swarnamahal financial services limited - introduction

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INTRODUCTORY DOCUMENT

SWARNAMAHAL FINANCIAL SERVICES LIMITEDA trust etched in gold



SS W W AARRNNAAMMAAHHAALL FFIINNAANNCCIIAALL SSEERRVVIICCEESS LLIIMMIITTEEDD

Incorporated under the Companies Act No. 17 of 1982 and re-registered under the Companies Act No.07

of 2007. The Company is also registered by the Monetary Board of the Central Bank of Sri Lanka under

the Finance Companies Act No. 78 of 1988.

IINNTTRROODDUUCCTTOORRYY DDOOCCUUMMEENNTT

For obtaining the listing of

25,000,007

Ordinary Voting Shares

on the Diri Savi Board of the Colombo Stock Exchange.

For further inquiries, please contact the Managers to the Introduction

If you are in any doubt regarding the contents of this document you should consult your stockbroker, bank

manager, lawyer or any other professional advisor.

The delivery of this Introductory Document shall not under any circumstance constitute a representation orcreate any implication or suggestion, that there has been no material change in the affairs of the Company since

the date of this document.

MANAGERS TO THE INTRODUCTION

Capital Alliance Limited,Level 05, “Millennium House”,

46/58, Navam Mawatha,

Colombo 02.

Tel: 011 2317777

Fax: 011 2317788



SWARNAMAHAL FINANCIAL SERVICES LIMITED – INTRODUCTORY LISTING

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DECLARATION

This Introductory Document has been prepared by Capital Alliance Limited from information

supplied by Swarnamahal Financial Services Limited (“The Company”) or which is publicly

available. The Directors of the Company, collectively and individually, having made all reasonable

inquiries, confirm that to the best of their knowledge and belief, the information contained herein is

true and correct in all material respects and that there are no other material facts, the omission of

which, would make any statement herein misleading. While Capital Alliance Limited has taken

reasonable care to ensure full and fair disclosure, it does not assume any responsibility for any

investment decision made by investors based on information contained herein. In making an

investment decision, prospective investors must rely on their own examination and assessments of the

Company including the risks involved.

No person is authorized to give any information or to make any representations not contained in this

Introductory Document and if given or made, any such information or representation must not be

relied upon as having been authorized by the Company.

The Colombo Stock Exchange (CSE) has taken reasonable care to ensure full and fairdisclosure of information in this Introductory Document. However, the CSE assumes

no responsibility for the accuracy of the statements made, opinions expressed or reports

included in this Introductory Document.




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ABBREVIATIONS USED IN THIS INTRODUCTORY DOCUMENT

CDS - Central Depository Systems (Pvt.) Limited

CSE - Colombo Stock Exchange

SFS or the “Company” - Swarnamahal Financial Services Limited

SEC - Securities & Exchange Commission of Sri Lanka

CBSL - Central Bank of Sri Lanka

Ordinary Share(s) - Ordinary Voting Share(s) of the Company

EGM - Extraordinary General Meeting




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TABLE OF CONTENTS 1 C ORPORATE I NFORMATION 5

2 I NFORMATION R ELEVANT T O T HE I NTRODUCTION 6

2.1 Introduction of Ordinary Voting Shares for Listing 6

2.2 Collection points 7

3 F INANCIAL S ECTOR 10

3.1 Registered Finance Companies 104 P ROFILE OF THE E NTRY 12

4.1 Overview of the Company and Nature of the Business 12

4.2 Principal Activities 13

4.3 Branch Network 14

4.4 Degree of Dependence 15

4.5 Corporate Structure 15

4.6 Human Resources 15

4.7 Information Technology 16

4.8 Future Plans and Prospects 16

4.9 Assumptions on future plans 16

4.10 Associated risks to future plans 17

5. D ETAILS OF THE BOARD OF D IRECTORS 20

6. S ENIOR M ANAGEMENT T EAM 27

7. C APITAL STRUCTURE 29

7.1 Stated Capital 29

7.2 Ten Largest Ordinary Shareholders as at 07th April 2011 29

7.3 Issue of Shares Prior to Listing 30

7.4 Changes to the Stated Capital 31

7.5 Convertible Debt Securities 31

7.6 Transferability of Shares 31

8. OTHER I NFORMATION 32

8.1 Litigation, Disputes and Contingent Liabilities 32

8.2 Inspection of Documents 329. F INANCIAL I NFORMATION 33

9.1 Ratios and Share Information 33

9.2 Receivables 34

9.2.1 Policy for classification of non-performing receivables 34

9.2.2 Composition of Receivables 34

9.2.3 Segmental Analysis of Loans & Advances, Leases, Hire Purchase by Industry 35

9.3 Maturity Analysis of Deposits & Borrowings 35

10 C ORPORATE GOVERNANCE P RACTICES 36

10.1 Independent Directors 36

10.2 Remuneration Committee 37

10.3 Audit Committee 38

11 D ECLARATION B Y THE D IRECTORS 39

AUDITED F INANCIAL S TATEMENTS AS AT 31 ST

M ARCH 2008 40


M ARCH 2009 69


M ARCH 2010 95

U N -AUDITED I NTERIM F INANCIAL S TATEMENTS AS AT 31 ST

D ECEMBER 2010 127

ANNEXURE 1 - D ETAILS OF T RANSFER OF S HARES 133




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1 CORPORATE INFORMATION

Name of the Company Swarnamahal Financial Services Limited

Incorporation & Legal Form A Public Unquoted Limited Liability Company Incorporated in Sri Lanka

on 14th

January 2004, under the Companies Act No.17 of 1982, and re-

registered on 16th September 2008 under the Companies Act No.7 of

2007.

The Company is also registered by the Monetary Board of the Central

Bank of Sri Lanka under the Finance Companies Act No.78 of 1988.

Company Registration No. PB 594

Registered Office No.676, Galle Road, Colombo 03.

Telephone 011-2556160-4 / 011-2595061

Fax 011-2595062 / 011-2589823

Company Secretary Cyrus Corporate Services (Pvt) Limited

A2, Matha Road,

Colombo 08.

Company Auditors BDO Partners

Chartered Accountants65/2, Sir Chiththampalam A Gardiner Mawatha,

Colombo 02.

Bankers Commercial Bank of Ceylon PLC

Sampath Bank PLC

Seylan Bank PLC

Hatton National Bank PLC




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2 INFORMATION RELEVANT TO THE INTRODUCTION

2.1 INTRODUCTION OF ORDINARY VOTING SHARES FOR LISTING

This Introductory Document dated 28

th

April 2011 is published for the purpose of obtaining alisting on the Colombo Stock Exchange for the Ordinary Voting Shares of Swarnamahal

Financial Services Limited.

The shares are to be listed on the Diri Savi Board of the Colombo Stock Exchange.

2.2 COLLECTION POINTS

Copies of the Introductory Document may be obtained from the Manager or any member firm

and trading member firm of the Colombo Stock Exchange

2.2.1 MANAGERS TO THE INTRODUCTION

Capital Alliance Limited

Level 5, ‘Millennium House’


Colombo 02.

Telephone : 011-2317777

Fax : 011-2317788




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2.2.2 MEMBERS AND TRADING MEMBERS OF THE CSE

Members of the CSE

Acuity Stockbrokers (Pvt) Limited

Level 6, Acuity House,

53, Dharmapala Mawatha,Colombo 03.

Telephone: 2206206

Fax: 2206298/9

E-mail: [email protected]

Asha Phillip Securities Limited

Level 4, "Millennium House"

46/58, Navam Mawatha,Colombo 02

Telephone: 2429100

Fax: 2429199


Asia Securities (Pvt) Limited

Level 21, West Tower,

World Trade Center,

Echelon Square, Colombo 1.

Telephone: 2423905,5320000

Fax: 2336018


Assetline Securities (Pvt) Limited

282, Kaduwela Road,

Battaramulla.

Telephone: 4700111, 2307366

Fax: 4700112


Bartleet Mallory Stockbrokers (Pvt) Ltd.

Level "G", Bartleet House,

65, Braybrooke Place,

Colombo 2.

Telephone: 5220200

Fax: 2434985


Capital TRUST Securities (Pvt) Limited

42, Sir Mohamed Macan Marker Mawatha,

Colombo 3.

Telephone: 5335225

Fax: 5365725


Ceylinco Stockbrokers (Pvt) Limited

Ceylinco House, Level 9,

69, Janadhipathi Mawatha,

Colombo 1.

Telephone: 4714300, 4714388, 4714389

Fax: 2387228


CT Smith Stockbrokers (Pvt) Limited

4-14, Majestic City,

10, Station Road,

Colombo 4.

Telephone: 2552290-4

Fax: 2552289


D N H Financial (Pvt) Limited

Level 16, West Tower,

World Trade Centre,Colombo 01.

Telephone: 5732222

Fax: 5736264


J B Securities (Pvt) Limited

150, St. Joseph Street,

Colombo 14.Telephone: 2490900, 0772490900

Fax: 2430070, 2446085,2447875





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MEMBERS AND TRADING MEMBERS OF THE CSE

John Keells Stockbrokers (Pvt) Limited

130, Glennie Street,

Colombo 2.

Telephone: 2306250,2342066-7,2446694-5

Fax: 2342068, 2326863


Lanka Securities (Pvt) Limited

228/2, Galle Road

Colombo 4.

Telephone: 4706757,2554942

Fax: 4706767


NDB Stockbrokers (Pvt) Limited

5th

Floor, NDB Building,

40, Navam Mawatha,

Colombo 2.

Telephone: 2314170-8

Fax: 2314180


SC Securities (Pvt) Limited

2nd

Floor,

55, D.R. Wijewardena Mawatha,

Colombo 10.

Telephone: 4711000

Fax: 2394405


Somerville Stockbrokers (Pvt) Limited

137, Vauxhall Street,

Colombo 2.

Telephone: 2329201-5, 2332827, 2338292-3

Fax: 2338921





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MEMBERS AND TRADING MEMBERS OF THE CSE

Trading Members of the CSE

Arrenga Capital (Pvt) Limited

410/115, Bauddhaloka Mawatha,Colombo 07

Tel: 2689107, 0777847720

Fax: 2689106

E-mail: rohan @ascot.lk

Capital Alliance Securities (Pvt) Limited

Level 5, "Millennium House",46/58 Navam Mawatha,

Colombo 02

Tel: 2317777

Fax: 2317788


Claridge Stockbrokers (Pvt) Limited

10, Gnanartha Pradeepa Mawatha,

Colombo 08

Tel: 2697974

Fax: 2677576


First Guardian Equities (Pvt) Limited

32nd

Floor, East Tower,

World Trade Centre,

Colombo 01

Tel: 5884400

Fax: 5884401E-mail: [email protected]

Heraymila Securities Limited

Level 8, South Wing,

‘Millennium House’


Colombo 02

Tel: 2359100

Fax: 2305522


IIFL Securities Ceylon (Pvt) Limited

27th

Floor, East Tower,

World Trade Centre,

Colombo 01

Tel: 2333000

Fax: 2333383


New World Securities (Pvt) Limited

2nd Floor, 45/2, Braybrooke Street,

Colombo 02

Tel: 23587800/20

Fax: 2358701

E-mail : [email protected]

Richard Pieris Securities (Pvt) Limited

69, Hyde Park Corner,

Colombo 02

Tel: 7448900

Fax: 2675064

E-mail : [email protected]

SKM Lanka Holdings (Pvt) Limited

377/3, Galle Road,

Colombo 03

Tel: 2372413-4


SMB Securities (Pvt) Limited

47, Dharmapala Mawatha,

Colombo 03

Tel: 5539593


Taprobane Securities (Pvt) Limited

2nd

Floor, 10, Gothami Road,

Colombo 08

Tel: 5328200

Fax: 5328277


TKS Securities (Pvt) Limited

19-01, East Tower,

World Trade Centre, Colombo 01

Tel: 7857799

Fax: 7857857





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3 FINANCIAL SECTOR

The financial sector in the country, including the Central Bank of Sri Lanka, mainly

comprises of the following major financial institutions – Licensed Commercial Banks,

Licensed Specialized Banks, Specialized Leasing Companies, Registered Finance

Companies, Insurance Companies and Pension and Provident Funds. In total, the asset base

of the country’s major financial institutions amounted to Rs. 5,616 billion as at end of

December 2009.

3.1 REGISTERED FINANCE COMPANIES

The core activities of Registered Finance Companies (RFCs) revolve around providing

financing to customers that do not have easy access to bank finance, through leasing and hire

purchase facilities. RFCs are regulated under the Finance Companies Act No.78 of 1988.

The total number of RFCs in operation as at end December 2009 was recorded at 35, carrying

out operations through a network of 289 branches spread island wide. Out of the total asset

base of Rs. 5,616 billion, the total asset base of RFCs for the year 2009 was recorded at Rs.

185 billion, accounting for 3.3% of the total assets of the country’s major financial

institutions.

Market share of the two largest RFCs accounted for approximately 37% of the total assets of

the industry during 2009, a reduction of 9% from 46% during 2008. The largest nine RFCs

accounted for approximately 73% of the total assets, whilst eighteen medium size RFCs

accounted for only 24% of total assets.

The sector is steadily recovering, with the performance of most of the companies in the sector

having been adversely affected in 2009 due to the resultant high interest rates and the

heightened credit and liquidity risks which were caused by the collapse of certain unregulated

finance companies. The financial distress caused by the collapse of the unregulated finance

companies, resulted in a loss of investor confidence in all finance companies and cast a

negative outlook on the entire sector.




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FINANCIAL SECTOR

This resulted in most of the Companies scaling down business operations to mitigate the risk

factor. Hire Purchase and Lease facilities which accounted for approximately 63% of the

RFC industry’s assets saw a slowdown in growth, with many companies curtailing lendingand adopting a conservative approach. Thus the growth of total assets of RFCs was recorded

at 5% as opposed to a 23% growth in 2008.

However, amidst these challenges most of the RFCs have continued to generate positive

returns, with 27 of the 35 RFCs complying with the increased minimum capital requirement,

and maintaining the capital adequacy well above the statutory minimum indicating the

sector’s resilience and ability to withstand its challenges.

The sector recovered significantly as a result of the good governance and well adopted

business practices undertaken by RFCs. The stability of the sector was preserved primarily

through the timely intervention and stringent regulations and supervision undertaken by the

CBSL, which undertook several measures to restore the public confidence in the sector and

provided advisory services on the recovery process.

Further, to enhance and strengthen the regulatory framework of the financial sector, CBSL

have proposed certain changes to the framework, which include closely monitoring the

compliance with the Finance Companies (Corporate Governance) Direction and making the

boards of directors more accountable for the companies’ performance and risk management

practices. In addition, RFCs have been required to list on the Colombo Stock Exchange by

the end of June 2011 to broad base the share ownership structure and to improve transparency

as well as the imposition of the Finance Companies (Reporting Requirement) Direction No.

05 of 2009 to grant more powers to the CBSL to regulate RFCs.

Source: Central Bank of Sri Lanka




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4 PROFILE OF THE ENTITY

4.1 OVERVIEW OF THE COMPANY AND NATURE OF THE BUSINESS

Swarnamahal Financial Services Limited (SFS) is a public unquoted limited liability

Company, which was incorporated on 14th January 2004 under the Companies Act of 1982 in

Colombo, and re-registered under the Companies Act No.7 of 2007 on 16th

September 2008.

The Company is also registered by the Monetary Board of the Central Bank of Sri Lanka

under the Finance Companies Act No.78 of 1988.

SFS is a well established Finance Company comprising of qualified and well experienced

staff with the ability to fulfil a wide array of financial requirements. The Company provides

professional, customer friendly, convenient and cost effective financial solutions to both

individual and corporate customers.

SFS is currently enriched with seven (07) fully-fledged Branches and eight (08) Pawning

Centres. The Company intends to expand its branch network rapidly in the near future in

order to provide a better service for its clientele. During the last two years, SFS has

strategically relocated two Branches and a Pawning Centre and it has further expanded the

Branch Network by opening two (2) fully-fledged Branches and six (6) Pawning Centres in

order to effectively capitalize the market opportunities. As a result, the Company continues

to be the one of the fastest growing Finance Companies in Sri Lanka today.

Further in January 2009, the Board of Directors re-structured the Company with the

appointment of a new Director/CEO, together with a few senior managers to overlook

different functional areas of the Company. The new management is focused on taking

proactive measures and implementing long term strategies to overcome challenges arising

from macro environmental factors.

It should be noted that the Company has made remarkable progress, within a short span of

two years, under the guidance of the new Director/CEO.




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PROFILE OF THE ENTITY

4.2 PRINCIPAL ACTIVITIES

The Company’s principal lines of business can be broadly classified under two categories –

Lending Products and Borrowing Products.

Lending Products include Pawning, Leasing, Hire Purchase and Term loans.

PAWNING – SFS Pawning offers a competitive amount of pawning advance with

attractive interest rates. The Pawning Team is trained professionally in order to

maintain high standards in terms of the quality of service provided. In addition,

Branches and Pawning Centres are open 365 days of the year to provide greaterconvenience to customers.

LEASING & HIRE PURCHASE – Leasing and Hire Purchase schemes are well

structured to suit the requirements of customers, enabling them to obtain maximum

benefits. SFS strives to offer highly competitive interest rates in the market together

with personalized and efficient service.

Borrowing Products include Fixed Deposits and Savings Accounts.

FIXED DEPOSITS – SFS possesses a fixed deposit portfolio worth Rs. 3.4 billion as

at 28th

February 2011. An additional interest rate of 1% p.a. than these applicable to

normal depositors will be offered to the Senior Citizens. SFS offers higher and more

competitive interest rates in the market with a guaranteed security.

SAVINGS ACCOUNTS – SFS offers a wide range of Savings Accounts which are

specifically designed both for corporate and individual customers.




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SFS SAVER – This product is exclusively designed for depositors who opt to

deposit in large volumes. Clients will earn higher interest rates on Savings

depending on the deposit amount.

NORMAL SAVINGS ACCOUNT – This account provides constant and

attractive interest rates for any amount of deposits.

MINOR SAVINGS ACCOUNT – This product is branded as “Kumara

Kumari” and offers attractive interest rates with a variety of valuable and

enjoyable gifts for minors.

4.3 BRANCH NETWORK

The branch network of the Company comprises of the following fully fledged Branches and

Pawning Centres:

FULLY FLEDGED BRANCHES

Jaffna No.338, Hospital Road, Jaffna 021 2220245

Kollupitiya No. 654, Galle Road, Colombo 03 011 2556160-4

Negombo No. 18, Greens Road, Negombo 031 2222619

Nugegoda No. 31, St. Thilakaratna Mw, Nugegoda 011 2810666

Ratnapura No.15, Main Street, Ratnapura 045 2226270

Trincomalee No.31, Central Road, Trincomalee 026 2226677

Vavuniya No.141, Kandy Road, Vavuniya 024 2226233

PAWNING CENTRES

Chilaw No. 24A, Bazaar Street, Chilaw 032 2224888

Gampaha No. 14, Baudhaloka Mawatha, Gampaha 033 2248444

Hatton No.15, Main Street, Hatton 051 2224466

Ja-Ela 120, Negombo Road, Ja-Ela 011 2249085

Kandy No.156, Kotugodella Street, Kandy 081 2226126

Ragama No. 62A, Tewatte Road, Ragama 011 2957053

Sea Street No. 147, Sea Street, Colombo 11 011 2452245

Wattala No. 416, Negombo Road, Wattala 011 3193340




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4.4 DEGREE OF DEPENDENCE

The Company does not have a high degree of dependence on any customer or supplier. The

advances portfolio and term deposits base are well spread out. The portfolio for pawning

advances as at 28th

February 2011 amounted to LKR 2,443 million approximately, out of

which almost 99% of advances are less than Rs. 100,000.00. The portfolio for leasing, hire

purchases and term loans advances as at 28th

February 2011 amounted to LKR 546 million

approximately, out of which almost 90% of the advances are less than Rs. 1,000,000.00. The

degree of dependence on term deposits is normally skewed with little or no dependence on

any one depositor or profile of depositors.

4.5 CORPORATE STRUCTURE

Swarnamahal Financial Services Limited is a solitary entity and does not have any

subsidiaries, nor is it a subsidiary of another Company.

4.6 HUMAN RESOURCES

The staff strength of SFS as at 28th

February 2011 was 186, in comparison to 180 employees

as at 31st

March 2010.

The Company adopts a stringent recruiting policy designed to attract experienced, talented

and skilled employees who will be able to work effectively in line with the emerging trends

of the future of the business.

The staff strength of the Company as at 28th

February 2011 can be broadly classified as

follows:

CEO 01

Managers 09

Senior Asst. Managers and Asst. Managers 09

Senior Executives and Executives 27

Non-Executives 140




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The Company does not have any Labour Unions and thus has not entered into any collective

agreement with the employees.

4.7 INFORMATION TECHNOLOGY

The Company is equipped with a state-of-the-art IT system. All the Branches and Pawning

Centres are electronically linked with each other across the island enabling to do real time

transactions all 365 days of the year.

4.8 FUTURE PLANS AND PROSPECTS

SFS intends to be the premier Financial Services Provider in the Market, by executing the

following plans:

SFS plans to increase the present Branch Network including Pawning Centres from

fifteen (15) to twenty five (25) in view of the expected higher Economic Growth

during the Financial Year 2011/12 which in turn would result in a higher demand for

the financial products of the Company. This plan has already been initiated and the

approval for the opening of a Pawning Centre and a Branch at Aluthgama and

Batticaloa respectively has been obtained from the Central Bank of Sri Lanka.

SFS will continue to focus on Pawn Broking in order to assure a higher quality Asset

Portfolio while maintaining NPL ratio below industry average.

SFS intends to engage in specific marketing campaigns in order to further strengthen

the brand image of the Company.

4.9 ASSUMPTIONS ON FUTURE PLANS

SFS expects an acceleration of the economic development with the prevalent peaceending of the three decade war which would in turn increase overall economic

activities while enhancing the demand for the financial products of the Company.

The Company does not expect a material change in the market interest rates that

would have a material impact on the present interest rate margin.




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SFS does not expect material changes in current tax legislations applicable to the

financial products that may affect the feasibility of its financial business.

SFS expects that the Company would have the availability and access to funds in

order to fulfil the lending requirements at a minimum cost.

4.10 ASSOCIATED RISKS TO FUTURE PLANS

Swarnamahal Financial Services Limited, along with other finance companies in the industry,

faces the following risks, which may have an adverse impact on the profitability of the

business. The following risk factors have been identified by the Company, having understood

the importance of managing risks involved in line with the business plan of the Company.

INTEREST RATE RISK

Financial institutions, such as SFS are susceptible to interest rate risk which arises due to

volatility in market rates. In order to manage interest rate risk, the Company regularly

reviews the movements of the interest rates and ensures that this risk is maintained within the

acceptable level. Interest rates movements are analyzed on regular basis to ascertain the

impact of the changes on the earnings of the Company.

CREDIT RISK MANAGEMENT

One of the ways in which financial institutions compete with banks, is through lending

activities such as Leasing, Hire Purchase and Pawning Advances, thereby exposing

themselves to credit risks, also known as default risk. To curtail the risks involved, the

Company has implemented a proper credit evaluation process to ascertain the credit and

trustworthiness of customers and guarantors. In addition, SFS has implemented a strong

recovery process to monitor and collect the debts regularly.

LIQUIDITY RISK MANAGEMENT

This relates to the inability of financial institutions to discharge existing financial

obligations on time, which was one of the main risk factors which affected some of the




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finance companies during the recent financial crisis. As a result the Company has, taken

measures to set in place a proper plan to maintain adequate liquid assets to meet the

financial commitments of the Company.

OPERATIONAL RISK MANAGEMENT

This refers to the possible financial losses arising as a result of errors or frauds of the staff,

failure of information systems or unpredictable or uncontrollable natural disasters. The

Company has implemented proper controls procedures and segregation of duties for each

category of employees and is enriched with the highly qualified Internal Audit Staff. They

regularly monitor the daily operational activities of each staff member to ensure that controls

are in order, and there are no deviations in operational activities against the set controls.

The Company is also enriched with one of the industry’s best IT system. Proper security and

backup procedures have also been implemented with a view to mitigate the operational risk.

ASSET AND LIABILITY MANAGEMENT RISK

One of the risks that can adversely affect financial institutions is asset-liability mismatch risk,

which in essence is a mismatch in the maturity pattern of assets and liabilities of a Company.

If maturity patterns of assets and liabilities are not well matched, there arises the possibility

of Companies facing a shortfall in liquidity rendering them incapable of meeting their

financial obligations. In order to mitigate asset-liability mismatch risks, SFS has established

an Asset-Liability Committee (ALCO), which holds monthly meetings in order to monitor

and review the implemented asset-liability management strategies, review the current and

prospective liquidity position, review the impact of major shifts and changes in the overall

investment and lending strategies and analyze the maturity of assets and liabilities.

Financial institutions, like SFS are also exposed to other macro-economic risks such as

exchange rate risk and inflation risk, which affect the disposable income of consumers

thereby affecting their saving and spending patterns. This has both direct and indirect impact

on the borrowing and lending portfolio of finance companies, in terms of the level of deposits

and the tendency for customers to invest in vehicle financing.




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Further risk factors which are faced by financial institutions such as SFS include regulatory

risks, which include amendments in legislation and directions issued by the Central Bank of

Sri Lanka as well as changes in the tax legislation. In addition, there is also the risk of

downgrades in credit ratings, which may affect the borrowing cost, the availability of debt

capital from financial markets and capability of raising deposits from public. There is also

reputational risk involved, arising from negative public opinion, which was witnessed after

the recent financial crisis, which may adversely affect the ability of finance companies to

attract and retain customers. As a result, SFS needs to be cognizant of the risks it can be

exposed to in an evolving macro environment.



5 DETAILS OF THE BOARD OF DIRECTORS

The Board of Directors of Swarnamahal Financial Services Limited comprises of ten (10) Directors with a wide

commercial knowledge and experience.

Name, Designation, Address

and Qualification Age Directorships on Other Boards Business

Dr. (Mrs.) Soma Edirisinghe

CHAIRPERSON

No.7/6, Sulaiman Terrace,

Colombo 05

72 Chairperson: Swarnamahal Jewellers (Pvt) Ltd

Edirisinghe Trust Investments Ltd.

PLMTT Muthukaruppan Chettiar (Pvt) Ltd

Swarnamahal Property Developers (Pvt) Ltd

EAP Networks (Pvt) Ltd

Intermedia Productions (Pvt) Ltd

Colombo Communications (Pvt) Ltd

Lavinia Breeze Sea Food Restaurant (Pvt) Ltd

EAP Security Services (Pvt) Ltd

Hotel Sapphire (Pvt) Ltd.

EAP Films & Theaters (Pvt) Ltd

EAP Property Developers (Pvt) Ltd

Integrated Power System (Pvt) Ltd

EAP Restaurant (Pvt) Ltd

Rockchalet Hotel Korathota

Counts for over 50 year

of Film, Gold, Jewel

Media and Management

Founder of “Jana Sara

profit organization to

difficult and rural areas




DETAILS OF THE BOARD OF DIRECTORS


and QualificationAge

Directorships on Other BoardsBusiness

Mr. Jeewaka Hemal Edirisinghe

DEPUTY CHAIRMAN

No. 98/2, Rosmead Place,

Colombo 07

49 Managing

Director :

Swarnamahal Jewellers (Pvt) Ltd
















the field of Gold, Jew

Media and Management

Mrs. Anjalee Deepa Edirisinghe

DIRECTOR

No.122, Ward Place,

Colombo 07

47 Director : Swarnamahal Jewellers (Pvt) Ltd





Intermedia Productions (Pvt) LtdColombo Communications (Pvt) Ltd



of Management and Fin








Mrs. Anjalee Deepa Edirisinghe

(Contd.)

Director: EAP Security Services (Pvt) LtdHotel Sapphire (Pvt) Ltd.






Mr. Nalaka Premal Edirisinghe

DIRECTOR

No.122, Ward Place,Colombo 07

42 Director: Swarnamahal Jewellers (Pvt) Ltd















Has an expert knowl

precious metals and ston


the field of Gold, Inform

and Management.

He is the Vice President

& Jewellery industry an

Member of Gem and

Jewellery Institute.

He is also a Member o

Association.








Mr.Asanka Edisinghe

DIRECTOR

No.7/6, Sulaiman Terrace,

Colombo 05

40 Director: Swarnamahal Jewellers (Pvt) LtdEdirisinghe Trust Investments Ltd.














Finalist of the Chartere

Accountants (UK) and

Association.


of Film Industry, Gold

and Finance.

Mr. Sunil Abeyratna

DIRECTOR

No.86, Waragoda Road,

Kelaniya

FCA (SL), FSCMA (UK),

FCMA (SL), CMA (AUS.)

63 Partner:

Chairman:

Director:

AbeyRatna & Co. an associate of AGN

International Limited UK and the 06th largest

Accounting association which is recognized in

102 countries in the world.

West Asia and African region of AGN.

AGN International Board, UK.

Edirisinghe Trust Investments Limited

A Fellow Member of

Accountants of Sri Lan

Institute of Managem

Member of Certified M

Australia and Fellow

Management Accountan

He has obtained the PhD

Management (Tea Indus

Honolulu USA.






and Qualification Age Directorships on Other Boards Business

Mr.Sameera Ganegoda

DIRECTOR/CEO

No.29, Pepiliyana Road,

Nadimala, Dehiwala

ACA, B.B.Mgt (Acc), ASCMA

39 Holds a Business Man

University of Kelaniya

of the Institute of Cha

Lanka, Society of

Accountants of Sri Lank

Accountants of Australi

He was the Former Gen

Administration of EdirLimited.

Mr.Mahendra De Silva

DIRECTOR

No. 1228,

Rajamalwatte Road,

Battaramulla

MBA (USJP), FCA, FSCMA(Aus)

56 Counts for over 25 year

of Finance.

Holds a Master’s

Administration (MBA)

Jayawardenapura, a Fell

of Chartered Accountan

of Certified Managemen








Mr. J.F.G. De Silva

DIRECTOR

No.5, Uswatta Road, Moratuwa

BSc., FCIB (UK)

69 He is a Fellow Membeof Bankers (UK) and h

Degree, University of C

He is a professional ba

Bank of Ceylon and r

General Manager. He

Director/CEO of Peop

from May 2003 to Septe

He has held Directorsh

Bank of Ceylon namel

Ceylease Financial Serv

and Nepal Bank of Ceyl

Mr. Sunimal Ajit Weerasinha

DIRECTOR

No. 550/8/7, Isuru Uyana,

Pelwatte, Battaramulla

60 He is a professional ban

banking experience at

the People’sBank as a

1979 and retired from

General Manager – Hum

2006. He was the G

Mortgage and Investm

2006 to November 2009

He has held Directorsh

Development Bank and

Company.




The Chairman nor any Director of the Company has been or is involved in any of the following events:

A petition under any bankruptcy laws filed against such person or any partnership in which he was a partner or a

he was an executive officer;

Conviction for fraud, misappropriation or breach of trust or any other similar offence which the CSE considers a d




27 | P a g e

6 SENIOR MANAGEMENT TEAM

Mr. Sameera Ganegoda – Director/Chief Executive Officer

ACA, B.B.Mgt (Acc), ASCMA

No.29, Pepiliyana Road,

Nadimala, Dehiwala

Mr. Ganegoda holds a Business Management Degree from the University of

Kelaniya. He is an Associate Member of the Institute of Chartered Accountants of Sri

Lanka, Society of Certified Management Accountants of Sri Lanka and National

Institute of Accountants of Australia.

He was the Former General Manager – Finance and Administration of Edirisinghe

Trust Investments Limited.

The Chief Executive Officer is not and was not involved in the following events:

A Petition under bankruptcy laws filed against such person or any partnership

in which he was a partner or any corporation of which he was an Executive

Officer.

Convicted for fraud, misappropriation or breach of trust or any other similar

offence which the CSE considers a disqualification.

The Company has provided Rs. 51,859.56 for the key management personnel out

of the total provision for staff retirement benefits for the year ending 31st

March

2010.




28 | P a g e

SENIOR MANAGEMENT TEAM

Mr. R.M.G. Ratnayake

MANAGER – FINANCE

Over 07 years of experience in Financial Sector. He holds a

Degree of B.Sc. Accountancy & Financial Management

(Special), from the University of Sri Jayawardenapura. Diplomain Treasury Management, Institute of Bankers of Sri Lanka.

Mrs. Chammika Dayaratne

MANAGER – LEGAL

Over 12 years of experience in the field of Law, Notary Public

and Company Secretary. She holds the LLB Degree from the

Open University of Sri Lanka and passed out as an Attorney at

Law from Sri Lanka Law College in 1997.

Mr. George Samantha

MANAGER–CORPORATE RELATIONS

Over 07 years of experience in the field of Banking and Finance.

He holds a B.Sc Marketing Management (Special) Hons. Degree

from the University of Sri Jayawardenapura and is an Associate

member of Sri Lanka Institute of Marketing (AMSLIM).

Mr. Mahesha Withanawasam

MANAGER – BRANCH OPERATIONS

Over 07 years of experience in the field of Accounting and

Finance. He holds a B.Sc. Accountancy & Financial Management

(Special) Degree from the University of Jayawardenapura.

Mr. Dhanuka Perera

MANAGER – PAWNING & GOLD SALES

Over 09 years of experience in the field of Pawning and Gold

Sales and holds a Diploma in Business Management from JMC.

Mr. R Harendran

MANAGER – INTERNAL AUDIT

He holds a bachelor of Business Administrations (Special

Finance Management) from the University of Colombo and is an

Associate Member of the Institute of Chartered Accountants of

Sri Lanka. He counts over 04 years of experience at Ernst and

Young (E&Y).

Mr. Newton Fernando

MANAGER – CREDIT

Over 12 years of experience in the field of Credit and holds a

B.Sc Business Administration (Special) Degree from the

University of Jayawardenapura.

Mrs. Subhani Edirisinghe

MANAGER-DEPOSIT MOBILIZATION

Over 10 years of experience in the field of deposit mobilization.

She holds a Degree of B.Sc Business Administrations from the

University of Sri Jayawardenapura.




29 | P a g e

7 CAPITAL STRUCTURE

7.1 STATED CAPITAL

Ordinary Shareholding Structure as at 07

th

April 2011Level of

Shareholding

No. of No. of % of

Shareholders Shares Shareholding

1 - 1,000 56 9,802 0.04

1,001 - 5,000 22 71,200 0.28

5,001 - 10,000 22 205,000 0.82

10,001 - 50,000 15 420,000 1.68

50,001 - 100,000 02 125,000 0.50

100,001 - 500,000 07 1,669,000 6.68

500,001 - 1,000,000 - - -

Over 1,000,000 06 22,500,005 90.00

Total 130 25,000,007 100.00

7.2 TEN LARGEST ORDINARY SHAREHOLDERS AS AT 07TH

APRIL 2011

ORDINARY SHAREHOLDERS NUMBER OF SHARE

SHARES PERCENTAGE

Dr. (Mrs.) Soma Edirisinghe 4,100,001 16.40

Mr. Jeewaka Hemal Edirisinghe 4,100,001 16.40

Mr. Nalaka Premal Edirisinghe 4,100,001 16.40

Mrs. Anjali Deepa Edirisinghe 4,100,001 16.40

Mr. Asanka Srimal Edirisinghe 4,100,001 16.40

M/s Edirisinghe Trust Investments Ltd. 2,000,000 8.00

Mr. L H Jagath Piyasena 500,000 2.00

Mr. M K Gunawardana 250,000 1.00

Mr. A Y Gunawardana 244,000 0.98

Mr. T G Thilakaratne 200,000 0.80

Mr. W G M Premadasa 200,000 0.80

Others 1,106,002 4.42

TOTAL 25,000,007 100.00

The public holding percentage as at the date of the Introductory Document is 10.00%




30 | P a g e

CAPITAL STRUCTURE

7.3 ISSUE OF SHARES PRIOR TO LISTING

The Company allotted Ordinary Voting Shares to the following shareholders of the

Company, two years preceding the date of this Introductory Document. The shares

were allotted to the shareholders on 10th

August 2009. Details of the share allotment

are as follows:

Name

No. of

Shares

issued

Price per

shareValue

Shareholding

after

allotment

% Share

holding after

the issue

Edirisinghe Trust Investments Ltd. 2,000,000 10.00 20,000,000.00 2,000,000 8.00%

Dr. (Mrs.) Soma Edirisinghe 600,000 10.00 6,000,000.00 4,600,001 18.40%

Mr.Jeewaka Hemal Edirisinghe 600,000 10.00 6,000,000.00 4,600,001 18.40%

Mrs. Anjali Deepa Edirisinghe 600,000 10.00 6,000,000.00 4,600,001 18.40%

Mr. Nalaka Premal Edirisinghe 600,000 10.00 6,000,000.00 4,600,001 18.40%

Mr. Asanka Srimal Edirisinghe 600,000 10.00 6,000,000.00 4,600,001 18.40%

Others - - - 2 -

5,000,000 10.00 50,000,000.00 25,000,007 100.00%

Further it should be noted, that 2,500,000 shares were transferred on 01st

April 2011

from some of the shareholders of SFS to selected individuals at a consideration of

Rs.20/- per share, in order to establish 10% public shareholding. Further details with

regard to the share transfer have been disclosed in Annexure 1 of this Document.

Apart from the issue and transfer of shares mentioned above, the Company has not

issued or transferred any other shares, of the same class or another class, within the

two years preceding the date of the Introductory Document.




31 | P a g e

CAPITAL STRUCTURE

7.4 CHANGES TO THE STATED CAPITAL

It should also be noted that the Company has not redeemed or repurchased any shares

in the two years preceding the date of the Introductory Document, nor have any shares

been subscribed or sold in conjunction with the public issue of shares and that there

has not been a reduction in the Stated Capital of the Company.

7.5 CONVERTIBLE DEBT SECURITIES

The Company does not have any outstanding convertible debt securities as at the date

of this Introductory Document.

7.6 TRANSFERABILITY OF SHARES

There are no statutory restrictions on the free transferability of the Shares to be listed

on the Colombo Stock Exchange. Further there are no restrictions applicable to non-

residents shareholders holdings shares of the Company.




32 | P a g e

8 OTHER INFORMATION

8.1 LITIGATION, DISPUTES AND CONTINGENT LIABILITIES

The Company has not been involved, nor is it currently involved in any legal,

arbitration or meditation proceeding as at the date of this Introductory Document

which may affect or may have had a significant effect on the Company's financial

position and profitability.

Further more; there were no legal, arbitration or meditation proceedings against the

Company in the recent past which affected the financial position or the profitability of

the Company as at the date of this Introductory Document.

The Company does not have any contingent liabilities that would affect its current and

future profits as at the date of this Introductory Document.

There have been no penalties imposed by Regulatory or State Authorities on the

Company.

8.2 INSPECTION OF DOCUMENTS

The Introductory Document and Articles of Association of Swarnamahal Financial

Services Limited will be hosted on the Company’s website at www.sfs.lk and on the

CSE website at www.cse.lk for a period of not less than fourteen (14) days.




33 | P a g e

9 FINANCIAL INFORMATION

9.1 RATIOS AND SHARE INFORMATION

Source: SFS

Year Ended Latest

Interim

31.12.2010

Comparative

Interim

31.12.200931.03.2010 31.03.2009

Net Interest Income / Total Average Assets (%) 7.04 3.57 6.53 3.86

Non-Interest Income / Total Average Assets (%) 0.40 1.78 0.06 0.83

Personnel & Other Non-Interest Expenses / Net Interest

Income & Non-Interest Income (%)79.99 112.38 58.55 87.81

Gross NPL Ratio (%) 0.61 - 0.45 1.60

General & Specific Loan Loss Reserves (B/S) / (Total

Non-Performing Loans – Interest-In-Suspense) (%)71.63 - 74.89 16.34

Liquid Assets / Customer Deposits & Short – TermFunds

0.12 0.22 0.11 0.10

Capital Adequacy Ratio (%) 23.66 12.85 21.76 15.61

Debt/Equity Ratio 0.43 0.00 0.35 0.00

Book Value per Share (Rs.) 9.24 6.28 11.32 8.60

Earnings per Share (Rs.) 0.72 (0.59) 2.08 0.75

Profit after Tax / Average Equity (%) 8.65 (7.30) 20.28 4.57

Return on Average Assets (%) 1.15 (0.78) 2.32 0.43

Effective Tax Rate (%) 24.19 - 25.74 -

Dividends / Profit after Tax (%) - - - -




34 | P a g e

FINANCIAL INFORMATION

9.2 RECEIVABLES

9.2.1 POLICY FOR CLASSIFICATION OF NON-PERFORMING RECEIVABLES

The Company regularly reviews the advances made for its customers and provisions

are made in accordance with the Finance Company Direction No.3 of 2006 for bad

and doubtful debt issued by the Central Bank of Sri Lanka and in compliance with the

Sri Lanka Accounting Standard No.33 of Revenue Recognition and Disclosure in the

Financial Statements of the Finance Companies. Accordingly, provisions are made on

following basis.

All advances in arrears for a period of 6-12 months 50%

All advances in arrears for over 12% months 100%

9.2.2 COMPOSITION OF RECEIVABLES:

Source: SFS

YE

31.03.2010

(%)

YE

31.03.2009

(%)

Latest

Interims

31.12.2010

(%)

Comparative

Interims

31.12.2009

(%)

Performing Loans & Advances

Less than 3 months 47 33 35 37

3-6 months 18 22 21 15

7-12 months 18 14 35 26

13-18 months 15 20 8 13

More than 18 months 2 11 2 8

Total (%) 100.00 100.00 100.00 100.00

Total Performing Loans

(Rs.) ‘000

1,394,446 695,826 2,560,337 1,351,241

Non Performing Loans &

Advances

1-2 months 15 - 19 12

3-6 months 28 - 36 41

6-7 moths 12 - 9 14

7-12 months 32 - 23 3113-18 months 13 - 13 2

Total (%) 100.00 - 100.00 100.00

Total Non-Performing Loans

(Rs.)’000

8,574 - 11,518 22,036

Total (Rs.) ‘000 1,403,020 695,826 2,751,855 1,373,277




35 | P a g e

FINANCIAL INFORMATION

9.2.3 SEGMENTAL ANALYSIS OF LOANS & ADVANCES, LEASES, HIRE PURCHASE

BY INDUSTRY

31.12.2010 31.02.2010 31.03.2009

Transport 351,476,599 234,436,705 107,539,436

Manufacturing 6,790,201 26,452,624 -

Trading 148,346,802 245,413,877 466,994,702

Others 2,065,241,614 896,716,687 121,291,656

Pawning 2,019,665,175 864,468,462 83,556,061

Other 45,576,439 32,248,225 37,735,595

Distribution of Total Advances 2,571,855,216 1,403,019,893 695,825,794

Leasing & Hire Purchase Receivables 351,476,599 234,436,705 107,539,436Loan & Advances 2,220,378,617 1,168,583,188 588,286,358

Total Advances 2,571,855,216 1,403,019,893 695,825,794

9.3 MATURITY ANALYSIS OF DEPOSITS & BORROWINGS

Source: SFS

YE

31.03.2010

(%)

YE

31.03.2009

(%)

Latest

Interims

31.12.2010(%)

Comparative

Interims

31.12.2009(%)

Maturity Period

Less than or equal to 1 month 19.69 24.83 14.15 18.89

More than 1 month less than or equal to 3 months 29.42 29.95 24.65 23.20

More than 3 months less than or equal to 6 months 17.83 13.26 14.36 20.14

More than 6 months less than or equal to 1 year 19.70 19.04 35.67 28.08

More than 1 year less than or equal to 3 years 6.71 8.35 6.54 7.44

More than 3 years less than or equal to 5 years 1.24 3.67 1.24 1.51

Matured (waiting for customer instructions) 5.42 0.90 3.39 0.74

TOTAL 100.00 100.00 100.00 100.00




36 | P a g e

10 CORPORATE GOVERNANCE PRACTICES

The Company places a high degree of importance on sound Corporate Governance

practices and is committed to maintaining the highest standards of business integrity

and ethical values while rewarding all its stakeholders.

The Board of Directors of Swarnamahal Financial Services Limited is responsible for

ensuring that the Corporate Governance practices of the Company are maintained and

adhered to.

The Company has nine (09) Non-Executive Directors on the Board out of which three

(03) Directors are Independent in order to facilitate the independent judgment in

Board discussions while providing input to the Board’s decision making process.

10.1 INDEPENDENT DIRECTORS

The following are the Independent, Non-Executive Directors of Swarnamahal

Financial Services Limited:

Mr. Damian Sunil Abeyratna

Mr. Joseph Felix Gorgonius De Silva

Mr. Sunimal Ajit Weerasinha

It should however be noted that according to the criteria set out in the Listing Rule

No. 7.10.4 f (i) of Colombo Stock Exchange, Mr. Damian Sunil Abeyratna does not

fall under the classification of an “Independent” Director as he represents the Board

of Edirisinghe Trust Investment Limited (ETI) as a Director where the majority of the

ETI Board represent the Board of SFS.

However, the following facts have been specially considered by the Board of SFS

when determining Mr. Damian Sunil Abeyratna as an Independent Director of SFS:

Swarnamahal Financial Services Ltd is a separate business entity and is not a

subsidiary or a holding entity of any other Company nor is there any material




37 | P a g e

CORPORATE GOVERNANCE PRACTICES

business relationship with any other Company in which the SFS Board of

Directors represent.

There is no significant share holding of ETI (ETI holds 8% shares of SFS)

SFS does not hold any shares of ETI.

Mr. Damian Sunil Abeyratna is only an Independent Director of ETI and does

not hold a material amount of shares of ETI.

10.2

REMUNERATION COMMITTEE

The Remuneration Committee constitutes of the following directors and is headed by

Mr. Damian Sunil Abeyratna

Mr. Damian Sunil Abeyratna – Independent Non-Executive Director

Mr. Nalaka Edirisinghe – Non-Executive Director

Mr. Joseph Felix Gorgonius De Silva – Independent Non-Executive Director

Mr. Sunimal Ajit Weerasinha – Independent Non-Executive Director

Statement of the Remuneration Policy

The Committee deliberates and determines the policies and criteria pertaining to the

fees of the Executive and Non-Executive Directors of the Company, emoluments of

Executive Directors, and salaries of the Corporate Management and Senior

Management to ensure that remuneration levels are sufficient to attract and retain the

caliber of professionals required for successful management and operation of the

Company.

The aggregate of sum remuneration paid to the Executive and Non-Executive

Directors amounts to Rs. 857,800/- per month.




38 | P a g e

CORPORATE GOVERNANCE PRACTICES

10.3 AUDIT COMMITTEE

The Audit Committee constitutes of the following five (5) Non-Executive Directors

and is headed by Mr. Damian Sunil Abeyratna

Mr. Damian Sunil Abeyratna – Independent Non-Executive Director

Mr. Nalaka Edirisinghe – Non-Executive Director

Mrs. Deepa Edirisinghe – Non-Executive Director

Mr. Joseph Felix Gorgonius De Silva – Independent Non-Executive Director

Mr. Sunimal Ajit Weerasinha – Independent Non-Executive Director

The Audit Committee plays a key role in reviewing the internal control system that

will guarantee the prevalence of effective internal controls. The Committee constantly

reviews the system and controls and makes recommendations for improvements

where necessary.

The Committee has reviewed all audited Financial Statements which include quarterly

Interim Statements in order to ensure that they comply with all statutory provisions,

Sri Lanka Accounting Standards and Central Bank mandated directives. In addition,

the Audit Plan and the Management Letter submitted by the External Auditors have

been reviewed by the Audit Committee.




39 | P a g e

11 DECLARATION BY THE DIRECTORS

We, the undersigned, who are named in the Introductory Document as Directors of

Swarnamahal Financial Services Limited, hereby declare and confirm that we have

read the provisions of the Companies Act No. 07 of 2007 and the Colombo Stock

Exchange Listing Rules and any amendments to it relating to the issue of this

Introductory Document and that those provisions have been complied with.

This Introductory Document has been seen and approved by us and we collectively

and individually accept full responsibility for the accuracy of the information given

and confirm that provisions of the CSE Listing Rules and of the Companies Act No. 7

of 2007 and any amendments to it from time to time have been complied with after

making all reasonable enquiries and to the best of our knowledge and belief, there are

no other facts, the omission of which would make any statement herein misleading or

inaccurate.

Dr. (Mrs.) Soma Edirisinghe (Sgd.)

Mr. Jeewaka Hemal Edirisinghe (Sgd.)

Mr. Nalaka Premal Edirisinghe (Sgd.)

Mrs. Anjalee Deepa Edirisinghe (Sgd.)

Mr. Asanka Shrimal Edirisinghe (Sgd.)

Mr. Damian Sunil Abeyratna (Sgd.)

Mr. Sameera Maulika Ganegoda (Sgd.)

Mr. Nanayakkara Godakandage Mahendra de Silva (Sgd.)

Mr. Joseph Felix Gorgonius De Silva (Sgd.)

Mr. Sunimal Ajit Weerasinha (Sgd.)




40 | P a g e

AUDITED FINANCIAL STATEMENTS AS AT 31ST MARCH 2008




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INCOME STATEMENT

FOR THE PERIOD ENDED 31ST DECEMBER 2010

31st March Variance

2010 2009 2010

(Unaudited) (Audited) (Audited) %Rs. Rs. Rs.

Income 467,478,765 295,434,208 425,680,931 58.23

Interest Income 465,566,587 279,035,651 417,561,368 66.85

Interest Expense (262,046,370) (202,451,109) (273,810,790) 29.44

Net Interest Income 203,520,217 76,584,542 143,750,578 165.75

Other Income 1,912,178 16,398,556 8,119,563 (88.34)

205,432,395 92,983,099 151,870,141 120.94

Less : Non Interest Expense

Personnel Costs - Fixed 52,401,503 34,342,598 36,807,240 52.58

Premises, Equipment and Establishment Expe 14,462,936 7,082,388 15,786,372 104.21

Provision for Retirement Benefits - - 585,973 -

Other Operational Expenses 53,419,885 40,220,921 68,298,518 32.82

120,284,324 81,645,907 121,478,103 47.32

Profit Before Loan Losses & Provisions 85,148,071 11,337,192 30,392,038 651.05

Loan Losses & Provisions (2,484,768) (2,174,162) (4,715,362) 14.29

Operating Profit Before Taxation & Value Added Tax 82,663,303 9,163,030 25,676,676 802.14

Less : Value Added Tax (10,544,818) (683,724) (2,283,724) -

Profit Before Taxation 72,118,485 8,479,306 23,392,952 750.52

Less : Provision for Taxation (20,000,000) - (6,610,341) -

Net Profit for the period 52,118,485 8,479,306 16,782,611 514.66

Basic Earnings per Share 2.08 0.75 0.72

Nine months ended 31st

December




STATEMENT OF CHANGES IN EQUITY

FOR THE NINE MONTHS ENDED 31ST DECEMBER 2010

STATEDCAPITAL

STATUTORYRESERVE

RETAINEDPROFIT/(LOSS)

CREDIT LOSSRESERVE

REVALURESE

Rs. Rs. Rs. Rs. Rs

Balance as at 01st April 2009 200,000,070 1,029,391 (45,527,218) 1,425,838

Issue of Ordinary shares 50,000,000 - - -

Transfer of Credit Loss Reserve - - - (1,415,738)

Net Profit/(Loss) for the period - - 8,479,306 -

Balance as at 31st December 2009 250,000,070 1,029,391 (37,047,912) 10,100

Balance as at 01st April 2010 250,000,070 4,385,913 (32,101,129) - 8,7

Net Profit/(Loss) for the period - - 52,118,485 -

Balance as at 31st December 2010 250,000,070 4,385,913 20,017,356 - 8,7

20th January 2011

SWARNAMAHAL FINANCIAL SERVICES LTD




130 | P a g e

STATEMENT OF CASH FLOW

FOR THE NINE MONTHS ENDED 31ST DECEMBER 2010

31st December

2010

31st December

2009

31st March

2010

(Unaudited) (Audited) (Audited)

Rs. Rs. Rs.

Cash Flow from Operating Activities

Net Profit/(Loss) Before Taxation 72,118,485 8,479,306 23,392,952

ADJUSTMENTS FOR,

Bad Debtors Provision 2,484,768 2,174,162 6,141,200

Depreciation 10,682,986 6,335,777 13,817,699

Provision for Gratuity - - 588,973

Investments in CRIB Written off - - 97,500

Operating Profit before changes in Operating Assets 85,286,239 16,989,245 44,038,324

(Increase) / Decrease in Operating Assets & Liabilities

Investments in Bank Deposits & Commercial Papers 50,239,569 (10,868,164) 27,898,072

Investments in Government Securities (54,488,761) 53,623,319 22,152,606

Funds Advance to customers (1,171,320,091) (606,816,724) (864,986,173)

Change in Inventories 21,688,414 (19,766,263) (7,999,992)

Change in Other Assets (152,529,559) 19,331,940 12,258,288 Deposits from Customers 1,266,486,691 577,021,602 594,276,202

Creditors & Accrued Expenses (13,896,494) 17,148,506 16,490,755

Net Cash from Operating Activities Before Tax 31,466,008 46,663,461 (155,871,918)

Gratuity Paid (375,000) - -

ESC Paid (3,609,774) - -

Tax Paid - (15,005,823)

Net Cash from/(used in) Operating Activities 27,481,234 46,663,461 (170,877,741)

Cash Flow from Investing Activities

Investment in Shares (3,904,250) - -

Purchase of Property Plant and Equipment (12,824,035) (24,190,556) (38,641,753)

Loan Repayment by related parties - 157,792,073

Net Cash from Investing Activities (16,728,285) (24,190,556) 119,150,320

Cash Flow from Financing Activities

Issue of Ordinary Shares - 50,000,000 50,000,000

Issue of Debenture - - 100,000,000

Borrowings - - -

Net Cash Used in Financing Activities - 50,000,000 150,000,000

Net Increase /(Decrease) in Cash and Cash equivalents 10,752,949 72,472,905 98,272,579

Cash and Cash Equivalents at the Beginning of the Period 87,627,303 (10,645,276) (10,645,276)

Cash and Cash equivalents at the end of the Period 98,380,252 61,827,629 87,627,303

CASH & CASH EQUIVALENTS

Cash in Hand 79,516,950 69,075,714 91,735,490

Cash at Bank 124,401,932 41,388,692 30,516,696

Bank Overdraft (105,538,630) (48,636,777) (34,624,883)

Cash and Cash Equivalent Reflected on Balance Sheet at the

end of the period98,380,252 61,827,629 87,627,303

20th January 2011

SWARNAMAHAL FINANCIAL SERVICES LTD




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NOTES TO THE FINANCIAL STATEMENTS

1. The figures given in the statements for the nine months ended 31st

December 2010 are

provisional and subject to audit.

2. The Accounting policies and methods of computation disclosed in the Financial statements for

the year ended 31st March 2010 were consistently followed during the said period.

3. The Financial Statements for the nine months have been presented in the same format adopted

in the audited published accounts as at 31st March 2010, and are in accordance with the Sri

Lanka Accounting Standards, SLAS 35 interim Financial Reporting.

4. Stated Capital – 25,000,007 Ordinary shares have been issued and fully paid up.

5. No circumstances have arisen since the Balance Sheet date, which would require adjustments

to or disclosure in the Financial Statements.

6. There are no material changes in contingent liabilities as at 31st

December 2010 from 31st

March 2010.

7. Directors shareholding as at 31st January 2011

No. Name of Director No. of Shares

1. Dr. (Mrs.) Soma Edirisinghe 4,600,001

2. Mr. Jeewka Edirisinghe 4,600,001

3. Mr. Nalaka Edirisinghe 4,600,001

4. Mrs. Deepa Edirisinghe 4,600,001

5. Mr. Asanka Edirisinghe 4,600,001

6. Edirisinghe Trust Investments Ltd 2,000,000

7. Mr. Mahendra De Silva 1

8. Mr. Sameera Ganegoda 1




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ANNEXURE 1 – DETAILS OF TRANSFER OF SHARES

No. of Shares Transferred : 2,500,000

Date of Transfer : 18th

March 2011

Date of Transfer was stamped: 01st April 2011

Consideration : Rs. 20.00 per share

Name of TransferorNo. of Shares

TransferredName of Transferee

No. of Shares

Transferred

Dr. Soma Edirisinghe 500,000 Mr. L Jagath Piyasena 500,000

Mr. J H Edirisinghe 250,000 Mr. M K Gunawardana 250,000

Mr. J H Edirisinghe 244,000 Mr.A.Y. Gunawardana 244,000

Mr. J H Edirisinghe 6,000 Mr. W G M Premadasa 200,000

Mrs. A D Edirisinghe 194,000

Mrs. A D Edirisinghe 200,000 Mr. T G Tillakaratne 200,000

Mrs. A D Edirisinghe 106,000 Mr. A S M Wanduragala 150,000

Mr. N P Edirisinghe 44,000

Mr. N P Edirisinghe 125,000 Dr. D M I Dissanayake 125,000

Mr. N P Edirisinghe 70,000 Mrs. S R Wooster 70,000

Mr. N P Edirisinghe 55,000 Mr.A. Sithampalam 55,000

Mr. N P Edirisinghe 50,000 Mr.A.R.J.Rajagopalan 50,000

Mr. N P Edirisinghe 50,000 Mr. J.A.Y. Deshaka 50,000

Mr. N P Edirisinghe 50,000 Mr. K S T Fernando 50,000

Mr. N P Edirisinghe 30,000 Mr.M.V.D. Peiris 30,000

Mr. N P Edirisinghe 26,000 Mr.P W Gunawardana 30,000Mr. A S Edirisinghe 4,000

Mr. A S Edirisinghe 30,000 Mrs. K P B P Perera 30,000

Mr. A S Edirisinghe 25,000 Ms.Ranjida Rajagopalan 25,000

Mr. A S Edirisinghe 25,000 Mr.S.E.Dias 25,000

Mr. A S Edirisinghe 25,000 Mr. C Jeyabalan 25,000

Mr. A S Edirisinghe 20,000 Mr. B Vaithieswaran 20,000

Mr. A S Edirisinghe 20,000 Mr. V Sridaran 20,000

Mr. A S Edirisinghe 20,000 Mr. D.C.Ratnayake 20,000

Mr. A S Edirisinghe 15,000 Mr. N L T I Sanjaya 15,000

Mr. A S Edirisinghe 15,000 Mr.A.A. Madawala 15,000

Mr. A S Edirisinghe 15,000 Mr. H M T Herath 15,000

Mr. A S Edirisinghe 10,000 Mr. M P S S Wijesinghe 10,000

Mr. A S Edirisinghe 10,000 Mrs.P Elisabath 10,000

Mr. A S Edirisinghe 10,000 Mrs. A R Miranda 10,000

Mr. A S Edirisinghe 10,000 Mr. J A Fernando 10,000

Mr. A S Edirisinghe 10,000 Mr. J C Sanjekanth 10,000

Mr. A S Edirisinghe 10,000 Mr. N Chryshanthi 10,000




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No. of Shares

Transferred

Mr. A S Edirisinghe 10,000 Mr. V Nageswaran 10,000

Mr. A S Edirisinghe 10,000 Mr. B Sathies 10,000

Mr. A S Edirisinghe 10,000 Mr. S NandaKumar 10,000

Mr. A S Edirisinghe 10,000 Mr. S Velrajah 10,000Mr. A S Edirisinghe 10,000 Mr.S. Vinothan 10,000

Mr. A S Edirisinghe 10,000 Mr.P. Thangaraj 10,000

Mr. A S Edirisinghe 10,000 Mrs. H T N Perera 10,000

Mr. A S Edirisinghe 10,000 Mr.T.N. Gunawardana 10,000

Mr. A S Edirisinghe 10,000 Mr. H M W B Herath 10,000

Mr. A S Edirisinghe 10,000 Mr. A R Rodrigo 10,000

Mr. A S Edirisinghe 10,000 Mr. S Mahadevan 10,000

Mr. A S Edirisinghe 7,500 Intag International (Pvt) Ltd 7,500

Mr. A S Edirisinghe 7,500 Mr.P. Gajendra 7,500

Mr. A S Edirisinghe 7,500 Mr.W E Abeyrathna 7,500

Mr. A S Edirisinghe 6,500 Mrs. G P N Jayamanna 6,500

Mr. A S Edirisinghe 6,000 Mr. W H Piyasena 6,000

Mr. A S Edirisinghe 5,000 Mrs. R A D G Ranatunga 5,000

Mr. A S Edirisinghe 5,000 Dynamic Inv. Holdings (Pvt) Ltd 5,000

Mr. A S Edirisinghe 5,000 Miss K S R Kumari 5,000

Mr. A S Edirisinghe 5,000 Mrs. I W A D Ushani 5,000

Mr. A S Edirisinghe 5,000 Mr. G.A.S.S. Chamila 5,000

Mr. A S Edirisinghe 5,000 Mr. D I Wickramasinghe 5,000

Mr. A S Edirisinghe 5,000 Mr. H.M.K.Appuhamy 5,000

Mr. A S Edirisinghe 4,100 Ms. H M K N Maduwanthi 4,100

Mr. A S Edirisinghe 3,000 Mr. W H D Prasanga 3,000Mr. A S Edirisinghe 2,500 Mrs. D S H Eleperuma 2,500

Mr. A S Edirisinghe 2,500 Mrs. J M M T jayasinghe 2,500

Mr. A S Edirisinghe 2,500 Mr. T Manoharaja 2,500

Mr. A S Edirisinghe 2,500 Ms.Utthara Dewalegama 2,500

Mr. A S Edirisinghe 2,500 Ms.I W A A D Kumari 2,500

Mr. A S Edirisinghe 2,500 Mr. H D Anandasiri 2,500

Mr. A S Edirisinghe 2,500 Mr. D K K S Samantha 2,500

Mr. A S Edirisinghe 2,500 Mrs. K K Prabodani 2,500

Mr. A S Edirisinghe 2,500 Ms.W B J D Jayathillake 2,500

Mr. A S Edirisinghe 2,000 Mr. H N D Niroshana 2,000

Mr. A S Edirisinghe 1,600 Mr. A M S.C Abewardana 1,600

Mr. A S Edirisinghe 1,500 Mr. U G I De Silva 1,500

Mr. A S Edirisinghe 1,500 Mr.T P Pathinayake 1,500

Mr. A S Edirisinghe 1,000 Mr. I G G Siriwardana 1,000

Mr. A S Edirisinghe 1,000 Mr. K A Nandana 1,000

Mr. A S Edirisinghe 1000 Mr A G S S Kumara 1000

Mr. A S Edirisinghe 700 Mr. M R Dewasurendra 700




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No. of Shares

Transferred

Mr. A S Edirisinghe 500 Mr. R Perera 500

Mr. A S Edirisinghe 500 Mrs. K.G.G. Dharmasiriwardana 500

Mr. A S Edirisinghe 200 Mr. I G A K C Gunawardana 200

Mr. A S Edirisinghe 200 Mr. H N Prasad 200Mr. A S Edirisinghe 200 Ms.D A S Sandakelum 200

Mr. A S Edirisinghe 100 Mr. K A C Jayasena 100

Mr. A S Edirisinghe 100 D L Kaluarachchi 100

Mr. A S Edirisinghe 100 Mr.K A D Priyasantha 100

Mr. A S Edirisinghe 100 Mr. L K P Wijetunga 100

Mr. A S Edirisinghe 100 Mr.I H Osman 100

Mr. A S Edirisinghe 100 Ms.D S D Siriwardana 100

Mr. A S Edirisinghe 100 Mr.T A K M Thebuwana 100

Mr. A S Edirisinghe 100 Mr.A S Wickramanayaka 100

Mr. A S Edirisinghe 100 Mr.P D R K Ihalawatta 100

Mr. A S Edirisinghe 100 Mr.K L D N R Kumara 100

Mr. A S Edirisinghe 100 Mr.N Rajendram 100

Mr. A S Edirisinghe 100 Mr.G A G Wasantha 100

Mr. A S Edirisinghe 100 Ms.K Nageswary 100

Mr. A S Edirisinghe 100 Mr.R A Jayadasa 100

Mr. A S Edirisinghe 100 Mr.M A K S M Arachchi 100

Mr. A S Edirisinghe 100 Mr.P K C Madusanka 100

Mr. A S Edirisinghe 100 Ms.W A I Udayanganee 100

Mr. A S Edirisinghe 100 Mr.S J I L Jayarathna 100

Mr. A S Edirisinghe 100 Mr.K B A C Prasad 100

Mr. A S Edirisinghe 100 Mr.R G S B Jayarathna 100Mr. A S Edirisinghe 100 Ms.R M S D Rajapaksha 100

Mr. A S Edirisinghe 100 Mr.H M J Kumara 100

Mr. A S Edirisinghe 100 Mr.W A H Lakmal 100

Mr. A S Edirisinghe 100 Ms.B W N R Menike 100

Mr. A S Edirisinghe 100 Mr.A K S R Amaraweera 100

Mr. A S Edirisinghe 100 Mr.K S Kumara 100

Mr. A S Edirisinghe 100 Ms.N M H T Narayana 100

Mr. A S Edirisinghe 100 Mr.G M C Pathmasiri 100

Mr. A S Edirisinghe 100 Mr.N M L N Narayana 100

Mr. A S Edirisinghe 100 Mr.K C K Vidanagamaarachchi 100

Mr. A S Edirisinghe 100 Ms.H B P S Rajahewa 100

Mr. A S Edirisinghe 100 Ms.S H C V Samanmali 100

Mr. A S Edirisinghe 100 Mr.M M P Silva 100

Mr. A S Edirisinghe 100 Mrs. L M S Bandara 100

Mr. A S Edirisinghe 100 Mr. S M Kumaranayake 100

Mr. A S Edirisinghe 100 Mr. R Prashanthan 100

Mr. A S Edirisinghe 100 Miss D H D Sriyanga 100




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No. of Shares

Transferred

Mr. A S Edirisinghe 100 Mr. L A N A D Jayasekara 100

Mr. A S Edirisinghe 100 Mr. P.Punyasiri 100

Mr. A S Edirisinghe 100 Miss. J S Weerakoon 100

Mr. A S Edirisinghe 100 Mr. M V G Perera 100Mr. A S Edirisinghe 100 Mr. M T P Senaviratna 100

Mr. A S Edirisinghe 100 Miss. M M Weerakkody 100

Mr. A S Edirisinghe 100 Mr. P D M Fernando 100

Mr. A S Edirisinghe 100 Mr.M H M S Buddhika 100

Total 2,500,000 Total 2,500,000