Trailblazingoptimising returns at zero risk. This proven expertise, analysis speciality and...

Trailblazing

Entrust Securities PLCFinancial, Environmental & Social Performance

Annual Report 2014/15

Read The Entrust Securities PLC Annual Report Onlineesl.entrust.lk

esl.entrust.lk

It’s in our DNA and we are proud of it. Through the years, we have challenged convention and seized every opportunity for growth and value

creation. Today, we are proud to be Sri Lanka’s only non bank Primary Dealer listed on the Colombo Stock Exchange, evidence that we are

truly a benchmarked corporate, with a bold attitude that has brought us to where we are today.

Over a decade we have been developing exceptional synergies, using our local financial sector expertise and global exposure to create value at individual, societal and national levels. That is how we have become a dynamic financial institution and why we are so proud of the Entrust team, who has led the way to success for both the Company and the

many stakeholders we partner with today.

Entrust Securities PLC

We’re trailblazing

Trailblazing

2E

ntru

st S

ecur

ities

PLC

Fi

nanc

ial,

Env

ironm

enta

l & S

ocia

l Per

form

ance

Ann

ual R

epor

t 201

4/15

Context of the Report • Risk Management • Corporate Governance • Committee Reports • Financial Reports

Contents

08 34

54 79 110

27Chairman's Message Sustainability Report

Corporate Governance

Financial Statements Investor Information

Management Discussion & Analysis

Context of the Report

An introduction to Our Annual Report 3About Us 4Financial Highlights 5Company Milestones 6Chairman's Statement 8Chief Operating Officer's Message 14 Board of Directors 18Management Team 22Our Team 25Management Discussion & Analysis 27Sustainability Report 34

Risk Management

Risk Management Report 44Report of the Integrated Risk Management Committee 51


Corporate Governance 54

Committee Reports

Report of the Audit Committee 70Report of the Remuneration Committee 73

Annual Report of the Board of Directors 74

Financial Reports

Statement of Directors’ Responsibilityfor Financial Reporting 78Independent Auditor's Report 79Statement of Financial Position 80Statement of Comprehensive Income 81Statement of Changes in Equity 82Statement of Cash Flows 83Notes to the Financial Statements 84

Investor Information 110Notice of Annual General Meeting 113Notes 114Form of Proxy 115Corporate Information Inner Back Cover

3E

ntru

st S

ecur

ities

PLC

Fi

nanc

ial,

Env

ironm

enta

l & S

ocia

l Per

form

ance

Ann

ual R

epor

t 201

4/15

An introduction to Our Annual ReportWe are proud to present our Integrated Report covering the financial year commencing 1st April 2014 and ended 31st March 2015. In keeping with the core values of the Entrust group, we have sought once again to provide a transparent and holistic view of our total operations over the course of the last financial year.

Through this report we have sought to present a balanced and cohesive assessment of our resources, strategy and value creation in order to provide our diverse and valued stakeholders with access to balanced and accurate information with regard to the performance of our Company over the last financial year thereby empowering them to make informed decisions that protect and further their interests.

Parameters of Report Content

This report covers the total operations of Entrust Securities PLC. The content that has been included in this report was carefully selected and prioritised by our management team, based on the requirements of our key stakeholders. The processes for selecting and prioritising the main topics contained within the chapters of this report include engagement with our stakeholders, careful consideration of our risks and opportunities and our strategic adjustments, relative to changes in external conditions.

Intended Audience

This report is intended for use by our valued shareholders and our varied stakeholders including but not restricted to pertinent statutory and regulatory agencies, financial industry professionals, clients and potential clients and any other stakeholders whose interests are influenced by the operations of Entrust Securities PLC.

Assurance

The financial statements presented herein are prepared in accordance with the Sri Lanka Accounting Standards issued by the Institute of Chartered Accounts of Sri Lanka. The Financial Statements are certified by the Manager-Finance and General Manager of Entrust Securities PLC and signed by our Chairman and Group Executive Director/Group Chief Operating Officer in order to ensure that, they present a true and fair view of the activities of the Company.

External assurance on our Financial Statements has been provided by PricewaterhouseCoopers (PwC) of Colombo, Sri Lanka.

Feedback and Comments

As we continuously strive to improve our corporate reporting process, your feedback, comments and queries are most welcome.

Please contact:

Group Executive Director / Group Chief Operating Officer

Level 23, East Tower,

World Trade Center, Echelon Square, Colombo 1

Tel : +94-11-5500600

Fax : +94-11-5266060

4E

ntru

st S

ecur

ities

PLC

Fi

nanc

ial,

Env

ironm

enta

l & S

ocia

l Per

form

ance

Ann

ual R

epor

t 201

4/15


Entrust Securities PLC is an undisputed trailblazer. Our speciality, especially in Government securities is undeniably due to our team of professionals who are equipped with the knowledge and competencies to decipher and impart timely information, together with forecasts of financial markets, optimising returns at zero risk. This proven expertise, analysis speciality and competence in market dynamics enables the Company to impart expert advise with foresight and experience, influencing clients to gain attractive returns on their investment.

The fifteen years since our inception have been exciting, where we have risen to earn the reputation of being the undisputed trusted name in the industry. The responsibility we espouse in imparting information and analysis has always enabled us to deliver exceptional service in financial solutions, especially in our specialist area of Government securities.

As we trailblaze ahead, we celebrate the great strides we have made, in growth and performance, laying the foundation for pursuing our ambitious plans. We are all about professionalism, integrity and commitment, which have pushed us to grow stronger, etching milestones along the way. Our reputation is one of being a responsible corporate steward, where ethics, integrity, stability, accountability and sincerity of action govern our entire business ethos.

Our Vision

Our Mission

"To be the first choice for financial solutions"

• To enhance shareholder value through financial stability and growth

• To satisfy our valued clients by providing innovative solutions to their financial needs

• To train, develop and empower employees to give their best

• To achieve highest operational efficiency through advanced technology

• To adhere to the highest corporate ethics and social responsibilities

• To be recognized for our expertise and professionalism

About Us

5E

ntru

st S

ecur

ities

PLC

Fi

nanc

ial,

Env

ironm

enta

l & S

ocia

l Per

form

ance

Ann

ual R

epor

t 201

4/15

Financial Highlights

Total Assets

17,328 Mn

Return on Equity

20.12 %

Shareholders' Funds

1,180 Mn

Financial Highlights2015 2014

For the year ended 31st March Rs. '000 Rs. '000

Financial PerformanceTurnover 1,492,382 1,329,569 Earning for the Year 220,633 274,357 Net Interest Income 269,045 182,381 Capital Gains 205,085 170,846

Financial PositionTotal Assets 17,328,148 12,444,007 Financial Assets 17,225,881 12,327,946 Financial Liabilities 16,105,066 11,373,803 Shareholders' Funds 1,180,146 1,012,643

Investor InformationNet Assets Value Per Share (NAVS) (Rs.) 35.76 30.69 Earnings Per Share (EPS) (Rs.) 6.69 8.32 Market Price at the end of the period (Rs.) 25.40 17.30 Price Earning Ratio (Times) 3.79 2.08 Market Capitalization (Rs. '000) 838,200 570,900

Compliance RatiosRisk Weighted Capital Adequacy Ratio (RWCAR) - Min. Req. 8% 20.37% 19.88%

Other RatiosNet Profit Ratio 14.78% 20.64%Return on Assets 1.27% 2.20%Return on Equity 20.12% 31.34%Net Interest Margin 1.82% 1.88%

6E

ntru

st S

ecur

ities

PLC

Fi

nanc

ial,

Env

ironm

enta

l & S

ocia

l Per

form

ance

Ann

ual R

epor

t 201

4/15


Company Milestones

February 2000

April 2003

May 2009

March 2009

• Incorporated and appointed as a dedicated licensed Primary Dealer by the Central Bank of Sri Lanka to deal exclusively in Government Securities.

• Company stated capital increased for stability and strength.

• Re-constituted the Board of Directors, infusing pragmatic stewardship to step into the next phase of our visionary journey.

• Re-named and re-branded as Entrust Securities Limited to forge ahead with a brand new corporate persona.

7E

ntru

st S

ecur

ities

PLC

Fi

nanc

ial,

Env

ironm

enta

l & S

ocia

l Per

form

ance

Ann

ual R

epor

t 201

4/15November 2011

March 2014

December 2014

February 2015

• First Non-Bank Primary Dealer in Sri Lanka to be listed on the Colombo Stock Exchange.

• Relocation of business premises to the country’s financial hub i.e. World Trade Center, Colombo 1, Sri Lanka to provide a better service to our clientele.

• Winner of the Asia Responsible Entrepreneurship Awards 2014 - South Asia region in the Social Empowerment category.

• Achievement of Rs. 1 billion in Shareholders’ Fund, while generating earnings of Rs. 274 million - the highest ever since 2000.

• Entrust Securities PLC was among a few Companies to be awarded a Certificate of Compliance in the category of Financial Institutions at the 50th Annual Report Awards 2014 organised by The Institute of Chartered Accountants of Sri Lanka.

• Appointed as a Licensed Stock Dealer and Stockbroker in Debt Securities by the Securities & Exchange Commission of Sri Lanka to exclusively deal in listed debt instruments.

8E

ntru

st S

ecur

ities

PLC

Fi

nanc

ial,

Env

ironm

enta

l & S

ocia

l Per

form

ance

Ann

ual R

epor

t 201

4/15


It has been a volatile year both globally and locally, but as is characteristic of Entrust Securities PLC, we perceive this volatility as one filled with opportunity and potential. There is an underlying fervour inherent in us to pursue horizons untouched and it is this that drove us to deliver commendable financial and operational performance. Since inception, Entrust Securities PLC has been pioneering, blazing trails that have now charted cutting edge focus and initiatives into Sri Lanka’s financial services industry. The last year has seen us further consolidate our prominence and formidable presence. As comprehensively showcased in our Annual Report for the financial year ended 31st March 2015, Entrust Securities PLC has been a consistent performer, showcasing immense strength and pragmatism to instil confidence in our unique business model and powerful brand among our valued stakeholders.

Global horizons

As elucidated upon in greater detail within subsequent chapters of our Annual Report, economic volatility continued to hold sway on the global stage over the course of the last financial year, as most major developed economies showed signs of recovery. However, many faltered below anticipated economic growth targets. Gradual improvements to the US economy prompted the US Federal Reserve to take certain decisions, which caused interest rates to rise and ultimately induce more US investors in emerging and frontier markets to redirect capital flows back into the USA. While Sri Lanka remained relatively insulated from the full impact of such outflows, other developing economies suffered limited negative impacts to their foreign direct investment inflows, a trend expected to continue through the next year.

Meanwhile, economic conditions in the EU continued to cascade instability in the region, with Greece's debt woes threatening the EU's stability and several others, including Spain, Portugal and Italy showing signs of stress across key macro-economic indicators. Reports of worsening socio-political conditions within some of these distressed economies have also been a source of risk, while tensions between Russia and EU member states have also escalated. If this continues unabated, the repercussions will have serious implications on the growth trajectories of EU nations and beyond.

Deftly navigating our way forward...Chairman's Message

"Entrust Securities PLC is exploring fresh opportunities in the finance and equities sector having recently obtaineda license from the Colombo Stock Exchange to trade in debt securities. The new license holds significant potential to leverage our positive brand image and wealth of technical expertise to deliver optimal service levels to our clients."

9E

ntru

st S

ecur

ities

PLC

Fi

nanc

ial,

Env

ironm

enta

l & S

ocia

l Per

form

ance

Ann

ual R

epor

t 201

4/15

Total Assets

17,328 Mn

+39.25%

A further noteworthy development that rose to prominence over the last financial year was the near unprecedented collapse of international crude oil prices, which fell below $50 per barrel. This directly and indirectly caused declines in several other related commodity prices. Plunging crude oil prices also exerted pervasive deflationary pressure around the globe, particularly in net-importing petroleum nations, whilst simultaneously eroding economic growth in petroleum net-exporting nations.

Structural imbalances within the Chinese economy caused a slight contraction in GDP growth, resulting in lower demand for commodities. Given the massive consumption of resources fuelling the rapid growth of the Chinese economy in the recent past, the East Asian giant’s

weaker consumption dynamics created a gap in international demand that also contributed in general to low commodity prices. While petroleum futures are generally difficult to predict, efficiency-promoting reform in China’s economy is anticipated to increase, leading to an extended period of readjustment for the country. This is likely to translate into continued weak demand for commodity prices over the short to medium term horizon.

The need for structural reform was also felt in Japan with the ‘three arrows’ of Prime Minister Shinzo Abe's Abenomics failing to deliver results as anticipated. The three pronged fiscal stimulus, monetary easing and structural reforms failed to produce adequate results during the last financial year, despite positive progress in terms of fiscal and monetary policy. The

10E

ntru

st S

ecur

ities

PLC

Fi

nanc

ial,

Env

ironm

enta

l & S

ocia

l Per

form

ance

Ann

ual R

epor

t 201

4/15


lack of reforms to complement the other two pillars of the ‘Abenomics’ policy, prevented Japan from exiting its deflationary cycle. It is important to note that while macro-economic dynamics differ significantly from those in Sri Lanka, China and Japan serve as cautionary examples in illustrating the importance of structural reforms, to prompt the smooth functioning of an economy over the medium-long term.

Local conditions

On the domestic front Sri Lanka’s economy continued to build momentum as GDP growth hit 7.4% led by industrial sector growth, particularly through construction. Lower energy costs assisted in pushing annual average inflation down to 3.3%, another favourable macroeconomic dynamic that has helped to sustain Sri Lanka’s growth momentum. The current account fell to 2.7% of GDP while the balance of payments recorded a US$ 1.37 billion surplus. Foreign currency inflows from worker remittances and tradable services helped mitigate increased imports of consumer goods. The country’s balance of payments was further supported by US$ 1.69 billion in Foreign Direct Investments, enabling a notably improved foreign currency reserve of US$ 8.2 billion, which is equivalent to 5.1 months of imports.

Import expenditure increased by a moderate 7.9% in 2014 to US$ 19.4 billion, as compared with US$ 18 billion in 2013. The relative share of consumer goods as a portion of imports continued to follow an increasing trend accounting for 20% of total imports in 2014, reflecting an improvement in general standards of living with average income levels continuing upward. However, the primary factor driving the larger import figures was increased expenditure on intermediate goods, particularly in textiles and petroleum products. Intermediate goods accounted for 60% of total imports amounting to US$ 11.4 billion, inclining 8% YoY. Historic declines in prices of international crude oil were offset by larger import volumes catering to increased thermal power generation, heralding a 6.7% increase in expenditure on fuel. This pushed the average price per barrel to US$ 104.5 per barrel during the first half of the year, but saw a downward plunge to US$ 50 per barrel over the remainder of the year.

Treasury bond yields during the first half of 2014 remained relatively flat and were expected to decline further on the back of continuing favourable macro-economic conditions. This was mostly due to low inflation, healthy foreign appetite for Sri Lanka Government securities, excess liquidity in the money market, low credit expansion and a relatively stable exchange rate.

Treasury bond maturities during the first three quarters of the 2014 calendar year helped keep market demand afloat and push yield curves down further into September 2014. However a dearth in principle Treasury bond maturities thereafter, resulted in a lack of similar demand pressure for the rest of the year and subsequent volatility combined with increased pressure on foreign holdings caused the relative spread to narrow further.

Chairman's Message

"Treasury bond yields during the first half of the 2014 remained relatively flat and were expected to decline further on the back of continuing favourable macroeconomic conditions including but not limited to low inflation, healthy foreign appetite for Sri Lanka Government securities, excess liquidity in the money market, low credit expansion and a relatively stable exchange rate."

11E

ntru

st S

ecur

ities

PLC

Fi

nanc

ial,

Env

ironm

enta

l & S

ocia

l Per

form

ance

Ann

ual R

epor

t 201

4/15

Following the landmark Presidential elections in January 2015, it has become evident that the people of Sri Lanka have begun emphasizing on the need for best practices in governance, which has continued throughout the year, with the people's voice being more demanding for better ethics, integrity and governance principles. While subsequent developments in the political sphere have created some volatility in certain sectors of the Sri Lanka economy, the swift and peaceful transition of power from January onwards, prompted a measure of stability in the country’s economic and socio-political dynamics.

Moving forward, the Central Bank has set an economic growth target of 7% by the end of the 2015 calendar year and has expressed confidence that such targets can be met, ably supported by the envisaged growth expected in the exports, agriculture and construction sectors.

Industry overview

The finance industry as a whole recorded a largely positive performance, aided by a loose monetary policy stance adopted by the Central Bank of Sri Lanka. Following a 50 basis point reduction in the Standing Lending Facility Rate (SLFR) down to 8% and eventual reduction of the Standing Deposit Facility Rate (SDFR) down to 5%, the Sri Lankan market entered a period of excess liquidity which was characteristic through the remainder of FY14/15.

The movement of policy rates is integral to our core business of dealing in Government securities. Hence, it was notable that consequent to the above-

mentioned policies, yield curves on 91-day, 182-day and 364-day Treasury bills dropped by 180 basis points, 201 basis points and 228 basis points to 5.74 per cent, 5.84 per cent and 6.01 per cent respectively.

Similarly, Treasury bond yields also recorded declines with the March 2014 issue of 20-year maturity Treasury bonds fetching a yield rate of 11.32%. The 30-year maturity Treasury bonds subsequently issued in March and May recorded a yield rate of 11.75%. Overall, yield rates on Treasury bonds in the primary market ranged from 8.65 per cent on 5-year Treasury bonds to 11.75 per cent at the long end of 30-year Treasury bonds. Treasury bonds below 5-year maturity were not issued in 2014. Having implemented stringent protocols to ensure that, our business continues to identify and be responsive to such fluctuations, we implemented all prudent and necessary measures to adjust our strategic position, based on the emerging trends and paradigms.

Our performance

Despite the host of challenging and turbulent conditions encountered on both the local and global fronts, Entrust Securities PLC continued its consistent performance, showcasing yet another year of exceptional financial results. The ability to blaze trails, despite challenges is characteristic to us and allows our inherent need to push boundaries to come to the fore. We are indeed proud to have posted a profit of Rs. 220.6 million which was boosted by improvements to our net interest income posted at Rs. 269 million for this year, well above last year’s Rs. 182 million.

Our commendable results for the year were bolstered by a strong performance in our core business of dealing in Government securities. Capital gains from this segment of our business contributed Rs. 205 million to our bottom line, achieving remarkable improvements over the previous year’s Rs. 170.8 million. The impressive results we proudly showcase this year have cascaded a definite line of value creation to our stakeholders, especially our shareholders, given that we delivered Earnings Per Share of Rs. 6.69 this year.

Strategic outlook

Entrust is founded on the unshakable foundation of forging and strengthening strong relationships. Our stakeholders, whether clients, our team, industry or the nation all benefit from this two way win-win relationship which remains at the core of our existence. Each of our decisions and thereby impacts are constructed upon a strong value base encompassing trust, integrity and professionalism. This has prompted us to maintain a reputation that is unblemished, well respected and renowned for being above board in every sphere of our business operations.

The Entrust brand has over the last decade become stronger and more respected. It is identified with clear values, principles and ethics remaining at the heart of a well run Company, where innovation and vision drive goals. Having built this brand into becoming one of great prowess, Entrust is now well on its way to charting a course towards becoming a premier diversified conglomerate with a well established local and global presence.

12E

ntru

st S

ecur

ities

PLC

Fi

nanc

ial,

Env

ironm

enta

l & S

ocia

l Per

form

ance

Ann

ual R

epor

t 201

4/15


Chairman'sMessage

The confidence sustained in us by the industry including peers and regulator, is well entrenched in the fact that we were accorded a license by the Securities and Exchange Commission of Sri Lanka to trade in debt securities. While this augments our reputation even further, we are also enthusiastic about the fresh opportunities that this feature brings to our business purview.

The new license holds significant potential for Entrust Securities PLC to leverage our positive brand image and wealth of technical expertise to deliver optimal service levels and generate valuable returns to our stakeholders. By creating synergies between affiliated companies under the Entrust group umbrella, we believe that our bottom line can be bolstered significantly. While we foresee immediate tangible competitive advantages, we are also cognizant of the crucial role we play in intensifying Sri Lanka’s corporate debt market by improving access to low-cost finance, which is a responsibility we have undertaken unequivocally. This would lead to a more vibrant and well developed corporate debt market capable of powering a dynamic and enterprising private sector.

Social responsibility

Our engagement and commitment to the communities around us remains vital to our existence. Practising a business model that is built on forging relationships with stakeholders, our communities form an imperative nucleus to giving us purpose, direction and a vision to ensure inclusivity, equality and empowerment.

Enthusiastic about building holistic citizens who can be team players and leaders in society, our two CSR platforms are formulated on sports and education. We continued to develop our partnerships in rugby, cricket, golf, horse racing and social dancing in developing sports upwards from school level.

In developing a knowledge based economy, we take the responsibility of nurturing a literate well educated nation as a primary facet in our social responsibility agenda. We take a special interest in improving educational opportunities for children, particularly those based in economically disadvantaged conditions who are denied access to even the most basic educational facilities. The group's extensive CSR outreach programmes are aimed at empowering children from these low income backgrounds, presenting them the imperative tools and facilities that will empower them in meeting their life's goals. Our flagship CSR programme, “Helping Hands”, which refurbished and upgraded the Gadaladeniya Maha Vidyalaya was completed this year. This award winning initiative by the Entrust group has been a multi-pronged effort that has not only infused joy and rewards, but also permeated tangible benefits among young students who are aware of the true value of education.

"In addition to our role at the forefront of Sri Lanka’s financial sector, the Entrust group has remained consistently committed to engagement and uplift of all our valued stakeholders through community out-reach and Corporate Social Responsibility programmes (CSR)."

13E

ntru

st S

ecur

ities

PLC

Fi

nanc

ial,

Env

ironm

enta

l & S

ocia

l Per

form

ance

Ann

ual R

epor

t 201

4/15

Acknowledgements

Our continued efforts at building a well governed successful Company is the result of our focus on long term partnerships with our stakeholders. From vision to execution, the multi-pronged efforts infused by our stakeholders in ensuring that we remain at the top of our game, trailblazing as we do are undeniably made up of these strong relationships. My Board of Directors has been an immense source of inspiration to me, being at my side and a constant sounding board for the decisions we have to make to ensure that the impact we have on our stakeholders is positive and advantageous to all. My sincere thanks to my fellow Directors.

A team as unique as ours is special and must be commended for their dynamism in constantly reaching outwards and upwards. No goal is too challenging, no vision too overwhelming. It is they who are responsible for the admirable results posted this year, for maintaining the group's values, ethics and integrity at the helm and for being the power behind everything we do. My heartfelt thank you to this team.

Furthermore I wish to convey my gratitude to our valued clientele for their continuous support. Our team’s efforts to protect and advance their interests have been enabled by the trust and confidence our clients and valued business partners constantly imbue. We pledge to reward that confidence with continued operational excellence in optimising returns to the best of our abilities.

Appreciation is also extended to the Governor, Deputy Governors and other officials of the Central Bank of Sri Lanka, in particular the officials at the Public Debt Department. Their advice, guidance and counsel have been invaluable in ensuring that Entrust Securities PLC remains compliant with the exacting regulatory and statutory norms required of the industry.

Maintaining a consistent trailblazing reputation doesn't come easy. We know we have to continue raising the bar, continue infusing best practices and above all, remain cognizant of the evolutionary changes that continue to develop around us. We will pioneer, innovate and spearhead financial solutions that will be of benefit to all our stakeholders, where financial inclusiveness and individual and collective empowerment will be the driver of overall national development.

Isira D B Dassanayake

Chairman

14th July 2015

14E

ntru

st S

ecur

ities

PLC

Fi

nanc

ial,

Env

ironm

enta

l & S

ocia

l Per

form

ance

Ann

ual R

epor

t 201

4/15


Being a dynamic financial entity that trailblazers pathway for others to emulate is now habitual for us. Heading towards our fifteenth year in business, the challenges we have faced are many, but each of these has enabled us to learn from lessons past and use these to etch pathways of opportunity for us. The exceptional synergies we have developed and thus leveraged upon to become trailblazers in the financial services industry has in tandem, enabled us to create value for stakeholders across the board. Strengthening our inherent traits of credibility, stability and accountability into an ethical operational milieu with strong financial foundations, has positioned us firmly as an influential driver in the industry.

Trailblazers

Achieving our goals despite an environment that has been challenging, it is certainly our team that must be commended for their unwavering passion and unbridled enthusiasm. It is they who believed in our vision and took the mantle upon themselves to spearhead initiatives that would drive our goals to fruition. It is this gung ho attitude that has positioned Entrust Securities PLC as the only Company in the Primary Dealer industry with a seven member team, each collating more than a decade of continued service. I commend their unparalleled allegiance and absolute commitment to the Company, which I believe is the recipe for success we intend riding upon for sustained results.

Achieving goals, reaching successBeing the only non-bank Primary Dealer listed on the Colombo Stock Exchange, the year under review has been quite challenging given that the Company had to consolidate its position against considerable hurdles. Some of the competition we encountered was considerably tough, augmented by the fact that they have been reiterating their presence within the industry for over a decade. The challenging environment was exacerbated with the Central Bank of Sri Lanka’s directive to allow Licensed Commercial Banks to practice as Primary Dealers. Given that these banks did not have to maintain a dedicated capital threshold as is compulsory for standalone Primary Dealers, the competition did have an unfair advantage which all added intensity to the competition. Coupled with this, total subscriptions at the primary Government securities auctions also increased. With the granting of new licenses, there are currently eight standalone Primary Dealers and eight Primary Dealer Units working under the aegis of Licensed Commercial Banks as at end of 2014.

The strength and brand value we have accumulated over the years since our inception has held us in good stead to compete with great alacrity and astuteness in this intensely competitive industry. The restructuring we effected for the group some years ago has also been a positive contributory factor in pushing our performance levels to greater heights. Being one of the oldest players in the Primary Dealer Market, the remarkable performance we recorded last year has undoubtedly constructed a firm foundation for the Company to continue moving upwards in performance, while maintaining a shrewd focus on the triple bottom line.

The continuation of the expansionary monetary policy mooted in the previous year continued this year as well. Treasury bill rates continued to decline due

"Credibility, stability and stature have been our trails and we have now positioned ourselves firmly as an industry leader. Having already established a strong and stable financial base compared to our players in the market, excluding Commercial banks, we have assuredly strengthened confidence and image, among our stakeholders."

Charting a course for the future...Chief Operating Officer’s Message

15E

ntru

st S

ecur

ities

PLC

Fi

nanc

ial,

Env

ironm

enta

l & S

ocia

l Per

form

ance

Ann

ual R

epor

t 201

4/15

to multiple policy rate reductions, supported significantly by the low inflationary environment. However, with the lack of credit growth continuing through most of the year, an uptick was observed only towards the fourth quarter. The pervasive low interest environment thus saw investors pursue returns on the equity markets rather than the more conventional methods they had been used to before.

Industry sectors performed considerably well from a macroeconomic perspective, heralding GDP growth by year end 2014 to stand at 7.4%. The

lower growth rate, compared to the forecast of 7.8% however, was primarily due to the comparatively slow growth of 6.4% recorded in the last quarter of the year. However, Sri Lanka has always portrayed consistent growth paradigms, which underscores the positives gained through astute fiscal policy, visionary planning and entrepreneurial dynamism. The country’s economy is no longer dominated by the agriculture sector, but instead by services which accounted for 57.6% of GDP. Industry and manufacturing also influenced growth which thus saw employment patterns follow these trends, shifting significantly from agriculture to industry and services.

This prompted the Asian Development Bank to predict growth of 7% in 2015, strengthening to 7.3% in 2016. However, the ADB also mentions that growth will be impacted by political transition, dependent on the revised priorities

Total Equity

1,180 Mn

+16.60%

of the elected government. While construction will slow after leading growth in recent years, consumption will pick up encouraged by price reductions in food and fuel.

With the services sector being a key driver in the economy, the All Share Price Index (ASPI) increased by 23% and the S&P SL20 index increased by 25% during the year. In similar vein, the primary and secondary markets garnered success in operational efficiencies of Primary Dealers as proclaimed by Central Bank of Sri Lanka, Public Debt Department. The value and volume of secondary market transactions in long-dated Treasury bonds increased substantially, with the conducive macroeconomic developments providing significant opportunity for Primary Dealers to engage in market making functions for Government securities.

One of the highlights in our year was that Entrust Securities PLC continued

16E

ntru

st S

ecur

ities

PLC

Fi

nanc

ial,

Env

ironm

enta

l & S

ocia

l Per

form

ance

Ann

ual R

epor

t 201

4/15


"The thing about trailblazing is there is no road map to follow. You automatically step toward the uncharted, previously impossible, yet to be accomplished, never before realized space. Entrust Securities PLC will continue to sail through its unique and singularly significant trails, share of voice and shape of its retinas."

Chief Operating Officer's Message

with our five year Business Plan, infusing the planned pragmatic trading strategies effectively and with timely precision, which led our income into an impressive Rs 220 Mn, well above the forecast. Our unwavering focus on maintaining capital requirement based on regulatory directives saw us post our total capital base at Rs 1.18 Bn by March 31st 2015. We remain well in compliance of the minimum capital adequacy ratio of 8%, recording a ratio of 20.37%.

Profitability in our business is benchmarked primarily on the increased primary and secondary market trading volumes and the appreciation in value of trading portfolios resulting from downward shifts in market yield rates. Benign macroeconomic conditions, low and stable inflation levels and favourable liquidity levels in the market are in general, beneficial to market players. To optimise on opportunities in the market, we continued to adopt the Bloomberg terminal and E-bond trading platforms.

A significant laurel we donned this year was when, in February 2015, we were appointed as a Licensed Stock Dealer and Stockbroker by the Securities & Exchange Commission of Sri Lanka to deal exclusively in listed debt instruments. A well developed and vibrant corporate debt market would allow Entrust Securities PLC to play a pivotal role and also provide greater flexibility and prospects for our expansive client portfolio.

A Central Counterparty (CCP) system for settlement of securities, share debt and other instruments was mooted jointly by the Colombo Stock Exchange of Sri Lanka, the Securities & Exchange of Sri Lanka and the Central Bank of Sri Lanka. This joint initiative entrenched the CCP as the common platform for the settlement of securities, including shares, corporate debt and Government securities, designed to be an apt truss for Sri Lanka’s growing capital market as well.

Risk focusOur industry remains in constant exposure to risk and risk management most of which can be alleviated or minimised with a farsighted outlook, well supported by prudent decision making and timely information. Having analysed past trends, interest volatility and external factors, we have been astute in our plans to build adequate buffers to minimise risk, devoid of any significant impact on our capital base. This focus on prudent risk management also pushes us to institute regular stress tests, while dealers are expected to infuse a mind-set of prudence and astuteness in all trading activities.

Share of voiceWe continue to nurture long term relationships with our stakeholders, enabling us to not only show consistent quantitative performance, but also to stand steadfast among the top Primary Dealers in the

country. Hence, significant emphasis has been given in servicing our valued clients with above par customer service, engaging them continually in dialogue, keeping them abreast of new market developments via numerous communication channels and forwarding daily market newsletters for their knowledge enhancement and information purposes. The testimonials received from some of our key clients will vouch for our exceptional customer service, reiterating that Entrust as a group will soon champion the concept of a one-stop-shop financial powerhouse, engaging not only Sri Lankans but expanding horizons to serve foreign clientele as well.

Caring for our communityThe triple bottom line has always been of primary focus to us given that we believe strongly in building a business that expounds the virtues of financial inclusiveness and creating wealth, while emphasizing on the ethos of empowering our stakeholders in a milieu of wealth creation that would prompt overall sustainable development. Our ethos is about constructing a strong sustainable business entity that would be the preferred choice for all stakeholders, reiterated on a reputation that places us as a responsible corporate steward. The work with our communities therefore is holistic. Each initiative is given apt consideration on its impact on the target stakeholder, our business and the environment.

The Entrust group mooted the Helping Hands project, which completed its second phase. The initiative provided a fully equipped library to Gadaladeniya Maha Vidyalaya, working wholeheartedly in developing literacy and a love for literature among the school’s students. We continue providing basic facilities to these students, as well as enabling them to continue their education, which in some instances may be a challenge

17E

ntru

st S

ecur

ities

PLC

Fi

nanc

ial,

Env

ironm

enta

l & S

ocia

l Per

form

ance

Ann

ual R

epor

t 201

4/15

without a helping hand. It is indeed fitting that our tireless team was presented with the Area Award 2014 for the “Helping Hands” project.

At the forefront of building well-rounded young men and women who will revel in team spirit and leadership qualities, the group continues to partner sports activities including rugby, cricket, horse racing and social dancing.

Focus on governanceThe strong corporate governance culture we espouse is a result of years of unshakeable resolve to build a responsible Company that remains firmly entrenched in ethics, values, accountability and transparency. This imperative has been the overarching tenet in building a strong governance foundation that has complimented our efforts of creating and maintaining a sustainable business model.

With this robust governance milieu embracing every single facet of the way we do business, our growth and value creation has birthed an enabling environment that allows us to operate our business and engage with our stakeholders within a sustainable structure. Our governance culture is permeated on a top down approach and is cascaded to each of our stakeholders, encouraging them to imbue best practices in their interactions. Governance remains a strong facet in our corporate psyche and is uncompromising, even in the most challenging circumstances.

Hence, it is in this backdrop that we have espoused full and complete compliance with all mandatory provisions of the Companies Act, the Listing Rules of the Colombo Stock Exchange, the Securities and Exchange Commission of Sri Lanka Act, numerous directives issued by the Central Bank of Sri Lanka (CBSL) and all other legislation and rules germane to our business operations.

Appreciations Entrust Securities PLC has had a good year, journeying towards a vision that enables us to reiterate our status as a leading Primary Dealer in a highly competitive industry. I am grateful to the Chairman and Board of Directors for their extraordinary stewardship in helming this dynamic Company, taking active interest in our progress and providing apt counsel when necessary to ensure that, we remain focused on reaching our goals.

The goals set out for last year have been achieved, undoubtedly due to the vital role played by Mr. Chandra J Dias, the CEO who resigned on the 31st of December 2014. The leadership he imparted to the team to ensure achieving the targets set out in the Business Plan for FY 2014/15 has surely given the Company the apt mindset to gain further momentum.

The trust and confidence our valued business partners and clients have in us is surely a fundamental to our success. The long term business relationships we have forged with them have been at the heart of our achievements, for which I am very appreciative.

We are also grateful for the unwavering support and guidance extended to us by the former and present Governors and senior officials and staff of the Public Debt Department of the Central Bank of Sri Lanka. Our sincere gratitude is also extended to the senior officers of the Colombo Stock Exchange and the Securities & Exchange Commission of Sri Lanka for their regulatory guidance. A word of thanks to our external and internal Auditors for their unwavering support, in being true partners in our governance and transparency journey.

Our shareholders encompass the trusses that our business is

constructed upon. Their continued confidence in us to be an ethical well governed company while creating wealth in a transparent and accountable manner has given us the impetus to pursue objectives that are ambitious and sometimes aggressive. Thank you for choosing us to be your partner to maximise your returns.

The future beckonsWe are trailblazers but it’s a trail that we have to forge ourselves. This is one of the reasons we have carried the mantle of being spearheads, while pursuing pathways that have not been charted. Our goals have been ambitious and we have had to pursue aggressive paths to achieve those goals. We see ourselves as leading the future, charting maps that can only be navigated by the courageous and brave, which is where we come in.

Our strategy for next year and beyond is manifold. Our stakeholders will always be paramount in our plans and the total investment solutions offered under the Group umbrella, allows them to leverage on the synergies within the group. Building our business on long term relationships and constantly engaging with them will continue as a fundamental in our value creation. We continue to remain focused and enthused at the existing prospects and challenges that are emerging. Our team will be equipped with the apt skills and competencies to pursue those ambitious goals, being encouraged to blaze trails and be recognised champions in the Primary Dealer industry.

R D Senerath

Group Executive Director/ Group Chief Operating Officer

14th July 2015

18E

ntru

st S

ecur

ities

PLC

Fi

nanc

ial,

Env

ironm

enta

l & S

ocia

l Per

form

ance

Ann

ual R

epor

t 201

4/15


Mr. C. U. RatwatteExecutive Director

Mrs. R. D. SenerathGroup Executive Director/ Group Chief Operating Officer

Mr. I. D. B. DassanayakeChairman

Board of Directors

19E

ntru

st S

ecur

ities

PLC

Fi

nanc

ial,

Env

ironm

enta

l & S

ocia

l Per

form

ance

Ann

ual R

epor

t 201

4/15

Mr. R. M. S. TillakawardanaNon-Executive Director

Dr. N. N. P. JayasuriyaIndependent / Non-Executive Director

Mr. S. JeyavarmanNon-Executive Director

Mr. G. A. K. NanayakkaraIndependent / Non-Executive Director

20E

ntru

st S

ecur

ities

PLC

Fi

nanc

ial,

Env

ironm

enta

l & S

ocia

l Per

form

ance

Ann

ual R

epor

t 201

4/15


I. D. B. DassanayakeChairman

Appointed to the Board in November 2012 as an Executive Director, Isira Dassanayake was subsequently appointed Chairman in April 2013.

An established and successful entrepreneur, he possesses a wealth of experience in the mercantile and public sector, with over twenty one years’ experience in the public and private sectors, during which time he headed several leading establishments across a diverse range of sectors.

With a Master’s Degree in Public Administration, he serves as the Chairman of Entrust group of Companies including Entrust Capital Partners (Pvt.) Limited, Entrust Holdings Limited, Entrust Limited, Entrust Wealth Management Limited, Entrust Capital Markets (Private) Limited, Entrust Investments Limited, Entrust Healthcare Limited, The Standard Credit Finance Limited, Western Sports Management (Pvt.) Limited and as the Executive Director of Multi Finance PLC.

Additionally he also serves on the Boards of Maruthi Estates Limited, Nippon Holdings (Private) Limited, Platinum Capital (Private) Limited and is also the Chairman of Pacific Trust (Private) Limited.

C. U. RatwatteExecutive Director

Appointed to the Board in November 2012, Chanuka Ratwatte has consistently served as an Executive Director of the Company.

Beginning his career as a Trainee Planter at Kahawatte Plantations PLC in 1993, he subsequently joined India’s Tata

Board of Directors

Tea as a Management Trainee, gaining extensive experience in an organisation of international repute. Leveraging his wide exposure in the field, he returned to join Watawala Plantations PLC in 1997 during which time he served as Head of Exports for four years and subsequently joined Brave Guard Security and Investigation Services as a Director in 2003.

Completing his primary and secondary education at Trinity College Kandy, he is a qualified planter holding accreditation from institutes in India, the United Kingdom and Germany.

In addition to his position at Entrust Securities, he also serves on the Boards of Entrust Capital Partners (Pvt.) Limited, Entrust Wealth Management Limited, Entrust Holdings Limited, Entrust Limited, Multi Finance PLC, Entrust Capital Markets (Private) Limited, Entrust Healthcare Limited, Western Sports Management (Pvt.) Limited, Entrust Investments Limited and The Standard Credit Finance Limited where he serves as Executive Director.

R. D. SenerathGroup Executive Director /Group Chief Operating Officer

Romesha Senerath joined Entrust group in year 2004 and was appointed to the Board in June 2009 and has been serving the Company as an Executive Director since then.

She holds an MBA from the University of New Buckinghamshire (UK) and is a Member of the Chartered Institute of Marketing (UK). She has also obtained the International Capital Markets Qualifications (ICMQ) conducted by the Securities Institute London (UK) and holds a Diploma in Business Skills and

Development conducted by the National Institute of Business Management (NIBM). She has over eighteen years of experience in Fund Management activities and overall management of corporate affairs. Prior to joining Entrust Group, she worked at Nations Lanka PLC as Senior Executive-Investments and at Union Assurance PLC as Acting Head of Investments.

She presently serves as the Group Executive Director/Group Chief Operating Officer of the Entrust Group of Companies namely Entrust Capital Partners (Pvt.) Limited, Entrust Holdings Limited, Entrust Limited, Entrust Wealth Management Limited, Entrust Capital Markets (Private) Limited, Entrust Investments Limited, Entrust Healthcare Limited, The Standard Credit Finance Limited, Western Sports Management (Pvt.) Limited and Multi Finance PLC. In addition to the above mentioned Directorships, she was appointed to the Board of Directors of Lanka Financial Services Bureau Limited (LFSBL) in March 2015.

Dr. N. N. P. JayasuriyaIndependent / Non-Executive Director

Appointed to the Board in August 2011, Dr. Nalin Jayasuriya has served the Company as an Independent Non-Executive Director and also serves as Chairman of the Remuneration Committee.

In addition to his position at Entrust Securities, he is presently the Group Chairman of the McQuire Rens Group and has previously functioned as the Director of Human Resources at Mackwoods Winthrop Ltd, Regional Human Resources Director in the East African Region offices of Sterling Winthrop and Regional Human

21E

ntru

st S

ecur

ities

PLC

Fi

nanc

ial,

Env

ironm

enta

l & S

ocia

l Per

form

ance

Ann

ual R

epor

t 201

4/15

Resources Consultant and Regional Head of Special Projects at the company formerly known as Smithkline Beecham International, South-East Asia & India, (currently Glaxo Smithkline).

A sought-after thought-leader, trainer and business consultant, he has conducted Executive Coaching for senior executives in blue-chip and multinational companies in Sri Lanka and across South-East Asia and the Middle East. He also presents management papers and addresses prestigious forums at numerous international conferences across the United Kingdom, the United States, Australia, Dubai, South Korea and the European Union.

Included in his extensive portfolio of work as an HR Consultant are complex projects undertaken at the Sri Lankan Ministry of Tourism, Sri Lankan Airlines, the Sir John Kothalawela Defence Academy and the Public Utilities Commission of Sri Lanka. He also played a lead role in the restructuring of Sri Lanka Rupavahini Corporation. He has also been a Lead Consultant, supported by PWC, in the re-profiling and re-structuring of the UNDP in 2001 for which he received a special commendation for his record speed from UN Headquarters in New York.

G. A. K. NanayakkaraIndependent / Non-Executive Director

Appointed to the Board in October 2011, Kishantha Nanayakkara serves as an Independent Non-Executive Director in addition to his role as Chairman of the Audit Committee.

He possesses a wealth of experience derived from a career spanning well over 20 years

across a wide range of sectors ranging from manufacturing to financial services where he has held several directorships and management positions, in addition to his role at Entrust securities, He holds the post of Managing Director at Resus Energy PLC, a position in which he has excelled since the company’s inception in 2003 under the brand, Hemas Power PLC.

Additionally, he has served on the Board of the Sri Lanka Sustainable Energy Authority, been an advisor to the National Council for Economic Development and a Consultant to the Public Enterprises Reform Commission (PERC).

R. M. S. TillakawardanaNon-Executive Director

Appointed to the Board in November 2013, he serves the Company in the role of Non-Executive Director.

An accomplished professional with over twenty two years in the mercantile sector, he holds extensive expertise in the fields of financial management, financial analysis, corporate and strategic planning, diagnostic studies, project feasibility studies and appraisals, auditing, research and market surveys.

In addition to his role at Entrust Securities, he is a Non-Executive Director on the Board of Multi Finance PLC.

Holding an MBA and an MA in Financial Economics from the University of Colombo in addition to a Diploma in Marketing from the Chartered Institute of Marketing (UK) and a Postgraduate Diploma in Marketing from the Post Graduate Institute of Marketing, University of Sri Jayawardenapura,

he is a Fellow of the Chartered Institute of Management Accountants of UK and a Chartered Global Management Accountant.

Additionally, he was also a founding member of the Institute of Certified Professional Managers, a Member of the Institute of Internal Auditors (IIA) of USA, former Vice President of IIASL and presently serves as a Board Member of CIMA Sri Lanka.

S. JeyavarmanNon-Executive Director

Appointed to the Board with effect from 15th June 2015, he serves the company as a Non-Executive Director.

A respected professional holding over thirty two years’ experience in Sri Lanka’s financial markets and fund management industry, he has been the Managing Director of Forbes Money Brokers Limited, Chief Executive Officer at National Asset Management Limited and Director and Chief Executive Officer at Orient Wealth Management Limited.

A Fellow of the Institute of Chartered Accountants of Sri Lanka, he currently serves as a Non-Executive Director at Entrust Wealth Management Limited and as an Advisory Panel Member of the Chartered Institute for Securities & Investment in Colombo. Prominently involved in Sri Lanka’s Unit Trust sub-sector, he has been the President of the Unit Trust Association of Sri Lanka, in addition to other prominent positions in committees representing the Unit Trust industry.

22E

ntru

st S

ecur

ities

PLC

Fi

nanc

ial,

Env

ironm

enta

l & S

ocia

l Per

form

ance

Ann

ual R

epor

t 201

4/15


Management Team

Mr. Kusal AbeykoonSenior Manager - Dealing

Mr. Mahesh AdikariSenior Manager - Dealing

Mr. Sanjeewa DayarathneGeneral Manager

Mr. Niloshan MendisAssistant General Manager - Treasury Operations

23E

ntru

st S

ecur

ities

PLC

Fi

nanc

ial,

Env

ironm

enta

l & S

ocia

l Per

form

ance

Ann

ual R

epor

t 201

4/15

Mr. Chanaka GamageSenior Manager - Business Development

Mr. Nipuna SanjeewaManager - Finance

Mr. Prasanna AmarasekaraManager - Middle Office & Risk Management

Mr. Nalin PereraManager - Treasury Operations

24E

ntru

st S

ecur

ities

PLC

Fi

nanc

ial,

Env

ironm

enta

l & S

ocia

l Per

form

ance

Ann

ual R

epor

t 201

4/15


Management Team

Mrs. Sanjani De S. GamageCompany Secretary

Mr. Indika Dissanayake Group IT Manager

Mrs. Wasanthi StephenHead of HRD

Ms. Anusha MalwattaSenior Manager - Corporate Communications

25E

ntru

st S

ecur

ities

PLC

Fi

nanc

ial,

Env

ironm

enta

l & S

ocia

l Per

form

ance

Ann

ual R

epor

t 201

4/15

Our Team

from left to rightMrs. Ishani Amarasekera, Mr. Dinesh Wickramaarachchi, Mr. Niroshan Kumara, Mr. Nadeeshan Kaluarachchi, Mr. Ajith Priyantha

Staff at Entrust Securities PLC

Support Services Staff

from left to rightMr. Viraj Mendis, Mr. Buddhika Edirisinghe, Mrs. Disna Weerasooriya, Mr. Lakmal SellahewaAbsent : Mr. Indika Dissanayake

26E

ntru

st S

ecur

ities

PLC

Fi

nanc

ial,

Env

ironm

enta

l & S

ocia

l Per

form

ance

Ann

ual R

epor

t 201

4/15


Our Team

from left to rightMr. Ronald Fernando, Ms. Devika Lakmini, Mr. Uditha Wickramarathna, Ms. Maneesha Gunarathna, Mrs. Ann Roshani

Support Services Staff

from left to rightMs. Joanne Vanninayake, Mr. Gayan Welipitiyage, Mr. Harsha Wijerathne, Mrs. Achini Jayawardena, Mr. Nadeeka SirithilakaAbsent : Mrs. Lakshini Gunathillake

27E

ntru

st S

ecur

ities

PLC

Fi

nanc

ial,

Env

ironm

enta

l & S

ocia

l Per

form

ance

Ann

ual R

epor

t 201

4/15

Management Discussion & AnalysisIntroduction

Being the nation's only non-bank Primary Dealer in Government securities to be listed on the Colombo bourse, our biggest strength is our pioneering focus. We enjoy trailblazing; we take pride in being the first to chart new paths and we relish spearheading initiatives that make us a leader. The financial performance showcased this year surely evidences our consistency in being cognizant of stakeholder aspirations. Our unwavering commitment to excellence has empowered us to overcome challenges, seek opportunities and hone our strengths. Any weaknesses we observed were quickly righted, bridging gaps with greater force and ensuring that we are ready for the emerging paradigms. We have worked through a year filled with landmark historic events and unprecedented collapses in international commodity prices which prompted the reverse of macroeconomic fortunes. These prompted transformations to our thought process as the local and global stages began changing faster than ever experienced and remained mindful of any paradigm that would impact us directly or indirectly.

Global Economy

Despite an initially positive outlook, global economic recovery faltered in 2014 to stand at 3.2% due to a result of geo-political turmoil in the Middle-East and around Russia. Economic uncertainty in the Eurozone and drastic shifts in commodity prices globally also had permeating impacts. Gradual recovery of the U.S economy resulted in a

TRAILBLAZING INTO THE FUTUREOur unwavering commitment to excellence has ensured that Entrust Securities PLC was able to deftly steer through the numerous peaks and troughs of a year filled with landmark upheavals from an unprecedented collapse in international commodity prices that reversed macroeconomic fortunes on a global scale to historic political change on the local stage

Revenue

Earnings per Share Profit for the Year

Net Interest Margin

Rs 1,492 Mn

Rs 6.69 Rs 220.6 Mn

1.82%Net AssetsNet Assets per Share

Rs 1,180 MnRs 35.76

13.7

63.4

22.9

Turnover Composition%

Reverse Interest Income

Securities Interest Income

Capital Gains

28E

ntru

st S

ecur

ities

PLC

Fi

nanc

ial,

Env

ironm

enta

l & S

ocia

l Per

form

ance

Ann

ual R

epor

t 201

4/15


tightening of American monetary policy, which dampened capital flows to emerging and frontier markets, as foreign investors became more selective about their investment destinations. In tandem, persistent economic turbulence in the Eurozone generated numerous downside risks in Greece, Germany, France, Spain and Portugal.

The anticipated continuation of conservative fiscal policies in the US is likely to drive international borrowing costs higher over the next financial year. This will also trigger the natural phenomenon of greater investor discrimination between emerging market economies based on more stringent appraisals of their structural vulnerabilities, macroeconomic strengths and weaknesses.

Mature economies recorded overall improvements to reach 1.9% in 2014, of which the US economy posted growth of 2.4%, improving by 0.2% over the previous year. Serious concerns are also being raised on the stability of the EU, particularly in the event that negotiations on a bailout for the Greek economy fell through and a potential ‘Grexit’ takes place. Overall, the European region recorded marginal improvements to reach 0.8% growth during the year under review. However uncertainty as to the fate of the Union is expected to loom large in 2015.

Despite a worsening of political tensions across the Middle-East, international crude oil prices bottomed out at under $50 a barrel, causing severe contractions in economic growth for oil exporting nations and resulting in numerous knock-on impacts for the prices of several global commodities.

Consequently, growth in once dynamic emerging and frontier market economies fell drastically to 4.7% in 2014, most notably in East Asia’s economic powerhouse of China. Structural imbalances within the Chinese economy dragged growth down from of 8.8% between 2010 and 2013, declining to 7.4%. Experts predict a further slackening of Chinese growth as the country embarks on far-reaching reforms, particularly in its state-owned banks which, have been advised by the World Bank to rein in wasteful investments, over-indebtedness and a weakly regulated shadow-banking system.

Lower Chinese growth rates as a result of this reform impetus are also expected to further dampen international commodity prices, since Chinese demand accounts for a major portion of total international demand. This anticipated weakening of international demand is likely to create larger surpluses in international commodity markets which, in turn, will likely exert further downward pressure on commodity prices during the coming financial year.

Consequently, developing countries that are net exporters of commodities, particularly those nations that exhibit low rates of value-addition and generally deal in raw bulk exports of commodities, are expected to be vulnerable to further dips in export earnings and weaker macroeconomic fundamentals. This in turn, could negatively impact

investor sentiment while countries that are net-importers will likely reap the benefits of deflated international commodity prices.

Meanwhile, the much touted Japanese economic philosophy of ‘Abenomics’ failed to maintain its initial positive results, as the country’s economic growth fell to 0.2% . Policy makers failing to implement some of the planned structural reforms to put the Japanese economy on a higher growth trajectory was primarily to blame.

The drastic plunge in major international commodity prices also had the impact of keeping global inflation rates at generally low levels across the globe. Japanese inflation rates averaged to 1.58% during the last quarter of the financial year while the Chinese economy posted an average inflation of 1.44%. The German economy hovered at 0.24% during the same period. Meanwhile, the US proceeded through another deflationary cycle, posting 0.09% deflation in the fourth quarter, as compared with inflation of 1.42% over the third quarter.

Global growth, according to analysis from the International Monetary Fund is expected to remain moderate, weighed down by high debt, unemployment and low investment, while interest rate hikes in the US combined with low inflation will also raise additional challenges in global economies. Despite such challenges, global growth is projected to rise to 3.5% in 2015 and 3.8% in 2016, supported by the gradual recovery of advanced economies and a continued decline in oil prices.


29E

ntru

st S

ecur

ities

PLC

Fi

nanc

ial,

Env

ironm

enta

l & S

ocia

l Per

form

ance

Ann

ual R

epor

t 201

4/15

The country’s external debt stock was reported to have increased to US$ 43 billion in the third quarter, compared with US$ 39.9 billion as at end of 2013. This was mainly due to the issuance of Sri Lanka’s 6th and 7th international sovereign bonds amounting to US$ 1.5 billion, in addition to the international bond issuances of the National Savings Bank of US$ 250 million and Sri Lankan Airlines of US$ 175 million.

However, total external debt as a percentage of GDP declined to 57.4% by the end of the third quarter, compared to 59.4% as at the end of 2013. This is expected to decline further as part of the new Government’s policy of taking a more conservative position on the acquisition of further debt.

Meanwhile, the Central Bank of Sri Lanka has set a target of 7% growth for 2015 and has expressed confidence that such a target is within reach. With the resumption of infrastructure and construction projects post reassessment, it is astute to perceive that this will lead to increased contribution by the construction sector to the wider economy.

The agriculture sector appears to be on track for improved supply-side conditions, likely to boost the sector’s contribution to the overall economy. Private investments into the services sector, particularly in tourism, also appear to have slowed following the political developments experienced this year. However, such investments are expected to resume once General elections conclude on August 17th 2015.

The Sri Lankan Economy

Sri Lanka’s key economic indicators were maintained within generally stable parameters during 2014/15. Parallel to a continuing rise in per capita income, which reached US$ 3,625 during the year, GDP growth increased to 7.4% in the third quarter, bolstered by promising growth in the industrial sector which hit 11.4% in 2014. However, the agricultural sector suffered drastic shocks during the year, resulting in its growth plummeting from 4.7% in 2013 down to a mere 0.3% by the end of the third quarter, while the services sector remained relatively flat at 6.5%. Notably, inflation was contained to single digits for the sixth consecutive year, with annual average inflation dropping to 3.3% by the end of 2014 compared with 6.9% by 2013. The stable inflation milieu was aided by improved domestic supply side conditions combined with low energy prices given that cheap international crude oil prices allowed for a downward revision of electricity, water, petrol, diesel and LP Gas.

7.8

6.4

7.7

6.4

GDP 2014/15%

4th Qtr

3rd Qtr2014

2nd Qtr

1st Qtr2015

130.5131.0131.5132.0132.5133.0133.5134.0134.5135.0

Apr-14

May-14

Jun-14

Jul-14

Aug-14

Sep-14

Oct-14

Nov-14

Dec-14

Jan-15

Feb-15

Mar-15

Movement of Exchange RateUSD/LKR

Moving into the final quarter of 2014 however, Sri Lanka bore witness to dramatic, albeit peaceful political change post a snap presidential election in January 2015. Consequently, with a new President at the helm and parliamentary elections to follow, there were several macro changes that took place in the governance arena. Reassessments of infrastructure outlays and developmental priorities, particularly in the context of the country’s debt dynamics took precedence.

30E

ntru

st S

ecur

ities

PLC

Fi

nanc

ial,

Env

ironm

enta

l & S

ocia

l Per

form

ance

Ann

ual R

epor

t 201

4/15


Market Capitalisation

+46.82%

838 Mn


In terms of fiscal targets, Government revenue has displayed a continually downward trend falling from 13.3% of GDP in 2013 down to 12.3% over the course of 2014. Hence consolidation of revenue streams through a strengthening of tax administration and a simplification of taxation policy remains a top priority. Managing the fiscal deficit has also been a continuous challenge with efficient management of recurrent expenditures, particularly in the context of heavy debts being incurred by state owned enterprises. Despite a decline in Government expenditure from 19.2% of GDP in 2013 down to 18.3% by the end of 2014, weaker revenue collection negated improved capital expenditure, culminating in a budget deficit of 1.3% of GDP.

However a series of measures implemented by the new regime in the first quarter of FY 2015, resulted in marginal improvements to Government revenue, while expenditure was also reined in with preliminary signs from the Central Bank of Sri Lanka indicating a further narrowing of the budget deficit over the course of this year.

Meanwhile, from an external sector perspective, Sri Lanka managed to lower its current account deficit down to 2.7% of GDP, while the balance of payments recorded a US$ 1.37 billion surplus. Inflows from trade in services combined with worker remittances, reduced the current account deficit, despite increased merchandise imports. The balance of payments was also supported by continued FDIs crossing the US$ 1.69 million in 2014 which was directed into Government, banking and private sector investments, buoying the improvement of Sri Lanka’s gross international reserves to US$ 8.2 billion, equivalent to 5.1 months of imports.

As a result of greater inflows and higher export earnings, the Sri Lankan Rupee performed well during the first half of the 2014 calendar year, but this trend was reversed during the second half. This was primarily due to increased expenditure on imports and net outflows, as foreign investors withdrew from Government securities. Consequently, steps were taken to shore up reserves by entering into a currency swap with the Reserve Bank of India and through the issuing of Sri Lanka Development Bonds.

Export earnings increased by 7.1% up to US$ 11.1 billion in 2014, building on the strong performance of all major export sectors. Industrial exports accounted for the majority 75% of total exports, increasing by 6.6% YoY to US$ 4.93 billion. Apparel and textiles contributed more than 50% of total growth in exports. Earnings from agricultural exports increased by 8.2% to US$ 2.79 billion with coconut products leading the way, while earnings from tea, which accounts for approximately 15% of total exports, grew by 5.6% in 2014 against a previous 9.2% in 2013.

Import expenditure increased by a moderate 7.9% in 2014 to a value of US$ 19.4 billion, as compared with US$ 18 billion in 2013. The relative share of consumer goods as a portion of imports continued to follow an increasing trend accounting for 20% of total imports in 2014, reflecting an improvement in general standards of living as average income levels continue upward. However, the main factor driving the larger import figures was increased expenditure on intermediate goods, particularly in textiles and petroleum products. Intermediate goods accounted for

60% of total imports amounting to US$ 11.4 billion, a growth of 8% YoY. The historic decline in international crude oil prices were offset by larger import volumes catering to increased thermal power generation. This caused a 6.7% increase in fuel expenditure to stand at US$ 4.6 billion at an average price of US$ 104.5 per barrel during the first half which, subsequently plunging to US$ 50 per barrel over the remainder of the year.

Treasury bond yields during the first half of the 2014 remained relatively flat and were expected to decline further on the back of continuing favourable macroeconomic conditions, including but not limited to low inflation, healthy foreign appetite for Sri Lankan Government securities, excess liquidity in the money market, low credit expansion and a relatively stable exchange rate.

With concern growing on debt maturities, confidence in the bond markets diluted moderately, despite reductions to the budget deficit. Significant Treasury bond maturities during the first three quarters of the 2014 calendar year helped keep market demand afloat, pushing yield curves down further into September

31E

ntru

st S

ecur

ities

PLC

Fi

nanc

ial,

Env

ironm

enta

l & S

ocia

l Per

form

ance

Ann

ual R

epor

t 201

4/15

2014. However, a dearth in principle Treasury bond maturities thereafter, resulted in a lack of similar demand pressure for the rest of the year and subsequent volatility combined with increased pressure on foreign holdings caused the relative spread to narrow further.

The Central Bank of Sri Lanka maintained a comparatively loose monetary policy stance over 2014 with a view to supporting greater economic activity and stimulating increased private sector credit growth. Repurchase rates and Reverse Repurchase rates which were set at 6.5% and 8.5% respectively in 2013, were subsequently renamed the Standing Deposit Facility Rate (SDFR) and the Standing Lending Facility Rate (SLFR). The SLFR was reduced by 50 basis points down to 8% in January 2014.

Industry Perspective

With the relatively loose monetary policy stance of the Central Bank of Sri Lanka combined with excess liquidity, it sought to encourage private commercial banks to increase the supply of credit to the private sector, designed at spurring investment, particularly into infrastructure and exploration of new business opportunities. The ultimate goal would be to grow the wider economy.

As stated above, consequent to Central Bank of Sri Lanka reducing its Standing Lending Facility Rate (SLFR) and since lending to the private sector continued to be sluggish even with such historic rate cuts, a special SDFR of 5% was offered from 23rd September 2014, which caused overnight market interest rates to post notable declines.

Interbank Call money rates also recorded significant drops over the course of the year, as a result of excess market liquidity. With January’s reduction in the SLFR, the Average Weighted Call Money Rate (AWCMR) dropped to 7.46% by the end of January 2014, compared with 7.66% in December 2013.

Over the course of the next month, AWCMR declined to 6.95% in February before falling further through the third quarter, to reach a low of 5.72% in October and stabilising at 6% for the remainder of the calendar year. It touched 6.21% at the beginning of the fourth quarter 2014, as compared with 7.66% in the previous year.

Yields on Government securities followed a similar trend with 91-day, 182-day and 364-day Treasury Bills dipping by 180 basis points, 201 basis points and 228 basis points to 5.74 per cent, 5.84 per cent and 6.01 per cent respectively.

Similarly, Treasury bonds also displayed a declining trend in 2014 with the March 2014 issue of 20-year maturity bonds fetching a yield rate of 11.32% . 30-year maturity Treasury bonds subsequently issued in March and May 2015 recorded a yield rate of 11.75%. Overall, yield rates on Treasury bonds in the primary market ranged from 8.65 per cent on 5 year Treasury bonds to 11.75 per cent for 30 year Treasury bonds. Treasury bonds below 5 year maturity were not issued in 2014.

6

8

10

12

Treasury bond yieldsUSD/LKR

1 Year Tbond3 Year Tbond5 Year Tbond10 Year Tbond

Apr-14

May-14

Jun-14

Jul-14

Aug-14

Sep-14

Oct-14

Nov-14

Dec-14

Jan-15

Feb-15

Mar-15

Meanwhile foreign holdings on Treasury bills and Treasury bonds posted net inflows during the first quarter of the year and into July 2014 before posting net outflows over the remainder of the second quarter. The third quarter was relatively flat in terms of net movement of foreign holdings, while the final quarter showed signs of a rebound, with net foreign outflows of US$ 2.62 million being posted for March 2015.

In this environment, Primary Dealers recorded an income of Rs. 3.71 billion in the fourth quarter of the 2014 calendar year and Rs. 3.35 billion in the first quarter of 2015. Gross profit was reported at Rs. 606 million and Rs. 676 million during 4Q14 and 1Q15 respectively. Meanwhile,

32E

ntru

st S

ecur

ities

PLC

Fi

nanc

ial,

Env

ironm

enta

l & S

ocia

l Per

form

ance

Ann

ual R

epor

t 201

4/15



standalone Primary Dealers reported a 35.2% return on equity during the first quarter of the financial year, rising sharply to a peak of 71.2% in the second quarter, before falling back significantly to 44.1% in the third quarter and finally dipping into negative 2.1% in the final quarter of the year.

420

440

460

480

500

520

Apr-14

May-14

Jun-14

Jul-14

Aug-14

Sep-14

Oct-14

Nov-14

Dec-14

Jan-15

Feb-15

Mar-15

Foreign Holdings of Government Securities Billion/LKR

Company Performance

In the backdrop of sluggish global economic growth and generally favourable yet dramatically volatile macroeconomic and socio-political dynamics, Entrust Securities continued its positive trend of delivering yet another truly impressive financial performance.

Our key performance indicators once again proved superior technical capabilities and expertise, posting an interest income of Rs. 1.29 billion over the previous Rs. 1.16 billion. Capital gains from the sale of Government securities, our core area of expertise, contributed a significant Rs. 205 million to the Company’s bottom line, improving dramatically over the Rs. 170 million captured in FY 13/14. The Company thus posted a profit of Rs. 220.6 million, as compared with last year’s landmark financial performance, when we posted a profit of Rs. 274.3 million. This was the single greatest financial performance for the Company since its inception in 2000.

We have always maintained a constant focus on delivering the best possible value to our shareholders, which has been reiterated with our Earnings Per Share of Rs. 6.69. Last year EPS stood at Rs. 8.32 per share. This is in addition to generating a commendable return on equity of 20.12%. Meanwhile, we were also able to achieve sharp asset growth of 39.25%, while our net assets per share recorded impressive progress, improving to Rs. 35.76 over the preceding year’s Rs. 30.69. Repurchase agreements recorded a growth of 41.6%.

Our Role in the Sri Lankan Development Story

Since our inception in 2000, we have always crafted ourselves to be a unique entity in Sri Lanka’s corporate sector, augmenting our role as the country’s only non-bank Primary Dealer to be listed on the Colombo Stock Exchange and in continuing our commitment to the wider national

interest. While focused on generating the best possible value for our shareholders, our holistic business model is constructed on a foundation of professionalism, honesty, strong values, trust and integrity. By espousing these corporate values strongly into the heart and soul of our business culture, we have forged trusted relationships with our stakeholders, strengthening our foundation of being a sustainable ongoing business entity.

During the last year, Entrust Securities PLC once again played a critical role in creating benchmarks in the industry, introducing a host of innovative new products and options. While taking cognizance of our duty to deliver meaningful returns to our shareholders, we have also worked to build and enhance relationships between our industry’s varied stakeholders. This triple-bottom line approach – balancing financial success with environmentally and socially responsible best practices – is another core aspect of the Entrust philosophy.

Knowledge is another key component to our continued success. We have always placed significant emphasis on developing the knowledge and competencies within our team, imbuing education, training and skills development as critical to fostering an empowered workforce. Over the years, training and skills development has become an intrinsic part of the Entrust corporate culture, whereby we spur initiatives to enhance our team's learning and development capabilities via internal and external training, holistic induction and on-the-job programmes.

33E

ntru

st S

ecur

ities

PLC

Fi

nanc

ial,

Env

ironm

enta

l & S

ocia

l Per

form

ance

Ann

ual R

epor

t 201

4/15

Being the oldest listed Primary Dealer in the country, we have been in constant dialogue and discussion with the regulator and germane industry peer groups, contributing insight and knowledge in the formulation of monetary policy and other relevant frameworks, to spur the prudent management of assets and liabilities within a holistic compliance culture.

Strategic Outlook

The last financial year was also notable for us as Entrust Securities PLC was awarded a license from the Securities and Exchange Commission of Sri Lanka (SEC) to trade in debt securities. Obtaining the two licenses from the Colombo Stock Exchange opens numerous avenues of business opportunities for the group. We remain extremely confident on being able to leverage the synergies within the group and the full suite of technical expertise and capabilities which would lead to generating significant income via this new stream of business that has emerged.

The issue of the Debt Securities Trading License to Primary Dealers by the Securities and Exchange Commission of Sri Lanka is part of a larger initiative implemented in collaboration with the Colombo Stock Exchange and the Government of Sri Lanka. It is designed to activate and deepen the secondary corporate debt market. This will give listed Sri Lankan corporates improved access to funding, which in turn can be channelled into investments and expansion, spurring new heights of economic development. Given our extensive experience and stature in the industry, we strongly believe that we can play a pivotal role in the secondary corporate debt market. By imparting professional advice augmented by our impressive collation of information, analysis and study of the industry, we can ensure that our stakeholders make timely informed decisions on maximising their returns.

Aligned with our commitment to upholding corporate best practices and the prudent management of our business model, we formulate and implement a regularly updated strategic Business Plan conceptualised to ensure the long-term success of Entrust Securities PLC while, generating the best possible returns to our valued stakeholders. The plan precisely identifies market opportunities and creates a pathway for the Company to meet those long term objectives by continually raising the bar in terms of performance. We strengthen this by developing innovative and stable financial solutions to suit the varied needs of our discerning, high net-worth clientele.

Our pragmatic decision to incorporate the Bloomberg platform into daily trading activities two years ago, was a pioneering initiative that has already infused significant benefits to our day-to-day operations. This has also enhanced our ability to identify and optimise business opportunities, aligned to our corporate strategy, while enabling increased accessibility for our client profile. Our processes and systems have also been strengthened with contemporary Disaster Recovery plans, back up procedures, infrastructure development with VPN access,

remote assistance and support for trouble shooting, enabling a more holistic IT risk management plan and instilling confidence in valued clientèle. Our knowledge based culture has also proved to be a valuable tool in honing the efforts of our highly specialised professional team. Meanwhile, we are also channelling significant efforts into expanding our team, adding an astute combination of young blooded professionals who will align themselves to the corporate values of our Company, while being inspired to constantly raise the bar in their individual career aspirations.

Having aligned our internal operational framework with accepted best practices, strengthened our technical analysis expertise and risk management framework by leveraging the latest technological advancements and honed our own highly skilled team of professionals, Entrust Securities PLC readies itself to trailblaze into the next year and beyond.

34E

ntru

st S

ecur

ities

PLC

Fi

nanc

ial,

Env

ironm

enta

l & S

ocia

l Per

form

ance

Ann

ual R

epor

t 201

4/15


Preamble

Entrust Securities PLC is founded on values of trust, integrity and honesty; values which we believe are integral to the long-term stability and success of our organisation. With well over a decade of successful operations behind us we believe that each passing year only increases our responsibility to maintain Entrust Securities PLC’s unblemished track record. While our core business naturally hinges on the smooth, responsive and efficient management of day-to-day operations, our organisation, from our most junior recruits up to our senior management team and Board of Directors, is fully cognizant of the fact that long-term success hinges on the stability of the Company and above all, the sustainability of our business model.

Our emphasis on sustainability is ultimately driven by the fundamental realisation that Corporations can only survive over the long-term if they form symbiotic relationships with employees, clients, shareholders, industry and community. Distilled into a single sentence, this policy can be defined through the now widely accepted concept of the triple bottom line, profit, people and planet.

Having firmly entrenched principles of sustainability into every facet of our operations, strategic vision, business plan and corporate governance structures, we engage in a process of constant monitoring and evaluation in order to ensure that our every decision and the ramifications of those decisions create positive impacts for our stakeholders by generating value at each phase. Our goal over the long-term is to become a leading, diversified global conglomerate. We believe that cultivating a reputation for being a trusted partner is pivotal to any such endeavour.

Our emphasis on sustainability is ultimately driven by the fundamental realization that corporations can survive over the long-term only if they form symbiotic relationships with employees, clients, shareholders, industry and community.

Economic Value Added

Rs 232Mn

Investment to Community

Rs 851,000

"At Entrust Securities PLC, the very fundamentals of sustainable development remains at the core of our business; it is entrenched into the entirety of our business delivery which enables us to keep our promises to our stakeholders."

Sustainability Report

Planet Profits

People

Social

Economic

Equitable

Sustainable

Bearable

Viable

Environment

35E

ntru

st S

ecur

ities

PLC

Fi

nanc

ial,

Env

ironm

enta

l & S

ocia

l Per

form

ance

Ann

ual R

epor

t 201

4/15

In distributing the fruits of our achievements among our varied and valued stakeholders, we are confident that we can generate meaningful value to a wide cross section of our population. By setting such an example we believe that, we can also encourage other members of Sri Lanka’s private sector to engage among their communities, build opportunity, ultimately launch the nation’s economy into a higher trajectory while sustaining the needs of all stakeholders.

Accordingly we have built our strategic and operational frameworks to consider at all times the economic, social and environmental impact of our business. However, going beyond analysis, we strive to continuously refine our strategic and operational framework in order to generate the best possible value for the widest group of stakeholders and ultimately uplifting standards on a national level.

Based around these general benchmarks – economic, social and environmental impact- the following pages of this report will provide a definition of our priorities, a detailed outline of initiatives undertaken by Entrust Securities PLC during the last financial year, within these three spheres and a holistic explanation of their impact on various stakeholder groups.

Economic Impact

Primarily focused in building and sustaining a strong, stable future, our goal in measuring the economic impact is to ensure optimal direct and indirect returns to all stakeholders from our shareholders to Directors, team members, valued business partners, regulatory and compliance managing bodies and the wider community.

Economic Value Generation & Distribution2014/15 2013/14

Source of Generation Rs'000 Rs'000

Interest Income 1,287,297 1,158,724 Capital Gain from Trading 205,085 170,846 Gain on Market Value Appreciation - 57,773 Others 1,530 903

1,493,913 1,388,246 Source of DistributionTo Investors in Repurchase Agreements 1,018,252 976,342 To Human Capital as emoluments 55,810 66,653 To Providers of services and suppliers 73,083 65,500 Loss on Market Value Depreciation 121,295 - To appreciation of Shareholders' fund 220,633 274,357 To Community 851 1,634 Depreciation of PPE (set aside) 3,989 3,760

1,493,913 1,388,246Economic Value AddedShareholders' Fund 1,180,146 1,012,643 Less : Cumulative Marked to Market gain

on Govt. Securities - (65,428)

Add : Cumulative Marked to Market loss on Govt. Securities

55,867 -

Adjusted Shareholders' Fund 1,236,013 947,215 Earnings 220,633 274,357 Less : Marked to Market Gain on

Government Securities - (57,773)

Add : Marked to Market Loss on Government Securities

121,295 -

Adjusted Earnings 341,928 216,584 Less : Cost of EquityCost of Equity % (based on 12 months

T'Bill rate plus 2% to risk premium)8.89% 9.05%

Cost of Equity Rs.'000 (109,882) (85,723)Economic Value Added 232,047 130,861 Key Financial Information & RatiosReturn on Equity 20.12% 31.34%Return on Assets 1.27% 2.20%Risk Weighted Capital Adequacy Ratio

(Minimum 8%)20.37% 19.88%

Net Assets per Share (Rs.) 35.76 30.69 Earnings per Share (Rs.) 6.69 8.32

2014/15 2013/14Taxes Paid to GovernmentWithholding Tax deducted at source (Rs.) 84,784,414 67,936,620

Our economic impact is therefore analysed along the following categories:

• Economic value generation and distribution

• Economic value added

• Key financial data and ratios

• Tax paid to the Government

36E

ntru

st S

ecur

ities

PLC

Fi

nanc

ial,

Env

ironm

enta

l & S

ocia

l Per

form

ance

Ann

ual R

epor

t 201

4/15



"Our goal is to deliver excellence in all our product and service offerings thus upholding the polished reputation of the Entrust Group while establishing a firm foundation for our clients to do their business with us."

Strengthening Relationships

Among Entrust Securities PLC’s key strengths is our ability to forge strong and lasting relationships with our esteemed clientele based on values of trust, confidence, credibility, service and most importantly informed knowledge. Leveraging on the extensive wealth of knowledge and technical acumen of the Entrust team, our goal is to deliver excellence in all our product and service offerings thus upholding the refined reputation of the Entrust group while establishing a firm foundation for our clients to do their business with us.

By maintaining open and cordial relationships with our clients according to the exact standards of the Entrust group we ensure that our service offerings go beyond the norm. By encouraging our team to continuously strengthen their relationships with our investors we lay the foundations for mutual prosperity and open up avenues for future business.

Informed by the most stringent standards of professionalism, Entrust Securities PLC has developed a culture of transparent and continuous dialogue enabling us to obtain valuable feedback from our clientele, which in turn allows for continual improvements to our service standards. Through the above described process we have honed our operational protocols to offer unmatched service to our esteemed clientele.

In furtherance of these objectives we also maintain an impartial and objective client complaints log which, we believe has created a useful tool to identify and swiftly rectify any potential weaknesses in our operational framework.

Despite our unblemished reputation that has been maintained for well over a decade, Entrust Securities PLC nevertheless takes all prudent measures to improve our brand visibility and awareness while augmenting brand value by maintaining a regime of open, transparent and effective communication with all our stakeholders. In this three-pronged manner – operational excellence, service excellence and effective communications, we ensure that, our business remains stable and secure from an economic standpoint.

Mechanisms to Mitigate Challenges

In our highly competitive industry, minor fluctuations in macro-economic dynamics can carry potentially dangerous downside risks. Hence while we acknowledge and place significant emphasis on achieving operational excellence and maintaining strong relationships, we also believe that it is crucial to take all necessary and prudent steps to mitigate such risks.

Consequently, we have channelled extensive resources and expertise into our research and analytical capacity in order to constantly improve our ability to detect and nullify threats thereby further augmenting our ability to withstand external challenges and ensure the stability of our business model.

Through the implementation of extensive risk management protocols, stringent standards of Corporate governance and flawless compliance with pertinent regulatory and statutory requirements, we ensure that we remain a stable and secure partner.

Among the measures adopted by Entrust Securities PLC in furtherance of these objectives are the following:

• Risk Management mechanisms

• Internal Controls

• Contingency funding arrangements

• Collateralised lending

• Maintaining favourable capital adequacy ratio

• Business continuity plans

• Disaster recovery processes

• Succession plans

37E

ntru

st S

ecur

ities

PLC

Fi

nanc

ial,

Env

ironm

enta

l & S

ocia

l Per

form

ance

Ann

ual R

epor

t 201

4/15

Industry Presence

In our capacity as the only Primary Dealer to be listed on the Colombo Stock Exchange (CSE) we are cognizant of our responsibility to maintain a prominent presence among regulators and related institutions. To that end we continue to maintain a cordial and productive relationship with the Central Bank of Sri Lanka and the CSE. Through these interactions we have extended vital assistance and support, particularly in areas of regulatory and statutory compliance, both in terms of existing requirements and new initiatives from the respective regulatory agencies. In this manner we ensure that, we remain aligned to compliance initiatives that are introduced, implemented and regularly ameliorated for the development of the industry. We also maintain membership in industry bodies that are relevant to the business operations we engage in including the Association of Primary Dealers (APD) and Financial Ombudsmen (Guarantee) Limited.

Social Impact

Measurement and managing the social impact of a company’s operations can be a daunting and complex task, particularly for a Company like Entrust Securities PLC that operates on the forefront of Sri Lanka’s Finance industry and as a Primary Dealer. Consequently our strategy for ensuring positive social change through our operations is multi-faceted and carefully designed to ensure that, Entrust Securities PLC plays a vibrant and active role in uplifting standards. We believe that Entrust Securities PLC can serve as a catalyst for the improvement of social conditions for our stakeholders on multiple levels. In that context the following sections detail initiatives undertaken during the last financial year, by Entrust Securities PLC to enhance the livelihoods of our employees and our communities.

Our Team

The success of Entrust Securities PLC as an organisation is built upon a solid foundation of trust, integrity and a visionary approach to our industry but ultimately the success of the Company hinges on the efforts and ability of our team. Consequently we place an extremely strong emphasis on the careful and effective management of our human capital in order to ensure that, our team has the technical acumen, motivation and support to truly deliver on the promise of excellence that is embedded in the Entrust group philosophy.

Employee Details

Pursuant to these objectives we maintain extensive protocols, procedures and policies, all of which are focused on ensuring that our people are equipped with all they require in terms of knowledge, skills, ethics and ability, to meet the lofty standards expected of members of the Entrust team and giving them a cutting edge over the competition.

We are an equal opportunity workplace that prides itself on its diversity and ethical integrity and we are firmly of the view that this approach ensures a vibrant, dynamic and progressive employment culture that is geared towards producing service excellence across all levels of the organisation.

Number of Employee Employment Categories

Senior Management

Middle Management

Executive

Non-Executive

Male

Female

14

12

6

4

3

21

Age Analysis

Employee Retention

25 Years & below

2 Years & below

26 - 30 Years

3 - 5 Years

31 - 35 Years

6 - 10 Years

40 Years & above

35 - 40 Years

10 Years & above

1

3

2

2

3

2

2

6

7

38E

ntru

st S

ecur

ities

PLC

Fi

nanc

ial,

Env

ironm

enta

l & S

ocia

l Per

form

ance

Ann

ual R

epor

t 201

4/15



Training and Development

Our Human Resources division designs and implements an extensive set of training and development courses for each year in consultation with all of our Divisional heads, the results of which are collated into a Master Training and Development programme that is regularly updated according to the progress of each Department but also according to the progress and needs of our individual employees.

Knowledge building is a fundamental part of the Entrust group culture and in that context we encourage and support all of our employees to develop and improve their respective capacities. This is an approach which we believe empowers our employees to improve their own abilities, which naturally has a multiplier effect in terms of the performance of Entrust Securities PLC. However in addition to this direct benefit, we also believe that in acquiring such knowledge with the full support of Entrust Securities PLC, our employees gain a level of self-actualisation and security which allows them to feel a part of the Entrust family. Our remarkable financial performance is therefore a testament to our winning approach to the management of our human capital.

In addition to our numerous official training programmes we also seek to create a conducive atmosphere for our most skilled employees to share their experience and knowledge with other members of the Entrust team. Through such knowledge sharing sessions we create further opportunities for our team to enhance their skills, thereby driving further performance improvements.

Training & Development Calendar

Training Programmes

Macroeconomics Modelling for Monetary Policy and Economic Management

Stress Testing Techniques for Risk ManagementPublic Debt Management : New Trends and ChallengesWorkshop on Fund Management Statistical programming and modelling using SPSS Software Treasury Operations and Asset & Liability Management Risk Management for Banking and Financial Institutions Clearing, Payment and Settlement Systems : Operational & Legal Aspects Operational Risk Management for Banks and Financial Institutions Fraud Detection In Financial Institutions Financial Intelligence for Banking and Financial Institutions Preparation and Submission of Statutory Returns for Regulatory Purposes Forensic Auditing to Mitigate Organisational Fraud Internal Controls and Auditing for Financial Institutions Effective Tax Management Budgeting & Forecasting Techniques Marketing for Non-Marketing ManagersCustomer Service ManagementRelationship Marketing to Uncover Hidden Opportunities Top Most Line/Essence of Branding Financial Management Skills for MarketersExploring New Dimensions in Customer Service Strategic Thinking & Goal Setting for Superior Organisational Performance Strategic Planning for Organisational Growth Increase Your Influence & Ability to Get Things Done Finance for Non-Finance Managers Transforming the Organisation Through Team BuildingLeadership & Personality Development Skills Development for Non-Executive StaffTechniques of Time Management Personal Grooming, Business & Social Etiquette Developing Executive Leadership Corporate Planning & Business Strategy Development

Motivation Enhancement of Efficiency and Productivity through Correct Attitudes

39E

ntru

st S

ecur

ities

PLC

Fi

nanc

ial,

Env

ironm

enta

l & S

ocia

l Per

form

ance

Ann

ual R

epor

t 201

4/15

Rewards and Remuneration

In addition to the cornucopia of opportunity available to our team as a result of our training and development policies, we also maintain that our employees must strive to maintain a harmonious work-life balance. This is a crucial factor in our success as it helps our team to feel content in their positions. However we also present our team with the opportunity to truly challenge themselves through their work and in this manner create a performance driven culture where strong performances are met with rewards above industry standards. The success of our approach is borne out by our financials as much as it is by our high rate of staff retention, with many of our original team having risen up the ranks since inception and who are still with us and performing exceptionally well to this day, a truly remarkable factor in our industry.

We maintain an open door culture and through our multi-faceted approach to Human Resource Management we have today managed to attract some of the best young talent to our Company while retaining several of the most prominent and experienced industry veterans, a unique blend that has helped to propel Entrust Securities PLC to new heights.

Our recruitment strategy is well integrated into our Business Plan, whereby our process identifies those individuals most likely to fit into the Entrust group culture, equipped with a dynamism to tread into new waters. This has enabled us to grow our numbers from a bottom line perspective. However, in the event of a team member wishing to terminate employment, we engage them in

an exit dialogue which is a helpful feedback process. It forms a learning exercise that, builds an ideal framework from which to drive further improvements to our HR processes.

We also strive to provide our entire team with security and peace of mind through medical benefits for our staff including OPD medical reimbursements, thus helping to build a healthy and happy workforce.

In addition to individual rewards for strong performance, we also work to create a vibrant and cohesive team culture by cultivating an atmosphere of friendly camaraderie both in our day-to-day activities but also through a series of events that are part of the Entrust group’s social calendar such as our annual staff trip, annual staff cricket tournament–Entrust Premiere League – and the annual staff Christmas party.

We also take great pride in highlighting the recent success of our Company Cricket team who after a gritty performance emerged as Overall Champions at the Primary Dealer Premiere League Season II six-a-side cricket tournament held at the MCA Grounds in September 2014. In addition to our tournament victory, the team also won further recognition through the efforts of Mr. Lakmal Sellahewa was adjudged Man of the Series and Mr. Harsha Hiranga who was adjudged Best Bowler at the conclusion of last year’s tournament. Their performance has been a source of inspiration for the rest of our team at Entrust Securities PLC and we wish to once again congratulate the team for their sporting spirit and we look forward to another strong performance at the next tournament.

40E

ntru

st S

ecur

ities

PLC

Fi

nanc

ial,

Env

ironm

enta

l & S

ocia

l Per

form

ance

Ann

ual R

epor

t 201

4/15



Health and Safety

Being a Company that operates in the financial sector our health and safety requirements are less stringent than what might be required in a more hazardous environment such as those found for example in the industrial manufacturing sector. Nevertheless we strive to provide our employees with a pristine work-space that is hygienic, well organised and pleasant to occupy. In that context we take pride in reporting that 6S programme which, we implemented during the previous financial year has yielded excellent results in terms of marked efficiency improvements, cost efficiencies, waste reductions and defects in the work space. The system has been fully integrated into the Entrust Securities PLC way of life.

Our office premises at the World Trade Center offer us an added layer of security and safety protocols and we regularly participate in the fire drills and demonstrations conducted by the management of the building, while also sharing awareness campaigns on safety procedures prevalent for the office towers.

Corporate Social Responsibility

Wealth creation and knowledge reside at the core of the Entrust group philosophy. In keeping with these values and our stated goals of serving as a catalyst for social and economic development in Sri Lanka, the Entrust group is actively engaged in a wide field of activities and projects that help us to engage and develop communities in Sri Lanka.

Given the importance that we ascribe to education as an empowering force, the Entrust group has also maintained a continuous and regular engagement with the village of Gadaladeniya in the Kandy district through our award winning flagship CSR initiative: ‘Helping Hands’. The primary objective of the project – which won recognition at the Asia Responsible Entrepreneurship Awards during the previous financial year - was to provide children from this underserved community with the facilities necessary to continue their basic education thereby empowering these children with the essential skills and knowledge needed to reap the benefits of the Sri Lankan growth story.

Building on the positive work carried out at the Gadaladeniya Maha Vidyalaya, this year we completed Phase II of the constructing project, the school’s library, thus completing our initial goal of developing the school to a standard where its students are provided with real opportunities to advance in their education.

For us at Entrust Securities PLC, this social responsibility initiative has been a rewarding yet humbling experience, given that it has enabled us to be a part of uplifting a community and watch the development that ensues as a result of our intervention.

41E

ntru

st S

ecur

ities

PLC

Fi

nanc

ial,

Env

ironm

enta

l & S

ocia

l Per

form

ance

Ann

ual R

epor

t 201

4/15

During last year Entrust also joined hands with the Rotary Club of Colombo Metropolitan in the fundraising initiative: ‘Lama Piyasa – Ragama Rehabilitation Hospital Project’. This vital initiative was based around the construction and administration of a rehabilitation ward at the Ragama Hospital dedicated solely to the care of juvenile victims of abuse or neglect. Through the Lama Piyasa initiative funds were gathered for the purchase of medical equipment and other essential items like furniture, air-conditioners and computers for the ward.

Entrust has also maintained an ongoing sponsorship of the Mahayaawatta Sahajeewana Welfare and Mutual Society based in Maharagama and this year

sponsored the society’s Sinhala and Tamil New Year Celebrations

In addition to our CSR project, the Entrust group is also actively engaged in supporting the development of sport through a series of sponsorships for Rugby and Cricket at school and club level in addition to our sponsorship of horse racing and golf events.

The Entrust group believes firmly in the power of sport to promote bonds of fraternity and hence we are proud to support and nurture Sri Lankan sports from school-level upwards and we constantly seek out new methods to increase our participation to support our local sports men and women and contribute towards greater national unity.

42E

ntru

st S

ecur

ities

PLC

Fi

nanc

ial,

Env

ironm

enta

l & S

ocia

l Per

form

ance

Ann

ual R

epor

t 201

4/15



Environmental Impact

As a Company engaged in the financial services industry Entrust Securities PLC maintains a small carbon footprint relative to other sectors such as manufacturing, retail etc. Nevertheless, our organisation remains committed to promoting awareness of environmental issues in our organisation and among our stakeholders, in addition to implementing any procedures that could further mitigate our footprint.

We believe that environmental sustainability is inextricably intertwined into our business strategy and ethos. By identifying and promoting best practices of preserving and conserving the environment, we can champion a sustainable environment around us and beyond.

Awareness building is a key component of our strategy and in keeping with this mindset, our organisation celebrates World Environment day each year with Company-wide awareness campaigns. Furthermore we actively encourage our employees and stakeholders to follow the 3Rs model – Reduce, Re-use, Recycle – as a means of optimising resource use and minimising wastage.

Our focus on creating awareness of environmentally friendly practices also permeates our CSR projects where in addition to conducting physical renovations of educational premises, we also teach children in Sri Lanka’s rural areas of the significance of environmental protection and its potential impact on their day-to-day lives both in the short and long term.

Our team was amongst a few who gained recognition at the 50th Annual Report Awards 2014 organised by the Institute of Chartered Accountants of Sri Lanka. Entrust Securities PLC's FY2013/14 Annual Report was awarded a Certificate of Compliance in the category of Financial Institutions, which is a significant achievement for the team.

In keeping with the 3Rs concept, we strongly encourage our employees to refrain as much as possible from using paper for printing and photocopying purposes, in addition to collecting waste paper for recycling.

The implementation of the 6S system in our offices have also provided remarkable results in reducing wastage of paper and looking to the future. Entrust Securities PLC aims to gradually phase out printed material and eventually move towards an all-together paperless office.

Aside from our internal initiatives to reduce our environmental impact our relocation to the World Trade Centre has also created several opportunities to further nullify our environmental impact. The premises themselves are designed to make maximum use of natural lighting, which serves to reduce unnecessary energy consumption. With the World Trade Center's recent Gold Certification from the Green Building Council of Sri Lanka our choice in shifting premises has been further vindicated.

Entrust Securities PLCAnnual Report 2013/14

We've got the

bers num

Level 16, West Tower, World Trade Center, Echelon Square, Colombo 01.

Annual Report 2013/14

Risk Management Report 44 | Report of the Integrated Risk Management Committee 51

Risk Management

Achieving sustainable growth

44E

ntru

st S

ecur

ities

PLC

Fi

nanc

ial,

Env

ironm

enta

l & S

ocia

l Per

form

ance

Ann

ual R

epor

t 201

4/15

Risk Management ReportRisk Management Report

Holistic analysis and effective management of risk within clearly understood governance structures is a critical ingredient in the continued success of the Entrust group. Volatility is pervasive across the financial services industry and even on a global level, there are numerous examples of failures in risk management and governance that serve as a cautionary example, highlighting the importance of implementing governance structures and risk management frameworks capable of mitigating such threats.

As Sri Lanka continues to develop at a rapid pace, the complexity and volume of business within the financial services sector has increased exponentially. Hence risk management, particularly in the case of Primary Dealers like Entrust Securities PLC, has assumed even greater importance. Ineffective risk controls have the potential, not only to destabilise a Company or group of Companies, but also carries dangerous implications in terms of financial sector and macro-economic stability as a whole.

In that context, the Entrust group places significant emphasis on the implementation and maintenance of a comprehensive risk management philosophy that strikes a meaningful balance between generating optimum value for our shareholders, while achieving a reasonable balance between risk and return.

Our risk management philosophy hinges on our ability to successfully detect existing threats to our business model, whilst leveraging extensive analytical capabilities and stringent risk management protocols to effectively anticipate future challenges. We adopt an Integrated Risk Management approach, in order to maximise returns, while remaining within the prudent limits of Entrust Securities PLC’s risk appetite.

Our risk management processes are continuously revised, refined and updated in order to ensure that Entrust Securities PLC remains fully compliant with all relevant regulatory and supervisory requirements. Over the course of the last financial year we adopted several new governance structures and policies, in addition to risk management tools and techniques which we believe are critical pre-requisites in achieving a sustainable growth model that, delivers meaningful value to all our valued stakeholders

Our approach is based on gaining a full understanding of the principal risks involved with achieving our objectives, particularly in the context of the carefully established risk appetite of Entrust Securities PLC. Accordingly, we have classified major risks which, we believe have the most potential in risk exposure into the following interconnected categories:

• Liquidity risks

• Market risks

• Operational risks

• Regulatory risks

• Reputational risks

• Strategic risks

Meanwhile, taking cognizance of our ultimate objective of maintaining a sustainable business model that generates the best value for the widest group of stakeholders, we have defined our risk objectives as:

• Identification, measurement, evaluation, monitoring and management significance of risks on a forward looking basis

• To define Entrust Securities PLC’s risk appetite and align the business strategies within the defined risk appetite

• To optimise risk-return decisions by maintaining the Primary Dealer’s capital strength and liquidity position

• To ensure that business growth plans are properly supported by effective risk infrastructure.

• To strengthen governance, controls and accountability across the organisation


45E

ntru

st S

ecur

ities

PLC

Fi

nanc

ial,

Env

ironm

enta

l & S

ocia

l Per

form

ance

Ann

ual R

epor

t 201

4/15

Governance Structure and Key Principles of Our Integrated Risk Management Framework

Our Integrated Risk Management framework is approved by Entrust Securities PLC's Board of Directors which assumes an oversight role over all significant risks assumed by the Company in its role as a leading Primary Dealer in Government securities. The Board maintains responsibility over approving the risk appetite and ensuring that, significant risks are duly managed within the protocols set out within the Integrated Risk Management framework.

Additionally, the Board also approves all risk management policies and ensures that necessary procedures and protocols are established and implemented throughout the Company. In order to further support the integrity of the Company’s protocols, the Integrated Risk Management function is assigned to an Integrated Risk Management Committee (IRMC) which provides further oversight into such processes.

Consequently, our principal risk framework enables clear accountability across our processes while ensuring that, significant risks are managed in accordance within our established and agreed upon risk appetite.

This enables sufficient monitoring and reporting, to maintain the effectiveness of such risk controls.

The Integrated Risk Management function is operated independently of profit and volume targets and is headed by a Risk and Compliance Officer (middle office function) in keeping with established best practices.

Market Risk Credit Risk Operational Risk

Company‘s risk appetite

Internal Capital Adequacy assessment process

Central Bank of Sri Lanka guidelines

Industry best practices

Inte

rest

Rat

e R

isk

Liqu

idity

Ris

k

Fore

ign

Exc

hang

e R

isk

Pol

itica

l Ris

k

Con

cent

ratio

n R

isk

Cou

nter

part

y R

isk

Def

ault

Ris

k

Doc

umen

tatio

n R

isk

Sus

tain

abilit

y R

isk

Pro

cess

Ris

k

Peo

ple

Ris

k

IT/S

yste

m R

isk

Ext

erna

l Ris

k

Lega

l Ris

k

Reg

ulat

ory

& C

ompl

ianc

e R

isk

Rep

utat

iona

l Ris

k

Str

ateg

ic R

isk

46E

ntru

st S

ecur

ities

PLC

Fi

nanc

ial,

Env

ironm

enta

l & S

ocia

l Per

form

ance

Ann

ual R

epor

t 201

4/15

Three Lines of Defence

Our framework is constructed around the concept of the 'Three Lines of Defence' whereby business management, risk management and assurance functions are implemented independently of one another. This model has achieved a high level of international acceptance and is now considered the norm in modern approaches to risk management. The model is used as our primary means from which to demonstrate and structure roles, responsibilities and accountability in decision making and risk control functions to achieve effective risk management, governance and assurance objectives.

Operational Risk Management

Operational risk management is defined as the risk of losses as a

Risk Management Report


consequence of failed or incomplete internal processes, people, issues, systemic issues or external developments. We manage our operational risk exposure through comprehensive internal controls and management processes aimed at ensuring timely identification, assessment, control and monitoring of potential risks continuously.

Our operational Risk Management governance and framework is defined in our Operational Risk Management Policy which aims to ensure accountability, responsibility and effective mitigation of operational risks within the Company. The policy also provides a broader framework for risk management, which includes identification and assessment of risk and controls, new product and process approval frameworks, measurement through incidents and exposure reporting, monitoring through key risk indicators and risk mitigation through process enhancement and insurance as a risk transferring mechanism.

Reputational Risk Management

Reputational risk arises from the impact of negative public or client opinion, market reputation and the potential damage caused to a brand by failures in the management of public relations. In order to protect the Company from exposure to such reputational risk, Entrust Securities PLC implements the following measures:

• All strategic and operational policies are embedded with practices designed to take cognizance of any potential reputational risks and

1st Line of Defense 2nd Line of Defense 3rd Line of Defense

Decentralised primary responsibilities of business support units

Centralised oversight risk management

Assurance: Independence of all other Compliance/Audit

Core Responsibilities Risk Management Compliance/Audit

• The primary responsibility for identifying, managing and reporting risks

• Self-assessment of risk and controls

• Ensuring compliance with all policies and procedures

• Promoting a strong risk culture and awareness of risk elements in their business activities

• Training as a method of mitigating risk in business operations

• Settling the Integrated Risk Management framework which encompasses:

Ø Identification

Ø Assessment of risks and controls

Ø Monitoring

Ø Controlling tools

Ø Setting appetite

• Provide support to the business review and report key risks to IRMC

• Challenge the self-assessment and inherent risks identified by the business units and review controls

• Independently identifying and assessing the market risk

• Overseeing and setting up of new policies

• Compliance

Ø Regulatory compliance

Ø Regulatory reporting

Ø Anti-Money Laundering

• Internal Audit

Ø Independent assurance of robustness of the different risk management processes and methodologies

Ø Independent oversight functions with enforcement ability to communicate with External Auditors and the Board Audit Committee

Ø Ensure that Entrust Securities PLC is compliant with the risk management framework

• External Audit

47E

ntru

st S

ecur

ities

PLC

Fi

nanc

ial,

Env

ironm

enta

l & S

ocia

l Per

form

ance

Ann

ual R

epor

t 201

4/15

mitigate any such risks. Such policies are further embedded across training programmes, Business Continuity Plans and through the Audit and Board Risk Management Committees.

• Entrust Securities PLC has developed a Whistle Blowing Policy that provides a channel for employees, clients and the general public to highlight any potential or actual breaches of law, statute, regulation or other ethical concern, related to any aspect of our operations.

Strategic Risk Management

Strategic risks are defined as any current or prospective condition such as a negative impact to Company earnings or capital

arising from adverse business decisions, improper implementation of decisions or a lack of responsiveness to changes in industry conditions. In order to protect the Company from exposure to such strategic risks, Entrust Securities PLC implements the following measures:

• Our Board of Directors working together with Entrust Securities PLC's Corporate Management team has formulated a five year strategic Business Plan which is reassessed and updated annually. This plan forms the foundation from which the Company defines new business goals and manages its budget and resource planning.

• Our strategic Business Plan is further linked with the performance of our employees on an individual basis through a process of achievement of goals and annual performance reviews, conducted with a view to further motivate our team and sustain the performance driven culture of the Entrust group. In this manner we ensure that our business goals and objectives are achieved, while simultaneously nullifying any potential exposure to strategic risks.

In our endeavour to further manage and mitigate any strategic risks, we ensure that all strategic decisions taken by the Board and Corporate management are made after strict consideration and compliance to applicable laws and regulations, Corporate Governance requirements, ethics, industry best practices and the core values of Entrust Securities PLC and those of the Entrust group.

Board of Directors(BOD’s)

Manager - Middle Office &Risk Management

General Manager Manager - Finanace

Internal Auditors

Finance DivisionTreasuryOperations Division

Group Executive Director/Group Chief Operating Officer (GED/GCOO)

AGM - TreasuryOperations

Dealing Division

Asset & Liability Committee(ALCO)

Integrated Risk ManagementCommittee (IRMC)

Remuneration Committee(RC)

Audit Committee(AC)

The Risk Management, Governance and Reporting Structure

48E

ntru

st S

ecur

ities

PLC

Fi

nanc

ial,

Env

ironm

enta

l & S

ocia

l Per

form

ance

Ann

ual R

epor

t 201

4/15


Market Risk Management

Market risk, also known as systemic risk is defined as the risk that the Company’s financial position will be adversely affected by movements in interest rates and inflation or any other risks that cannot be eliminated through diversification.

Entrust Securities PLC possesses an extremely well developed capacity and framework for detection and management of market risks, where a Market Risk Management Policy, Asset and Liability Management Policy and the Treasury Policy form the basis of structures, procedures, processes and controls. All policies and procedures targeting Market risk management are in full compliance with relevant regulations of the Central Bank of Sri Lanka.

Integrated Risk Management Committee (IRMC)

The Integrated Risk Management Committee (IRMC) is empowered to review Entrust Securities PLC’s risk management policies in relation to various risks, particularly market, liquidity, operational and reputational risks, as well as any relevant regulatory and compliance issues. The Committee monitors the Company’s risk profile in relation to the agreed risk appetite through regular reviews and related controls. It also reviews Business Continuity and Disaster Recovery Plans, key risk indicators and the implementation of the Integrated Risk Management Framework.

The following committees which operate within our broad policy framework further enhances the risk framework and governance structures of the Company.

Audit Committee

Provides direction to the Board of Directors and monitors the quality of the internal audit functions of the Company, Integrated Risk Management policies and procedures as well as their functionality at various levels. The quality of the Risk management function is reviewed by the internal audit on a continuous basis with the subsequent information being provided to the Audit Committee for further reference.

Asset & Liability Committee (ALCO)

A key management committee with responsibility for managing the Company’s assets and liabilities, in addition to key components including interest rate risk and liquidity risk as described in the functions of this Committee. The Committee’s key functions also includes decisions on product pricing, determining the optimum mix of assets and liabilities and stipulating the liquidity gap position and interest rate risk limits, formulating views on interest rates, setting benchmark lending rates and determining the asset and liability management strategy in light of the current and expected operating environment.

Policies, Procedures and Internal Control Framework

The prime responsibility for achieving organisational objectives, in addition to operational risk management rests with the business/functional units where such risk arises. A link between the process of achieving organisational goals and managing risks during the process has been created through a comprehensive policy, procedure and directive framework that stems from the Entrust Securities PLC’s vision, mission, founding principles, values and corporate strategy.

Risk Management, Monitoring and Compliance

The Middle Office monitors the comprehensive framework of dealing and treasury operating limits approved by the Board, including portfolio limits, trading limits, counter party limits, borrowing limits and lending limits, which are regularly reviewed and updated as required by prevailing business requirements, opportunities, regulator guidelines and industry best practices.

Vision, Mission &Values

Corporate Strategy

Policies, Procedures & Directives


49E

ntru

st S

ecur

ities

PLC

Fi

nanc

ial,

Env

ironm

enta

l & S

ocia

l Per

form

ance

Ann

ual R

epor

t 201

4/15

The Compliance Officer is responsible for independently ensuring that operating and business units comply with regulatory and internal guidelines. Additionally, the Compliance Unit continues to play a pivotal role in ensuring implementation of compliance function, in accordance with directives issued by the regulator and Board of Directors of Entrust Securities PLC.

In recognition of the fact that a compliance failure impacts the integrity and reputation of Entrust Securities PLC and the Entrust group, the Company’s agenda is shaped by regulatory and supervisory stipulations, strategic challenges and opportunities that regulatory developments may present for the Company's business model, as well as our responsibility to shareholders and stakeholders. This includes the implementation and review of specific policies, products, procedures, compliance risk assessment compliance testing and education of employees.

The Middle Office function also adopts a risk based approach to identify and assess compliance and risk related issues inherent in day-to-day operations and business activities arising out of applicable external and internal requirements. These are then regularly disseminated to our business operation units. Each business unit is thereafter responsible for embedding compliance requirements within its operations and ensuring they operate within the boundaries established by regulatory authorities.

This Division functions independently from operations and reports directly to the Group Executive Director/Group Chief Operating Officer of the Company. The officer attached to the Middle Office is qualified on the designation as dictated by the Central Bank of Sri Lanka directives.

Entrust Securities PLC will continue to develop and strengthen its Middle Office functions in terms of capabilities of employees, as well as the effectiveness of monitoring and reporting mechanisms.

Monitoring of Compliance Ensures;

• The establishment of a compliance culture that contributes towards the wider prudent risk management framework and culture of the Company

• An open line of communication between compliance and management officers enabling continuous monitoring of compliance with applicable regulatory requirements

• Management is enabled to monitor compliance as part of its Corporate Governance functions

• Incorporation of regulatory requirements into operational procedures, while allowing for corrective or remedial action in instances of non-compliance and mitigation of non-compliance risk exposure

Managing Risk and Compliance through IT Systems

CoreManagement

System

TradingPlatform

MarketDate

Systems

Lanka SecureSystem

SWIFT

50E

ntru

st S

ecur

ities

PLC

Fi

nanc

ial,

Env

ironm

enta

l & S

ocia

l Per

form

ance

Ann

ual R

epor

t 201

4/15

The modern Primary Dealer industry is engulfed with and deeply linked to IT systems which have pervaded into all aspects of service delivery, information gathering and day-to-day management and controls. This has led to a high dependency on such IT systems and hence, IT can have the potential for further risk exposure. This has thus become another area of focus gaining the attention of the Risk Officer.

IT support systems for Risk management and Compliance is a vital requirement, a fact which has also been given significant emphasis via Central Bank of Sri Lanka directives and guidelines. Additionally, the Integrated Risk Management Committee will probe all IT related risks as part of its continuous risk assessment procedure. Existing Risk Management processes are further strengthened and when appropriate - new processes are designed to further analyse risks, establish controls to effectively manage them and mitigate risk exposure.

Continuous Improvement through Future Value addition of Risk and Compliance

As risk management continues to be a key area of focus, it provides the framework for the stable foundation of a Primary Dealer in a much broader perspective. Risk management and compliance functions are striving to support achievement of the Company’s corporate objectives and to add value to shareholders, while conforming to the standards and regulations through continuous improvement.

Risk and Compliance Management activities would enable the Company to develop a robust and Integrated Risk Management Framework that supports achievement of respective business unit goals which, will ultimately lead to Entrust Securities PLC achieving its ultimate corporate objective of being the trusted leader in Sri Lanka’s financial services sector. Therefore, as the operating environment evolves, our structures, tools and techniques also have to change to be able to identify, measure and manage the risks.



51E

ntru

st S

ecur

ities

PLC

Fi

nanc

ial,

Env

ironm

enta

l & S

ocia

l Per

form

ance

Ann

ual R

epor

t 201

4/15

Report of the Integrated Risk Management CommitteeThe Integrated Risk Management Committee (IRMC) is a sub-committee of the Board, established to provide an independent oversight of the Company’s Risk management. This is achieved through reviewing reports on the Company’s IRM framework, reports that assess the nature and extent of risks faced by the Company and its risk appetite and reviewing the Risk Strategy Action Plan. The IRMC is required to monitor and review any escalated items and also monitor any outputs of any investigations and the implementation of management activities related to any escalated items. The Committee reports to the Board on the outcome of its monitoring and review of activities.

The IRMC is appointed by the Board comprises the following members:

1. Group Executive Director/ GCOO

2. Chief Executive Officer

3. Head of Dealing Division

4. Head of Treasury Operations

5. Head of Information Technology (IT)

6. Head of Finance

7. Head of Middle Office & Risk Management/Compliance Officer

The Chairman of the Committee shall be the Chief Executive Officer. In the absence of the Committee Chairman, the Group Executive Director/GCOO shall chair the meeting.

The Board shall have determined that each member has appropriate levels of relevant experience and shall be financially literate, as interpreted by the Board in its business judgment. Appointments should be for a minimum of three (3) years, to be extended by no more than two additional three-year periods, as long as members continue to be independent.

Authority

The Committee is authorised by the Board to:

1. Investigate any activity within its Terms of Reference

2. Set priorities for the work of the functions related to the IRMC

3. Seek any information it requires from any employee and all employees should co-operate with the requests of the IRMC

4. Obtain outside legal or independent professional advice and such advisors may be requested to attend meetings as necessary

Responsibilities

The IRMC is responsible for undertaking;

1. The matters specified and to ensure that the Company has a comprehensive risk management framework and to ensure that, appropriate compliance policies and systems are in place

2. To assess all risk types, including but not limited to credit, market, liquidity, operational and strategic risks to the Company through

appropriate risk indicators and management information

3. To ensure decisions related to risk are taken in accordance with established delegated authorities and corrective actions taken to mitigate risks taken beyond the risk tolerance of the Committee on the basis of the Company’s policies, regulatory and supervisory requirements

4. To monitor and assess the effectiveness of the Company’s Risk Management System and the robustness of the risk management function

5. To establish a compliance function to assess the Company’s compliance with laws, regulations, regulatory guidelines, internal controls and approved policies relating to all areas of business operations.

Other

1. Decide on appropriate recruitment, training and development for the IRMC, Senior Management, Audit, Treasury and Dealing Divisions to ensure that requisite skills are available to monitor and control risk

2. Review results of internal audit reports, feedback from external auditors and any other regulatory/ pronouncements/correspondence from external bodies which, consider the effectiveness and appropriateness of the control environment of the core business function and authorise specific actions arising thereof

3. Review compliance with the appropriate Company and regulatory guidelines

52E

ntru

st S

ecur

ities

PLC

Fi

nanc

ial,

Env

ironm

enta

l & S

ocia

l Per

form

ance

Ann

ual R

epor

t 201

4/15

Report of the Integrated Risk Management Committee


Committee Evaluation

1. The Committee members shall conduct an annual review of their effectiveness at the end of each financial year and any changes to the approved Terms of Reference (TORs) will be documented and reported to the Board.

2. If required, the approved TORs can be made available on the Company’s website in line with best practices and to uphold Corporate Governance values.

Meetings

Meetings should be held on a quarterly basis and should not be less than four (4) meetings per financial year. Additional meetings of the Committee may be held as and when required. The Chairman of the IRMC has the authority to convene a special meeting to discuss any urgent business or operational matter that may arise.

Romesha D Senerath

Chairperson

Integrated Risk Management Committee

14th July 2015


Establishing our presence

Corporate Governance 54

54E

ntru

st S

ecur

ities

PLC

Fi

nanc

ial,

Env

ironm

enta

l & S

ocia

l Per

form

ance

Ann

ual R

epor

t 201

4/15


Corporate Governance is the framework of rules and practices by which a Board of Directors ensures accountability, fairness and transparency in an organisation’s relationship with all its stakeholders. The Board of Directors is responsible for the governance of the Company and places considerable emphasis in developing rules, structures and processes to ensure integrity and transparency in a Company’s dealings, making the best effort in achieving performance and quality profits.

At Entrust Securities PLC, we adopt best governance practices and strive to satisfy legitimate claims of all stakeholders, ensuring transparency and timely financial reporting. We have continuously refined our structure and systems to ensure governance as defined in all compliance directives, being continually mindful that the Company is accountable to its stakeholders and the general public. The Board of Directors has committed itself to ensure effective overseeing off our business operations and to ensure that all such business affairs of the Company is conducted in adherence to the highest standards of good governance, embracing established best practices.

In a globalised economy, environmental, social and corporate governance responsibilities are critical to a Company’s long-term sustainability, financial stability and success. At Entrust Securities PLC, we consider these as integral to our business strategy. The Board leads by example in establishing professional standards and corporate values

for the Company and ensures that its obligations to its shareholders and other stakeholders are understood and met.

The Company’s corporate governance philosophy, within a framework of compliance and conformity, has been institutionalised at all levels, through a strong set of corporate values and a written Code of Conduct. All employees, senior management and the Board of Directors are required to embrace this philosophy in the performance of their official duties and in other situations, to uphold the Company’s image and reputation. In a globalised economy, environmental, social and corporate governance responsibilities are critical to a Company’s long-term sustainability, financial stability and success. At Entrust Securities PLC, we consider these to be integral to our business strategy.

Roles and Responsibilities of Chairman and CEO

The separation of responsibilities between the Chairman and the Chief Executive Officer is clearly defined. The functions of the Chairman and CEO are performed by independent individuals to ensure a separation of power. The Chairman provides leadership to the Board and ensures that proceedings at meetings are conducted in accordance with laid down guidelines and frameworks, while promoting high standards of Corporate Governance.

Board of Directors

The Board is the highest body of Entrust Securities PLC tasked with the responsibility of giving direction to the Company. The members of the Board possess the requisite expertise, skill and experience to effectively manage and direct the Company, to ensure that it maintains the highest standards of good governance and attains organisational goals. These are persons with vision, leadership qualities, proven competencies and integrity. The individual profiles of the members of the Board are detailed on pages 18 to 21 of this Report.

The Board strives to ensure that the management of the Company maintains an effective system of internal controls, providing assurance on efficient operations and compliance with applicable laws and regulations. The Board is primarily responsible for;

Ø Setting strategies, direction and establishing objectives for the management

Ø Monitoring performance against objectives whilst ensuring adequate internal controls with the highest ethical standards

Ø Holding regular meetings of the Board and Board Sub Committees

Ø Ensuring good governance and overseeing the risk management of the Company

Ø Appointing the Chief Executive Officer and determining the remuneration of the management and staff

Ø Declaring dividends based on performance of the Company

Ø Reporting to shareholders


55E

ntru

st S

ecur

ities

PLC

Fi

nanc

ial,

Env

ironm

enta

l & S

ocia

l Per

form

ance

Ann

ual R

epor

t 201

4/15

The Board of Directors has delegated some of its functions to Board Sub-Committees, while retaining final decision rights pertaining to matters under the purview of these committees. The following Sub-Committees were appointed by the Board and have been in operation during the period under review:

1. Audit Committee

2. Remuneration Committee

3. Integrated Risk Management Committee

Composition and Independence

The Board comprised six (6) members during the period under review; three (3) are Non-Executive Directors with two (2) of them being Independent Directors. This gives the Board the appropriate balance of skills and experience which is conducive for the business carried out by the Company. There exists a diversity of experience and skill on the current Board and the Directors contribute a balance of financial and banking experience together with business experience and skill. Collectively, the Non-Executive Directors (NEDs) infuse a wealth of experience and add value through their knowledge, arising from domestic and/or international experience, specialising in functional know-how, ensuring adequate Board diversity in accordance with the principles of Corporate Governance. In order to avoid potential conflicts or bias, the Independent Directors adhere to best practices as illustrated below, in addition to making a general disclosure of interests every year and also changes thereto.

The names of the Directors who served during the year under review are disclosed in the Annual Report of the Board of Directors on the Affairs of the Company on pages 74 to 76.

Tenure, Retirement and Re-election of Directors

At each Annual General Meeting, one of the existing Directors shall retire from office and seek re-election.

The provisions of the Company’s Articles of the Association also require Directors appointed by the Board to hold office until the next Annual General Meeting and seek appointment by the shareholders at that meeting.

Board Meetings

The results of the Company are regularly considered and monitored against the forecast budgets at Board meetings, during which a standard agenda is discussed, together with any other matter that requires the attention of the Board. The Board meets once in two months on a regular basis and whenever necessary, special meetings of the Board are held.

During the year ended 31st March 2015, six (6) meetings of the Board were held. Attendance of the Board is as follows:

Board Meetings

Name of MemberNo. of

Meetings Held

No. of Meetings Attended

Percentage of

Attendance

1. Mr. I. D. B. Dassanayake 06 05 83.34%

2. Mr. C. U. Ratwatte 06 06 100%

3. Mrs. R. D. Senerath 06 06 100%

4. Dr. N. N. P. Jayasuriya 06 05 83.34%

5. Mr. G. A. K. Nanayakkara 06 06 100%

6. Mr. R. M. S. Tillakawardana 06 06 100%

Board Sub-Committees

An Audit Committee, a Remuneration Committee and an Integrated Risk Management Committee have been established as Sub-Committees of the Board. The names of the Directors who serve on the said Committees are given in the respective Committee Reports.

Compliance Officer

The Manager – Middle Office and Risk Management functions as the Compliance Officer to ensure compliance with regulatory and statutory requirements and the laws and regulations governing Primary Dealers, Public Listed Companies and generally, in business activities undertaken by the Company.

56E

ntru

st S

ecur

ities

PLC

Fi

nanc

ial,

Env

ironm

enta

l & S

ocia

l Per

form

ance

Ann

ual R

epor

t 201

4/15


Employee Relations

Human Resource units are designed to enable high accessibility by any employee to every level of management. Constant dialogue and facilitation is also maintained relating to work related issues, as well as matters pertaining to general interest that could impact employees and their families.

The Management

The daily operations of the Company is entrusted to the Corporate and Senior Management headed by the Group Executive Director/Group Chief Operating Officer. They ensure that risks and opportunities are identified and steps taken to achieve targets within defined time frames and budgets.

Financial Disclosures and Transparency

Financial Statements are prepared in accordance with Sri Lanka Accounting Standards, Companies Act and the directions and rules issued thereunder. Since being listed on the Colombo Stock Exchange, the unaudited provisional quarterly statements of accounts have been published, in compliance with the Listing Rules of the Colombo Stock Exchange.

Messrs. PricewaterhouseCoopers are the External Auditors of the Company. The Auditors are allowed to act independently and without intervention from the Management or the Board to express an opinion on the financial statements of the Company. All required information is provided for examination to the Auditors.

Securities Trading Policy

The Company’s securities trading policy prohibits all employees and agents engaged by Entrust Securities PLC who are aware of unpublished price sensitive information, from trading in the Company’s shares or the shares of other companies in which the Company has a business interest. The Board, senior management as well as certain identified employees in senior executive roles who are privy to the Company’s results, in part or in full, prior to their availability to the public, are prohibited from trading during the periods leading up to the release of quarterly and annual results.

Ethical Standards

The Company requires all employees to maintain the highest standards of integrity in the performance of their duties and dealings on behalf of the Company.

The Company focuses on the training and career development of employees, to create an empowered and committed group of employees.

Statutory Payments

All statutory payments due to the Government, which have fallen due, have been made or where relevant provided for.

Compliance with Primary Dealer Regulations

As a Registered Primary Dealer, the Company is governed by the Public Debt Department of the Central Bank of Sri Lanka.

Accordingly, the Company has to establish, implement and maintain business activities in compliance with the Directions from time to time issued by the Central Bank of Sri Lanka.

Accountability and Disclosure

The members of the Board have reviewed in detail the Financial Statements in order to satisfy themselves that they present a true and fair view of the Company’s affairs.

For and on behalf of Board;

Sanjani de S Gamage

Company Secretary


57E

ntru

st S

ecur

ities

PLC

Fi

nanc

ial,

Env

ironm

enta

l & S

ocia

l Per

form

ance

Ann

ual R

epor

t 201

4/15

Corporate Governance Principle

Reference to Code

Degree of Compliance

A. DIRECTORS

A.1 The Board

The Company is headed by an effective Board which comprises of professionals with having required professional competence, skills and experience to lead and control the Company. The Board gives leadership in setting the strategic direction and implement sound control environment for the successful functioning of the Company.

Board Meetings A.1.1 Complied with.

During the year, the Board met 06 times.

Role of the Board A.1.2 Complied with.

The Board engages in providing direction in formulating a sound business strategy and closely monitoring the implementation of the strategy effectively.

Compliance with laws and seeking Independent Professional Advice

A.1.3 Complied with.

The Board collectively and Directors individually complied with the laws applicable to the Company.

The Directors are permitted to seek independent professional advice at the Company’s expense.

Access to advice & services of the Company Secretary


All Directors have access to the advice and services of the Company Secretary and the appointment/removal of the Company Secretary should be by resolution involving the whole Board.

Independent judgment of Directors


All Directors exercise independent judgment on issues of strategy, performance, resources and standard of business conduct.

Dedication of adequate time and effort by the Directors


All Directors dedicate their time and effort to ensure their duties towards the Board and the Company are satisfactorily discharged. In addition, Directors function as members of one or more sub-committees and ensure that adequate time and effort is allocated to discharge their duties towards the Board Sub-Committees.

Training for new and existing Directors


Every Director is provided adequate training when appointed to the Board. The Directors are constantly updated on the latest trends and issues facing the Company and the industry in general.

A.2 Chairman & the Chief Executive Officer

There should be a clear division of responsibilities at the head of the Company to ensure balance of power and authority so that no one individual has unfettered powers of decision. The Chairman as well as the Chief Executive Officer have a clear distinction of responsibilities and balance of power and authority.

The Company’s adherence with the Code of Best Practice on Corporate Governance issued jointly by the Institute of Chartered Accountants of Sri Lanka and the Securities and Exchange Commission of Sri Lanka (“Code”)

Section 1 – THE COMPANY

58E

ntru

st S

ecur

ities

PLC

Fi

nanc

ial,

Env

ironm

enta

l & S

ocia

l Per

form

ance

Ann

ual R

epor

t 201

4/15


Reference to Code


Separation of the roles of Chairman & CEO


A.3 Chairman’s Role

The Chairman’s role in preserving good corporate governance is crucial. As the person responsible for spearheading the Board, the Chairman should preserve order and facilitate the effective discharge of the Board.

Role of the Chairman A.3.1 Complied with.

The Chairman conducts Board proceedings in a proper manner and ensures that effective participation of both Executive and Non-Executive Directors is secured and the balance of power between Executive and Non-Executive directors is maintained.

A.4 Financial Acumen

The Code requires that the Board should comprise members with sufficient financial acumen and knowledge to offer guidance on financial matters.

Financial Acumen and Knowledge


The Board comprises members with academic and professional qualifications in Accounting, Business Finance and Management. Please refer Profiles of the Directors.

A.5 Board Balance

The Code requires the Board to maintain a balance between Executive Directors and Non-Executive Directors (NEDs) so that no individual or small group can dominate the Board’s decision making.

Presence of a Strong Team of NEDs


The Board comprised 3 Non-Executive Directors during the year. Two were Independent.

Indpendence of NEDs A.5.2 & A.5.3 Complied with.

The following 2 Non-Executive Directors were Independent Directors during the year;

1.Dr. N. N. P. Jayasuriya

2.Mr. G. A. K. Nanayakkara

Annual Declaration by NEDs on Independence


Both Independent Directors above have submitted their written declarations with regard to their independence as required by the Code.

Annual Determination by the Board on Independence of NEDs


The Board has determined the independence of Non-Executive Directors based on the written declarations submitted.

Appointment of an Alternate Director

A.5.6 Situation did not arise.

Appointment of Senior Independent Director and his availability for confidential discussions

A.5.7 & A.5.8 Not relevant.



59E

ntru

st S

ecur

ities

PLC

Fi

nanc

ial,

Env

ironm

enta

l & S

ocia

l Per

form

ance

Ann

ual R

epor

t 201

4/15


Reference to Code


Conducting meetings with NEDs only


Recording concerns in Board Minutes which cannot be unanimously resolved


Concerns of the Directors which cannot be unanimously resolved if any, are recorded with adequate details. All minutes are circulated to the members of the Board & formally approved at the subsequent meeting.

A.6 Supply of Information

The Code requires the Management to provide timely information in a form and of a quality appropriate to enable the Board members to discharge their duties.

Obligation of the Management to provide appropriate & timely information to the Board


Adequate Notice for Board Meetings


A.7 Appointments to the Board

The Code requires the Company to have formal & transparent procedures to appoint new Directors to the Board.

Presence of a Nomination Committee & Annual Assessment of composition of the Board

A.7.1 & A.7.2 Compliance through the Remuneration Committee.

Disclosure requirements when new appointments are made to the Board


A.8 Re-Election

The Code requires all directors to submit themselves for re-election at regular intervals and at least once in every 3 years.

Re-election of NEDs A.8.1 Complied with.

Appointment of Chairman & Directors subject to election by shareholders at the first opportunity


A.9 Appraisal of Board Performance

Board should periodically appraise their own performance in order to ensure that Board responsibilities are satisfactorily discharged.

Appraisal of Board performance


Annual self-evaluation by the Board


60E

ntru

st S

ecur

ities

PLC

Fi

nanc

ial,

Env

ironm

enta

l & S

ocia

l Per

form

ance

Ann

ual R

epor

t 201

4/15


Reference to Code


Disclosure of Criteria for Performance Evaluation


A.10 Disclosure of Information in respect of Directors

Shareholders should be kept advised of relevant details in respect of directors

Disclosure of Information on the Directors in the Annual Report


Brief Profiles of the Directors with expertise & experience, other business interests, Remuneration & status of independence are disclosed in this Annual Report.

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

The Code requires that the Board should assess the performance of the CEO at least annually.

Setting Annual Targets & Appraisal of Performance of the Chief Executive Officer

A.11.1 & A.11.2

Complied with.

At the end of the year, the Board evaluates the performance of the Chief Executive Officer and ascertains if the agreed objectives have been achieved.

B. DIRECTOR’S REMUNERATION

B.1 Remuneration Procedure

The Code requires that the Company should establish a formal and transparent procedure for developing an effective remuneration policy for both Executive Directors and NEDs, where no director is involved in deciding his/her own remuneration. This avoids conflicts of interests.

Establishment of a Remuneration Committee

B.1.1 Complied with.

A Remuneration Committee has been appointed and functions within the agreed terms of reference.

Refer Report of the Remuneration Committee

Composition of the Remuneration Committee

B.1.2 & B.1.3 Complied with.

Refer Report of the Remuneration Committee

Determination of Remuneration of the NEDs


The Non-Executive Directors receive a fee for being a director of the Board.

Ability to consult the Chairman and/or Chief Executive Officer and to seek professional advice by the Committee


B.2 Level & Make-Up of Remuneration

Levels of remuneration of both Executive and Non-Executive Directors should be sufficient to attract and retain the directors required to run the Company successfully. A proportion of Executive Directors' remuneration should be structured to link rewards to corporate and individual performance.

Remuneration of Executive Directors


Executive directors do not set their own remuneration.



61E

ntru

st S

ecur

ities

PLC

Fi

nanc

ial,

Env

ironm

enta

l & S

ocia

l Per

form

ance

Ann

ual R

epor

t 201

4/15


Reference to Code


Competitiveness of levels of Remuneration


When positioning remuneration levels relative to other companies in the industry, due care is taken to ensure that remuneration is commensurate with the comparative performance/scale of other companies in the industry.

Annual Revisions in Remuneration & Comparison with other Group Companies


The Remuneration Committee reviews the annual increments provided to Companies within the Group, when deciding on increments for staff.

Performance based Remuneration for Executive Directors

B.2.4 Not applicable

Executive Share Options B.2.5 Not applicable

Designing schemes of Performance related Remuneration


Performance related remuneration schemes are approved by the Remuneration Committee.

Early Termination of Executive Directors

B.2.7 & B.2.8 Not applicable.

Termination of Executive Directors, Chief Executive Officer & Chief Operating Officer is governed by their contracts of service/employment.

Levels of Remuneration of NEDs


Non-Executive Directors are remunerated aligned to market practices.

B.3 Disclosure of Remuneration

The Company’s Annual Report should contain a statement of Remuneration Policy and details of remuneration of the Board as a whole.

Disclosure of Remuneration


Refer the Report of the Remuneration Committee for the Remuneration Policy and details of the Remuneration Committee.

Aggregate remuneration paid to the Directors is disclosed in the Financial Statements.

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 AGM to communicate with shareholders and encourage their participation. The Board should encourage all shareholders to attend and actively participate at the AGM. The shareholders may raise any queries they have with the Directors. The Chairman, the CEO and the Chairmen of Board Sub-Committees should be present at the AGM to answer any queries.

Use of proxy votes C.1.1 Complied with.

As a matter of practice, proxy votes together with the votes of shareholders present at the AGM are considered for each resolution.

62E

ntru

st S

ecur

ities

PLC

Fi

nanc

ial,

Env

ironm

enta

l & S

ocia

l Per

form

ance

Ann

ual R

epor

t 201

4/15


Reference to Code


Separate resolutions for separate issues

C.1.2 Complied with.

Separate resolutions are placed before shareholders for business transactions at the AGM.

Availability of Chairmen of Board Committees


Chairman of the Company ensures that all Sub-Committee Chairmen are present at the AGM to answer any queries.

Adequate Notice of AGM to the shareholders together with the summary of the procedure

C.1.4 & C.1.5 Complied with.

Adequate notice is given to the shareholders for the AGM and a summary of the procedures governing voting at the AGM is provided in the proxy form.

C.2 Communication with Shareholders

The Board should implement effective communication with shareholders

Channel to reach all shareholders to disseminate timely information


Primary modes of communication with shareholders are the Annual Report and AGM. The following channels were also used;

• Financial and other notices as and when required

• Through the Colombo Stock Exchange

• Corporate website

• Press notices

Policy and Methodology of Communication & Implementation

C.2.2 & C.2.3 Complied with.

Refer Section C.2.1 above.

Contact Person C.2.4 Complied with.

Awareness of Directors on major issues and concerns of shareholders


A process has been adopted to ensure that all Directors are aware of the major issues and concerns raised by shareholders.

Contact Person for Shareholders

C.2.6 The relevant person with statutory responsibilities to contact in relation to shareholders’ matters is the Company Secretary.

Process for responding to Shareholders

C.2.7 All shareholder correspondence is via the company secretarial division.

C.3 Major and Material Transactions

The Code requires Directors to disclose to shareholders all proposed material transactions which would materially alter the net asset position of the Company.

Major Transactions C.3.1 Complied with.

D. ACCOUNTABILITY AND AUDIT

D.1 Financial Reporting

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



63E

ntru

st S

ecur

ities

PLC

Fi

nanc

ial,

Env

ironm

enta

l & S

ocia

l Per

form

ance

Ann

ual R

epor

t 201

4/15


Reference to Code


Board’s responsibility for Statutory & Regulatory Reporting

D.1.1 Complied with.

The interim accounts and annual financial statements were published on a timely basis during the year. Regulatory reports were filed by the due dates. Price sensitive information was also disclosed to the Colombo Stock Exchange (CSE) on a timely basis during the year.

Declarations by Directors in the Directors' Report


Refer Annual Report of the Board of Directors

Statements by Directors & Auditors on Responsibility for Financial Reporting


Refer the Statement of Directors’ Responsibility and Report of the Independent Auditors.

Management Discussion and Analysis


Refer Management Discussion and Analysis

Declaration by Directors on the Going Concern of the Business


Refer Annual Report of the Board of Directors

Serious Loss of Capital D.1.6 Situation has not arisen.

Disclosure of Related Party Transactions


Each related party has submitted signed and dated declarations mentioning whether they had related party transactions with the Company during the year.

D.2 Internal Control

The Board has overall responsibility for the system of internal controls to safeguard shareholders' investments and the Company’s assets and has delegated some of these responsibilities to the Board appointed Audit Committee (AC).

Evaluation of internal controls by the Board


In order to ensure that a sound system of internal controls is maintained, the AC ensures that an internal audit programme (which is adequate in terms of coverage and scope) is prepared on an annual basis.

Internal Audit function D.2.2 Complied with.

The internal audit function has been outsourced to a leading firm of Chartered Accountants. The Board believes that this provides greater access to global best practices and independence from management. The internal auditors may also conduct any additional tasks they deem necessary to effectively discharge their duties. The Company’s internal audit function is carried out by M/s Ernst & Young – Chartered Accountants.

D.3 Audit Committee

The Board has delegated its responsibility with regard to financial reporting, internal controls and maintaining an appropriate relationship with the Company’s Auditors to the AC. Accounting policies are agreed with the auditors and the AC and are applied on a consistent basis.

64E

ntru

st S

ecur

ities

PLC

Fi

nanc

ial,

Env

ironm

enta

l & S

ocia

l Per

form

ance

Ann

ual R

epor

t 201

4/15


Reference to Code


Composition of the Audit Committee


All Members of the AC are Non-Executive Directors and two members including the Chairman are Independent. Refer Report of the Audit Committee.

Duties of the Committee D.3.2 Complied with.

As per its charter, the AC is responsible for reviewing the scope and results of the audit and its efficacy.

Terms of Reference for Audit Committee


The AC operates within clearly defined Terms of Reference which have been approved by the Board.

Disclosure of Names of Members of the Audit Committee


The details and composition of the AC are provided in the Report of the Audit Committee.

D.4 Code of Business Conduct and Ethics

The Code requires the Company to adopt an Internal Code of Conduct & Ethics to be followed by all Directors and key management personnel.

Code of Business Conduct and Ethics


The Company has issued a Code of Conduct and all Directors, senior management and all employees are required to adhere to this.

Affirmation from the Chairman

D.4.2 Complied with

The Chairman is not aware of any violation of the Company’s Code of Ethics.

D.5 Corporate Governance Disclosures

The Company is fully compliant with the Code of Best Practice on Corporate Governance jointly issued by the ICASL and SEC, as well as the Corporate Governance Rules for Listed Companies issued by the CSE.

Annual Corporate Governance Report in the Annual Report


This Report from pages 54 to 56 serves this requirement.



Reference to Code


E INSTITUTIONAL INVESTORS

E.1 Shareholder Voting

The Code requires institutional shareholders to make considered use of their votes and encourages them to ensure their voting intentions are translated into practice.

Regular and structured dialogue with shareholders

E.1.1 Complied with.

The AGM is used as a forum to have a structured, objective dialogue with shareholders. The Chairman ensures that the views expressed at the AGM are communicated to the Board as a whole.

Section II – SHAREHOLDERS


65E

ntru

st S

ecur

ities

PLC

Fi

nanc

ial,

Env

ironm

enta

l & S

ocia

l Per

form

ance

Ann

ual R

epor

t 201

4/15


Reference to Code


E.2 Evaluation of Governance Disclosures

The Code requires the Company to encourage institutional investors to give due weight to all relevant factors drawn to their attention.

Due weight by institutional investors

E.2.1 Complied with.

Institutional investors are at liberty to give due weight to the matters related to the Board structure and composition, when they consider resolutions related to same.

F. OTHER INVESTORS

F.1 Investing/Divesting Decisions

The Code requires the Company to encourage other investors to seek independent advice in investing or divesting decisions.

Seek independent advice in investing or divesting decisions

F.1.1 Complied with.

Individual shareholders are encouraged and at liberty to conductt independent analyses and research and to seek independent advice prior to making investing or divesting decisions.

F.2 Shareholder Voting

The Code requires the Company to encourage individual shareholders to participate at shareholder meetings and exercise their voting rights.

Encourage voting by individual shareholders

F.2.1 Complied with.

All shareholders are encouraged to participate at general meetings and cast their votes. Notices of meetings are dispatched by the Company in adequate time.

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

Compliance Status of the Company in terms of Section 7.10 of the Continuing Listing Rules of the Colombo Stock Exchange (CSE) is given below;

Section Rule No. Requirement Compliance

Status

Details

Non Executive Directors

7.10.1 (a) Two or one third of the Directors, whichever is higher, should be Non-Executive Directors

Compliant Three Directors on the Board are Non-Executive Directors

7.10.1 (b) The total number of Directors is to be calculated based on the number as at the conclusion of the immediately preceding Annual General Meeting

Compliant No change to the Board was made during the year, from the immediately preceding AGM

7.10.1 (c) Any change occurring to this ratio shall be rectified within ninety (90) days from the date of the change.

Not Applicable

66E

ntru

st S

ecur

ities

PLC

Fi

nanc

ial,

Env

ironm

enta

l & S

ocia

l Per

form

ance

Ann

ual R

epor

t 201

4/15


Status

Details

Independent Directors

7.10.2 (a) Two or one third of Non-Executive Directors, whichever is higher, should be independent

Compliant The Board comprises two independent Non-Executive Directors

7.10.2 (b) Each Non-Executive Director should submit a declaration of independence/ non independence in the prescribed format

Compliant The Non-Executive Directors have submitted the required declarations

Disclosures relating to Directors

7.10.3 (a) Names of independent Directors should be disclosed within the Annual Report

Compliant The Company’s Independent Non-Executive Directors are

• Dr. N. N. P. Jayasuriya

• Mr. G. A. K. Nanayakkara

7.10.3 (b) In the event a Director does not qualify as independent as per the rules on corporate governance, but if the Board is of the opinion that the Director is nevertheless independent, it shall specify the basis of the determination in the Annual Report

Not Applicable

No such determination was required to be made by the Board

7.10.3 (c) A brief resume of each Director should be published in the Annual Report including the areas of expertise

Compliant Please refer Profiles of Directors

7.10.3 (d) Provide a brief resume of any new Director appointed to the Board

Compliant Please refer Profiles of Directors

Criteria for defining ‘independence

7.10.4 Requirements for meeting criteria to be independent

Compliant -

Remuneration committee

7.10.5 A listed company shall have a Remuneration Committee

Compliant Please refer the Report of the Remuneration Committee

7.10.5 (a) The Remuneration Committee shall comprise a minimum of two Independent Non-Executive Directors or a majority of Independent Non- Executive Directors, whichever is higher.

Compliant The Remuneration Committee comprises of a majority of Independent Non-Executive Directors



67E

ntru

st S

ecur

ities

PLC

Fi

nanc

ial,

Env

ironm

enta

l & S

ocia

l Per

form

ance

Ann

ual R

epor

t 201

4/15


Status

Details

One Non-Executive Director shall be appointed as Chairman of the committee by the Board

Compliant Dr. Nalin Jayasuriya who is an Independent, Non-Executive Director functions as Chairman of the Remuneration Committee

7.10.5 (b) The Remuneration Committee shall recommend the remuneration of the Chief Executive Officer and the Executive Directors

Compliant Please refer the Report of the Remuneration Committee

7.10.5 (c) The annual report shall set out:

• The names of the Directors that comprise the Remuneration Committee

• A statement of remuneration policy

• Aggregate remuneration paid to Executive and Non-Executive Directors

Compliant Please refer the Report of the Remuneration Committee.

Audit Committee

7.10.6 A listed company shall have an Audit Committee

Compliant -

7.10.6 (a) The Audit Committee shall comprise a minimum of two Independent Non Executive Directors, or a majority of Independent Non-Executive Directors, Executive Directors, or a majority of Independent Non-Executive Directors,

whichever is higher

Compliant The Board Appointed Audit Committee comprises of a majority of Independent Non-Executive Directors

One Non-Executive Director shall be appointed as Chairman of the Audit Committee by the Board

Compliant Mr. Kishantha Nanayakkara an Independent, Non-Executive Director, functions as the Chairman of the AC.

The Chief Executive Officer and Manager Finance shall attend Audit Committee meetings

Compliant The CEO, the Group Executive Director/Group Chief Operating Officer and Manager Finance attended all AC meetings.

68E

ntru

st S

ecur

ities

PLC

Fi

nanc

ial,

Env

ironm

enta

l & S

ocia

l Per

form

ance

Ann

ual R

epor

t 201

4/15


Status

Details

The Chairman or one member of the Committee should be a member of a recognized professional accounting body

Compliant Chairman and one other member of the Audit Committee are members of a professional accounting body.

7.10.6 (b) The functions of the Audit Committee shall include:

Overseeing of the preparation and presentation and adequacy of disclosures in the financial statements in accordance with Sri Lanka Accounting Standards

Overseeing compliance with financial reporting requirements, information requirements as per laws and regulations

Ensuring the internal controls and risk management are adequate to meet the requirements as detailed in the Sri Lanka Auditing Standards

Assessing of the independence and performance of the external auditors

Make recommendations to the Board pertaining to appointment, re-appointment and removal of external auditors and to approve the remuneration and terms of engagement of the external auditors

Compliant Please refer the Report of the Audit Committee

7.10.6 (c) The annual report shall set out;

The names of the Directors who comprise the Audit Committee

The Audit Committee shall determine the independence of the auditors and disclose the basis for such determination

A report by the Audit Committee setting out the manner of compliance of the functions set out in section 7.10 of the listing rules

Compliant Please refer the Report of the Audit Committee



Report of the Audit Committee 70 | Report of the Remuneration Committee 73Annual Report of the Board of Directors 74

Committee Reports

Expanding our reach

70E

ntru

st S

ecur

ities

PLC

Fi

nanc

ial,

Env

ironm

enta

l & S

ocia

l Per

form

ance

Ann

ual R

epor

t 201

4/15

Report of the Audit CommitteeThe Audit Committee (AC) assists the Board in implementing its responsibilities in relation to financial reporting requirements, risk management, internal auditing and the assessment of internal controls. The AC also reviews the effectiveness of the Company’s internal controls through review and follow-up of the Company’s internal audit reports and manages the Company’s relationship with the External Auditors.

The Committee’s in discharging its responsibilities places reliance on the work to the extent and in the manner it considers appropriate, without prejudicing the independence of the other Committees.

Composition of the Audit Committee

The Audit Committee comprises of three Non-Executive Directors. The Chairman of the Audit Committee is an Independent Non-Executive Director. The Audit Committee has the following members:

• Mr. Kishantha Nanayakkara (Chairman)

- Independent, Non-Executive Director

• Dr. Nalin Jayasuriya - Independent, Non-Executive Director

• Mr. Manohara Tillakawardana - Non-Executive Director

Functions

The duties of the Audit Committee include keeping under review, the scope and results of the audit and its effectiveness and the independence and objectivity of the Auditors. Where the Auditors also supply a substantial volume of non-audit services to the Company, the Committee shall keep the nature and extent of such services under review, seeking to balance objectivity, independence and value for money.

Authority, Duties and Responsibilities

1. Assist the Board in overseeing the preparation, presentation and adequacy of disclosures in the financial statements, in accordance with Sri Lanka Accounting Standards

2. Ensures the Company's compliance with financial reporting requirements, the Companies Act and other relevant financial reporting regulations and requirements

3. To ensure that the Company’s internal controls and risk management procedures are adequate to meet the requirements of the Sri Lanka Auditing Standards

4. To assess the Company’s ability to continue as a going concern in the foreseeable future

5. Assessing the independence and performance of the Company’s external auditors

6. To make recommendations to the Board, pertaining to appointment, re-appointment and removal of external Auditors and to approve the remuneration and terms of engagement of the external Auditors

7. Discussion of the audit plan, key audit issues and resolutions to same, management responses and the proposed remuneration of the Auditor

8. Discussion of the Company’s annual audited financial statements and quarterly financial statements with management and the Auditor

9. Discussion of the Company’s earnings to be disseminated to the media together with financial information and earnings guidance provided to analysts and rating agencies

10. Discussion of policies and practices with respect to risk assessment and risk management

11. Ensuring the establishment of a sound system of internal control

12. Ensuring the implementation of effective internal audit functions

13. Meeting separately, periodically, with Management, Internal Auditors and External Auditors

14. Establishing mechanisms for the confidential receipt, retention and treatment of complaints alleging fraud, received from internal/external sources and pertaining to accounting, internal controls or other such matters


71E

ntru

st S

ecur

ities

PLC

Fi

nanc

ial,

Env

ironm

enta

l & S

ocia

l Per

form

ance

Ann

ual R

epor

t 201

4/15

15. Assuring confidentiality to whistle blowing employees and formulation of proper ‘Whistle-Blowing’ Policy

16. Presenting a report to the Board on identified related parties and related party transactions on a regular basis

17. Setting clear hiring policies for employees or former employees of the Auditors

18. Reporting regularly to the Board of Directors.

Financial Reporting System

The Committee reviewed the financial reporting system adopted by the Company with particular reference to the following:

• The preparation, presentation and adequacy of the disclosures in the Company’s annual and interim financial statements, in accordance with Sri Lanka Accounting Standards, the Companies Act, No. 7 of 2007 and other applicable statutes

• The rationale and basis for the significant estimates and judgments underlying the financial statements

Meetings

The Committee met three (3) times during the period under review. The Company Secretary functions as the Secretary to the Committee. The Group Executive Director/Group Chief Operating Officer, the Chief Executive Officer and Manager (Finance) attend the meetings by invitation. The attendance at the meeting is as follows:

Audit Committee Meetings

Name of MemberNo. of

Meetings Held

No. of Meetings Attended

Percentage of

Attendance

1. Mr. Kishantha Nanayakkara - Chairman 3 3 100%

2. Dr. Nalin Jayasuriya - Member 3 3 100%

3. Mr. Manohara Tillakawardana - Member 3 3 100%

The Committee conducted the following activities;

Financial Reporting

The Audit Committee has reviewed and discussed the Company’s quarterly and annual financial statements prior to publication, with the management and the external auditors, including the extent of compliance with Sri Lanka Accounting Standards, the appropriateness of its accounting policies and material judgmental matters.

Internal Audit

During the year under review, the Committee reviewed the Audit Reports presented by Messrs. Ernst & Young Chartered Accountants, to whom the Internal Audit function is outsourced together with the management responses. A risk-based audit approach was adopted with the view to rationalising the usage of audit resources.

During the year, audit reports were received by the Committee from the Internal Auditors covering audits and investigations which were reviewed and discussed with management and the Internal Auditors. The recommendations of the Internal Auditors have been followed up and implemented. Formal confirmations and assurances were received from the Management on a quarterly basis regarding the efficacy and status of the internal control systems.

The AC monitored and reviewed the scope, extent and effectiveness of the activity that included updates on audit activities and achievements against the Company’s audit plan, advising management to take precautionary measures on significant audit findings and assessment of resource requirements of the Company.

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

72E

ntru

st S

ecur

ities

PLC

Fi

nanc

ial,

Env

ironm

enta

l & S

ocia

l Per

form

ance

Ann

ual R

epor

t 201

4/15

External Audit

At the conclusion of the audit, the Committee met with the Auditors to discuss the audit findings. The meetings were held without the presence of the Management. This assures complete independence and a non-compromising stance.

The Committee is satisfied that the independence of the External Auditors has not been impaired by any event or service that gives rise to a conflict of interest. Due consideration has been given to the nature of the services provided by the Auditors and the level of audit and non-audit fees received by the Auditors from the Company. The Committee also reviewed the arrangements made by the Auditors to maintain their independence and confirmation has been received from the Auditors of their compliance with the independent guidance given in the Code of Ethics of the Institute of Chartered Accountants of Sri Lanka.

The Audit Committee has recommended to the Board of Directors that Messrs. Price Waterhouse Coopers, Chartered Accountants, be re-appointed as the Auditors of the Company for the financial year ending 31st March 2016, subject to the approval of the shareholders at the next Annual General Meeting.

Conclusion

The Board appointed Audit Committee is of the view that adequate controls are in place to safeguard the Company’s assets and to ensure that the financial position and the results disclosed in the Audited Accounts are free from any material mis-statements.

Kishantha Nanayakkara

Chairman

Audit Committee

14th July 2015

Report of the Audit Committee


73E

ntru

st S

ecur

ities

PLC

Fi

nanc

ial,

Env

ironm

enta

l & S

ocia

l Per

form

ance

Ann

ual R

epor

t 201

4/15

The Board appointed Remuneration Committee (RC) comprises three (3) Non-Executive Directors & the Chairman of the Committee is an Independent Non-Executive Director. The RC has the following members:

1. Dr. Nalin Jayasuriya (Chairman) - Independent, Non-Executive Director

2. Mr. Kishantha Nanayakkara - Independent, Non-Executive Director

3. Mr. Manohara Tillakawardana - Non-Executive Director

Duties and Responsibilities

1. Recommend the remuneration and all incentives including any equity incentive awards, performance incentive and terminal benefits/pension rights for the Chief Executive Officer (CEO), any other Executive Director or Key Management Personnel

2. Evaluate the performance of the CEO, management development plans and succession planning

3. Review/monitor evaluation of performance of key management personnel and their management development and succession planning

4. Effective communication with shareholders on the Remuneration Policy and the Committee's work on behalf of the Board, through a Remuneration Committee Report

5. Recommend and ensure that the appropriate service contracts are available for Executive Directors

6. Determine the terms of any compensation package in the event of early termination of the contract of any Executive Director

7. Reward Executive Directors and key management personnel in a manner that ensures they are properly incentivised and motivated to perform in the best interests of the Company over the long term

8. Provide the level of remuneration required to attract and retain Executive Directors and key management personnel of an appropriate calibre

9. Design and implement strategic human resource policies

10. Conduct interviews and make recommendations on recruitment for the approval of the Board for the positions of Chief Executive Officer, Chief Operating Officer and Heads of Divisions.

Attendance and seeking Professional Advice

1. The Chief Executive shall be invited to attend meetings and shall be consulted on the performance and remuneration of Executive Directors and make proposals as necessary.

2. The Committee is authorised by the Board to seek appropriate professional advice internally and externally as and when considered necessary

Report of the Remuneration Committee

The Committee meets as often as necessary and makes recommendations on compensation structures, bonuses, increments and also on matters pertaining to recruitment of key management personnel to ensure the management and staff at all levels are adequately rewarded for their performance and commitment to the Company’s goals on a competitive basis.

The total of Directors’ remuneration paid during the year under review is set out in Note 30 (v) to the Financial Statements.

Nalin N P Jayasuriya

Chairman

Remuneration Committee

14th July 2015

74E

ntru

st S

ecur

ities

PLC

Fi

nanc

ial,

Env

ironm

enta

l & S

ocia

l Per

form

ance

Ann

ual R

epor

t 201

4/15

The Directors of Entrust Securities PLC have pleasure in presenting the Annual Report for the year ended 31st March 2015 that includes and covers the Audited Financial Statements, Chairman’s Statement, Group Executive Director/ Group Chief Operating Officer’s Review, Governance and Risk Management Report, Committee Reports, Statements of Responsibility and other relevant information, as well as disclosures required by the Companies Act No.7 of 2007 which form part of this Annual Report .

General

Entrust Securities PLC was a public limited liability Company incorporated on 29th February 2000 and re-registered under the Companies Act No.7 of 2007 on 13th January 2008. The Company was registered as a Primary Dealer on 29th February 2000 by the Central Bank of Sri Lanka.

The Ordinary Shares of the Company were listed on the Diri Savi Board of the Colombo Stock Exchange on 29th November 2011 and accordingly, the status of the Company changed to a public listed company and the new Company Registration Number is PB 173 PQ.

Nature of Operations

Entrust Securities PLC was established in the year 2000 as one of the dedicated Primary Dealer Companies to exclusively deal in Government securities. The Company has grown in strength during the last fifteen years with the valued and continuous support from its clients, to become a leading Primary Dealer in the Government securities market.

There was no significant change in the nature of business of the Company during the year under review that may have had a significant impact on the state of the Company’s affairs.

Annual Report of the Board of Directors

This Report and the Financial Statements reflect the state of affairs of the Company.

Vision, Mission and Corporate Conduct

The Company’s Vision and Mission are available on page 04 The Directors and all the employees conduct their activities to the highest level of ethical standards and integrity to achieve the Company's Vision and Mission.

Review of Business Performance

Review of Business Performance and future outlook of the Company is available in the Chairman’s Statement on page 08 and in the Group Executive Director/ Group Chief Operating Officer’s Review on page 14.

Financial Statements

The Financial Statements of the Company have been prepared in accordance with Sri Lanka Accounting Standards (SLFRs/LKASs), laid down by the Institute of Chartered Accountants of Sri Lanka and comply with requirements of the Companies Act No.07 of 2007. The aforementioned Financial Statements for the year ended 31st March 2015 duly signed by two Directors on behalf of the Board are on pages 80 to 109 which form an integral part of this Annual Report.

Auditors’ Report

The Report of the Auditors on the Financial Statements of the Company appears on page 79.

Accounting Policies

The Accounting Policies which are adopted by the Company in the preparation of Financial Statements are on pages 84 to 90. They are consistent with those of the previous period.

The Board of Directors

As at 31st March 2015, the Board of Directors of the Company comprised six (6) members. The information on Directors of the Company is available in the Directors’ Profile in page 20.

The names of the Directors who held office as at the end of the accounting period are given below:

Executive Directors

Mr. Isira D. B. Dassanayake - Chairman

Mr. Chanuka Ratwatte - Director

Mrs. Romesha Senarath - Director/Group Chief Operating Officer

Non-Executive Directors

Dr. Nalin Jayasuriya - Independent/ Non-Executive Director

Mr. Kishantha Nanayakkara - Independent/ Non-Executive Director

Mr. Manohara Tilakawardana - Non-Executive Director

New Appointments and Resignations to the Board

There were no new appointments made to the Board during the financial year ended 31st March 2015 and there were no resignations from the Board during the period under review.


75E

ntru

st S

ecur

ities

PLC

Fi

nanc

ial,

Env

ironm

enta

l & S

ocia

l Per

form

ance

Ann

ual R

epor

t 201

4/15

Retirement by Rotation and Re-Election of Directors

Dr. Nalin Naomal Perera Jayasuriya retires by rotation pursuant to Article 84 of the Articles of Association of the Company and being eligible for re-election, offers himself for re-election with the support of the continuing Directors.

The Agenda for the Annual General Meeting also includes an Ordinary Resolution to be taken up to elect Mr. Sivagnanasundaram Jeyavarman who was appointed to the Board since the last Annual General Meeting pursuant to Article 90 of the Articles of Association of the Company.

The Independence of Directors has been determined in terms of the Listing Rules of the Colombo Stock Exchange.

Related Party Transactions

Related party transactions have been declared at meetings of the Directors and are detailed in Note 30 to the financial statements.

Directors’ Interests

As required by the Companies Act, No. 7 of 2007, an Interest Register was maintained by the Company during the period under review. All Directors have made declarations as provided for in Section 192 (2) of the Companies Act aforesaid. The Interest Register is available for inspection as required under the Companies Act.

The Company carries out transactions in the ordinary course of business with entities in which a Director of the Company is a Director. The transactions with entities where a Director of the Company either has control or exercises significant influence have been classified as related party transactions and disclosed in Note 30 to the Financial Statements.

Remuneration and Fees

Details of Directors' remuneration and fees are set out in Note 30 (v) to the Financial Statements. All fees and remuneration have been duly approved by the Board of Directors of the Company.

Risk and Internal Control

The Board of Directors has satisfied itself that there exists an effective and comprehensive system of internal controls to monitor, control and manage the risks to which the Company is exposed, to carry on its business in an orderly manner, to safeguard its assets and to secure as far as possible the reliability and accuracy of records.


The Directors acknowledge their responsibility for the Company’s corporate governance and the system of internal control. The Directors are responsible to the shareholders for providing strategic direction to the Company and safeguarding the assets of the Company. The Board is satisfied with the effectiveness of the system of internal control for the period up to the date of signing the Financial Statements. The performance of the Company is monitored by way of regular review meetings. These meetings provide an opportunity to ensure that progress is in line with agreed targets. Regular Board meetings are held to further strengthen the review process and ensure compliance with all statutory and regulatory obligations.

Statutory Payments and Compliance with Laws and Regulations

The Directors, to the best of their knowledge and belief are satisfied that all statutory payments due to the Government and in relation to the employees have been made on time.

Auditors

The Company’s Auditors during the period under review were Messrs. PricewaterhouseCoopers. The fees paid to auditors are disclosed in Note 20 to the Financial Statements.

Based on the declaration from Messrs. PricewaterhouseCoopers, and as far as the Directors are aware, the Auditors do not have any relationship or interest in the Company or its subsidiaries, other than as disclosed.

The Auditors have expressed their willingness to continue in office.

In accordance with the Companies Act, No. 7 of 2007, an Ordinary Resolution proposing the re-appointment of Messrs. PricewaterhouseCoopers, Chartered Accountants, as Auditors to the Company will be submitted at the Annual General Meeting.

Independent Auditor’s Report

The independent Auditor’s report on the Financial Statements is given from page 79 of the Annual Report.

Stated Capital

The Stated Capital of the Company is Rs. 220,000,070/-

Directors’ Shareholding

The relevant interests of Directors in the shares of the Company as at 31st March 2015 are as follows:

76E

ntru

st S

ecur

ities

PLC

Fi

nanc

ial,

Env

ironm

enta

l & S

ocia

l Per

form

ance

Ann

ual R

epor

t 201

4/15

Annual Report of the Board of Directors

Name of Director Shareholding as at

31/03/2015

Shareholding as at

31/03/2014

Mr. Isira D. B. Dassanayake Nil Nil

Mr. Chanuka Ratwatte Nil Nil

Mrs. Romesha Senerath 10,000 10,000

Dr. Nalin Jayasuriya Nil Nil

Mr. Kishantha Nanayakkara Nil Nil

Mr. Manohara Tilakawardana Nil Nil

Shareholders

There were 889 shareholders as at 31st March 2015. The details of the distribution are given on page 112 of this report.

Major Shareholders, Distribution Schedule and other information

Information on the distribution of shareholding, analysis of shareholders, market values per share, twenty largest shareholders of the Company and percentage of shares held by the public as per the listing rules of the Colombo Stock Exchange are given on pages 110 to 112 under Investor Information.

Equal Opportunities

The Company is committed to providing equal opportunities to all employees irrespective of their gender, marital status, age, religion, race or disability. It is the Company’s policy to give full and fair consideration to persons, with respect to applications for employment, continued employment, training, career development and promotion, having regard for each individual’s particular aptitudes and abilities.

Reserves

The reserves of the Company with the movements during the year are given in Note 12 to the Financial Statements on page 82.

Internal Controls

The Board of Directors has taken steps to ensure the implementation of an effective and comprehensive system of internal controls covering financial, operational and compliance controls. The Internal Auditors are responsible to review and report on the efficacy of the internal control system and other regulations and the Company’s accounting and operational policies which are subject to further review by the Audit Committee as elaborated in the report of the Audit Committee on page 70.

Insurance and Indemnity

Pursuant to a decision of the Board, Entrust Securities PLC obtained an Insurance Policy to cover for Directors’ liability.

Corporate Social Responsibility

The Company carries out a Corporate Social Responsibility Programme.

Environmental Protection

Endeavours made by the Company on environmental preservation are available in page 42 under Sustainability Report.

Events after the Reporting Date

No material events occurred after the reporting date that required adjustments to or disclosure in the Financial Statements, other than those disclosed in Note 31 to the Financial Statements in page 109.

Going Concern

The Board of Directors has reviewed the Company’s Business Plans and is satisfied that the Company has adequate resources to continue its business operations in the foreseeable future. Accordingly, the Financial Statements are prepared considering the Company as a going concern.

Annual General Meeting

The Annual General Meeting will be held at the Rainbow Hall of the Grand Oriental Hotel, No. 2,York Street, Colombo 1 at 11.00 a.m. on Friday, 25th September 2015.

The notice of the Annual General Meeting appears on page 113.

Isira D B Dassanayake

Chairman/Group Executive Director

Romesha D Senerath

Group Executive Director/ Group Chief Operating Officer

Sanjani de S Gamage

Company Secretary

14th July 2015

Colombo


Seeking new challenges

Statement of Directors’ Responsibility 78 | Independent Auditor's Report 79 Statement of Financial Position 80 |Statement of Comprehensive Income 81

Statement of Changes in Equity 82 | Statement of Cash Flows 83 Notes to the Financial Statements 84 | Investor Information 110

Notice of Annual General Meeting 113 | Notes 114 | From of Proxy 115

Financial Reports

Context of the Report • Risk Management • Corporate Governance • Committee Reports • Financial Reports78

Ent

rust

Sec

uriti

es P

LC

Fina

ncia

l, E

nviro

nmen

tal &

Soc

ial P

erfo

rman

ce A

nnua

l Rep

ort 2

014/

15

Statement of Directors’ Responsibility for Financial ReportingThe responsibility of the Directors in relation to the financial statements of Entrust Securities PLC is set out in this Statement.

In terms of Section 150(1) and 151 of the Companies Act, No. 7 of 2007, the Directors of the Company are responsible for ensuring that the Company keeps proper books of accounts of all the transactions and prepare Financial Statements that give a true and fair view of the financial position of the Company as at end of each financial year and place them before a general meeting. The Directors are also responsible to ensure that Financial Statements comply with any regulations made under the Companies Act which specifies the form and content of Financial Statements and any other requirements which apply to the Company’s financial statements under any other law.

The Directors are responsible for ensuring that the Company keeps sufficient accounting records, which discloses the financial position of the Company with reasonable accuracy. It enables 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 in that context to have proper regard to the establishment of appropriate systems of internal control with a view to preventing and detecting of fraud and other irregularities.

It is also the responsibility of the Directors to ensure that the Company maintains proper accounting records and to take reasonable steps as far as practical, to ensure the accuracy and reliability of accounting records. They are also tasked with preparing Financial Statements using appropriate Accounting Policies applied consistently and supported by reasonable and prudent judgment and estimates in compliance with the Sri Lanka Accounting Standards, the Companies Act No. 07 of 2007 and the Listing Rules of the Colombo Stock Exchange. Changes in the Accounting Policies where applicable and the rationale for the changes have been disclosed in the ‘Notes to the Financial Statements'.

The Directors have been responsible for taking reasonable measures and care to safeguard the assets of the Company and to prevent and detect frauds and other irregularities. The Directors have instituted an effective and comprehensive system of internal controls and an effective system of monitoring its effectiveness, with internal audit being one of them. The Board has been provided additional assurance on the reliability of the Financial Statements through a process of independent and objective review performed by the Audit Committee.

The Directors continue to adopt the going concern basis in preparing Financial Statements. The Directors, after making inquiries and review of the Company’s Business Plan for the financial year 2015/2016, including cash flows and borrowing facilities, consider that the Company has adequate resources to continue in operation.

BY ORDER OF THE BOARD

ENTRUST SECURITIES PLC

Sanjani de S Gamage

Company Secretary

14th July 2015

79E

ntru

st S

ecur

ities

PLC

Fi

nanc

ial,

Env

ironm

enta

l & S

ocia

l Per

form

ance

Ann

ual R

epor

t 201

4/15

To the shareholders of Entrust Securities PLC

Report on the financial statements

1 We have audited the accompanying financial statements of Entrust Securities PLC, which comprise the statements of financial position as at 31 March 2015 and the statements of income, comprehensive income and changes in equity and cash flows for the year then ended and a summary of significant accounting policies and other explanatory information as set out in pages 80 to 109.

Management Responsibility for the Financial Statements

2 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 necessary, to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

Auditor's Responsibility

3 Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with Sri Lanka Auditing Standards. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance whether the financial statements are free from material misstatement.

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

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

Opinion

6 In our opinion, the financial statements of the Company give a true and fair view of the financial positions of the Company as at 31 March 2015, and of their financial performance and cash flows for the year then ended, in accordance with Sri Lanka Accounting Standards.

Report on other Legal and Regulatory Requirements

7 These financial statements also comply with the requirements of Section 151 (2) of the Companies Act, No. 07 of 2007.

Chartered Accountants

14th July 2015 Colombo

Independent Auditor's Report


Ent

rust

Sec

uriti

es P

LC

Fina

ncia

l, E

nviro

nmen

tal &

Soc

ial P

erfo

rman

ce A

nnua

l Rep

ort 2

014/

15

Statement of Financial Position

For the year ended 31st March Notes 2015 2014

ASSETSCash and cash equivalents 6 2,347,761 857,739Financial assets- Fair value through profit or loss 7.1 3,260,301,446 3,345,034,808- Loans and receivables 7.2 13,965,579,690 8,982,910,707Deposits, prepayments and other receivables 8 14,286,094 24,947,322Gratuity fund investment 9 6,649,360 5,578,032Assets held for sale 10 - 2,224,832Property, plant and equipment 11 78,983,223 82,453,810Total assets 17,328,147,574 12,444,007,250

EQUITY AND LIABILITIESCapital and reservesStated capital 12 220,000,070 220,000,000Special risk reserve 220,551,925 165,393,583Retained earnings 739,594,231 627,249,225Total equity 1,180,146,226 1,012,642,808

LIABILITIESFinancial liabilities- Other financial liabilities 13 16,105,066,376 11,373,802,669Accruals, provisions and other payables 14 35,334,288 51,640,099Post-employment benefit obligation-gratuity 15 7,600,684 5,921,674Total liabilities 16,148,001,348 11,431,364,442Total equity and liabilities 17,328,147,574 12,444,007,250Net assets per share 35.76 30.69

I certify that these financial statements have been prepared in compliance with the requirements of the Companies Act, No. 07 of 2007.

Nipuna Sanjeewa Sanjeewa Dayarathne Manager - Finance General Manager

Board of Directors is responsible for the preparation and presentation of these financial statements. These financial statements were authorised for issue by Board of Directors on 8th July 2015

Isira D B Dassanayake Romesha D Senerath Chairman Group Executive Director | GCOO

14th July 2015

The Notes on pages 84 to 109 form an integral part of these financial statements.

(all amounts in Sri Lanka Rupees)

81E

ntru

st S

ecur

ities

PLC

Fi

nanc

ial,

Env

ironm

enta

l & S

ocia

l Per

form

ance

Ann

ual R

epor

t 201

4/15


Interest income from government securities 16 1,287,297,397 1,158,723,560 Interest expense from government securities 17 (1,018,251,931) (976,342,224)Net interest income from government securities 269,045,466 182,381,336 Capital gain from sale of government securities 205,085,100 170,845,673 Brokerage fee (18,144,208) (12,503,027)(Loss) / gain from revaluation of government securities 18 (121,295,000) 57,773,000Other income 19 1,121,582 903,394 Sales and promotion costs (2,997,469) (5,276,758)Administration costs (112,307,620) (120,111,317)Operating profit 20 220,507,851 274,012,301 Other finance income 22 408,422 507,323 Other finance costs 22 - (15,945)Profit for the year 220,916,273 274,503,679

Other comprehensive lossItems that will not be reclassified to profit or lossRemeasurement of defined benefit obligations-gratuity 15 (282,902) (146,432)Total other comprehensive loss for the year (282,902) (146,432)Total comprehensive income for the year 220,633,371 274,357,247

Earnings per share- basic 25 6.69 8.32


Statement of Comprehensive Income(all amounts in Sri Lanka Rupees)


Ent

rust

Sec

uriti

es P

LC

Fina

ncia

l, E

nviro

nmen

tal &

Soc

ial P

erfo

rman

ce A

nnua

l Rep

ort 2

014/

15

Stated Special risk Retained Total

capital reserve earnings

Balance at 1 April 2013 220,000,000 96,804,271 421,481,290 738,285,561

Total comprehensive income for the yearProfit for the year - - 274,503,679 274,503,679 Other comprehensive loss for the year - - (146,432) (146,432)Total comprehensive income - - 274,357,247 274,357,247

Transfer to special risk reserve - 68,589,312 (68,589,312) - At 31 March 2014 220,000,000 165,393,583 627,249,225 1,012,642,808

Balance at 1 April 2014 220,000,000 165,393,583 627,249,225 1,012,642,808

Adjustment (Refer note 12) 70 - - 70

Total comprehensive income for the yearProfit for the year - - 220,916,273 220,916,273 Other comprehensive loss for the year - - (282,902) (282,902)Total comprehensive income - - 220,633,371 220,633,371

Dividend paid - - (53,130,023) (53,130,023)

Transfer to special risk reserve - 55,158,342 (55,158,342) - At 31 March 2015 220,000,070 220,551,925 739,594,231 1,180,146,226

As directed by the Central Bank of Sri Lanka, 25% of annual profit is transferred to the special risk reserve.


Statement of Changes in Equity(all amounts in Sri Lanka Rupees)

83E

ntru

st S

ecur

ities

PLC

Fi

nanc

ial,

Env

ironm

enta

l & S

ocia

l Per

form

ance

Ann

ual R

epor

t 201

4/15


Cash generated from operations 27 53,879,368 3,252,109 Gratuity paid 15 (99,000) (165,000)Proceeds received as gratuity for staff transfers 15 91,000 - Net cash generated from operating activities 53,871,368 3,087,109

Cash flows from investing activitiesPurchase of property, plant and equipment 11 (665,947) (9,600,634)Sales proceeds from disposal of property, plant and equipment 245,825 4,056,227Sales proceeds from disposal of assets held for sale 2,240,057 - Movement in gratuity fund investment 9 (1,071,328) (342,323)Net cash generated from / (used in) investing activities 748,607 (5,886,730)

Cash flows from financing activitiesDividend paid (53,130,023) - Cash inflow due to adjustment in promoters shares 70 - Net cash used in financing activities (53,129,953) - Increase / (decrease) in cash and cash equivalents 1,490,022 (2,799,621)

Movement in cash and cash equivalentsAt beginning of year 857,739 3,657,360 Increase / (decrease) 1,490,022 (2,799,621)Cash and cash equivalents at end of the year 6 2,347,761 857,739


Statement of Cash Flows(all amounts in Sri Lanka Rupees)


Ent

rust

Sec

uriti

es P

LC

Fina

ncia

l, E

nviro

nmen

tal &

Soc

ial P

erfo

rman

ce A

nnua

l Rep

ort 2

014/

15

Notes to the Financial Statements (In the notes all amounts are shown in Sri Lanka Rupees unless otherwise stated)

1 General information

Entrust Securities PLC ("the Company") was incorporated and commenced business operations on 29 February 2000. The primary dealer license was issued to the Company on 1 April 2000. The Company's principal activity is buying and selling of government securities for customers and leveraging on own portfolio in the money market.

The Company is a Public Limited Company incorporated and domiciled in Sri Lanka. The address of its registered office is at Level 23, East Tower, World Trade Center, Echelon Square, Colombo 1. The Company carries out business as a primary dealer in accordance with Registered Stock and Securities Ordinance and Local Treasury Bill Ordinance, and subject to the regulatory controls of the Central Bank of Sri Lanka. The Company was listed on the Dirisavi Board of the Colombo Stock Exchange on 29 November 2011.

The parent and ultimate parent Company of the Entrust Securities PLC is Entrust Holdings Limited and Entrust Capital Partners (Private) Limited respectively.

2 Changes in accounting policy and disclosures

(a) New accounting standards, amendments and interpretations adopted in 2014.

The following standards have been adopted by the Company for the first time with effect from financial year beginning on 1 April 2014. Those standards did not have a significant effect on the financial statements.

(i) SLFRS 12 ‘Disclosure of Interests in Other Entities’, includes the disclosure requirements for all forms of interests in other entities, including joint arrangements, associates, special purpose vehicles and other off balance sheet vehicles.

(ii) SLFRS 13 ‘Fair Value Measurement’, aims to improve consistency and reduce complexity by providing a precise definition of fair value and a single source of fair value measurement and disclosure requirements for use across Sri Lanka Accounting Standards.

(iii) IFRIC 21 ‘Levies’, establishes the accounting for an obligation to pay a levy if that liability is within the scope of LKAS 37 ‘Provisions’. The interpretation addresses what the obligating event which gives rise to pay a levy and when a liability should be recognised.

(iv) Amendment to LKAS 1 ‘Financial Statement Presentation’, regarding other comprehensive income. The main change resulting from these amendments is a requirement for entities to group items presented in ‘Other Comprehensive Income’ (OCI) on the basis of whether they are potentially reclassifiable to profit or loss subsequently (reclassification adjustments).

(v) Amendments to LKAS 32 ‘Financial Instruments: Presentation’, with regard to offsetting financial assets and financial liabilities. This amendment clarifies that the right of set-off must not be contingent on a future event. It must also be legally enforceable for all counterparties

in the normal course of business, as well as in the event of default, insolvency or bankruptcy. The amendment also considers settlement mechanisms.

(vi) Amendments to LKAS 36 ‘Impairment of Assets’, regarding recoverable amount disclosures for non-financial assets. This amendment removed certain disclosures of the recoverable amount of ‘Cash-Generating Units’(CGUs) which had been included in LKAS 36 by the issue of SLFRS 13.

(vii) Amendments to LKAS 39 ‘Financial Instruments: Recognition and Measurement’, on novation of derivatives and the continuation of hedge accounting. This amendment considers legislative changes to ‘over-the-counter’ derivatives and the establishment of central counterparties. Under LKAS 39 novation of derivatives to central counterparties would result in discontinuance of hedge accounting. The amendment provides relief from discontinuing hedge accounting when novation of a hedging instrument meets specified criteria.

(b) New accounting standards, amendments and interpretations issued but not yet adopted.

A number of new standards and amendments to standards and interpretations are effective for annual periods beginning after 1 January 2014, and have not been applied in preparing these financial statements.

85E

ntru

st S

ecur

ities

PLC

Fi

nanc

ial,

Env

ironm

enta

l & S

ocia

l Per

form

ance

Ann

ual R

epor

t 201

4/15

2 Changes in accounting policy and disclosures (contd...)

(b) New accounting standards, amendments and interpretations issued but not yet adopted (contd...)

(i) SLFRS 9 ‘Financial Instruments’, addresses the classification, measurement and recognition of financial assets and financial liabilities. The complete version of SLFRS 9 was issued in July 2014. It replaces the guidance in LKAS 39 that relates to the classification and measurement of financial instruments. SLFRS 9 retains but simplifies the mixed measurement model and establishes three primary measurement categories for financial assets: amortised cost, fair value through OCI and fair value through profit or loss. The basis of classification depends on the entity’s business model and the contractual cash flow characteristics of the financial asset. Investments in equity instruments are required to be measured at fair value through profit or loss with the irrevocable option at inception to present changes in fair value in OCI not recycling. There is now a new expected credit losses model that replaces the incurred loss impairment model used in LKAS 39. For financial liabilities there were no changes to classification and measurement except for the recognition of changes in own credit risk in other comprehensive income, for liabilities designated at fair value through profit or loss. SLFRS 9 relaxes the requirements for hedge effectiveness by replacing the bright line hedge effectiveness tests. It requires an economic relationship between the hedged item and hedging instrument and for the ‘hedged ratio’ to be the same as the one management actually use for risk management purposes. Contemporaneous documentation is still required but is different to that currently prepared under LKAS 39. The standard is effective for accounting periods beginning on or after 1 April 2018. Early adoption is permitted. The Company is yet to assess the full impact of SLFRS 9.

(ii) SLFRS 15, ‘Revenue from Contracts with Customers’, deals with revenue recognition and establishes principles for reporting useful information to users of financial statements about the nature, amount, timing and uncertainty of revenue and cash flows arising from an entity’s contracts with customers. Revenue is recognised when a customer obtains control of a good or service and thus has the ability to direct the use and obtain the benefits from the good or service. The standard replaces LKAS 18 and LKAS 11 and related interpretations. This standard will be effective for annual periods beginning on or after 1 April 2017 and earlier application is permitted.

There are no other standards or IFRIC interpretations that are not yet effective that would be expected to have a material impact to the Company.

3 Summary of significant accounting policies

The principal accounting policies applied in the preparation of these financial statements are set out below. These policies have been consistently applied to all the years presented unless otherwise stated.

3.1 Basis of preparation

The financial statements have been prepared in accordance with and comply with Sri Lanka Accounting Standards ("SLAS") under the historical cost convention except for following financial statement line items.

- Financial instruments at fair value through profit or loss, which are measured at fair value;

- Financial instruments at held to maturity, which are measured at amortized cost; and

- Post employment benefit obligation which is measured at the present value of the obligation.

3.2 Foreign currencies

(a) Functional and presentation currency

Items included in the financial statements are measured using the currency of the primary economic environment in which the entity operates ('the functional currency'). The financial statements are presented in Sri Lankan Rupees, which is the Company's functional and presentation currency.

(b) Transactions and balances

Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions. Foreign currency assets and liabilities are translated into the functional currency using the exchange rate prevailing at the statement of financial position date.

Foreign exchange gains and losses (if any) arising from translation are included in the statement of comprehensive income.

3.3 Financial assets

3.3.1 Classification

The Company allocates financial assets to the following categories; financial assets at fair value through profit or loss; loans and receivables; held-to-maturity investments; and available-for-sale financial assets. Management determines the classification of its financial


Ent

rust

Sec

uriti

es P

LC

Fina

ncia

l, E

nviro

nmen

tal &

Soc

ial P

erfo

rman

ce A

nnua

l Rep

ort 2

014/

15


3 Summary of significant accounting policies (contd...)

3.3 Financial assets (contd...)

3.3.1 Classification (contd...)

instruments at initial recognition. At the financial position date and during the reporting period,there were no financial assets classified as held to maturity and available for sale.

(a) Financial assets at fair value through profit or loss

This category comprises of financial assets classified as held for trading. A financial asset is classified as held for trading if it is acquired or incurred principally for the purpose of selling or repurchasing it in the near term or if it is part of a portfolio of identified financial instruments that are managed together and for which there is evidence of a recent actual pattern of short - term profit - taking. Financial assets held for trading consist of treasury bonds and treasury bills issued by the Government of Sri Lanka. They are recognized in the statement of financial position as ‘financial assets at fair value through profit or loss’.

Financial instruments included in this category are recognised initially at fair value; transaction costs are taken directly to the statement of comprehensive income. The fair value gains and losses arising from revaluation of held for trading revaluation assets are included in the statement of comprehensive income as gains and losses from revaluation of trading securities. This instruments are derecognised when the rights to receive cash flows have expired or the Company has transferred substantially all the risks and rewards of ownership and the transfer qualifies for derecognising.

The chosen valuation technique makes maximum use of market inputs and incorporates all factors that market participants would consider in setting a price. It is consistent with accepted economic methodologies for pricing financial instruments. Inputs to valuation techniques reasonably represent market expectations and measures of the risk-return factors inherent in the financial instrument. The Company calibrates valuation techniques and tests them for validity using prices from observable current market transactions in the same instrument or based on other available observable market data.

(b) Loans and receivables

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market, other than:

• those that the Company intends to sell immediately or in the short term, which are classified as held for trading, and those that the entity upon initial recognition designates as at fair value through profit or loss;

• those that the Company upon initial recognition designates as available for sale; or

• those for which the holder may not recover substantially all of its initial investment, other than because of credit deterioration.

Loans and receivables are carried at amortized cost. When the Company purchases a financial asset and simultaneously enters into an agreement to resell the asset (or a substantially similar asset) at a fixed price on a

future date ("reverse repo"), the arrangement is accounted for as a loan or receivable, and the underlying asset is not recognized in the Company’s financial statements. The carrying value of the securities purchased under agreement to sell is recorded at cost. The difference between sale and repurchase price is treated as interest and accrued over the life of the agreements using the effective interest rate method.

In the case of an impairment, the impairment loss is reported as a deduction from the carrying value of the loans and receivables recognised in the statement of income as ‘loans and receivable impairment charges’.

3.3.2 Recognition

The Company initially recognizes financial assets on the date at which they are originated. Regular way purchases of financial assets are recognized on the value date at which the Company commits to purchase the asset. All other financial assets are initially recognized on the value date at which the Company becomes a party to the contractual provisions of the instrument. A financial asset is measured initially at fair value plus, for an item not at fair value through profit or loss, transaction costs that are directly attributable to its acquisition or issue.

3.3.3 Derecognition

Financial assets are derecognised when the contractual rights to receive the cash flows from these assets have ceased to exist or the assets have been transferred and substantially all the risks and rewards of ownership of the assets are also transferred (that is, if substantially all the risks and rewards have not been transferred, the Company tests control to ensure that continuing involvement on the basis of any retained powers of control does not prevent derecognition).

87E

ntru

st S

ecur

ities

PLC

Fi

nanc

ial,

Env

ironm

enta

l & S

ocia

l Per

form

ance

Ann

ual R

epor

t 201

4/15


3.3 Financial assets (contd...)

3.3.3 Derecognition (contd...)

Government securities furnished by the Company under securities repurchased under resale agreements and securities sold under repurchase agreements are not de-recognised because the Company retains substantially all the risks and rewards on the basis of the predetermined repurchase price, and the criteria for de-recognition are therefore not met.

3.3.4 Impairment of financial assets

At each reporting date the Company assesses whether there is objective evidence that financial assets not carried at fair value through profit or loss are impaired. A financial asset or a group of financial assets is (are) impaired when objective evidence demonstrates that a loss event has occurred after the initial recognition of the asset(s), and that the loss event has an impact on the future cash flows of the asset(s) that can be estimated reliably. Objective evidence that financial assets are impaired can include significant financial difficulty of the counter party or issuer, default or delinquency by a counter party, indications that a counterparty or issuer will enter bankruptcy or other observable data relating to a group of assets such as adverse changes in the payment status of counterparty or issuers in the group, or economic conditions that correlate with defaults in the group.

The Company considers evidence of impairment for loans and receivables at both a specific asset and collective level. All individually significant loans and receivables are assessed for specific impairment. All individually significant loans and receivables found not to be specifically impaired are then collectively assessed for any impairment that has been incurred but not yet identified. Loans and receivables that are not individually significant are collectively assessed for impairment by grouping together loans and receivables with similar risk characteristics. Impairment losses on assets carried at amortized cost are measured as the difference between the carrying amount of the financial asset and the present value of estimated future cash flows discounted at the asset's original effective interest rate. Impairment losses are recognized in profit or loss and reflected in an allowance account against loans and receivables. Interest on impaired assets continues to be recognized through the unwinding of the discount. When a subsequent event causes the amount of impairment loss to decrease, the decrease in impairment loss is reversed through profit or loss.

The Company writes off certain securities purchased under resale agreements and government securities when they are determined to be uncollectible.

3.4 Reclassification of financial assets

The Company may choose to reclassify a financial asset held for trading out of the held-for-trading category if the financial asset is no longer held for the purpose of selling it in the near-term. Financial assets are permitted to be reclassified out of the held for trading category to available-for-sale category only in rare circumstances arising from a single event that is unusual and highly unlikely to recur in the near-term. In addition, the Company may choose to reclassify financial assets that would meet the definition of loans and receivables out of the held-for-trading category if the Company has the intention and ability to hold these financial assets for the foreseeable future or until maturity at the date of reclassification. Held-to maturity assets must

be reclassified to available-for-sale category if the loan portfolio become tainted following the sale of other than an insignificant amount of held-to-maturity assets prior to its maturity.

Reclassifications are made at fair value as of the reclassification date. Fair value becomes the new cost or amortised cost as applicable, and no reversals of fair value gains or losses recorded before reclassification date are subsequently made.

3.5 Financial liabilities

A financial liability is measured initially at fair value and initially recognized on the trade date at which the Company becomes a party to the contractual provisions of the instrument. The Company’s holding in financial liabilities is at amortised cost and represent mainly from securities sold under repurchase agreements. The Company derecognises a financial liability when its contractual obligations are discharged or cancelled or expired.

(a) Liabilities measured at amortised cost

Financial liabilities that are not classified as at fair value through profit or loss fall into this category and are measured at amortised cost. The amortized cost of a financial liability is the amount at which the financial liability is measured at initial recognition, minus principal repayments, plus the cumulative amortization using the effective interest method of any difference between the initial amount recognized and the maturity amount.

When the Company enters into an agreement to repurchase an asset (or a substantially similar asset) at a fixed price on a future date (“repo”), the counterparty liability is included as securities sold under repurchase agreements, as appropriate and the


Ent

rust

Sec

uriti

es P

LC

Fina

ncia

l, E

nviro

nmen

tal &

Soc

ial P

erfo

rman

ce A

nnua

l Rep

ort 2

014/

15


3.5 Financial liabilities (contd...)

underlying asset will continued to be recognised in the company’s financial statements. The difference between sale and repurchase price is treated as interest and accrued over the life of the agreement using the effective interest method.

3.6 Offsetting financial instruments

Financial assets and liabilities are offset and the net amount reported in the statement of financial position when there is a legally enforceable right to offset the recognised amounts and there is an intention to settle on a net basis or realise the asset and settle the liability simultaneously.

3.7 Revenue recognition

(a) Interest income and expense

Interest income and expense for all interest-bearing financial instruments are recognised within ‘interest income’ and ‘interest expense’ in the statement of comprehensive income using the effective interest method.

The effective interest method is a method of calculating the amortised cost of a financial asset or a financial liability and of allocating the interest income or interest expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash payments or receipts through the expected life of the financial instrument or, when appropriate, a shorter period to the net carrying amount of the financial asset or financial liability. When calculating the effective interest rate, the company estimates cash flows considering all contractual terms of the financial instrument (for example, prepayment options) but does not consider future credit losses. The calculation includes all fees and points paid or received between parties to the contract that are an integral part of the effective interest rate, transaction costs and all other premiums or discounts.

Once a financial asset or a group of similar financial assets has been written down as a result of an impairment loss, interest income is recognised using the rate of interest used to discount the future cash flows for the purpose of measuring the impairment loss.

(b) Capital gain

Net capital gains on sale of government securities are accounted for on the date of sale by deducting the carrying value of the securities from the sale proceeds.

3.8 Impairment of non-financial assets

Assets that have an indefinite useful life are not subject to amortisation and are tested annually for impairment. Assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs to sell and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash inflows (cash-generating units). The impairment test also

can be performed on a single asset when the fair value less cost to sell or the value in use can be determined reliably. Non-financial assets that suffered impairment are reviewed for possible reversal of the impairment at each reporting date.

3.9 Cash and cash equivalents

Cash and cash equivalents comprise balances with less than three months’ maturity from the date of acquisition for day to day operations, including cash in hand and deposits held with banks.

3.10 Property, plant and equipment

All property, plant and equipment is stated at historical cost less accumulated depreciation. Historical cost includes expenditure that is directly attributable to the acquisition of the items. Property, plant and equipment are initially recognised when the asset is in the location and condition necessary for it to be capable of operating in the manner intended by the Company and only when it is probable that future economic benefits associated with the item will flow to the Company and the cost of the item can be measured reliably. Land is stated at cost.

Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Company and the cost of the item can be measured reliably. The carrying amount of the replaced part is derecognised. All other repairs and maintenance are charged to the statement of income during the financial period in which they are incurred.

Carrying amount of property, plant and equipment are de-recognised when the assets cease to be in the condition necessary for it to be


89E

ntru

st S

ecur

ities

PLC

Fi

nanc

ial,

Env

ironm

enta

l & S

ocia

l Per

form

ance

Ann

ual R

epor

t 201

4/15


3.10 Property, plant and equipment (contd...)

capable of operating in the manner intended by the Company or on disposal of such asset or no future economic benefits are expected from its use or disposal.

Land is not depreciated. Depreciation is calculated on the straight line method to amortise the cost of each asset to their residual values over their estimated useful life as follows:

Computers and accessories

3 years

Furniture and other equipment

3-4 years

Motor vehicles 5 years The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at the end of each reporting period.

An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying amount is greater than its estimated recoverable amount.

Gains and losses on disposals are determined by comparing the proceeds with the carrying amount and are recognised within ‘other income’ in the statement of comprehensive income.

3.11 Non current assets held for sale

Non-current assets are classified as assets held for sale when their carrying amount is to be recovered principally through a sale transaction rather than through continuing use and a sale is considered highly probable within one year from the date of the classification. They are stated at the lower of carrying amount and fair value less costs to sell.

Non-current assets held for sale are de-recognised when the consideration are received or right to receive the cash or consideration is established. The gains or losses are recognised within 'other income' in the statement of comprehensive income when the financial transaction takes place.

3.12 Provisions

Provisions are recognised when the Company has a present legal or constructive obligation as a result of past events, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation, and a reliable estimate of the amount of the obligation can be made.

3.13 Employee benefits

(a) Defined contribution plans

A defined contribution plan is a pension plan under which the company pays fixed contributions into a separate entity. The Company has no legal or constructive obligations to pay further contributions if the fund does not hold sufficient assets to pay all employees the benefits relating to employee service in the current and prior periods.

All employees of the Company are members of the Employees' Provident Fund and Employees' Trust Fund, to which the Company contributes 12% and 3% respectively of such employees' basic or consolidated wage or salary, cost of living and all other allowances.

(b) Defined benefit obligation

A defined benefit plan is a plan that is not a defined contribution plan. Typically defined benefit plans define an amount of benefit that an employee will receive on retirement, usually dependent on one or more factors such as age, years of service and compensation. The defined benefit plan comprises of the gratuity payable under the Gratuity Act No 13 of 1983.

The liability recognised in the statement of financial position in respect of defined benefit obligation plans is the present value of the defined benefit obligation at the end of the reporting period. The defined benefit obligation is calculated annually using the projected unit credit method using the formula prescribed in Sri Lanka Accounting Standard ( LKAS 19) - Employee Benefits. The present value of the defined benefit obligation is determined by discounting the estimated future cash outflows using the market rates on Government bonds.

Actuarial gains and losses arising from experience adjustments and changes in actuarial assumptions are charged or credited to equity in other comprehensive income in the period in which they arise.

Past-service costs are recognised immediately in the statement of comprehensive income.

3.14 Stated capital

Ordinary shares are classified as equity.

Incremental costs directly attributable to the issue of new ordinary shares or options are shown in equity as a deduction, net of tax, from the proceeds.


Ent

rust

Sec

uriti

es P

LC

Fina

ncia

l, E

nviro

nmen

tal &

Soc

ial P

erfo

rman

ce A

nnua

l Rep

ort 2

014/

15


3.15 Dividend distribution

Dividend distribution to the Company’s shareholders is recognised as a reduction in retained earnings in the Company’s financial statements in the period in which the dividends are approved by the company’s shareholders, the Central Bank of Sri Lanka and are paid.

4 Critical accounting estimates,assumptions and judgments

Estimates, assumptions and judgments are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances.

The Company makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, seldom equal the related actual results. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amount of assets and liabilities within the next financial year are discussed below.

4.1 Defined benefit obligation - gratuity

The present value of the gratuity obligations depends on a number of factors that are determined on the projected unit credit method using a number of assumptions. The assumptions used in determining the net cost (income) for gratuity include the discount rate. Any changes in these assumptions will impact the carrying amount of pension obligations.

The Company determines the appropriate discount rate at the end of each year. This is the interest rate that should be used to determine the present value of estimated future cash outflows expected to be required to settle the gratuity obligations. In determining the appropriate discount rate, the Company considers the interest rates of government bonds that are denominated in the currency in which the benefits will be paid, and that have terms to maturity approximating the terms of the related gratuity obligation.

Other key assumptions for gratuity obligations are based in part on current market conditions. Additional information is disclosed in Note 15.


91E

ntru

st S

ecur

ities

PLC

Fi

nanc

ial,

Env

ironm

enta

l & S

ocia

l Per

form

ance

Ann

ual R

epor

t 201

4/15

5 Financial risk management

5.1 The core functions of the Company’s risk management are to identify all significant risks exposed, measure these risks, manage the risk positions and determine capital allocations. The Company frequently reviews its risk management policies and systems in order to respond to the changes in Sri Lankan economy and specially related to Sri Lankan money market.

The Company’s aim is to achieve an appropriate balance between risk and return and minimise potential adverse effects on the Company’s financial performance. The Company’s activities expose it to a variety of financial risks: market risk (interest rate risk), credit risk and liquidity risk.

The Company is also exposed to operational risks such as custody risk. Custody risk is the risk of loss of securities held in custody occasioned by the insolvency or negligence of the custodian. Although an appropriate legal framework is in place that eliminates the risk of loss of value of the securities held by the custodian, in the event of its failure, the ability of the Company to transfer securities might be temporarily impaired.

Another type of risk that the Company exposed to is settlement risk, where a counterparty does not deliver a security or its value as per agreement.

The Company’s overall risk management programme seeks to maximise the returns derived for the level of risk to which the Company is exposed and seeks to minimise potential adverse effects on the Company’s financial performance.

The following is a high level summary of the investment exposures by the Company’s investment and trading portfolios as at 31 March 2015 and 31 March 2014.

2015 2014

Rs. % Rs. %

Trading portfolio - fair value through profit or lossGovernment securities - treasury bonds 3,122,767,755 18% 2,743,177,532 22% treasury bills 137,533,691 1% 601,857,276 5%Loans and receivables- Government securities purchased under resale agreements (Reverse repo) 13,965,579,690 81% 8,982,910,707 73%Total 17,225,881,136 100% 12,327,945,515 100%

The risk officer at middle office overlooks the risk management function of the Company. As the company's portfolio solely consists of government securities, no significant credit risk has been identified since the product is issued by the Central Bank of Sri Lanka. The exposure to interest rate risk is regularly reviewed by the Integrated Risk Management Committee and the Board of Directors. In addition, internal audit is responsible for the independent review of risk management and the control environment.

The Company’s use of leverage can increase the Company’s exposure to these risks, which in turn can also increase the potential returns the Company can achieve. The Company has specific limits to manage the overall potential exposure within the risk and return policy framework. These limits include the ability to purchase government securities, ability to engage repo and reverse repo transactions. As per the Central Bank of Sri Lanka directions, the minimum capital requirement is the higher of Rs. 300 million (minimum capital) or the capital sufficient to meet the interest rate sensitivity of the trading portfolio plus reverse repo and capital for disallowances (capital charge) and capital for counterparty credit risk.

As evident from the investment exposures reflected in the above table, the business maintains an optimum exposure to identified asset classes to generate investment returns without excessive exposure to high risk assets.


Ent

rust

Sec

uriti

es P

LC

Fina

ncia

l, E

nviro

nmen

tal &

Soc

ial P

erfo

rman

ce A

nnua

l Rep

ort 2

014/

15

5 Financial risk management (contd...)

5.1.1 Liquidity risk

Liquidity is the availability of funds, or assurance that funds will be available, to honour all cash outflow obligations as and when they fall due. These commitments are generally met through cash inflows, supplemented by assets readily convertible to cash or through the Company’s capacity to enter into repurchase agreements.

Cash flow forecasting is performed by both front office and treasury divisions on a daily basis. The treasury operations division daily monitors and forecasts the liquidity requirement of front office (dealing division) to ensure it has sufficient cash to meet operational needs.

Managing liquidity is a fundamental component in risk management. This involves prudently managing assets and liabilities (on- and off-balance sheet) to ensure that cash inflows have an appropriate relationship to approaching cash outflows. This needs to be supported by a process of liquidity planning which assesses potential future liquidity needs, taking into account the changes in economic, regulatory or other operating requirements. Such planning involves identifying known, expected and potential cash outflows and weighing alternative asset/liability management strategies to ensure that adequate cash inflows will be available to the Company to meet these needs.

The table below analyses the Company’s financial liabilities into relevant maturity groupings based on the remaining period at the statement of financial position date to the contractual maturity date. The amounts disclosed in the table are the contractual undiscounted cash flows.

Between Between Over Total

At 31 March 2015Less than 3 months

3 months - 1 year

1 - 5 years 5 years

Securities sold under repurchase agreements

13,765,768,266 2,339,298,110 - - 16,105,066,376

Trade and other payables (ex statutory liabilities)

4,272,702 - - - 4,272,702

Operating lease commitments - 9,750,281 7,170,796 - 16,921,077 Total 13,770,040,968 2,349,048,391 7,170,796 - 16,126,260,155

Between Between Over Total

At 31 March 2014Less than 3 months

3 months - 1 year

1 - 5 years 5 years

Securities sold under repurchase agreements

7,662,213,408 3,711,589,261 - - 11,373,802,669

Trade and other payables (ex statutory liabilities)

5,629,277 - - - 5,629,277

Operating lease commitments - 6,588,451 20,733,538 - 27,321,989 Total 7,667,842,685 3,718,177,712 20,733,538 - 11,406,753,935

The maturity profile of the government securities which is designed and managed to meet the required level of liquidity as and when liquidity needs arises taking into consideration the time horizon of the financial liabilities of the business:

Controls in place to mitigate liquidity risk

The key controls in managing liquidity is as follows:

Liability Basket (Repo limitation based on Tenures): All the financial liabilities of the Company are same as the total repo portfolio. Hence by looking at the risk perspective, repo limits are being defined as of the total repo portfolio. The maximum threshold limits for repo / liability profile on different time periods has been listed.

Repo limits: Company is required to ensure adherence to the counter party limits prescribed by Board of Directors. In a market condition where the liquidity levels are low dealers are authorized to engage in repurchase transactions from the Central Bank of Sri Lanka - OMO (Open Market Operations) to cover the overall position.


93E

ntru

st S

ecur

ities

PLC

Fi

nanc

ial,

Env

ironm

enta

l & S

ocia

l Per

form

ance

Ann

ual R

epor

t 201

4/15


5.1.1 Liquidity risk (contd...) Rev-Repo limits: When the Company is running in to excess liquidity, the dealers should find a counterparty

(Licensed Commercial Banks, PDs’ etc.) from the market to purchases under resale agreements or if there aren’t any counterparties the company should transact to Central Bank of Sri Lanka - OMO (Open Market Operations) in order to square the overall position.

As at 31 March 2015

< 1 Yr 1Yr - 5 Yrs 5Yr - 10 Yrs > 10Yrs No statedmaturity

Total

Fair value through profit or lossInvestments in government securities [Note 7.1] 639,321,873 1,863,644,187 479,101,652 278,233,734 - 3,260,301,446Loans and receivablesGovernment securities purchased under resale agreements

12,392,221,471 1,573,358,219 - - - 13,965,579,690

Other loans and receivablesOther receivables (ex prepayment) 10,423,348 - - 1,000,000 11,423,348Cash and cash equivalents 2,347,761 - - - 2,347,761

13,044,314,453 3,437,002,406 479,101,652 278,233,734 1,000,000 17,239,652,245

As at 31 March 2014< 1 Yr 1Yr - 5 Yrs 5Yr - 10 Yrs > 10Yrs No stated

maturity Total

Fair value through profit or lossInvestments in government securities * 1,299,255,231 1,421,765,724 617,900,706 6,113,147 - 3,345,034,808Government securities

purchased under resale agreements * 8,982,910,707 - - - - 8,982,910,707Other receivables

(ex prepayment) 18,764,573 - - - 1,000,000 19,764,573Assets held for sale 2,224,832 - - - - 2,224,832Cash and cash equivalents 857,739 - - - - 857,739

10,304,013,082 1,421,765,724 617,900,706 6,113,147 1,000,000 12,350,792,659

* The amounts stated above are inclusive of accrued interest.

5.1.2 Credit risk

Credit risk is the risk of suffering financial loss, should any of the Company’s customers, clients or market counterparties fail to fulfil their contractual obligations to the Company.

The Company is exposed to risk arising from its business activities (‘trading exposures’), in the settlements (settlement risk) in reverse repurchase transactions with market counterparties. The credit risk management and control are centralized in the Asset & Liability Committee, which reports to the Board of Directors and head of each business unit regularly.

Prudential limits are set in order to minimise the organisations ability to take risks in order to ensure the safety of the stakeholders and the stability of the financial system.


Ent

rust

Sec

uriti

es P

LC

Fina

ncia

l, E

nviro

nmen

tal &

Soc

ial P

erfo

rman

ce A

nnua

l Rep

ort 2

014/

15


5.1.2 Credit risk (contd...)

The below table reflects the credit ratings of the financial assets of the business.

As at 31 March 2015Sovereign

riskAAA AA A Non rated Total

Fair value through profit or lossInvestments in government

securities [Note 7.1] 3,260,301,446 - - - - 3,260,301,446Loans and receivablesGovernment securities

purchased under resale agreements [Note 7.2] 13,965,579,690 - - - - 13,965,579,690Other receivables (excluding prepayments) - - - - 11,423,348 11,423,348 Cash and cash equivalents 1,241,950 247,915 303,911 545,075 8,910 2,347,761

17,227,123,086 247,915 303,911 545,075 11,432,258 17,239,652,245

As at 31 March 2014Sovereign

riskAAA AA A Non rated Total

Fair value through profit or lossInvestments in government securities 3,345,034,808 - - - - 3,345,034,808Loans and receivablesGovernment securities

purchased under resale agreements 8,982,910,707 - - - - 8,982,910,707Other receivables - - 19,764,573 19,764,573 (excluding prepayments) - -Assets held for sale - - - - 2,224,832 2,224,832 Cash and cash equivalents 272,576 247,915 198,751 118,497 20,000 857,739

12,328,218,091 247,915 198,751 118,497 22,009,405 12,350,792,659 5.1.3 Market risk

The Company is exposed to market risks, where the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices/yields. Market risks arise from open positions in interest rate, of which are exposed to general and specific market movements and changes in the level of volatility of market rates of securities or price of securities. The Company separates exposures to market risk into either financial assets held to maturity or financial assets fair value through profit or loss. The Company's the primary source of market risks are interest rate risk.

Credit and liquidity risks are defined and managed as separate risks. However, assessment of market risk does consider the interdependence between interest rate risks, and credit and liquidity risk (eg; loss incurred in the marked to market of the trading portfolio arises due to the liquidity shortfall in the money market).

5.1.3.1 Cash flow interest rate risk is the risk that the future cash flows of a financial instrument will fluctuate because of changes in market interest rates. Fair value interest rate risk is the risk that the value of a financial instrument will fluctuate because of changes in market interest rates. The Company takes on exposure to the effects of fluctuations in the prevailing levels of market interest rates on both its fair value and cash flow risks. Interest margins may increase as a result of such changes but may reduce losses in the event that unexpected


95E

ntru

st S

ecur

ities

PLC

Fi

nanc

ial,

Env

ironm

enta

l & S

ocia

l Per

form

ance

Ann

ual R

epor

t 201

4/15


5.1.3.1 (contd...)

movements arise. The Board of Directors sets limits on the level of mismatch of interest rate re-pricing and value at risk that may be undertaken, which is monitored daily by the risk officer at middle office.

The risk of an adverse financial impact due to changes in the absolute level of interest rates, in the shape or curvature of the yield curve or in any other interest rate relationship including volatility and spread between different yield curves.

The table below summarizes the nature of the interest rate risk associated with financial assets and financial liabilities:

As at 31 March 2015 Fixed interest Non interest

bearing Total

Financial assetsSecurities purchased under resale agreements* [Note 7.2] 13,965,579,690 - 13,965,579,690 Cash and cash equivalents [Note 6] 145,892 2,201,869 2,347,761

13,965,725,582 2,201,869 13,967,927,451

Financial liabilitiesSecurities sold under repurchase agreements* 16,105,066,376 - 16,105,066,376

As at 31 March 2014 Fixed interest Non interest

bearing Total

Financial assetsSecurities purchased under resale agreements* 8,982,910,707 - 8,982,910,707 Cash and cash equivalents - 857,739 857,739

8,982,910,707 857,739 8,983,768,446

Financial liabilitiesSecurities sold under repurchase agreements* 11,373,802,669 - 11,373,802,669

* The amounts stated above are inclusive of accrued interest.

5.1.3.2 The Company is exposed to government securities price risk. This arises from investments held by the Company for which prices in the future are uncertain. The Company’s policy requires that the overall market position is monitored on a daily basis by the company’s chief dealer and senior dealers and also is reviewed on a quarterly basis by the Board of Directors. Compliance with the Company’s investment policies are reported to the Board.

5.1.3.3 The sensitivity analysis for interest rate risk illustrates how changes in the fair value or future cash flows of a financial instrument at the reporting date will fluctuate in response to assumed movements in market interest rates. The management monitors the sensitivity of reported fair value of financial instrument on a regular basis by assessing the projected changes in the fair value of financial instruments held by the portfolios in response to assumed parallel shift in the yield curve by +/- 100 basis points.

2015 2014

Impact to;Net asset

valueProfit before

taxNet asset

valueProfit before

tax

Interest rate risk+100 basis pointsGovernment securities (91,262,829) (91,262,829) (64,288,000) (64,288,000)-100 basis pointsGovernment securities 97,047,203 97,047,203 67,013,000 67,013,000


Ent

rust

Sec

uriti

es P

LC

Fina

ncia

l, E

nviro

nmen

tal &

Soc

ial P

erfo

rman

ce A

nnua

l Rep

ort 2

014/

15


5.1.3.3 (contd...)

Controls in place to mitigate market Risk

Cut loss policy of the trading portfolio: In an adverse interest rate scenario dealers should implement the cut loss policy and should exit from the trading portfolio as laid down by policy paper.

Volume limits of the Trading portfolio: Though maximum tolerance levels are stated for the trading portfolio of the company, the limits on individual tenor and volume to be decide by dealers based on the prevailing market conditions and forwarded to Asset and Liability Committee (ALCO) and Board of Directors for formal approval.

Funding strategies: The Company has established a funding strategy that provides effective diversification in the sources and tenure of funding. It should maintain an ongoing presence in its chosen funding markets and strong relationships with funding sources to promote effective diversification. Over-reliance on a single source of funding should be avoided through implementing counter party limits and in-turn mitigate any adverse interest rate impact.

5.2 The Company’s objectives when managing capital are to safeguard the Company’s ability to continue as a going concern in order to provide returns for shareholders and benefits for other stakeholders and to maintain an optimal capital structure to reduce the cost of capital.

In order to maintain or adjust the capital structure, the Company may adjust the amount of dividends paid to shareholders, return the capital to shareholders, issue new shares or sell assets to reduce debt.

5.2.1 Capital adequacy ratio

Consistent with others in the industry, the Company monitors capital on the basis of risk weighted capital adequacy ratio as prescribed by the Central Bank of Sri Lanka. This ratio is calculated as available capital divided by risk weighted assets. The minimum capital adequacy ratio is 8%. Total capital is calculated as ‘equity’ including preference shares.

The capital adequacy ratios at 31st March 2015 and 31st March 2014 were as follows:

As at 31 March 2015 2014

Total risk weighted assets 5,792,434,693 5,092,272,000

Stated capital 220,000,070 220,000,000 Reserve capital 960,146,156 792,642,808

1,180,146,226 1,012,642,878

Capital adequacy ratio 20.37% 19.88%

The Company’s approach to managing capital involves managing assets, liabilities and risks in a coordinated and concerted manner, assessing shortfalls between reported and required capital levels on a regular basis and taking appropriate actions to influence the capital position of the Company in light of changes in economic conditions and risk appetites. An important aspect of the Company's overall capital management process is the setting of target risk adjusted rates of return which are aligned to performance objectives and risk appetite to ensure that the Company is focused on the creation of value for all stakeholders.


97E

ntru

st S

ecur

ities

PLC

Fi

nanc

ial,

Env

ironm

enta

l & S

ocia

l Per

form

ance

Ann

ual R

epor

t 201

4/15

6 Cash and cash equivalents

As at 31 March 2015 2014

Cash in hand and at bank 2,347,761 857,739

For the purpose of the cash flow statement, the year end cash and cash equivalents comprise the following:

As at 31 March 2015 2014

Central Bank of Sri Lanka 1,096,058 272,576 Cash at bank 1,096,901 565,163 Cash in hand 8,910 20,000 Short Term Investments 145,892 -

2,347,761 857,739

7 Financial assets

Financial assets summarised by measurement category are shown in the table below.

2015 2014

As at 31 March Carrying value Fair value Carrying value Fair value

Fair value through profit or loss 7.1 3,260,301,446 3,260,301,446 3,345,034,808 3,345,034,808 Securities purchased under resale agreements 7.2 13,965,579,690 13,965,579,690 8,982,910,707 8,982,910,707

17,225,881,136 17,225,881,136 12,327,945,515 12,327,945,515

The fair values of securities purchased under resale agreements have been estimated by comparing current market interest rates of similar instruments with the rates offered when the agreements were first recognised, together with appropriate market credit adjustments except for the securities purchased under resale agreements considered to be current of which fair value approximates the carrying value.

7.1 Financial assets at fair value through profit or loss

As at 31 March 2015 2014

Government securities 3,260,301,446 3,345,034,808 3,260,301,446 3,345,034,808

Treasury bills 137,533,691 601,857,276 Treasury bond 3,122,767,755 2,743,177,532

3,260,301,446 3,345,034,808


Ent

rust

Sec

uriti

es P

LC

Fina

ncia

l, E

nviro

nmen

tal &

Soc

ial P

erfo

rman

ce A

nnua

l Rep

ort 2

014/

15

7

7.1

Financial assets (contd...)

Financial assets at fair value through profit or loss (contd...)

Government securities classified at fair value through profit or loss are designated in this category upon initial recognition. There are no non-derivative financial assets held for trading.

These securities have been given as collaterals for securities sold under sold under repurchase agreements.

The fair value of those collaterals given are as follows;

As at 31 March Nature of the collateral 2015 2014

Financial asset Fair value through profit or loss - Government treasury bills 137,533,691 601,857,276

- Government treasury bonds 3,122,767,755 2,743,177,532 3,260,301,446 3,345,034,808

7.2 Securities purchased under resale agreements

As at 31 March 2015 2014

Reverse Repurchase agreements 13,965,579,690 8,982,910,707 13,965,579,690 8,982,910,707

Reverse Repurchase agreements - Within 1 year 12,392,221,471 8,982,910,707 Reverse Repurchase agreements - After 1 year 1,573,358,219 -

13,965,579,690 8,982,910,707

Securities purchased under resale agreements includes related parties amounting to Rs. 5,440,897,556 as disclosed in Note 30 b (iv) to the financial statements.

The interest yield of securities purchased under resale agreements was 8.24% (2014 - 12.24%).

7.3 Determination of fair value and fair values hierarchy

Level 1 Level 2 Level 3 Level 4

Financial assets at fair value through profit or lossGovernment securities- Treasury bills [Note 7.1] 137,533,691 - - 137,533,691 - Treasury bonds [Note 7.1] 3,122,767,755 - - 3,122,767,755 Total financial assets at fair value as at 31 March 2015 3,260,301,446 - - 3,260,301,446

Level 1 Level 2 Level 3 Level 4

Financial assets at fair value through profit or lossGovernment securities- Treasury bills [Note 7.1] 601,857,276 - - 601,857,276 - Treasury bonds [Note 7.1] 2,743,177,532 - - 2,743,177,532 Total financial assets at fair value as at 31 March 2014 3,345,034,808 - - 3,345,034,808


99E

ntru

st S

ecur

ities

PLC

Fi

nanc

ial,

Env

ironm

enta

l & S

ocia

l Per

form

ance

Ann

ual R

epor

t 201

4/15

7 Financial assets (contd...)

7.4 Fair value estimation

The table below analyses financial instruments carried at fair value, by valuation method. The different levels have been defined as follows:

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

• Inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly (that is, as prices) or indirectly (that is, derived from prices) (Level 2);

• Inputs for the asset or liability that are not based on observable market data (that is, unobservable inputs) (Level 3).

The following table presents the Company’s assets and liabilities that are measured at fair value at 31st March 2014 and 31st March 2015.

As at 31 March 2015 2014

AssetsFinancial assets at fair value through profit or loss 3,260,301,446 3,345,034,808 - Government Securities 3,260,301,446 3,345,034,808


0E

ntru

st S

ecur

ities

PLC

Fi

nanc

ial,

Env

ironm

enta

l & S

ocia

l Per

form

ance

Ann

ual R

epor

t 201

4/15

8 Deposits, prepayments and other receivables

As at 31 March 2015 2014

Deposits in Lanka Financial Services Bureau 1,000,000 1,000,000 Advances and prepayments 2,862,746 5,182,749 Other receivables 9,292,217 9,810,286 Receivable from related parties [Note 30 b (i)] 1,131,131 8,954,287

14,286,094 24,947,322

9 Gratuity fund investment

As at 31 March 2015 2014

Fund asset at beginning of year 5,578,032 5,235,709

Increase of Investment to the fund 761,905 -

Interest received on the assets 408,423 507,323

Settlements during the year (99,000) (165,000)Fund asset at the end of year 6,649,360 5,578,032

Above balance represents the fund maintained in a separate securities purchased under resale agreement to meet employees' retirement gratuity obligation.

10 Assets held for sale

During the last financial year the Company has shifted to new office location which results to cease some of its fixed assets used in previous premises. Management has decided to recover the carrying value of those assets through sale and accordingly re-classified above fixed assets not in use as “Assets held for sale”.

The carrying value and realisable value of assets held for sale was as follows;

2015 2014

As at 31 March Net book value Realised value Net book value Realised value

Furniture and fittings - - 1,380,932 477,942

Office equipment - - 837,161 1,752,515

Computer equipment - - 6,739 9,600 - - 2,224,832 2,240,057


101

Ent

rust

Sec

uriti

es P

LC

Fina

ncia

l, E

nviro

nmen

tal &

Soc

ial P

erfo

rman

ce A

nnua

l Rep

ort 2

014/

15

11 Property, plant and equipment

Land Furniture Computer and

equipment

Office equipment

Motor vehicle

Total

As at 31 March 2013

Cost 72,025,400 5,856,940 12,079,899 5,127,939 5,200,182 100,290,360 Accumulated depreciation - (3,279,463) (9,625,254) (3,326,249) (1,711,693) (17,942,659)Net book amount 72,025,400 2,577,477 2,454,645 1,801,690 3,488,489 82,347,701

Year ended 31 March 2014

Opening net book amount 72,025,400 2,577,477 2,454,645 1,801,690 3,488,489 82,347,701 Additions during the year - 6,357,669 953,590 2,289,375 - 9,600,634 Disposals during the year - (16,185) (46,883) (42,443) (3,404,665) (3,510,176)Re-classification - Cost - (1,380,932) (6,739) (837,161) - (2,224,832)Depreciation charges [Note 20] - (1,422,426) (1,378,306) (874,961) (83,824) (3,759,517)Closing net book amount 72,025,400 6,115,603 1,976,307 2,336,500 - 82,453,810

At 31 March 2014

Cost 72,025,400 6,295,671 12,747,982 3,892,601 118,448 95,080,102 Accumulated depreciation - (180,068) (10,771,675) (1,556,101) (118,448) (12,626,292)Net book amount 72,025,400 6,115,603 1,976,307 2,336,500 - 82,453,810

Year ended 31 March 2015

Opening net book amount 72,025,400 6,115,603 1,976,307 2,336,500 - 82,453,810 Additions during the year - 55,161 494,757 116,029 - 665,947 Disposals during the year-Cost - - (520,806) (118,448) (639,254)Accumulated depreciation of disposals 372,866 118,448 491,314 Re-classification-Cost (Refer below C) 955,155 (955,155) - - Accumulated depreciation (943,177) 943,177 - Depreciation charges [Note 20] - (1,943,005) (1,193,438) (852,151) - (3,988,594)Closing net book amount 72,025,400 4,227,759 1,141,664 1,588,400 - 78,983,223

At 31 March 2015

Cost 72,025,400 6,350,832 13,677,088 3,053,475 - 95,106,795 Accumulated depreciation - (2,123,073) (12,535,424) (1,465,075) - (16,123,572)Net book amount 72,025,400 4,227,759 1,141,664 1,588,400 - 78,983,223

(a) The cost of fully depreciated assets still in use as at 31 March 2015 amounted to Rs. 11,618,881 (2013 - Rs. 9,743,526).

(b) Land owned by the Company comprises of 17.29 perches and is located in Colombo 3. The market value of the land as at 31st March 2015 is Rs. 100 Million approximately.

(C) During the year company has reclassified office equipments worth of Rs. 972,226 (accumulated depriciation - Rs. 959,684) to computer equipments & Rs. 17,070 (Accumulated depreciation Rs. 16,508) vice versa.


2E

ntru

st S

ecur

ities

PLC

Fi

nanc

ial,

Env

ironm

enta

l & S

ocia

l Per

form

ance

Ann

ual R

epor

t 201

4/15

11 Property, plant and equipment (contd...)

(a) During the year, the company transferred property, plant and equipment which net book value of Rs 60,660 (2014 - Rs 162,639) to related parties and generated a disposal profit of Rs 140,176 (2014 - Rs. 59,083).

(b) Property, plant and equipment includes motor vehicle acquired under finance lease, the net book value of which is made up as follows:

As at 31 March 2015 2014

Cost - capitalised finance leases - 4,900,700 Accumulated depreciation - (1,511,049)Disposals - (3,389,651)Net book amount as at year end - -

12 Stated capital Number of

sharesValue (Rs.)

As at 31 March 2015 33,000,014 220,000,070 As at 31 March 2014 33,000,014 220,000,000

The addition of Rs. 70 represents the value of seven (7) ordinary shares of Rs. 10 each, initially allotted to the promoters of the Company which were subsequently transferred to the holding Company, Entrust Limited at the time of the Company's listing on the Colombo Stock Exchange. With the restructuring of Entrust Group on 27 May 2014, Entrust Limited transferred its existing shareholding of Entrust Securities PLC to the new holding Company i.e. Entrust Holdings Limited. Since the value of the above mentioned Promoters' shares had been omitted from the Company's books of accounts since inception and also since the amount is immaterial, the Company has subsequently adjusted this omission, during the current year.

13 Financial liabilities

As at 31 March 2015 2014

- Government securities sold under repurchase agreements 16,105,066,376 11,373,802,669

Payable under repurchase agreements includes related parties as disclosed in Note 30 b (iii) to the financial statements.

Average interest paid percentage on government securities sold under repurchase agreements was 7.41% (2014 - 10.99%)


103

Ent

rust

Sec

uriti

es P

LC

Fina

ncia

l, E

nviro

nmen

tal &

Soc

ial P

erfo

rman

ce A

nnua

l Rep

ort 2

014/

15

14 Accruals, provisions and other payables

As at 31 March 2015 2014

Accrued expenses [refer (a) below] 3,462,658 4,543,911 Other payables [refer (b) below] 30,632,039 40,952,713 Payable to related parties [Note 30 b (ii)] 1,239,591 6,143,475

35,334,288 51,640,099

(a) Accrued expenses mainly consist of printing and publication expenses Rs 1,400,000 (2014 - Rs 1,500,000) and sales commission Rs 262,480 (2014 - Rs 164,389).

(b) Other payables mainly consist of bonus payable of Rs 26,359,337 (2014 - Rs. 35,323,436) and miscellaneous payable of Rs 727,966 (2014 - Rs 3,039,025) relating to unpresented cheques.

15 Post-employment benefit obligation - gratuityPost-employment benefit obligation comprises of provision for gratuity. The amounts recognised in the statement of financial position are determined as follows:

As at 31 March 2015 2014

Present value of unfunded obligation 7,600,684 5,921,674 Liability in the statement of financial position 7,600,684 5,921,674

The movement in the defined benefit obligation over the year is as follows:

As at 31 March 2015 2014

At beginning of year 5,921,674 4,709,182 Current service costs 814,906 697,392 Interest costs 589,202 533,668 Actuarial loss 282,902 146,432 Receipts due to staff in-transfers 91,000 - Payments made during the year (99,000) (165,000)At end of year 7,600,684 5,921,674

The amounts recognised in the statement of comprehensive income are as follows:

As at 31 March 2015 2014

Statement of income:- Current service cost 814,906 697,392 - Interest cost 589,202 533,668 Total included in the staff costs [Note 21] 1,404,108 1,231,060

Other comprehensive loss:- Actuarial loss 282,902 146,432


4E

ntru

st S

ecur

ities

PLC

Fi

nanc

ial,

Env

ironm

enta

l & S

ocia

l Per

form

ance

Ann

ual R

epor

t 201

4/15

15 Post-employment benefit obligation - gratuity (contd...)

The principal actuarial assumptions used were as follows:

As at 31 March 2015 2014

Discount rate per annum 10.03% 12.13%Annual salary increment rate 12.00% 12.00%Retiring age 55 55 Staff turnover 12.50% 22.22%

Sensitivity analysis of key actuarial assumptions used:

Future salary increases Discount rate

Discount rate

1% increase 1% decrease 1% increase 1% decrease

The effect on;- The current service cost 54,575 (51,588) (52,026) 56,105 - Interest cost - - 58,745 (58,744)

16 Interest income on government securities

Year ended 31 March 2015 2014

Interest income on investment and trading securities 342,359,848 318,308,390 Interest income on securities purchased under resale agreements 944,937,549 840,415,170

1,287,297,397 1,158,723,560

17 Interest expense


Interest expenses on government securities sold under repurchase agreements (1,018,251,931) (976,342,224)

18 (Losses)/ Gains from revaluation of government securities


Treasury bonds (120,441,000) 57,015,000Treasury bills (854,000) 758,000

(121,295,000) 57,773,000


105

Ent

rust

Sec

uriti

es P

LC

Fina

ncia

l, E

nviro

nmen

tal &

Soc

ial P

erfo

rman

ce A

nnua

l Rep

ort 2

014/

15

19 Other income


Profit on disposal of property, plant and equipment 97,885 546,051 Profit on assets held for sale 15,225 - Miscellaneous income 1,008,472 357,343

1,121,582 903,394

20 Expenses by natureThe following items have been charged in arriving at operating profit:


Directors' emoluments 4,870,000 3,020,333 Advertising and promotions 913,601 3,030,330 Auditors' remuneration 400,000 350,000 Staff costs [Note 21] 50,940,374 63,632,920 Depreciation on property, plant and equipment [Note 11] 3,988,594 3,759,517 Transport expenses 9,090,421 9,777,179 Swift, bloomberg and bank charges 8,273,842 9,325,766 Other administration and selling expenses 36,828,257 32,492,030

115,305,089 125,388,075

21 Staff costs


Salaries and bonuses 45,175,102 57,792,582 Staff welfare 1,343,883 1,447,610 Defined contribution plans 3,017,281 3,161,668 Defined benefit obligation [Note 15] 1,404,108 1,231,060

50,940,374 63,632,920

Monthly average number of persons employed by the Company during the year - full time 17 21 No. of persons employed by the Company at the year end 14 19

22 Other finance income - net


Other finance incomeInterest income from gratuity fund investment 408,422 507,323

408,422 507,323

Other finance costsLease interest - (15,945)Other finance income - net 408,422 491,378


6E

ntru

st S

ecur

ities

PLC

Fi

nanc

ial,

Env

ironm

enta

l & S

ocia

l Per

form

ance

Ann

ual R

epor

t 201

4/15

23 Income taxes and VAT on financial services (a) No income tax is provided as the management is of the view that the Company's interest income is not

liable and not a part of its assessable income for income tax under section 32 as it is in the business of primary dealer. Further, the company does not pay VAT on financial services under section 25 (A) as the management is of the opinion that the Company is not in the business of providing financial services. Except as noted in Note 23 (b), the Company has not received any assessment of income tax and VAT on financial services from the Department of Inland Revenue.

(b) The Department of Inland Revenue has issued an assessment for the income tax for the year of assessment 2003/2004. The appeal made by the Company against the said notice of assessment had been determined by the Commissioner General of Inland Revenue reducing the assessable income. Accordingly, the income tax payable for the year of assessment 2003 / 2004 is LKR 29,099,850 (excluding penalty that is limited to a maximum of 50% of the amount of tax outstanding).The Company is of the opinion that there's no further tax liability with the representations made by tax advisor according to the Inland Revenue Act No.10 of 2006.

However, The Company made a petition of appeal to the Board of Review against the said determination of the Commissioner General of Inland Revenue and the Board of Review has made its determination confirming the determination of the Commissioner General of Inland Revenue.

Therefore, the Company filed a case in the Court of Appeal seeking the determination on the questions of law arising on the stated case of the Board of Review. The case is still pending.

24 Withholding TaxThe Company pays Withholding Tax at source on purchase of treasury Bills and treasury Bonds. The Company recognises interest income from those instruments net of Withholding Tax paid.

25 Earnings per shareEarnings per share is calculated by dividing the net profit attributable to shareholders by the weighted average number of ordinary shares in issue during the year.


Net profit attributable to shareholders (Rs) 220,916,273 274,503,679 Weighted average number of ordinary shares in issue 33,000,014 33,000,014 Earnings per share (Rs)- basic 6.69 8.32

26 Dividend per share(a) The Company has distributed a dividend of Rs 1.61 per share amounting to Rs 53.13 million on 10 October

2014.


107

Ent

rust

Sec

uriti

es P

LC

Fina

ncia

l, E

nviro

nmen

tal &

Soc

ial P

erfo

rman

ce A

nnua

l Rep

ort 2

014/

15

27 Cash generated from operations

Reconciliation of profit before tax to cash generated from operations:


Profit before income tax 220,916,273 274,503,679

Adjustments for:

Depreciation [Note 11] 3,988,594 3,759,517

Loss / (gain) from revaluation of government securities 121,295,000 (57,773,000)

Provision for gratuity [Note 15] 1,404,108 1,231,060

Changes in operating assets and liabilities:

- Financial assets Fair value through profit or loss (36,561,638) (1,168,157,829)

- Securities purchased under resale agreements (4,982,668,983) (4,233,566,201)

- Financial assets Held-to-maturity - 187,569,790

- Securities sold under repurchase agreements 4,731,263,707 4,976,490,571

- Other assets 10,661,228 (7,378,755)

- Other liabilities (16,305,811) 27,119,328

Profit on disposal of property, plant and equipment (97,885) (546,051)

Profit on disposal of assets held for sale (15,225) - Cash generated from operations 53,879,368 3,252,109

28 Contingent liabilitiesThere were no contingent liabilities except for any liability which may arise from matters stated in Note 23.

29 Commitments(a) Capital commitments Capital expenditure approved but not disbursed as at 31 March 2015 - Rs. 1,464,847

There were no material capital commitments outstanding at the statement of financial position date other than disclosed above.

(b) Operating lease commitments

The future aggregate minimum lease payments under cancellable operating leases are as follows;

As at 31 March 2015 2014

No later than 1 year 9,750,281 6,588,451

Later than 1 year and no later than 5 years 7,170,796 20,733,538 Total 16,921,077 27,321,989


8E

ntru

st S

ecur

ities

PLC

Fi

nanc

ial,

Env

ironm

enta

l & S

ocia

l Per

form

ance

Ann

ual R

epor

t 201

4/15

30 Related party transactionsMrs R D Senerath who is a director and shareholder of the Company is also a director of the Entrust Limited, Multi Finance PLC, Entrust Investments Limited, Entrust Capital Partners (Private) Limited, Entrust Holdings Limited, Entrust Wealth Management Limited, The Standard Credit Finance Limited, Entrust Capital Markets (Private) Limited, Western Sports Management (Private) Limited, and Entrust Healthcare Limited.

Mr I D B Dasanayake and Mr C U Ratwatte who are directors of the Company are also a directors of Entrust Limited, Multi Finance PLC, Entrust Investments Limited, Entrust Capital Partners (Private) Limited, Entrust Holdings Limited, Entrust Wealth Management Limited, The Standard Credit Finance Limited, Entrust Capital Markets (Private) Limited, Western Sports Management (Private) Limited, Pacific Trust (Private) Limited, Platinum Capital (Private) Limited, and Entrust Healthcare Limited. Mr I D B Dasanayake is also a director of Maruthi Estate (private) Limited and Nippon Holdings (Private) Limited.

Dr Nalin Jayasooriya who is a director of the Company is also a director of McQuire Rens and Jones (Private) Limited and Eswaran Brothers Exports (Private) Limited.

Mr C U Ratwatte who is a director of the Company is also a director of Brave Guard Security and Investigation Services Limited.

Mr R M S Tilakawardana is also a director of Multi Finance PLC, SLT Human Capital Solutions (Private) Limited, ABS Informations (Private) Limited and Selronne (Private) Limited.

Mr G A K Nanayakkara is also a director of Resus Energy PLC (formerly known as Hemas Power PLC) and Pan Asia Power PLC

(a) The following transactions were carried out with related parties:

As at 31 March 2015 2014

(i) Capital gain

Entrust Limited 19,075,088 8,010,356

(ii) Reimbursement of expense

Entrust Limited 8,886,351 7,848,851 Multi Finance PLC 121,898 -

(iii) Recovery of expenses

Entrust Limited 9,737,300 8,717,946 Multi Finance PLC 2,269,925 138,006 Entrust Healthcare Limited - 22,839

(iv) Interest income

Entrust Limited 416,808,561 557,218,012 Multi Finance PLC - 118,464 Entrust Healthcare Limited - 753

(v) Interest expense

Entrust Limited 26,456,005 16,810,364 Multi Finance PLC 306,661 1,201,386 Entrust Healthcare Limited - 161,231 Entrust Capital Markets (Private) Limited 1,268,071 - Directors of Entrust Securities PLC 515,320 390,622


109

Ent

rust

Sec

uriti

es P

LC

Fina

ncia

l, E

nviro

nmen

tal &

Soc

ial P

erfo

rman

ce A

nnua

l Rep

ort 2

014/

15

30 Related party transactions (contd...)

As at 31 March 2015 2014

(vi) Service charges

McQuire Rens & Jones (Private) Limited 23,548 17,483 Brave Guard Security and Investigation Services - 364,426

(vii) Disposal profit [Note 11]

Entrust Limited 59,503 35,069 Entrust Wealth Management Limited 80,673 - Multi Finance PLC - 24,014

(b) Year end balances arising from the above transactions;

(i) Receivables from related parties

Entrust Limited 777,064 8,925,472 Multi Finance PLC 185,322 4,573 Entrust Wealth Management Limited 168,745 - Entrust Healthcare Limited - 24,242

1,131,131 8,954,287

(ii) Payable to related parties

Entrust Limited 1,228,456 6,143,475 Multi Finance PLC 11,135 -

1,239,591 6,143,475

(iii) Payables to related parties on securities sold

under repurchase agreements:

Entrust Limited 145,328,078 107,964,766 Multi Finance PLC 27,105,199 274,651 Entrust Capital Markets (Private) Limited 10,168,071 - Directors of Entrust Securities PLC 10,092,879 4,088,503

192,694,227 112,327,920

(iv) Receivable from related parties on securities

purchased under resale agreements

Entrust Limited 5,440,897,556 6,023,642,237

(v) Compensation to Key Management Personnel Short term benefits

Emoluments of directors 4,870,000 3,020,333 Emoluments of senior management 30,496,100 22,771,247

35,366,100 25,791,580

31 Events after the reporting periodNo events have occurred since the statement of financial position date which require adjustment to, or disclosure in, the financial statements.


0E

ntru

st S

ecur

ities

PLC

Fi

nanc

ial,

Env

ironm

enta

l & S

ocia

l Per

form

ance

Ann

ual R

epor

t 201

4/15

Investor Information

20 Major Shareholders as at 31st March 2015

Name No of Shares %

1 ENTRUST HOLDINGS LIMITED 28,653,814 86.83

2 ENTRUST LIMITED 628,600 1.90

3 MR. F.R. MUZAMMIL 168,465 0.51

4 MRS. E.M.I. WIJEYAWICKREMA 153,980 0.47

5 MRS. D.N. KEERTHISINGHE 150,000 0.45

6 MR. R.R.S. ANANDA 108,352 0.33

7 MISS. R.W.K.C.M.M.A.S. FERDINANDO 105,000 0.32

8 FIRST CAPITAL MARKETS LTD/ MR. S.N. KUMAR 102,701 0.31

9 COMMERCIAL BANK OF CEYLON PLC/ S.R. FERNANDO 102,093 0.31

10 MR. D.L. WIJESURIYA 100,000 0.30

11 MRS. H.G. CHANDRALATHA 100,000 0.30

12 MULTI FINANCE PLC 100,000 0.30

13 MRS. R.K. RUWANPATHIRANAGE 100,000 0.30

14 MR. K.S. GANESHAN 77,000 0.23

15 MR. M.H. SULAIMAN 75,000 0.23

16 MRS. U.N.S. FERNANDO 60,000 0.18

17 NATIONAL DEVELOPMENT BANK PLC/ M.R. BADURDEEN 52,800 0.16

18 MRS. P.S.L. FERNANDO 50,000 0.15

19 MISS. W. HAMZA 37,089 0.11

20 MR. R. UDALAGAMA 37,010 0.11

Directors’ Shareholding 10,000 0.03

Other Shareholding 2,028,110 6.17

TOTAL 33,000,014 100%

• Public Shareholding - 10.93%

111

Ent

rust

Sec

uriti

es P

LC

Fina

ncia

l, E

nviro

nmen

tal &

Soc

ial P

erfo

rman

ce A

nnua

l Rep

ort 2

014/

15

20 Major Shareholders as at 31st March 2014

Title Initial Name No of Shares %

1 ENTRUST LIMITED 29,282,414 88.74

2 MR. M.M. FUAD 212,873 0.65

3 PANA ASIA BANKING CORPORATION PLC/MR. V.P.K.A. PAL 193,352 0.59

4 MRS. E.M.I. WIJEYAWICKREMA 179,183 0.54

5 CRAVINGS (PVT.) LIMITED. 167,831 0.51

6 PREMIUM CAPITAL (PVT.) LIMITED 105,000 0.32

7 MR. W.N. ABEYSURIYA 104,262 0.32

8 MRS. H.G. CHANDRALATHA 100,000 0.30

9 MULTI FINANCE PLC 100,000 0.30

10 MR. M. JAYAWEERA 83,638 0.25

11 MISS. W. HAMZA 75,000 0.23

12 MR. M.H. SULAIMAN 75,000 0.23

13 MRS. A.P. WICKREMASOORIYA 70,000 0.21

14 MRS. U.N.S. FERNANDO 60,000 0.18

15 MRS. S.D.N. KITCHEL 55,950 0.17

16 NATIONAL DEVELOPMENT BANK PLC/ M.R. BADURDEEN 52,800

17 MRS. P.S.L. FERNANDO 50,000 0.16

18 FIRST CAPITAL MARKETS LIMITED./ MR. S.W.U. ARUNASHA 50,000 0.15

19 MRS. G.L.J.R. EDIRIMANNE 46,500 0.15

20 MR. M.Y. KAREEM 45,000 0.14

Directors’ Shareholding 10,000 0.03

Other Shareholding 1,881,211 5.83

TOTAL 33,000,014 100%

• Public Shareholding - 10.93%


2E

ntru

st S

ecur

ities

PLC

Fi

nanc

ial,

Env

ironm

enta

l & S

ocia

l Per

form

ance

Ann

ual R

epor

t 201

4/15

Investor Information

Distribution of Shareholding as at 31st March 2015

From - To No. of Shareholders No. of Shares %

1 - 1,000 555 168,971 0.52

1,001 - 10,000 260 899,798 2.73

10,001 - 100,000 65 1,758,240 5.32

100,001 - 1,000,000 8 1,519,191 4.61

Over 1,000,000 1 28,653,814 86.82

TOTAL 889 33,000,014 100%

Analysis of Shareholders as at 31st March 2015

Category No. of Shareholders No. of Shares %

Local Individuals 877 3,559,713 10.79%

Local Institutions 12 29,440,301 89.21%

Foreign Individuals None None N/A

Foreign Institutions None None N/A

TOTAL 889 33,000,014 100%

Directors’ Shareholding as at 31st March 2015

Name of Director Shareholding as at31/03/2015

Shareholding as at31/03/2014

Mr. Isira D. B. Dassanayake Nil Nil

Mr. Chanuka Ratwatte Nil Nil

Mrs. Romesha Senerath 10,000 10,000

Dr. Nalin Jayasuriya Nil Nil

Mr. Kishantha Nanayakkara Nil Nil

Mr. Manohara Tilakawardana Nil Nil

Share Prices for the Year

31.03.2015 31.03.2014

Highest price during the year 69.70 28.40

Lowest during the period 17.20 15.20

As at end of the period 25.40 17.30

No. of transactions 15,234 3,566

No. of shares traded (Mn) 45.1 5.3

113

Ent

rust

Sec

uriti

es P

LC

Fina

ncia

l, E

nviro

nmen

tal &

Soc

ial P

erfo

rman

ce A

nnua

l Rep

ort 2

014/

15

Notice of Annual General Meeting

NOTICE IS HEREBY GIVEN that the 15th Annual General Meeting of Entrust Securities PLC will be held on Friday, 25th September 2015 at 11.00 a.m. at the Rainbow Hall, Grand Oriental Hotel, No.2, York Street, Colombo 1 for the following purposes:

1. Ordinary Resolution 1

To receive and consider the Report of the Directors and the Statement of Accounts for the Financial Year ended 31st March 2015 together with the Report of the Auditor’s thereon.


To re-elect as a Director, Dr. Nalin Naomal Perera Jayasuriya who retires by rotation pursuant to Article 84 of the Articles of Association of the Company.


To elect as a Director, Mr. Sivagnanasundaram Jeyavarman who was appointed to the Board since the last Annual General Meeting pursuant to Article 90 of the Articles of Association of the Company.


To re-appoint Messrs. PricewaterhouseCoopers, Chartered Accountants, as Auditors to the Company and to authorize the Directors to determine their remuneration.


To authorize the Directors to determine and make donations.

By Order of the Board

ENTRUST SECURITIES PLC

Sanjani de S Gamage

Company Secretary

14th July 2015

Colombo

Notes:

1. Only persons who are shareholders of the Company and whose names appear on the Share Register as at the AGM date will be entitled to attend the above meeting.

2. A shareholder entitled to attend and vote at the above meeting is entitled to appoint a proxy to attend and vote in his/her place by completing the Form of Proxy enclosed herewith.

3. A proxy need not be a shareholder of the Company. However, the proxy must be above 18 years of age.

4. Shareholders/Proxy holders are kindly advised to bring with them their National Identity Card when attending the meeting.

5. For more information, please refer Administrative Details enclosed herewith.


4E

ntru

st S

ecur

ities

PLC

Fi

nanc

ial,

Env

ironm

enta

l & S

ocia

l Per

form

ance

Ann

ual R

epor

t 201

4/15

Notes

115

Ent

rust

Sec

uriti

es P

LC

Fina

ncia

l, E

nviro

nmen

tal &

Soc

ial P

erfo

rman

ce A

nnua

l Rep

ort 2

014/

15

I/We (name of shareholder/s) …………………………………………………………………………………..………....…

(holder of NIC/Company Registration No./s ………….……………………….………………………....................…) of

(address of shareholder/s) ………………………………………………………….........................................................

being a shareholder/s of Entrust Securities PLC hereby appoint:

(Name of proxy) ……………………………………………………………………………………………………………

(holder of NIC/Passport No ..…………………………….…………………..…………….………..………………..…)

of (address of proxy) ………………………….…………………………………........................................................

OR failing him/her

Isira Dharmapriya Bandara Dassanayake (Chairman of the Company) or, failing him, one of the Directors of the Company

As my/our proxy to represent me/us and vote on my/our behalf in accordance with the preference as indicated below at the 15th Annual General Meeting of the Company to be held on 25th September 2015 at 11.00 a.m. and at any adjournment thereof and at every poll which may be taken in consequence thereof.

RESOLUTIONS FOR AGAINST

1. To receive and consider the Report of the Directors and the Statement of Accounts for the Financial Year ended 31st March 2015 together with the Report of the Auditor’s thereon.

2. To re-elect as a Director, Dr. Nalin Naomal Perera Jayasuriya who retires by rotation pursuant to Article 84 of the Articles of Association of the Company.

3. To elect as a Director, Mr. Sivagnanasundaram Jeyavarman who was appointed to the Board since the last Annual General Meeting pursuant to Article 90 of the Articles of Association of the Company.

4. To re-appoint Messrs. PricewaterhouseCoopers, Chartered Accountants, as Auditors to the Company and to authorize the Directors to determine their remuneration.

5. To authorize the Directors to determine and make donations.

(Please indicate with a ‘X’ in the space provided how your proxy is to vote on each resolution. If you do not do so, the proxy will vote or abstain from voting at his/her discretion.)

Signature(s) of Shareholder(s) Contact No. of Shareholder(s) Date

Note:

Instructions as to completion of the Form of Proxy are on the reverse hereof.

Form of Proxy


6E

ntru

st S

ecur

ities

PLC

Fi

nanc

ial,

Env

ironm

enta

l & S

ocia

l Per

form

ance

Ann

ual R

epor

t 201

4/15

Form of Proxy

Notes and Instructions as to completion of Form of Proxy

1. A shareholder entitled to attend and vote at the meeting but is unable to attend the meeting, can appoint not more than one proxy to attend and vote at the AGM instead of him/her, by completing the Form of Proxy.

2. Please complete the Form of Proxy by filling in legibly, your full name, address and contact number and thereafter date and sign in the space provided.

3. In order to be valid, the Form of Proxy must be duly completed and forwarded to the Company Secretary, Entrust Securities PLC, Level 23, East Tower, World Trade Centre, Echelon Square, Colombo 01 and must be received not later than 48 hours before the time appointed for holding the meeting, i.e. before 11.00 a.m. on 22nd September 2015.

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

5. If the appointer is a Company or Corporation, the Form of Proxy should be executed either under its Common Seal or by a duly authorized officer of the Company or Corporation in accordance with its Articles of Association or Constitution.

6. The Form of Proxy should only be used for the purpose of appointing a proxy to attend and vote on your behalf at the AGM in the event you are unable to attend the meeting and should not be used to confirm participation at the AGM.

7. If a shareholder has submitted a Form of Proxy prior to the meeting and subsequently decides to attend the meeting him/herself, he/she should take immediate steps to revoke the appointment of proxy.

Name of Company

Entrust Securities PLC

Legal Form

A public limited liability Company incorporated on 29th February 2000 under the Companies Act No.17 of 1982 and re-registered under the Companies Act No. 7 of 2007 on 13th January 2008.

Entrust Securities PLC is a Primary Dealer licensed by the Central Bank of Sri Lanka. It is also licensed by the Securities & Exchange Commission of Sri Lanka as a Stock Broker and Stock Dealer in Debt Securities.

Company Registration Number

PB 173 PQ

Stock Exchange Listing

The Ordinary Shares of the Company were listed on the ‘Diri Savi’ Board of the Colombo Stock Exchange on 29th November 2011.

Accounting Year-end

31st March

Tax Payer Identification Number (TIN)

134008741

Board of Directors

Mr. Isira D. B. Dassanayake - Chairman

Mr. Chanuka Ratwatte - Executive Director

Mrs. Romesha Senerath - Group Executive Director/Group Chief Operating Officer

Dr. Nalin Jayasuriya - Independent, Non-Executive Director

Mr. Kishantha Nanayakkara - Independent, Non-Executive Director

Mr. Manohara Tillakawardana - Non-Executive Director

Mr. Sivagnanasundaram Jeyavarman - Non-Executive Director (appointed w.e.f. 15th June 2015)

Board Sub-Committees

Board appointed Audit Committee

Mr. Kishantha Nanayakkara (Chairman)

Dr. Nalin Jayasuriya

Mr. Manohara Tillakawardana

Board appointed Remuneration Committee

Dr. Nalin Jayasuriya (Chairman)

Mr. Kishantha Nanayakkara

Mr. Manohara Tillakawardana

Board appointed Integrated Risk Management Committee

Ms. Romesha Senerath - Group Executive Director/Group Chief Operating Officer

Mr. Sanjeewa Dayarathne - General Manager/Chief Dealer

Mr. Nalin Perera - Manager - Treasury Operations

Mr. Nipuna Sanjeewa - Manager - Finance

Mr. Indika Dissanayake - Group IT Manager

Mr. Prasanna Amarasekara - Manager - Middle Office & Risk Management

External Auditors

PricewaterhouseCoopers


Internal Auditors

Ernst & Young


Bankers

Nations Trust Bank PLC

Sampath Bank PLC

Bank of Ceylon

People’s Bank

Seylan Bank PLC

Pan Asia Banking Corporation PLC

Tax Advisors

Gajma & Co.


Company Secretary

Ms. Chayanika AbeyRatna (resigned w.e.f. 31st December 2014)

Ms. Sanjani de S. Gamage (appointed w.e.f. 1st January 2015)

Compliance Officer

Mr. Prasanna Amarasekara

Registered Office

Level 23, East Tower,World Trade Center, Echelon Square,Colombo 01

Tel: +94-11-5500600

Fax: +94-11-5266060

Business Office

Level 16, West Tower,

World Trade Center, Echelon Square,

Colombo 01

Tel: +94-11-5500600

Fax: +94-11-4715769

E-mail: [email protected]

Website: http://esl.entrust.lk

Corporate Information

Designed & produced by

Digital Plates & Printing by Aitken Spence Printing & Packaging (Pvt) Ltd

esl.entrust.lk

Date post:	11-Oct-2020
Category:	Documents
Upload:	others
View:	0 times
Download:	0 times

Trailblazingoptimising returns at zero risk. This proven expertise, analysis speciality and...

Documents