible for the preparation of financial statements that give a true and fair view in accordance with Sri Lanka Accounting Standards, and for such internal control as

management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the financial statements, management is responsible for assessing the Group’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Group or to cease operations, or has no realistic alternative but to do so.

Those charged with governance are responsible for overseeing the Company’s and the Group’s financial reporting process.

AUDITOR’S RESPONSIBILITIES FOR THE AUDIT OF THE FINANCIAL STATEMENTS

Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with SLAuSs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.








As part of an audit in accordance with SLAuSs, we exercise professional judgment and maintain professional skepticism throughout the audit. We also:

° Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.

° Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the company and the Group’s internal control.

° Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.

° Conclude on the appropriateness of management’s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Company and the Group’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Company and the Group to cease to continue as a going concern.

° Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation.

° Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision and performance of the group audit. We remain solely responsible for our audit opinion.

We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.

We also provide those charged with governance with a statement that we have complied with ethical requirements in accordance with the Code of Ethics regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.

From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.

REPORT ON OTHER LEGAL AND REGULATORY REQUIREMENTS

As required by section 163 (2) of the Companies Act No. 07 of 2007, we have obtained all the information and explanations that were required for the audit and, as far as appears from our examination, proper accounting records have been kept by the Company.

CA Sri Lanka membership number of the engagement partner responsible for signing this independent auditor’s report is 2347.

SJMS AssociatesChartered Accountants

24th July 2020





STATEMENT OF INCOME

Group Company

For the year ended 31st March 2020 2019 2020 2019

Notes Rs.'000 Rs.'000 Rs.'000 Rs.'000

Income 11 25,758,685 23,566,453 22,064,136 20,287,638

Interest income 12 20,116,816 18,571,815 20,038,336 18,494,161

Less: Interest expenses 13 6,769,027 5,977,190 6,825,241 6,011,808

Net interest income 13,347,789 12,594,625 13,213,095 12,482,353

Other revenue 14 3,753,158 3,340,097 - -

Less: Cost of sales 2,696,572 2,412,427 - -

Gross profit 1,056,586 927,670 - -

Operating lease income 1,030,459 1,000,957 1,033,916 1,004,701

Other income 15 858,252 653,584 991,884 788,776

16,293,086 15,176,836 15,238,895 14,275,830

Less: Operating expenses 16

Personnel expenses 2,321,753 2,213,401 2,031,738 1,940,425

Premises, equipment, establishment and other expenses 2,682,749 2,532,507 2,507,623 2,374,563

Employee retirement benefit expenses 17.1 250,238 202,361 227,429 181,986

5,254,740 4,948,269 4,766,790 4,496,974

Profit before impairment on loans and other credit losses 11,038,346 10,228,567 10,472,105 9,778,856

Less: Impairments and other credit losses 18 4,785,758 2,213,650 4,775,343 2,210,174

6,252,588 8,014,917 5,696,762 7,568,682

Share of profit of associates, net of tax 19 859,924 765,726 - -

Profit before VAT on financial services, NBT, debt repayment levy and income tax 7,112,512 8,780,643 5,696,762 7,568,682

Less: VAT on financial services and NBT 919,391 1,173,645 919,391 1,173,645

Debt repayment levy 355,937 258,240 355,937 258,240

Profit before income tax 20 5,837,184 7,348,758 4,421,434 6,136,797

Less: Income tax expense 21 1,727,880 2,220,004 1,526,240 2,054,273

Profit after income tax 4,109,304 5,128,754 2,895,194 4,082,524

Attributable to equity holders of the parent 3,990,148 5,041,398 2,895,194 4,082,524

Attributable to non-controlling interest 119,156 87,356 - -

Net profit for the year 4,109,304 5,128,754 2,895,194 4,082,524

Basic and diluted earnings per share - Rs. 22 18.08 22.85

Dividend per share 23

Paid 1.20 3.60

Proposed 1.20

The accounting policies and notes from pages 108 to 185 form an integral part of these financial statements


STATEMENT OF COMPREHENSIVE INCOME

Group Company


Notes Rs.'000 Rs.'000 Rs.'000 Rs.'000

Profit for the year 4,109,304 5,128,754 2,895,194 4,082,524

Other comprehensive income to be reclassified to income statement

Fair value changes in debt securities at fair value through other comprehensive income

Share from associates, net of tax 51 93,774 (1,644) - -

Total other comprehensive income to be reclassified to income statement 93,774 (1,644) - -

Other comprehensive income not to be reclassified to income statement

Actuarial gains / (losses) on defined benefit plans 17.2 (177,388) (78,756) (172,737) (84,706)

Tax effect thereon 38 49,580 2,263 48,366 3,862

(127,808) (76,493) (124,371) (80,844)

Share from associates, net of tax (10,018) 4,947 - -

Revaluation of land & buildings

Gain on revaluation of land and buildings - 3,758,345 - 2,784,268

Tax effect thereon 38 - (1,091,016) - (779,595)

- 2,667,329 - 2,004,673

Share from associates, net of tax 49 86,032 6,439 - -

Total other comprehensive income not to be reclassified to income statement

(51,794) 2,602,222 (124,371) 1,923,829

Other comprehensive income for the year (net of tax) 41,980 2,600,578 (124,371) 1,923,829

Total comprehensive income for the year 4,151,284 7,729,332 2,770,823 6,006,353

Attributable to equity holders of the parent 4,031,948 7,425,559 2,770,823 6,006,353

Attributable to non-controlling interest 119,336 303,773 - -

Total comprehensive income for the year 4,151,284 7,729,332 2,770,823 6,006,353

The accounting policies and notes from pages108 to 185 form an integral part of these financial statements


Group Company

For the year ended 31st March 31.03.2020 31.03.2019 31.03.2020 31.03.2019

Notes Rs.'000 Rs.'000 Rs.'000 Rs.'000

ASSETSCash in hand and at banks 24 773,312 740,055 671,117 697,390 Fair value through profit or loss financial assets 25 5,599,847 564,843 5,320,028 558,482 Trade and other receivables 26 1,499,363 1,272,695 566,309 456,153 Tax receivables 27 1,616 391 - - Inventories and other stocks 28 997,014 978,258 81,520 381,363 Securities bought under repurchase agreements 29 4,440,427 3,289,551 4,440,427 3,289,551 Loans and receivables from banks 30 2,403,532 1,447,867 2,398,375 1,441,839 Loans and receivables from others 31 2,616,233 593,140 2,026,744 38,715 Loans and receivables from customers 32 4,167,030 5,996,253 4,167,893 5,986,999 Net investment in leases and hire purchase 33 74,343,334 75,751,083 74,343,334 75,751,083 Investments in real estate 34 18,339 23,053 18,339 23,053 Investment properties 35 303,800 303,800 303,800 303,800 Investments in associates 36 7,430,736 6,503,658 1,454,646 1,391,054 Investments in subsidiaries 37 - - 289,063 289,063 Deferred tax asset 38 18,439 14,871 - - Right of use assets 39 443,545 - 612,968 - Property, plant and equipment 40 12,605,679 12,659,775 10,358,739 10,405,707 Intangible assets 41 132,421 118,787 131,751 117,937 Total assets 117,794,667 110,258,080 107,185,053 101,132,189 LIABILITIESBank overdrafts 1,241,075 1,461,012 1,224,972 1,444,731 Tax payables 27 836,968 1,991,734 752,572 1,914,796 Trade and other payables 42 1,297,648 1,674,727 913,308 1,175,837 Amounts due to subsidiaries - - 86,209 216,021 Short term borrowings 43 982,277 2,329,590 650,295 2,236,061 Deposits 44 52,912,500 45,149,518 53,390,977 45,669,738 Long term borrowings 45 7,150,700 7,050,557 7,148,317 7,046,982 Debentures 46 1,791,038 2,296,284 1,791,038 2,296,284 Lease liabilities 39 353,415 - 522,842 - Employee benefit obligations 47 1,746,130 1,398,235 1,612,038 1,277,780 Deferred tax liability 38 3,960,035 5,046,493 3,459,432 4,546,182 Total liabilities 72,271,786 68,398,150 71,552,000 67,824,412 SHAREHOLDERS' FUNDSStated capital 48 1,696,898 1,527,778 1,696,898 1,527,778 Revaluation reserve 49 4,823,863 4,745,864 3,567,167 3,573,069 Reserve fund 50 2,213,000 2,037,000 2,213,000 2,037,000 Other comprehensive income reserve 51 111,767 17,993 - - Loan loss reserve 52 920,000 920,000 920,000 920,000 Revenue reserves 53 34,560,162 31,492,005 27,235,988 25,249,930 Funds attributable to equity holders of the parent 44,325,690 40,740,640 35,633,053 33,307,777 Non-controlling interest 37.1 1,197,191 1,119,290 - -

45,522,881 41,859,930 35,633,053 33,307,777 Total liabilities, shareholders' funds and non-controlling interest 117,794,667 110,258,080 107,185,053 101,132,189 Net asset value per share - Rs. 200.86 184.62 161.47 150.94

I certify that the financial statements comply with the requirements of the Companies Act No.07 of 2007.

K. Kandeepan IhsanChief Financial Officer

The Board of directors is responsible for the preparation and presentation of these financial statements.Approved and signed for and on behalf of the board.

E. H. Wijenaike G. S. N. Peiris Managing Director Director (Finance)

23rd July 2020

The accounting policies and notes from pages 108 to 185 form an integral part of these financial statements.

STATEMENT OF FINANCIAL POSITION


STATEMENT OF CHANGES IN EQUITY

The

acco

untin

g po

licie

s an

d no

tes

from

pag

es 1

08 to

185

form

an

inte

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hese

fina

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tem

ents

Attr

ibut

able

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ders

of t

he c

ompa

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Grou

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the

year

end

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1st M

arch

202

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ca

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Balan

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s at

01s

t Apr

il 201

8 1

,337

,564

2

,291

,952

1

,824

,000

1

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7 9

20,0

00

23,

402,

957

4,1

18,1

21

865

,255

3

4,77

9,48

6

Net

pro

fit fo

r the

yea

r end

ed 3

1st M

arch

201

9 -

-

-

-

-

-

5

,041

,398

8

7,356

5

,128

,754

Oth

er c

ompr

ehen

sive

inco

me

-

2

,458

,574

-

(1

,644

) -

-

(7

2,76

9) 2

16,4

17

2,6

00,5

78

Tota

l com

preh

ensiv

e in

com

e fo

r the

year

end

ed 3

1st M

arch

201

9 -

2

,458

,574

-

(1

,644

) -

-

4

,968

,629

3

03,7

73

7,7

29,3

32

Dep

recia

tion

on re

valu

atio

n su

rplu

s49

-

(4,6

62)

-

-

-

-

4,6

62

-

-

Trans

fers

dur

ing

the

year

50 -

-

2

13,0

00

-

-

-

(213

,000

) -

-

Uncla

imed

divi

dend

s w

ritte

n ba

ck -

-

-

-

-

-

1

35

108

2

43

Redu

ctio

n in

net

ass

ets

due

to d

ispos

al of

a s

ubsid

iary

owne

d by

an

asso

ciate

com

pany

-

-

-

-

-

-

(5,3

63)

-

(5,3

63)

Effe

ct o

n bu

y-ba

ck o

f sha

res

by a

sub

sidiar

y co

mpa

ny -

-

-

-

-

-

-

(2

5,06

1) (2

5,06

1)

Divi

dend

s fo

r the

yea

r end

ed 3

1st M

arch

201

8 1

90,2

14

-

-

-

-

-

(346

,814

) (2

4,78

5) (1

81,3

85)

Divi

dend

s fo

r the

yea

r end

ed 3

1st M

arch

201

9 -

-

-

-

-

-

(4

37,3

22)

-

(437

,322

)

Bala

nce

as a

t 31s

t Mar

ch 2

019

1,5

27,7

78

4,7

45,8

64

2,0

37,0

00

17,9

93

920

,000

2

3,40

2,95

7 8

,089

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1

,119

,290

4

1,85

9,93

0

Net

pro

fit fo

r the

yea

r end

ed 3

1st M

arch

202

0 -

-

-

-

-

-

3

,990

,148

1

19,1

56

4,1

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04

Oth

er c

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sive

inco

me

-

86,

032

-

93,

774

-

-

(138

,006

) 1

80

41,

980

Tota

l com

preh

ensiv

e in

com

e fo

r the

year

end

ed 3

1st M

arch

202

0 -

8

6,03

2 -

9

3,77

4 -

-

3

,852

,142

1

19,3

36

4,1

51,2

84

Dep

recia

tion

on re

valu

atio

n su

rplu

s49

-

(8,0

33)

-

-

-

-

8,0

33

-

-

Trans

fers

dur

ing

the

year

50 -

-

1

76,0

00

-

-

-

(176

,000

) -

-

Effe

ct a

risin

g ou

t of b

uy -

back

of s

hare

s by

a s

ubsid

iary

com

pany

-

-

-

-

-

-

(1,4

49)

1,4

49

-

Uncla

imed

divi

dend

s w

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n ba

ck -

-

-

-

-

-

9

8 8

6 1

84

Divi

dend

s fo

r the

yea

r end

ed 3

1st M

arch

201

9 1

69,1

20

-

-

-

-

-

(349

,858

) (4

2,97

0) (2

23,7

08)

Divi

dend

s fo

r the

yea

r end

ed 3

1st M

arch

202

0 -

-

-

-

-

-

(2

64,8

09)

-

(264

,809

)

Bala

nce

as a

t 31s

t Mar

ch 2

020

1,6

96,8

98

4,8

23,8

63

2,2

13,0

00

111

,767

9

20,0

00

23,

402,

957

11,

157,2

05

1,1

97,1

91

45,

522,

881


Attr

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to e

quity

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of t

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Com

pany

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nded

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Gen

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re

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earn

ings

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Rs.’

000

Rs.’

000

Rs.’

000

Rs.’

000

Rs.’

000

Rs.’

000

Rs.’

000

Balan

ce a

s at

01s

t Apr

il 201

8 1

,337

,564

1

,571

,945

1

,824

,000

9

20,0

00

23,

391,

776

(1,1

49,9

39)

27,8

95,3

46

Net

pro

fit fo

r the

yea

r end

ed 3

1st M

arch

201

9 -

-

-

-

-

4

,082

,524

4

,082

,524

Oth

er c

ompr

ehen

sive

inco

me

-

2,0

04,6

73

-

-

-

(80,

844)

1,9

23,8

29

Tota

l com

preh

ensiv

e in

com

e fo

r the

year

end

ed 3

1st M

arch

201

9 -

2

,004

,673

-

-

-

4

,001

,680

6

,006

,353

Dep

recia

tion

on re

valu

atio

n su

rplu

s49

-

(3,5

49)

-

-

-

3,5

49

-

Trans

fers

dur

ing

the

year

50 -

-

2

13,0

00

-

-

(213

,000

) -

Divi

dend

s fo

r the

yea

r end

ed 3

1st M

arch

201

8 1

90,2

14

-

-

-

-

(346

,814

) (1

56,6

00)

Divi

dend

s fo

r the

yea

r end

ed 3

1st M

arch

201

9 -

-

-

-

-

(4

37,3

22)

(437

,322

)

Bala

nce

as a

t 31s

t Mar

ch 2

019

1,5

27,7

78

3,5

73,0

69

2,0

37,0

00

920

,000

2

3,39

1,77

6 1

,858

,154

3

3,30

7,777

Net

pro

fit fo

r the

yea

r end

ed 3

1st M

arch

202

0 -

-

-

-

-

2

,895

,194

2

,895

,194

Oth

er c

ompr

ehen

sive

inco

me

-

-

-

-

(124

,371

) (1

24,3

71)

Tota

l com

preh

ensiv

e in

com

e fo

r the

year

end

ed 3

1st M

arch

202

0 -

-

-

-

-

2

,770

,823

2

,770

,823

Dep

recia

tion

on re

valu

atio

n su

rplu

s49

-

(5,9

02)

-

-

-

5,9

02

-

Trans

fers

dur

ing

the

year

50 -

-

1

76,0

00

-

-

(176

,000

) -

Divi

dend

s fo

r the

yea

r end

ed 3

1st M

arch

201

9 1

69,1

20

-

-

-

-

(349

,858

) (1

80,7

38)

Divi

dend

s fo

r the

yea

r end

ed 3

1st M

arch

202

0 -

-

-

-

-

(2

64,8

09)

(264

,809

)

Bala

nce

as a

t 31s

t Mar

ch 2

020

1,6

96,8

98

3,5

67,1

67

2,2

13,0

00

920

,000

2

3,39

1,77

6 3

,844

,212

3

5,63

3,05

3

The

acco

untin

g po

licie

s an

d no

tes

from

pag

es 1

08 to

185

form

an

inte

gral

par

t of t

hese

fina

ncia

l sta

tem

ents

STATEMENT OF CHANGES IN EQUITY


Group Company

For the year ended 31st March 2020 2019 2020 2019Rs.'000 Rs.'000 Rs.'000 Rs.'000

Cash flows from operating activitiesInterest receipts 18,172,983 16,988,185 18,125,075 16,900,181 Interest payments (2,914,496) (2,858,749) (2,968,428) (2,876,444)Recoveries on bad debts previously written off 123,020 134,259 123,020 134,259 Receipts from other operating activities 7,937,199 7,375,381 1,171,897 1,280,316 Cash payments to employees and suppliers (9,663,501) (8,686,796) (3,313,098) (3,343,785)Operating profit before changes in operating assets 13,655,205 12,952,280 13,138,466 12,094,527 (Increase) / decrease in operating assets:Securities with bank and non-bank financial institutions (8,620,210) (423,760) (8,620,210) (423,760)Loans to customers (34,836,966) (47,221,184) (34,830,332) (47,205,549)Recoveries from customers 33,477,994 34,999,787 33,461,766 34,984,121 Others 397,016 (1,888,209) 413,764 (1,724,387)Increase / (decrease) in operating liabilities:Net cash effect on deposits 5,596,575 2,658,407 5,555,372 2,970,370 Net cash from operating activities before value added tax, VAT/NBT on

financial services and debt repayment levy 9,669,614 1,077,321 9,118,826 695,322 Value added tax, VAT/NBT on financial services and debt repayment levy (1,717,647) (2,034,752) (1,574,968) (1,879,170)Net cash on operating activities before income tax 7,951,967 (957,431) 7,543,858 (1,183,848)Income tax paid (3,837,194) (2,012,734) (3,660,346) (1,910,114)Net cash inflow / (outflow) from operating activities 4,114,773 (2,970,165) 3,883,512 (3,093,962)

Cash flows from investing activitiesDividends received from subsidiaries and associates 24,550 24,401 72,469 42,031 Dividends received from other companies 20,165 21,340 20,159 21,333 Investments in fixed deposits (156,362) (794,408) - - Investments in commercial papers and securitization papers (70,000) - - -Investments in unit trusts (294,250) - - - Investment in associates (63,592) - (63,592) - Divestment of unit trusts 35,400 20,333 - - Purchase of shares by a subsidiary company - - - 22,983 Purchase of shares by a subsidiary company from non-controlling interest - (23,663) - - Divestment of debentures 50,000 69,000 - - Divestment of fixed deposits 166,222 787,707 - - Purchase of property, plant and equipment (587,014) (1,151,410) (534,307) (1,128,280)Disposal of property, plant and equipment 136,326 55,596 132,868 51,544 Net cash outflow from investing activities (738,555) (991,104) (372,403) (990,389)

Cash flows from financing activitiesBorrowings 6,196,624 22,513,257 4,540,000 21,543,300 Repayment of borrowings (8,644,296) (18,476,295) (7,224,933) (17,402,500)Unclaimed dividends written back 150 159 - -Lease installment settlement (189,220) - (189,205) - Dividends paid to equity holders of the parent (443,429) (586,974) (443,429) (586,974)Dividends paid to non-controlling interest (42,796) (24,785) - - Net cash inflow /(outflow) outflow from financing activities (3,122,967) 3,425,362 (3,317,567) 3,553,826

Net increase / (decrease) in cash and cash equivalents 253,251 (535,907) 193,542 (530,525)Cash and cash equivalents at the beginning of the period (720,944) (185,037) (747,329) (216,804)Cash and cash equivalents at the end of the year (467,693) (720,944) (553,787) (747,329)

Cash in hand and at banks 773,312 740,055 671,117 697,390 Bank overdrafts (1,241,075) (1,461,012) (1,224,972) (1,444,731)Impairment provision for cash equivalents 70 13 68 12 Cash and cash equivalents at the end of the year (467,693) (720,944) (553,787) (747,329)

Movement of borrowings (short term, long term loans and debentures)Balance at the beginning of the year 11,676,431 7,402,240 11,579,327 7,201,298 Amount borrowed during the year 6,196,624 22,513,257 4,540,000 21,543,300 Capital repaid during the year (8,644,296) (18,476,295) (7,224,933) (17,402,500)Amortised interest 695,256 237,229 695,256 237,229 Balance at the end of the year 9,924,015 11,676,431 9,589,650 11,579,327

The accounting policies and notes from pages 108 to 185 form an integral part of these financial statements

CASH FLOW STATEMENT


1. GENERAL INFORMATION

1.1 Reporting entity

Central Finance Company PLC is a public limited liability company incorporated on 5th December 1957 and domiciled in Sri Lanka. Its registered office and principal place of business is at No. 84, Raja Veediya, Kandy. The ordinary shares of the company are listed on the Colombo Stock Exchange.

The staff strength of the company as at 31st March 2020 was 1,892 (1,896 as at 31st March 2019).

1.2 Consolidated financial statements

The consolidated financial statements of Central Finance Company PLC as at and for the year ended 31st March 2020 comprise of the company (parent company), its subsidiaries (together referred to as the “group”) and the group’s interests in associates. The consolidated financial statements of all companies in the group other than CF Insurance Brokers (Pvt) Ltd, Nations Trust Bank PLC and Capital Suisse Asia Ltd. have been prepared for a common financial year, which ends on 31st March. Financial year of the three companies referred to above ends on 31st December.

1.3 Parent enterprise

Central Finance Company PLC does not have a parent of its own.

1.4 Principal business activities and nature of operations

1.4.1 Company

The principal business activities of the company are leasing, loans, vehicle hire, deposit mobilization, vehicle trading and provision of other financial services.

1.4.2 Subsidiaries


Central Industries PLC Manufacture and distribution of PVC pipes and fittings

Central Mineral Industries (Pvt) Ltd.

Manufacture of mineral products

Central Construction and Development (Pvt) Ltd.

Investment company

Expanded Plastic Products Ltd.

Investment company

ACCOUNTING POLICIES



Mark Marine Services (Pvt) Ltd.

Hydropower generation

Central Developments Ltd. Investment company

CF Insurance Brokers (Pvt) Ltd.

Insurance broking

Central Transport and Travels Ltd.

Hiring of vehicles

Hedges Court Residencies (Pvt) Ltd.

Construction and sale of apartments

Dehigama Hotels Company Ltd.

Renting of commercial property

CF Growth Fund Ltd. Investment company

Kandy Private Hospitals Ltd. Provision of healthcare services

1.4.3 Associates


Nations Trust Bank PLC Licensed commercial bankTea Smallholders Factories PLC

Processing green leaf purchased from tea smallholders and the sale of processed black tea

Capital Suisse Asia Ltd. Investment company

There were no significant changes in the nature of the principal business activities of the company and the group during the financial year under review.

2 BASIS OF PREPARATION

2.1 Statement of compliance

The consolidated financial statements of the group and the separate financial statements of the company which comprise the statement of financial position, statement of income, statement of comprehensive income, statement of changes in equity and cash flow statement together with accounting policies and notes have been prepared and presented in accordance with Sri Lanka Accounting Standards (LKASs and SLFRSs) as issued by the Institute of Chartered Accountants of Sri Lanka and in compliance with the requirements of the Companies Act No. 07 of 2007 and amendments thereto and the Finance Business Act No. 42 of 2011; and provide appropriate disclosures as required by the Listing Rules of the Colombo Stock Exchange.


2.2 Approval of the consolidated financial statements by the board of directors

The consolidated financial statements as at and for the year ended 31st March 2020 were authorised for issue by the board of directors on 23rd July 2020.

2.3 Basis of measurement

The consolidated financial statements have been prepared on the historical cost convention except in respect of the following, which are treated as shown below:

° Land and buildings are measured at cost at the time

of acquisition and subsequently measured at revalued

amounts

° Investment properties are measured at their fair value

° Equity investments and investments in unit trusts

classified as fair value through profit or loss(FVTPL)

are measured at their fair value

Liability for defined benefit obligations is recognised at present value of the defined benefit obligation less fair value of the plan assets

2.4 Functional and presentation currency

The consolidated financial statements are presented in Sri Lankan Rupees, which is the currency of the primary economic environment in which group operates (group’s functional currency). All financial information presented in Sri Lankan Rupees has been given to the nearest thousand, unless otherwise stated, as permitted by LKAS 01 – Presentation of Financial Statements.

The information presented in US Dollars on pages 198 and 199 does not form part of the financial statements and is solely for the information of stakeholders.

2.5 Presentation of financial statements

The assets and liabilities of the group and the company presented in the statement of financial position are grouped by their nature and listed in an order that reflects their relative liquidity and maturity pattern.

2.6 Changes in accounting policies and disclosures

The group has adopted Sri Lanka Accounting Standard SLFRS 16 - Leases which became effective for the annual reporting periods beginning on or after 01st January 2019

for the first time. The group has not adopted any other accounting standard, interpretation or amendment that has been issued but not effective.

2.6.1 Sri Lanka Accounting Standard SLFRS 16 – Leases

Sri Lanka accounting Standards SLFRS 16 – Leases (SLFRS 16) became effective for annual periods beginning or after 1st January 2019. SLFRS 16 replaces LKAS 17- Leases, IFRIC interpretation 4- determining whether an arrangement contains a Lease, SIC -15 Operating Leases Incentives and SIC-17 Evaluating the substance of transactions involve in the legal form of a lease. This standard sets out the principles for the recognition, measurement, presentation and disclosure of Leases and requires lessees to recognise most leases on the statement of financial position. Lessor accounting under SLFRS 16 is substantially unchanged from LKAS 17 whereby lessors will continue to classify leases either as operating or finance leases using similar principles as in LKAS 17. Therefore SLFRS 16 does not have an impact for leases where the group is the lessor. The group applied SLFRS - 16 only to contracts that were previously identified as leases applying LKAS 17 at the date of initial application.

The group has adopted SLFRS 16 using the modified retrospective method from 1st April 2019, without restating comparatives for the 2018/19 reporting period, as permitted under the specific transitional provisions in the standard. The group elected to use the transitional practical expedient not to reassess whether a contract is or contains a lease as at 01st January 2019 and instead, the group applied the standard only to the contracts that were previously identified as leases applying LKAS 17 at the date of initial application. The group recognised right of use assets and lease liabilities for those leases previously classified as operating leases. The right of use assets for most leases were recognised based on the carrying amounts as if the standard had always been applied, apart from the use of incremental borrowing rate on the date of initial application.

2.7 Comparative information

The accounting policies have been consistently applied by the company and the group with those of the previous financial year in accordance with LKAS 01 – Presentation of Financial Statements. The presentation and classification of the financial statements of the previous year are amended, where relevant for better presentation and to be comparable with those of the current year.


2.8 Materiality and aggregation

In accordance with LKAS 01 - Presentation of Financial Statements, each material class of similar items is presented separately in the financial statements. Items of dissimilar nature of functions are presented separately, where material.

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

3. SIGNIFICANT ACCOUNTING JUDGMENTS, ESTIMATES AND ASSUMPTIONS

The preparation of consolidated financial statements in conformity with Sri Lanka Accounting Standards (SLFRSs/LKASs) requires management to make judgments, estimates, and assumptions that influence the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates.

Judgments and estimates are based on historical experience and other factors, including expectations that are believed to be reasonable under the circumstances and assumptions based on such knowledge and expectation of future events. Hence, actual experience and results may differ from these judgments and estimates. The estimates and underlying assumptions are reviewed on an on-going basis. Revisions to accounting estimates are recognised in the period in which the estimates are revised if the revision affects only that period, or in the period of the revision and future periods as well, if the revision affects both current and future periods. Information about significant areas of estimates and uncertainty that have the most significant effect on the amounts recognised in the consolidated financial statements are as follows:

3.1 Going concern

In determining the basis of preparing the financial statements for the year ended 31 March 2020, based on available information, the management has assessed the existing and anticipated effects of COVID-19 and the appropriateness of the use of the going concern basis.

In March 2020, the group evaluated the resilience of its businesses considering a wide range of factors under multiple stress tested scenarios, relating to expected revenue streams, cost management, profitability, the ability to defer non-essential capital expenditure, if any, cash reserves and potential sources of bank and non-bank financing facilities, if required.

Having evaluated the facts and circumstances which impacts the future operations of the group and after giving due consideration to the possible outcomes of Covid-19, the directors are satisfied that the group, has adequate resources to continue in its operations in the foreseeable future and continue to adopt the going concern basis in preparing and presenting these financial statements.

3.2 Classification of financial assets

The Group used judgements when assessing of the business model within which the assets are held.

3.3 Fair value of financial instruments

The determination of fair values of financial assets and financial liabilities recorded in the statement of financial position for which there is no observable market price are determined using a variety of valuation techniques that include the use of mathematical models. The inputs to these models are derived from observable market data where possible, but if this is not available, judgement is required to establish their fair values. The group measures fair value using the fair value hierarchy that reflects the significance of inputs used in making measurements.

3.4 Deferred tax assets

Deferred tax assets are recognised for all deductible temporary differences, unused tax losses and tax credits to the extent it is probable that taxable profits will be available against which these credits/losses can be utilised. Significant management judgments are required to determine the amount of deferred tax assets that can be recognised, based on the likely timing and level of future taxable profits together with future tax planning strategies.

Deferred tax assets are measured at the highest amount that is more likely than not to be recovered, based on current or estimated future taxable profit. The net carrying amount of deferred tax assets is reviewed at each reporting date and is adjusted to reflect the current assessment of future taxable profits. Any adjustments are recognised in profit or loss.

ACCOUNTING POLICIES


Deferred tax is calculated at the tax rates that are expected to apply to the taxable profit (tax loss) of the periods in which management expects the deferred tax asset to be realised or the deferred tax liability to be settled, on the basis of tax rates that have been enacted or substantively enacted by the end of the reporting period. New tax rates which have been gazetted have not been approved by the Parliament, therefore for deferred tax, previous rates have been applied.

3.5 Impairment losses on financial assets (Expected credit losses (ECL) on financial assets)

The group measures loss allowances using both lifetime ECL and 12-month ECL. When estimating ECL the group determines whether the credit risk of a financial asset has increased significantly since initial recognition. In regard to this, the group considers reasonable and supportable information that is relevant and available without undue cost or effort. This includes both quantitative and qualitative information and analysis, based on the group’s historical experience and informed credit assessments including forward-looking information.

3.6 Useful lives of property, plant and equipment and intangible assets

The useful lives, residual values and methods of depreciation/amortisation of property, plant and equipment and intangible assets are reviewed at each reporting date. Judgment of the management is exercised in the estimation of these values, rates and methods and therefore they are subject to uncertainty.

3.7 Impairment losses on property, plant and equipment and intangible assets

The group assesses at each reporting date whether there is an indication of objective evidence of impairment of assets. If any such indication exists, the group makes an estimate of the asset’s recoverable amount. This requires the estimation of the value in use of such individual assets. Estimating the value in use requires management to make an estimate of the expected future cash flows from the asset or the cash-generating unit, which requires management judgment on expected future cash flows and discount rates to be used in determining the value in use.

3.8 Defined benefit plans

Cost of defined benefit plans are determined using actuarial valuations. Actuarial valuation involves making various assumptions, determining discount rates, future

salary increases and mortality rates. Due to the complexity of the valuation, the underlying assumptions and their long-term nature such estimates are subject to significant uncertainty. All assumptions are reviewed at each reporting date.

In determining the appropriate discount rate, the management considers the interest rates of Sri Lanka Government Bonds. The mortality rate is based on publicly available mortality tables. Estimate on future salary increases is based on expected future inflation rates and expected future salary increase rate of the company.

3.9 Commitments and contingencies

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

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

3.10 Classification of investment properties

Management judgment is required to determine whether a property qualifies as an investment property. Properties held to earn rentals or for capital appreciation or both and which generate cash flows largely independently of the other assets held by the group are accounted for as investment properties. On the other hand, properties used for operations or in the process of providing services or for administrative purposes and which do not directly generate cash flows as standalone assets are accounted for under property, plant and equipment. The group assesses on an annual basis, the accounting classification of its properties taking into consideration the current use of such properties.

3.11 Fair value measurement of investment properties and Property, plant and equipment

Investment properties and Property, plant and equipment’s of the group are measured at fair value for the purposes of preparing the consolidated financial statements. Group management determines the main appropriate techniques and inputs required for measuring the fair value. In determining the fair value of the investment properties, management uses observable market data and the services of a qualified external valuer.


3.12 Impairment of non- financial assets

An impairment exists when the carrying value of an asset or cash generating unit exceeds its recoverable amount, which is the higher of its fair value less costs to sell and its value in use. The fair value less costs to sell calculation is based on available data from binding sales transactions in an arm’s length transaction of similar assets or observable market prices less incremental costs for disposing of the asset. The value in use calculation is based on a discounted cash flow model. The cash flows are derived from the budget for the next five years and do not include restructuring activities that the group is not yet committed to or significant future investments that will enhance the asset’s performance of the cash generating unit being tested. The recoverable amount is most sensitive to the discount rate used for the discounted cash flow model as well as the expected future cash-inflows and the growth rate used for extrapolation purposes.

3.13 Impairment loss on accounts receivable and other assets

The group reviews accounts receivable, and other assets on an individual basis to assess any indications of impairment and if a provision for impairment should be recorded in the consolidated statement of profit or loss and comprehensive income. Such estimates are necessarily based on assumptions about several factors involving varying degrees of uncertainty, and actual results may differ resulting in future changes to such provisions.

3.14 Right of use assets and incremental borrowing rate

The group uses its judgment in determining whether an operating lease contract qualifies for recognition of right of use assets. The group applies judgments in evaluating whether it is reasonably certain whether or not to exercise the option to renew or terminate the lease. The group considers all relevant factors that create economic benefits for it to exercise either the renewal or termination. Further, the group cannot readily determine the interest rate implicit in the lease. Therefore, the group uses the incremental borrowing rate to measure lease liability. The incremental borrowing rate is the rate of interest that the group would have to pay to borrow over a similar term and with similar security the funds necessary to obtain an asset of a similar value to the right of use asset in similar economic environment.

4 BASIS OF CONSOLIDATION

The group financial statements comprise the financial statements of the company, its subsidiaries in terms of the Sri Lanka Accounting Standard (SLFRS 10) - Consolidated

Financial Statements and its interests in associates accounted for in accordance with the Sri Lanka Accounting Standard (LKAS 28) - Investments in Associates and Joint Ventures.

4.1 Subsidiaries

Subsidiaries included in the consolidated financial statements are those companies controlled by the group. Control is achieved when the group is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee. Specifically, the group controls an investee if, and only if, the group has:

° Power over the investee

° Exposure or rights to variable returns from its

involvement with the investee

° The ability to use its power over the investee to affect

its returns

The group reassesses whether or not it controls an investee if facts and circumstances indicate that there are changes to one or more of the three elements of control indicated above. Generally, there is a presumption that a majority of voting rights results in control. When the group has less than a majority of the voting rights of an investee, it has power over the investee when the voting rights are sufficient to give it the practical ability to direct the relevant activities of the investee unilaterally. When the group has less than a majority of the voting rights of an investee, the group considers all relevant facts and circumstances in assessing whether it has power over an investee, including the contractual arrangements with the other shareholders of the investee and the rights arising from other contractual arrangements.

Central Industries PLC, a quoted public company listed on the Colombo Stock Exchange, is consolidated as a subsidiary company with a group equity investment of 49.98% taking into account the fact that the group possesses power over the investee and is able to decide the variable return of the investee.

Financial statements of subsidiaries are included in the consolidated financial statements from the date on which the control commences until the control ceases. The profit or loss and net assets of a subsidiary attributable to equity interests that are not owned by the parent, directly or indirectly, are disclosed separately as “Non-controlling Interest”. Profit or loss and each component of other

ACCOUNTING POLICIES


comprehensive income of subsidiaries are attributed to the owners of the parent and to the non–controlling interests. Total comprehensive income is attributed to the owners of the parent and to the non-controlling interests even if this results in the non-controlling interests having a deficit. The accounting policies of the subsidiaries are changed when necessary to align them with the policies adopted by the group.

Changes in the group’s ownership interests in subsidiaries that do not result in the group losing control over the subsidiaries are accounted for as equity transactions. The carrying amounts of the group’s interests and the non-controlling interests are adjusted to reflect the changes in their relative interests in the subsidiaries. Any difference between the amount by which the non-controlling interests are adjusted and the fair value of the consideration paid or received is recognized directly in equity and attributed to owners of the company.

When the group loses control of a subsidiary, a gain or loss is recognised in the income statement and is calculated as the difference between (i) the aggregate of the fair value of the consideration received and the fair value of any retained interest and (ii) the previous carrying amount of the assets (including goodwill), and liabilities of the subsidiary and any non-controlling interests. All amounts previously recognised in other comprehensive income in relation to that subsidiary are accounted for as if the group had directly disposed of the related assets or liabilities of the subsidiary (i.e. reclassified to profit or loss or transferred to another category of equity as specified/permitted by applicable SLFRSs).The fair value of any investment retained in the former subsidiary at the date when control is lost is regarded as the fair value on initial recognition for subsequent accounting under group’s accounting policy for financial instruments or when appropriate, the cost on initial recognition of an investment in an associate or jointly controlled entity.

Consolidated financial statements are prepared to a common financial year ending 31st March. All subsidiaries in the group other than CF Insurance Brokers (Pvt) Ltd., have a common financial year ending 31st March. The financial year end for CF Insurance Brokers (Pvt) Ltd., is 31st December; and hence, adjustments are made based on financial statements drawn up to 31st March.

There are no significant restrictions on the ability of the subsidiaries to transfer funds to the other entities within the group in the form of cash dividends or repayment of loans and advances. All subsidiaries of the group as at

the reporting date have been incorporated in Sri Lanka. A list of subsidiaries is given in note no. 37 to the financial statements and the details of non-controlling interests are given in note no. 37.1 to the financial statements.

4.2 Associates

Associates are those enterprises in which the group has significant influence. Significant influence is the power to participate in the financial and operating policy decisions of the investee, but without control or joint control over those policies. Investments in associates are accounted for using the equity method and are initially recognised at cost. The consolidated financial statements include the group’s share of gains and losses accounted under the equity method from the date significant influence commences until the date significant influence ceases. When the group’s share of losses exceeds its investment in an equity accounted investee, the carrying amount of that interest is derecognised and the recognition of further losses is discontinued except to the extent that the group has an obligation or has made payments on behalf of the investee. The audited consolidated financial statements of Nations Trust Bank PLC and Capital Suisse Asia Ltd. are drawn up to 31st December; and hence, adjustments are made based on financial statements drawn up to 31st March. The group held 20% ownership interest in Nations Trust Bank PLC (NTB) until end February 2018 and with the issuance of convertible non-voting shares, the group’s ownership interest increased to 21.10% from March 2018.The ownership interest further increased to 21.38% from 01st January 2020 with the purchase of convertible non-voting shares from the secondary market. The group holds 19.82% voting shares in NTB as at 31.03.2020. Central Bank of Sri Lanka has issued guidelines restricting the amount of voting rights that can be held by a single party/group in NTB and, accordingly, the group’s voting rights in NTB are restricted to 10% with effect from 31.03.2018. The CF group as a promoter shareholder continue to hold board positions at NTB, since the incorporation of the bank in 1999. In addition to the ability to participate in policymaking decisions, the CF nominee –directors serve on the Board Supervisory Committee, the Board Audit Review Committee, the Human Resource and Remuneration Committee, the Nomination Committee, the Credit Committee and the Integrated Risk Management Committee of NTB. (All Board appointed sub-committees other than the Related Party Transactions Review Committee). The group’s share of profit or loss of NTB and changes in the equity have been accounted for at 20% up to end February 2018 and 21.10% from March 2018 up to 31.12.2019 and at 21.38% from 01st January 2019,having taken into consideration the


combination of our economic interest of 21.38% in the entity ,continuing support towards the bank’s capital calls as a promoter shareholder and our ability to exercise significant influence on the operating and financial policies of NTB as evidenced by the representation and participation in all policy and decision making committees of the Bank at the apex level.

All associate companies of the group are incorporated in Sri Lanka and there are no significant restrictions on the ability of the associates except for Nations Trust Bank PLC to transfer funds to the group in the form of cash dividends or repayment of loans and advances. As per the provisions contained in section 3.1 of the Banking Act Direction No.03 of 2020 issued by the Central Bank of Sri Lanka, Licensed Commercial Banks incorporated or established in Sri Lanka are not permitted to declare cash dividends not already declared for financial year 2019 and any interim cash dividends for financial year 2020. Pursuant to the above direction, Nations Trust Bank PLC will have a restriction on payment of dividends during the financial year ending 31st December 2020. A list of associates is given in note no. 36 to the financial statements.

4.3 Transactions eliminated on consolidation

Intra-group transactions and balances, income, expenses and any unrealised gains arising from intra-group transactions are eliminated in preparing the consolidated financial statements. Unrealised gains arising from transactions with associates are eliminated to the extent of the group’s interest in the associates against the investment in the associate. Unrealised losses are eliminated in the same way as unrealised gains except that they are eliminated only to the extent that there is no evidence of impairment.

5 ASSETS AND LIABILITIES AND BASES OF THEIR VALUATION

5.1 Financial instruments - Initial recognition, classification and subsequent measurement

5.1.1 Recognition

All financial assets and liabilities are initially recognised on the trade date, the date that the company becomes a party to the contractual provisions of the instrument.

5.1.2 Initial measurement of financial instruments

The classification of financial instruments at initial recognition depends on their cash flow characteristics and the business model for managing the instruments. All financial instruments are initially measured at fair value

plus transaction costs, except in the case of financial assets and financial liabilities recorded at fair value through profit or loss. Transaction costs in relation to financial assets and financial liabilities at fair value through profit or loss are dealt with through the income statement.

5.1.3 Measurement categories of financial instruments

The group classifies all of its financial assets based on the business model for managing the assets and the assets’ contractual terms measured at either;

° Amortised cost

° Fair value through profit or loss (FVTPL)

5.1.3.1 Amortised cost

A financial asset is measured at amortised cost if it meets both of the following conditions and is not designated as FVTPL:

° The asset is held within a business model whose

objective is to hold assets to collect contractual cash

flows; and

° The contractual terms of the financial asset give

rise on specified dates to cash flows that are solely

payments of principal and interest on the principal

amount outstanding.

After initial measurement, these are subsequently measured at amortised cost (gross carrying amount using the EIR, less provision for impairment). Amortised cost is calculated by taking into account any discount or premium on acquisition and fees and costs that are an integral part of the EIR. The amortisation is included in interest income while the losses arising from impairment are recognised in impairment charges for loans and other losses in the income statement.

The amortised cost of a financial asset or financial liability is the amount at which the financial asset or financial liability is measured on initial recognition minus the principal repayments, plus or minus the cumulative amortisation using the effective interest rate (EIR) method of any difference between that initial amount and the maturity amount and, for financial assets, adjusted for any expected credit loss allowance (ECL).

Financial assets measured at amortised cost of the group comprise of cash and cash equivalents, loans and receivables from banks, loans and receivables from customers, net investment in leases and hire purchase, securities bought under repurchase agreements, loans and receivables from others and trade and other receivables.

ACCOUNTING POLICIES


5.1.3.2 Fair value through profit or loss (FVTPL)

As per SLFRS 9, all financial assets other than those classified at amortised cost or FVOCI are classified as measured at FVTPL. Financial assets at fair value through profit or loss include financial assets that are held for trading or managed and whose performance is evaluated on a fair value basis as they are neither held to collect contractual cash flows nor held both to collect contractual cash flows and to sell financial assets and financial assets designated upon initial recognition at fair value through profit or loss.

Financial assets measured at FVTPL are measured initially at fair value and transaction costs that are directly attributable to its acquisition or issue is charged to profit or loss. Financial assets measured at FVPTL are subsequently recorded in the statement of financial position at fair value. Changes in fair value, gains / (losses) from trading and dividend income are recognised in the income statement under other income.

No impairment loss is recognised on equity instruments classified as financial assets measured at FVTPL.

FVTPL assets comprise of Investments in quoted and unquoted shares and investments in unit trusts.

5.2 Financial liabilities

The group classifies its financial liabilities as measured at amortised cost. The group’s financial liabilities comprise of bank overdrafts, deposits from customers, long term and short term borrowings, trade and other payables, debentures and lease liabilities.

5.3 Reclassification of financial assets and liabilities

When the group reclassifies the financial assets, it applies the reclassification prospectively from the reclassification date without restating any previously recognised gains or losses (including impairment losses) or interest. Financial liabilities are never reclassified.

When a financial asset is reclassified out of the amortised cost measurement category and into the fair value through profit or loss measurement category, its fair value is measured at the reclassification date. Any gain or loss arising from a difference between the previous amortised cost of the financial asset and fair value is recognised in profit or loss.

When a financial asset is reclassified out of the fair value through profit or loss measurement category and into amortised cost measurement category, its fair value at the reclassification date becomes its new gross carrying amount.

Reclassification is at the discretion of management, and is determined on an instrument-by-instrument basis. Further the group does not reclassify any financial instrument out of the fair value through profit or loss category if upon initial recognition it was designated as fair value through profit or loss.

5.4 De-recognition of financial assets and liabilities

5.4.1 Financial assets

A financial asset (or, where applicable a part of a financial asset or part of a group of similar financial assets) is derecognised when:

° The right to receive cash flows from the asset has

expired.

° The group has transferred its right to receive cash

flows from the asset or has assumed an obligation

to pay the received cash flows in full without

material delay to a third party under a ‘pass–through’

arrangement; and either:

° The group has transferred substantially all the risks

and rewards of the asset or

° The group has neither transferred nor retained

substantially all the risks and rewards of the asset, but

has transferred control of the asset.

On de-recognition of a financial asset, the difference between the carrying amount of the asset (or the carrying amount allocated to the portion of the asset transferred) and consideration received (including any new asset obtained less any new liability assumed) is recognised in the income statement.

When the group has neither transferred nor retained substantially all of the risks and rewards of the asset nor transferred control of the asset, the asset is recognised to the extent of the group’s continuing involvement in the asset. In that case, the group also recognises an associated liability. The transferred asset and the associated liability are measured on a basis that reflects the rights and obligations that the group has retained.


5.4.2 Financial liabilities

A financial liability is derecognised when the obligation under the liability is discharged, cancelled or expired.

Where an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as a de-recognition of the original liability and the recognition of a new liability. The difference between the carrying value of the original financial liability and the consideration paid is recognised in the income statement.

5.5 Offsetting financial instruments

Financial assets and financial liabilities are offset and the net amount is reported in the statement of financial position if, and only if, there is a currently enforceable legal right to offset the recognised amounts and there is an intention to settle on a net basis, or to realise the asset and settle the liability simultaneously. Income and expenses are presented on a net basis only when permitted under LKASs/SLFRSs or for gains and losses arising from a group of similar transactions.

5.6 Impairment allowance for financial assets

The group has recorded the impairment for expected credit losses for all loans and advances, net investment in leases and hire purchase and other financial assets not held at FVTPL in accordance with SLFRS 9. Fair value through profit or loss financial instruments are not subject to impairment under SLFRS 9.

The ECL approach is based on the credit losses expected to arise over the life of the asset (the lifetime expected credit loss or LTECL), unless there has been no significant increase in credit risk since origination, in which case the impairment is based on the 12 months’ expected credit loss (12 month ECL).

12 month ECL is the portion of ECL that results from default events on a financial instrument that are possible within the 12 months after the reporting date. Financial instruments for which a 12 month ECL is recognised are referred to as stage 1 financial instruments.

Lifetime ECLs are ECLs that result from all possible default events over the expected life of the financial instrument. Financial instruments for which a lifetime ECL is recognised but which are not credit-impaired are referred to as Stage 2 financial instruments.

Both LTECLs and 12 month ECLs are calculated on either an individual basis or a collective basis, depending on the nature of the underlying portfolio of financial instruments. The group has established a policy to perform an assessment at the end of each reporting period of whether a financial instrument’s credit risk has increased significantly since initial recognition, by considering the change in the risk of default occurring over the remaining life of the financial instrument. Based on the above process, the company categorises its loans and advances and net investments in leases and hire purchase into Stage 01 (12 month ECL), Stage 2 (Lifetime ECL - not credit impaired) and Stage 3 (Life time ECL - credit impaired).

5.6.1 Credit impaired financial assets

At each reporting date, the group assesses, whether financial assets carried at amortised cost are credit impaired. A financial asset is credit impaired when one or more events that have detrimental impact on the estimated future cash flows of the financial asset have occurred.

Evidence that a financial asset is credit-impaired includes the following observable data:

° Significant financial difficulty of the borrower

° A breach of contract such as a default or past due

event

° The restructuring of a loan or advance by the group

on terms that the group would not consider otherwise

° It is becoming probable that the borrower will enter

bankruptcy or other financial renegotiation or

° The disappearance of an active market for a security

because of financial difficulties

A loan that has been renegotiated due to deterioration in the borrower’s condition is usually considered to be credit impaired unless there is evidence that the risk of not receiving contractual cash flows has reduced significantly and there are no other indicators of impairment.

5.6.2 Restructured financial assets If the terms of a financial asset are renegotiated or modified or an existing financial asset is replaced with a new one due to financial difficulties of the borrower, then an assessment is made of whether the financial asset should be derecognised and ECL are measured as follows:

ACCOUNTING POLICIES


° If the expected restructuring will not result in

derecognition of the existing asset, and then the

expected cash flows arising from the modified

financial asset are included in calculating the cash

shortfalls from the existing asset.

° If the expected restructuring results in derecognition of

the existing asset, then the expected fair value of the

new asset is treated as the final cash flow from the

existing financial asset at the time of its derecognition.

5.6.3 Calculation of ECL

The ECL is calculated based on three probability weighted scenarios to measure the expected cash shortfall (the base case, the best case and the worst case), discounted at an approximation to the EIR. Each of these is associated with different loss rates. The assessment of multiple scenarios incorporates how defaulted loans are expected to be recovered, including the probability that the loans will cure and the value of collateral or the amount that might be received by selling the asset.

Key elements of the ECL calculations are:

Probability of default (PD)

The probability of default is an estimation of the likelihood of default over a given time horizon. A default may only happen at a certain time over the assessed period.

Exposure at default (EAD)

The exposure at default is an estimation of the exposure at a future default date, taking into account expected changes in the exposure after the reporting date, including repayments of principal and interest, whether scheduled by contract or otherwise, expected draw downs on committed facilities and accrued interest from Past due contracts.

Loss given default (LGD)

The loss given default is an estimate of the loss arising in the case where a default occurs at a given time. It is based on the difference between the contractual cash flows due and those that the lender would expect to receive, including from the realization of any collateral. It is usually expressed as a percentage of the EAD.

In the ECL models, the group relies on a number of forward looking information as economic inputs, such as

° GDP Growth

° Unemployment rates

° Interest rates

° Inflation rate

° Exchange rate

The inputs and models used for calculating ECLs may not always capture all characteristics of the market at the date of the financial statements. To reflect this, qualitative adjustments or overlays are made as and when required, as temporary adjustments when such differences are significantly material.

5.6.4 Calculations of ECLs for individually significant loans and individually not significant loans

The group first assesses ECLs individually for financial assets that are individually significant to the group. In the event the group determines that such assets are not impaired (not in stage 3), it includes the assets in a group of financial assets with similar credit risk characteristics and collectively assesses them for impairment. However, assets that are individually assessed for impairment and for which an impairment loss is or continues to be recognised are not included in a collective assessment of impairment. If the asset is impaired, the amount of the loss is measured by discounting the expected future cash flows of a financial asset at its original effective interest rate and comparing the resultant present value with financial asset’s current carrying amount. The impairment on individually significant accounts is reviewed on a regular basis. Individually assessed impairment is only reversed when there is reasonable and objective evidence of a reduction in the established loss estimate. Interest on impaired assets continues to be recognised on the net carrying value of the asset.

For all customers whose exposure is more than or equal to the internal threshold for classifying them as individually significant, the group calculates ECL on an individual basis. For all other asset classes, the group calculates ECL on a collective basis. The group categorises these exposures into smaller portfolios, based on a combination of internal and external characteristics of the loans such as product type, type of collateral, past due status industry of the borrower and whether the loan is restructured or rescheduled.


5.6.5 Collateral valuation

The collateral comes in various forms, such as vehicles, equity securities, real estate, inventories, and other non -financial assets. The fair value of collateral affects the calculation of ECLs. The group uses active market data, to the extent possible to value financial assets held as collateral. Non-financial collateral, such as vehicles and real estate, are valued based on data provided by third parties such as independent valuation specialists to the extent it is practically possible.

5.7 Write-offs

Uncollectible loans are written off against the related allowance for loan impairment on completion of the company’s internal processes and when all reasonably expected recoverable amounts have been collected. The timing and extent of write-offs may involve some element of subjective judgment. Nevertheless, a write-off will often be prompted by a specific event, such as the inception of insolvency proceedings or other formal recovery action, which makes it possible to establish that part or the entire advance, is beyond realistic prospect of recovery. Unlikely to pay factors include objective conditions such as bankruptcy, debt restructuring, fraud or death of the borrower. It also includes credit-related modifications of contractual cash flows due to significant financial difficulty. Assets that are written off may be subject to enforcement activity and if there is any recovery on such assets that is recognised as other income in the income statement.

5.8 Cash and cash equivalents

Cash and cash equivalents comprise cash in hand and bank balances and short term savings deposits (less than 3 months). Bank overdrafts that are repayable on demand are also included as a component of cash and cash equivalents for the purpose of the cash flow statement.

5.9. Lease and hire purchase receivables

5.9.1 Leases

Assets leased to customers, where all the risks and rewards incidental to the ownership other than the legal title are transferred substantially, are accounted for as finance leases in accordance with Sri Lanka Financial Reporting Standard 16 - Leases, and are reflected in the statement of financial position after deduction of initial rentals received, unearned interest income and allowances for impairment losses.

5.9.2 Hire purchase

Assets hired to customers under hire purchase agreements, which transfer all the risks and rewards incidental to ownership as well as the legal title at the end of such contractual period are classified as hire purchase receivables. Such assets are accounted for in a manner similar to finance leases.

5.10 Investments in subsidiaries and associates

Investments in subsidiaries and associates are accounted for at cost less accumulated impairment losses in the separate financial statements. In the consolidated financial statements, investments in associate companies are accounted under the equity method reduced by accumulated impairment losses, if any, and the carrying amount is adjusted for post-acquisition changes in the group’s share of net assets of the associates.

Provision for impairment is made where the decline in value is other than temporary and such impairment is made for investments individually.

5.11 Inventories and other stocks

Inventories are valued at the lower of cost and net realisable value under the weighted average cost method. The cost of raw materials is determined at purchase price including all expenses incurred in sourcing. The cost of work-in-progress is the value of raw material transferred to production. The cost of finished goods includes raw material cost and all direct and indirect expenses incurred in production. Vehicles, spare parts and other stocks are valued at cost or net realisable value whichever is lower. Net realisable value is the estimated selling price less estimated cost of completion and the estimated cost necessary to make the sale. Inventories are regularly assessed for impairment and provisions are made accordingly.

5.12 Investments in real estate

Investments in real estate are valued at cost and net realisable value whichever is lower. Net realisable value is the estimated selling price less estimated cost of completion and the estimated cost necessary to make the sale.

5.13 Investment properties

Investment properties are properties held either to earn rental income or for capital appreciation or both, but not for sale in the ordinary course of business, used

ACCOUNTING POLICIES


in the production or supply of goods or services or for administrative purposes. Investment properties are initially measured at cost and the fair value model is used for subsequent measurement in accordance with Sri Lanka Accounting Standard (LKAS 40) –Investment Property. The cost of the investment property comprises of its purchase price and any directly attributable expenditure. Fair valuations of the properties are carried out by independent valuer/valuers having appropriate professional qualifications.

When an item of property, plant and equipment is transferred to investment property following a change in its use, the difference between the carrying amount of the item immediately prior to the date of transfer and its fair value is recognised directly in equity under revaluation reserve, if it is a gain. If it is a decline in value, the decrease is charged against revaluation reserve to the extent that it was previously credited and any decrease beyond such value is charged to the income statement.

If an investment property becomes owner – occupied, it is reclassified as property, plant and equipment and its fair value at the date of reclassification becomes its deemed cost for subsequent accounting.

5.14 Intangible assets

An intangible asset is recognised if it is probable that future economic benefits that are attributable to the asset will flow to the company and the cost of the asset can be measured reliably in accordance with Sri Lanka Accounting Standard (LKAS 38) - Intangible Assets. Accordingly, these assets are stated in the statement of financial position at cost less accumulated amortisation and impairment losses, if any. Subsequent expenditure on acquisition and improvement of intangible assets is capitalised only when it increases the standard of performance of these assets and where future economic benefits embodied in these assets will flow to the company. Intangible assets with finite lives are amortised over their useful lives and are assessed for impairment whenever there is an indication that the intangible asset may be impaired. The amortisation period and the amortisation method for an intangible asset with a finite useful life are reviewed at the end of the financial year.

An intangible asset is derecognised on disposal or when no future economic benefits are expected from its use. Gains or losses arising from derecognition of an intangible asset, measured as the difference between the net

disposal proceeds and the carrying amount of the asset are recognised in the income statement when the item is derecognised.

Computer software, which do not form an integral part of hardware are recognised as intangible assets and are stated at cost less accumulated amortisation and any accumulated impairment loss. Amortisation is charged over a period of five years on a straight-line basis.

5.15 Property, plant and equipment

5.15.1 Basis of recognition

Property, plant & equipment are recognised if it is probable that future economic benefits associated with the asset will flow to the company and cost of the asset can be reliably measured.

5.15.2 Basis of measurement

An item of property, plant and equipment that qualifies for recognition as an asset is initially measured at cost. Cost includes expenditure directly attributable to acquisition of the asset and subsequent costs excluding the costs of day- to-day servicing. The cost of self-constructed assets includes the cost of materials, direct labour, any other costs directly attributable to bringing the asset to a working condition for its intended use and the costs of dismantling and removing the items and restoring the site on which they are located and capitalised borrowing costs.

5.15.3 Cost model

The group applies the cost model to all property, plant and equipment except freehold land and freehold buildings and records them at cost of purchase together with any incidental expenses thereon less accumulated depreciation and any accumulated impairment charges.

5.15.4 Revaluation model

The group applies the revaluation model for the entire class of freehold land and freehold buildings for measurement after initial recognition. Such properties are carried at revalued amounts, less any subsequent accumulated depreciation on buildings and any accumulated impairment losses charged subsequent to the date of revaluation.

When an asset is revalued, any increase in the carrying value is recognised in other comprehensive income and accumulated in equity under revaluation reserve except to the extent that it reverses a revaluation decrease of


the same asset previously recognised in the income statement in which case the increase is recognised in the income statement to the extent of the decrease previously expensed. A decrease in the carrying value arising on the revaluation is recognised in the income statement and any decrease that offsets a previous surplus on the same asset is recognised in other comprehensive income to the extent of any credit balance available in the revaluation surplus in respect of that asset and any excess is recognised as an expense in the income statement. The difference in depreciation based on the revalued carrying amount and cost is transferred from revaluation reserve to retained earnings through equity statement. Any balance remaining in the revaluation reserve in respect of an asset is transferred directly to retained earnings on retirement or disposal of the asset.

When group companies occupy a significant portion of the investment property of a subsidiary, such investment properties are treated as property, plant and equipment in the consolidated financial statements and accounted for as per Sri Lanka Accounting Standard (LKAS 16) - Property, Plant and Equipment.

5.15.5 Subsequent costs

Subsequent expenditure incurred for the purpose of acquiring, extending or improving assets of a permanent nature by means of which to carry on the business or to increase the earning capacity of the business is treated as capital expenditure and such expenses are recognised in the carrying amount of an asset. The costs associated with day-to-day servicing of property, plant and equipment are recognised in the income statement as incurred.

5.15.6 Capital work in progress

These are expenses of a capital nature directly incurred in the construction of buildings awaiting capitalisation. Capital work in progress will be transferred to the relevant assets once ready for the intended use.

5.15.7 Derecognition

The carrying amount of an item of property, plant and equipment is derecognised on disposal or when no further economic benefits are expected from its use. Any gain or loss arising on derecognition of the asset is recognised in the income statement in the year in which the asset is derecognised.

5.15.8 Depreciation

Provision for depreciation is calculated using the straight-line method on the cost or other amount substituted for cost of all property, plant and equipment other than freehold land in order to allocate depreciable amounts over the estimated useful lives of such assets. The estimated useful lives of assets are as follows:

Assets category Years

Freehold buildings 12- 40Furniture & office equipment 10

Motor vehicles and lifts 05

Plant, machinery & other equipment 08

Air conditioners & computer servers 08

Generators 15

Computers 05

Other assets 10

Depreciation of an asset begins when it is available for use and ceases at the earlier of the date that the asset is classified as held for sale or the date that the asset is derecognised.

5.15.9 Operating lease assets

Operating lease assets are classified under property, plant and equipment at cost less accumulated depreciation and impairment losses, if any. Cost of the asset net of residual value is depreciated over the estimated useful life. Residual value is the estimated net amount that the company would expect from disposal of the asset at the end of its estimated useful life, calculated based on the current market prices of similar classes of vehicles, and are subject to annual review. Initial direct costs incurred in negotiating operating leases are added to the carrying amount of the leased asset and recognised over the lease term on the same basis as rental income.

5.15.10 Right of use assets and lease liabilities

The group recognises a right-of-use asset and a lease liability at the lease commencement date. The right-of-use asset is initially measured at cost, which comprises the initial amount of the lease liability adjusted for any lease payments made on or before the commencement date, plus any initial direct costs incurred and an estimate of costs to dismantle and remove the underlying asset or to restore the underlying asset or the site on which it is located, less any lease incentives received. The right-of-use asset is subsequently depreciated using the straight-line method from the commencement date to the end of the lease term.

ACCOUNTING POLICIES


The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement date discounted using the incremental borrowing rates of respective group companies and subsequently at amortised cost using the effective interest method. The group presents right-of-use assets and lease liabilities separately in the statement of financial position.

The group has used historical information when determining the lease term when the contract contains options to extend or terminate the lease.

The group remeasures the lease liability (and makes a corresponding adjustment to the related right-of-use asset) whenever:

° A lease contract is modified and the lease

modification is not accounted for as a separate

lease, in which case the lease liability is remeasured

based on the lease term of the modified lease by

discounting the revised lease payments using a

revised discount rate at the effective date of the

modification.

° Right-of-use assets are depreciated over the shorter

period of lease term and useful life of the underlying

asset.

° In determining whether a right-of-use asset is impaired

and accounts for any identified impairment loss in

accordance with LKAS-36, Impairment of Assets.

The Group as lessor

Leases for which the group is a lessor are classified as finance or operating leases. Whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessee, the contract is classified as a finance lease. All other leases are classified as operating leases.

Lease transactions under LKAS-17 (Leases) applicable up to 31.03.2019.

The group enters into lease contracts both as a lessee and lessor. The terms and conditions of these contracts were assessed and the leases were classified as operating lease or finance leases according to their economic substance at the inception of the lease.

Finance Leases

When the group is the lessor under a lease agreement that transfers substantially all of the risks and rewards incidental to the ownership of the asset to the lessee are included in the financial statements.

Operating leases

Assets leased under leases other than financial lease are classified as operating leases. Operating lease assets are classified under property, plant and equipment at cost less accumulated depreciation and impairment losses, if any. Cost of the asset net of residual value is depreciated over the estimated useful life.

Group as lessee Operating lease rentals payable were recognised as an expense over the lease term, which commenced when the lessee controlled the physical use of the property. Lease incentives were treated as a reduction of rental expense and were also recognised over the lease term.

5.15.11 Determination of fair value

Some of the group’s assets and liabilities are measured at fair value for financial reporting purposes. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value measurement is based on the presumption that the transaction to sell the asset or transfer the liability takes place either:

° In the principal market for the asset or liability or

° In the absence of a principal market, in the most

advantageous market for the asset or liability.

All assets and liabilities which are measured or disclosed at fair value in the financial statements are categorised within the fair value hierarchy given below based on the degree to which the inputs to the fair value measurements are observable and the significance of the inputs to the fair value measurements.

° Level 1 - quoted market prices in active markets for

identical assets or liabilities.

° Level 2 - valuation techniques for which the

lowest level input that is significant to the fair value

measurement is directly or indirectly observable.


° Level 3 - valuation techniques for which the

lowest level input that is significant to the fair value

measurement is unobservable.

Level 1

When available, the group measures the fair value of an instrument using quoted market prices in an active market for that instrument. A market is considered as active if quoted prices are readily and regularly available and represent actual and regularly occurring market transactions on an arm’s length basis. Quoted equities are valued under level 1.

Level 2

If a market for a financial instrument is not active, the group establishes fair value using valuation techniques. These include discounted cash flow analysis, effective interest rate calculations and forecasted future cash flow calculations using recent arm’s length transactions between knowledgeable and willing parties. These valuation techniques make maximum use of market inputs, incorporate all factors that market participants would consider in setting a price and are consistent with accepted economic methodologies for pricing financial instruments. Investments in unit trusts are valued under level 2.

Level 3

Certain financial instruments are recorded at fair value using valuation techniques in which current market transactions or observable market data are not available. Fair value of such instruments are determined using a valuation model that has been tested against prices or inputs to actual market transactions and best estimates of the most appropriate model assumptions. Fair value of unquoted equity securities are determined using net assets value.

There have been no transfers between these levels.

Details of financial instrument measured at fair value are given in note no. 55 to the accounts.

5.15.12 Impairment of non-financial assets

The group assesses at each reporting date whether there is an indication of objective evidence of impairment of assets. If any such indication exists, the group makes an estimate of the asset’s recoverable amount. An asset’s recoverable amount is the higher of an asset’s or cash generating unit’s fair value less costs to sell and its value

in use and is determined for an individual asset unless the asset does not generate cash inflows that are largely independent of those from other assets or groups of assets. Where the recoverable amount of an asset is below its carrying amount the asset is considered impaired and is reduced to its recoverable amount. Impairment losses are recognised in the income statement in those expense categories consistent with the function of the impaired asset except for property previously revalued and the revaluation surplus was credited to equity. In such case, the impairment is recognised against the revaluation reserve to the extent that it reverses a previous revaluation surplus. An assessment is made at each reporting date as to whether there is any indication that previously recognised impairment losses may no longer exist or may have decreased. Previously recognised impairment losses other than in respect of goodwill are reversed only if there has been an increase in the recoverable amount of such asset. Such increased carrying amount of an asset attributable to reversal of an impairment loss is recognised only up to the carrying amount that would have been determined had no impairment loss been recognised for the asset in prior years.

5.16 Liabilities and provisions

5.16.1 Deposits

Deposits include term deposits accepted under various tenors ranging from one month to five years and savings deposits. These deposits are initially recognised at transaction value and subsequently measured at amortised cost using the effective interest rate method.

5.16.2 Income tax

Income tax for the year comprises current tax and deferred tax. Income tax is recognised in the statement of income except to the extent that it relates to items directly recognised in equity or other comprehensive income.

The liability for current taxation has been computed on the basis of the profit for the year as adjusted for taxation purposes in accordance with the provisions of the Inland Revenue Act No. 24 of 2017.

5.16.3 Deferred tax

Deferred tax is provided on temporary differences at the reporting date between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred tax liabilities are recognised for all taxable temporary differences, except:

ACCOUNTING POLICIES


° where the deferred tax liability arises from the initial

recognition of goodwill or of an asset or liability in a

transaction that is not a business combination and,

at the time of the transaction, affects neither the

accounting profit nor taxable profit or loss; and

° in respect of taxable temporary differences associated

with investments in subsidiaries, where the timing

of the reversal of the temporary differences can

be controlled and it is probable that the temporary

differences will not reverse in the foreseeable future

Deferred tax is measured at the tax rates that are expected to apply for the temporary differences when they reverse based on the tax laws that have been enacted or substantively enacted as at the reporting date. A deferred tax asset is recognised for all deductible temporary differences, carry forward unused tax credits and unused tax losses, only to the extent that it is probable that future taxable profits will be available against which the asset can be utilised. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be realised. Deferred tax arising on items recognised in other comprehensive income and equity is dealt with through other comprehensive income and equity statement respectively.

As per Inland Revenue Act No. 24 of 2017, which became effective from 01st April 2018, capital assets will attract tax at applicable rates on the gains at the time of disposal.

5.16.4 Withholding tax on dividends

Dividends distributed out of taxable profit of the subsidiaries and associates of the company attracted a 14% tax deduction at source up to 31.12.2019 and therefore is not available for set off against the tax liability of the company. Thus, the withholding tax deducted at source is recognised as income tax expense in the consolidated financial statements. Withholding tax that arises from the distribution of dividends by the company is recognised as a liability of the shareholders’ according to the provision of the Inland Revenue Act No. 24 of 2017. Withholding tax paid at the rate of 14% at source was considered the final tax in the hands of any person up to 31.12.2019. Therefore dividend received by the company subjected to 14% withholding tax shall be final tax on dividends and will not be further taxed.

5.16.5 Value added tax and nation building tax on financial services

The value base for Value Added Tax (VAT) and Nation Building Tax (NBT) for the company is the adjusted accounting profit before tax and employee emoluments. The adjustment to the accounting profit before tax is for economic depreciation computed on prescribed rates as per the VAT Act. The Nation Building Tax (NBT) was abolished with effect from 1st December 2019.

5.16.6 Debt repayment levy (DRL)

DRL was imposed with retrospective effect from 01st October 2018 till 31st December 2021 through the Finance Act No. 35 of 2018 approved by the Parliament on 1st November 2018 on banks and licensed finance companies only. DRL is payable at 7% on the same value base considered for VAT and NBT on financial services. The Debt Repayment Levy was abolished with effect from 1st January 2020.

5.16.7 Economic service charges (ESC)

As per the Finance Act No. 11 of 2004, and amendments thereto, ESC was introduced with effect from 1st April 2004. The ESC is payable at 0.5% on liable turnover of the company and is deductible against subsequent income tax payments. Unclaimed ESC, if any, can be carried forward and set off against the income tax payable in the three subsequent years. The ESC was abolished with effect from 1st January 2020.

5.16.8 Crop insurance levy

Section 14 of the Finance Act No. 12 of 2013 imposed a crop insurance levy on institutions under the purview of

° Banking Act No. 30 of 1988.

° Finance Business Act No. 42 of 2011

° Regulation of Insurance Industry Act No. 43 of 2000

Accordingly, the company is required to pay 1% of the profit after tax for a year of assessment to the National Insurance Trust Fund with effect from 1st April 2013.

5.16.9 Employee benefits

5.16.9.1 Defined benefit plans

A defined benefit plan is a post-employment benefit plan other than a defined contribution plan. The estimation of this liability, determined by an independent, qualified actuary, necessarily involves long-term assumptions, which


have been disclosed in note no. 47. The defined benefit obligation is calculated annually using the projected unit credit method. The services of a qualified actuary is obtained to determine the valuation of the defined benefit obligation for the company as well as those subsidiary companies within the group that adopted the actuarial valuation method in computing the provision required in accordance with Sri Lanka Accounting Standard (LKAS 19) – Employee Benefits. This standard also provides actuarial techniques, which approximates the actuarial valuation which has been adopted by the other companies within the group that have not adopted the actuarial valuation method. The projected unit credit method projects the current data using the actuarial assumptions and calculates projected benefits at the participants’ assumed retirement date. The key assumptions used in determining the defined benefit obligations are given in note no. 47.

The defined benefit obligation recognised in the statement of financial position represents the present value of the defined benefit obligation as reduced by the fair value of plan assets. Actuarial gains and losses are recognised as income or expenses in the statement of comprehensive income during the financial year in which they arise. The gratuity liability of the parent company is externally funded in part by a gratuity fund established in 1987, with the investments of the fund being mainly in fixed deposits, treasury bills and debentures with approved banks. Gratuity liabilities of the other companies in the group are not externally funded. Provision is made for defined benefit plan liability for all employees from the first year of service in conformity with Sri Lanka Accounting Standard (LKAS 19) – Employee Benefits.

The liability of the parent company is computed on the following basis for employees who have joined the company on or before 01.04.2013 while the rest of the employees are entitled for half a month’s salary for each completed year of service as per the provisions of the Gratuity Act No. 12 of 1983.

Length of service (completed years)

No. of months’ salary for each completed year

Up to 15 1/215 up to 30 1

30 up to 35 1 ½

35 up to 40 2

Over 40 2 ½

However, under the Payment of Gratuity Act No. 12 of 1983, the liability to an employee arises only on completion of five years of continued service. Liabilities for the other companies in the group are computed on the basis of half a month’s salary for each year of completed service.

5.16.9.2 Defined contribution plans

A defined contribution plan is a post-employment benefit plan under which an entity pays fixed contributions into a separate entity and will have no legal or constructive obligation to pay further amounts. Obligations for contributions to the Employees’ Provident Fund and Employees’ Trust Fund covering all employees are recognised as expenses in the income statement as incurred.

5.17 Provisions

In accordance with Sri Lanka Accounting Standard 37 - Provisions, Contingent Liabilities and Contingent Assets, recognition of a provision in the statement of financial position is made when the group has a present legal or constructive obligation as a result of past events and it is probable that an outflow of economic benefits will be required to settle the obligation.

5.18 Commitments and contingencies

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

Capital commitments and contingent liabilities as at the date of the statement of financial position are disclosed in the respective notes to the consolidated financial statements. Contingent assets are disclosed where an inflow of economic benefit is probable.

5.19 Earnings per share

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

ACCOUNTING POLICIES


5.20 Segmental reporting

A segment is a distinguishable component of the group that is engaged in providing an individual product or service (business segment) or in providing services within a particular economic environment (geographical segment) which is subject to risks and rewards that are different from those of other segments. In accordance with Sri Lanka Accounting Standard (SLFRS 8) - Operating Segments, segmental information is presented for identifiable operative units of the group, classified into seven segments according to the nature of products or services rendered. These business segments comprise of leasing hire purchase and advances, medical services, power generation, manufacturing, insurance broking, investments and real estate. Inter-segment transfers are accounted for at competitive fair market prices charged to inter- company counterparts for similar services and such services are eliminated on consolidation. Segment results, assets and liabilities include items directly attributable to a segment as well as those that can be allocated on a reasonable basis.

5.21 Events after the reporting date

All material events after the statement of financial position date have been considered and where appropriate adjustments to or disclosures are made in the consolidated financial statements.

6 RECOGNITION OF INCOME AND EXPENSES

Revenue is recognised to the extent that it is probable that 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.

6.1 Interest income and expense

For all financial instruments measured at amortised cost interest income or expense is recorded using the Effective Interest Rate (EIR). EIR is the rate that exactly discounts estimated future cash payments or receipts through the expected life of the financial instrument or a shorter period, where appropriate, to the net carrying amount of the financial asset or financial liability. The calculation takes into account all contractual terms of the financial instrument (for example, prepayment options) and includes any fees or incremental costs that are directly attributable to the instrument and are an integral part of the EIR, but not future credit losses. Interest expenses of the group other than the parent company is recognised under other expenses.

The carrying amount of the financial asset or financial liability is adjusted if the group revises its estimates of payments or receipts. The adjusted carrying amount is calculated based on the original EIR and the change in carrying amount is recorded as interest and similar income for financial assets and interest and similar expense for financial liabilities.

Once the recorded value of a financial asset or a group of similar financial assets has been reduced due to an impairment loss, interest income continues to be recognised using the original rate of interest.

6.2 Fees and commission income and expenses

Fees and commission income and expenses that are integral to the effective interest rate on a financial asset or liability are included in the measurement of the effective interest rate.

Fees and commission income are recognised as the related services are performed.

Other fees and commission expenses relate mainly to transaction and service fees, which are expensed as the services are received. Fee and commission expenses are recognised on an accrual basis.

6.3 Income from leases

6.3.1 Finance leases and hire purchase

In accordance with Sri Lanka Financial Reporting Standard 16 - Leases, income on finance leases is recognised based on a pattern reflecting a constant periodic rate of return on capital outstanding. The excess of aggregate lease rentals receivable over the cost of the leased asset constitutes the total unearned interest income at the commencement of the lease. The unearned interest income is taken into revenue on an accrual basis over the term of the lease commencing from the month in which the first rental is due in proportion to the reducing capital outstanding balance. Interest income on assets that became credit-impaired after initial recognition, is calculated by applying the effective interest rate to the amortized cost of the asset (Net of impairment) in reporting periods subsequent to the asset becoming credit-impaired. The calculation of interest revenue reverts to the gross basis in subsequent reporting periods if the asset is no longer credit-impaired. Lease receivables are regularly reviewed for impairment and if impaired, income is recognised on net of loss allowance basis.


6.3.2 Operating leases

Income from operating leases is recognised on a straight-line basis over the lease term and accounted under operating lease income.

6.4 Interest income on loans and advances

Interest on loans and advances is determined using the effective interest rate method and recognised on accrual basis. Interest income on loan assets that became credit-impaired after initial recognition, is calculated by applying the effective interest rate to the amortised cost of the asset (Net of impairment) in reporting periods subsequent to the asset becoming credit-impaired. The calculation of interest revenue reverts to the gross basis in subsequent reporting periods if the asset is no longer credit-impaired Loans and advances are regularly reviewed for impairment and, if impaired, income is recognised on net of loss allowance basis.

6.5 Overdue interest

Overdue interest on leases, hire purchase, loans and other advances is recognised on cash basis.

6.6 Interest income on investments in government securities

Interest is computed using effective interest rate method and taken to the income statement on accrual basis, based on a pattern reflecting a constant periodic rate of return.

6.7 Interest income on deposits with banks

Interest is computed using effective interest rate method and taken to the income statement on accrual basis.

6.8 Interest income on debentures, commercial and securitization papers

Interest is computed using effective interest rate method and taken to the income statement on accrual basis.

6.9 Dividend income

Dividend income is recognised in the income statement on the date the group’s right to receive payment is established.

6.10 Real estate income

Real estate income is recognised on accrual basis.

6.11 Interest income on rent-purchase facilities for real estate

Rental income on rent-purchase facilities provided on sale of real estate is recognised on accrual basis.

6.12 Profit or loss on sale of securities

Profit or loss arising from the sale of marketable equity securities and unit trusts classified into fair value through profit or loss is accounted for in the income statement on the date of the transaction. Fair value gains are accounted in the income statement under other income.

6.13 Profit/loss from sale of property, plant, and equipment

Profit/loss from sale of property, plant and equipment is recognised in the period in which the sale occurs.

6.14 Expenditure recognition

Expenses are recognised in the income statement on the basis of a direct association between the cost incurred and the earnings of specific items of income. All expenses incurred in the running of the business and in maintaining property, plant and equipment in a state of efficiency are charged to the income statement while interest and other expenses payable are recognised on an accrual basis.

6.15 Borrowing costs

Borrowing costs are recognised as an expense in the period in which they are incurred, except to the extent that they are directly attributable to the acquisition, construction, or production of a qualifying asset, in which case they are capitalised as part of the cost of that asset, in accordance with Sri Lanka Accounting Standard 23 - Borrowing Costs.

7 SIGNIFICANT ACCOUNTING POLICIES SPECIFIC TO THE BUSINESS OF THE SUBSIDIARIES

7.1 Rendering of services – power generation

Revenue from energy supplied is recognised upon delivery of energy to Ceylon Electricity Board and delivery of electrical energy is completed when electrical energy meeting the specifications as set out in the Power Purchase Agreement is received at the metering point.

7.2 Insurance broking

Commission income on insurance broking is recognised on an accrual basis and matched with related costs and expenses.

ACCOUNTING POLICIES


8 STATEMENT OF CASH FLOW

The statement of cash flow has been prepared using the direct method in accordance with Sri Lanka Accounting Standard 7 - Statement of Cash Flows. Cash and cash equivalents comprise cash in hand and balances with banks net of outstanding bank overdrafts.

9 NEW ACCOUNTING STANDARDS ISSUED BUT NOT YET EFFECTIVE

The Institute of Chartered Accountants of Sri Lanka has issued the following new Accounting Standards that have an effective date in the future and have not yet been applied in preparing the financial statements for the year ended 31st March 2020.

Sri Lanka Accounting Standard (SLFRS 17) – Insurance Contracts

The above standard is not applicable to group.

Amendments to Sri Lanka Accounting Standard - LKAS 1 Presentation of Financial Statements and Sri Lanka Accounting Standard - LKAS 8 Accounting Policies, Changes in Accounting Estimates and Errors

The amendments to LKAS 1 - Presentation of Financial Statements and LKAS 8 Accounting policies, Changes in accounting Estimates and Errors align the definition of material” across the standard and clarify certain aspects of the definition. The new definition states that, “information is material if omitting or obscuring it could reasonably be expected to influence decisions that the primary users of general-purpose financial statements make on the basis of those financial statements, which provide financial information about a specific reporting entity.

The amendments are applied prospectively for the annual periods beginning on or after 1st January 2020 with early application permitted.

Amendments to SLFRS 03: Definition of a business

Amendments to the definition of a business in Sri Lanka Accounting Standard SLFRS - 3 (Business combinations) are made to help entities determine whether an acquired set of activities and assets is a business or not. These

amendments clarify the minimum requirements for a business, remove the assessment of whether market participants are capable of replacing any missing elements, and add guidance to help entities assess whether an acquired process is substantive, narrow the definitions of a business and of outputs, and introduce an optional fair value concentration test.

The amendments are applied prospectively for the annual periods beginning on or after 1st January 2020 with early application permitted.

Amendments to Conceptual Framework for Financial Reporting

Revisions to the conceptual framework were made because some important issues were not covered and some guidance was unclear or out of date. The revised conceptual framework includes:

° a new chapter on measurement

° guidance on reporting financial performance

° improved definitions of an asset and a liability and

guidance supporting these definitions and

° clarifications in important areas, such as the roles of

stewardship, prudence and measurement uncertainty

in financial reporting

The amendments are effective for annual periods beginning 01st January 2020 with early application permitted. The group will adopt the above standards on the effective dates.

10 FINANCIAL RISK MANAGEMENT

The company manages its exposure to the risks integral to its activities through a process of risk identification, analysis, measurement and continuous monitoring. The company is exposed to credit, liquidity, market and operational risks arising out of its activities.

The company’s exposure to each of the above risk categories and policies, processes and measures taken to manage such risks are given in the Risk Management Report given on pages 26 to 35.


Group Company

2019/20 2018/19 2019/20 2018/19

Rs.'000 Rs.'000 Rs.'000 Rs.'000

11 INCOMEInterest income (Note 12) 20,116,816 18,571,815 20,038,336 18,494,161

Other revenue (Note 14) 3,753,158 3,340,097 - -

Operating lease income 1,030,459 1,000,957 1,033,916 1,004,701

Other income (Note 15) 858,252 653,584 991,884 788,776

25,758,685 23,566,453 22,064,136 20,287,638

12 INTEREST INCOMENet investment in leases and hire purchase 18,528,941 16,768,103 18,528,941 16,768,103

Loans and receivables from customers 892,025 1,269,798 890,646 1,268,464

Loans and receivables from others 180,993 98,898 104,930 25,447

Securities bought under repurchase agreements 317,064 280,202 317,064 280,202

Loans and receivables from banks 197,793 154,814 196,755 151,945

20,116,816 18,571,815 20,038,336 18,494,161

The entirety of the interest income is derived from financial instruments held at amortised cost.

Group Company

2019/20 2018/19 2019/20 2018/19

Rs.'000 Rs.'000 Rs.'000 Rs.'000

13 INTEREST EXPENSESDeposits 5,624,498 4,760,353 5,680,712 4,794,971

Loans and overdrafts 922,743 791,129 922,743 791,129

Debentures and other debt securities 179,970 425,708 179,970 425,708

Interest on lease liabilities 41,816 - 41,816 -

6,769,027 5,977,190 6,825,241 6,011,808

Interest expenses of the group other than the parent company are categorised under premises, equipment, establishment and other expenses.

Group Company

2019/20 2018/19 2019/20 2018/19

Rs.'000 Rs.'000 Rs.'000 Rs.'000

14 OTHER REVENUEManufacturing and trading income 3,203,008 2,792,215 - -

Insurance broking 371,693 358,446 - -

Medical services 119,951 127,013 - -

Power generation 58,506 62,423 - -

3,753,158 3,340,097 - -

NOTES TO THE FINANCIAL STATEMENTS


Group Company

2019/20 2018/19 2019/20 2018/19

Rs.'000 Rs.'000 Rs.'000 Rs.'000

15 OTHER INCOMEService charges 234,998 309,828 234,998 309,828

Recovery of bad debts written off 121,765 129,285 121,765 129,285

Fair value change in investment properties - 12,921 - 12,921

Profit on sale of property, plant and equipment 121,598 69,663 120,495 65,631

Dividend income from equity investments measured at fair value through profit or loss- quoted 10,019 14,887 10,013 14,869

Dividend income from equity investments measured at fair value through profit or loss- unquoted 11,623 9,963 11,623 9,963

Dividend income from subsidiaries - - 54,692 39,409

Dividend income from associates - - 91,945 78,136

Gains (losses) from financial instruments measured at fair value through profit or loss - quoted equities 2,393 1,097 2,393 1,097

Gains (losses) from financial instruments measured at fair value through profit or loss - unquoted equities - 7,089 - 7,148

Fair value gains/(losses) from financial instruments measured at fair value through profit or loss - quoted equities (25,401) (89,951) (25,327) (89,761)

Fair value gains/(losses) from financial instruments measured at fair value through profit or loss -unquoted equities (8,047) 12,471 (7,762) 12,617

Fair value gains/(losses) from financial instruments measured at fair value through profit or loss -unquoted units 225,679 1,283 210,386 -

Profit on real estate operations 6,203 10,114 6,203 10,114

Profit on maintenance of vehicles 6,397 7,875 6,397 7,875

Others 151,025 157,059 154,063 179,644

858,252 653,584 991,884 788,776

Group Company

2019/20 2018/19 2019/20 2018/19

Rs.'000 Rs.'000 Rs.'000 Rs.'000

16 OPERATING EXPENSES Operating expenses include the following:

Directors' emoluments 197,642 196,227 196,354 193,080

Legal expenses 11,370 10,487 10,240 10,487

Depreciation 585,690 561,877 527,592 503,121

Depreciation on right of use assets 172,234 - 172,225 -

Amortisation of intangible assets 44,177 44,230 43,997 44,049

Audit fees and expenses 4,145 4,648 2,492 2,978

Non-audit fees and expenses 1,037 909 260 252

Donations 593 2,550 493 2,091

Employees' Provident Fund contributions 194,816 175,389 163,849 146,956

Employees' Trust Fund contributions 46,898 42,218 39,157 35,109


Group Company

2019/20 2018/19 2019/20 2018/19

Rs.'000 Rs.'000 Rs.'000 Rs.'000

17 EMPLOYEE RETIREMENT BENEFIT EXPENSES

17.1 Amounts recognised in the income statementCurrent service cost 91,345 77,150 80,564 67,479

Interest cost 174,770 143,007 162,742 132,303

Expected return on assets (15,877) (17,796) (15,877) (17,796)

250,238 202,361 227,429 181,986

17.2 Amounts recognised in the other comprehensive incomeGains /(losses) due to changes in assumptions (44,403) 29,961 (38,439) 22,733

Actuarial gains/(losses) due to experience adjustments (130,940) (108,543) (132,253) (107,265)

Actuarial gains/(losses) on plan assets (2,045) (174) (2,045) (174)

(177,388) (78,756) (172,737) (84,706)

18 IMPAIRMENTS AND OTHER CREDIT LOSSES Charge on individually significant loans (Note. 32.1 (a) & 33.3(a) ) 178,014 213,086 178,014 213,086

Charge on individually not significant loans (Note. 32.1 (b) & 33.3 (b) ) 2,990,896 1,542,399 2,990,896 1,542,399

3,168,910 1,755,485 3,168,910 1,755,485

Charge/(reversal) on other credit losses (Note. 32.2 & 34.1) (2,131) 7,697 (2,131) 7,697

Charge on trade and other receivables (Note. 26.1) 12,217 4,629 980 1,204

Charge/(reversal) on other financial assets (Note.24.1,30.1,31.1) 14,762 (69) 15,584 (120)

Losses on de-recognition of financial assets measured at amortised cost 1,592,000 445,908 1,592,000 445,908

4,785,758 2,213,650 4,775,343 2,210,174

Group

2019/20 2018/19

Rs.'000 Rs.'000

19 SHARE OF PROFIT OF ASSOCIATES,NET OF TAXNations Trust Bank PLC 825,514 746,020

Tea Smallholders Factories PLC 30,497 15,036

Capital Suisse Asia Ltd. 3,913 4,670

859,924 765,726



Group

2019/20 2018/19

Rs.'000 Rs.'000

20 GROUP PROFIT / (LOSS) BEFORE INCOME TAX

Central Finance Company PLC 4,421,434 6,136,797

Central Industries PLC 262,985 177,029

Central Developments Ltd. 28,665 24,623

Dehigama Hotels Company Ltd. 40,820 412,348

Central Transport & Travels Ltd. 9,983 10,523

Central Construction & Development (Pvt) Ltd. (11) (7)

Central Homes (Pvt) Ltd. 4,901 4,585

CF Growth Fund Ltd. 53,880 35,835

Expanded Plastic Products (Pvt) Ltd. 1,378 1,280

Central Mineral Industries (Pvt) Ltd. (2,642) (1,718)

Kandy Private Hospitals Ltd. 12,912 16,040

Mark Marine Services (Pvt) Ltd. 35,523 38,989

Hedges Court Residencies (Pvt) Ltd. (1,356) 14

CF Insurance Brokers (Pvt) Ltd. 351,232 300,565

5,219,704 7,156,903

Inter-group adjustments (242,444) (573,871)

Share of profit of associates 859,924 765,726

5,837,184 7,348,758

Group Company

2019/20 2018/19 2019/20 2018/19

Rs.'000 Rs.'000 Rs.'000 Rs.'000

21 INCOME TAX EXPENSEThe provision for the year is made up as follows:

Current tax charge 2,777,830 3,225,646 2,582,843 3,077,445

Over provision of current tax relating to previous years (20,113) (69,123) (18,219) (67,417)

Withholding tax on inter-company dividends 10,609 18,123 - -

Capital gain tax - 164 - 164

Decrease in deferred tax liabilities (Note 38) (1,038,495) (953,767) (1,038,384) (955,919)

Increase in deferred tax assets (Note 38) (1,951) (1,039) - -

1,727,880 2,220,004 1,526,240 2,054,273

21.1 Income tax on profit of the company has been computed at the rate of 28% from 01.04.2019 to 31.12.2019 and at 24% from 01.01.2020 to 31.03.2020 as specified in the Notice to Taxpayers No. PN/IT/2020-03 (Amended) dated 18.02.2020 issued by the Department of Inland Revenue (2018/19 - 28%) on the taxable income. Group companies other than Mark Marine Services (Pvt) Ltd., Central Industries PLC and Kandy Private Hospitals Ltd. have computed tax at 28% up to 31.12.2019 and at 24% from 01.01.2020 to 31.03.2020. (2018/19 - 28%). Operating income of Mark Marine Services (Pvt) Ltd., was liable at 14% during 2019/20 financial year while other income was liable at 28% up to 31.12.2019 and at 24% from 01.01.2020 to 31.03.2020. (Operating income of Mark Marine Services (Pvt) Ltd. was liable at 14% and other income at 28% during 2018/19 financial year). Operating income of Kandy Private Hospitals Ltd. was liable at 28% up to 31.12.2019 and at 14% from 01.01.2020 to 31.03.2020 while the other income was taxed at 28% up to 31.12.2019 and at 24% from 01.01.2020 to 31.03.2020 respectively. (operating and other income were liable at 28% in 2018/19 financial year). Operating income of Central Industries PLC was taxed at 28% from 01.04.2019 to 31.12.2019 and at 18% from 01.01.2020 to 31.03.2020 while the other income was liable at 28% from 01.04.2019 to 31.12.2019 and from 01.01.2020 to 31.03.2020 at 24%.(Operating income and other income were liable at 28% in 2018/19 financial year). Dividend income of the group is liable for tax at 14% from 01.01.2020 to 31.03.2020.


21.2 A reconciliation between tax expense and the product of accounting profit multiplied by the statutory tax rate is as follows:

Group Company

2019/20 2018/19 2019/20 2018/19

Rs.'000 Rs.'000 Rs.'000 Rs.'000

Profit before tax 5,837,184 7,348,758 4,421,434 6,136,797

Share of profit of associates (859,924) (765,726) - -

Other consolidation adjustments 242,444 573,871 - - Accounting profit chargeable for income tax 5,219,704 7,156,903 4,421,434 6,136,797 Tax effect on chargeable profits at 28%, 24% 18% and 14% (2018/19 - 28% & 14%)

1,386,505 2,000,132 1,182,675 1,718,303

Tax effect on allowable credits (1,130,778) (407,409) (1,110,076) (275,592)Tax effect on exempt profits (57,596) (50,780) (46,601) (25,028)Tax effect on non- deductible expenses 1,890,746 789,209 1,856,534 764,467 Tax effect on gains / (losses) on disposals 700,311 896,234 700,311 895,295 Tax effect on losses claimed (11,358) (1,740) - - Charged to income statement 2,777,830 3,225,646 2,582,843 3,077,445 Over provision for previous years (20,113) (69,123) (18,219) (67,417)Capital gain tax - 164 - 164 Decrease in deferred tax liabilities (Note 38) (1,038,495) (953,767) (1,038,384) (955,919)Increase in deferred tax assets (Note 38) (1,951) (1,039) - - WHT on inter-company dividends 10,609 18,123 - -

1,727,880 2,220,004 1,526,240 2,054,273 Effective tax rate (excluding deferred tax) 53.22 45.07 58.42 50.15

22 EARNINGS PER SHARE

The calculation of basic and diluted earnings per share is based on the net profit for the year attributable to ordinary shareholders and the weighted average number of ordinary shares outstanding during the year.

Group

2019/20 2018/19

Rs.'000 Rs.'000

Profit attributable to equity holders of the parent (Rs.000) 3,990,148 5,041,398

Weighted average number of ordinary shares used as denominator ('000) 220,674 220,674

Basic and diluted Earnings per Share (Rs.) 18.08 22.85

Diluted earnings per share and the basic earnings per share are same due to non availability of potential dilutive ordinary shares.

Weighted average number of ordinary shares for earnings per share

Group

31.03.2020 31.03.2019

Number of shares at the beginning of the year 220,674,367 218,661,027

Restatement due to scrip dividend paid in July 2019 - 2,013,340

Weighted average number of shares at the end of the year 220,674,367 220,674,367

Weighted average number of shares as at 31st March 2019 has been restated based on the number of shares issued as scrip dividend in July 2019 in accordance with Sri Lanka Accounting Standard LKAS 33 - Earnings Per Share.



Group & Company

2019/20 2018/19

Rs.'000 Rs.'000

23 DIVIDENDS

Paid:

Interim Rs. 1.20 (2018/19: Rs. 2.00) 264,809 437,322

Final Rs. 1.60 - 349,858

Proposed:

Final Rs. 1.20 264,809 -

529,618 787,180

Dividend per share (Rs.) - Paid and proposed 2.40 3.60

Group Company

31.03.2020 31.03.2019 31.03.2020 31.03.2019

Rs.'000 Rs.'000 Rs.'000 Rs.'000

24 CASH IN HAND AND AT BANKSCash in hand 551,789 613,503 550,198 611,470

Cash at bank 206,643 111,565 106,037 70,932

Savings deposits 14,950 15,000 14,950 15,000

Expected credit loss allowance (70) (13) (68) (12)

773,312 740,055 671,117 697,390

Group Company

31.03.2020 31.03.2019 31.03.2020 31.03.2019

Rs.'000 Rs.'000 Rs.'000 Rs.'000

24.1 MOVEMENT IN EXPECTED CREDIT LOSS ALLOWANCEBalance at the beginning of the year 13 10 12 9

Charge to income statement during the year 57 3 56 3

Balance at the end of the year 70 13 68 12

Group Company

31.03.2020 31.03.2019 31.03.2020 31.03.2019

Rs.'000 Rs.'000 Rs.'000 Rs.'000

25 FAIR VALUE THROUGH PROFIT OR LOSS FINANCIAL ASSETSQuoted securities (25.1) 174,542 452,249 174,324 451,958

Unquoted equities (25.2) 100,567 108,614 98,762 106,524

Investment in units (25.3) 5,324,738 3,980 5,046,942 -

5,599,847 564,843 5,320,028 558,482



Group Group Company

No. of Cost Market No. of Cost Market No. of Cost Market No. of Cost MarketShares Value Shares Value Shares Value Shares Value

31.03.2020 31.03.2020 31.03.2019 31.03.2019 31.03.2020 31.03.2020 31.03.2019 31.03.2019

Rs.'000 Rs.'000 Rs.'000 Rs.'000 Rs.'000 Rs.'000 Rs.'000 Rs.'000

25.1 Investments in quoted securities

Banks, Finance & Insurance

Ceylinco Insurance PLC (Non-voting) 11,000 9,075 8,690 11,000 9,075 9,905 11,000 9,075 8,690 11,000 9,075 9,905

Commercial Bank of Ceylon PLC 63,622 7,952 3,824 62,614 7,845 6,180 63,622 7,952 3,824 62,614 7,845 6,180

Commercial Bank of Ceylon PLC (Non-voting) 77,729 8,209 4,547 76,273 8,078 6,407 77,729 8,209 4,547 76,273 8,078 6,407

Hatton National Bank PLC 120,912 27,603 12,708 119,137 27,244 20,850 120,912 27,603 12,708 119,137 27,244 20,850

HNB Assurance PLC 166,551 10,793 20,153 166,551 10,793 19,270 166,551 10,793 20,153 166,551 10,793 19,270

Janashakthi Insurance Company PLC 32,185 499 731 32,185 499 856 32,185 499 731 32,185 499 856

National Development Bank PLC 237,666 30,522 15,733 226,595 29,389 21,345 237,666 30,522 15,733 226,595 29,389 21,345

Peoples Leasing & Finance PLC 1,071,492 17,699 13,072 1,040,000 17,252 13,936 1,071,492 17,699 13,072 1,040,000 17,252 13,936

Sampath Bank PLC 84,971 22,643 10,111 81,616 21,852 14,699 84,971 22,643 10,111 81,616 21,852 14,699

134,995 89,569 132,027 113,448 134,995 89,569 132,027 113,448

Beverage, Food and Tobacco

Cargills (Ceylon) PLC 118,857 20,416 20,206 118,857 20,416 23,771 118,857 20,416 20,206 118,857 20,416 23,771

Closed End Funds

Namal Acuity Value Fund - - - 2,744,900 161,583 236,061 - - - 2,744,900 161,583 236,061

Construction and Engineering

Access Engineering PLC 470,743 12,159 6,214 470,743 12,159 6,120 470,743 12,159 6,214 470,743 12,159 6,120

Diversified Holdings

Distilleries Company of Sri Lanka PLC 369,395 6,108 4,802 369,395 6,108 5,356 369,395 6,108 4,802 369,395 6,108 5,356

Hemas Holdings PLC 221,566 20,801 12,451 221,566 20,801 16,617 217,681 20,760 12,233 217,681 20,760 16,326

John Keells Holdings PLC 54,261 10,500 6,262 54,261 10,500 8,465 54,261 10,500 6,262 54,261 10,500 8,465

37,409 23,515 37,409 30,438 37,368 23,297 37,368 30,147

Health Care

The Lanka Hospital Corporation PLC 92,089 5,844 2,532 92,089 5,844 4,024 92,089 5,844 2,532 92,089 5,844 4,024

Manufacturing

Alumex PLC 80,000 1,640 576 80,000 1,640 800 80,000 1,640 576 80,000 1,640 800

Chevron Lubricants Lanka PLC 110,900 18,348 5,933 110,900 18,348 6,942 110,900 18,348 5,933 110,900 18,348 6,942

Tokyo Cement Company (Lanka) PLC (Non- voting) 300,000 13,500 6,000 300,000 13,500 5,550 300,000 13,500 6,000 300,000 13,500 5,550

Swisstek (Ceylon) PLC 178,319 13,834 4,815 178,319 13,834 6,205 178,319 13,834 4,815 178,319 13,834 6,205

47,322 17,324 47,322 19,497 47,322 17,324 47,322 19,497

Power & Energy

Lanka IOC PLC 33,505 1,005 529 33,505 1,005 583 33,505 1,005 529 33,505 1,005 583

LVL Energy Fund Limited. 769,900 7,699 3,234 769,900 7,699 6,082 769,900 7,699 3,234 769,900 7,699 6,082

8,704 3,763 8,704 6,665 8,704 3,763 8,704 6,665

Telecommunications

Dialog Axiata PLC 1,343,368 15,529 11,419 1,343,368 15,529 12,225 1,343,368 15,529 11,419 1,343,368 15,529 12,225

282,378 174,542 440,993 452,249 282,337 174,324 440,952 451,958


Group Group Company

No. of Cost Market No. of Cost Market No. of Cost Market No. of Cost MarketShares Value Shares Value Shares Value Shares Value

31.03.2020 31.03.2020 31.03.2019 31.03.2019 31.03.2020 31.03.2020 31.03.2019 31.03.2019


25.1 Investments in quoted securities

Banks, Finance & Insurance

Ceylinco Insurance PLC (Non-voting) 11,000 9,075 8,690 11,000 9,075 9,905 11,000 9,075 8,690 11,000 9,075 9,905

Commercial Bank of Ceylon PLC 63,622 7,952 3,824 62,614 7,845 6,180 63,622 7,952 3,824 62,614 7,845 6,180

Commercial Bank of Ceylon PLC (Non-voting) 77,729 8,209 4,547 76,273 8,078 6,407 77,729 8,209 4,547 76,273 8,078 6,407

Hatton National Bank PLC 120,912 27,603 12,708 119,137 27,244 20,850 120,912 27,603 12,708 119,137 27,244 20,850

HNB Assurance PLC 166,551 10,793 20,153 166,551 10,793 19,270 166,551 10,793 20,153 166,551 10,793 19,270

Janashakthi Insurance Company PLC 32,185 499 731 32,185 499 856 32,185 499 731 32,185 499 856

National Development Bank PLC 237,666 30,522 15,733 226,595 29,389 21,345 237,666 30,522 15,733 226,595 29,389 21,345

Peoples Leasing & Finance PLC 1,071,492 17,699 13,072 1,040,000 17,252 13,936 1,071,492 17,699 13,072 1,040,000 17,252 13,936

Sampath Bank PLC 84,971 22,643 10,111 81,616 21,852 14,699 84,971 22,643 10,111 81,616 21,852 14,699

134,995 89,569 132,027 113,448 134,995 89,569 132,027 113,448

Beverage, Food and Tobacco

Cargills (Ceylon) PLC 118,857 20,416 20,206 118,857 20,416 23,771 118,857 20,416 20,206 118,857 20,416 23,771

Closed End Funds

Namal Acuity Value Fund - - - 2,744,900 161,583 236,061 - - - 2,744,900 161,583 236,061

Construction and Engineering

Access Engineering PLC 470,743 12,159 6,214 470,743 12,159 6,120 470,743 12,159 6,214 470,743 12,159 6,120

Diversified Holdings

Distilleries Company of Sri Lanka PLC 369,395 6,108 4,802 369,395 6,108 5,356 369,395 6,108 4,802 369,395 6,108 5,356

Hemas Holdings PLC 221,566 20,801 12,451 221,566 20,801 16,617 217,681 20,760 12,233 217,681 20,760 16,326

John Keells Holdings PLC 54,261 10,500 6,262 54,261 10,500 8,465 54,261 10,500 6,262 54,261 10,500 8,465

37,409 23,515 37,409 30,438 37,368 23,297 37,368 30,147

Health Care

The Lanka Hospital Corporation PLC 92,089 5,844 2,532 92,089 5,844 4,024 92,089 5,844 2,532 92,089 5,844 4,024

Manufacturing

Alumex PLC 80,000 1,640 576 80,000 1,640 800 80,000 1,640 576 80,000 1,640 800

Chevron Lubricants Lanka PLC 110,900 18,348 5,933 110,900 18,348 6,942 110,900 18,348 5,933 110,900 18,348 6,942

Tokyo Cement Company (Lanka) PLC (Non- voting) 300,000 13,500 6,000 300,000 13,500 5,550 300,000 13,500 6,000 300,000 13,500 5,550

Swisstek (Ceylon) PLC 178,319 13,834 4,815 178,319 13,834 6,205 178,319 13,834 4,815 178,319 13,834 6,205

47,322 17,324 47,322 19,497 47,322 17,324 47,322 19,497

Power & Energy

Lanka IOC PLC 33,505 1,005 529 33,505 1,005 583 33,505 1,005 529 33,505 1,005 583

LVL Energy Fund Limited. 769,900 7,699 3,234 769,900 7,699 6,082 769,900 7,699 3,234 769,900 7,699 6,082

8,704 3,763 8,704 6,665 8,704 3,763 8,704 6,665

Telecommunications

Dialog Axiata PLC 1,343,368 15,529 11,419 1,343,368 15,529 12,225 1,343,368 15,529 11,419 1,343,368 15,529 12,225

282,378 174,542 440,993 452,249 282,337 174,324 440,952 451,958



Group Group Company

No. of Cost Fair value No. of Cost Fair value No. of Cost Fair value No. of Cost Fair value Shares Shares Shares Shares

31.03.2020 31.03.2020 31.03.2019 31.03.2019 31.03.2020 31.03.2020 31.03.2019 31.03.2019


25.2 Unquoted equitiesCredit Information Bureau of Sri Lanka. 4,827 637 97,656 4,827 637 104,521 4,827 637 97,656 4,827 637 104,521 Finance Houses Consortium (Pvt) Ltd. 20,000 200 914 20,000 200 913 20,000 200 914 20,000 200 913 Rajawella Holdings (Pvt) Ltd. 54,600 546 1,805 54,600 546 2,090 - - - - - - Telshan Network (Pvt) Ltd. 972,000 9,720 192 972,000 - 1,090 972,000 - 192 972,000 - 1,090

11,103 100,567 1,383 108,614 837 98,762 837 106,524

Fair value of unquoted investments is based on net asset value per share basis based on the valuation performed as per the latest financial statements of the respective companies.

Group Group Company

No. of Cost Market No. of Cost Market No. of Cost Market No. of Cost MarketUnits Value Units Value Units Value Units Value

31.03.2020 31.03.2020 31.03.2019 31.03.2019 31.03.2020 31.03.2020 31.03.2019 31.03.2019


25.3 Investment in unitsFirst Capital Money Market Fund. 294,929 500,000 515,315 - - - 294,929 500,000 515,315 - - - Capital Alliance Limited Income Fund. 66,268,345 1,200,000 1,248,900 - - - 66,268,345 1,200,000 1,248,900 - - - JB Vantage Money Market Fund. 48,010,803 1,159,056 1,220,170 - - - 41,358,373 1,000,000 1,051,102 - - - NDB Wealth Money Plus Fund. 93,275,126 1,977,552 2,055,066 201,706 2,750 3,980 88,340,185 1,873,996 1,946,338 - - - Namal High Yield Fund. 12,298,394 280,000 285,287 - - - 12,298,394 280,000 285,287 - - -

5,116,608 5,324,738 2,750 3,980 4,853,996 5,046,942 - .

The group/company has not pledged any investments in quoted and unquoted securities measured at FVTPL as at 31.03.2020 and 31.03.2019.

The above fair value through profit or loss financial assets are measured at fair value through profit or loss upon initial recognition.

Group Company

31.03.2020 31.03.2019 31.03.2020 31.03.2019

Rs.'000 Rs.'000 Rs.'000 Rs.'000

26 TRADE & OTHER RECEIVABLESTrade & other receivables 1,538,535 1,299,662 580,035 468,899 Provision for impairment (39,172) (26,967) (13,726) (12,746)

1,499,363 1,272,695 566,309 456,153

Group Company

31.03.2020 31.03.2019 31.03.2020 31.03.2019

Rs.'000 Rs.'000 Rs.'000 Rs.'000

26.1 Movement in impairment for trade & other receivables Balance at the beginning of the year 26,967 47,970 12,746 11,542 Charge to income statement during the year 12,217 4,629 980 1,204 Write off of previously impaired debtors (12) (25,632) - - Balance at the end of the year 39,172 26,967 13,726 12,746


Group Group Company

No. of Cost Fair value No. of Cost Fair value No. of Cost Fair value No. of Cost Fair value Shares Shares Shares Shares

31.03.2020 31.03.2020 31.03.2019 31.03.2019 31.03.2020 31.03.2020 31.03.2019 31.03.2019


25.2 Unquoted equitiesCredit Information Bureau of Sri Lanka. 4,827 637 97,656 4,827 637 104,521 4,827 637 97,656 4,827 637 104,521 Finance Houses Consortium (Pvt) Ltd. 20,000 200 914 20,000 200 913 20,000 200 914 20,000 200 913 Rajawella Holdings (Pvt) Ltd. 54,600 546 1,805 54,600 546 2,090 - - - - - - Telshan Network (Pvt) Ltd. 972,000 9,720 192 972,000 - 1,090 972,000 - 192 972,000 - 1,090

11,103 100,567 1,383 108,614 837 98,762 837 106,524

Fair value of unquoted investments is based on net asset value per share basis based on the valuation performed as per the latest financial statements of the respective companies.

Group Group Company

No. of Cost Market No. of Cost Market No. of Cost Market No. of Cost MarketUnits Value Units Value Units Value Units Value

31.03.2020 31.03.2020 31.03.2019 31.03.2019 31.03.2020 31.03.2020 31.03.2019 31.03.2019


25.3 Investment in unitsFirst Capital Money Market Fund. 294,929 500,000 515,315 - - - 294,929 500,000 515,315 - - - Capital Alliance Limited Income Fund. 66,268,345 1,200,000 1,248,900 - - - 66,268,345 1,200,000 1,248,900 - - - JB Vantage Money Market Fund. 48,010,803 1,159,056 1,220,170 - - - 41,358,373 1,000,000 1,051,102 - - - NDB Wealth Money Plus Fund. 93,275,126 1,977,552 2,055,066 201,706 2,750 3,980 88,340,185 1,873,996 1,946,338 - - - Namal High Yield Fund. 12,298,394 280,000 285,287 - - - 12,298,394 280,000 285,287 - - -

5,116,608 5,324,738 2,750 3,980 4,853,996 5,046,942 - .

The group/company has not pledged any investments in quoted and unquoted securities measured at FVTPL as at 31.03.2020 and 31.03.2019.

The above fair value through profit or loss financial assets are measured at fair value through profit or loss upon initial recognition.

Group Company

31.03.2020 31.03.2019 31.03.2020 31.03.2019

Rs.'000 Rs.'000 Rs.'000 Rs.'000

26 TRADE & OTHER RECEIVABLESTrade & other receivables 1,538,535 1,299,662 580,035 468,899 Provision for impairment (39,172) (26,967) (13,726) (12,746)

1,499,363 1,272,695 566,309 456,153

Group Company

31.03.2020 31.03.2019 31.03.2020 31.03.2019

Rs.'000 Rs.'000 Rs.'000 Rs.'000

26.1 Movement in impairment for trade & other receivables Balance at the beginning of the year 26,967 47,970 12,746 11,542 Charge to income statement during the year 12,217 4,629 980 1,204 Write off of previously impaired debtors (12) (25,632) - - Balance at the end of the year 39,172 26,967 13,726 12,746


Group Company

31.03.2020 31.03.2019 31.03.2020 31.03.2019

Rs.' 000 Rs.' 000 Rs.'000 Rs.'000

27 TAX RECEIVABLES/PAYABLESBalance at the beginning of the year 1,991,343 904,801 1,914,796 864,753

Provision for the year 2,777,830 3,225,646 2,582,843 3,077,445

Under/(over) provision for previous years (20,113) (69,123) (18,219) (67,417)

Provision for Capital gain tax - 164 - 164

Income tax paid (3,604,808) (1,753,383) (3,447,346) (1,666,376)

Economic Service Charge paid (232,386) (259,515) (213,000) (243,902)

Withholding tax claimed (76,514) (57,247) (66,502) (49,871)

Balance at the end of the year 835,352 1,991,343 752,572 1,914,796

Income tax receivable 1,616 391 - -

Income tax payable (836,968) (1,991,734) 752,572 1,914,796

(835,352) (1,991,343) 752,572 1,914,796

Group Company

31.03.2020 31.03.2019 31.03.2020 31.03.2019

Rs.' 000 Rs.' 000 Rs.'000 Rs.'000

28 INVENTORIES AND OTHER STOCKSVehicles 100,123 417,107 100,123 417,107

Raw materials 567,981 264,558 - -

Work - in - progress 16,533 8,866 - -

Finished goods 309,190 240,186 - -

Machinery & vehicle spare parts 39,919 31,976 15,734 9,773

Others 17,894 15,874 8,970 7,563

Goods-in-transit 11,803 70,674 - -

1,063,443 1,049,241 124,827 434,443

Specific provision for stock obsolescence (66,429) (70,983) (43,307) (53,080)

Net carrying amount 997,014 978,258 81,520 381,363

Inventories recognised as an expense during the year amounted to Rs.126.67 million for the company and Rs.2,513.42 million for the group (Rs.137.37 million for the company and Rs.2,276.04 million for the group in 2018/19 financial year).

Write down of Inventories recognised as an expenses during the financial year amounted to Rs.7.80 million for the group and the company (Rs.1.48 million for group and company in 2018/19 financial year).

Inventories pledged as security for banking facilities as at 31.03.2020 amounted to Rs.7.33 million (Rs.12.5 million as at 31.03.2019).



Facilities available from banks against a negative pledge over the inventories of subsidiary company, Central Industries PLC

Bank Facilities available 31.03.2020 31.03.2019

Rs.'000 Rs.'000

Nations Trust Bank PLC Short term loan, overdraft, import loan and guarantee facilities 250,000 250,000

Hatton National Bank PLC Short term loan, overdraft, import loan and guarantee facilities 200,000 200,000

Commercial Bank of Ceylon PLC Short term loan, overdraft, import loan and guarantee facilities 287,000 142,000

Sampath Bank PLC Overdraft, import loan and guarantee facilities 65,000 65,000

Public Bank Ltd. Import loan and guarantee facilities - 135,000

Seylan Bank PLC Import loan and guarantee facilities 215,000 -

1,017,000 792,000

Inventories carried at net realisable value as at 31st March 2020 amounted to Rs.56.81 million for the company and Rs.85.80 million for the group (as at 31.03.2019 Rs.364.03 million for the company and Rs.381.64 million for the group).

Group Company

31.03.2020 31.03.2019 31.03.2020 31.03.2019

Rs.' 000 Rs.' 000 Rs.'000 Rs.'000

29 SECURITIES BOUGHT UNDER REPURCHASE AGREEMENTSAt amortised cost 4,440,427 3,289,551 4,440,427 3,289,551

4,440,427 3,289,551 4,440,427 3,289,551

Above investments have maturities within one year.

Group Company

31.03.2020 31.03.2019 31.03.2020 31.03.2019

Rs.' 000 Rs.' 000 Rs.'000 Rs.'000

30 LOANS AND RECEIVABLES FROM BANKSDeposits with banks at amortised cost 2,407,301 1,448,171 2,402,143 1,442,142

Expected credit loss allowance (3,769) (304) (3,768) (303)

2,403,532 1,447,867 2,398,375 1,441,839

Above investments have maturities within one year.

Group Company

31.03.2020 31.03.2019 31.03.2020 31.03.2019

Rs.' 000 Rs.' 000 Rs.'000 Rs.'000

30.1 Movement in expected credit loss allowance Balance at the beginning of the year 304 258 303 258

Charge to income statement during the year 3465 46 3465 45

Balance at the end of the year 3769 304 3768 303


Group Company

31.03.2020 31.03.2019 31.03.2020 31.03.2019

Rs.' 000 Rs.' 000 Rs.'000 Rs.'000

31 LOANS AND RECEIVABLES FROM OTHERSDeposits with financial institutions at amortised cost 200,888 172,606 - -

Debentures at amortised costs 304,668 392,243 25,918 38,890

Securitised and commercial papers at amortised cost 2,123,758 30,132 2,013,064 -

2,629,314 594,981 2,038,982 38,890

Expected credit loss allowance (13,081) (1,841) (12,238) (175)

2,616,233 593,140 2,026,744 38,715

Receivable within one year 2,114,173 252,946 1,676,756 13,890

Receivable after one year 515,141 342,035 362,226 25,000

2,629,314 594,981 2,038,982 38,890

Group Company

31.03.2020 31.03.2019 31.03.2020 31.03.2019

Rs.' 000 Rs.' 000 Rs.'000 Rs.'000

31.1 MOVEMENT IN EXPECTED CREDIT LOSS ALLOWANCEBalance at the beginning of the year 1,841 1,959 175 343

Charge /(write back) to income statement during the year 11,240 (118) 12,063 (168)

Balance at the end of the year 13,081 1,841 12,238 175

Group Company

31.03.2020 31.03.2019 31.03.2020 31.03.2019

Rs.' 000 Rs.' 000 Rs.'000 Rs.'000

32 LOANS AND RECEIVABLES FROM CUSTOMERSTerm loans, sub loans and micro finance loans 4,305,435 5,562,534 4,305,435 5,562,534

Loans against fixed deposits 984,392 1,139,399 995,112 1,139,399

Housing and real estate receivables 6,990 6,196 6,990 6,196

Loans to employees 98,565 94,884 88,708 85,630

5,395,382 6,803,013 5,396,245 6,793,759

Impairment for individually significant loans (Note 32.1(a)) (368,524) (293,407) (368,524) (293,407)

Impairment for individually not significant loans (Note 32.1(b)) (856,183) (509,729) (856,183) (509,729)

Other credit losses (Note 32.2) (3,645) (3,624) (3,645) (3,624)

4,167,030 5,996,253 4,167,893 5,986,999

Receivable within one year 3,620,966 4,218,744 3,627,595 4,215,588

Receivable after one year 1,774,416 2,584,269 1,768,650 2,578,171

5,395,382 6,803,013 5,396,245 6,793,759



Group Company

31.03.2020 31.03.2019 31.03.2020 31.03.2019

Rs.' 000 Rs.' 000 Rs.'000 Rs.'000

32.1 (a)

Movement in impairment for individually significant loans

Balance at the beginning of the year 293,407 113,793 293,407 113,793

Charge to the income statement during the year 103,661 189,773 103,661 189,773

Write off of impaired loans (28,544) (10,159) (28,544) (10,159)

Balance at the end of the year 368,524 293,407 368,524 293,407

(b) Movement in impairment for individually not significant loans


Charge to the income statement during the year 458,585 354,463 458,585 354,463

Write off of impaired loans (112,131) (17,805) (112,131) (17,805)


Total impairment provision 1,224,707 803,136 1,224,707 803,136

32.2 Other credit losses


Charge /(write back) to the income statement during the year 21 (92) 21 (92)


Group Company

31.03.2020 31.03.2019 31.03.2020 31.03.2019

Rs.' 000 Rs.' 000 Rs.'000 Rs.'000

33 NET INVESTMENT IN LEASES & HIRE PURCHASE

Lease receivables (Note 33.1) 79,322,593 78,421,288 79,322,593 78,421,288

Hire purchase receivables (Note 33.2) 70,752 213,430 70,752 213,430

79,393,345 78,634,718 79,393,345 78,634,718

Impairment for individually significant leases (Note 33.3(a)) (181,394) (112,097) (181,394) (112,097)

Impairment for individually not significant leases (Note 33.3(b)) (4,868,617) (2,771,538) (4,868,617) (2,771,538)

74,343,334 75,751,083 74,343,334 75,751,083

33.1 Lease receivables

Gross rental receivables 100,254,772 105,380,555 100,254,772 105,380,555

Unearned interest income (27,584,125) (30,284,262) (27,584,125) (30,284,262)

72,670,647 75,096,293 72,670,647 75,096,293

Amounts receivable from lessees 8,206,167 5,378,452 8,206,167 5,378,452

Rentals received in advance (1,554,221) (2,053,457) (1,554,221) (2,053,457)

79,322,593 78,421,288 79,322,593 78,421,288


Group Company

31.03.2020 31.03.2019 31.03.2020 31.03.2019

Rs.' 000 Rs.' 000 Rs.'000 Rs.'000

33.2 Hire purchase receivablesGross rental receivable 16,271 92,296 16,271 92,296 Unearned interest income (2,365) (10,032) (2,365) (10,032)

13,906 82,264 13,906 82,264 Amounts receivable from hirers 56,846 131,785 56,846 131,785 Rentals received in advance - (619) - (619)

70,752 213,430 70,752 213,430

Rentals receivable on lease and hire purchase Not later than one yearGross rentals receivables 45,448,760 43,439,342 45,448,760 43,439,342 Unearned interest income (12,906,938) (14,116,305) (12,906,938) (14,116,305)Rentals received in advance (285,686) (319,159) (285,686) (319,159)

32,256,136 29,003,878 32,256,136 29,003,878 Later than one year and not later than five yearsGross rentals receivables 62,506,713 66,972,810 62,506,713 66,972,810 Unearned interest income (14,577,440) (16,070,325) (14,577,440) (16,070,325)Rentals received in advance (1,093,823) (1,605,732) (1,093,823) (1,605,732)

46,835,450 49,296,753 46,835,450 49,296,753 Later than five yearsGross rentals receivables 578,583 570,936 578,583 570,936 Unearned interest income (102,112) (107,664) (102,112) (107,664)Rentals received in advance (174,712) (129,185) (174,712) (129,185)

301,759 334,087 301,759 334,087 Total receivables on leases and hire purchase 79,393,345 78,634,718 79,393,345 78,634,718

Maturity analysis of undiscounted lease and hire purchaseNot later than one year 45,448,760 43,439,342 45,448,760 43,439,342 More than one year not later than two years 27,774,790 29,370,229 27,774,790 29,370,229 More than two years not later than three years 20,383,352 21,260,680 20,383,352 21,260,680 More than three years not later than four years 10,738,543 11,474,635 10,738,543 11,474,635 More than four years not later than five years 3,610,027 4,867,265 3,610,027 4,867,265 More than five years 578,583 570,936 578,583 570,936 Total 108,534,056 110,983,088 108,534,056 110,983,088

33.3 (a) Movement in impairment for individually significant leasesBalance at the beginning of the year 112,097 88,784 112,097 88,784 Charge to the income statement during the year 74,353 23,313 74,353 23,313 Write off of impaired loans (5,056) - (5,056) - Balance at the end of the year 181,394 112,097 181,394 112,097

33.3 (b) Movement in impairment for individually not significant leases

Balance at the beginning of the year 2,771,538 2,452,282 2,771,538 2,452,282 Charge to the income statement during the year 2,532,311 1,187,936 2,532,311 1,187,936 Write off of impaired loans (435,232) (868,680) (435,232) (868,680)Balance at the end of the year 4,868,617 2,771,538 4,868,617 2,771,538

Total impairment provision 5,050,011 2,883,635 5,050,011 2,883,635



Group Company

31.03.2020 31.03.2019 31.03.2020 31.03.2019

Rs.' 000 Rs.' 000 Rs.'000 Rs.'000

34 INVESTMENTS IN REAL ESTATE


Transferred from property, plant and equipment - 8,732 - 8,732

Disposals during the year (6,866) (22,724) (6,866) (22,724)

69,164 76,030 69,164 76,030

Provision for impairment (50,825) (52,977) (50,825) (52,977)


34.1 Movement in impairment for real estate


Charge/(write back) to income statement during the year (2,152) 7,789 (2,152) 7,789


Group & Company

31.03.2020 31.03.2019

Rs.' 000 Rs.' 000

35 INVESTMENTS PROPERTIES

Balance at the beginning of the year 303,800 313,663

Revaluation gain - 12,921

Disposals during the year - (22,784)

Balance at the end of the year 303,800 303,800

Information of investment properties

Location Group & CompanyRange of estimates for

unobservable inputExtent

Perches Fair valuePrice per perch for land 31.03.2020 31.03.2019

Rs.000 Rs.000 Rs.000

Sarasavigama Road, Hindagala 52.37 1,050.40 55,000 55,000

167/121, Hekiththa Road, Wattala 600.00 375.00 225,000 225,000

Mahiyangana Road, Diganawatte 50.49 356.50 18,000 18,000

Mahaberiyatenna, Digana 75.62 76.70 5,800 5,800

303,800 303,800

The investment properties are revalued regularly to ensure that the carrying values do not differ materially from the fair values of such properties. The investment properties were revalued by Mr. Anuradha Seneviratne an independent Qualified Valuer on comparison method in March 2020 and it was concluded that there is no material change in the fair value of such properties compared to the carrying values, hence no fair value adjustments during the current financial year.


Details of group’s investment properties and information about the fair value hierarchy as at the end of the reporting period are as follows:

Group & Company

Level 3 Fair value31.03.2020 31.03.2019 31.03.2020 31.03.2019

Rs.000 Rs.000 Rs.000 Rs.000

Investment properties 303,800 303,800 303,800 303,800

There were no maintenance costs incurred in respect of investment properties.

There are no restrictions on the realisability of the investment properties.

There are no contractual obligations to construct or develop investment properties or for repairs,maintenance or enhancements.


36 COMPANY’S/GROUP’S INVESTMENTS IN ASSOCIATES

Investor Investee Principal Principal % Holding No. of shares Cost Market Value/Fair Value

place business 31.03.2020 31.03.2019 31.03.2020 31.03.2019 31.03.2020 31.03.2019 31.03.2020 31.03.2019

of business activities Rs.'000 Rs.’000 Rs.'000 Rs.'000

Central Finance Company PLC Quoted investments 22.85% 22.85% 6,854,814 6,854,814 99,337 99,337 130,927 165,201

Tea Smallholders Factories PLC Sri Lanka Processing green leaf purchased from tea smallholders and the sale of processed black tea

9.85% 9.89% 24,124,933 24,124,933 673,603 673,603 1,524,696 2,168,831

Nations Trust Bank PLC (voting) Sri Lanka Licensed commercial bank 20.84% 18.42% 8,121,765 7,355,587 652,216 588,624 609,132 590,654

Nations Trust Bank PLC (convertible non-voting)

Central Finance Company PLC Unquoted investmentsCapital Suisse Asia Ltd.

Sri Lanka Investment company 16.29% 16.29% 2,949,003 2,949,003 29,490 29,490 30,080 35,242

Company investment in associates 1,454,646 1,391,054 2,294,835 2,959,928

CF Growth Fund Ltd. Quoted investmentsTea Smallholders Factories PLC 6.45% 6.45% 1,933,678 1,933,678 30,361 30,361 36,933 46,602 Nations Trust Bank PLC (voting) 4.93% 4.95% 12,069,880 12,069,880 316,937 316,937 762,816 1,085,082 Nations Trust Bank PLC (convertible non-voting)

5.40% 5.27% 2,103,451 2,103,451 168,327 168,327 157,759 168,907

Unquoted investmentsCapital Suisse Asia Ltd. 8.29% 8.29% 1,500,000 1,500,000 15,000 15,000 15,300 17,926

CF Insurance Brokers (Pvt) Ltd. Quoted investmentsNations Trust Bank PLC (voting) 4.96% 4.98% 12,152,256 12,152,256 432,567 432,567 768,023 1,092,488


5.43% 5.30% 2,117,807 2,117,807 169,476 169,476 158,836 170,060

Group's investment in associates 2,587,314 2,523,722 4,194,502 5,540,993

Adjustment on sale of shares within the group (224,844) (224,844) - -

Group's investment in associates 2,362,470 2,298,878

Group's share of associate companies' retained assetsTea Smallholders Factories PLC 314,878 279,010

Nations Trust Bank PLC 4,752,497 3,917,092

Capital Suisse Asia Ltd. 891 8,678

Group's investment in associates (equity basis) 7,430,736 6,503,658


36 COMPANY’S/GROUP’S INVESTMENTS IN ASSOCIATES

Investor Investee Principal Principal % Holding No. of shares Cost Market Value/Fair Value

place business 31.03.2020 31.03.2019 31.03.2020 31.03.2019 31.03.2020 31.03.2019 31.03.2020 31.03.2019

of business activities Rs.'000 Rs.’000 Rs.'000 Rs.'000

Central Finance Company PLC Quoted investments 22.85% 22.85% 6,854,814 6,854,814 99,337 99,337 130,927 165,201

Tea Smallholders Factories PLC Sri Lanka Processing green leaf purchased from tea smallholders and the sale of processed black tea

9.85% 9.89% 24,124,933 24,124,933 673,603 673,603 1,524,696 2,168,831

Nations Trust Bank PLC (voting) Sri Lanka Licensed commercial bank 20.84% 18.42% 8,121,765 7,355,587 652,216 588,624 609,132 590,654


Central Finance Company PLC Unquoted investmentsCapital Suisse Asia Ltd.

Sri Lanka Investment company 16.29% 16.29% 2,949,003 2,949,003 29,490 29,490 30,080 35,242

Company investment in associates 1,454,646 1,391,054 2,294,835 2,959,928

CF Growth Fund Ltd. Quoted investmentsTea Smallholders Factories PLC 6.45% 6.45% 1,933,678 1,933,678 30,361 30,361 36,933 46,602 Nations Trust Bank PLC (voting) 4.93% 4.95% 12,069,880 12,069,880 316,937 316,937 762,816 1,085,082 Nations Trust Bank PLC (convertible non-voting)

5.40% 5.27% 2,103,451 2,103,451 168,327 168,327 157,759 168,907

Unquoted investmentsCapital Suisse Asia Ltd. 8.29% 8.29% 1,500,000 1,500,000 15,000 15,000 15,300 17,926

CF Insurance Brokers (Pvt) Ltd. Quoted investmentsNations Trust Bank PLC (voting) 4.96% 4.98% 12,152,256 12,152,256 432,567 432,567 768,023 1,092,488


5.43% 5.30% 2,117,807 2,117,807 169,476 169,476 158,836 170,060

Group's investment in associates 2,587,314 2,523,722 4,194,502 5,540,993

Adjustment on sale of shares within the group (224,844) (224,844) - -

Group's investment in associates 2,362,470 2,298,878

Group's share of associate companies' retained assetsTea Smallholders Factories PLC 314,878 279,010

Nations Trust Bank PLC 4,752,497 3,917,092

Capital Suisse Asia Ltd. 891 8,678

Group's investment in associates (equity basis) 7,430,736 6,503,658


Year ended Year ended 31.03.2020 31.03.2019 31.03.2020 31.03.2019

Group Company

Rs.000 Rs.000 Rs.000 Rs.000

Investment in associates (at cost) at the beginning of the year 2,298,878 2,409,136 1,391,054 1,330,862

Adjustment on sale of shares within the group - (224,844) - -

Investment made during the year (cash effect) 63,592 - 63,592 -

Increase in investment through scrip dividends(non cash effect) - 114,586 - 60,192

Investment in associates (at cost) at the end of the year 2,362,470 2,298,878 1,454,646 1,391,054

No impairment provision has been made for decline in market value of non-voting shares of Nations Trust Bank PLC at the company level as the market value of total investment in voting and non-voting shares is higher than the cost of the investment.


Nations Trust Bank PLCTea Smallholders Factories PLC

Capital Suisse Asia Ltd. Total

31.03.2020 31.03.2019 31.03.2020 31.03.2019 31.03.2020 31.03.2019 31.03.2020 31.03.2019

Rs.'000 Rs.’000 Rs.'000 Rs.’000 Rs.'000 Rs.’000 Rs.'000 Rs.’000

Group's investment in associates at cost at the beginning of the year 2,124,690 2,234,948 129,698 129,698 44,490 44,490 2,298,878 2,409,136

Investment made during the year 63,592 114,586 - - - - 63,592 114,586

Adjustment on sale of shares within the group - (224,844) - - - - - (224,844)Investment in associates (at cost) at the end of the year 2,188,282 2,124,690 129,698 129,698 44,490 44,490 2,362,470 2,298,878 Group's share of associate companies' retained earnings at beginning of the year 3,917,092 3,292,025 279,010 273,977 8,678 19,006 4,204,780 3,585,008

For the year endedShare of profit / (loss) of associates (net of tax) 825,514 746,020 30,497 15,036 3,913 4,670 859,924 765,726

Share of other comprehensive income (net of tax) 149,478 2,168 20,310 7,574 - - 169,788 9,742

Dividends received (139,586) (123,121) (14,940) (17,577) (11,700) (9,635) (166,226) (150,333)

Reduction in net assets due to disposal of a subsidiary owned by an associate company - - - - - (5,363) - (5,363)

6,940,780 6,041,782 444,575 408,708 45,381 53,168 7,430,736 6,503,658

Fair value of unquoted investments is based on net asset value per share basis.



31.03.2020 31.03.2019 31.03.2020 31.03.2019 31.03.2020 31.03.2019 31.03.2020 31.03.2019

As at Rs.'000 Rs.’000 Rs.'000 Rs.’000 Rs.'000 Rs.’000 Rs.'000 Rs.’000

36.1 Summarised financial information of associates

Assets 328,441,234 344,349,173 1,644,202 1,699,443 184,671 216,567 330,270,107 346,265,183

Liabilities 296,509,625 316,369,741 225,317 402,965 50 263 296,734,992 316,772,969

Non-controlling interest - - - - - - - - Equity 31,931,609 27,979,432 1,418,885 1,296,478 184,621 216,304 33,535,115 29,492,214 For the year endedRevenue 45,737,597 44,754,242 2,109,139 2,171,257 23,723 25,347 47,870,459 46,950,846

Profit after tax 3,899,662 3,535,642 104,086 51,318 15,919 16,171 4,019,667 3,603,131

Other comprehensive income 705,373 10,270 69,319 25,848 - - 774,692 36,118

Total comprehensive income 4,605,035 3,545,912 173,405 77,166 15,919 16,171 4,794,359 3,639,249

Total comprehensive income attributable to equity holders of the company 4,605,035 3,545,912 173,405 77,166 15,919 16,171 4,794,359 3,639,249

Total comprehensive income attributable to non-controlling interest - - - - - (2,829) - (2,829)




31.03.2020 31.03.2019 31.03.2020 31.03.2019 31.03.2020 31.03.2019 31.03.2020 31.03.2019

Rs.'000 Rs.’000 Rs.'000 Rs.’000 Rs.'000 Rs.’000 Rs.'000 Rs.’000

Group's investment in associates at cost at the beginning of the year 2,124,690 2,234,948 129,698 129,698 44,490 44,490 2,298,878 2,409,136

Investment made during the year 63,592 114,586 - - - - 63,592 114,586

Adjustment on sale of shares within the group - (224,844) - - - - - (224,844)Investment in associates (at cost) at the end of the year 2,188,282 2,124,690 129,698 129,698 44,490 44,490 2,362,470 2,298,878 Group's share of associate companies' retained earnings at beginning of the year 3,917,092 3,292,025 279,010 273,977 8,678 19,006 4,204,780 3,585,008

For the year endedShare of profit / (loss) of associates (net of tax) 825,514 746,020 30,497 15,036 3,913 4,670 859,924 765,726

Share of other comprehensive income (net of tax) 149,478 2,168 20,310 7,574 - - 169,788 9,742

Dividends received (139,586) (123,121) (14,940) (17,577) (11,700) (9,635) (166,226) (150,333)

Reduction in net assets due to disposal of a subsidiary owned by an associate company - - - - - (5,363) - (5,363)

6,940,780 6,041,782 444,575 408,708 45,381 53,168 7,430,736 6,503,658

Fair value of unquoted investments is based on net asset value per share basis.



31.03.2020 31.03.2019 31.03.2020 31.03.2019 31.03.2020 31.03.2019 31.03.2020 31.03.2019

As at Rs.'000 Rs.’000 Rs.'000 Rs.’000 Rs.'000 Rs.’000 Rs.'000 Rs.’000

36.1 Summarised financial information of associates

Assets 328,441,234 344,349,173 1,644,202 1,699,443 184,671 216,567 330,270,107 346,265,183

Liabilities 296,509,625 316,369,741 225,317 402,965 50 263 296,734,992 316,772,969

Non-controlling interest - - - - - - - - Equity 31,931,609 27,979,432 1,418,885 1,296,478 184,621 216,304 33,535,115 29,492,214 For the year endedRevenue 45,737,597 44,754,242 2,109,139 2,171,257 23,723 25,347 47,870,459 46,950,846

Profit after tax 3,899,662 3,535,642 104,086 51,318 15,919 16,171 4,019,667 3,603,131

Other comprehensive income 705,373 10,270 69,319 25,848 - - 774,692 36,118

Total comprehensive income 4,605,035 3,545,912 173,405 77,166 15,919 16,171 4,794,359 3,639,249

Total comprehensive income attributable to equity holders of the company 4,605,035 3,545,912 173,405 77,166 15,919 16,171 4,794,359 3,639,249

Total comprehensive income attributable to non-controlling interest - - - - - (2,829) - (2,829)


37 GROUP’S/COMPANY’S INVESTMENTS IN SUBSIDIARIES

% Holding % Holding No. of shares Cost Market Value/Directors’ Valuation

Principal business activities Principal Group Company Company Company Companyplace 31.03.2020 31.03.2019 31.03.2020 31.03.2019 31.03.2020 31.03.2019 31.03.2020 31.03.2019 31.03.2020 31.03.2019

of business Rs.'000 Rs.’000 Rs.'000 Rs.'000

Quoted investments


Sri Lanka49.98% 49.98% 44.06% 44.06% 8,709,000 8,709,000 42,905 42,905 285,655 245,594

Unquoted investments

Central Developments Ltd. Investment company Sri Lanka 99.99% 99.99% 39.79% 39.79% 5,289,972 5,289,972 52,900 52,900 117,550 107,546

Dehigama Hotels Company Ltd. Renting of commercial property Sri Lanka 79.69% 79.69% 79.69% 79.69% 659,854 659,854 7,443 7,443 454,460 449,104

Expanded Plastic Products (Pvt) Ltd. Investment company Sri Lanka 99.99% 99.99% 40.00% 40.00% 2,559,967 2,559,967 25,600 25,600 31,162 26,420

Central Mineral Industries (Pvt) Ltd. Manufacture of mineral products Sri Lanka 99.99% 99.99% 39.99% 39.99% 139,979 139,979 1,400 1,400 35,038 36,163

Central Transport & Travels Ltd. Hiring of vehicles Sri Lanka 99.99% 99.99% 39.64% 39.64% 1,169,000 1,169,000 11,690 11,690 43,112 40,067

Central Construction & Development (Pvt) Ltd. Investment company Sri Lanka 99.90% 99.90% 0.10% 0.10% 5 5 - - - -

CF Growth Fund Ltd. Investment company Sri Lanka 99.99% 99.99% 39.87% 39.87% 6,500,000 6,500,000 65,000 65,000 427,289 546,375

Kandy Private Hospitals Ltd. Provision of healthcare services Sri Lanka 66.58% 66.58% 37.00% 37.00% 203,700 203,700 2,363 2,363 182,909 180,308

CF Insurance Brokers (Pvt) Ltd. Insurance broking Sri Lanka 99.99% 99.99% 40.00% 40.00% 4,949,997 4,949,997 49,500 49,500 779,567 835,196


Sri Lanka99.99% 99.99% 38.48% 38.48% 1,315,000 1,315,000 13,151 13,151 16,888 15,499

Mark Marine Services (Pvt) Ltd. Hydro power generation Sri Lanka 56.79% 58.12% 39.09% 40.00% 1,712,237 1,712,237 27,579 27,579 25,555 25,465



Sri Lanka100.00% 100.00% 40.00% 40.00% 2,000,000 2,000,000 20,000 20,000 - -

319,531 319,531 2,399,186 2,507,737

Provision for impairment in investments in subsidiaries

(30,468) (30,468)

Net investment in subsidiary companies 289,063 289,063

Fair value of unquoted investments is based on net asset value per share basis based on audited financial statements of respective companies.



37 GROUP’S/COMPANY’S INVESTMENTS IN SUBSIDIARIES

% Holding % Holding No. of shares Cost Market Value/Directors’ Valuation

Principal business activities Principal Group Company Company Company Companyplace 31.03.2020 31.03.2019 31.03.2020 31.03.2019 31.03.2020 31.03.2019 31.03.2020 31.03.2019 31.03.2020 31.03.2019

of business Rs.'000 Rs.’000 Rs.'000 Rs.'000

Quoted investments


Sri Lanka49.98% 49.98% 44.06% 44.06% 8,709,000 8,709,000 42,905 42,905 285,655 245,594

Unquoted investments

Central Developments Ltd. Investment company Sri Lanka 99.99% 99.99% 39.79% 39.79% 5,289,972 5,289,972 52,900 52,900 117,550 107,546

Dehigama Hotels Company Ltd. Renting of commercial property Sri Lanka 79.69% 79.69% 79.69% 79.69% 659,854 659,854 7,443 7,443 454,460 449,104

Expanded Plastic Products (Pvt) Ltd. Investment company Sri Lanka 99.99% 99.99% 40.00% 40.00% 2,559,967 2,559,967 25,600 25,600 31,162 26,420

Central Mineral Industries (Pvt) Ltd. Manufacture of mineral products Sri Lanka 99.99% 99.99% 39.99% 39.99% 139,979 139,979 1,400 1,400 35,038 36,163

Central Transport & Travels Ltd. Hiring of vehicles Sri Lanka 99.99% 99.99% 39.64% 39.64% 1,169,000 1,169,000 11,690 11,690 43,112 40,067

Central Construction & Development (Pvt) Ltd. Investment company Sri Lanka 99.90% 99.90% 0.10% 0.10% 5 5 - - - -

CF Growth Fund Ltd. Investment company Sri Lanka 99.99% 99.99% 39.87% 39.87% 6,500,000 6,500,000 65,000 65,000 427,289 546,375

Kandy Private Hospitals Ltd. Provision of healthcare services Sri Lanka 66.58% 66.58% 37.00% 37.00% 203,700 203,700 2,363 2,363 182,909 180,308

CF Insurance Brokers (Pvt) Ltd. Insurance broking Sri Lanka 99.99% 99.99% 40.00% 40.00% 4,949,997 4,949,997 49,500 49,500 779,567 835,196


Sri Lanka99.99% 99.99% 38.48% 38.48% 1,315,000 1,315,000 13,151 13,151 16,888 15,499

Mark Marine Services (Pvt) Ltd. Hydro power generation Sri Lanka 56.79% 58.12% 39.09% 40.00% 1,712,237 1,712,237 27,579 27,579 25,555 25,465



Sri Lanka100.00% 100.00% 40.00% 40.00% 2,000,000 2,000,000 20,000 20,000 - -

319,531 319,531 2,399,186 2,507,737

Provision for impairment in investments in subsidiaries

(30,468) (30,468)

Net investment in subsidiary companies 289,063 289,063

Fair value of unquoted investments is based on net asset value per share basis based on audited financial statements of respective companies.


37.1 Non-controlling interest (NCI) in subsidiaries

Subsidiary% of ownership and voting

rights held by NCIShare of income of NCI Share of other comprehensive

income of NCI Share of total comprehensive

income of NCI Adjustment through equity

statementNon -controlling interest(NCI) Dividends paid to /repurchase

of shares from NCIAs at For the year ended For the year ended For the year ended For the year ended As at For the year ended

31.03.2020 31.03.2019 31.03.2020 31.03.2019 31.03.2020 31.03.2019 31.03.2020 31.03.2019 31.03.2020 31.03.2019 31.03.2020 31.03.2019 31.03.2020 31.03.2019

Rs.’000 Rs.’000 Rs.’000 Rs.’000 Rs.’000 Rs.’000 Rs.’000 Rs.’000 Rs.’000 Rs.’000 Rs.’000 Rs.’000

Central Industries PLC 50.02% 50.02% 96,991 64,773 293 112,406 97,284 177,179 75 80 887,913 815,273 24,719 19,776

Mark Marine Services (Pvt) Ltd. 43.21% 41.88% 13,582 13,465 (233) 173 13,349 13,638 1,449 - 28,256 26,707 13,249 25,061

Dehigama Hotels Company Ltd. 20.31% 20.31% 5,906 4,979 - 47,800 5,906 52,779 - - 115,826 114,462 4,542 4,542 Kandy Private Hospitals Ltd. 33.42% 33.42% 2,677 4,139 120 56,038 2,797 60,177 11 28 165,196 162,848 460 467

119,156 87,356 180 216,417 119,336 303,773 1,535 108 1,197,191 1,119,290 42,970 49,846

37.2 Summarised financial information of subsidiaries

As at For the year ended31.03.2020 31.03.2019 31.03.2020 31.03.2019 31.03.2020 31.03.2019 31.03.2020 31.03.2019 31.03.2020 31.03.2019 31.03.2020 31.03.2019

Assets Liabilities Equity Revenue Profit/(loss) after tax Total comprehensive income

Central Industries PLC 2,576,180 2,255,670 801,071 625,780 1,775,109 1,629,890 3,182,456 2,769,967 193,905 129,495 194,490 354,218

Central Developments Ltd. 307,179 272,240 11,767 1,971 295,412 270,269 29,832 24,848 25,057 21,341 25,142 21,301

Dehigama Hotels Company Ltd. 752,768 724,465 182,453 160,870 570,315 563,595 39,186 35,863 29,079 258,666 29,079 258,666

Expanded Plastic Products (Pvt) Ltd. 78,042 66,280 135 229 77,907 66,051 1,472 1,390 1,010 925 1,040 853

Central Mineral Industries (Pvt) Ltd. 132,576 135,110 44,969 44,688 87,607 90,422 20,552 22,248 (2,903) (1,416) (2,814) 35,691

Central Transport & Travels Ltd. 109,677 103,236 919 2,161 108,758 101,075 1,071 1,071 7,215 7,651 7,683 7,682

Central Construction & Development (Pvt) Ltd. - - 50 38 (50) (38) 73 85 (11) (7) (11) (7)

CF Growth Fund Ltd. 1,071,932 1,370,500 180 50 1,071,752 1,370,450 54,071 36,067 53,880 35,835 (298,697) 123,713

Kandy Private Hospitals Ltd. 642,855 641,144 148,542 153,860 494,313 487,284 119,951 127,013 8,009 12,385 8,371 180,062

CF Insurance Brokers (Pvt) Ltd. 2,246,473 2,396,296 297,555 308,305 1,948,918 2,087,991 371,693 358,446 258,446 227,931 (114,323) 349,436

Central Homes (Pvt) Ltd. 44,186 41,142 296 862 43,890 40,280 5,012 4,725 3,612 3,301 3,612 3,301

Mark Marine Services (Pvt) Ltd. 72,879 73,399 7,499 9,647 65,380 63,756 58,506 62,422 31,433 32,150 30,893 32,562

Hedges Court Residencies (Pvt) Ltd. 38,304 28,925 195,402 184,530 (157,098) (155,605) 505 614 (1,493) (157) (1,493) (157)

Year ended Year ended31.03.2020 31.03.2019

Effects on the funds attributable to equity holders of the parent due to reduction in parent’s ownership interest in Mark Marine Services (Pvt) Ltd.

Ownership interest 56.79% 58.12%

Reduction in profits attributable to equity holders of the parent (Rs.000) (418)

Increase in share of other comprehensive income attributable to equity holders of the parent due to loss of other comprehensive income reported by the subsidiary (Rs.000) 7

Increase in profits attributable equity holders of the parent due to reduction of dividends received by the group (Rs.000) 407

Decrease in funds attributable to equity holders of the parent(Rs.000) (4)



37.1 Non-controlling interest (NCI) in subsidiaries

Subsidiary% of ownership and voting

rights held by NCIShare of income of NCI Share of other comprehensive

income of NCI Share of total comprehensive

income of NCI Adjustment through equity

statementNon -controlling interest(NCI) Dividends paid to /repurchase

of shares from NCIAs at For the year ended For the year ended For the year ended For the year ended As at For the year ended

31.03.2020 31.03.2019 31.03.2020 31.03.2019 31.03.2020 31.03.2019 31.03.2020 31.03.2019 31.03.2020 31.03.2019 31.03.2020 31.03.2019 31.03.2020 31.03.2019

Rs.’000 Rs.’000 Rs.’000 Rs.’000 Rs.’000 Rs.’000 Rs.’000 Rs.’000 Rs.’000 Rs.’000 Rs.’000 Rs.’000

Central Industries PLC 50.02% 50.02% 96,991 64,773 293 112,406 97,284 177,179 75 80 887,913 815,273 24,719 19,776

Mark Marine Services (Pvt) Ltd. 43.21% 41.88% 13,582 13,465 (233) 173 13,349 13,638 1,449 - 28,256 26,707 13,249 25,061

Dehigama Hotels Company Ltd. 20.31% 20.31% 5,906 4,979 - 47,800 5,906 52,779 - - 115,826 114,462 4,542 4,542 Kandy Private Hospitals Ltd. 33.42% 33.42% 2,677 4,139 120 56,038 2,797 60,177 11 28 165,196 162,848 460 467

119,156 87,356 180 216,417 119,336 303,773 1,535 108 1,197,191 1,119,290 42,970 49,846

37.2 Summarised financial information of subsidiaries

As at For the year ended31.03.2020 31.03.2019 31.03.2020 31.03.2019 31.03.2020 31.03.2019 31.03.2020 31.03.2019 31.03.2020 31.03.2019 31.03.2020 31.03.2019

Assets Liabilities Equity Revenue Profit/(loss) after tax Total comprehensive income

Central Industries PLC 2,576,180 2,255,670 801,071 625,780 1,775,109 1,629,890 3,182,456 2,769,967 193,905 129,495 194,490 354,218

Central Developments Ltd. 307,179 272,240 11,767 1,971 295,412 270,269 29,832 24,848 25,057 21,341 25,142 21,301

Dehigama Hotels Company Ltd. 752,768 724,465 182,453 160,870 570,315 563,595 39,186 35,863 29,079 258,666 29,079 258,666

Expanded Plastic Products (Pvt) Ltd. 78,042 66,280 135 229 77,907 66,051 1,472 1,390 1,010 925 1,040 853

Central Mineral Industries (Pvt) Ltd. 132,576 135,110 44,969 44,688 87,607 90,422 20,552 22,248 (2,903) (1,416) (2,814) 35,691

Central Transport & Travels Ltd. 109,677 103,236 919 2,161 108,758 101,075 1,071 1,071 7,215 7,651 7,683 7,682

Central Construction & Development (Pvt) Ltd. - - 50 38 (50) (38) 73 85 (11) (7) (11) (7)

CF Growth Fund Ltd. 1,071,932 1,370,500 180 50 1,071,752 1,370,450 54,071 36,067 53,880 35,835 (298,697) 123,713

Kandy Private Hospitals Ltd. 642,855 641,144 148,542 153,860 494,313 487,284 119,951 127,013 8,009 12,385 8,371 180,062

CF Insurance Brokers (Pvt) Ltd. 2,246,473 2,396,296 297,555 308,305 1,948,918 2,087,991 371,693 358,446 258,446 227,931 (114,323) 349,436

Central Homes (Pvt) Ltd. 44,186 41,142 296 862 43,890 40,280 5,012 4,725 3,612 3,301 3,612 3,301

Mark Marine Services (Pvt) Ltd. 72,879 73,399 7,499 9,647 65,380 63,756 58,506 62,422 31,433 32,150 30,893 32,562

Hedges Court Residencies (Pvt) Ltd. 38,304 28,925 195,402 184,530 (157,098) (155,605) 505 614 (1,493) (157) (1,493) (157)

Year ended Year ended31.03.2020 31.03.2019

Effects on the funds attributable to equity holders of the parent due to reduction in parent’s ownership interest in Mark Marine Services (Pvt) Ltd.

Ownership interest 56.79% 58.12%

Reduction in profits attributable to equity holders of the parent (Rs.000) (418)

Increase in share of other comprehensive income attributable to equity holders of the parent due to loss of other comprehensive income reported by the subsidiary (Rs.000) 7

Increase in profits attributable equity holders of the parent due to reduction of dividends received by the group (Rs.000) 407

Decrease in funds attributable to equity holders of the parent(Rs.000) (4)


Group Company

31.03.2020 31.03.2019 31.03.2020 31.03.2019

Rs.' 000 Rs.' 000 Rs.'000 Rs.'000

38 DEFERRED TAX ASSETS AND LIABILITIES

Deferred tax liability

At the beginning of the year 5,046,493 4,912,249 4,546,182 4,726,368

Transfer to /(from) income statement (1,038,495) (953,767) (1,038,384) (955,919)

Transfer to /(from) statement of other comprehensive income (47,963) 1,088,011 (48,366) 775,733

At the end of the year 3,960,035 5,046,493 3,459,432 4,546,182

Deferred tax assets

At the beginning of the year 14,871 14,574 - -

Transfer to/(from) income statement 1,951 1,039 - -

Transfer to /(from) statement of other comprehensive income 1,617 (742) - -

At the end of the year 18,439 14,871 - -

Statement of financial position

Income Statement Other comprehensive income

31.03.2020 31.03.2019 2019/20 2018/19 2019/20 2018/19

Rs.' 000 Rs.' 000 Rs.'000 Rs.'000 Rs.'000 Rs.'000

38.1 Group

Deferred tax assets, liabilities and income tax relate to the following:


Capital allowances for tax purposes 4,456,075 5,434,013 977,938 891,557 - (1,091,016)

Fair value changes in unquoted investments and investment properties 543 1,943 1,400 (1,943) - -

4,456,618 5,435,956 979,338 889,614 - (1,091,016)

Deferred tax assets

Defined benefit plans (480,845) (382,281) 50,601 59,091 47,963 3,005

Revaluation loss on repossessed stocks (7,013) (6,416) 597 6,416 - -

Tax losses (1,242) (766) 476 (1,354) - -

On right of use assets (7,483) - 7,483

(496,583) (389,463) 59,157 64,153 47,963 3,005

Deferred tax income / (expense) 1,038,495 953,767 47,963 (1,088,011)

Net deferred tax liability 3,960,035 5,046,493





31.03.2020 31.03.2019 2019/20 2018/19 2019/20 2018/19

Rs.' 000 Rs.' 000 Rs.'000 Rs.'000 Rs.'000 Rs.'000

Deferred tax assets

Defined benefit plans 19,680 16,216 1,847 615 1,617 (742)

Carried forward tax losses - - - (85) - -

19,680 16,216 1,847 530 1,617 (742)


Capital allowances for tax purposes (1,241) (1,345) 104 509 -

(1,241) (1,345) 104 - - -

Deferred tax income / (expense) 1,951 1,039 1,617 (742)

Net deferred tax asset 18,439 14,871

Total charged to income statement / statement of other comprehensive income 1,040,446 954,806 49,580 (1,088,753)

The amount of unused tax losses for which deferred tax assets have not been recognised amounts to Rs.83.32 million as at 31.03.2020 (31.03.2019-Rs.123.64 million).



31.03.2020 31.03.2019 2019/20 2018/19 2019/20 2018/19

Rs.' 000 Rs.' 000 Rs.'000 Rs.'000 Rs.'000 Rs.'000

38.2 Company

Deferred tax assets, liabilities and income tax relate to the following:


Capital allowances for tax purposes 3,924,756 4,908,433 983,677 896,995 - (779,595)

Fair value changes in unquoted investments and investment properties

543 1,943 1,400 (1,943) - -

3,925,299 4,910,376 985,077 895,052 - (779,595)

Deferred tax assets

Defined benefit plans (451,371) (357,778) 45,227 54,451 48,366 3,862

Revaluation loss on repossessed stocks

(7,013) (6,416) 597 6,416 - -

On right of use assets (7,483) - 7,483

(465,867) (364,194) 53,307 60,867 48,366 3,862

Deferred tax income / (expense) 1,038,384 955,919 48,366 (775,733)

Net deferred tax liability 3,459,432 4,546,182



Group Company

31.03.2020 31.03.2020

Rs.' 000 Rs.'000

39 RIGHT OF USE ASSETS AND LEASE LIABILITIESRight of use assets Impact due to adaptation of SLFRS-16 451,464 451,381

Additions and improvements 164,315 333,812 Depreciation charge for the period (172,234) (172,225)Balance at the end of the year 443,545 612,968

Lease liabilityImpact due to adaptation of SLFRS-16 357,624 357,548

Leases obtained 164,315 333,811

Interest expenses 41,825 41,816

Lease payments (210,349) (210,333)


Maturity analysis of right of use assetsLess than one year 143,457 143,447

01 to 5 years 221,709 391,166

More than 5 years 78,379 78,355

443,545 612,968

Maturity analysis of lease liabilitiesLess than one year 106,540 106,534

01 to 5 years 159,465 328,926

More than 5 years 87,410 87,382

353,415 522,842

Lease liabilities as at 01st April 2019 can be reconciled to the opening lease commitments as of 31st March 2019, as follows:

Group Company

31.03.2020 31.03.2020

Rs.' 000 Rs.'000

Operating lease commitments as at 31st March 2019 451,464 451,381

Discounted operating lease commitments as at 01st April 2019 357,624 357,548

Lease liabilities as at 01st April 2019 357,624 357,548

The present value of operating lease commitments as at 01st April 2019 has been calculated using incremental borrowing rates ranging from 10.85% to 12.60% for the group.

The following are the amounts recognised in the income statement

Group Company

31.03.2020 31.03.2020

Rs.' 000 Rs.'000

Depreciation on right of use assets 172,234 172,225

Interest expenses on lease liability 41,825 41,816


Land and Furniture Motor Operating Plant, machinery Capital Total

Buildings and office vehicles lease assets and other work-in-equipment equipment progress

Rs.' 000 Rs.' 000 Rs.'000 Rs.'000 Rs.’000 Rs.’000 Rs.’000

40 PROPERTY, PLANT AND EQUIPMENT

GROUPCost/valuationAs at 01.04.2018 3,854,001 324,962 894,050 4,220,104 1,906,215 28,220 11,227,552

Additions 40,356 22,487 137,004 883,162 84,708 21,902 1,189,619 Transfers - - 148,171 (148,171) - - - Surplus on revaluation 3,638,141 - - - - - 3,638,141 Write offs - - - - (968) - (968)

Disposals - (16,849) (44,130) (110,715) (111,556) (47,572) (330,822)

As at 31.03.2019 7,532,498 330,600 1,135,095 4,844,380 1,878,399 2,550 15,723,522

Additions 415 52,313 122,826 351,946 194,480 1,377 723,357

Transfers - - 56,356 (56,356) - - -

Write offs - (1) - - (887) - (888)

Disposals - (4,051) (123,140) (250,091) (10,348) (1,630) (389,260)

As at 31.03.2020 7,532,913 378,861 1,191,137 4,889,879 2,061,644 2,297 16,056,731

Accumulated depreciationAs at 01.04.2018 94,257 210,504 498,818 851,226 1,177,100 - 2,831,905

Charge for the year 26,009 21,618 85,631 290,562 138,057 - 561,877

Transfers - - 83,067 (83,067) - - -

Revaluation adjustment on accumulated depreciation (120,204) - - - - - (120,204)Write off - - - - (830) - (830)

On disposals - (12,927) (34,534) (52,976) (108,564) - (209,001)

As at 31.03.2019 62 219,195 632,982 1,005,745 1,205,763 - 3,063,747

Charge for the year 31,744 23,846 95,272 297,290 137,538 - 585,690

Transfers - - 31,137 (31,137) - - -

Write offs - (1) - - (752) - (753)

On disposals - (2,603) (87,670) (97,603) (9,756) - (197,632)

As at 31.03.2020 31,806 240,437 671,721 1,174,295 1,332,793 - 3,451,052

Net book valueAs at 01.04.2018 3,759,744 114,458 395,232 3,368,878 729,115 28,220 8,395,647

As at 31.03.2019 7,532,436 111,405 502,113 3,838,635 672,636 2,550 12,659,775

As at 31.03.2020 7,501,107 138,424 519,416 3,715,584 728,851 2,297 12,605,679



Land and Furniture Motor Operating Plant, machinery Capital Total

Buildings and office vehicles lease assets and other work-in-equipment equipment progress

Rs.' 000 Rs.' 000 Rs.'000 Rs.'000 Rs.’000 Rs.’000 Rs.’000

40 PROPERTY, PLANT AND EQUIPMENT

COMPANYAs at 01.04.2018 2,832,462 300,482 851,741 4,220,104 1,082,536 787 9,288,112 Additions 1,674 21,620 137,004 883,162 54,317 653 1,098,430 Transfers - 148,171 (148,171) - - - Surplus on revaluation 2,714,514 - - - - - 2,714,514 Disposals - (16,541) (35,668) (110,715) (110,245) - (273,169)As at 31.03.2019 5,548,650 305,561 1,101,248 4,844,380 1,026,608 1,440 12,827,887 Additions 415 49,467 122,826 351,946 143,493 - 668,147 Transfers - - 56,356 (56,356) - - Disposals - (3,729) (117,390) (250,091) (9,545) - (380,755)As at 31.03.2020 5,549,065 351,299 1,163,040 4,889,879 1,160,556 1,440 13,115,279

Accumulated depreciationAs at 01.04.2018 53,509 191,510 466,052 851,226 625,617 - 2,187,914 Charge for the year 16,245 20,951 81,428 290,562 93,935 - 503,121 Transfers - - 83,067 (83,067) - - - Revaluation adjustment on accumulated depreciation (69,754) - - - - (69,754)On disposals - (12,789) (26,072) (52,976) (107,264) - (199,101)As at 31.03.2019 - 199,672 604,475 1,005,745 612,288 - 2,422,180 Charge for the year 19,401 23,086 92,325 297,290 95,490 - 527,592 Transfers - - 31,137 (31,137) - - - On disposals - (2,418) (84,220) (97,603) (8,991) - (193,232)As at 31.03.2020 19,401 220,340 643,717 1,174,295 698,787 - 2,756,540

Net book valueAs at 01.04.2018 2,778,953 108,972 385,689 3,368,878 456,919 787 7,100,198 As at 31.03.2019 5,548,650 105,889 496,773 3,838,635 414,320 1,440 10,405,707 As at 31.03.2020 5,529,664 130,959 519,323 3,715,584 461,769 1,440 10,358,739

Operating Leases

Property, plant and equipment includes assets given under operating leases on short and long term basis. An analysis of the rentals to be received on such operating leases are as follows:

Group & Company

31.03.2020 31.03.2019

Rs.'000 Rs.'000

Receivable within one year 933,136 924,796 Receivable within 1-5 years 1,345,378 1,877,766 Receivable after 5 years 638 80,704

2,279,152 2,883,266

Undiscounted maturity analysis of operating lease assetsNot later than one year 933,136 924,796 More than one year not later than two years 735,881 797,243 More than two years not later than three years 412,558 669,451 More than three years not later than four years 149,296 338,041 More than four years not later than five years 47,643 73,031 More than five years 638 80,704

2,279,152 2,883,266


Information on the freehold land and buildings of the company and the group as at 31.03.2020

Revaluations

Freehold land and buildings of the group are revalued regularly (once in five years) to ensure that the carrying amounts do not differ materially from the fair values of such properties. The freehold land and buildings of the company and the subsidiaries, Kandy Private Hospitals Ltd., Dehigama Hotels Company Ltd., Central Mineral Industries (Pvt) Ltd. and Central Industries PLC were revalued in March 2019 by Mr. Anuradha Seneviratha, an Independent, Qualified Valuer/Licensed Surveyor resulting in the carrying amounts being increased by Rs.2,784.26 million and Rs.3,758.34 million respectively. The valuations were carried out under the “Comparison” and “Contractor’s” methods on the basis that the land and buildings are of freehold ownership and are free from any restrictions in regard to title. These revaluations were carried out under level 2 of the fair value hierarchy.

Range of estimates for unobservable inputs

Location/Address Price per Price per for Depreciation Extent Cost / Cost / Total Accumulated Net book

perch for square foot rate (Perches) revaluation revaluation value depreciation value

land building land of buildings

Rs.' 000 Rs.' 000 % Rs.'000 Rs.’000 Rs.’000 Rs.’000 Rs.’000 Rs.’000

Central Finance Company PLC

City Office

No.270, Vauxhall Street, Colombo 02. 7,944.08 3.36 2.50 117.32 932,000 121,000 1,053,000 3,025 1,049,975

No.268, Vauxhall Street, Colombo 02. 7,983.39 14.0 2.50 21.67 173,000 254,000 427,000 6,350 420,650

Branches

No.62, Maithripala Senanayake Mawatha,

Anuradhapura

3,756.22 6.07 2.50 40.20 151,000 34,000 185,000 850 184,150

No.367, Main Street, Negombo. 3,482.76 2.00 2.86 29.00 101,000 8,400 109,400 240 109,160

No.38, Mihindu Mawatha, Kurunegala. 3,093.82 1.75 2.86 54.63 169,000 4,300 173,300 123 173,177

No.04, Udaya Raja Mawatha, Badulla. 3,197.03 1.75 2.86 26.90 86,000 7,200 93,200 206 92,994

No.78, Kumarathunga Mawatha, Matara. 2,882.24 2.00 2.86 125.25 361,000 13,000 374,000 372 373,628

No.21, Kurunegala Road, Dambulla 2,247.62 3.25 2.86 21.00 47,200 5,300 52,500 152 52,348

No.143, Colombo Road, Moragahayata,

Ratnapura

3,887.84 3.20 2.86 42.44 165,000 10,000 175,000 286 174,714

No.312, High-level Road, Nugegoda. 6,988.47 4.75 2.50 13.86 97,000 32,000 129,000 800 128,200

No.215, Maradana Road, Colombo 10 7,429.51 2.50 2.50 39.37 292,500 24,500 317,000 612 316,388

No.254, 254/1, Katugastota Road, Kandy. 3,043.70 3.14 2.50 83.24 179,000 43,415 222,415 1,080 221,335

Vehicle Yards

No.249, Katugastota Road, Kandy. 2,920.40 0.85 2.86 137.31 401,000 7,800 408,800 223 408,577

No.313, Koholwila Road, Kelaniya. 238.16 1.29 5.56 348.50 83,000 17,000 100,000 945 99,055

Batalahenawatte Road, Gonawala, Kelaniya. 148.11 - - 189.05 28,000 850 28,850 85 28,765

No.258/3, Katugastota Road, Kandy. 1,988.53 - - 52.30 104,000 - 104,000 - 104,000

No.210, Siri Dhamma Mawatha, Colombo 10. 2,857.14 1.56 3.33 121.45 347,000 31,000 378,000 1,032 376,968

No.313, Madawala Road, Katugastota. 1,457.33 0.80 8.33 167.43 244,000 1,600 245,600 133 245,467

Kirindiwela Road, Pugoda. 24.18 3.50 4.00 1,600.00 38,680 2,320 41,000 93 40,907

Other properties

No.244, Vauxhall Street, Colombo 02. 9,008.33 3.50 2.50 13.21 119,000 37,000 156,000 925 155,075

326, D.S.Senanayaka Veediya, Kandy 7,533.49 3.00 5.00 10.90 82,115 3,885 86,000 194 85,806

Bungalows

No.8, Sukhastan Gardens, Ward Place, Colombo 7. 4,509.70 3.00 2.50 38.14 172,000 18,000 190,000 450 189,550

No.25, Sri Rahula Road, Nuwaraeliya. 896.91 4.50 2.50 194.00 174,000 24,000 198,000 600 197,400

Indibedda, Moratuwa 497.81 3.20 2.50 251.10 125,000 25,000 150,000 625 149,375

Car Parks

Yatinuwara Veediya, Kandy. 5,000.00 - - 14.00 70,000 - 70,000 - 70,000

No.267 & 269, Vauxhall Street, Colombo 02. 7,992.20 - - 10.26 82,000 - 82,000 - 82,000

Total for the company 4,823,495 725,570 5,549,065 19,401 5,529,664


Range of estimates for unobservable inputs

Group companies Price per Price per for Depreciation Extent Cost / Cost / Total Accumulated Net book

Location/Address perch for square foot rate (Perches) revaluation revaluation value depreciation value

land building land of buildings

Rs.' 000 Rs.' 000 % Rs.'000 Rs.’000 Rs.’000 Rs.’000 Rs.’000 Rs.’000

Dehigama Hotels Company Ltd.

No.84, Raja Veediya, Kandy. 7,058.82 2.66 2.50 85.00 600,000 99,000 699,000 2,475 696,525

Kandy Private Hospitals Ltd.

No.35, Dr. C.D.L.Fernando Mawatha, Mahaiyawa,

Kandy.

2,141.45 2.87 2.86 127.25 272,500 81,009 353,509 1,443 352,066

No. 35/178 & 35/178/1/1, Dr. C.D.L.Fernando

Mawatha, Mahaiyawa, Kandy.

1,870.08 2.05 3.33 38.10 71,250 25,750 97,000 1,686 95,314

Kirillagodawatta,off Dr. C.D.L.Fernando

Mawatha,Mahaiyawa,Kandy. 1,500.00 - - 20.00 30,000 - 30,000 - 30,000

Central Mineral Industries (Pvt) Ltd.

Diganatenna Estate, Gonawala,

Rajawella, Digana 60.16 0.84 4.00 1,916.25 115,288 4,712 120,000 241 119,759


Factory

No.195/4, Kerawalapitiya Road, Hendala, Wattala. 600.12 1.29 4.00 522.00 313,260 83,323 396,583 3,332 393,251

Udathuththiripitiya, Yakkala 44.71 2.59 2.50 1,400.00 62,595 78,324 140,919 1,958 138,961

Head office

No.312, Nawala Road, Rajagiriya. 5,333.33 3.50 2.50 18.00 96,000 50,837 146,837 1,270 145,567

Total for the group 6,384,388 1,148,525 7,532,913 31,806 7,501,107

Description of the above valuation techniques together with narrative description of the fair value measurement to changes in significant unobservable inputs are given below:

Valuation techniques Significant unobservable valuation inputs

Sensitivity of the fair value measurement to inputs

Comparison method for valuation of land considers the selling price of a similar property within a reasonably recent period of time in determining the fair value of the property being revalued. This involves evaluation of recent active market prices of similar assets making appropriate adjustments for differences in size,nature,location, condition of specific property. Contractor’s method assesses all the cost of providing modern equivalent property ,and thereafter adjusting it to the age of the subject property.

Price per perch for land. Price per square foot for building and depreciation rate for building

Estimated fair value would get increased/(decreased) if, price per perch get higher/ (lower).Price per square foot get higher / (lower) and depreciation rate for building get lower/(higher).

Group Company

31.03.2020 31.03.2019 31.03.2020 31.03.2019

Rs.' 000 Rs.' 000 Rs.'000 Rs.'000

Number of buildings owned by the group and company 47 47 24 24



The details of the revaluations carried out in March 2019 are given below.

Location/Address Valuation Net Book Revalued Revaluation

Method Value before Amount Surplus/ Revaluation (deficits)

Rs.'000 Rs.'000

Central Finance Company PLCOfficesNo.270, Vauxhall Street, Land Comparison 320,500 932,000 611,500 Colombo 02. Building Contractor's 92,313 121,000 28,687 No.268, Vauxhall Street, Colombo 02. Land Comparison 65,000 173,000 108,000

Building Contractor's 237,828 254,000 16,172

BranchesNo.62, Maithripala Senanayake Mawatha, Land Comparison 50,250 151,000 100,750 Anuradhapura Building Contractor's 33,182 34,000 818 No.367, Main Street, Land Comparison 43,500 101,000 57,500 Negombo Building Contractor's 6,294 8,400 2,106 No.38, Mihindu Mawatha, Land Comparison 97,350 169,000 71,650 Kurunegala Building Contractor's 2,271 4,300 2,029 No.04, Udaya Raja Mawatha, Land Comparison 36,800 86,000 49,200 Badulla Building Contractor's 3,600 7,200 3,600 No.78, Kumarathunga Mawatha, Land Comparison 145,200 361,000 215,800 Matara Building Contractor's 5,828 13,000 7,172 No.143, Colombo Road Land Comparison 79,878 165,000 85,122 Moragahayata, Ratnapura Building Contractor's 5,477 10,000 4,523 No.312, Highlevel Road, Land Comparison 47,000 97,000 50,000 Nugegoda Building Contractor's 21,875 32,000 10,125 No.21, Kurunegala Road, Land Comparison 20,000 47,200 27,200 Dambulla Building Contractor's 4,375 5,300 925 No.254, Katugastota Road, Land Comparison 89,660 179,000 89,340 Kandy Building Contractor's 30,756 43,000 12,244 215,Maradana Road,Colombo 10. Land Comparison 135,985 292,500 156,515


Vehicle YardsNo.249, Katugastota Road, Land Comparison 200,447 401,000 200,553 Kandy. Building Contractor's 6,368 7,800 1,432 No.313, Koholwila Road, Kelaniya. Land Comparison 36,500 83,000 46,500

Building Contractor's 8,303 17,000 8,697 Batalahenawatte Road, Gonawala, Land Comparison 23,750 28,000 4,250 Kelaniya Building Contractor's 753 850 97 No.210, Siri Dhamma Mawatha Land Comparison 173,576 347,000 173,424 Colombo 10 Building Contractor's 17,880 31,000 13,120 No.313, Madawala Road, Land Comparison 120,000 244,000 124,000 Katugastota Building Contractor's 583 1,600 1,017 No.258/3, Katugastota Road, Kandy Land Comparison 52,000 104,000 52,000 Kirindiwela Road,Pugoda Land Comparison 21,200 38,680 17,480

Building Contractor's 2,215 2,320 105

Other propertiesNo.244,Vauxhall Street,Colombo 02. Land Comparison 40,000 119,000 79,000

Building Contractor's 28,000 37,000 9,000 326,D.S.Senanayake Veediya,Kandy. Land Comparison 55,730 82,115 26,385

Building Contractor's 3,953 3,885 (68)


Location/Address Valuation Net Book Revalued Revaluation

Method Value before Amount Surplus/ Revaluation (deficits)

Rs.'000 Rs.'000

BungalowsNo.8, Sukhastan Gardens, Land Comparison 76,000 172,000 96,000 Ward Place, Colombo 7. Building Contractor's 12,250 18,000 5,750 No.25, Sri Rahula Road Land Comparison 106,600 174,000 67,400 Nuwaraeliya Building Contractor's 11,725 24,000 12,275 Indibedda, Moratuwa Land Comparison 75,250 125,000 49,750


Car ParksYatinuwara Veediya, Land Comparison 42,000 70,000 28,000 Kandy.No.267 & 269, Vauxhall Street, Land Comparison 30,750 82,000 51,250 Colombo 02.

Sub total Land 2,184,926 4,823,495 2,638,569 Building 579,456 725,155 145,699

Total for the company 2,764,382 5,548,650 2,784,268

Kandy Private Hospitals Ltd.No.35, Dr. C.D.L.Fernando Mawatha, Mahaiyawa, Kandy. Land Comparison 112,900 272,500 159,600


No.35/178 & 35/178/1/1, Dr.C.D.L.Fernando Mawatha, Mahaiyawa, Kandy.

Land Comparison 35,600 71,250 35,650


Kirillagodawatta,off Dr.C.D.L.Fernando Mawatha, Land Comparison 10,000 30,000 20,000 Mahaiyawa, Kandy.

Central Mineral Industries (Pvt) Ltd.Diganatenna Estate, Gonawala, Land Comparison 63,100 115,288 52,188 Rajawella, Digana Building Contractor's 4,657 4,712 55

Central Industries PLCFactoryKerawalapitiya Land Comparison 130,525 313,260 182,735


Udathuththiripitiya, Yakkala Land Comparison 36,861 62,595 25,734 Building Contractor's 73,281 78,324 5,043

Head officeNawala Land Comparison 40,000 96,000 56,000


Dehigama Hotels Company Ltd.No.84, Raja Veediya, Kandy. Land Comparison 244,000 600,000 356,000


Total for the group Land 2,857,912 6,384,388 3,526,476 Building 885,732 1,117,601 231,869

3,743,644 7,501,989 3,758,345



Where properties have fallen in value, the decreases have been charged against revaluation reserve to the extent that it was credited previously and any decrease beyond such value was charged to the income statement during the year of such revaluations.

The carrying value of freehold land and buildings of the group, if carried at cost less accumulated depreciation and impairment, would amount to Rs.855.83 million as at 31.03.2020 (as at 31.03.2019 - Rs.885.50 million).

The cost of fully depreciated assets of the group and company which are still in use amounted to Rs. 2,388.01 million and Rs.1,956.75 million respectively as at 31.03.2020 (group Rs.2,201.97 million and company Rs. 1,836.38 million as at 31.03.2019).

Property, plant and equipment pledged as security for banking facilities The carrying value of land and buildings pledged as security for banking facilities obtained amounted to Rs. 2,519.20 million and Rs. 1,470.62 million for the group and company as at 31.03.2020 respectively (group - Rs.2,532.45 million and company Rs.1,480.00 million as at 31.03.2019).

The carrying value of machinery equipment pledged as security for banking facilities by a group company amounted to Rs.4.87 million as at 31.03.2020 (31.03.2019 - 5.72 million).

Facilities available from banks against a negative pledge over the properties of a subsidiary company

As at As at

Bank Nature of facility 31.03.2020 31.03.2019

Rs.000 Rs.'000

Public Bank Ltd. Import loans and guarantee facilities 80,000 80,000

80,000 80,000

There were no temporary idle property, plant and equipment as at 31.03.2020 (31.03.2019 - Nil).

There were no capitalised borrowing costs related to acquisition of property, plant and equipment during the financial year 2019/20 (2018/19 - Nil).

There were no restrictions on the title of property, plant and equipment of the group as at the year end.

No compensation was received or due from third parties for items of property, plant and equipment that were impaired, lost or given up.

As a result of the Covid-19 outbreak in the country in mid March 2020, it has been concluded that there is no adjustment required for impairment of property, plant and equipment.


Group Company

31.03.2020 31.03.2019 31.03.2020 31.03.2019

Rs.'000 Rs.'000 Rs.'000 Rs.'000

41 INTANGIBLE ASSETS

Computer software at cost

At the beginning of the year 384,986 325,245 380,694 320,953

Additions 57,811 59,741 57,811 59,741

At the end of the year 442,797 384,986 438,505 380,694

Amortisation

At the beginning of the year (266,199) (221,969) (262,757) (218,708)

Charge for the year (44,177) (44,230) (43,997) (44,049)

At the end of the year (310,376) (266,199) (306,754) (262,757)

Carrying value at the end of the year 132,421 118,787 131,751 117,937

The cost of fully depreciated intangible assets which are currently in use as at 31.03.2020 at the group and company amounted to Rs. 209.38 million and Rs. 205.88 million respectively (group - Rs.134.29 million and company Rs. 130.78 million as at 31.03.2019).

There were no capitalised borrowing costs related to acquisition of intangible assets during the financial year 2019/20 (2018/19 - Nil).

There are no intangible assets pledged as security for banking facilities as at 31.03.2020 (31.03.2019 - Nil) .

Group Company

31.03.2020 31.03.2019 31.03.2020 31.03.2019

Rs.'000 Rs.'000 Rs.'000 Rs.'000

42 TRADE AND OTHER PAYABLES

Accrued interest on deposits 2,535 58,630 2,535 58,630

Accrued expenses 242,265 138,980 101,330 47,002

Creditors 531,934 791,849 340,681 508,528

Others 520,914 685,268 468,762 561,677

1,297,648 1,674,727 913,308 1,175,837



Group/ Company Lending Nature of Security

Borrower Institution facility 31.03.2020 31.03.2019

Rs.'000 Rs.'000

43 SHORT TERM BORROWINGS

Central Finance

Company PLC

Hatton National Bank PLC Revolving short term loan Mortgage over lease

receivables

250,065 401,871

Commercial Bank of

Ceylon PLC

Revolving short term loan Mortgage over properties

and lease receivables

400,230 653,441

National Development

Bank PLC

Revolving short term loan Mortgage over lease

receivables

- 700,244

Seylan Bank PLC Revolving short term loan Mortgage over lease

receivables

- 480,505

Total for the company 650,295 2,236,061

Central Industries PLC Hatton National Bank PLC Short term loan Unsecured 53,383 45,240

Commercial Bank of

Ceylon PLC

Short term loan Unsecured 239,899 -

Seylan Bank PLC Short term loan Unsecured 27,000 -

Public Bank Short term loan Unsecured 11,700 48,289

331,982 93,529

Total for the group 982,277 2,329,590

Short term borrowings have maturities less than one year.

Group Company

31.03.2020 31.03.2019 31.03.2020 31.03.2019

Rs.'000 Rs.'000 Rs.'000 Rs.'000

44 DEPOSITS

Term deposits 51,824,640 44,042,483 52,050,798 44,532,699

Savings 1,087,860 1,107,035 1,340,179 1,137,039

52,912,500 45,149,518 53,390,977 45,669,738

Payable within one year 41,233,229 35,861,529 41,711,706 36,381,749

Payable after one year 11,679,271 9,287,989 11,679,271 9,287,989

52,912,500 45,149,518 53,390,977 45,669,738

The above includes a sum of Rs.862,768,770/- ( Rs.713,690,669/- as at 31.03.2019) deposited with the company by the directors and their close family members.



Group/ Company Lending Security

Borrower Institution 31.03.2020 31.03.2019

Rs.'000 Rs.'000

45 LONG TERM BORROWINGS

Central Finance Company PLC NDB Bank PLC Mortgage over lease receivables 4,834,449 4,287,538

International Finance Corporation Mortgage over lease receivables 2,124,406 2,419,110

State Bank of India Mortgage over properties 189,462 241,026

Indian Bank Mortgage over lease receivables - 99,308

Total for the company 7,148,317 7,046,982

Central Mineral Industries (Pvt)Ltd. Commercial Bank of Ceylon PLC Pledge over machinery and equipment

2,383 3,575

2,383 3,575

Total for the group 7,150,700 7,050,557

Payable within one year 941,963 496,607

Payable after one year 6,208,737 6,553,950

Total for the group 7,150,700 7,050,557

Group & Company

31.03.2020 31.03.2019

Rs.'000 Rs.'000

46 DEBENTURES

Face value at the beginning of the year 2,250,000 5,500,000

Redeemed during the year (500,000) (3,250,000)

Face value at end of the year 1,750,000 2,250,000

Amortised interest at end of the year 41,038 46,284

At the end of the year 1,791,038 2,296,284

Date of issue

Colombo Stock

Interest payment

No. of Debentures

Face value Rate of interest

Tenor Date of maturity

Group & Company

Exchange frequency issuedListing

31.03.2020 31.03.2019

Rs.’000 (%) Rs.'000 Rs.'000

1-Jun-15 Listed Semi annually

5,000,000 500,000 9.00 4 years 31-May-19 - 510,779

1-Jun-15 Listed Annually 17,500,000 1,750,000 9.52 5 years 31-May-20 1,791,038 1,785,505

1,791,038 2,296,284


Group Company

31.03.2020 31.03.2019 31.03.2020 31.03.2019

Rs.'000 Rs.'000 Rs.'000 Rs.'000

47 EMPLOYEE BENEFIT OBLIGATIONS

Present value of defined benefit obligation 1,930,625 1,599,930 1,796,533 1,479,475

Fair value of plan assets (184,495) (201,695) (184,495) (201,695)

Unfunded status 1,746,130 1,398,235 1,612,038 1,277,780

Net retirement benefit obligation 1,746,130 1,398,235 1,612,038 1,277,780

Movement of the retirement benefit obligation

Present value of defined benefit obligation at the beginning of the year 1,599,930 1,442,118 1,479,475 1,323,027

Interest cost 174,770 143,007 162,742 132,303

Current service cost 91,345 77,150 80,564 67,479

Payments made during the year (110,763) (140,927) (96,940) (127,866)

Actuarial (gain) / loss 175,343 78,582 170,692 84,532

Present value of defined benefit obligation at the end of the year 1,930,625 1,599,930 1,796,533 1,479,475

Movement of the plan assets

Fair value of the plan assets at the beginning of the year 201,695 253,509 201,695 253,509

Contributions paid into the plan 65,908 58,431 65,908 58,431

Benefits paid by the plan (96,940) (127,867) (96,940) (127,867)

Expected return on plan assets 15,877 17,796 15,877 17,796

Actuarial loss (2,045) (174) (2,045) (174)

Fair value of the plan assets at the end of the year 184,495 201,695 184,495 201,695

Plan assets consist of the following:

Investments in treasury bills 65,907 64,679 65,907 64,679

Investments in debentures 36,431 31,522 36,431 31,522

Investments in fixed deposits with banks 82,157 105,494 82,157 105,494

184,495 201,695 184,495 201,695

Retirement benefit liability of Central Finance Company PLC is partly funded externally through a gratuity fund established in 1987 and the shortfalls on gratuity payments are funded by the company.

Retirement benefit obligations of Central Finance Company PLC, Central Industries PLC, and CF Insurance Brokers (Pvt) Ltd., have been determined based on actuarial valuations carried out by Mr. Pushpakumara Gunasekera-Actuary/Associate of the Institute of Actuaries of Australia. Employee benefit liabilities of Central Mineral Industries (Pvt) Ltd., Kandy Private Hospitals Ltd., and Mark Marine Services (Pvt) Ltd., are computed based on a formula which approximates actuarial valuation.



Details of actuarial assumptions of the parent company are as follows:

31.03.2020 31.03.2019

Actuarial assumptions

Discount rate 9.50% 11.00%

Future salary increases 10.00% 10.00%

31.03.2020 31.03.2019

Details of actuarial assumptions of subsidiary company Central Industries PLC




31.12.2019 31.12.2018

Details of actuarial assumptions of subsidiary company CF Insurance Brokers (Pvt) Ltd.




Mortality Staff withdrawal rate

A1967/70 Ultimate Mortality Table 18%

A 1967/70 ultimate Mortality Rates

Age: 20 25 30 35 40 45 50 55

Rate 0.00089 0.00069 0.00065 0.00086 0.00144 0.00264 0.00479 0.00844

Disability rates Age: 20 25 30 35 40 45 50 55

Rate 0.00012 0.00012 0.00012 0.00013 0.00018 0.00028 0.00048 0.00086

Disability rates are based on standard permanent disability rates for accident & sickness used by insurance industry in Sri Lanka.


Sensitivity of assumptions employed in gratuity liability valuation

The following table demonstrates the impact on the defined benefit obligation and statement of comprehensive income of the changes in the significant actuarial assumptions employed with all other variables held constant in the employee benefit liability measurement

Company 2019/2020 2018/2019

Increase/(decrease)

Sensitivity effect on comprehensive income statement increase/ (decrease) in comprehensive

income for the year

Sensitivity effect on the employee benefit obligation increase/ (decrease)

in liability

Sensitivity effect on comprehensive income statement increase/(decrease) in comprehensive

income for the year


in liability

Rs.000 Rs.000 Rs.000 Rs.000

Discount rate 1% 24,375 (24,375) 21,391 (21,391)

-1% (25,766) 25,766 (22,733) 22,733

Salary increment rate 1% (33,196) 33,196 (29,135) 29,135

-1% 32,099 (32,099) 28,016 (28,016)

Group 2019/2020 2018/2019

Increase/(decrease)


income for the year


in liability


income for the year


in liability

Rs.000 Rs.000 Rs.000 Rs.000

Discount rate 1% 28,429 (28,429) 24,640 (24,640)

-1% (30,170) 30,170 (26,251) 26,251

Salary increment rate 1% (37,905) 37,905 (32,937) 32,937

-1% 36,516 (36,516) 31,592 (31,592)


Maturity profile of the defined benefit obligation

Parent company

Defined benefit

Future working life time obligation

Rs.'000

Within next 12 months 1,200,831

Between 1-2 years 82,779


Total 1,796,533

Weighted average duration of defined benefit obligation 3.93 years

Subsidiary - Central Industries PLC

Defined benefit


Rs.'000

Within next 12 months 19,080



Total 54,775

Weighted average duration of defined benefit obligation 3.73 years

Subsidiary - CF Insurance Brokers(Pvt)Ltd.

Defined benefit


Rs.'000

Within next 12 months 5,948




Total 67,168

Weighted average duration of defined benefit obligation 7.30 yesrs



Group & Company

31.03.2020 31.03.2019 31.03.2020 31.03.2019

In'000 Rs.'000 In’000 Rs.'000

48 STATED CAPITAL

Issued and fully paid - ordinary shares

At the beginning of the year 218,661 1,527,778 216,759 1,337,564

Scrip dividends 2,013 169,120 1,902 190,214

At the end of the year 220,674 1,696,898 218,661 1,527,778

A scrip dividend of Rs.0.90 per share was paid in July 2019. Subsequent to the scrip dividend, reserves amounting to Rs.169.12 million were capitalised at the rate of Rs.84/= through issue of 2,013,340 new shares. As a result, the number of shares increased to 220,674,367. Net assets per share of the previous periods were adjusted accordingly.

Group Company

31.03.2020 31.03.2019 31.03.2020 31.03.2019

Rs.'000 Rs.'000 Rs.'000 Rs.'000

49 RAEVALUATION RESERVES

Balance at the beginning of the year 4,745,864 2,291,952 3,573,069 1,571,945

Depreciation on revaluation surplus (8,033) (4,662) (5,902) (3,549)

Revaluation of land and buildings - 3,448,727 - 2,784,268

Deferred tax on revaluation surplus - (996,592) - (779,595)

Share of revaluation surplus - associate company 86,032 6,439 - -

Balance at the end of the year 4,823,863 4,745,864 3,567,167 3,573,069

Revaluation reserve consists of the net surplus on the revaluation of land and buildings.

Group Company

31.03.2020 31.03.2019 31.03.2020 31.03.2019

Rs.'000 Rs.'000 Rs.'000 Rs.'000

50 RESERVE FUND

Balance at the beginning of the year 2,037,000 1,824,000 2,037,000 1,824,000

Transfers during the year 176,000 213,000 176,000 213,000


The company’s reserve fund is maintained in accordance with Direction No. 9 of 1991 as amended by Direction No. 1 of 2003 issued by the Central Bank of Sri Lanka under the Finance Business Act No. 42 of 2011.



Group

31.03.2020 31.03.2019

Rs.'000 Rs.'000

51 OTHER COMPREHENSIVE INCOME (OCI) RESERVE

Balance at the beginning of the year 17,993 19,637

Fair value change during the year 93,774 (1,644)


Other comprehensive income (OCI) reserve represents share of gains/(losses) arising from financial assets of an associate company designated at fair value through other comprehensive income.

Group Company

31.03.2020 31.03.2019 31.03.2020 31.03.2019

Rs.'000 Rs.'000 Rs.'000 Rs.'000

52 LOAN LOSS RESERVE



Loan loss reserve was made during 2017/18 financial year to match the gap between regulatory time based provision and impairment based on Sri Lanka Financial Reporting Standards (SLFRS) on loans and advances. The impairment excess over the regulatory time based provision as at 31.03.2020 stands at Rs. 1,881.33 million (net of interest in suspense).

Group Company

31.03.2020 31.03.2019 31.03.2020 31.03.2019

Rs.'000 Rs.'000 Rs.'000 Rs.'000

53 REVENUE RESERVES

General reserve 23,402,957 23,402,957 23,391,776 23,391,776

Retained earnings 11,157,205 8,089,048 3,844,212 1,858,154


General reserve represents amounts set aside by the directors for future expansions, and to meet any contingencies. Objectives, policies and processes for managing capital has been disclosed in the Risk Management Report on pages 26 to 35.

54 SECURED LIABILITIES

Short and long term borrowings together with the debentures of the company have been secured on the mortgage of specific land and buildings, pledge of specific quoted company shares and assignment of specific lease receivables and hypothecation of hire purchase and lease contracts. The carrying value of the assets mortgaged / assigned as security amounted to Rs.22,698 million as at 31.03.2020 (As at 31.03.2019 - Rs. 23,748 million).

Company

31.03.2020 31.03.2019

Rs.Mn Rs.Mn

Total available facilities 12,704 12,443

Used 7,688 7,666

Unused 5,016 4,777


General terms and conditions relating to above pledges are

1 The value of the lease receivables pledged as securities to be over and above the facilities obtained.

2 The mortgaged receivables should comprise assets with appropriate past due days.

3 All assets mortgaged to the lending institutions should be valued at such intervals as mandated by law and applicable regulations by professionally qualified valuers.

4 Company should maintain comprehensive insurance cover over all the assets pledged to the lending institutions.

55 ANALYSIS OF FINANCIAL ASSETS AND LIABILITIES BY MEASUREMENT BASIS - GROUP

The following table analyses the carrying amounts of the financial instruments by category as defined in Sri Lanka Accounting Standard - SLFRS 9 Financial Instruments.

Analysis of financial assets and liabilities by measurement basis - Group As at 31.03.2020

Description Fair value through profit

or loss

Amortised cost

Total Fair value Fair value measurement

level

Rs.’000 Rs.'000 Rs.'000 Rs.’000

Cash in hand and at banks - 773,312 773,312

Fair value through profit or loss financial assets

Quoted securities 174,542 - 174,542 Level 1

Unquoted securities 100,567 - 100,567 Level 3

Unit trusts 5,324,738 - 5,324,738 Level 2

Trade and other receivables - 1,499,363 1,499,363

Securities bought under repurchase agreements - 4,440,427 4,440,427

Loans and receivables from banks - 2,403,532 2,403,532

Loans and receivables from others - 2,616,233 2,616,233 2,508,473

Loans and receivables from customers - 4,167,030 4,167,030 3,699,579

Net investment in leases and hire purchase - 74,343,334 74,343,334

Total financial assets 5,599,847 90,243,231 95,843,078

Bank overdrafts - 1,241,075 1,241,075

Trade and other payables - 1,297,648 1,297,648

Short term borrowings - 982,277 982,277

Deposits - 52,912,500 52,912,500 50,999,031

Long term borrowings - 7,150,700 7,150,700 6,676,598

Debentures - 1,791,038 1,791,038

Lease liabilities - 353,415 353,415 353,415

Total financial liabilities - 65,728,653 65,728,653


As at 31.03.2019


or loss

Amortised cost


level

Rs.’000 Rs.'000 Rs.'000 Rs.’000

Cash in hand and at banks - 740,055 740,055 Fair value through profit or loss financial assetsQuoted securities 452,249 - 452,249 Level 1Unquoted securities 108,614 - 108,614 Level 3Unit trusts 3,980 - 3,980 Level 2Trade and other receivables - 1,272,695 1,272,695 Securities bought under repurchase agreements - 3,289,551 3,289,551 Loans and receivables from banks - 1,447,867 1,447,867 Loans and receivables from others - 593,140 593,140 587,740 Loans and receivables from customers - 5,996,253 5,996,253 6,273,697 Net investment in leases and hire purchase - 75,751,083 75,751,083 Total financial assets 564,843 89,090,644 89,655,487

Bank overdrafts - 1,461,012 1,461,012 Trade and other payables - 1,674,727 1,674,727 Short term borrowings - 2,329,590 2,329,590 Deposits - 45,149,518 45,149,518 43,602,860 Long term borrowings - 7,050,557 7,050,557 6,176,390 Debentures - 2,296,284 2,296,284Total financial liabilities - 59,961,688 59,961,688

Analysis of financial assets and liabilities by measurement basis - Company As at 31.03.2020


or loss

Amortised cost


level

Rs.’000 Rs.'000 Rs.'000 Rs.’000

Cash in hand and at banks - 671,117 671,117 Fair value through profit or loss financial assetsQuoted securities 174,324 - 174,324 Level 1Unquoted securities 98,762 - 98,762 Level 3Unquoted units 5,046,942 - 5,046,942 Level 2Trade and other receivables - 566,309 566,309 Securities bought under repurchase agreements - 4,440,427 4,440,427 Loans and receivables from banks - 2,398,375 2,398,375 Loans and receivables from others - 2,026,744 2,026,744 1,918,984 Loans and receivables from customers - 4,167,893 4,167,893 3,700,442 Net investment in leases and hire purchase - 74,343,334 74,343,334 Total financial assets 5,320,028 88,614,199 93,934,227

Bank overdrafts - 1,224,972 1,224,972 Trade and other payables 913,308 913,308 Short term borrowings - 650,295 650,295 Deposits - 53,390,977 53,390,977 51,477,508 Long term borrowings - 7,148,317 7,148,317 6,674,215 Debentures - 1,791,038 1,791,038 Lease liabilities 522,842 522,842 521,609 Total financial liabilities - 65,641,749 65,641,749



Analysis of financial assets and liabilities by measurement basis - Company As at 31.03.2019


or loss

Amortised cost


level

Rs.’000 Rs.'000 Rs.'000 Rs.’000

Cash in hand and at banks - 697,390 697,390


Quoted securities 451,958 - 451,958 Level 1

Unquoted securities 106,524 - 106,524 Level 3

Trade and other receivables - 456,153 456,153

Securities bought under repurchase agreements - 3,289,551 3,289,551

Loans and receivables from banks - 1,441,839 1,441,839

Loans and receivables from others - 38,715 38,715 33,315

Loans and receivables from customers - 5,986,999 5,986,999 6,264,443

Net investment in leases and hire purchase - 75,751,083 75,751,083

Total financial assets 558,482 87,661,730 88,220,212

Bank overdrafts - 1,444,731 1,444,731

Trade and other payables 1,175,837 1,175,837

Short term borrowings - 2,236,061 2,236,061

Deposits - 45,669,738 45,669,738 44,123,080

Long term borrowings 7,046,982 7,046,982 6,172,815

Debentures - 2,296,284 2,296,284

Total financial liabilities - 59,869,633 59,869,633

Level 01 valuations are based on market prices published by the Colombo Stock Exchange for shares quoted on the Colombo Stock Exchange and level 02 valuation for unit trusts, the prices published by fund managers for respective funds.

Level 03 valuations have been determined using valuation techniques which approximate the fair value.

Financial instruments measured at amortised cost presented above where the fair value has not been disclosed separately, are approximately representing the fair value of such investments.

There have been no transfers among level 01 level 02 and level 03.


Financial assets and financial liabilities measured at fair value - Fair value hierarchy

Group 31 March 2020

Level 1 Level 2 Level 3 Total


Investments in quoted securities 174,542 - - 174,542

Unquoted equities - - 100,567 100,567

Investments in units - 5,324,738 - 5,324,738

174,542 5,324,738 100,567 5,599,847

Group 31 March 2019





Investments in units - 3,980 - 3,980

452,249 3,980 108,614 564,843

Company 31 March 2020





Investments in units 5,046,942 5,046,942

174,324 5,046,942 98,762 5,320,028

Company 31 March 2019




Unquoted equities - 106,524 106,524

451,958 - 106,524 558,482



Level 3 fair value measurements

The following table shows a reconciliation from the beginning balance to the ending balance for fair value measurements in level 3 of the fair value hierarchy.

Group Company

31.03.2020 31.03.2019 31.03.2020 31.03.2019

Rs.'000 Rs.'000 Rs.'000 Rs.'000


Disposals during the year - (22,087) - (12,347)

Changes in fair value during the year (8,047) 12,471 (7,762) 12,617


Unobservable inputs used in measuring fair value

Type of financial instrument Fair value as at 31.03.2020 valuation technique

Significant unobservable inputs

Fair value measurement sensitivity to unobservable inputs

Group Company

Rs.000 Rs.000

Investment in unquoted equities 100,567 98,762 Net asset value per share

Net asset value Increase in net asset value by 10% would increase the fair value by 10%.

56 CAPITAL COMMITMENTS

Capital commitments for which provision has not been made in the financial statements amounts to approximately Rs.42.70 million for the company and Rs. 48.05 million for the group (2018/19 - Rs. 85.23 million for the company and Rs. 87.26 million for the group).

Group Company

31.03.2020 31.03.2019 31.03.2020 31.03.2019

Rs.'000 Rs.'000 Rs.'000 Rs.'000

57 CONTINGENT LIABILITIES

Guarantees Issued

Fully secured guarantees issued on behalf of depositors 46,692 30,555 46,692 30,555

Letter of credit facilities - 83,251 - 83,251

Other guarantees - 10,897 - -

46,692 124,703 46,692 113,806

Maturity profiles of contingent liabilities are 44,577 120,733 44,577 109,836

Payable within one year 2,115 3,970 2,115 3,970

Payable after one year 46,692 124,703 46,692 113,806

Contingent liabilities and commitments- associate companies 197,316 187,265



Tax assessments against the company

The following tax assessments are outstanding which have been duly appealed against.

1. Income Tax for year of assessment 2009/2010, amounting to Rs. 248.6 million, on Assessment No. ITA 12301100091. Tax Appeals

Commission Determination received against the company on April 2, 2018.The company appealed against such determination to

Court of Appeal and the matter is pending there.

2. Income Tax for year of assessment 2010/11, amounting to Rs. 35.7 million, on Assessment No. ITA 13291100250. Pending at the

Tax Appeals Commission.

3. Income Tax for year of assessment 2013/14, amounting to Rs.346.2 million, on Assessment No. ITA 16310500158V1. Pending at

the Tax Appeals Commission.

4. Income Tax for year of assessment 2016/17, amounting to Rs. 426.6 million, on Charge No. 0201617002. Pending at the

Department of Inland Revenue.

5. Income Tax for year of assessment 2017/18, amounting to Rs. 277.2 million, on Charge No. 0201718002. Pending at the

Department of Inland Revenue.

6. Value Added Tax (VAT) for taxable periods from April 1, 2009 to March 31, 2010 (12 months) amounting to Rs. 177.3 million,

on Assessment Nos. 6961125, 6961126, 6961127, 6961128, 6961129, 6961130, 6961131, 6961132, 6961133, 6961134,

6961135 and 7015292. Determination by the Tax Appeals Commission issued in favour of the company on 01st June 2016.

The Department of Inland Revenue has appealed against same to Court of Appeal.

7. Value added tax for the quarters ended December 31, 2013, March 31, 2014 amounting to Rs. 116.9 million on Assessment

Nos.7372445 and 7372446. This has been referred to the Tax Appeals Commission.

8. Value added tax for the quarters ended June 30, 2014, September 30, 2014 and December 31, 2014 amounting to Rs. 170.1

million on Assessment Nos.7389287, 7401318,7401319. Pending at the Tax Appeals Commission.

9. Value added tax for the quarters ended September 30, 2016, and December 31, 2016 amounting to Rs. 22.8 million on Charge

Nos.7001630002, 7001640002. Pending at the Department of Inland Revenue.

10. Nation Building Tax for the quarter ended March 31, 2016 amounting to Rs. 13.3 million on Charge No. 9001610002. Pending at

the Department of Inland Revenue.

11. Nation Building Tax for the period from April 1, 2016 to March 31, 2017 amounting to Rs. 10.8 million on Charge No.

9001620002, 9001630002, 9001710002 (Assessment Nos.3). Pending at the Department of Inland Revenue.

12. Nation Building Tax for the period from April 1, 2017 to March 31, 2018 amounting to Rs. 27.5 million on Charge No. 9001720002,

9001730002, 9001740002, 9001810002 (Assessment Nos.4). Pending at the Department of Inland Revenue.


Group companies

CF Insurance Brokers (Pvt) Ltd.


Nation Building Tax (NBT) for years of assessment 2011/12 ,2012/13 and 2013/14, amounting to Rs. 3.53 million Rs.6.10 million and Rs.2.17 million, respectively, on Assessment Nos. 7123212, 7123214, 7123215, 7300338, 7300339, 7300340, 7300341, 7254951 and 7199781. Determination of the Tax Appeals Commission issued in favour of the Company on 31st July 2019 for Assessment Nos. 7123212, 7300338, 7300339, 7300340, 7300341, 7254951 and 7199781 amounting to Rs.9.04 million on time barred provisions. The Company has appealed against Assessment Nos. 7123214 and 7123215 amounting to Rs.2.76 million to Court of Appeal.



Nation Building Tax (NBT) for years of assessment 2009/10, 2010/11 and 2011/12, amounting to Rs.12.37 million, Rs.12.75 million and Rs.14.93 million respectively, on Assessment Nos. 7186237, 7186238, 7186239, 7186240, 7186241, 7186242, 7186243, 7186244, 7186245, 7186246, 7186247, 7186248. Determination of the Tax Appeals Commission issued in favour of the Company on 31st July 2019 for Assessment Nos. 7186237,7186238,7186245 and 7186246 amounting to Rs.13.65 million on time barred provisions. The company has appealed against Assessment Nos. 7186239, 7186240, 7186241,7186242,7186243, 7186244,7186247 and 7186248 amounting to Ra.26.40 million to Court of Appeal and the Department of Inland Revenue has also appealed against the Assessment Nos. 7186245 and 7186246 amounting to Rs.7.46 million to Court of Appeal.

58 IMPACT DUE TO COVID-19

COVID-19 pandemic has caused disruption to business and economic activities and increased uncertainty to the global and local economies. Subsequent to the outbreak of COVID-19 in Sri Lanka, the company has strictly adhered to the guidelines and directions issued by the Government, Health authorities and the Central Bank of Sri Lanka (CBSL) when conducting its business operations. Accordingly, the company is currently in the process of providing relief for the affected businesses and individuals in line with the directions issued by CBSL. The company is continuously assessing possible disruptions due to COVID-9 pandemic.

The company considered the Probability of Default (PD), Loss Given Default (LGD), Economic Factor Adjustment (EFA) and the staging of facilities computed as at 31st March 2020 in order to estimate the Expected Credit Loss (ECL). The company also updated the available macroeconomic input factors when assessing the probability weighted forward looking macro-economic indicators in the EFA used as at 31.03.2020

The fair values of Equity Investments have been determined based on the market prices prevailed as at 20th March 2020, which is the last date of trading during the financial year 2019/20.

59 EVENTS AFTER THE REPORTING PERIOD

Proposed final dividend

The directors have recommended the payment of a final dividend of Rs.1.20 per share by way of a scrip dividend through the allotment of new shares for the year ended 31st March 2020 which requires the approval of shareholders at the Annual General Meeting to be held on 28th August 2020. In accordance with LKAS 10 “Events after the reporting period”,this proposed final dividend has not been recognised as a liability at the year-end (2018/19 – 70 cents per share payable in cash and 90 cents per share by way of a scrip diviend through the allotment of new shares).

As required by section 56 (2) of the Companies Act No.7 of 2007, the board of directors has confirmed that the company satisfies the solvency test in accordance with Section 57 of the Companies Act No. 7 of 2007, and have obtained necessary approvals from the Central Bank of Sri Lanka prior to declaring the said dividend.

No other circumstances have arisen since the reporting date, which would require adjustments to / or disclosure in the financial statements.



60 RELATED PARTY DISCLOSURES

60.1 Parent and ultimate parent

The company does not have a parent of its own.

60.2 Subsidiaries and associates

Relationship with subsidiaries and associates are explained in the pages 187 to 189 of the annual report.

The directors of the company are also directors of the following subsidiary and associate companies of the group.

The company carried out transactions in the ordinary course of business at market rates with these related entities.

C.L

.K.P

. Jay

asur

iya*

E.H

. Wije

naik

e

G.S

.N. P

eiris

A.K.

Gun

arat

ne

D.P

.de

Silv

a

C.K

.Het

tiara

chch

i

A.D

.B.T

alw

atte

Dr.(

Mrs

.)A.

D.N

.de

Zoys

a

A.R.

Fern

ando

K.B

.Her

ath

M.H

.de

Silv

a**

Central Industries PLC - x x x - - - - - - -

Central Developments Ltd. - - x - x - - - - - -

Dehigama Hotels Company Ltd. - x x - - - - - - - -

Expanded Plastic Products (Pvt) Ltd. - - x - - - - - - - -

Central Mineral Industries (Pvt) Ltd. - - x - - - - - - - -

Central Transport & Travels Ltd. - - x - - - - - - - -

Central Construction & Development (Pvt) Ltd. - - - - - - - - - - -

CF Growth Fund Ltd. - - x - x - - - - - -

Kandy Private Hospitals Ltd. - x x - - - - - - - -

CF Insurance Brokers (Pvt) Ltd. - - x x x x - - - - -

Central Homes (Pvt) Ltd. - - x - - - - - - - -

Mark Marine Services (Pvt) Ltd. - - - x x - - - - - -

Hedges Court Residencies (Pvt) Ltd. - - x - x - - - - - -

Capital Suisse Asia Ltd. - x - x - - - - - - -

Nations Trust Bank PLC - - - - x - - - x - -

Tea Smallholders Factories PLC - x - x - - - - - - -

*Retired w.e.f. 30. 06. 2020

** Appointed w.e.f. 01. 07. 2020


Group Company

31.03.2020 31.03.2019 31.03.2020 31.03.2019

Rs.'000 Rs.'000 Rs.'000 Rs.'000

60.3 Amounts due from related parties(a) Subsidiaries

Trade and other receivables - - 19,813 320

Loans and advances 10,720 -

- - 30,533 320

(b) Associates

Securities bought under repurchase agreements 3,394,230 3,289,551 3,394,230 3,289,551

Deposits 5,157 1,191,963 - 1,185,935

Lease and hire purchase receivables 11,200 16,153 11,200 16,153

3,410,587 4,497,667 3,405,430 4,491,639

(c) Key management personnel (KMP) and their close family members

Loans and advances 1,681 5,893 1,681 5,893

Total amount due from related parties 3,412,268 4,503,560 3,437,644 4,497,852

60.4 Amounts due to related parties

(a) Subsidiaries

Deposits - - 478,477 520,220

Amounts due to subsidiaries - - 86,209 216,021

- - 564,686 736,241

(b) Associates

Deposits 180,776 215,093 180,776 215,093

Short term loans and overdraft facilities 596,643 872,936 596,643 872,936

777,419 1,088,029 777,419 1,088,029

(c) Key management personnel (KMP) and their close family members

Deposits 932,439 769,863 927,683 769,863

Total amount due to related parties 1,709,858 1,857,892 2,269,788 2,594,133



Group Company

Year ended 31.03.2020 31.03.2019 31.03.2020 31.03.2019

Rs.'000 Rs.'000 Rs.'000 Rs.'000

60.5 Transactions with related parties(a) Subsidiaries

Collection of insurance premium - - 2,547,467 2,175,828 Rendering of services - - 12,676 17,306 Rent paid - - 39,186 35,863 Vehicle hire rentals paid - - 1,071 1,071

Accounting and administration charges received - - 175 175 Deposits placed - - 316,784 417,977 Withdrawal of deposits by subsidiaries - - 357,987 106,014 Vehicle hire rentals received - - 3,457 3,744 Loans given - - 10,720 -

Dividends received - - 54,692 39,409 Interest received - - 904 - Interest paid - - 56,214 34,618 Rent received - - 8,320 8,974

(b) AssociatesInterest paid 45,549 71,302 45,549 71,302 Interest received 371,123 395,770 370,618 395,156 Lease/vehicle hire facilities given 16,730 24,195 16,730 24,195 Dividends received 164,137 138,986 91,945 78,136

Loans obtained 400,000 250,000 400,000 250,000 Investment in shares 63,592 114,586 63,592 60,192 Loans settled 400,000 500,000 400,000 500,000 Investments in reverse REPOs 33,819,500 13,277,000 33,819,500 13,277,000

Divestment of reverse REPOs 33,719,500 13,062,000 33,719,500 13,062,000 Placement of fixed deposits 2,195,000 4,480,000 2,195,000 4,480,000 Loans given 10,325 - 10,325 - Recovery of loans 10,325 - 10,325 - Withdrawal of fixed deposits 3,355,000 4,170,000 3,355,000 4,170,000 Receipt of deposits from associates - 113,000 - 113,000 Withdrawal of deposits by associates - 1,850 - 1,850 Vehicle hire rentals received 14,230 11,218 14,230 11,218 Lease and hire purchase rentals received 8,422 13,164 8,422 13,164 Commission earned on sale of vehicles - 109 - 109

(c) Key management personnel (KMP) and their close family membersInterest paid on deposits 94,212 77,336 94,212 77,336 Loans given 500 - 500 - Recovery of loans 4,687 5,583 4,687 5,583 Interest received 337 594 337 594 Vehicle hire charges received - 34 - 34

Post-employment benefits for key management personnelContributions to provident fund 35,552 31,492 33,472 29,584 Contributions to gratuity fund 10,433 8,385 9,820 7,832

Compensation of key management personnelShort term employee benefits 258,673 250,026 237,630 228,554


Related parties include key management personnel defined as those persons having authority and responsibility for planning, directing and controlling the activities of the company. Such KMPs comprise members of the board of directors of the company and key employees of the company who are responsible for planning, directing and controlling the operations of the company.

The related party transactions with subsidiaries and associates are carried out at the same terms and conditions available for third parties. The terms and conditions of the transactions with KMP’s are similar to other employees of the company as per their contract of employment. There have been no provision for related party balances. Deposits placed with related parties are unsecured and all other balance from related parties are secured.

As required by rule 9.3.2 (a) of the Listing Rules of the Colombo Stock Exchange, there are no non-recurrent related party transactions which exceed 10% of the equity or 5% of the total assets, whichever is lower, as per the audited financial statements of the company.

During the financial year ended 31.03.2020, the company carried out transactions with Nations Trust Bank PLC in the ordinary course of business at market rates, the value of which exceed 10% of the consolidated gross revenue/income of the group as per the latest audited financial statements of the company.

As required by rule 9.3.2 of the Listing Rules of the Colombo Stock Exchange details of the above transactions are given below. However, these transactions are exempt transactions as per section 9.5 (e ) of the listing rules.

Name of the related party Relationship Nature of the transaction

Aggregate value of related party

transactions entered into

during the financial year

(Rs.000)

Aggregate value of related party

transactions as a % of net

revenue/income

Terms and conditions of the related party transactions

Nations Trust Bank PLC Associate company

Investment in reverse REPO'S

33,819,500 131.29 Transactions are carried out at market rates with general terms and conditions in the ordinary course of business


Divestment of reverse REPOs



Withdrawal of fixed deposits




61 MATURITY ANALYSIS

An analysis of the total assets employed and the total liabilities of the company, based on the remaining period from the balance sheet date to the respective contractual maturity dates is given below:

Up to 3 months 3 to 12 months 1 to 3 years 3 to 5 years More than 5 years Impairment provision Total

31.03.2020 31.03.2019 31.03.2020 31.03.2019 31.03.2020 31.03.2019 31.03.2020 31.03.2019 31.03.2020 31.03.2019 31.03.2020 31.03.2019 31.03.2020 31.03.2019

Rs.'000 Rs.'000 Rs.'000 Rs.'000 Rs.'000 Rs.'000 Rs.'000 Rs.'000 Rs.'000 Rs.'000 Rs.'000 Rs.'000 Rs.'000 Rs.'000

Interest earning assets:Securities bought under repurchase agreements 4,440,427 3,289,551 - - - - - - - - - - 4,440,427 3,289,551

Loan and receivables from banks 2,402,143 1,442,142 - - - - - - - - (3,768) (303) 2,398,375 1,441,839 Loan and receivables from others 1,159,810 12,950 516,946 940 362,226 25,000 - - - - (12,238) (175) 2,026,744 38,715 Net investment in leases & hire purchases 14,342,038 11,282,347 17,914,099 17,721,433 34,989,874 35,896,349 11,845,576 13,400,502 301,758 334,087 (5,050,011) (2,883,635) 74,343,334 75,751,083 Term loan, sub loan & micro finance 1,621,401 1,510,429 1,233,316 1,736,096 1,034,136 1,857,623 280,239 327,412 136,343 130,975 (1,224,707) (803,136) 3,080,728 4,759,398 Loans against fixed deposits 269,038 476,893 453,584 444,147 233,986 143,752 38,504 74,607 - - - - 995,112 1,139,399 Housing and land 5,616 5,584 207 299 653 205 514 108 - - (3,645) (3,624) 3,345 2,572 Staff loans 11,880 11,110 32,552 31,030 25,090 25,800 17,137 17,000 2,049 690 - - 88,708 85,630 Total interest earning assets 24,252,353 18,031,006 20,150,704 19,933,945 36,645,965 37,948,729 12,181,970 13,819,629 440,150 465,752 (6,294,369) (3,690,873) 87,376,773 86,508,187 Non-interest earning assets:Cash in hand and at banks 671,185 697,402 - - - - - - - - (68) (12) 671,117 697,390 FVtPL financial assets 5,320,028 558,482 - - - - - - - - - - 5,320,028 558,482 Trade and other receivables 580,035 468,899 - - - - - - - - (13,726) (12,746) 566,309 456,153 Investments in real estate - - - - - - 69,164 76,030 - - (50,825) (52,977) 18,339 23,053 Investments property - - - - - - - - 303,800 303,800 - - 303,800 303,800 Inventories and other stocks 81,520 381,363 - - - - - - - - - - 81,520 381,363 Investments in associates - - - - - - - - 1,454,646 1,391,054 - - 1,454,646 1,391,054 Investments in subsidiaries - - - - - - - - 289,063 289,063 - - 289,063 289,063 Intangible assets - - - - - - - - 131,751 117,937 - - 131,751 117,937 Right of use assets 38,206 - 105,241 - 223,330 - 167,836 - 78,355 - - - 612,968 - Property, plant and equipment - - - - - - - - 10,358,739 10,405,707 - - 10,358,739 10,405,707 Total non-interest earning assets 6,690,974 2,106,146 105,241 - 223,330 - 237,000 76,030 12,616,354 12,507,561 (64,619) (65,735) 19,808,280 14,624,002 Total assets 30,943,327 20,137,152 20,255,945 19,933,945 36,869,295 37,948,729 12,418,970 13,895,659 13,056,504 12,973,313 (6,358,988) (3,756,608) 107,185,053 101,132,189 Percentage 28.87% 19.91% 18.90% 19.71% 34.40% 37.52% 11.59% 13.74% 12.18% 12.83% -5.93% -3.71% 100% 100%

Interest bearing liabilities:Bank overdrafts 1,224,972 1,444,731 - - - - - - - - - - 1,224,972 1,444,731 Short term borrowings 662,335 2,280,912 - - - - - - - - - - 662,335 2,280,912 Deposits 14,401,778 12,165,258 29,282,266 26,249,961 10,897,497 8,965,304 4,266,451 2,948,723 - - - - 58,847,992 50,329,246 Lease liabilities 43,233 - 98,556 - 257,885 - 200,385 - 108,926 - - - 708,985 - Long term borrowings 554,387 145,135 570,664 587,505 4,729,369 2,741,738 3,546,808 6,859,489 - - - - 9,401,228 10,333,867 Debentures 1,819,379 518,740 - 166,600 - 1,819,379 - - - - - - 1,819,379 2,504,719 Total interest bearing liabilities 18,706,084 16,554,776 29,951,486 27,004,066 15,884,751 13,526,421 8,013,644 9,808,212 108,926 - - - 72,664,891 66,893,475

Non-interest bearing liabilities:Trade and other payables 913,308 1,175,837 - - - - - - - - - - 913,308 1,175,837 Employee benefit obligations 291,768 232,101 874,710 696,303 91,468 65,025 523,311 292,860 - 149,419 - - 1,781,257 1,435,708 Amounts due to subsidiaries 86,209 216,021 - - - - - - - - - - 86,209 216,021 Tax payables 752,572 1,914,796 - - - - - - - - - - 752,572 1,914,796 Deferred tax liability - - - - - - 1,565,315 - 1,894,117 4,546,182 - - 3,459,432 4,546,182 Total non-interest bearing liabilities 2,043,857 3,538,755 874,710 696,303 91,468 65,025 2,088,626 292,860 1,894,117 4,695,601 - - 6,992,778 9,288,544 Total liabilities 20,749,941 20,093,530 30,826,196 27,700,369 15,976,219 13,591,446 10,102,270 10,101,072 2,003,043 4,695,601 - - 79,657,669 76,182,019 Percentage 26.05% 26.38% 38.70% 36.36% 20.06% 17.84% 12.68% 13.26% 2.51% 6.16% 0.00% 0.00% 100% 100%

Contingent liabilitiesFully secured guarantees issued on behalf of depositors 3,877 5,870 41,515 24,215 1,300 470 46,692 30,555 Letter of credit facilities 83,251 - - - - - 83,251 -

Maturities given above may change due to Covid- 19 Moratorium Relief offered. Maturities of interest bearing liabilities and employee benefit obligations are presented on undiscounted basis.


Up to 3 months 3 to 12 months 1 to 3 years 3 to 5 years More than 5 years Impairment provision Total

31.03.2020 31.03.2019 31.03.2020 31.03.2019 31.03.2020 31.03.2019 31.03.2020 31.03.2019 31.03.2020 31.03.2019 31.03.2020 31.03.2019 31.03.2020 31.03.2019

Rs.'000 Rs.'000 Rs.'000 Rs.'000 Rs.'000 Rs.'000 Rs.'000 Rs.'000 Rs.'000 Rs.'000 Rs.'000 Rs.'000 Rs.'000 Rs.'000

Interest earning assets:Securities bought under repurchase agreements 4,440,427 3,289,551 - - - - - - - - - - 4,440,427 3,289,551

Loan and receivables from banks 2,402,143 1,442,142 - - - - - - - - (3,768) (303) 2,398,375 1,441,839 Loan and receivables from others 1,159,810 12,950 516,946 940 362,226 25,000 - - - - (12,238) (175) 2,026,744 38,715 Net investment in leases & hire purchases 14,342,038 11,282,347 17,914,099 17,721,433 34,989,874 35,896,349 11,845,576 13,400,502 301,758 334,087 (5,050,011) (2,883,635) 74,343,334 75,751,083 Term loan, sub loan & micro finance 1,621,401 1,510,429 1,233,316 1,736,096 1,034,136 1,857,623 280,239 327,412 136,343 130,975 (1,224,707) (803,136) 3,080,728 4,759,398 Loans against fixed deposits 269,038 476,893 453,584 444,147 233,986 143,752 38,504 74,607 - - - - 995,112 1,139,399 Housing and land 5,616 5,584 207 299 653 205 514 108 - - (3,645) (3,624) 3,345 2,572 Staff loans 11,880 11,110 32,552 31,030 25,090 25,800 17,137 17,000 2,049 690 - - 88,708 85,630 Total interest earning assets 24,252,353 18,031,006 20,150,704 19,933,945 36,645,965 37,948,729 12,181,970 13,819,629 440,150 465,752 (6,294,369) (3,690,873) 87,376,773 86,508,187 Non-interest earning assets:Cash in hand and at banks 671,185 697,402 - - - - - - - - (68) (12) 671,117 697,390 FVtPL financial assets 5,320,028 558,482 - - - - - - - - - - 5,320,028 558,482 Trade and other receivables 580,035 468,899 - - - - - - - - (13,726) (12,746) 566,309 456,153 Investments in real estate - - - - - - 69,164 76,030 - - (50,825) (52,977) 18,339 23,053 Investments property - - - - - - - - 303,800 303,800 - - 303,800 303,800 Inventories and other stocks 81,520 381,363 - - - - - - - - - - 81,520 381,363 Investments in associates - - - - - - - - 1,454,646 1,391,054 - - 1,454,646 1,391,054 Investments in subsidiaries - - - - - - - - 289,063 289,063 - - 289,063 289,063 Intangible assets - - - - - - - - 131,751 117,937 - - 131,751 117,937 Right of use assets 38,206 - 105,241 - 223,330 - 167,836 - 78,355 - - - 612,968 - Property, plant and equipment - - - - - - - - 10,358,739 10,405,707 - - 10,358,739 10,405,707 Total non-interest earning assets 6,690,974 2,106,146 105,241 - 223,330 - 237,000 76,030 12,616,354 12,507,561 (64,619) (65,735) 19,808,280 14,624,002 Total assets 30,943,327 20,137,152 20,255,945 19,933,945 36,869,295 37,948,729 12,418,970 13,895,659 13,056,504 12,973,313 (6,358,988) (3,756,608) 107,185,053 101,132,189 Percentage 28.87% 19.91% 18.90% 19.71% 34.40% 37.52% 11.59% 13.74% 12.18% 12.83% -5.93% -3.71% 100% 100%

Interest bearing liabilities:Bank overdrafts 1,224,972 1,444,731 - - - - - - - - - - 1,224,972 1,444,731 Short term borrowings 662,335 2,280,912 - - - - - - - - - - 662,335 2,280,912 Deposits 14,401,778 12,165,258 29,282,266 26,249,961 10,897,497 8,965,304 4,266,451 2,948,723 - - - - 58,847,992 50,329,246 Lease liabilities 43,233 - 98,556 - 257,885 - 200,385 - 108,926 - - - 708,985 - Long term borrowings 554,387 145,135 570,664 587,505 4,729,369 2,741,738 3,546,808 6,859,489 - - - - 9,401,228 10,333,867 Debentures 1,819,379 518,740 - 166,600 - 1,819,379 - - - - - - 1,819,379 2,504,719 Total interest bearing liabilities 18,706,084 16,554,776 29,951,486 27,004,066 15,884,751 13,526,421 8,013,644 9,808,212 108,926 - - - 72,664,891 66,893,475

Non-interest bearing liabilities:Trade and other payables 913,308 1,175,837 - - - - - - - - - - 913,308 1,175,837 Employee benefit obligations 291,768 232,101 874,710 696,303 91,468 65,025 523,311 292,860 - 149,419 - - 1,781,257 1,435,708 Amounts due to subsidiaries 86,209 216,021 - - - - - - - - - - 86,209 216,021 Tax payables 752,572 1,914,796 - - - - - - - - - - 752,572 1,914,796 Deferred tax liability - - - - - - 1,565,315 - 1,894,117 4,546,182 - - 3,459,432 4,546,182 Total non-interest bearing liabilities 2,043,857 3,538,755 874,710 696,303 91,468 65,025 2,088,626 292,860 1,894,117 4,695,601 - - 6,992,778 9,288,544 Total liabilities 20,749,941 20,093,530 30,826,196 27,700,369 15,976,219 13,591,446 10,102,270 10,101,072 2,003,043 4,695,601 - - 79,657,669 76,182,019 Percentage 26.05% 26.38% 38.70% 36.36% 20.06% 17.84% 12.68% 13.26% 2.51% 6.16% 0.00% 0.00% 100% 100%

Contingent liabilitiesFully secured guarantees issued on behalf of depositors 3,877 5,870 41,515 24,215 1,300 470 46,692 30,555 Letter of credit facilities 83,251 - - - - - 83,251 -

Maturities given above may change due to Covid- 19 Moratorium Relief offered. Maturities of interest bearing liabilities and employee benefit obligations are presented on undiscounted basis.



Leasing, hire purchase and other

advances

Medical services Power generation Manufacturing Insurance broking Investments Real estate Intra segmental adjustments

Total

For the year 31st March 2020 2019 2020 2019 2020 2019 2020 2019 2020 2019 2020 2019 2020 2019 2020 2019 2020 2019

62 BUSINESS SEGMENT INFORMATIONAll figures in Rs.000

RevenueInterest income 19,422,740 18,039,568 15,449 14,051 - - 698 557 55,335 45,692 618,698 463,475 3,896 8,472 - 20,116,816 18,571,815

Other revenue - - 119,951 127,013 58,506 62,423 3,203,008 2,792,215 371,693 358,446 - - - - - 3,753,158 3,340,097

Operating lease income 1,030,459 1,000,957 - - - - - - - 1,030,459 1,000,957

Other income 566,633 664,100 664 633 - - 6,077 9,861 40,724 27,341 400,975 68,015 5,918 22,620 (162,739) (138,986) 858,252 653,584

Income from external customers 21,019,832 19,704,625 136,064 141,697 58,506 62,423 3,209,783 2,802,633 467,752 431,479 1,019,673 531,490 9,814 31,092 (162,739) (138,986) 25,758,685 23,566,453

Inter - segment income 85,042 31,795 1 1 3,589 8,381 336 167 36,779 14,171 28,512 61,885 46,331 40,209 (200,590) (156,609) - -

Total income 21,104,874 19,736,420 136,065 141,698 62,095 70,804 3,210,119 2,802,800 504,531 445,650 1,048,185 593,375 56,145 71,301 (363,329) (295,595) 25,758,685 23,566,453

ExpensesInterest expenses 6,321,993 5,613,411 - - - - - - - - 425,682 341,060 21,352 22,719 - - 6,769,027 5,977,190

Depreciation & amortisation 743,814 547,170 9,780 8,435 10 5,254 44,561 42,961 16,260 1,438 - - 2,476 849 (14,800) - 802,101 606,107

Cost of sales - - 56,562 57,287 20,716 20,543 2,579,652 2,291,965 - - - - - - - - 2,656,930 2,369,795

Impairments and other credit losses 4,777,372 2,202,565 (279) (18) (4) (2) 11,237 3,425 (1,283) 932 (580) 183 (2,373) 7,816 1,668 (1,251) 4,785,758 2,213,650

Other operating and administrative expenses 3,971,240 3,898,536 57,090 59,954 5,850 6,020 314,264 289,061 113,869 112,692 591 307 16,095 18,224 13,282 - 4,492,281 4,384,794

15,814,419 12,261,682 123,153 125,658 26,572 31,815 2,949,714 2,627,412 128,846 115,062 425,693 341,550 37,550 49,608 150 (1,251) 19,506,097 15,551,536

Inter - segment expenses 97,026 71,577 - - - - 73 85 24,453 30,023 979 75 979 75 (123,510) (101,835) - -

Total expenses 15,911,445 12,333,259 123,153 125,658 26,572 31,815 2,949,787 2,627,497 153,299 145,085 426,672 341,625 38,529 49,683 (123,360) (103,086) 19,506,097 15,551,536

Segment results 5,193,429 7,403,161 12,912 16,040 35,523 38,989 260,332 175,303 351,232 300,565 621,513 251,750 17,616 21,618 (239,969) (192,509) 6,252,588 8,014,917

Share of profit of associates,net of tax 859,924 765,726

Profit before VAT on financial services, NBT debt repayment

levy and income tax

7,112,512 8,780,643

Less: VAT on financial services, NBT and debt repayment levy 1,275,328 1,431,885

Profit before income tax 5,837,184 7,348,758

Less: Income tax expense 1,727,880 2,220,004

Profit after income tax 4,109,304 5,128,754

Non-controlling interest 119,156 87,356

Profit attributable to equity holders of the parent 3,990,148 5,041,398

As at 31.03.2020

As at 31.03.2019

As at 31.03.2020

As at 31.03.2019

As at 31.03.2020

As at 31.03.2019

As at 31.03.2020

As at 31.03.2019

As at 31.03.2020

As at 31.03.2019

As at 31.03.2020

As at 31.03.2019

As at 31.03.2020

As at 31.03.2019

As at 31.03.2020

As at 31.03.2019

As at 31.03.2020

As at 31.03.2019

Segment assets 92,267,184 93,123,260 642,855 641,144 72,879 73,403 2,708,756 2,390,774 2,246,473 2,397,865 15,359,692 8,679,008 1,157,397 1,121,385 (4,894,173) (5,487,744) 109,561,063 102,939,095

Investments in associates 7,430,736 6,503,658

Unallocated assets 802,868 815,327

Total assets 92,267,184 93,123,260 642,855 641,144 72,879 73,403 2,708,756 2,390,774 2,246,473 2,397,865 15,359,692 8,679,008 1,157,397 1,121,385 (4,894,173) (5,487,744) 117,794,667 110,258,080

Segment liabilities 61,526,669 56,536,207 148,542 153,860 7,499 9,647 846,090 670,506 297,555 309,873 4,012,972 3,332,049 579,469 568,071 (971,052) (920,821) 66,447,744 60,659,392

Unallocated liabilities 5,824,042 7,738,758

Total liabilities 61,526,669 56,536,207 148,542 153,860 7,499 9,647 846,090 670,506 297,555 309,873 4,012,972 3,332,049 579,469 568,071 (971,052) (920,821) 72,271,786 68,398,150

Additions to non-current assets 668,147 1,098,430 16,167 52,348 - - 36,782 35,375 2,261 3,466 - - - - - - 723,357 1,189,619

Additions to intangible assets 57,811 59,741 - - - - - - - - - - - - - - 57,811 59,741

Additions to right of use assets 333,812 - - - - - - - 9,423 - - - - - (178,920) - 164,315 -

Cash flows from operating activities 3,629,136 (2,900,240) 11,885 9,302 (9,527) 28,159 (160,336) 148,311 278,716 208,306 260,355 (147,291) 73,422 1,798 31,122 (318,510) 4,114,773 (2,970,165)

Cash flows from investing activities (359,355) (936,893) (19,666) (1,855) 40,604 27,629 (32,625) (15,380) (168,474) (188,250) (30,213) (84,033) (50,543) (9,876) (118,283) 264,880 (738,555) (991,104)

Cash flows from financing activities (3,100,267) 3,339,271 (1,360) (1,398) (30,679) (56,115) 187,990 (143,374) (36,527) (21,656) (207,016) 201,501 (22,269) 6,176 87,161 100,957 (3,122,967) 3,425,362

63 Disclosures relating to credit, market and liquidity risks and capital are provided in the Risk Management Report in pages 26 to 35.


Leasing, hire purchase and other

advances

Medical services Power generation Manufacturing Insurance broking Investments Real estate Intra segmental adjustments

Total

For the year 31st March 2020 2019 2020 2019 2020 2019 2020 2019 2020 2019 2020 2019 2020 2019 2020 2019 2020 2019

62 BUSINESS SEGMENT INFORMATIONAll figures in Rs.000

RevenueInterest income 19,422,740 18,039,568 15,449 14,051 - - 698 557 55,335 45,692 618,698 463,475 3,896 8,472 - 20,116,816 18,571,815

Other revenue - - 119,951 127,013 58,506 62,423 3,203,008 2,792,215 371,693 358,446 - - - - - 3,753,158 3,340,097

Operating lease income 1,030,459 1,000,957 - - - - - - - 1,030,459 1,000,957

Other income 566,633 664,100 664 633 - - 6,077 9,861 40,724 27,341 400,975 68,015 5,918 22,620 (162,739) (138,986) 858,252 653,584

Income from external customers 21,019,832 19,704,625 136,064 141,697 58,506 62,423 3,209,783 2,802,633 467,752 431,479 1,019,673 531,490 9,814 31,092 (162,739) (138,986) 25,758,685 23,566,453

Inter - segment income 85,042 31,795 1 1 3,589 8,381 336 167 36,779 14,171 28,512 61,885 46,331 40,209 (200,590) (156,609) - -

Total income 21,104,874 19,736,420 136,065 141,698 62,095 70,804 3,210,119 2,802,800 504,531 445,650 1,048,185 593,375 56,145 71,301 (363,329) (295,595) 25,758,685 23,566,453

ExpensesInterest expenses 6,321,993 5,613,411 - - - - - - - - 425,682 341,060 21,352 22,719 - - 6,769,027 5,977,190

Depreciation & amortisation 743,814 547,170 9,780 8,435 10 5,254 44,561 42,961 16,260 1,438 - - 2,476 849 (14,800) - 802,101 606,107

Cost of sales - - 56,562 57,287 20,716 20,543 2,579,652 2,291,965 - - - - - - - - 2,656,930 2,369,795

Impairments and other credit losses 4,777,372 2,202,565 (279) (18) (4) (2) 11,237 3,425 (1,283) 932 (580) 183 (2,373) 7,816 1,668 (1,251) 4,785,758 2,213,650

Other operating and administrative expenses 3,971,240 3,898,536 57,090 59,954 5,850 6,020 314,264 289,061 113,869 112,692 591 307 16,095 18,224 13,282 - 4,492,281 4,384,794

15,814,419 12,261,682 123,153 125,658 26,572 31,815 2,949,714 2,627,412 128,846 115,062 425,693 341,550 37,550 49,608 150 (1,251) 19,506,097 15,551,536

Inter - segment expenses 97,026 71,577 - - - - 73 85 24,453 30,023 979 75 979 75 (123,510) (101,835) - -

Total expenses 15,911,445 12,333,259 123,153 125,658 26,572 31,815 2,949,787 2,627,497 153,299 145,085 426,672 341,625 38,529 49,683 (123,360) (103,086) 19,506,097 15,551,536

Segment results 5,193,429 7,403,161 12,912 16,040 35,523 38,989 260,332 175,303 351,232 300,565 621,513 251,750 17,616 21,618 (239,969) (192,509) 6,252,588 8,014,917

Share of profit of associates,net of tax 859,924 765,726

Profit before VAT on financial services, NBT debt repayment

levy and income tax

7,112,512 8,780,643

Less: VAT on financial services, NBT and debt repayment levy 1,275,328 1,431,885

Profit before income tax 5,837,184 7,348,758

Less: Income tax expense 1,727,880 2,220,004

Profit after income tax 4,109,304 5,128,754

Non-controlling interest 119,156 87,356

Profit attributable to equity holders of the parent 3,990,148 5,041,398

As at 31.03.2020

As at 31.03.2019

As at 31.03.2020

As at 31.03.2019

As at 31.03.2020

As at 31.03.2019

As at 31.03.2020

As at 31.03.2019

As at 31.03.2020

As at 31.03.2019

As at 31.03.2020

As at 31.03.2019

As at 31.03.2020

As at 31.03.2019

As at 31.03.2020

As at 31.03.2019

As at 31.03.2020

As at 31.03.2019

Segment assets 92,267,184 93,123,260 642,855 641,144 72,879 73,403 2,708,756 2,390,774 2,246,473 2,397,865 15,359,692 8,679,008 1,157,397 1,121,385 (4,894,173) (5,487,744) 109,561,063 102,939,095

Investments in associates 7,430,736 6,503,658

Unallocated assets 802,868 815,327

Total assets 92,267,184 93,123,260 642,855 641,144 72,879 73,403 2,708,756 2,390,774 2,246,473 2,397,865 15,359,692 8,679,008 1,157,397 1,121,385 (4,894,173) (5,487,744) 117,794,667 110,258,080

Segment liabilities 61,526,669 56,536,207 148,542 153,860 7,499 9,647 846,090 670,506 297,555 309,873 4,012,972 3,332,049 579,469 568,071 (971,052) (920,821) 66,447,744 60,659,392

Unallocated liabilities 5,824,042 7,738,758

Total liabilities 61,526,669 56,536,207 148,542 153,860 7,499 9,647 846,090 670,506 297,555 309,873 4,012,972 3,332,049 579,469 568,071 (971,052) (920,821) 72,271,786 68,398,150

Additions to non-current assets 668,147 1,098,430 16,167 52,348 - - 36,782 35,375 2,261 3,466 - - - - - - 723,357 1,189,619

Additions to intangible assets 57,811 59,741 - - - - - - - - - - - - - - 57,811 59,741

Additions to right of use assets 333,812 - - - - - - - 9,423 - - - - - (178,920) - 164,315 -

Cash flows from operating activities 3,629,136 (2,900,240) 11,885 9,302 (9,527) 28,159 (160,336) 148,311 278,716 208,306 260,355 (147,291) 73,422 1,798 31,122 (318,510) 4,114,773 (2,970,165)

Cash flows from investing activities (359,355) (936,893) (19,666) (1,855) 40,604 27,629 (32,625) (15,380) (168,474) (188,250) (30,213) (84,033) (50,543) (9,876) (118,283) 264,880 (738,555) (991,104)

Cash flows from financing activities (3,100,267) 3,339,271 (1,360) (1,398) (30,679) (56,115) 187,990 (143,374) (36,527) (21,656) (207,016) 201,501 (22,269) 6,176 87,161 100,957 (3,122,967) 3,425,362

63 Disclosures relating to credit, market and liquidity risks and capital are provided in the Risk Management Report in pages 26 to 35.


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38


COM

PAN

Y PR

OFI

LEBO

ARD

OF

DIR

ECTO

RS

Subsidiaries

Central Industries PLC Central Developments Ltd

Central Transport and Travels Ltd

Central Construction and Development (Pvt) Ltd

Central Mineral Industries (Pvt) Ltd

Year of Incorporation

1984 1974 1990 1983 1990

Stated Capital Rs.121,320,460 (19,768,428 Shares)

Rs.132,940,000 (13,294,000 Shares)

Rs.29,490,070 (2,949,007 Shares)

Rs.50,000 (5000 Shares)

Rs.3,500,000 (350,000 Shares)

Group Holding 49.98% 99.99% 99.99% 99.90% 99.99%

Status of the Company

Quoted Unquoted Unquoted Unquoted Unquoted

Principal Business Activities

Manufacture and distribution of PVC pipes and fittings

Investment company

Hiring of vehicles Investment company Manufacture of mineral products

Registered Office No. 312, Nawala Road, Rajagiriya.

No. 270, Vauxhall Street, Colombo 02.

No. 84, Raja Veediya, Kandy.

No. 84, Raja Veediya, Kandy.

Diganatenna Estate, Gonawala, Digana.

G.S.N. Peiris (Chairman) G.S.N. Peiris G.S.N. Peiris W.M.S. Wanasinghe G.S.N. Peiris

A.N.P. Wickramasuriya D.P.de Silva C.S. Hettiarachchi G.A.Bandaranayake W.M.S. Wanasinghe

E.H. Wijenaike W.M.S. Wanasinghe

C.S.W. De Costa G.A.Bandaranayake

A.K. Gunaratne A.R. Wijenaike

A. Hettiarachchi

I.S. Jayasinghe

C.S. Hettiarachchi

D.T.R. De Silva

I.M.P.Rupathunge (Chief Executive Officer)

Company Secretary Corporate Services Ltd,No 216, De Saram Place, Colombo 10

Kandy Business

Consultants (Pvt) Ltd,

80, Kings Street, Kandy

Kandy Business



Kandy Business



Kandy Business



GROUP COMPANIES


COM

PAN

Y PR

OFI

LEBO

ARD

OF

DIR

ECTO

RS

Subsidiaries Subsidiaries Associates

Central Homes (Pvt) Ltd

CF Growth Fund Ltd

CF Insurance Brokers (Pvt) Ltd

Dehigama Hotels Company Ltd

Expanded Plastic Products Ltd

Hedges Court Residencies (Pvt) Ltd


Mark Marine Services (Pvt) Ltd

Capital Suisse Asia Ltd.



Year of Incorporation 1987 1992 1995 1973 1978 2005 1967 1997 1995 1999 1991

Stated Capital Rs.34,175,020

(3,417,502 Shares)

Rs.163,036,780

(16,303,678

Shares)

Rs.123,750,000

(12,375,000

Shares)

Rs.8,280,700

(828,070 Shares)

Rs.64,000,000

(6,400,000

Shares)

Rs.50,000,000

(5,000,000

Shares)

Rs. 6,084,750

(550,500 Shares)

Rs. 34,244,792

(4,380,599 Shares)

Rs. 181,000,070

(18,100,007

Shares)

Rs.9,408,135,000

(Voting - 244,878,841

Convertible Non-voting

- 38,973,031)

Rs. 150,000,000 (30,000,000

Shares)

Group Holding 99.99% 99.99% 99.99% 79.69% 99.99% 99.99% 66.58% 56.79% 24.58% Voting 19.74%


31.67%

29.30%

Status of the Company Unquoted Unquoted Unquoted Unquoted Unquoted Unquoted Unquoted Unquoted Unquoted Quoted Quoted

Principal Business

Activities

Property

development and

sale of real estate

Investment

company

Insurance broking Renting of

commercial

property

Investment

company

Construction and

sale of apartments

Provision of healthcare

services

Hydro power

generation

Investment

company

Licensed commercial

bankProcessing green leaf purchased from tea small holders and the sale of processed black tea

Registered Office No. 270, Vauxhall

Street, Colombo

02.

No. 270, Vauxhall

Street, Colombo

02.

No. 270, Vauxhall

Street, Colombo

02.

No. 84, Raja

Veediya, Kandy.

No. 270, Vauxhall

Street, Colombo

02.

No. 270, Vauxhall

Street, Colombo

02.

No. 255/8, Katugastota

Road, Kandy.

No. 4, Circular

Lane, Sapumal

Place, Rajagiriya.

No. 244, Vauxhall

Street, Colombo

02.

No. 242, Union Place,

Colombo 02.

No. 4, Layden Bastian Road,

Colombo 01

G.S.N. Peiris G.S.N. Peiris G.S.N. Peiris

(Chairman)

E.H. Wijenaike G.S.N. Peiris G.S.N. Peiris G.S.N. Peiris A.A.A. Makalanda A.K. Gunaratne P. Talwatte (CEO/Director)) K.N.J. Balendra (Chairman)

K. Kandeepan

Ihsan

D.P. de Silva D.P. de Silva G.S.N. Peiris W.M.S.

Wanasinghe

D.P. de Silva S. Ranasinghe G.C.J. Makalanda E.H. Wijenaike J.G.A. Cooray E.H. Wijenaike

K. Kandeepan

Ihsan

A.K. Gunaratne W.A.L. Galagoda K. Kandeepan

Ihsan

A.P.R. Aluwihare A.K. Gunaratne S.T. Amarasuriya K.O.V.S.M.S. Wijesinghe A.S. Jayathilleke

C.S. Hettiarachchi L. Sirimanne S.B. Etulgama D.P. de Silva G.N. Fernando D.P. de Silva J.G.A. Cooray

K. Kandeepan Ihsan

A. Jayasinghe P.B. Iddawela C.S. Hettiarachchi N. Amarasuriya J.C.A.D' Souza S.K.L. Obeysekera

C.K. Hettiarachchi C.S. Hettiarachchi S. Kiriwattuduwa R.D. Rajapaksa J.R. Gunaratne

D.A.C. Goonetilleke A.M.L. Beligaswatte N.I.R. De Mel A.K. Gunaratne

A.R. Wijenaike E.H. Wijenaike S. Maheshwari A. Goonetilleke

S.L. Sebastian H. R. A. Wanasinghe

(CEO)

R.S. Cader

C.H.A.W. Wickramasuriya

A.R. Fernando

Company Secretary Kandy Business

Consultants (Pvt)

Ltd.

80, Kings Street,

Kandy

Kandy Business

Consultants (Pvt)

Ltd.

80, Kings Street,

Kandy

Kandy Business

Consultants (Pvt)

Ltd.

80, Kings Street,

Kandy

Corporate Services (Pvt) Ltd. 216, De Saram Place, Colombo 10

Kandy Business

Consultants (Pvt)

Ltd.

80, Kings Street,

Kandy

Kandy Business

Consultants (Pvt)

Ltd.

80, Kings Street,

Kandy

Kandy Business

Consultants (Pvt) Ltd.


Management

Applications (Pvt) Ltd.

12, Rotunda Gardens,

Colombo 03

Chaminda Dias Theja Silva Keells Consultants Limited.130, Glennie Street,Colombo 02

GROUP COMPANIES


Subsidiaries Subsidiaries Associates

Central Homes (Pvt) Ltd

CF Growth Fund Ltd

CF Insurance Brokers (Pvt) Ltd

Dehigama Hotels Company Ltd

Expanded Plastic Products Ltd

Hedges Court Residencies (Pvt) Ltd


Mark Marine Services (Pvt) Ltd

Capital Suisse Asia Ltd.



Year of Incorporation 1987 1992 1995 1973 1978 2005 1967 1997 1995 1999 1991

Stated Capital Rs.34,175,020

(3,417,502 Shares)

Rs.163,036,780

(16,303,678

Shares)

Rs.123,750,000

(12,375,000

Shares)

Rs.8,280,700

(828,070 Shares)

Rs.64,000,000

(6,400,000

Shares)

Rs.50,000,000

(5,000,000

Shares)

Rs. 6,084,750

(550,500 Shares)

Rs. 34,244,792

(4,380,599 Shares)

Rs. 181,000,070

(18,100,007

Shares)

Rs.9,408,135,000

(Voting - 244,878,841


- 38,973,031)

Rs. 150,000,000 (30,000,000

Shares)

Group Holding 99.99% 99.99% 99.99% 79.69% 99.99% 99.99% 66.58% 56.79% 24.58% Voting 19.74%


31.67%

29.30%

Status of the Company Unquoted Unquoted Unquoted Unquoted Unquoted Unquoted Unquoted Unquoted Unquoted Quoted Quoted

Principal Business

Activities

Property

development and

sale of real estate

Investment

company

Insurance broking Renting of

commercial

property

Investment

company

Construction and

sale of apartments

Provision of healthcare

services

Hydro power

generation

Investment

company

Licensed commercial

bankProcessing green leaf purchased from tea small holders and the sale of processed black tea

Registered Office No. 270, Vauxhall

Street, Colombo

02.

No. 270, Vauxhall

Street, Colombo

02.

No. 270, Vauxhall

Street, Colombo

02.

No. 84, Raja

Veediya, Kandy.

No. 270, Vauxhall

Street, Colombo

02.

No. 270, Vauxhall

Street, Colombo

02.

No. 255/8, Katugastota

Road, Kandy.

No. 4, Circular

Lane, Sapumal

Place, Rajagiriya.

No. 244, Vauxhall

Street, Colombo

02.

No. 242, Union Place,

Colombo 02.

No. 4, Layden Bastian Road,

Colombo 01

G.S.N. Peiris G.S.N. Peiris G.S.N. Peiris

(Chairman)

E.H. Wijenaike G.S.N. Peiris G.S.N. Peiris G.S.N. Peiris A.A.A. Makalanda A.K. Gunaratne P. Talwatte (CEO/Director)) K.N.J. Balendra (Chairman)

K. Kandeepan

Ihsan

D.P. de Silva D.P. de Silva G.S.N. Peiris W.M.S.

Wanasinghe

D.P. de Silva S. Ranasinghe G.C.J. Makalanda E.H. Wijenaike J.G.A. Cooray E.H. Wijenaike

K. Kandeepan

Ihsan

A.K. Gunaratne W.A.L. Galagoda K. Kandeepan

Ihsan

A.P.R. Aluwihare A.K. Gunaratne S.T. Amarasuriya K.O.V.S.M.S. Wijesinghe A.S. Jayathilleke

C.S. Hettiarachchi L. Sirimanne S.B. Etulgama D.P. de Silva G.N. Fernando D.P. de Silva J.G.A. Cooray

K. Kandeepan Ihsan

A. Jayasinghe P.B. Iddawela C.S. Hettiarachchi N. Amarasuriya J.C.A.D' Souza S.K.L. Obeysekera

C.K. Hettiarachchi C.S. Hettiarachchi S. Kiriwattuduwa R.D. Rajapaksa J.R. Gunaratne

D.A.C. Goonetilleke A.M.L. Beligaswatte N.I.R. De Mel A.K. Gunaratne

A.R. Wijenaike E.H. Wijenaike S. Maheshwari A. Goonetilleke

S.L. Sebastian H. R. A. Wanasinghe

(CEO)

R.S. Cader

C.H.A.W. Wickramasuriya

A.R. Fernando

Company Secretary Kandy Business

Consultants (Pvt)

Ltd.

80, Kings Street,

Kandy

Kandy Business

Consultants (Pvt)

Ltd.

80, Kings Street,

Kandy

Kandy Business

Consultants (Pvt)

Ltd.

80, Kings Street,

Kandy

Corporate Services (Pvt) Ltd. 216, De Saram Place, Colombo 10

Kandy Business

Consultants (Pvt)

Ltd.

80, Kings Street,

Kandy

Kandy Business

Consultants (Pvt)

Ltd.

80, Kings Street,

Kandy

Kandy Business

Consultants (Pvt) Ltd.


Management

Applications (Pvt) Ltd.

12, Rotunda Gardens,

Colombo 03

Chaminda Dias Theja Silva Keells Consultants Limited.130, Glennie Street,Colombo 02


GROUP VALUE ADDED STATEMENT

Group Company


Rs.'000 Rs.'000 Rs.'000 Rs.'000

Value AddedOperating income earned by providing financial services 24,900,433 22,912,869

Cost of services (11,346,247) (10,316,017)

Value added by financial services 13,554,186 12,596,852

Other Income 858,252 653,584

Impairment on loans and other credit losses (4,785,758) (2,213,650)

Share of profits of associates, net of tax 859,924 765,726

10,486,604 11,802,512

Value Allocated

To employees

Remuneration & other benefits 2,571,991 24.53 2,415,762 20.46

To providers of capital

Dividends to shareholders 529,618 5.05 787,180 6.67

Non-controlling interest 119,156 1.14 87,356 0.74

To government RevenueIncome tax 1,727,880 16.47 2,220,004 18.81

VAT on financial services and NBT 919,391 8.77 1,173,645 9.94

Debt repayment levy 355,937 3.39 258,240 2.19

To expansion and growthRetained income 3,460,530 33.00 4,254,218 36.05

Depreciation & amortisation 802,101 7.65 606,107 5.14

10,486,604 100.00 11,802,512 100.00

Consolidated sources & utilisation of income Group Company


Rs.'000 Rs.'000 Rs.'000 Rs.'000

Sources of incomeInterest and operating income 24,900,433 93.55 22,912,869 94.17

Other income 858,252 3.22 653,584 2.68

Share of profits of associates, net of tax 859,924 3.23 765,726 3.15

26,618,609 100.00 24,332,179 100.00

Utilisation of incomeInterest expenses 6,769,027 25.43 5,977,190 24.56

Remuneration & other benefits to employees 2,571,991 9.66 2,415,762 9.93

Other operating expenses including cost of sales impairment on loans & other credit losses

10,165,079 38.19 7,158,584 29.42

and depreciation & amortisation

Taxation 3,003,208 11.28 3,651,889 15.01

Dividends to shareholders 529,618 1.99 787,180 3.24

Retained income 3,460,530 13.00 4,254,218 17.48

Non-controlling interest 119,156 0.45 87,356 0.36

26,618,609 100.00 24,332,179 100.00


QUARTERLY STATISTICS - COMPANY

2019-2020

As at 31.03.2020 31.12.2019 30.09.2019 30.06.2019


(Rs.'000)

Total assets 107,185,053 104,056,570 103,632,872 102,300,740

Advances to customers 78,511,227 78,917,539 81,463,034 82,126,385

Average assets 105,620,812 103,844,721 102,966,806 101,716,465

Bank and other borrowings 10,814,622 9,235,446 9,421,652 10,004,283

Deposits 53,390,977 52,456,879 51,858,942 48,980,987

Shareholders' funds 35,633,053 35,015,680 34,649,390 33,862,224

For the three months ended 31.03.2020 31.12.2019 30.09.2019 30.06.2019

Income statement

(Rs.'000)

Interest income 5,285,699 4,932,294 4,866,851 4,953,492

Interest expenses (1,723,098) (1,704,939) (1,708,524) (1,688,680)

Net interest income 3,562,601 3,227,355 3,158,327 3,264,812

Operating lease income 257,677 256,463 260,840 258,936

Other income 321,993 254,940 276,760 138,191

Total operating income 4,142,271 3,738,758 3,695,927 3,661,939

Operating expenses (1,208,971) (1,175,056) (1,227,232) (1,155,531)

Impairment and other credit losses (1,570,907) (1,292,312) (896,329) (1,015,795)

VAT on financial services and NBT, and debt repayment levy (206,961) (314,200) (383,088) (371,079)

Income tax expense (413,688) (326,091) (402,112) (384,349)

Profit for the quarter 741,744 631,099 787,166 735,185

Other comprehensive income for the quarter (124,371) - - -

Total comprehensive income for the quarter 617,373 631,099 787,166 735,185

Ordinary share information

Market price per share (Rs)

Highest 107.10 110.00 97.30 94.00

Lowest 81.00 91.00 85.00 83.00

Last traded 81.00 104.00 92.60 87.50

Net asset per share 161.47 158.68 157.02 153.45

Financial measures

Profitability

Return on capital employeed (annualised) (%) 11.72 11.06 12.28 12.15

Return on average shareholders' equity (annualised) (%) 8.40 7.25 9.19 8.76

Return on assets (annualised) (%) 2.81 2.43 3.06 2.89

Productivity

Non interest expenses to total revenue (%) 20.61 21.59 22.71 21.60

Cost to income (%) 29.19 31.43 33.20 31.56

Asset quality

Gross NPA ratio (%) 9.28 8.39 8.15 6.99



SHARE INFORMATION

1. Stock Exchange

The ordinary shares of the Company are listed on the Colombo Stock Exchange. The debentures that had been listed on the Colombo Stock Exchange as at 31.03.2020 were redeemed in June 2020.

The audited income statement for the year ended 31st March 2020 and the audited statement of financial position as at 31st March 2020 of the Company and of the group are submitted to the shareholders and Colombo Stock Exchange within five months from the close of the financial year.

2. Number of ordinary shareholders as at 31st March 2020 – 2,753

(Stated capital of the Company consists solely of voting ordinary shares).(Number of shareholders as at 31.03.2019 - 2,867)

Following tables show the pattern of distribution of shareholders

Residents Non-residents Total

No. of

Shareholders

No. of

Shares %

No. of

Shareholders

No. of

Shares %

No of

Shareholders

No. of

Shares %

1-1,000 1272 228,168 0.10 10 3,724 0.01 1,282 231,892 0.11

1,001-10,000 859 3,010,020 1.36 12 69,202 0.03 871 3,079,222 1.39

10,001-100,000 457 12,444,876 5.64 19 742,335 0.34 476 13,187,211 5.98

100,001-1,000,000 92 24,857,462 11.26 9 1,763,242 0.80 101 26,620,704 12.06

Over 1,000,000 17 145,961,751 66.14 6 31,593,587 14.32 23 177,555,338 80.46

2,697 186,502,277 84.50 56 34,172,090 15.50 2,753 220,674,367 100.00

There were 2,803 resident and 64 non-resident shareholders as at 31st March 2019.

31st March 2020 31st March 2019

No. of Shareholders No. of Shares %

No. of Shareholders No. of Shares %

Individuals 2,557 94,766,981 42.94 2,657 98,777,718 45.17

Institutions 196 125,907,386 57.06 210 119,883,309 54.83

2,753 220,674,367 100.00 2,867 218,661,027 100.00

3. Public holding - 31.03.2020

The Company adopts option 01 under the section 7.13.1 of the amended Listing Rules which are effective from 17th January 2018.

Float adjusted market capitalisation (Rs.Bn)

Public holding percentage (%)

Number of public shareholders

Minimum requirement

Available amount

Minimumrequirement

Public holding (%)

Minimum requirement

Available amount

31.03.2020

Option 01 Rs.10 Bn Rs. 11.26Bn No minimum % requirement

63.02% 500 2,736

31.03.2019

Option 01 Rs.10 Bn Rs. 11.63Bn No minimum % requirement

62.97% 500 2,851


4. Twenty largest shareholders as at 31st March 2020

31st March 2020 31st March 2019

No. of Shares % No. of Shares %

1 Corporate Services (Private) Limited A/C No 01 35,548,488 16.11 35,223,926 16.11

2 E.H. Wijenaike 34,009,737 15.41 33,699,223 15.41

3 Employees Provident Fund 23,701,371 10.74 23,484,974 10.74

4 Thurston Investments Limited 12,850,762 5.82 12,733,433 5.82

5 Hallsville Trading Group Inc. 11,348,798 5.14 9,379,350 4.29

6 Ceylon Investment PLC A/C # 02 8,790,002 3.98 8,000,687 3.66

7 Rubber Investment Trust Limited A/C # 01 7,106,573 3.22 4,019,963 1.84

8 A.J. Wijenaike 6,883,020 3.12 6,820,177 3.12

9 Ceylon Guardian Investment Trust PLC A/C # 02 5,974,054 2.71 5,228,494 2.39

10 N.W. Wijegoonawardene 4,549,646 2.06 4,508,108 2.06

11 E.W. Balasuriya & Co. (Pvt) Ltd 3,563,924 1.62 2,234,546 1.02

12 C.R. Dunuwille 2,837,451 1.29 2,811,545 1.29

13 N.M. Gunawardana 2,735,961 1.24 2,710,982 1.24

14 P.R. Munasinha 2,581,598 1.17 2,558,028 1.17

15 Employees Trust Fund Board 2,304,261 1.04 2,283,223 1.04

16 P.M. Wijenaike 2,138,068 0.97 2,118,548 0.97

17 Citibank Newyork S/A Norges Bank Account 2 2,127,713 0.96 - -

18 S.K. Wedande 1,793,322 0.81 1,776,949 0.81

19 A.K. Gunaratne 1,757,437 0.80 1,741,392 0.80

20 N.M. Wahab 1,578,639 0.72 1,564,227 0.72

174,180,825 78.93 162,897,775 74.50

Others 46,493,542 21.07 55,763,252 25.50

Total 220,674,367 100.00 218,661,027 100.00

*Comparative shareholdings as at 31st March 2019 held by the twenty largest shareholders as at 31st March 2020.

5. Market Value

Movement in market value of the ordinary shares of the company was as follows

2019/2020 2018/2019 2017/2018

Rs. Rs. Rs.

Highest 110.00 (on 05.12.2019) 108.90 (on 05.04.2018) 110.00 (on 02.01.2018)

Lowest 81.00 (on 20.03.2020) 80.10 (on 13.03.2019) 84.00 (on 10.10.2017)

Year end 81.00 84.50 99.90

6. Dividend Payments

Dividend per share

2019/2020 2018/2019

Rs. Rs.

Interim paid 1.20 2.00

Final – paid - 1.60

Proposed 1.20 -

Total 2.40 3.60


2018/2019 2017/2018

Dividend pay-out (Rs.000) 529,618 787,180

7. SHARE TRADING

2019/2020 2018/2019 2017/2018

No. of shares traded 11,286,640 21,224,068 19,889,735

Value of shares traded (Rs. '000) 1,093,447 2,053,043 1,901,521

Market capitalization (Rs. '000) 17,874,623 18,476,857 21,654,213

8. STATED CAPITAL IS REPRESENTED BY NUMBER OF SHARES IN ISSUE AS GIVEN BELOW

31.03.2020 31.03.2019

Ordinary voting shares 220,674,367 218,661,027

9. DEBENTURES

9.1 Information on Listed Debentures

The Company made no debenture issues during the year ended 31st March 2020.

The Company had issued Rs.100/- par valued 25,000,000 rated, secured, redeemable debentures to the value of Rs.2.5 billion in June 2015, Rs.1,000/- par valued 2,000,000 rated, unsecured, redeemable debentures to the value of Rs.2 billion in June 2013 and Rs.100/- par valued 20,000,000 rated, secured, redeemable debentures to the value of Rs.2 billion in December 2013.

Details of the above issues are given below:

Date of issue Interest payment

frequency

No. of Debentures

issued

Face value

Rs.’000

Coupon rate Annual effective

Rate

Tenor Date of maturity

Rated unsecured redeemable debentures

17-Jun-13 Quarterly 300,000 300,000 14.25 15.03 3 years Redeemed in Jun-16

17-Jun-13 Quarterly 300,000 300,000 14.50 15.31 4 years Redeemed in Jun-17

17-Jun-13 Quarterly 1,400,000 1,400,000 14.75 15.59 5 years Redeemed in Jun-18

Rated secured redeemable debentures

12-Dec-13 Semi annually 2,000,000 200,000 13.00 13.42 3 years Redeemed in Dec-16



12-Dec-13 Annually 10,000,000 1,000,000 13.95 13.95 5 years Redeemed in Dec-18

Rated secured redeemable debentures

01-Jun-15 Semi annually 2,500,000 250,000 08.35 08.52 3 years Redeemed in May-18

01-Jun-15 Semi annually 5,000,000 500,000 09.00 09.20 4 years Redeemed in May-19

01-Jun-15 Annually 17,500,000 1,750,000 09.52 09.52 5 years Redeemed in Jun-20

Objectives of the debentures issued in June 2013, December 2013 and June 2015 have been fully achieved.



9.2 Market value, traded yield, and yield to maturity of last trade done during the year (%)

There were no debenture trades during the year ended 31.03.2020.

9.3 Debt related ratios

As at31.03.2020

Debt/equity ratio (times) 1.80

Quick assets ratio (times) 1.04

Interest cover (times) 1.65

9.4 Interest rates of comparable government securities (%)

As at31.03.2020

03 Year treasury bonds 9.04



9.5 Credit Ratings

There were no changes in credit ratings of the company or of the debentures during the year.


DECADE AT A GLANCE

2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

Rs.’000 Rs.’000 Rs.’000 Rs.’000 Rs.’000 Rs.’000 Rs.’000 Rs.’000 Rs.’000 Rs.’000

Group income 8,094,371 9,148,164 11,318,774 13,410,771 15,963,249 16,284,923 18,145,869 20,502,024 23,566,453 25,758,685

Interest income 6,269,481 7,492,975 9,755,419 11,916,505 12,463,439 12,624,010 14,104,260 16,114,759 18,571,815 20,116,816

Other revenue - - - - 2,524,826 2,660,584 2,823,108 2,786,351 3,340,097 3,753,158

Operating lease income 1,413,023 1,074,360 1,022,377 1,034,981 334,506 364,207 497,619 807,240 1,000,957 1,030,459

Other income 411,867 580,829 540,978 459,285 640,478 636,122 720,882 793,674 653,584 858,252

Interest expenses

Interest on deposits (2,072,875) (2,165,955) (3,010,368) (3,873,030) (3,345,777) (2,744,446) (3,301,687) (4,314,616) (4,760,353) (5,624,498)

Interest on bank and other borrowings (282,388) (497,348) (1,058,674) (857,349) (758,369) (937,630) (943,840) (888,929) (1,216,837) (1,102,713)

Interest on lease liabilities - - - - - - - - - (41,816)

Cost of sales - - - - (1,761,781) (1,792,067) (1,981,548) (1,970,053) (2,412,427) (2,696,572)

Operating expenses (2,545,141) (2,602,889) (2,826,385) (3,394,155) (3,694,249) (4,251,348) (4,653,890) (4,801,213) (4,948,269) (5,254,740)

Impairment and other credit losses (186,822) 87,520 (201,441) (1,216,365) (1,834,150) (658,347) (302,794) (396,051) (2,213,650) (4,785,758)

Share of profit of associates, net of tax 301,496 347,932 438,629 480,869 533,127 549,105 628,890 793,947 765,726 859,924

Vat on financial services (273,333) (173,096) (218,177) (182,591) (240,796) (444,978) (815,686) (1,116,079) (1,173,645) (919,391)

Debt repayment levy - - - - - - - - (258,240) (355,937)

Profit before income tax 3,035,308 4,144,328 4,442,358 4,368,150 4,861,254 6,005,212 6,775,314 7,809,030 7,348,758 5,837,184

Income tax expense (1,123,870) (1,084,534) (1,157,641) (1,013,784) (1,126,234) (1,902,419) (2,020,285) (2,303,003) (2,220,004) (1,727,880)

Net profit for the year 1,911,438 3,059,794 3,284,717 3,354,366 3,735,020 4,102,793 4,755,029 5,506,027 5,128,754 4,109,304

Attributable to equity holders of the parent 1,827,034 2,964,837 3,217,058 3,291,239 3,633,279 3,993,671 4,665,195 5,439,837 5,041,398 3,990,148

Attributable to non-controlling interest 84,404 94,957 67,658 63,127 101,741 109,122 89,834 66,190 87,356 119,156

2011 2012 2013 2014 2015 2016 2017 2018 2019 2020



Stated capital 203,020 568,420 568,420 568,420 568,420 568,420 1,337,564 1,337,564 1,527,778 1,696,898

Capital reserves 1,312,973 1,308,607 1,337,282 2,517,669 2,527,454 2,509,879 2,510,631 2,291,952 4,745,864 4,823,863

Reserve fund 682,000 800,000 939,000 1,078,000 1,229,000 1,396,000 1,599,000 1,824,000 2,037,000 2,213,000

OCI reserve / AFS reserve 72,282 (821) 12,887 26,665 102,499 91 (37,023) 19,637 17,993 111,767

Investment fund - 223,492 478,857 732,716 - - - - - -

Loan loss reserve - - - - - - - 920,000 920,000 920,000

Revenue reserves 8,983,262 11,008,108 13,553,801 16,062,203 19,891,223 22,303,590 24,158,943 27,521,078 31,492,005 34,560,162

Funds attributable to equity holders of the parent

11,253,537 13,907,806 16,890,247 20,985,673 24,318,596 26,777,980 29,569,115 33,914,231 40,740,640 44,325,690

Non-controlling interest 574,060 614,089 630,839 731,711 795,979 855,819 884,232 865,255 1,119,290 1,197,191

11,827,597 14,521,895 17,521,086 21,717,384 25,114,575 27,633,799 30,453,347 34,779,486 41,859,930 45,522,881


2011 2012 2013 2014 2015 2016 2017 2018 2019 2020


Assets

Cash and other liquid assets 2,405,834 3,320,187 3,326,317 4,580,351 4,919,919 4,152,976 4,377,189 4,911,973 5,477,473 7,617,271

FVTPL Financial assets 32,173 24,659 33,101 536,737 218,080 39,992 447,991 654,954 564,843 5,599,847

Available for sale investments 252,583 192,049 195,404 206,981 267,024 234,820 - - - -

Investments in associates 1,795,601 2,011,360 2,364,929 2,719,082 3,167,824 3,537,114 4,075,059 5,769,300 6,503,658 7,430,736

Advances to customers 27,570,496 38,153,555 44,318,139 48,341,935 53,464,335 59,735,967 62,782,169 68,880,573 81,747,336 78,510,364

Other assets 2,798,186 2,350,001 2,272,034 3,577,169 3,365,417 3,470,872 3,498,109 3,763,330 3,304,995 6,030,770

Property, plant and equipment 4,084,303 3,745,802 4,047,417 5,467,305 5,801,116 5,925,833 7,134,854 8,395,647 12,659,775 12,605,679

Total assets 38,939,176 49,797,613 56,557,341 65,429,560 71,203,715 77,097,574 82,315,371 92,375,777 110,258,080 117,794,667

Liabilities

Deposits 19,887,906 22,795,351 26,984,757 32,673,095 33,448,265 34,299,143 35,527,936 40,570,199 45,149,518 52,912,500

Bank and other borrowings 2,839,926 8,400,512 7,661,345 6,411,628 6,322,225 8,504,386 9,050,927 8,167,277 13,137,443 11,165,090

Other liabilities 4,383,747 4,079,855 4,390,153 4,627,453 6,318,650 6,660,246 7,283,161 8,858,815 10,111,189 8,194,196

Total liabilities 27,111,579 35,275,718 39,036,255 43,712,176 46,089,140 49,463,775 51,862,024 57,596,291 68,398,150 72,271,786

Key indicators

Group

Earnings per share (Rs.) 90.00 28.27 30.67 31.38 34.64 38.08 21.52 24.88 22.85 18.08

Net asset value per share (Rs.) 554.36 132.60 161.04 200.09 231.86 255.31 135.23 155.10 184.62 200.86

Company

No of shares 20,300,000 104,883,333 104,883,333 104,883,333 104,883,333 104,883,333 216,758,888 216,758,888 218,661,027 220,674,367

Earnings per share (Rs.) 79.32 24.87 26.45 26.47 28.63 31.79 18.05 20.65 18.50 13.12

Net asset value per share (Rs.) 480.59 114.91 138.81 171.01 196.55 214.26 111.81 127.57 150.94 161.47

Gross dividends paid (Rs.'000) 213,150 262,208 304,162 335,627 367,092 419,534 509,383 867,036 787,180 529,618

Dividend cover (times covered) 7.55 9.95 9.12 8.27 8.18 7.95 7.68 5.16 5.14 5.47

Market price per share (Rs.) 1,273.70 171.30 180.00 181.00 250.10 210.00 86.20 99.90 84.50 81.00

Price earnings ratio 16.06 6.89 6.80 6.84 8.74 6.61 4.78 4.84 4.57 6.17


INCOME STATEMENT IN US DOLLARS

Group Company

For the year ended 31st March 2020 2019 2020 2019USD'000 USD’000 USD’000 USD’000

Income 135,636 133,832 116,182 115,212

Interest income 105,928 105,468 105,515 105,027

Less: Interest expenses 35,643 33,944 35,939 34,141

Net interest income 70,285 71,524 69,576 70,886

Other revenue 19,763 18,968 - -

Less: Cost of sales 14,199 13,700 - -

Gross profit 5,564 5,268

Operating lease income 5,426 5,684 5,444 5,706

Other income 4,519 3,712 5,223 4,479

85,794 86,188 80,243 81,071

Less: Operating expenses

Personnel expenses 12,226 12,570 10,698 11,020

Premises, equipment, establishment and other expenses 14,126 14,382 13,204 13,485

Employee retirement benefit expenses 1,318 1,149 1,198 1,033

27,670 28,101 25,100 25,538

Profit before impairment on loans and other credit losses 58,124 58,087 55,143 55,533

Less: Impairments and other credit losses 25,200 12,571 25,145 12,551

32,924 45,516 29,998 42,982

Share of profit of associates, net of tax 4,528 4,348 - -

Profit before VAT on financial services, NBT, debt repayment levy and income tax

37,452 49,864 29,998 42,982

Less: VAT on financial services and NBT 4,842 6,665 4,842 6,665

Debt repayment levy 1,874 1,467 1,874 1,467

Profit before income tax 30,736 41,732 23,282 34,850

Less: Income tax expense 9,098 12,607 8,037 11,666

Profit after income tax 21,638 29,125 15,245 23,184

Attributable to equity holders of the parent 21,011 28,629 15,245 23,184

Attributable to non-controlling interest 627 496 - -

Net profit for the year 21,638 29,125 15,245 23,184

Basic and diluted earnings per share - USD 0.10 0.13

Dividend per share

Paid 0.01 0.02

Proposed 0.01

USD Exchange rate was Rs. 189.91 as at 31 st March 2020 (USD exchange rate as at 31.03.2019 was Rs.176.09)

The Income Statement given on this page is solely for the convenience of the shareholders, bankers, investors, customers and other users of financial statements and do not from part of the audited financial statements


STATEMENT OF FINANCIAL POSITION IN US DOLLARS

Group Company

For the year ended 31st March 2020 2019 2020 2019USD’000 USD’000 USD’000 USD’000

ASSETSCash in hand and at banks 4,072 4,203 3,534 3,960 Fair value through profit or loss financial assets 29,487 3,208 28,013 3,172 Trade and other receivables 7,895 7,228 2,982 2,590 Tax receivables 9 2 - - Inventories and other stocks 5,250 5,555 429 2,166 Securities bought under repurchase agreements 23,382 18,681 23,382 18,681 Loans and receivables from banks 12,656 8,222 12,629 8,188 Loans and receivables from others 13,776 3,368 10,672 220 Loans and receivables from customers 21,942 34,052 21,947 34,000 Net investment in leases and hire purchase 391,465 430,184 391,465 430,183 Investments in real estate 97 131 97 131 Investment properties 1,600 1,725 1,600 1,725 Investments in associates 39,128 36,934 7,660 7,900 Investments in subsidiaries - - 1,521 1,642 Deferred tax asset 97 84 - - Right of use assets 2,336 71,894 3,228 - Property, plant and equipment 66,377 - 54,546 59,093 Intangible assets 697 675 694 670 Total assets 620,266 626,146 564,399 574,321

LIABILITIESBank overdrafts 6,535 8,297 6,450 8,205 Tax payables 4,407 11,311 3,963 10,874 Trade and other payables 6,833 9,511 4,809 6,677 Amounts due to subsidiaries - - 454 1,227 Short term borrowings 5,172 13,230 3,424 12,698 Deposits 278,619 256,400 281,138 259,356 Long term borrowings 37,653 40,040 37,642 40,019 Debentures 9,431 13,040 9,431 13,040 Lease liabilities 1,861 - 2,753 - Employee benefit obligations 9,195 7,940 8,488 7,256 Deferred tax liability 20,852 28,658 18,216 25,817 Total liabilities 380,558 388,427 376,768 385,169

SHAREHOLDERS' FUNDS

Stated capital 8,935 8,676 8,935 8,676 Revaluation reserve 25,401 26,951 18,783 20,291 Reserve fund 11,653 11,568 11,653 11,568 Other comprehensive income reserve 589 102 - - Loan loss reserve 4,844 5,225 4,844 5,225 Revenue reserves 181,982 178,841 143,416 143,392 Funds attributable to equity holders of the parent 233,404 231,363 187,631 189,152 Non-controlling interest 6,304 6,356 - -

239,708 237,719 187,631 189,152 Total liabilities, shareholders' funds and non-controlling interest 620,266 626,146 564,399 574,321 Net asset value per share - USD 1.06 1.05 0.85 0.86

USD Exchange rate was Rs. 189.91 as at 31 st March 2020 (USD exchange rate as at 31.03.2019 was Rs.176.09)

The Statement of financial position given on this page is solely for the convenience of the shareholders, bankers, investors,customers and other users of financial statements and do not from apart of the audited financial statements.


EMPLOYEES OF THE YEAR

CITY OFFICE 2019/20

DecemberMr. K.W. Priyankara

AugustMr. K.A.D.P. Kanugala

AprilMiss. J.A.A.C. Jayakody

JanuaryMr. I.H.N. Randhima

SeptemberMr. T.M.K. Peiris

MayMrs. W.M.R. Anne

FebruaryMiss. V.P.N. Vitharana

OctoberMiss. K.S.L. Wijerathna

JuneMrs. A.S.N. Perera

NovemberMiss. A.W. Piryanthi

JulyMrs. P.M. Vidanapathirana


HEAD OFFICE 2019/20

DecemberMrs. Janaki Abeynayake

AugustMrs. Nalika Jayalath

AprilMr. Priyal Wickramaratne

JanuaryMr. Lakshan Hettiarachchi

SeptemberMr. Tharindu Tennakoon

MayMiss. Anjalee Munasinghe

FebruaryMrs. Chandra Dissanayake

OctoberMr. Channaka Ilangakoon

JuneMrs. Himali Attanayake

NovemberMr. Mahinda Thalagune

JulyMiss. Maneesha Yaparatne


GLOSSARY OF FINANCIAL TERMS

AAccounting policies - The specific principles, bases, conventions, rules and practices adopted by an entity in preparing and presenting financial statements.

Accrual basis - The system of accounting wherein revenue is recognised at the time it is earned and expenses at the time they are incurred, regardless of whether cash has actually been received or paid out.

Amortisation - The systematic allocation of the depreciable amount of an intangible asset over its useful life.

Associate company - An associate is an entity, including an unincorporated entity such as a partnership, over which the investor has significant influence and that is neither a subsidiary nor an interest in a joint venture.

CCash equivalents - Short-term, highly liquid investments that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value.

Collective impairment provisions - Impairment is measured on a collective basis for homogeneous groups of lending facilities that are not considered as individually significant.

Consolidated financial statements - Financial statement of a holding company and its subsidiaries based on their combined assets, liabilities and operating results.

Contingencies - A condition or situation existing at the balance sheet date where the outcome will be confirmed only by the occurrence or non-occurrence of one or more future events.

Corporate governance - Process by which corporate entities are governed to promote stakeholder interest. Shareholders exert collective pressure on

management to ensure equitable decision making on matters that may affect the value of their holdings and base their response on statutory requirements or on so called “Best Practice”.

Credit risk - The risk that one party to a financial instrument will cause a financial loss for the other party by failing to discharge an obligation.

DDeferred taxation - Sum set aside for tax in the Financial Statements that may become payable/receivable in a financial year other than the current financial year.

Dividend cover - Profit attributable to ordinary shareholders divided by gross dividends to ordinary shares; this indicates number of times dividend is covered by current year’s distributable profits.

Dividend per share - Value of the total dividend paid out and proposed to ordinary shareholders divided by the number of ordinary shares in issue; this indicates the proportion of current year’s dividend attributable to an ordinary share in issue.

EEarnings per share (EPS) - Profit attributable to ordinary shareholders divided by the number of ordinary shares in issue; this indicates the proportion of current year’s earnings attributable to an ordinary share in issue.

Effective interest method - Is a method of calculating the amortised cost of a financial asset or a financial liability (or group of financial assets or financial liabilities) and of allocating the interest income or interest expense over the relevant period.

Equity method - A method of accounting whereby the investment is initially recognised at cost and adjusted thereafter for the post-acquisition change in the investor’s share of net assets of the investee. The profit or loss of the investor includes the investor’s share of the profit or loss of the investee.

F Fair value - Is the amount for which an asset could be exchanged, or a liability settled, between knowledgeable, willing parties in an arm’s length transaction.

Financial asset - Any asset that is cash, an equity instrument of another entity or a contractual right to receive cash or another financial asset from another entity.

Financial instrument - Is any contract that gives rise to a financial asset of one entity and a financial liability or equity instrument of another entity.

Financial liability - A contractual obligation to deliver cash or another financial asset to another entity or to exchange financial assets or financial liabilities with another entity under conditions that are potentially unfavourable to the entity.

Finance lease - A lease that transfers substantially all the risks and rewards incidental to the ownership of an asset to the lessee. Title may or may not eventually be transferred.

GGross dividend - The proportion of profit distributed to shareholders including the tax withheld.

Group - A group is a parent and all its subsidiaries and associates.

HHeld-for-trading - Debt and equity investments that are purchased with the intent of selling them within a short period of time.

Held to maturity investment - Are non-derivative financial assets with fixed or determinable payments and fixed maturity that an entity has the positive intention and ability to hold to maturity.

Hire purchase - A contract between hirer and financier where the hirer takes on hire a particular article from the financier, with


the option to purchase the article at the conclusion of the agreed rental payments.

IImpairment - This occurs when recoverable amount of an asset is less than its carrying amount.

Individual impairment - Impairment is measured on an individual basis for Non homogeneous groups of lending facilities that are considered as individually significant.

Intangible asset - An intangible asset is an identifiable non- monetary asset without physical substance

Interest cover - Earnings before interest and tax divided by interest expenses. This indicates the ability to cover or service interest charges of the debt holders.

LLease - An agreement whereby the lessor conveys to the lessee in return for a payment or series of payments the right to use an asset for an agreed period of time.

Liquid asset - Assets that are held in cash or in a form that can be converted to cash readily, such as balances with banks and treasury bills.

Liquidity risk - The risk that an entity will encounter difficulty in meeting obligations associated with financial liabilities.

MMarket capitalisation - Number of ordinary shares in issue multiplied by market value of a share and indicates total market value of all ordinary shares in issue.

Market risk - The risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market price. Market risk comprises three types of risks: currency risk, interest rate risk, and other price risk.

NNon-controlling interest - Portion of the profit or loss and net assets of a subsidiary attributable to equity interests that are not owned, directly or indirectly through subsidiaries, by the parent.

Net asset value per ordinary share - Ordinary shareholders’ funds divided by the number of ordinary shares in issue.

Non-performing advances - Loans and advances of which rentals are in arrears for six months or more.

OOperating lease - An operating lease is a lease other than a finance lease.

Parent - A parent is an entity that has one or more subsidiaries.

PPast due - A financial asset is past due when a counterparty has failed to make a payment when contractually due.

RRelated parties - Parties are considered to be related if one party has the ability to control the other party or exercise significant influence over the other party in making financial and operating decisions.

Related party transactions - Is a transfer of resources, services or obligations between related parties, regardless of whether a price is charged or not.

Reverse repurchase agreement - Transaction involving the purchase of securities by a bank or dealer and resale back to the seller at a future date and specified price.

Return on average assets (ROA) - Profit after tax expressed as a percentage of average total assets.

Return on average equity (ROE) - Profit after tax less preference share dividends if any, expressed as a percentage of average ordinary shareholders’ equity.

SSegmental analysis - Analysis of financial information by segments of an enterprise specifically the different industries and the different geographical areas in which it operates.

Shareholders’ funds (Equity) - Total of issued and fully paid ordinary share capital and capital and revenue reserves attributable to ordinary shareholders.

Subsidiary company - An entity, including an unincorporated entity such as a partnership, which is controlled by another entity, known as the parent.

Substance over form - The consideration that the accounting treatment and the presentation in financial statements of transactions and the events are governed by their financial reality and not merely by its legal form.

TTier I capital - Core capital representing permanent share holders’ equity and reserves created or increased by appropriations of retained earnings or other surpluses.

Tier II capital - Supplementary capital representing revaluation reserves, general provisions and other capital instruments, which combine certain characteristics of equity and debts, such as, hybrid capital instruments and unsecured subordinate term debts.

Transaction costs - Are incremental costs that are directly attributable to the acquisition, issue or disposal of a financial asset or financial liability. An incremental cost is one that would not have been incurred if the entity had not acquired, issued or disposed of the financial instrument.


NOTICE OF MEETING

Notice is hereby given that the Sixty Second (62nd) Annual General Meeting of Central Finance Company PLC (the “Company”) will be held at the Grand Kandyan Hotel, No.89/10,Lady Gordon’s Drive, Kandy on the 28th day of August 2020 at 9.30 a.m. for the following purposes.

1. To receive and consider the annual report of the board of directors along with the financial statements of the Company for the year ended 31st March 2020 and the auditors’ report thereon

2. To declare a final dividend as recommended by the board of directors and to consider and if thought fit, to pass the following resolutions:

ORDINARY RESOLUTION - DISTRIBUTION OF A FINAL DIVIDEND FOR THE FINANCIAL YEAR ENDED 31ST MARCH 2020

IT IS HEREBY RESOLVED THAT

i. a final dividend of Rupees One and Cents Twenty (Rs. 1.20) constituting of a total dividend of Rupees Two Hundred and Sixty Four Million Eight Hundred and Nine Thousand Two Hundred and Forty and Cents Forty (Rs. 264,809,240.40) be paid on the issued and fully paid shares of the Company for the financial year ended 31st March 2020.

ii. the shareholders entitled to the final dividend would be those shareholders whose names have been duly registered in the Register of Shareholders and those shareholders whose names appear on the Central Depository Systems (Private) Limited (“CDS”) as at end of trading on the 28th of August 2020 (the “Entitled Shareholders”).

iii. the said final dividend of Rupees One and Cents Twenty (Rs. 1.20) per share be distributed in the form of a scrip dividend by the issue of a maximum of Three Million Three Hundred and Fifty Two Thousand Fifteen (3,352,015) new shares computed on the basis of the following formula and issued at a consideration of Rupees Seventy Nine (Rs. 79) per each new share:

Number of shares to be issued to each shareholder

=

Number of shares held as at end of trading on the date of the Annual General Meeting

x1

65.83334711

iv. the number of shares to be eventually issued as scrip dividend shall depend on the number of residual fractions arising from the scrip dividends after applying the aforesaid formula and the residual fractions arising from the scrip dividend shall be disregarded in entirety and the value of such fractions (computed on the basis of the aforesaid consideration for the shares to be issued) shall be paid by cheque to the shareholders.

(Number of shares held by a shareholder as at end of trading on the AGM date*1 )

65.83334711

v. the new shares to be issued by way of scrip dividend shall immediately consequent to the allotment thereof to the entitled shareholders rank equal and pari passu in all respects with the existing issued and fully paid ordinary shares of the Company and shall be listed on the Colombo Stock Exchange.

vi. accordingly the management and secretaries of the Company be and are hereby authorised to attend to all matters pertaining to the aforesaid final dividend inclusive of the proposed issue of new ordinary shares of the Company by way of scrip dividend.

3. To re-elect as a director Dr. (Mrs.) A.D.N. de Zoysa, who retires by rotation in terms of Article 105 of the Articles of Association of the Company, and being eligible has offered herself for re-election.

4. To re-elect as a director M.H. de Silva, who retires in terms of Article 111 of the Articles of Association of the Company, and being eligible has offered himself for re-election.

5. WHEREAS the Audit Committee has recommended the appointment of KPMG, Chartered Accountants, of 32 A, Sir Mohamed Macan Markar Mawatha, Colombo 03 as auditor of the Company in place of SJMS Associates.

WHEREAS SJMS Associates have given notice to the Company that they do not wish to be re-appointed, at this Annual General Meeting as the auditor of the Company and have also informed that there are no circumstances connected with their ceasing to hold office, which they consider should be brought to the attention of the shareholders or the creditors of the Company; and

IT IS HEREBY RESOLVED THAT KPMG of 32 A, Sir Mohamed Macan Markar Mawatha, Colombo 03 be and are hereby appointed as Auditor of the Company to hold office until the conclusion of the next Annual General Meeting of the Company and to audit the financial statements of the Company for the accounting period ending 31st March 2021 at a remuneration to be agreed with the Board of Directors.

6. To authorise the directors to determine the contributions to

charities for the ensuing year.

By order of the Board,

Corporate Services (Private) LimitedSecretaries

Central Finance Company PLCColombo, on this 23rd day of July 2020

Note: Any shareholder entitled to attend and vote is entitled to appoint a proxy instead. A proxy need not be a shareholder, instruments appointing proxies must be lodged with the Company not less than forty eight (48) hours before the meeting.

It is proposed to dispatch the dividend warrants on 09th September 2020 in accordance with the rules of the Colombo Stock Exchange, the shares of the Company will be quoted ex-dividend with effect from 31st August 2020.


FORM OF PROXY

*I/We…………………………………………………………………………………………………….………………………………of…………

……………………………………………..………………………………………………………………………..…………………………………

.being *a shareholder/shareholders of CENTRAL FINANCE COMPANY PLC do hereby appoint

1.Asite Drupath Bandara Talwatte or failing him,

2.Eranjith Harendra Wijenaike or failing him,

3.Gerard Shamil Niranjan Peiris or failing him,

4.Arjuna Kapila Gunaratne or failing him,

5.Dhammika Prasanna de Silva or failing him,

6.Dr. (Mrs.) Agampodi Damitha Nandanie de Zoysa or failing her,

7.Arjun Rishya Fernando or failing him,

8. Chandika Kushan Hettiarachchi or failing him,

9. Kuda Banda Herath or failing him,

10. Manjula Hiranya de Silva or failing him,

…………………………………………………………………………………………………………of……………………………………………

………………………………………………………………………………………………………………………………………………………… as *my/our Proxy to vote/speak for me/us on *my/our behalf at the Sixty Second Annual General Meeting of the Company to be held at The Grand Kandyan Hotel, No. 89/10, Lady Gordon’s Drive, Kandy on the 28th day of August 2020 at 9.30 a.m. and at any adjournment thereof, and at every poll which may be taken in consequence thereof

For Against

1. To receive and consider the annual report of the Board of Directors together

with the financial statements of the Company and the report of the auditors

thereon for the financial year ended 31st March 2020.

2. To approve a final dividend of Rupees One and Cents Twenty (Rs. 1.20) per share,

by way of a scrip dividend.

3. To re-elect as a director, Dr. (Mrs.) A.D.N. de Zoysa who retires by rotation

in terms of Article 105 of the Articles of Association of the Company and

being eligible has offered herself for re-election.

4. To re-elect as a director, M.H. de Silva who retires in terms of Article 111 of the Articles of

Association of the Company, and being eligible has offered himself for re-election.

5. To appoint M/s KPMG, Chartered Accountants, as auditor of the Company

to hold office until the conclusion of the next Annual General Meeting of the

Company at a remuneration to be agreed upon by the Board of Directors;

and to audit the financial statements of the Company for the accounting period

ending 31st March 2021.

6. To authorise the directors to determine the contributions to charities for the ensuing year.

Signed this……day of………….Two Thousand and Twenty

………………..………………..

*Signature/s

Note: Please delete the inappropriate words.


INSTRUCTIONS AS TO COMPLETION

1. Kindly perfect the Form of Proxy after filling in legibly your full name and

address and sign in the space provided. Please fill in the date of signature.

2. A shareholder entitled to attend and vote at the Meeting is entitled to appoint

a Proxy who need not be a shareholder, to attend and vote instead of him.

3. In the case of a Corporation, the Form must be completed under its Common

Seal, which should be affixed and attested in the manner prescribed by the

Articles of Association.

4. If the Form of Proxy is signed by an Attorney, the relevant Power of Attorney

should also accompany the completed Form of Proxy, in the manner

prescribed by the Articles of Association.

5. The completed Form of Proxy should be deposited at the Registered Office of

the Company, No.84, Raja Veediya, Kandy not less than forty eight (48) hours

before the appointed time for the Meeting.


To request information or submit a comment/query to the company, please complete the following and return this page to -

General Manager - Finance

Central Finance Company PLC,

270, Vauxhall Street, Colombo 2.

Sri Lanka

Email: [email protected]

Name : ................................................................................................................................................................................................

Permanent mailing address : ................................................................................................................................................................................................

................................................................................................................................................................................................

Contact numbers (Tel) : .................................. .................................. .................................. Country code Area code Number

(Fax) : .................................. .................................. .................................. Country code Area code Number

Email : ................................................................................................................................................................................................

Name of company : ................................................................................................................................................................................................(If applicable)

Designation : ................................................................................................................................................................................................(If applicable)

Company address : ................................................................................................................................................................................................(If applicable) ................................................................................................................................................................................................

Please tick (ü) the appropriate box Yes No

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INVESTOR FEEDBACK FORM


CORPORATE INFORMATION

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NAME OF COMPANYCentral Finance Company PLC

LEGAL FORMA Quoted Public Company with limited liability incorporated in Sri Lanka on 5th December 1957 and registered under the Companies Act No. 07 of 2007.

Registered under Finance Business Act No. 42 of 2011 and Finance Leasing Act No. 56 of 2000.

Approved Credit Agency under:

• Mortgage Act No. 6 of 1949

• Trust Receipt Ordinance No. 12 of 1947

COMPANY REGISTRATION NUMBERPQ 67

DIRECTORSA. D. B. Talwatte Independent Non - executive Director/Chairman

E. H. Wijenaike Managing Director

G. S. N. Peiris Director (Finance)

A. K. Gunaratne Deputy Managing Director/Deputy CEO

D. P. de Silva Director/Chief Operating Officer

Dr. (Mrs) A. D. N. de ZoysaIndependent Non - executive Director

A. R. FernandoNon - executive Director

C. K. Hettiarachchi Director (Marketing)

K. B. Herath Independent Non - executive Director

M. H. de Silva Independent Non - executive Director

STOCK EXCHANGE LISTINGThe ordinary shares of the are listed on the Colombo Stock Exchange

HEAD/ REGISTERED OFFICE84, Raja Veediya, KandyTelephone : 081 - 2227000Facsimile : 081 - 2232047

CITY OFFICE270, Vauxhall Street, Colombo 2.Telephone : 011 - 2300555Facsimile : 011 - 2300441E-mail : [email protected] : www.centralfinance.lk

BANKERSBank of CeylonCitibank N.A.Commercial Bank of Ceylon PLCHatton National Bank PLCNDB Bank PLCNations Trust Bank PLCPeople’s BankSampath Bank PLCSeylan Bank PLCStandard Chartered BankDFCC Bank PLCState Bank of India

AUDITORSJMS Associates,Chartered Accountants,11, Castle Lane,Colombo 04

LEGAL ADVISERF. J. & G. de Saram,Attorneys-at-Law,P.O. Box 212,Colombo

CREDIT RATINGSA+(lka) by Fitch Ratings Lanka Limited

COMPANY SECRETARYCorporate Services (Pvt) Limited, 216, de Saram Place, Colombo10 Telephone : 011 - 4605100Facsimile : 011 - 4718220

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Printed by Printage (Pvt) Ltd

www.centralfinance.lk

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