ANNUAL REPORT COMMERCIAL CREDIT PLC. 2010-2011 Contents 2 2
Purpose. Vision, Mission and Shared Values 1 Graphical Presentation of Key Indicators 2 Financial Highlights 3 Chairman’s Message 5 CEO’s Review 7 Board of Directors 9 A Brief Profile of Board of Directors 12 Corporate Management Team 15 Management Discussion & Analysis 21 Sri Lankan Economy 21 About the Company 23 Product Portfolio 28 Human Capital 30 Achievements 31 Financial Review 33 Corporate Social Responsibility 34 Report of the Board of Directors 37 Risk Management 41 Corporate Governance 42 Report of the Audit Committee 45 Report of the Remuneration Committee 46 Financial Statements 47 Balance Sheet 50 Income Statement 51 Statement of Changes in Equity 52 Cash Flow Statement 53 Notes to the Financial Statements 54 Five Year Summary 80 Investor Information 81 Commercial Credit Network 83 Notice of Meeting 85 Form of Proxy 87 Corporate Information PURPOSE To build leaders who uplift the lives of people by simple acts of love
VISION To be the Most Preferred Company admired for its people, partnership and performance
MISSION Applying our passion for human values through ethical business opportunities, ensuring development of our staff as individuals and recognizing them, as we contribute to the betterment of our customers through flexible and respectful service, while creating shareholder value
SHARED VALUES The Company’s values provide guidance throughout its operations, from strategic planning to day-to-day decision making, and governs the manner in which the Company treats all stakeholders. n Loving and Caring n Integrity and Trust n Learning and Development n Think Win-Win n Synergy and Team Work
COMMERCIAL CREDIT PLC. ANNUAL REPORT 2010/2011 1 GRAPHICAL PRESENTATION OF KEY INDICATORS
Graphical Presentation of Key Indicators
Net Income Net Interest Income
2011 2011
2010 2010
2009 2009
2008 2008
2007 2007
0 180 360 540 720 900 0 160 320 480 640 800 Rs. 000,000 Rs. 000,000 Profit/(Loss) beforeTaxation Profit/(Loss) after Taxation
2011 2011
2010 2010
2009 2009
2008 2008
2007 2007
-30 26 82 138 194 250 0 14 28 42 56 70 Rs. 000,000 Rs. 000,000 Asset Base Loans & Advances
2011 2011
2010 2010
2009 2009
2008 2008
2007 2007
0 1100 2200 3300 4400 5500 0 400 800 1200 1600 2000 Rs. 000,000 Rs. 000,000 Deposits Base
2011
2010
2009
2008
2007
0 800 1600 2400 3200 4000 Rs. 000,000
COMMERCIAL CREDIT PLC. ANNUAL REPORT 2010/2011 2 FINANCIAL HIGHLIGHTS/REVIEW
Financial Highlights
2007 2008 2009 2010 2011
(Rs. ‘000) (Rs. ‘000) (Rs. ‘000) (Rs. ‘000) (Rs. ‘000)
Net Income 115,463 140,012 162,862 218,765 848,282
Net Interest Income 76,305 103,048 126,666 170,400 702,488
Profit/(Loss) Before Taxation 36,163 32,812 -1,280 -25,942 244,366
Profit/(Loss) After Taxation 39,308 29,334 7,098 45,190 60,094
Asset Base 881,762 1,196,137 1,389,813 2,270,642 5,350,179
Loans & Advances 247,586 241,849 269,603 389,762 1,944,229
Deposit Base 569,043 712,919 854,331 1,732,958 3,840,492
COMMERCIAL CREDIT PLC. ANNUAL REPORT 2010/2011 3
COMMERCIAL CREDIT PLC. ANNUAL REPORT 2010/2011 4 CHAIRMAN’S MESSAGE
Chairman’s Message
am pleased to welcome you to the 28th Annual General Meeting of Commercial Credit PLC and to present you our Annual Report and Audited Accounts for the financial year 2010/2011. Whilst the results are the best ever in our history, I believe the Company is yet to realise its full potential in Ithis new and exciting environment.
It is encouraging to note that our business strategies over the past few years have achieved their aim of growing the business while ensuring its strength and stability.
Overview of the Global Economy Notwithstanding the sharp dip in the global economy in 2008 and contrac- tion in 2009, global GDP showed an increase of 3.9% in 2010. While high-income countries recorded a growth despite severe economic strain, developing economies managed a stronger show, recording a growth of 7% - twice as high as that of high-income countries.
Consequently, low and middle-income countries contributed towards nearly half of global economic growth, which stood at 46% in 2010. Global GDP is projected to increase only by 3.3% and 3.6 % during 2011 and 2012, with developing economies expanding by over 6% annually.
Overall, financial conditions are improving, reinforcing generally positive outcomes which should impact our island nation positively.
Outlook for the Sri Lankan Economy This financial year was the first full year of operation following the end of the three-decade-long civil conflict. Seizing the opportunities presented by newfound peace, the economy is emerging from three decades of modest growth to realize its true potential. The country’s economic and financial This financial year witnessed as the consolidation remains a top priority in the pro- first full year of operation subse- cess of economic rehabilitation. quent to the ending of the three-decade- Sri Lanka became one of the fastest growing long conflict, therefore the economy is economies in the world, growing a massive 8% emerging from three decades of modest in 2010, the highest annual growth rate in three decades, while inflation continued to remain low growth to realize its true potential. The around the mid-single digit levels, according to dawn of peace has brought with it oppor- the Central Bank of Sri Lanka. The general deficit tunities for the country’s economic and reduced to 7.9% of GDP in 2010, from 9.9% in 2009. The government plans to further reduce financial consolidation. the budget deficit to 6.8% in 2011 and to below 5% in the medium term.
Inflation remained unresponsive at a mid- single digit and market interest rates continued to decline with the Central Bank of Sri Lanka further easing its monetary policy. The financial market remained liquid and public confidence in financial institutions strengthened in tandem with the stringent regula- tory measures adopted by the Central Bank of Sri Lanka during the year.
COMMERCIAL CREDIT PLC. ANNUAL REPORT 2010/2011 5 CHAIRMAN’S MESSAGE
Company Performance Commercial Credit has performed exceptionally well in the year under review, posting strong financial results and consolidating its reach in the market. We recorded a total revenue of over Rs. 1.2 billion surpassing the Rs.1 billion mark for the first time in the Company’s history.
The Company recorded a net profit before tax of Rs.244.36 million during this period, compared with Rs. 25.9 million loss in the previous year. This was due to the 162% growth in the investment base; from 1.7 billion in March 2010 to 4.4 billion in March 2011. These investments were mainly backed by the Fixed Deposit base of the company, which also has grown by 122% from 1.7 billion in March 2010 to 3.8billion in March 2011.
The Asset base of the Company recorded a 130.4% growth during the financial year from 2.3 billion in March 2010 to 5.3 billion in March 2011.
The efficiency of operation resulting from the implementation of new strategies and focused direction became evident in the Company’s Cost to Income ratio, which dropped significantly to 59% in 2011 from 92% in the preceding year.
Appreciation The guidance, support and contribution of the Board of Directors have been invaluable at this time of the Company’s immense growth and expansion, and I wish to express my gratitude for their contribu- tion towards the company’s success. We have grown both in size and reputation, and achieved excel- lent results during the year under review. I also wish to express my sincere appreciation towards the Chief Executive Officer, the highly capable and empowered management team and the members of staff who remain steadfast in their dedication and loyalty towards the Company.
I am especially grateful to all our customers, depositors and shareholders for the trust and confidence you have placed in us, enabling us to achieve continuous and sustained growth, even during times of volatility.
In an era of promising and exciting opportunities, I am confident that Commercial Credit will continue to lead a revolution in the industry, and play an integral role in redefining the nation’s financial land- scape.
Vagdevi Fernando Chairman
17th November, 2011
COMMERCIAL CREDIT PLC. ANNUAL REPORT 2010/2011 6 CEO’S REVIEW
CEO’s Review
Dear Shareholder,
t is with great pleasure that I present you a review of the operations of our Company for the year ended 31st March 2011. 2010/11 was a year of considerable achievements in which I believe we laid a firm foundation for the accomplishment of corporate goals identified at the recently unveiled IThree Year Strategic Growth Plan.
A well-planned and executed strategy of New Corporate image, New Innova- tive Products and Modern Infrastructure, together with an empowered work culture has resulted in the Company recording tremendous growth in its deposit and lending base, unprecedented in the sector in the past. The reli- able and user friendly MIS system together with the extended branch reach were the key enabling factors for the remarkable growth of the company.
The company has achieved in terms of pre- tax profit a growth of 1142%, and the pre-tax loss of Rs. 25.9 million in March 2010 has improved to a profit of Rs. 244.3 million for the year ending 2011. The increase of profit after Income tax was however marginal at 32.98% due to reversal of previous year’s realized deffered tax asset of Rs 121 million. In addition, the Interest income and Interest Expenditure Gap has grown a staggering 312.26% from Rs. 170.4 million to Rs. 702.49 million. Achieving these astronomical figures in an industry dominated by a number of established players is true testament to the company’s strate- gic direction and pioneering vision.
The driving force behind the Company’s astro- Commercial Credit once again nomical success to date is its dedicated workforce drawn from the cream of the industry’s talent demonstrated its indomitable spirit pool. The company’s culture of liberalization and and growth potential with the launch empowerment has enabled the team to deliver of a motivated and aspiring strategic results above and beyond industry norms. The loyalty and commitment of the team members growth plan under the theme “Winning have been pivotal factors in the Company’s suc- Strategies” - a new era of excellence and cess story. During the period under review the team work... Company increased its staff strength from 312 to 489 with over 80% of the new recruits being competent marketers.
The scalability the company has achieved was possible due to the culture of empowerment practiced throughout the company together with the highly efficient MIS system. The MIS system has facilitated Credit Management at the front line, whilst ensuring that control and information flow are maintained at the head office in order to ensure compliance and creditworthiness, thereby enabling the Company to achieve one of the best NPA ratios and Cost to Income ratios in the industry.
During this period the Company has introduced many new innovative and trail-blazing products, leading to increased mobilization of funds and effectiveness of the lending portfolio. This has enabled the com- pany to reach a wider segment of society and serve a client base of over 310,000 customers.
Moreover, during this period the company’s brick and mortar presence expanded from 16 to 22 locations throughout the country, increasing its presence whilst ensuring greater convenience for its island-wide customer base. The company is in the process of improving the existing branch infra-
COMMERCIAL CREDIT PLC. ANNUAL REPORT 2010/2011 7 CEO’S REVIEW
structure in order to create a modernized ambience for both staff and customers. The branch expansion and infrastructure upgrading, coupled with a new brand logo and innovative marketing and advertising strategies have strengthened the Company’s foundation, ensuring its future growth as it pursues its goal of becoming the leader in the finance industry within the next three years.
The listing of 218,074,365 ordinary voting shares on the Diri Savi board of the Colombo Stock Exchange mid this year created waves among investors attracting much attention and thereby enabling the company to achieve the 4th highest market capitalization among the companies in the finance industry of the country.
Further, having earned a distinct and widely acknowledged reputation as one of the fastest growing and most successful finance companies in the country, Commercial Credit once again demonstrated its indomitable spirit and growth potential with the launch of a motivated and aspiring strategic growth plan under the theme “Winning Strategies” - a new era of excellence and team work’ - the three year strategic plan focuses on increasing the company’s stellar performance.
I am proud to announce that, the company was awarded the ‘Best Finance Company in Asia’ at the recently concluded international UDC Business Awards in Malaysia. Being awarded the prestigious interna- tional UDC Business Award further validates Commercial Credit’s reputation as an eminent financial institu- tion in the Asian region, and puts the company on the global map of leading finance establishments.
Having competed with leading finance companies in the Asian region, the company’s stellar track record of successes and record-breaking achievements over the past few years secured the company the illustrious Award.
The inculcation of a pioneering corporate culture, with self-managed and dedicated employees, who are empowered to perform to their optimum, will assure the attainment of the Company’s strategic goals.
I take this opportunity to express my gratitude to the Chairman and my fellow directors, for the guidance and support extended in all areas of the Company’s operations.
On behalf of the Board of Directors I would like to express my deep appreciation to the officials of the Central Bank of Sri Lanka for their guidance and continued assistance and to our stakeholders for their continues loyalty and trust.
Finally, these achievements would not have been possible without the extreme devotion and hard work of my staff to whom I extend my special appreciation and utmost gratefulness for enabling Commercial Credit to outperform its competitors in the finance industry.
Roshan Egodage Chief Executive Officer
17th November, 2011
COMMERCIAL CREDIT PLC. ANNUAL REPORT 2010/2011 8 BOARD OF DIRECTORS
Board of Directors
he Company’s business and operations are managed under the supervision of the following members of the Board. The Board of Directors of the Company comprises Eight Directors consisting Three Executive TDirectors, One Non Executive Director and Four Non Executive Independent Directors Name Age Other Directorships/Positions Held
Mrs. Vagdevi Wimalangi Fernando 73 Past president of Finance Houses Association Executive Chairperson Director- Kelani Paper Converters Ltd.
Mr. George Hemachandra 67 Chairman of Hemachandras (Kandy) Ltd. Non Executive Director Director of Hotel Hiltop Kandy.
Mr. Cecil Perera 54 Director -Management Systems (Pvt)Ltd, Independent Non Executive Director Director -Eurocentre DDC Lanka (Pvt)Ltd, Director -Winall(Pvt)Ltd, Director -Thilanka Hotels (Pvt) Ltd. Director- Legallnc Secretarial & Management Services (Pvt) Ltd Director- Legallnc Trustee Services (Pvt) Ltd Director – Legallnc Investment Services (Pvt) Ltd
Mr.Samantha Kumara Gunaratne 43 Director -Best Cars Lanka (Pvt) Ltd Independent Non Executive Director Director -SK Consultants (Pvt)Ltd. Director – RDS Bakers (Pvt) Ltd
Mr. Thirunavukarasu Someswaran 67 Director- Panasian Power PLC, Independent Non Executive Director Director - Someswaran Centre (Pvt) Ltd Director- Sunrise Senior (Pvt) Ltd Director - Centre for Advancement of Resource Mobilization (CARM) Director- CLEANCO Lanka Limited Director- Serendib Land PLC Director-SMB Leasing PLC Director-Abans Finance PLC Director-Equality-based community support & training (ECSAT)
Mrs. Geya Rasi Egodage 46 Director -R D S Bakers (Pvt)Ltd Executive Director Director -B. G. Investments (Pvt) Ltd Director- B.G. Capital (Pvt) Limited
Mr. Roshan Sanjaya Egodage 47 Director -B. G. Investments (Pvt) Ltd Chief Executive Officer Director- B.G.Capital (Pvt) Limited
Mr. Susantha Pinto 44 Director – Green Earth Constructions (Pvt) Ltd Independent Non Executive Director Director – Green Earth Renewables (Pvt) Ltd Director – Green Earth Technologies (Pvt) Ltd Director - S and H Holdings (Pvt) Ltd Director – Hotel Supplies (Pvt) Ltd Director – Green Earth Plantations (Pvt) Ltd
COMMERCIAL CREDIT PLC. ANNUAL REPORT 2010/2011 9 The Board of Directors
From left to right: Mr.Samantha Kumara Gunaratne - Independent Non Executive Director, Mr. Thirunavukarasu Someswaran - Independent Non Executive Director, Mrs. Geya Rasi Egodage - Executive Director, Mr. Roshan Sanjaya Egodage - Chief Executive Officer, Mrs. Vagdevi Wimalangi Fernando - Executive Chairperson, Mr. Cecil Perera - Independent Non Executive Director, Mr. George Hemachandra - Non Executive Director, Mr. Susantha Pinto - Independent Non Executive Director BOARD OF DIRECTORS
A Brief Profile of Board of Directors
MRS. V.W. FERNANDO Executive Chairperson MR. R.S. EGODAGE Chief Executive Officer No. 847/2 Peradeniya Road, Kandy No. 475/5, Elvitigala Mawatha, Colombo 05.
Mrs. Vagdevi Fernando joined the Mr. Egodage took over the reins Board of Directors of Commercial of Commercial Credit Ltd. in Credit Ltd following the demise October 2009 following the of her late husband Mr. K. H. takeover of the company by B.G. Donald Fernando who was the Investments at the same time. Founder Chairman of the Com- As the CEO of the company, he pany in 1988. Having entered has been the driving force behind the teaching profession for a few the company’s stellar success, years following her graduation charting a visionary course of from University, Mrs. Fernando leadership and growth, ensuring has also worked internationally in the company’s status today as Germany and England in various one of the country’s most suc- capacities. cessful and respected finance companies. She is a respected businesswoman who has earned the recogni- tion of the corporate fraternity for her contributions to the business An industry veteran with a wealth of experience and achievements arena. to his credit, Mr. Egodage is a skilled corporate strategist with a proven track record in guiding corporate entities towards record Mrs. Fernando is a senior member of the Finance Houses Associa- growth and success. His passion and innate talent for establishing tion (FHA), and was its first female Chairman and the only female pioneering and liberated corporate strategies has been validated by to have held the position of President for two consecutive years. Commercial Credit’s trailblazing success in just 18 months, growing She was the recipient of the Central Province Entrepreneur of the from a relatively small market share to being within the top five Year Gold Award in 2006, the Central Province Business for Unity registered finance companies in terms of Net Interest Income. Silver Award in recognition of her contribution to social responsibil- ity and peace, and a Merit Award at the National Entrepreneur His success is due in part to the multi-disciplinary approach he of the Year Awards. She was also named in the 2003 American brings to the table, gleaned through a diverse career in a range of International WHO’s WHO of Professional and Business Women. industries, including Engineering, Manufacturing, Plantations and She is a Life Member of the Ceylon Chamber of Commerce Finance. (Central Province), The Women’s Chamber of Commerce (Central Province), The Sri Lanka Federation of University Women, The Prior to taking over the stewardship of Commercial Credit, Mr. Alliance Francaise de Kandy, The Organization of Professionals of Egodage has held several top level management positions in the Kandy and the Sinhala Velanda Sangamaya. finance industry. He was appointed as the Deputy Chief Executive Director of The Finance Company PLC in 2006. Holding overall A past pupil of VisakhaVidyalaya, Colombo, she holds a BA General responsibility for the company’s operations, while serving on the Arts degree from the University of Peradeniya, and is an active boards of several group companies at the same time, he led The member of the University Alumni Association. She also served on Finance Company to declare the highest ever profits in over 70 the University Council for a period of 3 years. years of operation, in what is popularly referred to as the Billion Month. Having made her mark in the business arena at a time when the field was dominated by men, Mrs. Fernando continues to serve as Other positions Mr. Egodage has held in reputed listed companies the company’s Chairman with the wisdom, capability, integrity and include Deputy Manager – Corporate Finance of the Merchant efficiency she has gleaned for nearly 23 years in this post, and will Bank of Sri Lanka, where he was instrumental in restructuring continue to do so in the future. the Plantations sector, General Manager – Finance Planning and Administration – Kotagala Plantations PLC and General Manager – Project and Planning, Agalawatte Plantations PLC – both positions where he held key responsibilities for the overall direction of the company. He also held key positions of responsibility in companies
COMMERCIAL CREDIT PLC. ANNUAL REPORT 2010/2011 12 BOARD OF DIRECTORS
including Central Finance, Peoples Ventures and Ceylon Pencil She brings these same skills and dedication to her role as Execu- Company. He currently serves on the Board of Directors of BG tive Director of Commercial Credit and is an integral component of Investments (Pvt) Ltd. the company’s success story.
An avid sportsman and a firm believer in the wisdom of an organi- She holds a B.Sc Special Degree with a Major in Chemistry from zation with a bottom-heavy management strategy, Mr. Egodage the University of Peradeniya and a Post Graduate Diploma in Busi- places strong emphasis on employee participation and empower- ness Administration from the Open University of Sri Lanka. ment, as well as a liberated corporate culture. His continuing focus remains the company’s strategic direction and its expansion into new markets, whilst facilitating its continued growth and success. MR. G.G. HEMACHANDRA Non Executive Director No. 454/23, Piachaud Gardens, Kandy. Having acquired a BSc. Eng. (Hons) degree from the University of Peradeniya and initially embarking on a career in the engineering A founder director of the com- field, he then set his sights on a career in management, earning pany, Mr. Hemachandra is the a MBA from the University of Colombo. He has since then gone Chairman of Hemachandras on to earn numerous professional qualifications including FCMA, (Kandy) Ltd, one of the oldest Dip.M(UK), ACIM and ASCMA. He is undoubtedly one of the most and well known jewellery busi- qualified CEO’s in the Finance industry today nesses in Kandy. He is also a Director of Hotel Hilltop Kandy.
MRS. G.R. EGODAGE Executive Director A doyen in his industry with over No. 475/5, ElvitigalaMawatha, Colombo 05. 45 years of experience in the field of commerce, he has been Mrs. Egodage joined Commercial indispensable in advising and Credit as an Executive Director guiding the company to reach following the company’s manage- the heights it has today. ment takeover in 2009. She is presently a Director of B.G. Investments Pvt. Ltd and R.D.S MR. C. PERERA Independent Non Executive Director Bakers (Pvt) Ltd. No:10, Gonawala, Kelaniya
Mrs. Egodage began her career During a career spanning over as an Assistant lecturer at the 28 years as an Attorney-at-Law Department of Chemistry, of the Supreme Court, he has University of Peradeniya. As her gained a vast amount of exper- career advanced she collaborated tise in all areas of the Law, includ- on many research projects before joining Ansell Lanka, where she ing Corporate Law, Banking Law, served for a period of 4 years as a Process chemist. From 1996 Leasing & Finance Law, Capital to 2005 she held the post of Assistant Director for Quality Control Market & Fund Management and Quality Assurance at the Coconut Development Authority. Services, Corporate Debt Financ- ing Services, and Intellectual Following this, Mrs. Egodage switched careers, putting her qualifica- Property Advisory Services. tion in Business Administration to good use as she took up a posi- tion as the Managing Director of R.D.S. Bakers (Pvt) Ltd. A well respected figure in legal circles, Mr. Perera is currently a partner of Legal Inc - Attorneys-at- Here she quickly gained a reputation for skilled management ability Law & Notary Public. Prior to this he served as the Head of Legal and an adherence to the highest ethical standards, and was instru- Department at Merchant Bank of Sri Lanka Ltd. for a period of 10 mental in developing the popular brand ‘Wonder B’ which R. D. S. years, as well as at LB Finance PLC and The Finance PLC as a legal Bakers is now synonymous with . officer.
COMMERCIAL CREDIT PLC. ANNUAL REPORT 2010/2011 13 BOARD OF DIRECTORS
He currently serves on the boards of Management Systems (Pvt) He also serves on the Director Board of Panasian Power PLC, Ltd, Thilanka Hotels (Pvt) Ltd, Eurocenter DDC (Pvt) Ltd and Winall the European Chamber of Commerce, Equity Based Community (Pvt) Ltd. He has passed the Certificate Course on Modern Bank- Support and Training, Business Council of Indonesia of the Ceylon ing conducted by the Post Graduate Institute of Management, Sri Chamber of Commerce and is Vice President of The International Jayewardenepura University. Chamber of Commerce.
He is a member of the Tax Faculty, Organization of Professional MR. S. K. GUNARATNE Independent Non Executive Director Association, International Fiscal Association and Sri Lanka Institute No.38, Panawala, Eheliyagoda. of Directors. He is a fellow member of CMA and a member of its Governing Council. Mr. Gunaratne is an Independent Consultant in Energy Conserva- tion and Management, and Mr. Susantha Pinto Independent Non-Executive Director serves as an Independent Non No 53/7A, Perera Mw, Old Kottawa Rd, Mirihana, Nugegoda. Executive Director at Commercial Credit. Mr.Gunaratne has worked Mihindakulasuriya Susantha in senior Engineering positions Devapriya Pinto started his career at some of the leading apparel as a Trainee Planter in 1996 with companies such as MAS Hold- Balangoda Estate, Sri Lanka State ings and Brandix, as well as in the Plantation Corporation and later Sugar and Plantation industry. functioned as Assistant Superin- tendent and Superintendent in With over 22 years of experience leading plantation companies in in the fields of Engineering and Energy Management, he has Sri Lanka. participated in many project teams and forums involved in the construction and commissioning of many mass scale manufactur- He served Solar Electric Light ing facilities for the Plywood and Textile Industry. Company as the Director – Operations during which he He has been a key member of technical teams which visited theU contributed in many ways towards the improvement of operations nited Kingdom, Malaysia, China and India in order to evaluate the such as financing, after sales service of Renewable Energy- Solar suitability of adaptation of new Machinery and Technologies for Sri Photo voltaic etc. He was the Chief Executive Officer of Ceylinco Lankan industries. Renewables (Pvt) Limited for a period of two years.
He holds a National Diploma in Engineering Sciences specializing Mr. Susantha Pinto also served as the Chairman at Green Earth in Mechanical Engineering. He is currently a Director of Best Cars Group before joining Commercial Credit as a Non- executive Direc- Lanka (Pvt) Ltd. and SK Consultants (Pvt) Ltd. tor.
Being an old boy of St. Anthony’s College, Kandy, he obtained a MR. T. SOMESWARAN Independent Non Executive Director Diploma in Plantation Management and he is currently reading for No.3/1, St Michael’s Apartment, a MBA from Western Sydney University in Australia. 4, Alfred House Gardens, Colombo 03. He brings a high degree of commitment and dedication coupled Mr. Someswaran is a Chartered with industry expertise in to the business s a Non-Executive Direc- Accountant counting over 35 tor of Commercial Credit PLC and he is recognized as a major years in practice and recently component in Commercial Credit’s attaining expected improved retired from the post of Senior performance. Partner of SJMS Associates, a firm of Chartered Accountants associ- ated with Deloitte in Sri Lanka. He serves on the Audit Commit- tee of the Institute of Chartered Accountants of Sri Lanka and Serendib Lands (Pvt) Limited.
COMMERCIAL CREDIT PLC. ANNUAL REPORT 2010/2011 14 CORPORATE MANAGEMENT TEAM
Corporate Management Team
Mr. Roshan Sanjaya Egodage Mr. K.L.A.Senevirathne Managing Director/ Chief Executive Officer Deputy General Manager – Operations Please refer to Director Profile Mr. K.L.A.Senevirathne is cur- rently employed at Commercial Credit PLC as a Deputy General Manager - Operations. He has Mrs. G R Egodage also worked for both Kelani Working Director Cables Limited and The Finance Please refer to Director Profile PLC, where he held the position of an Assistant General Manager. He has more than 25 years of Finance Industry experience.
Mr. C. Prasanna Wickramasinghe His self motivation and vision of Deputy General Manager – Information Technology empowerment is a key contribu- tion and motivator of the company’s ethos, which is to cultivate Mr. C. Prasanna Wickramasin- and encourage a new breed of corporate workforce, which will ghe is currently employed at take the country’s corporate culture into a new era of incentive, Commercial Credit PLC as the impetus and inspiration. Deputy General Manager – In- formation Technology. Mr. J.L.A.S. Priyankara One of the most skilled and Deputy General Manager – Operations qualified professionals in the industry, Mr.Wickramasinghe As the Deputy General leads Commercial Credit’s IT Manager – Operations at Com- department, which boasts one mercial Credit, Mr. Priyankara of the best state of the art IT is responsible for a wide range systems in the Finance Industry. of the company’s day to day activities as well as holding joint One of the Company’s longest serving employees, responsibility for implementing Mr.Wickramasinghe is a Chartered IT Professional and a member its strategic focus. of the British Computer Society – MBCS CITP. He has completed a MSc in Information Technology at the Charles Stuart University, Mr. Priyankara brings with him Australia, and in addition holds both IDM – Diploma in Program- over 22 years of experience ming in IT – SL, and ACS - Advanced Diploma in IT – Australia. in the industry in various key positions, which enables him to discharge his duties with the highest levels of efficiency and skill.
Mr. Priyankara’s skill in working with leaders and teams to set goals and his effectiveness in motivating teams to achieving these goals, thereby linking the Company’s vision and strategy with its growth imperatives is vital in Commercial Credit’s market growth plans and aspirations. He is a Bachelor of Arts (Hons.) Graduate from the University of Ruhuna and has also completed his MBA at the University of Manipal – India.
COMMERCIAL CREDIT PLC. ANNUAL REPORT 2010/2011 15 CORPORATE MANAGEMENT TEAM
Mr. Andrew Samuel Mr. S. Nanayakkara Deputy General Manager – Corporate Planning Deputy General Manager Recoveries
Andrew Samuel joined Commer- Mr. Nanayakkara is resourceful cial Credit Limited as the Deputy individual with unique set of General Manager – Corporate personal code of ethics which Planning in February 2010. With governs his conduct whilst giving 17 years of diverse experience utmost trust for customers and and knowledge, he brings the the employer. In his over 29 understanding of the busi- years of unblemished service in ness‘ needs to the design and the field of finance and he has facilitation of transformational contributed many ways to uplift programs. the standard of the industry.
Prior to his current position, During his period at The Finance he had a long and successful Company he had been a driving career in the Plantations industry in several key management force for its branch managers and center managers in achieving positions. Having joined the sector as a Trainee Assistant consecutive growth in profitability, investments and recoveries Manager in 1994 at Mackwoods Plantations Pvt. Ltd., his natural enabling them to win the Annual Award for the best perfor- capability, intelligence and enthusiasm earned him distinction and mance. Also he was a member of the Credit Committee and a recognition, as well as the position of Manager within just seven team leader of the Product Development Team at The Finance years. He joined Aspic Plantations Pvt. Ltd. in the capacity of CEO Company. in 2008, and was also a director of several group companies, later moving on to Deraniyagala Plantations Pvt. Ltd. where he Mr. Nanayakkara not only possesses industry experience but also held the position of Director/CEO. He was also a director of Next possesses the professional qualifications in the field of Finance, Finance. Recoveries and Credit management. He has a Diploma in Credit Management and has completed I.A.B. (U.K). During his career he has managed several noteworthy achieve- ments, including intitiating and implementing participatory As a competent individual in credit evaluation, recoveries, trainer management structures, achieving record crops in both Tea and on recoveries, credit management, administration etc Mr. Nanay- Rubber Estates and facilitating significant estate development akkara is a strategic asset in achieving the Organizational goals. projects.
An Old Boy of Trinity College, Mr.Samuel holds an MBA the Uni- versity of Peradeniya. He is an Associate Member of the National Institute of Plantation Management(AIPM), and a Fellow of the Chartered Institute of Management Accountants -UK (FCMA).
COMMERCIAL CREDIT PLC. ANNUAL REPORT 2010/2011 16 CORPORATE MANAGEMENT TEAM
Mr. Shammi Jayathilake Mr. M.A.D. Janaka Deshapriya Deputy General Manager – Marketing Chief Financial officer
Mr. Chaminda Janaka( Shammi) During a career spanning over Jayathilaka started his career 15 years in the field of finance, as a Marketing Executive at he has gained a vast amount of Ceylinco Insurance Co.PLC, he expertise in the industry. is a dynamic personality who contributed many ways for the He is a fellow member of achievements of the organiza- Society of Certified Manage- tional goals. He has experience ment Accountants of Sri Lanka as an Asst. Sales Manager at and a member of the Institute Golden Lion Universal- Hong of Charted Accountants of Sri Kong, Ceylinco Shriram Capital Lanka. Management Services Co. Ltd & Asia Growth Fund-Mauritius Prior to joining Commercial as an Asst. Sales Manager from November 1998 to Oct 2000, Credit PLC he has severed The Finance Company Plc as Chief where he awarded as the best performer in two consecutive Acting AGM Finance, General Manager Operations, General Man- Years. ager overlooking the financial activities.
During his tenure at Ceylinco Consolidated Overseas Limited He has experience in Accounting and Financial Management, Dubai, UAE, as a Country Manager he had brought many changes Budget development and management forcasting, planning to the operations. Later he had moved to Ceylinco Express Remit- , Treasury Management, Auditing, Tax Planning and business tance Co. (Pvt) Limited as a Regional Manager- Middle East & leadership. Europe from April 2005 to August 2010 where he collaborated on many research projects. He had also served Frostaire Indus- As the Chief Financial Officer at Commercial Credit, Mr. De- tries (Pvt) Limited as a Head of Sales making use of his industry shapriya is responsible for Overlooking Finance Division holds knowledge and the experience. the responsibility of managing and directing activities towards the company’s strategic focus. He brings the same to Commercial Credit by taking his deities as Deputy General Manager Marketing and he is an integral compo- nent of the Company’s success story.
COMMERCIAL CREDIT PLC. ANNUAL REPORT 2010/2011 17 The Corporate Management Team
1st Row (Left To Right): Mr. Shammy Jayathilake, Mr. Sebestian Nanayakkara, Mr. Sudath Jayasekera, Mr. Andrew Samuel, Mrs. Vagdevi Wimalangi Fernando, Mr. Roshan Sanjaya Egodage, Mrs. Geya Rasi Egodage, Mr. K. Senarathne, Mr. Janaka Deshapriya, Mr. Prasnna Wickramasinghe.
2nd Row (Left To Right): Mr. D.G. Jayarathne, Mr. Dhanushka Udugama, Mr. Saman Gunawardena, Mr. Ayesh Pitigala, Mr. Anil Manawadu, Mr. Anuradha Ranaweera Regional Managers & Senior Manager
1st Row ( Left To Right): Sunil Wijesinghe, Lalith Attanayake, Mahiinda Seelagama, Niroshan Madawala, Indika Prasad, Chitrabandu De Silva, Thilak De Alwis, Mrs. Pushpa Wijesinghe, Lalith Lunuwila, Mahesh Lakshan, Vijith Weerakoon, Shafraz Jainudeen, Sanjeewa Jayamanne, Asitha Ratnayake
2Nd Row (Left To Right ): Shantha Thanthirige, Gamage Piyadasa, Abeyakumara, Nalaka Kariyawasam, Saman Perera, Anushka Silva, Jagath Gamage, Wasala Ariyapala, Lalith Dissanayake, Chaminda Ranasinghe, Faizal Devananda, S Thirukumaran, Sanath Sujeewa, Jeewa N Athukorala, Dharshana Mallawarachchi, Nishantha Weerakoon MANAGEMENT DISCUSSION & ANALYSIS
Management Discussion & Analysis Sri Lankan Economy
wo years before Sri Lanka gained its second lease of inde- markable turnaround since the second quarter of 2009, continues pendence and peace has prevailed within its borders thus to improve in 2010. Both exports and imports recovered strongly, far, May 2009 ushered in a new era for Sri Lanka with more while increased earnings from the tourism industry and higher in- resources for productivity enhancement and development; ward remittances offset the widening trade deficit to a great extent, Ta larger workforce, serene coastlines including a natural harbor reducing the external current account deficit. that were inaccessible by war, more land to develop and cultivate, connectivity of people, land and infrastructure and more so an Increased capital and financial flows resulted in the balance of undivided focus on growth and development. payments (BOP) recording a surplus in 2010, further strengthening external reserves of the country.
MACRO ECONOMIC REVIEW With favorable macroeconomic conditions and the recovery in Sri Lanka’s economy grew by an impressive8.0 per cent in 2010, economic activity and also with the supportive regulatory and su- reflecting a fast recovery from the setback suffered in 2009 and pervisory framework, the performance and stability of the financial moved to a high and sustainable growth path. All key sectors of sector strengthened in 2010 the economy demonstrated a commendable performance in 2010, underpinned by the peaceful domestic environment, and improved investor confidence, favorable macroeconomic condi- FINANCE SECTOR PERFORMANCE tions and gradual recovery of the global economy from one of the A stable financial system creates a favourable environment for deepest recessions in history. depositors and investors, encourages financial institutions and markets to function effectively and efficiently, and hence, promotes Sri Lanka has mostly had strong growth rates in recent years. In investment and economic growth. Financial system stability GDP per capita terms, it is ahead of other countries in the South requires a stable financial and economic environment within an Asian region. effective regulatory framework and a safe and robust payment and settlement system. The maintenance of financial system stability 2010 Q2 GDP growth recorded an 8.5% increase and is well on entails identifying and addressing potential vulnerabilities and risks track to meet year-end target growth levels with 1H 2010 record- to the financial system. ing a 7.8% growth compared to 1H 2009, where we estimated GDP growth to be about 7.2% for 2010. The NBFI (Non Banking Financial Institutions) sector has grown and developed on a fragmented basis, as has its regulatory frame- Inflation continued to remain low at around mid-single digit levels work. Whereas the component parts of the mosaic of activities and the benign outlook for inflation enabled the Central Bank to covered by the report function reasonably well, they do so within ease its monetary policy stance further in 2010. An encourag- an environment of unleveled playing fields. They are often subject ing improvement in the overall fiscal situation was witnessed in to restrictive or discriminatory practices and to taxes imposed with 2010 with the recovery in government revenue supported by the little consultation and consideration as to the likely consequences. expansion of economic activity, the addressing of certain persistent Regulation is more often a euphemism for control of the sector structural issues in the tax system, as well as the containment of organizations, as opposed to supervision of its professional bodies recurrent expenditure. and, despite government efforts to control, swathes of activities fall outside the regulatory net altogether. An encouraging improvement in the overall fiscal situation was witnessed in 2010 with the recovery in Government revenue There would appear to be an evident requirement for more ef- supported by the expansion of economic activity, the addressing of fective supervision encompassing all organizations or individuals certain persistent structural issues in the tax system, as well as the engaged in financial operations and more consultation with profes- containment of recurrent expenditure. sional associations.
The overall deficit was reduced to 7.9 percent of GDP in 2010 from 9.9 percent in 2009. The external sector, which made a re-
COMMERCIAL CREDIT PLC. ANNUAL REPORT 2010/2011 21 MANAGEMENT DISCUSSION & ANALYSIS
FUTURE OUTLOOK The Asian Development Bank (ADB) expects inflation to average 8 Sri Lanka is one of the “largish economies” that will have managed per cent in 2011. It is expected to move the curve down wards in to provide access to electricity to rural areas. In 2006, the coverage years to come. was 78.5 per cent and in 2009, it rose to 83.2 per cent. When considers the rural poverty it had come down sharply from 15.7 per cent (2009) to 7.6 per cent (2010). Areas of Concern The main areas of concern were expenditure and also doubts over The Central Bank predicts 8 per cent growth rate in 2011 and the ability of the government to achieve its target of bringing down 2012. This was possible because the recovery was spread out budget deficit to the promised levels. In the long-run growth is across all sectors — agriculture, manufacturing and services. unsustainable without macroeconomic stability. Now comes the uphill task of bringing down budget deficit to 5 per cent over the next two years. On the tax side some measures have been taken. Global Economic Climate But doubts remain on expenditure side. Current expenditure has to Overall the global financial crisis has been stabilized but is still be curtailed. volatile; however the European debt crisis may have another round with the problems that still prevail in Ireland for instance and Portu- The country needs to streamline many of its procedures which gal not able to resolve their debt problems. would in turn increase the ease of doing business. For example, Sri Lanka has more procedures involved in obtaining licences and There is a now a shift in global demand to fast growing, large permits to build a warehouse, compared to other South Asian emerging economies. A substantial proportion of global growth country. Tax administration could be streamlined and revised to over the next 3-5 years will be derived from large emerging boost the efficiency of the overall system. markets, due to their inherent domestic demand arising from their large populations and high growth rates (averaging 8%-10% over Number of procedures in property registration in Sri Lanka exceeds the next five years). the regional average. Nonetheless, costs are still lower than those of its South Asian peers. Other developing countries can leverage on the shift in growth poles by restructuring production such that it will be complemen- There is much scope to further strengthen the country’s financial tary to the demand and output generated by these countries, infrastructure, in terms of the collection and dissemination of credit rather than to be in direct competition against them. information (for both individuals and firms). There is a need to increase the level of transparency and accountability concerning transactions in the country, to encourage a higher level of eco- Sri Lanka’s Prospects nomic activity. When considering the Sri Lanka’s prospects, the economists state that the country’s economy has poised for a strong rebound, show- Economic prospects in 2011 and 2012 have improved consider- ing a strong first half performance with a GDP of 7.1% in the first ably with GDP growth forecast at 6.5% and 6.3% respectively. quarter and 8.5% in the second. There has also been recovery in Medium-to-long term growth prospects revised upwards; average exports and domestic demand. annual GDP growth raised to 6.2% from 5.5% for 2011-15 period while the earlier 6.0% forecast for 2016-20 has been raised mar- Real GDP growth in 2011 is projected at 6.5% and is marginally ginally to 6.1% as the country’s long term potential has increased. lower at 6.3% in 2012. The services sector is projected to grow by 7.0% in 2011 and 6.9% in 2012, while industry, led by manufac- turing, is projected to expand by 6.4% in 2011 and 2012.
Overall Inflation Overall inflation increased to 8.6 per cent in March 2011, due to escalating food prices — food prices were 13.9 higher than a year earlier.
COMMERCIAL CREDIT PLC. ANNUAL REPORT 2010/2011 22 MANAGEMENT DISCUSSION & ANALYSIS
About the Company
HISTORY 04th October 1982 witnessed the birth of Commercial Credit lean staff structure, in addition to garnering it ISO 9001:2008 in Limited in the hill capital of Kandy. The Company, registered as October 2006 for enhanced quality management compliance. a Finance Company under the Finance Companies Act No.78 of 1988 under the Monetary Board of Central Bank of Sri Lanka. A change in the majority shareholding in October of 2009 resulted in a new management team with Mr. Roshan Egodage taking over During the initial stages of operation the Company was mainly the reins of the Company. A well planned and executed strategy of focused on lending to the Agricultural sector with this sector New Corporate Image, New Innovative Products, and Modern Infra- accounting for over 50% of the lending portfolio. Although the structure together with an empowered work culture has resulted in Company had 16 locations spread around the country, the tradi- the Company recording a huge growth in the deposit and lending tional agricultural regions of the country such as Anuradhapura, base, unprecedented in the sector in the past. The very robust and Dehiattakandiya etc. accounted for the bulk of its business. user friendly MIS system together with the extended branch reach were key enabling factors for the growth the Company. A key dynamic the Company ensured during the first phase of its re-emergence was the inculcation of a very strong Process and Having served over 100,000 customers across the country System driven culture, resulting in the development of a highly Commercial Credit will strive to create future leaders, who will be advanced Management Information System (MIS). This has ena- empowered to uplift the living standards of society at large, with bled the Company to manage day to day operations with a very enhanced customer service and innovative products.
STRATEGIC PLANNING Commercial Credit as the fastest grow- MTI’s 8S Model® SCOPE ing finance company in the country has identified that developing a strategic plan is a prerequisite to achieving a consistent growth within a highly chal- SCAN lenging corporate environment. The Company collaborated with international strategic consultants “MTI Consultants” SIGHTS to wet the Strategic plan for the next 3 years drawn internally by involving all levels of the organisation over a period of 12 months and to bring in the STRATEGY international experience they had. The model used by MTI is given here.
STRUCTURE SYSTEMS SOCIAL RESPONSIBILITY
STAFF
COMMERCIAL CREDIT PLC. ANNUAL REPORT 2010/2011 23 The Strategic Planning Team
1st Row (Left To Right): Mrs. Shashiprabha Pemasinghe, Nirosh Madawala, K L A Seneviratne, Andrew Samuel, Mrs. Vagdevi Fernando, Roshan Egodage, Geya Egodage, Shammy Jayathilake, Sudath Jayasekera, Sebestian Nanayakkara, Ms. Vathsala Sathiyakeerthi,
2nd Row (Left To Right ): Asitha Ratnayake, Saman Gunawardene, Prasanna Wickramasinghe, Ayesh Pitigala, D G Jayaratne, Anil Manawadu, Janaka Deshapriya, Anuradha Ranaweera, Sanjeewa Jayamanne, Dhanushka Udugama, Tharaka Dayabandara MANAGEMENT DISCUSSION & ANALYSIS
STRATEGIC STRUCTURING PROCESS
The Strategic Plan ensured that all vital functions that an organisation should have are incorporated, categorised broadly as Value Flow and Enablers as illustrated Strategy, Performance below. The attainment of the subcomponents of value flow will be made possible Management & by the enablers. Organizational OfficeLeadership Environment All functional leaders have come up with Strategic Initiatives and Milestones which are to be implemented over the next three years which on completion will find the company in a different league by March 2014. Office Environment
Product Development OfficeProcess Environment & Management
Supply Chain Channel Development & Management Office CultureEnvironment
Customer Conversion Finance
Enablers OfficeCorporate Environment Comms Service Delivery Value Flow Value
People
Collections OfficeCompliance Environment
Risk
OfficeTechnology Environment
OPERATIONS REVIEW With each and every member of the staff being immersed in the company’s liberated corporate mind-set, the Company has been Branch Network able to benchmark new levels of performance and service in the Commercial Credit PLC is continuing its record- breaking story of industry. success as it spread its reach across Sri Lanka, stamping its unique brand of service and corporate leadership on cities across the During past two years, the Company expanded its reach from 16 country. The company’s rapid turnaround to become one of the locations to 22 locations spread across the country Nugegoda, most success stories in recent history has garnered it the trust, Moratuwa and Gmapaha adding in to the network as the newest recognition and respect of the industry. members. This will be expansion of the company’s promise to “Build Leaders Who Uplift Lives through Simple Act of Love”. Living up to our aspiration of being the ‘Preferred Choice’, Com- mercial Credit has made significant investments in our distribution Having increased the total number of island wide branches and channels, as we aim to serve increasing customer demands for centers to 22 further expansion plans are in the pipeline. Helping added convenience. to uplift the lives of its customers and facilitating district economic empowerment by offering a variety of flexible services will enable
COMMERCIAL CREDIT PLC. ANNUAL REPORT 2010/2011 26 MANAGEMENT DISCUSSION & ANALYSIS
solutions for each geographical territory and its target customer behavior.
Also by using various in-house and independent researches we customized our advertising and promotions and also use the same mechanism to track the progress. As per the results we develop or change our marketing strategies.
With our past 29 Years of service excellence Commercial Credit provides superior financial services for the domestic customers. Our goal is to exceed the expectations of every client by offering outstanding customer service, increased flexibility and greater value thus improving operational efficiency. Commercial Credit maintains Ceremonial Opening of the Moratuwa Branch the standard rates for lending and borrowing to the customers and further renders speed and quality services. In addition Commercial Commercial Credit to become a nationwide force, while taking Credit provides the financial services through its Island wide branch pride in the personal success of our customers. network and the head office being in Kandy, where customers are provided with increased convenience of access in obtaining the Commercial Credit’s corporate strategy, combined with its values services. and disciplined and conservative approach to managing risk, has ensured continued revenue and profit growth, while maintaining good levels of liquidity and the company remains confident about Product Development future business opportunities. Research and Development that Commercial Credit has under- taken resulted in the innovation of new Financial Products that offer better benefits to its client base. Continuous evaluations are MARKETING STRATEGIES executed to ensure that Commercial Credit operates with the most optimum Product Portfolio and it is assessed on a continuous Brand Development basis as to whether modifications are required to be made to the Company is currently working on a well defined Marketing Strategy product portfolio if the changes are made the financial products that would make the brand of Commercial Credit one of the lead- would be relaunched to the customers or else discontinue certain ing and preferred brands in the financial service industry after the financial products in maintaining the competitive edge of the firm end of the period for which it has implemented its Strategic Plan in the finance industry. for three years. Company provides a comprehensive and powerful model for Brand Image development, to help define the brand Through our internal IT system customer history can be captured strategy .Brand building and tracking so that the institution is in and this gives an insight to the engagement of the customer greater control over the value of its brand. This constructs a sys- throughout a longer period of time. Staff keep records about the tematic approach to marketing planning that will help the institution referral customers through the existing client base. The Company design and implement marketing efforts in an effective, efficient also monitors the progress of the customer by using a “progress manner that is in line with the corporate and business plan. report”, where our field staff conduct progress visits to customers. This further gives an indication about the customer history and Company uses both the Above the Line (ATL) and Below the Line the desire to continue with Ccommercial Credit. And also provides (BTL) Communication strategy to create awareness, inform the excellent working environment to all the members of the staff and mass market, where the TV, Radio and print media are used for a friendly environment to customers as appropriate. Commercial branding campaigns and enhancing product awareness. Street Credit conducts the stakeholder Aanalysis which covers customer, promotions, posters, street boards, Digital media and Exhibitions staff, shareholder, management, and changes in demand, to arrive are undertaken with a view of helping particular segments in gath- at the perception levels of current and future products brand aware- ering information such as businessmen and students ness and the potential customer needs, staff perception about the job satisfaction, management and shareholder expectation. The comprehensive marketing plan for Commercial Credit is filled with sub plans for each region of the country. It has tailor made
COMMERCIAL CREDIT PLC. ANNUAL REPORT 2010/2011 27 MANAGEMENT DISCUSSION & ANALYSIS
PRODUCT PORTFOLIO n MOTOR CREDIT (Hire purchase): a vehicle hire with the n LAND EASY PAYMENT: the Company will purchase real option to purchase the vehicle at the end of the agreed rental estate, block out, develop and sell the land to customers either period. outright or on an easy payment scheme. The ownership of the land will be transferred to the customer upon complete n MOTOR QUICK: This product is similar as Motor credit, repayment of the total rentals. where the company grants the facility within one hour to the registered owner up to 50% of the valuation with a maximum n SHORT TERM LOANS: This product is targeted towards repayment of 24 months. farmers engaging in seasonal cultivation.
n MICRO FINANCE: This product caters specifically to n CONSUMER CREDIT: This facility is granted to mainly women entrepreneurs who have no access to normal government and selected private sector employees to channels of banking, with the objective of uplifting their lives. purchase Consumer durables (TV, Refrigerators, Sawing Machine, Washing Machine etc.), and jewellery. n LEASING: The Company will retain ownership of the Vehicle, while the lessee will have possession on the asset and n SHORT TERM LOAN AGAINST FD: This is a specified enjoy its usage upon payment of a specified amount of rental facility available only for Fixed Deposit holders where up to over a specified period of time. 75% of the face of the certificate value would be granted as a loan by securitizing the FD certificate. n LEASE PURCHASE: Similar to a normal leasing product but will be extended for machinery and a mortgage will be n EDUCATIONAL LOAN: facility granted for both local and executed on the asset. international educational purposes, where the borrower may be the student or the parents of the students. n CASH LOAN: The Facility is granted with a view for facilitating personal financial requirements such as wedding n PAWN BROKING: Commercial Credit offers pawning expenses, purchase of home appliances, house renovation, facilities to clients under flexible terms of contract and thereby etc. addressing their immediate financial requirements. DEPOSIT PRODUCTS
Deposits can be for a period of 01 month to 5 years and the n CCL REGULAR – Similar to CCL Daily Business with minimum deposits should be 5000/= Interest is paid monthly deposits on a monthly basis instead of Daily. The minimum or at maturity. deposit amount is Rs. 250 and minimum period of deposit is one year. n FIXED SAVERS DEPOSITS: “Punchi Panchi” Children Savings - Children below the age of 18 can open accounts to n ONE TO ONE (1 TO 1) BONUS – Similar to CCL Regular, save on daily or monthly basis. A CCL “Till” will be given to the however the customer will be offered one to one Bonus depositor and collections will be made on a regular basis and interest at maturity of the deposit when it is converted to a credited to their account. Birthday gifts, Emergency Insurance normal Fixed Deposit. Covers, Bonus interests and many more rewards are on offer to encourage the habit of saving among young depositors.
n CCL DAILY BUSINESS – A deposit scheme where, Commercial Credit officers visit the customer daily to collect deposits. The minimum deposit amount is Rs. 250 and the minimum period of deposit is six months.
COMMERCIAL CREDIT PLC. ANNUAL REPORT 2010/2011 28 MANAGEMENT DISCUSSION & ANALYSIS
CUSTOMER FOCUS support requirements. Convenience, process supports such as document handling and collecting, financial utilization assistance, Feedback from Current Customers payment procedure and legal support are other key requirements for customers. These requirements are determined through past Commercial Credit has identified that our customers are the life information obtained with regard to customer perception, man- blood of the Company’s success. We therefore give priority to agement experience, industry standards, and previous research customer feedback and address customer concerns via various studies. methods incorporated into our daily business activities. These methods include customer satisfaction surveys, interviews, focused The above customer support requirements are comprehensively group discussions, Know Your Customer (KYC) forms, suggestion conveyed through induction programs for every employee and also boxes, customer touch points at Customer Relationship Manage- training programs conducted on a periodic basis. The CRM depart- ment (CRM), a web based portal as well as feedback collected ment handles most customer complaints. Through these training from staff who come into contact with customers. programs Commercial Credit has prepared all staff and processes to support customer requirements. Throughout the entire branch network and our dedicated work force, customers can obtain any details they require, as and when The recent incorporation of the CRM unit within Commercial Credit they require. Commercial Credit publishes newspaper advertise- has ensured a structured and systematic approach towards manag- ments on particular products on weekend newspapers, and also ing customer relationships. From the time customer enters into a engaged in a brand building campaign during the 2011 Cricket transaction with Commercial Credit, full attention is paid towards world cup. A quarterly newsletter provides additional information to developing and managing the relationship. existing and potential customers. The speed of the service Commercial Credit provides creates an Our sales force assists the Company’s customer base in various opportunity to retain and acquire more customers and to develop ways, helping them to grow their business and utilize the funds positive word of mouth. Commercial Credit sends periodic newslet- they obtain in the most efficient manner. Through the mobile ters to all existing customers to keep them informed about recent network customers can contact the relevant officers for any require- developments within the company and of any special events. ments.
The dedicated sales force is an integral component of the Com- pany’s customer support endeavours. With regard to our high net worth fixed deposit customers, the Company provides highly trained staff to service them.
In the lending products segment, the Company has a team of marketing executives with a different skills set to serve the SME sector. These two segments of marketing executives have been trained to industry standards level to maintain and build relation- ships and to retain and acquire customers. Commercial Credit uses both ATL and BTL communication strategies to create awareness, with TV, Radio and print media being used for branding campaigns and product awareness. Street promotions and exhibitions target particular segments such as businessmen and students.
The CRM department mainly serves the FD customer base and makes available the needed data for customer reference. Periodic customer training programs are organized to support the SME customer segment with the CEO’s personal involvement. Product knowledge such as interest rate, benefits over competitor products and accessibility are key to customers when considering their
COMMERCIAL CREDIT PLC. ANNUAL REPORT 2010/2011 29 MANAGEMENT DISCUSSION & ANALYSIS
INFORMATION TECHNOLOGY Usage of Intra-net Software Reliability is an important attribute of software quality, Intranet is an effective knowledge sharing tool which enables the together with functionality, usability, performance, serviceability, sharing of information about products, market situation and other capability, install-ability, maintainability, and documentation. We related information within the organization. have been maintaining an in-house developed Core ERP system which is web-enabled. Software development is carried out as per the IT industry standards. The above mentioned attributes are Usage of Mobile Technology well understood, adhered to and maintained by the IT division for Usage of mobile phones as a business tool enables the field staff high software reliability. We have been able to develop our own of CCL to update systems while on the field. Real time updating of software applications based on a user-centric approach which information helps management with timely decision making and results in high user-friendliness. User access levels are controlled the utilization of SMS as a business process supporting commu- by the system itself while adhering to the basic security concerns nication and marketing tool enables Commercial Credit to inform of IT operation. Customers on a timely basis about their due and outstanding payments, enabling effective collection of funds. Further it assists our deposit customers by reminding them of maturity dates and Continuous Improvement Plan renewal of deposit accounts. SMS is used as a marketing tool to A comprehensive Disaster Recovery plan is scheduled to be im- build customer relationships. SMS inquiries have enabled the field plemented along with a Business Continuity Plan (BCP) as one of staff to carry out their duties effectively assisting them with receipt- strategies to mitigate associated risks of the entire IT operation. ing, cash banking etc.
Human Capital
Capability and Capacity Staff Welfare The workforce of Commercial Credit is always recognized as We at Commercial Credit are committed to the highest stand- the driving force behind the company attaining its current high ards of employee welfare across several areas of the business status. We firmly believe that the distinct edge we enjoy in a and in this respect the company has initiated diverse plans for highly competitive environment is enabled by our workforce. the benefit of the staff.
Therefore Commercial Credit recognizes the importance of The main focus of investing in welfare activities is to uplift the maintaining staff motivation and dedication throughout their living standards of all members of the Company. All employ- engagement with the company as the key to long term suc- ees are entitled to an Accident medical insurance cover, which cess of the company. Hence the Company pays great attention covers all the hospitalization expenses in an emergency. This to identifying and measuring the capability and capacity of insurance cover has also been extended to immediate family people with respect to their relevant functional areas and their members to secure their lives against the unforeseen. level of competence. Through a company maintained fund, staff members receive The function of operation of the staff is identified by the nature numerous benefits in terms of Death Donations, Wedding of capability of each staff member, where it consists of discus- Gifts, Retirement Bonuses, Medical Bill Claims, Etc. Further sions with senior management and the Human Resource these benefit schemes have been extended for staff loan facili- function at the stages of recruitment. Compensation is also ties without interest. decided based on the same framework of operation, which identifies the capabilities and capacities of staff. As a principle driven organization, we always encourage our members to live a balanced life, contributing to the company The company would offer a competitive benefits package that and the family uniformly. Hence we organize family get- fits the needs of the employee. Health insurance, life insurance togethers in order to demonstrate the value of employees’ and retirement savings would be major factors in retaining families to the Company. employees.
COMMERCIAL CREDIT PLC. ANNUAL REPORT 2010/2011 30 MANAGEMENT DISCUSSION & ANALYSIS
Achievements
UDC MASTERCLASS “SthreeMela” Award- 2011 ASIA BEST FINANCING COMPANY 2011 Chairman of Commercial Credit PLC, Mrs. Vagdevi Fernando was Cementing its reputation as a Premier Financial Institution bench- recently presented with an award by SthreeMela (Voice of Sri marking the highest International Standards of service and opera- Lankan Women) in recognition of her contribution to Sri Lanka’s tion, Commercial Credit was adjudged the “Best Finance Company financial services industry. in Asia” at recently concluded International UDC Business Awards in Malaysia.
“Governor of the Central Province TikiriKobbekaduwa presented the Award Presented by Former prime Minister of Malaysia–Dr .Mahathir award to Mrs. Vagdevi Fernando at a well patronised event at the Mohamed. Award received by Mr Andrew Samuel DGM – Corporate Kandy City Centre, organised by Voice of Sri Lankan Women which is Planning in the presence of the DGM-Operations Mr. Sudath headed by Mrs. VisakhaDharmadasa in Kandy.” Jayasekara and Mr. K. L. A. Senevirathna.
“SLIM Award- 2011 FHA- Volleyball Champions 2011
Commercial Credit has gone to prove how much it is equipped with Commercial Credit appeared champions in FHA-Volleyball competitve and indisputable strategic thinking coupled with a sense Championship 2011, proving that it not only excells in its core of young and dynamic business acumen where Commercial Credit business but also fuels the spirit of team work by a way of ruled the “SLIM Industry Masters Strategic Business Challenge-2011” encouraging employee participation in sports.
COMMERCIAL CREDIT PLC. ANNUAL REPORT 2010/2011 31 MANAGEMENT DISCUSSION & ANALYSIS
Mercantile Rugby Championship 2010
The passion and commitment of Commercial Credit towards sports are well embodied with the facilities provided for Rugby and Basketball where Commercial Credit got itself felicitated with the crown of Mercantile Rugby Championship 2010.
COMMERCIAL CREDIT PLC. ANNUAL REPORT 2010/2011 32 FINANCIAL REVIEW
Financial Review
Cost to Income Ratio Net Income Growth (%) Net Interest Income Growth Cost to income ratio well Cost to Income 2011 explains the way of execution of 1.5
2010 the core business at Commercial 1.2 Credit with a clear understand- 2009 ing of cost where all such cost 0.9 2008 minimization strategies are 0.6 2007 implemented within the firm with the intention of increasing 0 40 80 120 160 200 0.3 0 63 126 189 252 315 shareholder wealth without compromising the degree of 0.0 Net Income Growth efficiency in executing the busi- 2010 2011 2007 The net income of Commercial Credit has increased by 634.68% ness operations. In the financial 2008 2009 from the financial year 2007 to 2011 where a massive growth in year 2010/2011 a well under net income could be observed during the financial years 2010 controlled cost to income ratio was produced amounting to 0.73, to 2011 by 287.76%. This considerable growth in net income is which is the lowest for the time span of 5 years under considera- mainly due to the expansion strategy that Commercial Credit has tion and this is expected to be further reduced going forward. been working on and it needs to be noted that massive levels of growth in net income is yet to be experienced in to the future given the implementation of the well defined and strategically Earnings Per Share crafted growth strategy. The EPS of Commercial EPS Credit for the financial year 20
2008/2009 was the lowest 16 Net Interest Income Growth recorded with in the immediate Net Interest Income has increased by 312.26% during the finan- five years where in the financial 12 cial years 2010 to 2011 where this is mainly due to the increase year 2009/2010 a recovery was in the demand for financial products such as Loans and Advances recorded. Although there were 8 plus Leasing. The increased market confidence with which Com- right issue and share split which 4 mercial Credit is attached resulted in the attraction of increased led to increase the share volume deposits which assist the financing of increased demand for by 45 folds, Commercial Credit 0 Loans and Advances. PLC was able to maintain a de- 2010 2011 2007 cent EPS of 4.42 in 2010/2011 2008 2009 financial year. Return on Equity ROE (%) 30 Commercial Credit had been Non Performing Loans able to generate a ROE figures of 24 19.9% and 14.18% in the fi- Non Performing Loans of NPA (%) nancial years of 2009/2010 and 18 Commercial Credit have been 10 2010/2011 respectively, despite constantly decreasing over the 12 8 a low ROE figure of 3.17% in period from 7.27% in the finan- the financial year of 2008/2009 6 cial year 2006/2007 to 3.17 in 6 where the figures were well the financial year 2010/2011. above the industry standard 0 This mainly reflects the level of 4 in both the financial years of professionalism that Commercial 2010 2011 2007 2008 2009 2 2009/2010 and 2010/2011. Credit employs in facilitating its The significant increase in the number of shares due to the rights base of clients to satisfy their 0 issue was a major contributor for investment plans and more financial requirements while 2010 2011 2007 importantly Commercial Credit explains the potential of attaining being profitable. 2008 2009 high figures in respect of ROE given the implementation of the new strategic plan that it has started off with.
COMMERCIAL CREDIT PLC. ANNUAL REPORT 2010/2011 33 CORPORATE SOCIAL RESPONSIBILITY
Corporate Social Responsibility
ommercial Credit as a responsible corporate citizen is extremely concerned about the well- being of the society we live and work in. Our main financial support is targeted at the low-income segment of the society. Commercial Credit is in the process of developing products and assistance for the state- Cemployee community. Community Activities
Blood Donations Activities We support this activity by encouraging employees to donate bloods and more than 100 employees took part in this event.
Donations for the Kandy Hospital Neurosurgical Unit by the Chairperson of the Commercial Credit.
COMMERCIAL CREDIT PLC. ANNUAL REPORT 2010/2011 34 CORPORATE SOCIAL RESPONSIBILITY
Oxygen Cylinder Donation to Kandy Hospital by our CSR Team
Vesak Dansala Activities at Kandy
COMMERCIAL CREDIT PLC. ANNUAL REPORT 2010/2011 35 CORPORATE SOCIAL RESPONSIBILITY
Customer Training The CEO personally conducts training programs for Microfinance customers on self development, child education, healthcare and well-being. Further, Commercial Credit conducts training on marketing New Product Development (NPD)and financials for customers in order to assist the development of their business.The unique concept of encouraging housewives in rural areas to earn extra income for the family has enabled them to contribute to the Gross Domestic Production (GDP). Emergent growth in rural locations helps to give more employment opportunities to the system. We have engaged on these activities with the intention adding economic value to the organization, community and other stakeholders
COMMERCIAL CREDIT PLC. ANNUAL REPORT 2010/2011 36 REPORT OF THE BOARD OF DIRECTORS
Report of the Board of Directors
The Directors have pleasure in presenting to the shareholders the Annual Report of the Board of Directors for the year ended 31st March, 2011.
This Report contains information required by Section 168 of the Companies Act No. 7 of 2007 and other necessary information required by the Listing Rules of Colombo Stock Exchange.
Principal Activities During the year, the principal activities of the Company were Acceptance of Deposits, Granting Lease facilities, Hire Purchase, Personnel Loans, Micro Loans and other credit facilities, Real Estate Development and related services.
Changes to the Nature of Business
There was no significant changes to the principle activities of the Company during the Financial Year Ended 31st March, 2011.
Financial Statements The Financial Statements for the Year ended 31st March, 2011 are set out on pages 50 to 79 in the Annual Report.
Auditors’ Report The Auditors’ Report which is an integral part of the Financial Statements prepared for the Accounting period ended 31st March, 2011 is set out on page 48-49 in the Annual Report.
Director’s Responsibility for the Financial Statements The Directors are responsible for preparing and presenting the financial statements, which are set-out on page 44 The financial statements have been prepared in conformity with the Sri Lanka Accounting Standards as laid down by the Institute of Chartered Accountants of Sri Lanka, Companies Act No.7 of 2007 and the Listing Rules of the Colombo Stock Exchange.
The Directors are satisfied that the Financial Statements, presented on pages 50 to 79 inclusive, give a true and fair view of the state of affairs of the Company as well as the profit for the year then ended.
Accounting Policies The accounting policies adopted in the preparation of the financial statements are given on pages 55 to 60.The Directors consider that, in preparing these Financial Statements, suitable accounting policies have been used which are applied consistently and supported by reasonable and prudent judgment and that all applicable accounting standards have been followed. The Financial Statements are prepared on a going concern basis.
Corporate Governance A description of the Company’s Corporate Governance practices is set out on pages 42 to 44.
COMMERCIAL CREDIT PLC. ANNUAL REPORT 2010/2011 37 REPORT OF THE BOARD OF DIRECTORS
Directorate The names of the Directors as at date are set out under Corporate Information. The changes to the Directorate during the period under review are set out below: Mrs Vagdevi Wimalangi Fernando Mr George Ginendra Hemachandra Mr Roshan Sanjaya Egodage Appointed w.e.f 15th March, 2011 Mr Ihala Gamaralalage Samantha Kumara Gunaratne Mrs Geya Rasi Egodage Mr Thirunavukkarasu Someswaran Appointed w.e.f 15th March, 2011 Mr Kalugamage John Cecil Perera Appointed w.e.f 15th March, 2011 Mr Mihindukulasooriya Susantha Devapriya Pinto Appointed w.e.f 19th June, 2011
Mr Janaka Suwandarathna and Mr Duminda Mahali Weerasekare, Mr Suresh Manitha Weerasooriya, Mr Paul Leslie Suren Peter had resigned w.e.f 1st March, 2011 and 5th June, 2010 respectively.
Mrs Vagdevi Wimalangi Fernando who is 73 years of age vacates her office in terms of the provisions of Section 210 of the Companies Act No. 07 of 2007
Notice is given by the Company to its Shareholders of the intention to move an Ordinary Resolution for the re-appointment of Mrs V W Fernando as a Director of the Company until 31st December 2011, in terms of the provisions of Section 211 of the Companies Act No. 07 of 2007, and is referred to in the Notice convening the Annul General Meeting for the year 2011.
In terms of Article 24 (6) of the Articles of Association of the Company Mr George Ginendra Hemachandra, Director, retires by rotation and being eligible is recommended by the Board of Directors for re-election by the Members at the Annual General Meeting for the year 2011.
In terms of Article 24 (2) of the Articles of Association of the Company Mr Roshan Sanjaya Egodage, Director, retires and being eligible is recommended by the Board of Directors for election by the Members at the Annual General Meeting for the year 2011.
In terms of Article 24 (2) of the Articles of Association of the Company Mr Thirunavukarasu Someswaran, Director, retires and being eligible is recommended by the Board of Directors for election by the Members at the Annual General Meeting for the year 2011.
In terms of Article 24 (2) of the Articles of Association of the Company Mr Kalugamage John Cecil Perera, Director, retires and being eligible is recommended by the Board of Directors for election by the Members at the Annual General Meeting for the year 2011.
In terms of Article 24 (2) of the Articles of Association of the Company Mr Mihindukulasuriya Susantha Devapriya Pinto, Director, retires and being eligible is recommended by the Board of Directors for election by the Members at the Annual General Meeting for the year 2011.
Board Subcommittees
The following Board Sub-Committees have been established by the Company:
Audit Committee Mr Thirunavukkarasu Someswaran – Chairman Mr Kalugamage John Cecil Perera Mr Ihala Gamaralalage Samantha Kumara Gunaratne
COMMERCIAL CREDIT PLC. ANNUAL REPORT 2010/2011 38 REPORT OF THE BOARD OF DIRECTORS
Integrated Risk Management Committee Mr. T. Someswaran Mr. Janaka Deshapriya Mr. Roshan Sanjaya Egodage Mr. Sebestian Nanayakkara Mr. Andrew Samuel Ms. Vathsala Sathyakeerthi
Remuneration Committees:
Mr. S Gunarathne – Chairman Mr. Cecil Perera – Member Mr. G Hemachandra – Member
The Reports of the Board Audit and Remuneration Subcommittees are set out on page 45-46.
The Composition of the above Board Sub-Committees, and their functions and responsibilities are set out in the Corporate Governance Report appearing on pages 42 to 44 of this Annual Report.
Interest Register An interest Register is required to be maintained in terms of Companies Act No. 7 of 2007, which came into effect on 03rd May, 2007. Directors’ Interest in Contracts or proposed contracts with the Company are disclosed in Note 34 to the Financial Statements for the period under review appearing on page 77.
Directors’ Shareholding The shares held by the Directors at the beginning and at the end of the financial year were as follows. (The Articles of Association of the Company do not stipulate a share qualification for Directors):
31.03.2011 31.03.2010
Mrs Vagdevi Wimalangi Fernando 1,032,951 732,951 Mr George Ginendra Hemachandra 495,168 395,168 Mr Roshan Sanjaya - Mr Ihala Gamaralalage Samantha Kumara Gunaratne - Mrs Geya Rasi Egodage - Mr Thirunavukkarasu Someswaran - Mr Kalugamage John Cecil Perera - Mr Mihindukulasooriya Susantha Devapriya Pinto -
Directors’ Fees and Emoluments Directors’ fees and emoluments for the Financial Year ended 31st March, 2011, are as follows.
Directors’ Fees and emoluments Rs. 9,672,177 (2010 – Rs 6,967,906)
Donations During the year the Company has made Rs. 940,032 as charitable contributions. (2010 - Rs. 116,150)
COMMERCIAL CREDIT PLC. ANNUAL REPORT 2010/2011 39 REPORT OF THE BOARD OF DIRECTORS
Property, Plant & Equipment The details of the property, plant & equipment of the Company, additions during the year and the depreciation charges for the year are shown in note 12 to the Financial Statements. The Directors consider the market value of the property, plant & equipment not to be significantly different to the amounts disclosed.
Stated Capital There has been no change in the Stated Capital of the Company during the year under review. The Stated Capital of the Company as at 31st March, 2011 was Rs. 170,640,315 consisting of 218,074,365 Ordinary Shares. The Shares of the Company are listed on the Colombo Stock Exchange.
Shareholders The total shareholder base of the Company as at 31st March, 2011 was 214 (2010 - 212 ).The distribution of the shareholding and a listing of the 20 major shareholders are given under Investor Information on page 81-82.
Statutory Payments The Directors, to the best of their knowledge and belief are satisfied that all statutory payments in relation to the Government had been made upto date.
Post Balance Sheet Events No circumstances have arisen since the Balance Sheet date, which would require adjustment to, or disclosure in the financial statements, other than note 33.
Auditors The financial statements for the period under review have been audited by Messrs Ernst & Young Chartered Accountants . Rs 2.3 million has been paid as Audit Fee for the year ended 31st March, 2011.
A Resolution appointing M/s Ernst & Young as the Auditors of the Company and authorising the Directors to determine their remuneration will be proposed at the Annual General Meeting.
Auditors’ Relationship with the Company The Company did not have any relationship with the Auditors M/s Ernst & Young, Chartered Accountants, other than that of the Auditor, during the Financial Year Ended 31st March, 2011.
By Order Of the Board
______Secretary
JACEY & COMPANY ______Secretaries Director Director Roshan Sanjaya Egodage Samantha Kumara Gunaratne
17th November, 2011
COMMERCIAL CREDIT PLC. ANNUAL REPORT 2010/2011 40 RISK MANAGEMENT
Risk Management
isk management is “the process of analyzing Liquidity risk is the risk faced by the participants due to the short- exposure to risk and determining how to best handle such age of cash or cash equivalent to meet the obligations of the Com- exposure” which ensures that participants assume well cal- pany on time. Management of this risk is mainly a responsibility of culated business risks which safeguard their capital, funding the Treasury Department. Each company should ensure that there Rsources and profitability from various sources of risk. The mecha- are sufficient liquid assets to meet the working capital requirement nism permits the creation of a culture of risk awareness across all thus ensuring a smooth run in daily operations. One of the main sections of the company, to identify, measure, analyze and evalu- risks RFCs face in this context is the asset liability mismatch and ate risks and to set appropriate policies to the risk appetite in order RFCs must ensure that company’s cash inflow is in line with cash to manage and hedge such identified risks. out flow. All RFCsparticipants should maintain minimum amount of liquid assets, 10%, which is mandated by CBSL regulations. Credit risk: the borrowers’ inability to meet the obligations towards the Company on time would expose a Company to this Operational risk is the risk caused by the failure in the routine risk. The management of this risk is in the hands of each Company operational functions of the Company. This could arise as a result hence there are several actions companies take prior to lending of a failure in the systems, procedures, processes, failure of the facilities to clients. Assessing the credit worthiness of the client employees to comply with the set rules and regulations or through is done by considering details of the property held by the client, human error. As a mitigation strategy, RFCs participants place obtaining a report from the Credit Information Bureau (CRIB), en- special emphasis on training given to employees thus ensuring that suring credit worthy guarantors etc. Evaluatingthe credit worthiness they have comprehensive knowledge and skills required to per- of the customer depends on the knowledge and experience of the form the particular job assigned to them. Further, all the employees credit officer concerned, hence companies make sure that their are given a well defined job profile which clearly communicates staff are given comprehensive training in this regard. Further, being the roles and responsibilities of each. Authority levels are assigned conservative the companies provide provisions out of the profit to to employees considering the role he/she plays in the corporate meet this risk. hierarchy and it is clearly communicated to the staff thus ensuring that every employee follows the relevant instructions. Economic risk associated with debtors’ capability to meet the obligations as well as a potential borrowers’ ability to borrow would Reputation risk can be defined as the risk arising from negative get adversely affected due to changes in the state of the economy. perception on the part of customers, counterparties, shareholders, This too is to a greater extent beyond the control of the Company. investors or regulators that can adversely affect a RFC’s ability to However, in order to mitigate the risk participant can improve the maintain existing, or establish new, business relationships and accuracy of the predictions made based on the analysis of past continued access to sources of funding. This risk is not directly trends and prevailing market conditions. related to one particular company but affects the whole sector. RFCs sector experienced this risk with the failure of several entities Interest rate risk is the potential impact on an institution’s earn- connected to banks and finance companies in the Ceylinco Group, ings and net assets values of changes in interest rates. Interest significantly hindering the normal business activities of the sector. rate risk arises when an institution principal and interest cash flows (including final maturities), both on and off balance sheet, have mismatched reprising dates. The amount at risk is a function of the magnitude, direction of interest rate changes and the size and maturity structure of the mismatch Position.
Managing interest rate risk is a fundamental component of safe and sound management of all institutions. It involves prudently managing positions in order to control, within set parameters, the impact of changes in interest rate on the institution.
Significant factors in managing the risk include the frequency, volatility and direction of rate changes, the slope of the interest rate yield curve, the size of the interest-sensitive position and the basis of reprising at rollover dates.
COMMERCIAL CREDIT PLC. ANNUAL REPORT 2010/2011 41 CORPORATE GOVERNANCE
Corporate Governance
orporate Governance involves a set of relationships A Statement of Directors’ Responsibilities for the preparation of between a Company’s Management, its Board, its Share- Financial Statements is set out on page 44 of this Report. holders and other Stakeholders. It provides a structure that works for the benefit of everyone concerned by ensuring Cthat the Company adheres to accepted ethical standards and best Board Sub-Committees practices as well as to formal laws. The Board sub-committees scrutinize and analyze the areas under their purview and make recommendations to the Board on neces- The Company ensures that the four fundamental pillars of Cor- sary adjustments and modifications to the internal systems of the porate Governance, which is responsibility, accountability, fairness Company. The Board has constituted an Audit sub-Committee and and transparency are upheld at all times, thus improving the a Remuneration Sub-Committee. public understanding of the structure, activities and policies of the Company. n Audit Committee n Remuneration Committee We believe that good Corporate Governance plays an integral n Integrated Risk Management Committee role in enhancing and retaining Investor trust and therefore the Company always seeks to ensure that it maintains integrity and The Composition of the Board as at the end of the period under transparency in attaining its goals. review is set out in the table below, together with a record of the attendance of every Director. Compliance with the Code of Best Practice The Company currently complies with the requirements set out Name of the Director Category Board in the Code of Best Practice for Corporate Governance issued by the Institute of Chartered Accountant of Sri Lanka and the Rules on Corporate Governance contained in the Listing Rules of the attend Attended Colombo Stock Exchange. Eligible to Mrs V W Fernando Executive 10 10 Board of Directors Non-Independent The Board of Directors of the Company comprises of eight mem- Mr G G Hemachandra Non-executive 10 9 bers who jointly oversee the activities of the Company and are Non-Independent responsible for the management of the Company. The Company’s Mr H S K Gunaratne Non-executive 10 10 Board of Directors consists of professionals in varied fields and Independent collectively posses a wide area of knowledge and experience. Mrs G R Egodage Executive 10 10 Non-Independent One Third of the Directors retire by rotation at each Annual General Meeting and those eligible are recommended for re-election. Mr R S Egodage Executive - - Independent The Board meets once a month as and when the need arises to Mr T Someswaran Non-Executive - - discuss any prevailing issues, to take appropriate action in achiev- Independent ing the results and to review the financial performance of the Company. Mr C Perera Non-Executive - - Independent In accordance with the Listing Rules of the Colombo Stock Mr M S D Pinto Non-Executive - - Exchange, the Board has constituted 2 committees, namely, the Independent Audit and the Remuneration Committees, in addition to which Nomination, Risk and Strategic Planning Committees have also been formed.
COMMERCIAL CREDIT PLC. ANNUAL REPORT 2010/2011 42 CORPORATE GOVERNANCE
Company Secretaries Compliance with Legal Requirements Jacey & Company provides Corporate Secretarial Services to the All Directors have access to the advice and services of the Com- Company. The Company Secretaries play a key role in compliance pany Secretaries as well as to the Financial Information of the matters by ensuring that the Company complies with the require- Company. The Directors make every endeavor to ensure that the ments of the Companies Act No.7 of 2007, the Rules of the Co- Company Complies with Laws and Regulations. lombo Stock Exchange and other regulatory bodies. The Secretaries also ensure that Board procedures are followed and information is provided to shareholders on a timely basis.
Corporate Governance Report Levels of compliance as per Section 07 of the Listing Rules of the Colombo Stock Exchange
Rule No: Subject Applicable requirement Compliance Status
7.10.1 Non-Executive At least 1/3 of the total number of Directors should be Non-Executive Complied Directors Directors at the immediately preceding Annual General Meeting
7.10.2 Independent At least 1/3 of Non Executive Directors should be independent Complied Directors Of the eight Directors Mr H S K Gunaratne, Mr T Someswaran, Mr C Perera Complied and Mr M S D Pinto are Independent Directors.
Each Non-Executive Director should submit a declaration of independence/ non independence in the prescribed format
7.10.3 Disclosure relating Names of independent Directors should be disclosed in the Annual Report Complied to Directors The Board shall make a determination annually as to the independence or Complied non independence of each non-executive Director based on the Declara- tion
A brief resume of each Director should be included in the Annual Report and should include the Director’s areas of expertise
7.10.5 Remuneration A listed Company shall have a Remuneration Committee and shall com- Complied Committee prise of Non-Executive Directors a majority of whom will be independent Please refer page 46 of the Annual Report
7.10.6 Audit Committee A Listed entity shall have an Audit Committee comprising of Non-Executive Complied Directors a majority of whom shall be independent Complied A non Executive Director shall be appointed as the Chairman of the Audit Committee Please refer page 45 of the Annual Unless otherwise determined by the Committee the Chief Executive Officer Report and the Chief Finncial Officer shall attend Audit Committee Meetings
The Chairman or one Member of the Committee should be a member of a recognized professional accounting body
COMMERCIAL CREDIT PLC. ANNUAL REPORT 2010/2011 43 CORPORATE GOVERNANCE
Statement of Directors’ Responsibilities resources are available within the Company for the Company to Directors’ Responsibilities for the Preparation of Financial State- continue in operation for the foreseeable future. ments The Directors have taken all reasonable steps expected of them to This Statement of Directors’ Responsibilities is to be read in safeguard the assets of the Company and to establish appropriate conjunctions with the Auditors’ Report and is made to distinguish systems of internal controls in order to prevent, deter and detect the respective responsibilities of the Directors and of the Auditors any fraud, misappropriation or other irregularities. in relation to the Financial Statements contained in this Annual Report. The Directors have also taken all reasonable steps to ensure that the Company maintain adequate and accurate accounting books The Directors of your Company are required by the Companies Act of record which reflect the transparency of transactions and provide No.7 of 2007 to prepare Financial Statements which give a true an accurate disclosure of the Company’s financial position. and fair view of the state of affairs of the Company as at the end of the financial year, and of the Profit and Loss and of the Cashflows The Directors are required to provide the Auditors with every op- of the Company and of the Group for the financial year. portunity to take whatever steps and undertake whatever inspec- tion they consider appropriate for the purpose of enabling them to The Directors confirm that the Financial Statements of the Com- give their Audit Report. The Directors are of the view that they have pany for the year ended 31st March, 2011 presented in the Report discharged their responsibilities in this regard. have been prepared in accordance with the Sri Lanka Accounting Standards and the Companies Act No.7 of 2007. In preparing the Financial Statements, the Directors have selected the appropriate Compliance Report accounting policies and have applied them consistently. Reason- The Directors confirm that, to the best of their knowledge, all taxes able and prudent judgments and estimates have been made and and levies payable by the Company and all contributions, levies applicable accounting standards have been followed and the Fi- and taxes payable on behalf of the employees of the Company, nancial Statements have been prepared on a going concern basis. and all other known statutory obligations as at the balance sheet date have been paid or provided for in the Financial Statements. The Directors are of the view that adequate funds and other
By Order of the Board
______JACEY & COMPANY Secretaries
Colombo
17th November, 2011
COMMERCIAL CREDIT PLC. ANNUAL REPORT 2010/2011 44 REPORT OF THE AUDIT COMMITTEE
Report of the Audit Committee
Composition of the Committee and Meetings
The Audit Committee comprise of the following three Independent Non-Executive Directors: Mr T Someswaran - Chairman Mr S Gunaratne Mr C Perera
As the Company was listed on the Colombo Stock Exchange (CSE) after the Financial Year under review, the Committee was formed thereafter in accordance with the Listing Rules of the CSE, in 28th July 2011 and therefore, has not had any Meetings during the period under review.
The role of the Audit Committee
The main objective of the Audit Committee is to assist the Board of Directors to effectively carry out it’s responsibilities to the financials and other connected affairs of the company.
The committee discusses reports of internal and external audits at these meetings. The company’s External Auditors and the Chief Financial Officer of the Company are also invited to participate at these meetings.
Financial Reporting
The Audit Committee had reviewed and discussed Company’s Annual Financial Statements with the Management and the External Auditors prior to publication and have discussed the extent of compli- ance with Sri Lanka Accounting Standards and other applicable laws, rules and guidelines.
Internal Audit
The Committee has reviewed and discussed with Management and the Internal Auditors, Audits and investigations which were presented by the internal auditors.
External audit
The Audit Committee has recommended to the Board of Directors that M/s Ernst & Young, Char- tered Accountants be re-appointed as Auditors subject to the approval of Shareholders at the Annual General Meeting.
______Mr T Someswaran Chairman – Audit Committee
17th November, 2011
COMMERCIAL CREDIT PLC. ANNUAL REPORT 2010/2011 45 REPORT OF THE REMUNERATION COMMITTEE
Report of the Remuneration Committee
The Remuneration Committee appointed by the Board As the Company was listed on the Colombo Stock Exchange comprises of three Members of whom two are Independent (CSE) after the Financial Year under review, the Committee Non-Executive Directors. The Committee is headed by Mr S K was formed thereafter in accordance with the Listing Rules Gunaratne, and the members include Mr C Perera and Mr G G of the CSE, in 28 July, 2011 and therefore, has not had any Hemachandra. Meetings during the period under review.
The primary purpose of the Remuneration Committee is to The aggregate remuneration paid to the Directors during the review the performance of the Executive Directors and the period under review is Rs. 9,673,177. Chief Executive Officer and to recommend appropriate remu- neration benefits and other payments. The proceedings of the Committee are reported to the Board of Directors who will in turn make the final determination based on the recommenda- tions of the Committee.
______Mr S K Gunaratne Chairman – Remuneration Committee
17th November, 2011
COMMERCIAL CREDIT PLC. ANNUAL REPORT 2010/2011 46 Financial Statements
Contents Report of the Auditors 48 Balance Sheet 50 Income Statement 51 Statement of Changes in Equity 52 Cash Flow Statement 53 Notes to the Financial Statements 54
COMMERCIAL CREDIT PLC. ANNUAL REPORT 2010 47 SPF/BV/HDS
INDEPENDENT AUDITOR’S REPORT TO THE SHAREHOLDERS OF COMMERCIAL CREDIT LIMITED
Report on the Financial Statements
We have audited the accompanying financial statements of Commercial Credit Limited (“Company”), which comprise the balance sheets as at 31 March 2011, and the income statements, statements of changes in equity and cash flow statements for the year then ended, and a summary of significant accounting policies and other explanatory notes. The Financial Statements of the Company as at 31 March 2010 and for the year then ended were audited by another Auditor whose report dated 03 February 2011 expressed a qualified opinion due to the Auditors disagreement in connection with the management’s adjustments of provision for fall in value of land stocks, write off of receivables through retained earnings and revenue recognition on profit on sale of real estate under easy payment schemes.
Management’s Responsibility for the Financial Statements
Management is responsible for the preparation and fair presentation of these financial statements in accordance with Sri Lanka Accounting Standards. This responsibility includes designing, implementing and maintaining internal control rel- evant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error, selecting and applying appropriate accounting policies, and making accounting estimates that are reasonable in the circumstances.
Scope of Audit and Basis of Opinion
Our responsibility is to express an opinion on these financial statements based on our audit. Except for the paragraphs a) to c) identified below, we conducted our audit in accordance with Sri Lanka Auditing Standards. Those standards re- quire that we plan and perform the audit to obtain reasonable assurance whether the financial statements are free from material misstatement.
An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial state- ments. An audit also includes assessing the accounting pilicies used and significant estimates made by management, as well as evaluating the overall financial statement presentation.
Except for the matters referred in the following paragraphs, (a) to (c) we have obtained all the information and explana- tions which to the best of our knowledge and belief were necessary for the purposes of our audit. We therefore believe that our audit provides a reasonable basis for our opinion.
COMMERCIAL CREDIT PLC. ANNUAL REPORT 2010/2011 48 Opinion
a) Up to the beginning of the current financial year, the Company’s practice was to recognise profit on sale of real estate -un der easy payment scheme upon entering to the contract of agreement to sell, which is not in compliance with Sri Lanka Accounting Standards - 29 “Revenue Recognition”. Despite the fact that this was changed from the current year onwards, in the absence of adequate audit evidence we were unable to satisfy ourselves as to the effect of the amounts which should have been included in the current year’s income in relation to such contracts relevant to prior years. b) We were engaged to undertake the audit on 9 April 2011, subsequent to the balance sheet date, and therefore it has not been feasible to review or observe the performance of internal controls in operation for the year in relation to, contingent liabilities, commitments and disclosure of related party transactions. We have not been able to perform alternative audit procedures that provide sufficient and appropriate audit evidence whether contingent liabilities, commitments and disclo- sures of related party transactions are fairly stated. c) In the absence of a break-up of an amount of Rs. 12,210,291/- included in accrued expenses and other payables as given in Note 18, we were unable to carry out audit procedures to satisfy ourselves in relation to the fairness of the same. In our opinion, except for the effects , if any , as might have been determined to be necessary on the financial statements in respect of the matters referred in the preceding paragraphs, so far as appears from our examination, the Company maintained proper accounting records for the year ended 31 March 2011 and the financial statements give a true and fair view of the Com- pany’s state of affairs as at 31 March 2011 and its profit and cash flows for the year then ended in accordance with Sri Lanka Accounting Standards.
Report on Other Legal and Regulatory Requirements
In our opinion, these financial statements also comply with the requirements of Sections 151(2) of the Companies Act No. 7 of 2007.
25 October 2011 Colombo
COMMERCIAL CREDIT PLC. ANNUAL REPORT 2010/2011 49 BALANCE SHEET
Balance Sheet
As at 31 March 2011 Note 2011 2010 Rs. Rs. ASSETS Cash and Bank Balances 203,708,480 51,924,106 Treasury Bills 3 76,969,364 116,251,251 Placements with other banks 4 110,559,966 9,706,520 Loans and Advances 5 1,944,228,721 389,762,504 Lease rentals receivable and Stock out on hire 6 2,490,821,145 1,300,555,245 Real Estate and Vehicle Stock 9 152,841,459 44,777,435 Other Debtors, Deposits and Prepayments 10 67,103,855 36,353,283 Investment Securities 11 5,426,900 201,900 Dealing Securities 11.1 24,939,856 55,084 Tax Receivable - - 7,913,443 Property, Plant and Equipment 12 238,531,843 160,488,214 Leasehold Property 13 9,047,039 9,207,644 Investment Property 14 26,000,000 22,000,000 Deferred Tax Asset 27.2 - 121,445,236 Total Assets 5,350,178,628 2,270,641,865
LIABILITIES Deposits from customers 15 3,840,492,289 1,732,958,193 Borrowings 16 594,985,722 81,795,887 Other liabilities 18 426,937,260 219,073,395 Tax Payable 33,133,610 - Employment Benefit Liability 19 13,489,412 9,889,650 Deferred Tax Liability 27.2 9,003,099 - Total Liabilities 4,918,041,392 2,043,717,125
SHAREHOLDERS’ FUNDS Stated Capital 20 170,640,315 73,718,375 Reserves 21 261,496,921 153,206,365 Total Equity 432,137,236 226,924,740
Total Equity and Liabilities 5,350,178,628 2,270,641,865
Commitments and Contingencies 11,955,027 11,459,264 These Financial Statements are in compliance with the requirements of the Companies Act No.07 of 2007 .
______M.A.D. Janaka Deshapriya - Chief Financial Officer The Board of Directors is responsible for the preparation and presentation of the Financial Statements signed for and on behalf of the board by ;
______Vagdevi Fernando - Chairman Roshan Egodage - Chief Executive Officer The Accounting Policies and notes on pages 56 through 81 form an integral part of the Financial Statements. 14 October 2011, Colombo
COMMERCIAL CREDIT PLC. ANNUAL REPORT 2010/2011 50 INCOME STATEMENT
Income Statement
Year ended 31 March 2011 Note 2011 2010 Rs. Rs.
Income 22 1,258,391,240 425,466,094
Interest Income 23 1,112,597,093 377,101,417 Interest Expense 24 410,109,441 206,700,994
Net Interest Income 702,487,652 170,400,423 Net Income from Real Estate 71,883,738 22,961,942 Other Operating Income 25 73,910,409 25,402,735
Less: Operating Expenses Staff Costs 291,573,186 114,310,266 Provision for Staff Retirement Benefits 4,439,162 2,440,000 General & Administration Expenses 201,310,791 87,023,921 Provision for fall in value of Investments, Bad and Doubtful Loans and Write Offs 69,048,637 33,768,762 Profit/(Loss) from Operations 26 281,910,023 (18,777,849)
Value Added Tax on Financial Services (37,543,728) (7,164,561) Profit/(Loss) before Taxation 244,366,295 (25,942,410)
Provision for Income Taxation 27 (184,271,908) 71,132,513
Profit for the year 60,094,387 45,190,103
Earnings Per Share 28 4.42 9.33
The Accounting Policies and notes on pages 56 through 81 form an integral part of the Financial Statements.
COMMERCIAL CREDIT PLC. ANNUAL REPORT 2010/2011 51 STATEMENT OF CHANGES IN EQUITY ------Rs. Total Total (690,361) 49,892,181 49,892,181 96,921,940 96,921,940 (2,856,641) 45,190,103 45,190,103 60,094,387 60,094,387 (1,671,329) (1,696,011) 226,924,739 226,924,739 (1,060,890) 224,048,280 224,048,280 (36,034,423) 432,137,236 432,137,236
- - - Rs. (690,361) (2,856,641 (8,318,520) 45,190,103 45,190,103 60,094,387 60,094,387 (1,671,329) (1,386,125) (1,500,000) (9,200,000) (1,060,890) Accumulated Profit/ (Loss) (30,443,115) (30,443,115) (12,018,877) (33,319,574) (36,034,423)
------Rs. 8,318,520 8,318,520 8,318,520 8,318,520 Investment Fund Reserve Fund
------Rs. Fund Fund Reserve 1,500,000 1,500,000 9,200,000 12,018,877 12,018,877 50,294,760 50,294,760 73,013,637 73,013,637 50,294,760 50,294,760
Rs. ------General Reserve 58,751,125 58,751,125 58,751,125 58,751,125 58,751,125 58,751,125
------Rs. Reserve Revaluation 49,892,181 49,892,181 74,603,594 74,603,594 74,603,594 74,603,594 (1,696,011) 122,799,764 122,799,764
------Rs. Stated Capital 73,718,375 73,718,375 73,718,375 73,718,375 96,921,940 96,921,940 170,640,315 170,640,315
2010 Statement of Changes in Equity March 2011 ended 31 Year Balance as at 1 April 2009 off of Bogus Contract Error Correction-Write Error Correction-Receivable Company Advance Tax Error Correction-GST Receivable of Error Correction-Write-down Real Estate Inventory to NRV Error Correction-Suspense clearance account Net Profit for the year March Balance as at 31 Net Profit for the year Right Issue of Shares for cash Surplus on Revaluation of Property, Plant & Equipment during the year to/(from) Reserve Fund Transferred 2008/09 For 2009/10 For 2010/11 For effect of item transferred from Tax Liability Deferred Tax Reserve to Investment Fund Transferred March 2011 Balance as at 31 form an integral part through 81 of the Financial Statements. and notes on pages 56 Accounting Policies The
COMMERCIAL CREDIT PLC. ANNUAL REPORT 2010/2011 52 CASH FLOW STATEMENT
Cash Flow Statement
Year ended 31 March 2011 Note 2011 2010 Rs. Rs. Cash Flows From / (Used in) Operating Activities Profit/(Loss) before Tax 244,366,295 (25,942,410) Adjustments for Depreciation 12.2 12,154,671 7,590,331 Amortization of Lease Hold Property 13 160,605 312,120 Provision for doubtful debts 66,004,331 33,768,762 Increase in Market Value of Investment Property (4,000,000) - Depreciation in Market Value of Quoted Shares 11.1 1,686,898 - Depreciation in Market Value of Real Estate Stocks 5,357,409 Profit from Sale of Property , Plant and Equipment 25 (3,946,176) (952,369) Provision for Defined Benefit Plans 19 4,439,162 2,440,000 Notional Tax Credit on Interest on Treasury Bills 23.1 (1,219,810) (1,328,712) Profit from operation before Working Capital Changes 325,003,386 15,887,722 Increase in Real Estate Stock (113,421,434) (37,117,920) Increase in Lease Rentals Receivable and Stock out on hire (1,241,343,317) (568,342,342) Decrease in Government of Sri Lanka Treasury Bills 19,276,035 10,314,166 Increase in Loans and Advances (1,569,393,126) (169,046,484) Increase in Other Debtors, Deposits, Prepayments (30,536,345) (5,238,795) Increase in Placement with Banks (100,853,446) 1,463,792 Increase in Deposits from Customers 2,107,534,096 878,384,699 Increase in Other Liabilities 205,090,394 67,406,769 Cash Generated from Operations (398,643,757) 193,711,607
Retirement Benefit Liabilities Paid 19 (839,400) (1,869,500) Net Cash From/(Used in) Operating Activities before Income Tax Payments (399,483,157) 191,842,107 Taxes Paid (13,252,726) (4,645,857) Net Cash used in Operating Activities (412,735,882) 187,196,250
Cash Flows from / (Used in) Investing Activities Acquisition of Property, Plant and Equipment 12.5 (35,455,993) (21,464,183) Acquisition of Investment Property - - (22,000,000) Acquisition of Investments (31,796,670) - Proceeds from Sales of Property, Plant and Equipment 6,865,753 2,467,500 Net Cash Flows Used in Investing Activities (60,386,910) (40,996,683) Cash Flows from / (Used in) Financing Activities Proceeds from Loans Obtained 395,000,000 46,000,000 Repayments of Bank Loans (78,392,667) (67,777,163) Payment under Finance Lease Liabilities (6,842,371) (5,693,531) Proceeds from the Right Issue of Shares 96,921,940 - Net Cash Flows from/(Used in) Financing Activities 406,686,902 (27,470,694) Net Increase/(Decrease) in Cash and Cash Equivalents (66,435,891) 118,728,874 Cash and Cash Equivalents at the beginning of the year 73,710,135 (45,018,739) Cash and Cash Equivalents at the end of the year 17 7,274,244 73,710,135 The Accounting Policies and notes on pages 56 through 81 form an integral part of the Financial Statements.
COMMERCIAL CREDIT PLC. ANNUAL REPORT 2010/2011 53 NOTES TO THE FINANCIAL STATEMENTS
Notes to the Financial Statements
1. CORPORATE INFORMATION
1.1 General Commercial Credit PLC is a public limited liability company incorporated and domiciled in Sri Lanka. The registered office of the Company is located at No 106, Yatinuwara Veediya, Kandy and the principal place of business is situated at the same place.
1.2 Principal Activities and Nature of Operations During the year, the principal activities of the Company were Acceptance of Deposits, Granting Lease facilities, Hire Purchase, Personnel Loans, Micro Loans and other credit facilities, Real Estate Development and related services.
1.3 Parent Enterprise and Ultimate Parent Enterprise The Company’s parent entity is BG Investment (Private) Limited. In the opinion of the directors, the Company’s ultimate parent undertaking and controlling party is BG Capital (Private) Limited, which is incorporated in Sri Lanka.
1.4 Date of Authorization for Issue The Financial Statements of Commercial Credit PLC for the year ended 31 March 2011 was authorized for issue in accordance with a resolution of the board of directors on 14th October 2011
2.1 BASIS OF PREPARATION These financial statements presented in Sri Lankan Rupees have been prepared on a historical cost basis and prepared in Sri Lanka Rupees except when otherwise stated. The preparation and presentation of financial statements is in compliance with the Companies Act No.7 of 2007 and Finance Companies Act No.78 of 1988.
2.1.1 Statement of compliance The Financial Statements of Commercial Credit PLC has been prepared in accordance with Sri Lanka Accounting Standards. These Financial Statements are presented in accordance with Sri Lanka Accounting Standard No. 33 Revenue Recognition and Disclosures in Financial Statements of Finance Companies.
2.12 Going Concern The Directors have made an assessment of the Company’s ability to continue as a going concern and they do not intend either to liquidate or to cease trading.
2.1.3 Comparative Information The accounting policies have been consistently applied by the Company and, are consistent with those used in the previous year.
2.2 SIGNIFICANT ACCOUNTING ESTIMATES AND ASSUMPTIONS In the process of applying the Company’s Accounting Policies, management is required to make judgments, apart from those involving estimations, which may have a significant effect on the amounts recognized in the Financial Statements. Further, the management is required to consider, key assumptions concerning the future and other key sources of estimation of uncertainty at the Balance Sheet date that may have a significant risk of causing material adjustments to the carrying amounts of assets and liabilities. The respective carrying amounts of assets and liabilities are given in the related Notes to the Financial Statements. The key items which involve these judgments, estimates and assumptions are discussed below:
COMMERCIAL CREDIT PLC. ANNUAL REPORT 2010/2011 54 NOTES TO THE FINANCIAL STATEMENTS
Impairment Losses on Leases Stock out on Hire and Loans and Advances In addition to the provisions made for possible loan losses based on the parameters and directives for specific provisions on Leases Stock out on Hire and Loans and Advances by the Central Bank of Sri Lanka, the Company reviews its Loans and Ad- vances portfolio at each reporting date to assess whether a further allowance for impairment should be provided in the Income Statement. The judgments by the management is required in the estimation of these amounts and such estimations are based on assumptions about a number of factors and actual results may differ, resulting in future changes to the allowances.
Defined Benefit Plans The Defined Benefit Obligation and the related charge for the year is determined using actuarial valuation. The actuarial valuation involves making assumptions about discount rates, future salary increase, mortality rates etc. Due to the long term nature of such obligation these estimates are subject to significant uncertainty. Further details are given in Note 19 to these financial statements.
Real Estate Stocks Real Estates Stocks have been accounted at cost as disclosed under accounting policy 2.3.6 the Directors have evaluated the recoverability considering the current market prices of respective stocks.
2.3 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES 2.3.1 Taxation a) Current Taxes Income tax assets and liabilities for the current and prior periods are measured at the amount expected to be recovered from or paid to the Commissioner General of Inland Revenue. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted by the balance sheet date. The provision for income tax is based on the elements of income and expenditure as reported in the financial statements and computed in accordance with the provisions of the Inland Revenue Act. b) Deferred Taxation Deferred income tax is provided, using the liability method, on temporary differences at the balance sheet date between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes. Deferred income tax liabilities are recognised for all taxable temporary differences except where the deferred income tax liability arises from the initial recognition of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss. Deferred income tax assets are recognised for all deductible temporary differences, carry-forward of unused tax assets and unused tax losses, to the extent that it is probable that taxable profit will be available against which the deductible temporary differences, and the carry-forward of unused tax assets and unused tax losses can be utilised except where the deferred income tax asset relating to the deductible temporary difference arises from the initial recognition of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss; and The carrying amount of deferred income tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred income tax asset to be utilised. Deferred income tax assets and liabilities are measured at the tax rates that are expected to apply to the year when the asset is realised or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the bal- ance sheet date. Deferred income tax relating to items recognised directly in equity is recognised in equity and not in the income statement.
COMMERCIAL CREDIT PLC. ANNUAL REPORT 2010/2011 55 NOTES TO THE FINANCIAL STATEMENTS
2.3.2 Borrowing Costs Borrowing costs are recognised as an expense in the period in which they are incurred.
2.3.3 Loans and Advances Loans and advances to customers are stated net of provision for bad and doubtful loans and interest not accrued to revenue.
2.3.4 Lease Rentals Receivable & Stock Out on Hire Assets leased to customers under agreements, which transfer substantially all the risks and rewards associated with ownership other than legal title, are classified as finance leases. Lease rentals receivable represents the total minimum lease payments due net of unearned income and allowance for doubtful recoveries. Assets sold to customers under fixed rate hire agreements, which transfer all the risks and rewards as well as the legal title at the end of such contractual period are classified as stock out on hire. Such assets are accounted for in a similar manner as finance leases.
2.3.5 Provisions for Bad and Doubtful Debts Amounts are set a side with regard to possible losses on loans, advances hire purchase, finance leases and operating leases in line with Finance Companies (Provision for Bad and Doubtful Debts) Direction No. 3 of 2006 issued by the Central Bank of Sri Lanka.
2.3.6 Real Estate and Vehicle Stock Real estate stock comprises all costs of purchase, cost of conversion and other costs incurred in bringing the real estate to its saleable condition. Purchase Cost - Land cost with legal charges. Cost of conversion - Actual Development costs Vehicle Stock is stated at cost.
2.3.7 Cash and Cash Equivalents Cash and cash equivalents are defined as cash in hand, demand deposits and short-term highly liquid investments, readily con- vertible to known amounts of cash and subject to insignificant risk of changes in value. For the purpose of cash flow statement, cash and cash equivalents consist of cash in hand and deposits in banks net of out- standing bank overdrafts. Investments with short maturities i.e. three months or less from the date of acquisition are also treated as cash equivalents.
2.3.8 Property, Plant and Equipment Plant and equipment is stated at cost, excluding the costs of day to day servicing, less accumulated depreciation and accumu- lated impairment in value. Such cost includes the cost of replacing part of the plant and equipment when that cost is incurred, if the recognition criteria are met. Depreciation is calculated on written – down value basis over the useful life of the assets as follows. Furniture & Fittings...... 15% p.a. Equipment...... 20% p.a. Motor Vehicles...... 25% p.a. Computer Hardware...... 20% p.a. Air Conditioning...... 20% p.a. Telephone System...... 20% p.a. Fire Protection Equipment...... 20% p.a. Fixtures & Fittings...... 33.33% p.a.
COMMERCIAL CREDIT PLC. ANNUAL REPORT 2010/2011 56 NOTES TO THE FINANCIAL STATEMENTS
2.3.9 Leaseshold Property Leasehold property is situated at recorded carrying value. Such carrying amounts are amortized over the remaining lease term or useful life of the leasehold property whichever is shorter. No further revaluation of these leasehold properties is carried out.
2.3.10 Investment Property Investment properties are measured initially at cost, including transaction costs. The carrying amounts includes the cost of replac- ing part of an existing investment property at the time that cost is incurred if the recognition criteria are met; and exclude the costs of day to day servicing of an investment property. Subsequent to initial recognition, investment properties are stated at fair value, which reflectsmarket conditions at the balance sheet date. Gains or losses arising from changes in the fair values of investment properties are included in the income statement in the year in which they arise.
2.3.11 Leases a) Finance Leases – where the Company is the Lessee Property, plant and equipment on finance leases, which effectively transfer, to the Company substantially all of the risk and benefits incidental to ownership of the leased item are capitalized at the inception of the lease at the fair value of the leased property or, if lower, at the present value of the minimum lease payments. Lease payments are apportioned between the finance charges and reduction of the lease liability so as to achieve a constant rate of interest on the remaining balance of the liability. Finance charges are charged reflected in the income statement. Capitalised leased assets are depreciated over the shorter of the estimated useful life of the asset and the lease term, if there is no reasonable certainty that the Company will obtain ownership by the end of the lease term. The depreciation policy for depre- ciable leased assets is consistent with that for depreciable asset that are owned as described in 2.3.8. The cost of improvements to or on leasehold property is capitalized, disclosed as leasehold improvements, and depreciated over the unexpired period of the lease or the estimated useful lives of the improvements, whichever is shorter. Operating lease payments are recognised as an expense in the income statement on a straight line basis over the lease term.
2.3.12 Investments a) Current Investments – Government Securities Current investments include Government of Sri Lanka Treasury Bills which are stated at cost plus a portion of discount or premium. The cost of an investment is the cost of acquisition inclusive of brokerages, fees, duties and bank fees. b) Current Investments – Trading Securities Current investments are carried at market value Unrealized gains and losses on current investments carried at market value are recognized as income or expense. c) Long Term Investments – Investment Securities Long term investments are stated at cost The cost of the investment is the cost of acquisition inclusive of brokerage fees, duties and bank fees. The carrying amount of long-term investments is reduced to recognise a decline other than temporary in the value of invest- ments, determined on an individual investment basis.
COMMERCIAL CREDIT PLC. ANNUAL REPORT 2010/2011 57 NOTES TO THE FINANCIAL STATEMENTS
Disposal of Investment On disposal of an investment, the difference between net disposals and proceeds and the carrying amounts is recognised as income or expense.
2.3.13 Employment Benefit Obligations a) Defined Benefit Plan – Gratuity The Company measures the present value of the promised retirement benefits for gratuity, which is a defined benefit plan with the advice of an independent professional actuary using the Projected Unit credit Method (PUC) as required by Sri Lanka Account- ing Standards No.16, Employee Benefit (Revised 2006). The item stated under Retirement Benefit Liability in the Balance Sheet.
Recognition of Actuarial Gains and Losses Actuarial gains & losses are recognized as income or expenses when the net cumulative unrecognized actuarial gains & losses at the end of the previous reporting period exceeded 10% of the higher of the defined benefit obligation and the fair value of plan assets at the date. The gains/losses are recognized over the expected average remaining working lives of the employees participating in the plan.
Funding Arrangement The Gratuity liability is not externally funded. b) Defined Contribution Plans – Employees’ Provident Fund & Employees’ Trust Fund Employees are eligible for Employees’ Provident Fund Contributions and Employees’ Trust Fund Contributions in line with respective Statutes and Regulations. The Company contributes 15% and 3% of gross emoluments of employees to Employees’ Provident Fund and Employees’ Trust Fund respectively.
2.3.14 Provisions Provisions are recognized when the company has a present obligation (legal or constructive) as a result of a past event, where it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. If the effect of the time value of money is material, provisions are deter- mined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and, where appropriate, the risks specific to the liability. Where discounting is used, the increase in the provision due to the passage of time is recognized as an interest expense.
2.3.15 Revenue Recognition Revenue is recognised to the extent that it is probable that the economic benefits will flow to the Company and the revenue and associated costs incurred or to be incurred can be reliably measured. Revenue is measured at the fair value of the consideration received or receivable net of trade discounts and sales taxes. The following specific criteria are used for the purpose of recogni- tion of revenue. a) Income from leasing activities and hire purchase agreements Income from Finance leases is recognised on the basis of the financing method. The excess of aggregate rental receivable over the cost of the leased assets constitute the total unearned income at the commencement of the contract. The earned income is taken into revenue over the term of the lease, commencing from the month in which the lease is executed, in proportion to the declining receivable balance of the lease.
COMMERCIAL CREDIT PLC. ANNUAL REPORT 2010/2011 58 NOTES TO THE FINANCIAL STATEMENTS
Income arising from the residual interest in hire purchase agreements is credited to the profit and loss account as it accrues in proportion to the declining receivable balance of the agreement. However, accrual of income both from leases and hire purchase agreements ceases when the account is overdue for more than six months in compliance with Direction No. 15 of 1991 (Accrued Interest) and thereafter recognised on a cash basis. b) Interest Income from Loans and Advances Interest income from loans and advances is recognised on an accrual basis. However, income from loans and advances ceases when the account is overdue for more than six months in compliance with Direction No. 15 of 1991 (Accrued Interest) and thereafter recognised on a cash basis. c) Interest income from other sources Interest income from Government of Sri Lanka Treasury Bills is recognised on a time proportion basis, and discounts on purchase are amortised to income on a straight line basis over periods to maturity. Income from all other interest bearing investments is recognised as revenue on an accrual basis. d) Dividend Income Dividend income is recognised on a cash received basis. e) Overdue Interests Overdue interest income from leasing and other loans have been accounted for on a cash received basis. f) Real Estate Sales Revenue is recognised when properties are sold and the buyer has taken possession of such properties. However, when there is insufficient assurance as to the receipt of the total consideration, income is accounted for on a cash received basis. Revenue is recognized when properties are sold and the Risk and Reward of ownership has passed to the buyer. In the case of realestate sales under easy payment schemes, profit element is recognized over the period of such scheme. g) Others Other income is recognised on an accrual basis Net Gains and losses of a revenue nature on the disposal of property, plant & equipment and other non current assets includ- ing investments have been accounted for in the income statement, having deducted from proceeds on disposal, the carrying amount of the assets and related selling expenses. 2.3.16 Expenditure Recognition Expenses are recognised in the income statement on the basis of a direct association between the cost incurred and the earn- ing of specific items of income. All expenditure incurred in the running of the business and in maintaining the property, plant & equipment in a state of efficiency has been charged to income in arriving at the profit for the year.
2.3.17 Segmental Reporting A segment is a distinguishable component of the Company that is engaged either in providing related products or services (busi- ness segment), or in providing products and services within a particular economic environment (geographical segment), which is subject to risks and returns different from those of other business segments. For the purpose of segment reporting disclosures, the information is presented in respect of the Company’s business segment which is based on the Company’s management and internal reporting structure. The Company comprises the following major Business segments; lending, leasing, real estates, invest- ments and others.
COMMERCIAL CREDIT PLC. ANNUAL REPORT 2010/2011 59 NOTES TO THE FINANCIAL STATEMENTS
Inter-segment pricing is determined on an arms length basis. Measurement of segment assets, liabilities, segment revenue and results is based on the accounting policies set out above. Seg- ment revenue results, assets and liabilities include items directly attributable to segments as well as those that can be allocated on a reasonable basis. 2.4 Effect of Sri Lanka Accounting Standard issued but not yet effective: a) The following standards have been issued by the Institute of Chartered Accountants of Sri Lanka. - Sri Lanka Accounting Standard 44 Financial Instruments; Presentation (SLAS 44) - Sri Lanka Accounting Standard 45 Financial Instruments; Recognition and Measurement (SLAS 45) - Sri Lanka Accounting Standard 39 Share Based Payments (SLAS 39) The effective date of SLAS 44, 45 and 39 was changed during the year to be effective for financial periods beginning on or after 01 January 2012. These three standards have been amended and forms a part of the new set of financial reporting standards mentioned under note (b) below. b) Following the convergence of Sri Lanka Accounting Standards with the International Financial Reporting. Standards, the Council of the Institute of Chartered Accountants of Sri Lanka has adopted a new set of financial reporting standards that would apply for financial periods beginning on or after 01 January 2012. The application of these financial reporting standards is substantially different to the prevailing standards.
COMMERCIAL CREDIT PLC. ANNUAL REPORT 2010/2011 60 NOTES TO THE FINANCIAL STATEMENTS
Year ended 31 March 2011 2011 2010 Rs. Rs.
3. TREASURY BILLS Government of Sri Lanka Treasury Bills - Face Value 68,224,951 88,297,236 Less : Income allocated for future periods (1,255,587) (2,051,837) Re-Purchase Agreements 10,000,000 30,005,852 76,969,364 116,251,251
4. PLACEMENTS WITH OTHER BANKS Fixed Deposits 110,559,966 9,706,520 110,559,966 9,706,520
5. LOANS AND ADVANCES Real Estate Loans 185,746,683 51,591,526 Short Term Loans 62,803,628 25,125,516 Long Term Loans 19,098,477 29,153,227 Personal Loans 21,874,471 101,665,226 Cash Loans 578,665,954 124,243,572 Consumer Credit Loans 17,416,943 29,818,922 Micro Finance Loans 1,072,356,936 42,439,956 Staff Loans (Note 5.1) 10,727,374 3,728,993 Fixed Savers Deposits Loans - 4,085,804 Rescheduled Loans 5,241,553 2,568,605 Pawning Stock 178,548 595,482 1,974,110,967 415,016,827 Less : Provision for Bad debts (20,616,227) (15,113,417) 1,953,494,740 399,903,410 Interest in suspense (9,266,019) (10,140,906) 1,944,228,721 389,762,504
5.1 Term Loans include loans granted to Company Officers, the movement of which is as follows : As at the beginning of the year 3,728,990 4,384,226 Add : Loans granted during the year 13,993,674 4,628,578 Less : Repayments during the year (6,995,290) (5,283,814) As at the end of the year 10,727,374 3,728,990
6. RENTALS RECEIVABLE ON LEASE & HIRE-PURCHASE Lease (Note 6.a) 870,976,802 733,628,638 Hire-Purchases (Note 6.b) 1,619,844,343 566,926,607 2,490,821,145 1,300,555,245
COMMERCIAL CREDIT PLC. ANNUAL REPORT 2010/2011 61 NOTES TO THE FINANCIAL STATEMENTS
Year ended 31 March 2011 2011 2010 Rs. Rs. 6. a Lease Gross rentals receivable 1,365,248,147 1,102,020,850 Less: Unearned income (370,383,573) (284,895,071) Pre-paid rentals (28,459,280) (29,251,290) Interest in suspense (4,067,764) (2,067,408) Provision for credit losses (91,360,728) (52,178,443) 870,976,802 733,628,638
6. b Hire-Purchases Gross rentals receivable 2,452,562,542 913,432,946 Less: Unearned income (809,734,888) (337,111,851) Pre-paid rentals (1,121,085) (206,783) Interest in suspense (1,148,819) (369,431) Provision for credit losses (20,713,408) (8,818,274) 1,619,844,343 566,926,607
6.1 Receivable not later than one year Gross rentals receivable 1,549,883,249 909,578,978 Less: Unearned income (621,885,004) (352,827,843) Pre-paid rentals (7,223,390) (13,294,497) Interest in suspense (5,216,583) (1,099,751) Provision for credit losses (54,383,849) (27,448,523) 861,174,423 514,908,364
Receivable later than one year and not later than five years Gross rentals receivable 2,267,927,431 1,105,874,818 Less: Unearned income (558,233,629) (269,179,079) Pre-paid rentals (22,356,975) (16,163,576) Interest in suspense - (1,337,086) Provision for credit losses (57,690,104) (33,548,194) 1,629,646,723 785,646,883
COMMERCIAL CREDIT PLC. ANNUAL REPORT 2010/2011 62 NOTES TO THE FINANCIAL STATEMENTS
Year ended 31 March 2011
7. LEASE RENTALS RECEIVABLE AND STOCK OUT ON HIRE 7.1 Non-Performing Advances Lease & Hire Loans and Advances Total Purchase (Rs.) (Rs.) (Rs.) 2011 2010 2011 2010 2011 2010 Amount Receivable 194,425,146 131,180,220 67,151,844 48,216,799 261,576,990 179,397,019 Less: Interest in suspense (5,216,583) (2,436,839) (9,266,019) (10,140,906) (14,482,601) (12,577,745) Provision for Bad Debts (112,074,136) (60,996,717) (20,616,227) (15,113,417) (132,690,362) (76,110,134) Net non-performing advances 77,134,428 67,746,664 37,269,598 22,962,476 114,404,026 90,709,140
2011 2010 Rs. Rs. 7.2 Segmental Analysis of Loans and Advances, Leases, Hire Purchase by Industry Agriculture 462,498,095 503,719,845 Services 668,814,278 271,536,451 Trading 83,566,042 66,821,671 Transport 3,196,109,571 1,455,482,070 Others 1,380,933,670 132,910,584 Distribution of Total Advances 5,791,921,656 2,430,470,621 Gross Receivable Lease & Hire Purchase Receivables 3,817,810,689 2,015,453,796 Loans & Advances 1,974,110,967 415,016,824 Total Advances 5,791,921,656 2,430,470,620
COMMERCIAL CREDIT PLC. ANNUAL REPORT 2010/2011 63 NOTES TO THE FINANCIAL STATEMENTS
Year ended 31 March 2011 2011 2010 Rs. Rs. 8. PROVISION FOR LOSSES
8.1 Movement in provision for Bad and Doubtful Debts Balance at the beginning of the year 76,110,134 52,392,726 Charge/Appropriation during the year 66,004,331 24,548,503 Written Off during the year (9,424,102) 831,095 132,690,363 76,110,134
8.2 Provision for Bad and Doubtful Debts consist of provisioning against ; Leases and Hire Purchase 112,074,136 34,785,066 Loans and Advances 20,616,227 41,325,068 132,690,363 76,110,134
9. REAL ESTATE AND VEHICLE STOCKS Real Estate Stocks 177,127,507 80,811,858 Less: Fall in Value of Real Estate Stock (41,391,832) (36,034,423) 135,735,675 44,775,435 Vehicle Stock 17,105,784 - 152,841,459 44,777,435
10. OTHER DEBTORS, DEPOSITS & PREPAYMENTS Sundry Debtors 15,265,209 10,881,471 Deposits & Prepayments 51,838,646 25,471,812 67,103,855 36,353,283
11. INVESMENT SECURITIES Unquoted Shares 11 (a) 5,426,900 201,900 5,426,900 201,900
COMMERCIAL CREDIT PLC. ANNUAL REPORT 2010/2011 64 NOTES TO THE FINANCIAL STATEMENTS
11(a) INVESTMENTS IN UNQUOTED SHARES Number of Cost Directors Number of Cost Directors Shares as at Valuation as at Shares as at Valuation as at 2011 2011 2011 2010 2010 2010 Rs. Rs. Rs. Rs. Credit Information Bureau 19 1,900 1,900 19 1,900 1,900 Valible One Limited (Note: 11(b)) 209,000 5,225,000 5,225,000 - - - Finance House Consortium (Pvt) Ltd 20,000 200,000 200,000 20,000 200,000 200,000 Less: Fall in Value of Investment - - - - Net Investment in Unquoted shares 5,426,900 5,426,900 20,019 201,900 201,900
11(b) Vallibel One Limited was listed in Colombo Stock Exchange on 8 July 2011. 11.1 DEALING SECURITIES Number of Cost Market Value Number of Cost Market Value Shares as at as at Shares as at as at 2011 2011 2011 2010 2010 2010 Rs. Rs. Rs. Rs. Bank Finance and Insurance Hatton National Bank PLC -Voting 770 25,145 292,600 770 25,145 144,953 Hatton National Bank PLC - Non-voting 214 6,786 45,646 214 6,786 29,960 Sampath Bank PLC - Voting 10,341 2,996,460 3,080,774 341 13,420 75,702 Commercial Bank PLC 15,000 4,155,830 3,987,000 - - - Peoples’ Merchant Bank PLC 100 625 2,500 100 625 2,350 First Capital Holdings PLC 20,000 445,726 442,000 - - - Vanik Incorporation PLC 218 108 - 218 108 - The Finance Company PLC 648 9,000 23,976 648 9,000 11,340 7,639,679 7,874,496 2,291 55,084 264,305 Trading Hayleys PLC 10,000 3,690,880 3,821,000 - - - 3,690,880 3,821,000 - - - Construction & Engineering MTD Walkers PLC 30,000 2,578,560 1,950,000 - - - DIMO Engineering PLC 3,000 5,612,160 4,454,220 Colombo Dockyard PLC 6,400 1,600,000 1,632,640 9,790,720 8,036,860 - - - Chemicals & Pharmaceuticals Lankem Ceylon PLC 5,000 2,291,470 2,007,500 - - - 2,291,470 2,007,500 - - - Beverages, Food and Tobacco Distilleries Company of Sri Lanka PLC 10,000 1,719,040 1,800,000 - - - Lion Brewery (Ceylon) PLC 2,700 524,206 540,000 - - - 2,243,246 2,340,000 - - - Hotels and Travels John Keels Hotels PLC 50,000 970,758 860,000 - - - 970,758 860,000 - - -
Net Investment Securities in quoted shares 26,626,754 24,939,856 2,291 55,084 264,305 Less: Fall in Value of Investment (1,686,898) Net Investment in Quoted shares 24,939,856
COMMERCIAL CREDIT PLC. ANNUAL REPORT 2010/2011 65 NOTES TO THE FINANCIAL STATEMENTS
12. PROPERTY, PLANT AND EQUIPMENT 12.1 Gross Carrying Amounts Balance Balance as at Additions/ Increase in as at Cost 01.04.2010 (Transfers) Revaluation Disposals 31.03.2011 Freehold Assets Rs. Rs. Rs. Rs. Rs.
Land 71,165,000 - 43,835,000 - 115,000,000 Building 36,335,000 - 4,165,000 - 40,500,000 Furniture and Fittings 25,638,730 22,120,209 - - 47,758,939 Equipment 3,471,765 2,746,830 - - 6,218,595 Motor Vehicles and Accessories 7,719,392 - - 7,654,380 65,012 Computer Systems 19,565,277 10,581,973 - 141,000 30,006,250 Air Conditioning 5,064,378 2,727,375 - - 7,791,753 Generators 1,734,926 - - - 1,734,926 170,694,468 38,176,387 48,000,000 7,795,380 249,075,475
Assets on Finance Lease Equipment 3,560,989 - - - 3,560,989 Motor Vehicle 16,336,913 - - - 16,336,913 Computer Systems 8,535,249 5,049,310 - - 13,584,559 28,433,151 5,049,310 - - 33,482,461 Total Value of Depreciable Assets 199,127,619 43,225,697 48,000,000 7,795,380 282,557,936
A revaluation was carried out by independent valuers Messrs.R.G.Wimalasena (AIV) and Messrs. R.C.Wijesuriya (AIV) for the purpose of ascertaining the fair value of land and building. Such assets were valued on an open market value for existing use basis. The results of such revaluation was incorporated in these financial statement from its effective dates which is 31 March 2011.The surplus arising from the revaluation was transferred to a Revaluation Reserve. Balance as at Charge for the Balance as at 01.04.2010 Period Transfers Disposals 31.03.2011 Rs. Rs. Rs. Rs. Rs. 12.2 Depreciation Freehold Assets Building 1,437,283 454,898 1,892,181 - - Furniture & Fittings 2,982,973 3,821,173 - - 6,804,146 Equipment 1,477,685 361,765 - - 1,839,450 Motor Vehicles & Accessories 3,794,981 1,097,450 - 4,847,997 44,434 Computer Systems 14,328,664 1,643,392 - 27,806 15,944,250 Air Conditioning 2,281,964 413,688 - - 2,695,652 Generators 1,012,260 36,594 - - 1,048,854 27,315,810 7,828,959 1,892,181 4,875,803 28,376,786 Assets on Finance Lease Equipment - 441,625 - - 441,625 Motor Vehicle 9,350,199 1,746,681 - - 11,096,880 Computer Systems 1,973,396 2,137,406 - - 4,110,802 11,323,595 4,325,712 - - 15,649,307 38,639,405 12,154,671 1,892,181 4,875,803 44,026,093
There aren’t any temporarily idling assets as at 31st March 2011.
COMMERCIAL CREDIT PLC. ANNUAL REPORT 2010/2011 66 NOTES TO THE FINANCIAL STATEMENTS
Balance Balance as at as at 01.04.2010 31.03.2011 Rs. Rs. Net Book Value At Cost 143,378,658 220,698,689 On Finance Leases 17,109,556 17,833,154 160,488,214 238,531,843
12.3 During the financial year, the Company acquired Property, Plant and Equipment to the aggregate value of Rs.42,913,517/- (2010 - Rs.29,068,322/-) . Cash payments amounting to Rs.35,143,813/- ( 2010 - Rs.21,464,183/-) was paid during the year for purchases of Property , Plant and Equipment .
12.4 Property, Plant and Equipment includes fully depreciated assets having a gross carrying amount of Rs.31,750,035/- ( 2010- Rs.35,020,596/) . 2011 2010 Rs. Rs. 13. LEASEHOLD PROPERTY At 1 April 9,207644 9,519,764 Amortisation for the year (over a period 78 years) (160,605) (312,120) At 31 March 9,047,039 9,207,644
14. INVESTMENT PROPERTY At the beginning of the year 22,000,000 - Purchase of Investment Property - 22,000,000 Net gain from fair value adjustment 4,000,000 - At the end of the year 26,000,000 22,000,000
Valuation Details of Investment Property
Investment property at No. 50/2, Anula Vidyalaya Road , Nugegoda as at 31st March 2011 was valued by Mr. D. Jayawardene, a qualified professional valuer, by using open market value method. The change in fair value was recognised in the Income State- ment. 2011 2010 Rs. Rs. 15. DEPOSITS FROM CUSTOMERS Fixed Deposits-Monthly 1,303,272,819 477,696,741 Fixed Deposits-Maturity 2,359,001,688 1,207,103,637 Savers Deposits 178,217,782 48,157,815 3,840,492,289 1,732,958,193
16. BORROWINGS Bank Loans (16.1) 376,421,883 59,814,550 Bank Overdrafts 206,434,236 8,219,823 Finance Lease (16.3) 12,129,603 13,761,514 594,985,722 81,795,887
COMMERCIAL CREDIT PLC. ANNUAL REPORT 2010/2011 67 NOTES TO THE FINANCIAL STATEMENTS ------Offered Security Mortgage for bond No.3666 Securitisation of Lease receiv Primary Mortgage Bond 17.5 Primary Registered Mortgage - Lease Rentals receivables Lease & HP receivables for - Mortgage over lease receivables able with a retained margin of 40% of lease contracts with a total mil receivable value of Rs.250 lion together with the underly ing assets and a special power of attorney in favour the Bank Rs.1.0 million and leeway avail able on existing territory float ing mortgage bond no. 4573 for Rs.5.0 million million,Secondary Mortgage million, Tertiary Bond Rs.3.75 Mortgage million Bond Rs.8.25 and Quarternary Mortgage Bond over property situated at Kandy Veediya, Yatinuwara 106, & Registered Mortgage Bond- dated 05/10/2006 2006/01 over lease/ hire purchase million. contracts for Rs.25 Bond for Rs.6.5 million. over the property situated in Main street Hingurakgoda. million Rs.125
- the Loan Terms of Terms 24 Months 24 48 Months 60 Months 45 Months 48 Months 48 Months 60 Months
- - Rs. As at 1,603,550 1,603,550 3,404,000 31.03.2011 31.03.2011 73,437,500 73,437,500 79,336,000 79,336,000 48,100,550 48,100,550 20,540,283 20,540,283 376,421,883 376,421,883 150,000,000 150,000,000
-
Rs. 928,800 928,800 1,650,000 7,459,717 7,459,717 1,750,200 1,750,200 1,562,500 1,562,500 5,664,000 45,470,950 45,470,950 78,392,667 78,392,667 13,906,500 13,906,500 Repayments
- - - - Rs. Loans Obtained 57,000,000 57,000,000 75,000,000 75,000,000 28,000,000 28,000,000 85,000,000 150,000,000 150,000,000 395,000,000 395,000,000
- - - - Rs. As at 1,650,000 3,353,750 3,353,750 4,332,800 4,332,800 59,814,550 59,814,550 01.04.2010 01.04.2010 36,571,500 36,571,500 13,906,500 13,906,500 HNB Securitization Loan-02 HNB Securitization Loan-03 Capital Loan- HNB Commercial Bank Revolving Loan Loan Commercial Bank- HG Term Loan Commercial Bank Term Ceyleases Financial Services Loan SB Securitisation Loan-01 HNB Revolving Loan 16.1 Bank Loans 16.1
COMMERCIAL CREDIT PLC. ANNUAL REPORT 2010/2011 68 NOTES TO THE FINANCIAL STATEMENTS
16.2 The Company has unutilized borrowing facilities of Rs. 28,000,000/- as at 31st March 2011.( 2010 - Rs. 29,263,884) 16.3 Finance Leases As at New Leases Repayments As at 01.04.2010 Obtained 31.03.2011 Rs. Rs. Rs. Rs.
Finance Leases 13,761,514 5,210,460 6,842,371 12,129,603 13,761,514 5,210,460 6,842,371 12,129,603 Gross Liability 17,216,024 14,687,530 Finance Charges allocated for future periods (3,454,510) (2,557,927) Net Liability 13,761,514 12,129,603
16.4 Refer Note 29 for the Gross Liability and Finance Charges Allocated for the future periods on maturity basis.
17. CASH AND CASH EQUIVALENTS IN THE CASH FLOW STATEMENT Components of Cash and Cash Equivalents 17.1 Favourable Cash & Cash Equivalents balance 2011 2010 Rs. Rs. Cash & Bank Balances 203,708,480 51,924,106 Re-Purchase Agreements ( less than 3 months) 10,000,000 30,005,852 213,708,480 81,929,958 17.2 Unfavourable Cash & Cash Equivalents balance Bank Overdrafts (206,434,236) (8,219,823) Total Cash and Cash Equivalents for the Purpose of Cash Flow Statements 7,274,244 73,710,135
18. OTHER LIABILITIES 2011 2010 Rs. Rs. Accrued Interest 120,167,581 68,363,417 Accrued Expenses and Other Payables 230,972,247 142,458,682 Deferred Revenue on Real Estate sales 38,158,012 - Advances received against Real Estate Stocks 37,639,420 8,251,296 426,937,260 219,073,395
19. RETIREMENT BENEFIT LIABILITY 2011 2010 Rs. Rs. Retirement Benefit Obligations - Gratuity Balance at the beginning of the year 9,889,650 9,319,150 Amount Charged/(Reversed) for the year (19.1) 4,439,162 2,440,000 Payments made during the year (839,400) (1,869,500) Balance at the end of the year 13,489,412 9,889,650
An actuarial valuation of the gratuity was carried out as at 31 March 2011 by Piyal S Goonetilleke and Associates, a firm of professional actuaries. The valuation method used by the actuary to value the Fund is the “Projected Unit Credit Method”, recom- mended by SLAS No.16. The present value of defined benefit obligation as at 31st March 2011 is Rs. 14,983,659/-
COMMERCIAL CREDIT PLC. ANNUAL REPORT 2010/2011 69 NOTES TO THE FINANCIAL STATEMENTS
19.1 Expenses on Defined Benefit Plan 2011 2010 Rs. Rs. Current Service Cost for the year 2,517,784 623,109 Interest cost for the year 1,792,539 1,153,393 Actuarial Loss/Gain Recognised during the Year 128,839 663,498 4,439,162 2,440,000
19.2 Actuarial assumptions 2011 2010 Discount Rate 12 % 12 % Salary scale 11 % 11 % Staff Turnover 20 years 10 % 10 % 25 years 10 % 10 % 30 years 10 % 10 % 35 years 10 % 7.5 % 40 years 5 % 5 % 45 years 3 % 2.5 % 50 years 1 % 1 % Mortality - GA 1983 Mortality Table Retirement age - Normal retirement Age, or age on valuation date, if greater .
20. STATED CAPITAL 2011 2010 Number Rs. Number Rs. 20.1 Fully paid ordinary shares 218,074,365 170,640,315 4,846,097 73,718,375
20.2 Rights of Shareholders The holders of ordinary shares confer their right to receive dividends as declared from time to time and are entitled to one vote per share at the meeting. All shares rank equally with regard to the Company’s residual assets. 20.3 Share Split The Company, with the sanction of the shareholders at an Extraordinary General Meeting held on 24th March 2011 subdivided its 14,538,291 Ordinary Shares in issue on the basis of 15 Ordinary Shares for every 01 ordinary Share held and thereby the number of shares in issue increased to 218,074,365.
21. RESERVES Reserve Investment Retained Total Fund Fund Reserve Profits Rs. Rs. Rs. Rs. At the beginning of the year 50,294,760 - (30,443,115) 19,851,645 Profit for the year - - 60,094,387 60,094,387 50,294,760 - 29,651,272 79,946,032 Transfers to/(from) during the year For 2008/09 2009/10 1,500,000 - (1,500,000) - For 2009/10 9,200,000 - (9,200,000) - For 2010/11 12,018,877 - (12,018,877) - Transfers to/(from) during the year - 8,318,520 (8,318,520) - At the end of the year 73,013,637 8,318,520 (1,386,125) 79,946,032
Reserve Fund is a capital reserve which contains profits transferred as required by Section 3(b)(ii) of Central Bank Direction No. 1 of 2003.
COMMERCIAL CREDIT PLC. ANNUAL REPORT 2010/2011 70 NOTES TO THE FINANCIAL STATEMENTS
The Investment Fund Reserve is created in accordance with the Central Bank guidelines issued to create an Investment Fund Reserve 8% of the profits liable for VAT on Financial Services is transferred to this reserve monthly when the payment of VAT on Financial Services for such month becomes due. 22. INCOME 2011 2010 Rs. Rs. 22.1 Summary Gross Income(22.2) 1,258,391,240 425,466,094 1,258,391,240 425,466,094
22.2 Segmental Analysis of Gross Income Interest 1,112,597,093 377,101,417 Real Estate 71,883,738 22,961,942 Fees & Commision Income 59,141,424 20,649,462 Others 14,768,985 4,753,273 1,258,391,240 425,466,094 23. INCOME Interest on Leases 271,723,707 227,828,014 Interest on Loans 451,117,891 85,519,090 Interest on Hire Purchase 354,996,315 46,905,899 Interest on Land Finance 20,425,013 2,978,433 Interest on Treasury Bills 12,198,093 13,287,127 Interest on Bank Deposits 2,136,074 582,854 1,112,597,093 377,101,417
23.1 Notional Tax Credit for withholding Tax on Government Securities on Secondary market Transactions The Inland Revenue Act No.10 of 2007, provided that a company which derives interest income from the secondary market trans- actions in Government Securities ( on or after April 1, 2002 ) would be entitled to a notional tax credit ( being one nineth of the net interest income ) provided such interest income forms part of the statutory income of the Company for that year of assessment.
Accordingly the net interest income earned from the secondary market transactions in Government Securities for the year, has been grossed up in the Financial Statement & the resulting notional Tax credit amounts to Rs.1,219,810/- (2010 - Rs.1,328,712/-). 2011 2010 24. INTEREST EXPENSES Rs. Rs. Interest on Fixed Deposits- Maturity 255,477,932 131,079,176 Interest on Fixed Deposits- Term 124,667,398 53,836,640 Interest on Savers Deposits 4,185,162 1,844,496 Interest on Loans 14,835,017 13,150,027 Interest on Bank Overdrafts 7,979,776 4,866,767 Interest on Finance Leases 2,964,157 1,923,888 410,109,441 206,700,994
COMMERCIAL CREDIT PLC. ANNUAL REPORT 2010/2011 71 NOTES TO THE FINANCIAL STATEMENTS
2011 2010 Rs. Rs. 25. OTHER OPERATING INCOME Income from Investments - quoted 345,877 8,167 Profit on Sale of Property Plant and Equipment 3,946,176 956,349 Other Income on Real Estate 6,363,556 1,512,695 Service Charges 33,288,702 15,997,092 Documentation Charges 20,200,975 3,041,784 Commission Income 5,651,747 1,610,586 Recoveries of Bad Debts on write offs 2,646,667 955,062 Sundry Income 611,055 1,000 Profit on Repossessed Items 855,655 - Rent Income - 1,320,000 73,910,409 25,402,735
26. PROFIT FROM OPERATION STATED AFTER CHARGING THE FOLLOWING EXPENSES Depreciation 12,154,671 7,590,331 Defined Contribution Plan Costs - EPF & ETF included in Staff Costs 20,488,751 8,403,927
27. PROVISION FOR INCOME TAX The major components of income tax expense for the years ended 31 March are as follows : Income Statement Current Income Tax Current Income Tax charge(27.1) 55,519,585 13,319,403 Deferred Income Tax Deferred Taxation Charge (27.2) 128,752,323 (84,451,916) Income tax expense reported in the Income Statement 184,271,908 (71,132,513)
27.1 A reconciliation between tax expense and the product of accounting profit multiplied by the statutory tax rate is as follows : Accounting Profit before Income Tax 244,366,295 (25,942,410)
Income Tax Expense at the statutory income tax rate of 35% Non deductable expenses 330,400,200 69,276,074 Tax Effect of Other Allowable Credits (372,134,047) (40,167,486) 202,632,448 3,166,178 Profit on Leasing Business 37,803,150 87,123,475 Claim of Tax Loss (84,152,459) (57,114,404) 156,283,139 33,175,249 Income Tax @ 35% 54,699,099 11,614,697 Social Security Levy at 1.5% of Tax ( 2010 - 1.5% ) 820,486 174,220 Income Tax Expense at the effective income tax rate of 36% ( 2010- 36% ) 55,519,585 11,788,917
COMMERCIAL CREDIT PLC. ANNUAL REPORT 2010/2011 72 NOTES TO THE FINANCIAL STATEMENTS
27.2 Deferred Tax Assets , Liabilities and Income Tax relates to the followings
Balance Sheet Income Statement
2011 2010 2011 2010 Rs. Rs. Rs. Rs. Deferred Tax Liability Capital allowances for tax purposes 25,334,623 (50,614,366) 84,402,658 70,197,039 Revaluation of Buildings 1,696,011 - - Effect of rate change (8,453,669) 27,030,634 (50,614,366) 75,948,989 70,197,039
Deferred Tax Assets Defined Benefit Plans 3,777,035 3,461,378 1,259,917 199,675 Tax Loss 14,250,500 67,369,492 49,556365 14,055,203 Effect of rate change - - 1,987052 - 18,027,535 70,830,870 52,803,334 14,254,878
Deferred tax Expense 128,752,323 (84,451,917)
Net Deferred Tax Liability/(Asset) 9,003,099 (121,445,236)
28. EARNING PER SHARE
28.1 Basic Earnings Per Share is calculated by dividing the net profit for the period attributable to ordinary shareholders by the weighted average number of ordinary shares outstanding during the year.
28.2 The following reflects the Income & Share data used in the Basic Earnings Per Share computation . 2011 2010 Amounts Used as the Numerators: Rs. Rs.
Net Profit Attributable to Ordinary Shareholders for Basic Earnings Per Share 60,094,387 45,190,103
Number of Ordinary Shares Used as Denominators for Basic Earnings per share 2011 2010 Number Number Weighted Average number of Ordinary Shares in issue 13,595,626 4,846,097 Applicable to Basic Earnings Per Share 4.42 9.33
COMMERCIAL CREDIT PLC. ANNUAL REPORT 2010/2011 73 NOTES TO THE FINANCIAL STATEMENTS
- - - -
Rs. 55,084 55,084 Total 2010 201,900 201,900 7,913,443 7,913,443 9,207,644 9,207,644 9,706,520 9,706,520 9,889,650 9,889,650 44,777,435 44,777,435 13,761,514 13,761,514 51,924,106 51,924,106 36,353,283 36,353,283 68,034,373 68,034,373 22,000,000 22,000,000 219,073,395 219,073,395 116,251,251 116,251,251 389,762,504 389,762,504 160,488,214 160,488,214 121,445,236 2,043,717,125 2,043,717,125 1,732,958,193 1,732,958,193 2,270,641,865 2,270,641,865 1,300,555,245 1,300,555,245
- - Rs. 2011 Total Total 9,047,039 9,047,039 5,426,900 5,426,900 9,003,099 67,103,854 67,103,854 33,133,610 33,133,610 13,489,412 13,489,412 12,129,603 12,129,603 76,969,364 76,969,364 24,939,856 24,939,856 26,000,000 26,000,000 426,937,260 426,937,260 110,559,966 110,559,966 152,841,459 582,856,119 582,856,119 203,708,480 203,708,480 238,531,845 238,531,845 4,918,041,392 4,918,041,392 5,350,178,628 5,350,178,628 1,944,228,721 1,944,228,721 2,490,821,145 2,490,821,145 3,840,492,289 3,840,492,289
------Rs. years over 3 857,060 857,060 9,047,039 9,047,039 5,426,900 5,426,900 9,003,099 87,269,817 87,269,817 28,071,670 28,071,670 13,489,412 13,489,412 11,303,868 11,303,868 26,000,000 26,000,000 110,975,146 110,975,146 289,700,767 289,700,767 172,843,195 172,843,195 238,531,845 238,531,845 656,833,428 656,833,428
------Rs. 1-3 1-3 years 6,782,478 6,782,478 2,166,670 2,166,670 34,016,011 34,016,011 485,185,797 485,185,797 168,766,899 168,766,899 309,782,009 309,782,009 275,620,409 275,620,409 1,332,722,564 1,332,722,564 1,644,671,243 1,644,671,243
------
Rs. 3-12 3-12 months 4,096,890 31,537,579 31,537,579 47,853,928 47,853,928 72,473,216 72,473,216 54,102,968 54,102,968 108,917,685 108,917,685 504,382,897 504,382,897 1,047,838,214 1,047,838,214 2,097,594,211 2,097,594,211 1,740,530,304 1,740,530,304 1,966,921,138 1,966,921,138
------
Rs. months 1,250,236 1,250,236 1,642,281 1,642,281 Less than 3 33,133,610 33,133,610 29,115,436 29,115,436 32,542,546 32,542,546 24,939,856 327,514,413 327,514,413 364,014,916 364,014,916 152,841,459 152,841,459 203,708,480 203,708,480 499,338,681 499,338,681 230,640,858 230,640,858 1,569,879,072 1,569,879,072 2,162,418,188 2,162,418,188 1,308,143,655 1,308,143,655
Assets Cash and Bank Bills Treasury Deposits with Banks Loans and Advances Lease Rental Receivable and Stock out on Hire Stock Real Estate & Vehicle Other Debtors, Deposits and Prepayments Investment Portfolio Dealing Securities Receivable Tax Plant & Equipment Property, Leasehold Property Investment Property Asset Deferred Tax As at 31.03.2011 Liabilities Deposits from Customers Borrowings Finance Leases (Note:29.1) Other liabilities Payable Tax Retirement Benefit Liability Liability Differed Tax As at 31.03.2011 contractual maturity dates are given below. ANALYSIS MATURITY An analysis of the total assets employed and liabilities at year end , based on remaining balance sheet d ate to respective 29.
COMMERCIAL CREDIT PLC. ANNUAL REPORT 2010/2011 74 NOTES TO THE FINANCIAL STATEMENTS
29.1 Finance Leases Less than 3-12 1-3 Total 3 months months years Rs. Rs. Rs. Rs. Finance Leases-Gross Liability 1,706,280 5,151,463 7,829,787 14,687,530 Less: Finace Charges allocated for Future Periods (456,044) (1,054,573) (1,047,309) (2,557,927) 1,250,236 4,096,890 6,782,478 12,129,603
30. COMMITMENTS AND CONTINGENCIES 30.1 Contingent Liabilities There are no contingent liabilities as at the balance sheet date. 30.2 Commitments The Company has purchase commitments for acquisition of Property, Plant and Equipment & Vehicle Stocks incidental to the ordinary course of business are , 2011 2010 Rs. Rs. Contracted but not provided for 11,955,027 11,459,264 11,955,027 11,459,264
31. ASSETS PLEDGED The following assets have been pledged as security for liabilities. Carrying Amount Pledged Carrying Amount Pledged Nature of Liability 2011 2010 Included Under Rs. Rs. Lease Receivables & Stock out on hire Loans 502,940,022 258,940,022 Lease Rentals Receiv ables & Stock out on hire Freehold Land & Building Loans & Overdrafts 111,258,866 111,829,091 Property, Plant and Equipment 614,198,888 370,769,113
COMMERCIAL CREDIT PLC. ANNUAL REPORT 2010/2011 75 NOTES TO THE FINANCIAL STATEMENTS Rs. Rs. 2010 2010 7,590,331 7,590,331 5,012,755 5,012,755 71,132,513 71,132,513 45,190,103 21,464,183 21,464,183 20,389,980 20,389,980 (7,164,561) 362,495,171 362,495,171 409,331,929 409,331,929 400,063,359 400,063,359 (25,942,410) 425,466,093 425,466,093 (18,777,849) 1,860,772,698 1,860,772,698 2,270,104,627 2,270,104,627 2,042,839,110 2,042,839,110 1,680,343,939 1,680,343,939
Total Total Rs. 2011 60,094,387 60,094,387 12,154,671 12,154,671 63,701,431 63,701,431 10,208,978 10,208,978 43,225,697 43,225,697 244,366,295 244,366,295 561,497,000 561,497,000 281,910,023 281,910,023 516,144,538 516,144,538 (37,543,728) 4,918,041,392 4,918,041,392 4,788,681,628 4,788,681,628 5,350,178,628 5,350,178,628 1,258,391,240 1,258,391,240 (184,271,908) 1,184,480,832 1,184,480,832 4,401,896,854
- - - - Rs. 2010 176,620 176,620 7,590,331 7,590,331 5,012,755 5,012,755 5,012,755 5,012,755 362,495,171 362,495,171 409,331,929 409,331,929 21,464,183 21,464,183
- - - - Unallocated Rs. 2011 6,847,231 6,847,231 12,154,671 12,154,671 10,208,978 10,208,978 10,208,978 10,208,978 43,225,697 43,225,697 561,497,000 561,497,000 516,144,538
- - - - - Rs. 2010 467,133 467,133 505,155 505,155 14,337,113 14,337,113 13,869,980 13,869,980 113,976,413 113,976,413 126,214,755 126,214,755
- - - - - Short Term Investment Short Term Rs. 2011 714,907 714,907 2,510,209 2,510,209 14,334,167 14,334,167 15,049,074 15,049,074 217,896,087 217,896,087 200,296,485 200,296,485
- - - - - Rs. 2010 997,528 997,528 2,371,078 2,371,078 95,831,723 95,831,723 28,311,453 28,311,453 25,940,375 25,940,375 86,539,454 86,539,454
- - - - - Real Estate Rs. 2011 8,740,027 8,740,027 92,308,752 92,308,752 22,824,561 22,824,561 101,048,779 101,048,779 295,516,029 295,516,029 321,482,357 321,482,357
- - - - - Rs. 2010 3,217,910 3,217,910 88,737,000 88,737,000 85,519,090 85,519,090 281,710,367 281,710,367 311,959,324 311,959,324 (14,690,899) Term Loan Term
- - - - - Rs. 2011 31,639,542 31,639,542 151,447,375 151,447,375 451,117,891 451,117,891 482,757,433 482,757,433 1,616,448,358 1,616,448,358 1,758,482,039 1,758,482,039
- - - - - Rs. 2010 (212,891) 1,552,145 1,552,145 48,458,044 48,458,044 46,905,899 569,712,714 569,712,714 514,470,847 514,470,847
- - - - - Hire Purchase Rs. 2011 9,139,314 9,139,314 83,281,770 83,281,770 364,135,629 364,135,629 354,996,315 354,996,315 1,619,844,343 1,619,844,343 1,489,008,514 1,489,008,514
- - - - - Rs. 2010 12,781,713 12,781,713 (5,553,363) 227,828,015 227,828,015 757,054,182 757,054,182 240,609,728 240,609,728 683,646,857 683,646,857
- - - - - Finance Lease Rs. 2011 13,467,641 13,467,641 14,998,877 14,998,877 271,723,707 271,723,707 870,976,802 870,976,802 800,627,468 800,627,468 285,191,348 285,191,348 FINANCIAL REPORTING SEGMENT BY Total Revenue Total
Interest Based Income & others Fee Unallocated Revenue Segmental Result on Financial Institutions VAT Profits from Operations Expenses Income Tax Net profit for the period Segment Asset Unallocated Assets Segment Liabilities Unallocated Liabilities Liabilities Total Depreciation and Amortization and Equipment Addition to Property,Plant
Others 32.
COMMERCIAL CREDIT PLC. ANNUAL REPORT 2010/2011 76 NOTES TO THE FINANCIAL STATEMENTS
33. EVENTS OCCURRING AFTER THE BALANCE SHEET DATE
There have been no material events occurring after the Balance Sheet date that require adjustments to or disclosure in the Finan- cial Statements other than the company was registered in the Colombo Stock Exchange on 01 June 2011.
34. RELATED PARTY DISCLOSURES
34.1 Transactions with Key Managerial persons
The Key Managerial personnel of the Company are the members of its Board of Directors and Corporate Management. Follow- ing transactions are entered between the company and its Key Management Personnel and their close family members.
34.1.1 Compensation to Key Managerial Personnel 2011 2010 Rs. Rs.
Short Term Employment Benefits Paid 23,945,677 6,968,000 Post Employment Benefits 3,720,850 2,670,000
2011 2010 34.1.2 Other transactions with Key Managerial Personnel Rs. Rs.
Fixed Deposits Accepted during the year 8,632,000 8,090,000 Fixed Deposits held at the end of the year 9,156,848 11,140,000 Interest paid on Fixed Deposits 1,432,453 4,642,000
35. COMPARATIVE INFORMATION
35.1 The presentation and classification of the following items in the financial statements are amended to ensure the comparability with the current year.
Rs. Rs. Current As Reported Presentation Previously (a) Cash and Bank Balances 51,924,106 49,438,469 Bank Transfer - 2,485,637 51,924,106 51,924,106
(b) Treasury Bills 116,251,251 86,245,400 Placements with other banks 9,706,520 39,712,371 125,957,771 125,957,771
(c) Loans and Advances 389,762,502 915,342,409 Supplier Payable - (13,078,081) Rental Receivables - 173,346,688 Lease rentals receivable and Stock out on hire 1,300,555,245 592,977,866 Repossessed inventory - 21,728,865 1,690,317,747 1,690,317,747
COMMERCIAL CREDIT PLC. ANNUAL REPORT 2010/2011 77 NOTES TO THE FINANCIAL STATEMENTS
Rs. Rs. Current As Reported Presentation Previously (d) Other Debtors, Deposits and Prepayments 36,353,283 229,152,308 Bank Transfer - (2,485,637) Land sales Income Receivables - (1,192,044) Rental Receivables - (173,346,688) VAT receivables - (15,774,656) 36,353,283 36,353,283 (e) Property, Plant and Equipment 160,488,214 165,495,762 Intangible assets - 758,826 Leasehold Property 9,207,644 3,441,270 169,695,858 169,695,858 (f) Borrowings 81,795,887 59,814,550 Lease creditors - 13,761,514 Bank overdraft - 8,219,823 81,795,887 81,795,887 (g) Other liabilities 219,073,395 249,517,391 Supplier payable - (13,078,081) Land sales Income Receivables - (1,192,044) VAT receivables - (15,774,656) Income tax Receivable - (399,215) 219,073,395 219,073,395 (h) Interest income 377,101,417 346,843,191 Default Interest LE & LP - 30,258,227 377,101,417 377,101,418 Other income 25,402,735 55,660,962 Default Interest LE & LP - (30,258,227) 25,402,735 25,402,735 (i) Premises, equipment & establishment expenses - 63,734,303 Other overhead expenses - 30,454,179 General & Administration Expenses 87,023,921 - Value Added Tax on Financial Services - (7,164,561) 87,023,921 87,023,921 2,864,646,120 2,864,646,120
COMMERCIAL CREDIT PLC. ANNUAL REPORT 2010/2011 78 NOTES TO THE FINANCIAL STATEMENTS
35.2 Reason for changes in the presentation and classification: (a) Cash in transits were recorded under the other receivables in previous year accounts, was reclassified under Cash and bank during the current year for a better presentation of these Financial Statements (b) Rs. 30 million Repos were recorded under the placements with other banks in previous year accounts, was reclassified under Treasury bills during the current year for a better presentation of these Financial Statements. (c) Lease and loans rental receivable were recorded under the Other Receivables in previous year accounts, was reclassified under the Lease Receivables & loans & Advances respectively in current year for a better presentation of these Financial Statements. (d) Input VAT is recorded under the Other Receivables in previous year accounts, was reclassified under the other payable by netting off with the VAT payable in current year for a better presentation of these Financial Statements. (e) Computer software which is recorded under Intangible assets in previous year accounts, was reclassified under the Property Plant and Equipment in current year for a better presentation of these Financial Statements. (f) Borrowings, Finance leases and Bank overdrafts which were recorded separately in previous year accounts, was aggregated under the Borrowings in current year for a better presentation of these Financial Statements. (g) Supplier Payable Balances which is deducted from lease receivables in previous year accounts, was reclassified under the Other payables in current year for a better presentation of these Financial Statements. (h) Default interest for LE & LP,which was recognised as an other income in previous year accounts, was reclassified under the Interest Income in current year for a better presentation of these Financial Statements. (i) Premises, equipment & establishment expenses,which was presented separately in the income statement in previous year accounts, was aggregated under the General & Administration Expenses in current year for a better presentation of these Financial Statements.Also the VAT on financial services,is separately disclosed in the income statement.
COMMERCIAL CREDIT PLC. ANNUAL REPORT 2010/2011 79 FIVE YEAR SUMMARY
Five Year Summary
2007 2008 2009 2010 2011 (Rs. ‘000) (Rs. ‘000) (Rs. ‘000) (Rs. ‘000) (Rs. ‘000)
For the year ended 31st March OPERATING RESULTS
Revenue 182,666 249,126 350,461 425,466 1,258,391
Interest Income 143,508 212,162 314,266 377,101 1,112,597
Interest Expense 67,203 109,114 187,600 206,701 410,109
Operating Expenses & Provision 79,300 107,200 164,142 237,543 566,372
Profit/(Loss) before Taxation 36,163 32,812 -1,280 -25,942 244,366
Taxation 3,145 3,478 8,378 71,132 184,272
Profit/(Loss) after Taxation 39,308 29,334 7,098 45,190 60,094
As at 31st March ASSETS
Cash & Bank Balances 4,985 5,342 12,578 51,924 203,708
Lease Rentals Receivables and Stock Out on Hire 282,532 451,218 548,361 1,300,555 2,490,821
Loans & Advances 247,586 241,849 269,603 389,762 1,944,229
Property Plant and Equipment 72,901 144,918 143,996 160,488 238,531
Total Assets 881,762 1,196,137 1,388,813 2,270,642 5,350,179
EQUITY & LIABILITIES
LIABILITIES
Deposits from Customers 569,043 712,919 854,331 1,732,958 3,840,492
Long Term Borrowings 26,148 66,868 81,592 81,796 594,986
Retiring Gratuity Obligations 7,070 8,627 9,319 9,890 13,489
SHAREHOLDERS’ FUND
Stated Capital 41,022 58,718 73,718 73,718 170,640
Revaluation Reserve 17,341 74,603 74,603 74,603 122,800
Statutory Reserve 45,295 50,295 50,295 50,295 73,014
General Reserves 40,751 58,751 58,751 58,751 58,751
Retained Earnings 6,689 12,883 -33,320 30,443 -1,386
Total Shareholder’s Fund 151,098 255,251 224,048 226,925 432,137
No of Shares 4,844,972 4,844,972 4,844,972 4,844,972 218,074,365
COMMERCIAL CREDIT PLC. ANNUAL REPORT 2010/2011 80 INVESTOR INFORMATION
Investor Information
1. TOP TWENTY SHAREHOLDERS
Ordinary Voting Shares 31st March 2011 31st March 2010 Name Number % Number % of Shares of Shares 1 M/S B. G. Investments (Pvt) Ltd 168,103,980 77.09% 2,423,534 50.01% 2 Mrs. Vagdevi Wimalangi Fernando 15,494,265 7.11% 732,951 15.12% 3 Mr. George Ginendra Hemachandra 7,427,520 3.41% 395,168 8.15% 4 Ms. Deegala Nilanthi Keerthisinghe 3,424,260 1.57% 75,230 1.55% 5 Pedrisons Limited 2,388,750 1.10% 159,250 3.29% 6 Mr. Sri Deva Kumara Semage 2,116,485 0.97% 101,099 2.09% 7 Mr. Thusitha Kumara Hemachandra 1,425,000 0.65% 95,000 1.96% 8 Mr. Deegala Jayantha Keerthisinghe 1,162,980 0.53% 24,577 0.51% 9 Dr. Eresha Fernando 1,148,550 0.53% 76,570 1.58% 10 Ms. Nirmala Samudra Hemachandra 1,124,490 0.52% 74,966 1.55% 11 Mr. Premakumar Shanthilal Maryson Fernando 879,885 0.40% 58,659 1.21% 12 Mrs. Susila Semage 814,455 0.37% 24,297 0.50% 13 Mr. Karandeniya Hewage Ukkantha Garvin Fernando 724,320 0.33% 47,738 0.99% 14 Mr. Mahendra Nalaka Kariyawasam. 471,075 0.22% 11,456 0.24% 15 Mr. Batapola Arachchige Lal Athula Indrasena 417,060 0.19% 9,268 0.19% 16 M/S. Isuru Finance Company Limited 393,810 0.18% 26,254 0.54% 17 Mr. Panduka Bimal Fernando 337,425 0.15% 22,495 0.46% 18 Mr. Munugoda Hewage Gunawardena 327,000 0.15% 21,800 0.45% 19 Mr. Gampolage Shiran De Fonseka/JAYASURIYA 300,000 0.14% 19,380 0.40% 20 Mr. Amal Indrajith Fernando 292,950 0.13% 19,530 0.40%
TOTAL ISSUED SHARE CAPITAL 208,774,260 95.74% 4,419,222 91.19%
2. STOCK EXCHANGE LISTING
The Stock exchange ticker symbol for Commercial Credit PLC is “ COCR”. (Listed on 1st June 2011)
3. SHAREHOLDER BASE The Total number of (Ordinary Voting) shares as at March 31, 2011 were 218,074,365 compared to 4,846,097 as at March 31, 2010.
COMMERCIAL CREDIT PLC. ANNUAL REPORT 2010/2011 81 INVESTOR INFORMATION
4. DISTRIBUTION OF SHAREHOLDERS Ordinary Voting - Shareholding as at 31st March 2011
Resident Non-Resident Total Range of No. of No. of % of Share No. of No. of % of Share No. of No. of % of Share Shareholders Holders Shares holdings Holders Shares holdings Holders Shares holdings 1 - 1,000 0 0 0.00% 0 0 0.00% 1,001 - 5,000 48 123,975 0.06% 48 123,975 0.06% 5,001 - 10,000 28 204,390 0.09% 28 204,390 0.09% 10,001 - 50,000 57 1,282,245 0.59% 57 1,282,245 0.59% 50,001 - 100,000 34 2,477,535 1.14% 34 2,477,535 1.14% 100,001 - 500,000 34 7,751,280 3.55% 34 7,751,280 3.55% 500,001 - 1,000,000 3 2,418,660 1.11% 3 2,418,660 1.11% 1,000,001 - 50,000,000 9 35,712,300 16.38% 9 35,712,300 16.38% 50,000,001 - 75,000,000 1 168,103,980 77.09% 75,000,001 & above 1 168,103,980 77.09% Total 214 218,074,365 100.00% 214 218,074,365 100.00%
5. COMPOSITION OF SHAREHOLDERS
March 31, 2011 March 31, 2010 Ordinary Voting Shares No. of No. of % of Share No. of No. of % of Share Shareholders Shares holdings Shareholders Shares holdings Resident 214 218,074,365 100% 212 4,846,097 100% Non-Resident ------Total 214 218,074,365 100% 212 4,846,097 100%
Individual 211 47,187,825 21.64% 209 2,237,059 46.16% Institution 3 170,886,540 78.36% 3 2,609,038 53.84% Total 214 218,074,365 100% 212 4,846,097 100%
2011 2010 DIRECTORS’ SHAREHOLDING No. of Shares % of Holding No. of Shares % of Holding
Mrs. Vagdevi Wimalangi Fernando 15,494,265 7.11% 732,951 15.77% Mr. George Ginendra Hemachandra 7,427,520 3.41% 395,168 8.50%
COMMERCIAL CREDIT PLC. ANNUAL REPORT 2010/2011 82 COMMERCIAL CREDIT NETWORK
Commercial Credit Network
City Office - Colombo 1 No. 45, Dharmapala Mawatha, Colombo 07 Head Office Hingurakgoda Kandy 2 No. 01, Medirigiriya Road, Hingurakgoda. No. 106, Anuradhapura Yatinuwara Veediya, 3 No. 272, Maithripala Senanayake Mawatha, Anurad- hapura Kandy Rathnapura 4 No. 126 B, Bandaranayaka Mawatha, Ratnapura Galle 5 No. 14, Dickson Road, Galle Moratuwa 6 No. 115, New Galle Road, Moratuwa Badulla 7 NO.262, Lower Street, Badulla Nugegoda 8 No. 231, High Level , Nugegoda 3 18 Gampaha 9 No. 6, Mangala Road, Gampaha 20 17 2 Kurunegala 10 No. 53, Ground Floor, Rajapihilla Road, Kurunegala 15 Negombo 16 11 No.113A, Greens Road, Negombo Maharagama 12 No. 223, High Level Road, Maharagama 10 Nuwara Eliya 19 13 11 No. 50, Kandy Road, Nuwara Eliya Avissawella 14 No. 64/141 C, Hospital Road, Avissawella 1 9 14 13 8 7 Dambulla 6 12 15 No. 738, Anuradhapura Road, Dambulla 4 Dehiattakandiya 16 Commercial No. 10, Opposite Bank of Ceylon, 21 Dehiattakandiya Galnewa 17 No. 03, Jaya Mawatha, Galnewa Galenbindunuwewa 5 18 No. 131, Sippikulama Road, Galenbindunuwewa Mahiyanganaya 19 No. 24, 1st Floor, New Town, Mahiyanganaya Thambuththegama 20 No. 150, Opposite Public Fare, Thambuththegama Embilipitiya 21 No. 53, Hayesha Building, Main Street, Embilipitiya
COMMERCIAL CREDIT PLC. ANNUAL REPORT 2010/2011 83 COMMERCIAL CREDIT NETWORK
H T K Narampanawa A N Gunasinghe H M S Kumara M U S Perera Lakmal Weerabahu Hingurakgoda Galenbindunuwewa Mahiyanganaya Galnewa Anuradhapura
P K S S Wilmot H P S Panditharathna B H I Niroshan D M P G Dayaratne M P T Dhanapala Nuwara Eliya Gampaha Moratuwa Dehiattakandiya Ratnapura
A K M A Artigala J P A S Jayaweera W A N Weerasinghe P K W Rathnayake D K K Denewaka Avissawella Negombo Dambulla Embilipitiya Nugegoda
H L K Karunaratne K H P K Dissanayake G R Abhayakumara Mrs. R B Rambukwella Mrs. G S S Doole Kurunegala Thambuttegama Maharagama Galle Badulla
COMMERCIAL CREDIT PLC. ANNUAL REPORT 2010/2011 84 NOTICE OF MEETING
Notice of Meeting
NOTICE is hereby given that the Twenty Eighth Annual General Meeting of Commercial Credit PLC will be held at No.106, Yatinuwara Veediya, Kandy on 15th December 2011 at 10am for the following purposes :
1. To receive and consider the Audited Financial Statements for the Year Ended 31st March, 2011 together with the Reports of the Directors’ and Auditors’ thereon.
2. (i) To re-appoint as a Director, Mrs V W Fernando who is 73 years of age on 5th April, 2011, and who vacates her office in terms of Section 210 of the Companies Act No. 07 of 2007 (the Act), until 31st December, 2011, in accordance with the Finance Comapnies Corporate Governance Direction No. 3 of 2008.
Notice is hereby given to propose the undernoted Ordinary Resolution in compliance with Section 211 of the Act, in relation to her re-appointment.
“RESOLVED THAT the age limit of 70 years referred to in Section 210 of the Companies Act No. 7 of 2007 shall not apply to Mrs Vagdevi Wimalagi Fernando who is and hereby re-appointed as a Director of the company until 31st December 2011, in accordance with the Finance Comapnies Corporate Governance Direction No. 3 of 2008.”
(ii) To re-elect George Ginendra Hemachandra, Director, who retires by rotation in terms of Article 24 (6) of the Articles of Association of the Company.
(iii) To elect Mr Roshan Sanjaya Egodage, Director, who retires in terms of Article 24 (2) of the Articles of Association of the Company
(iv) To elect Mr Thirunavukarasu Someswaran, Director, who retires in terms of Article 24 (2) of the Articles of Association of the Company
(v) To elect Mr Kalugamage John Cecil Perera, Director, who retires in terms of Article 24 (2) of the Articles of Association of the Company
(vi) To elect Mihindukulasuriya Susantha Devapriya Pinto, Director, who retires in terms of Article 24 (2) of the Articles of Association of the Company
3. To approve donations
4. To appoint the Auditors Messrs Ernst & Young. Chartered Accountants, to hold office until the conclusion of the next Annual General Meeting and to authorize the Directors to determine their remuneration.
By order of the board,
JACEY & COMPANY SECRETARIES Colombo, 17th November, 2011 NOTE: 1. A member entitled to attend and vote at the meeting is entitled to appoint a proxy to attend and vote in his/her stead. 2. A proxy need not be a member of the company 3. The completed form of proxy must be deposited at the registered office of the company at no.106, Yatinuwara Veediya, Kandy not less than 48 hours before the time fixed for the meeting.
COMMERCIAL CREDIT PLC. ANNUAL REPORT 2010/2011 85 COMMERCIAL CREDIT PLC. ANNUAL REPORT 2010 86 Form of Proxy
I/We the undersigned ______of ______being a member/members of Commercial Credit PLC do hereby appoint ______of ______whom failing MRS V W FERNANDO whom failing MR G G HEMACHANDRA whom failing MR R S EGODAGE whom failing MR H S K GUNARATNE whom failing MRS G R EGODAGE whom failing MR T SOMESWARAN whom failing MR C PERERA whom failing MR M S D PINTO as my/our Proxy to represent me/us and *______to vote on my/our behalf at the TWENTY EIGHTH ANNUAL GENERAL MEETING of the Company to be held on ______, 2011 (Please Complete) and at any adjournment thereof, and at every poll which may be taken in consequence thereof. I /We the undersigned hereby author- ise my/our proxy to vote on my/our behalf in accordance with the preference indicated below: For Against 1. To receive and consider the Audited Financial Statements for the year ended 31st March, 2011 and the Reports of the Auditors’ and of the Directors’ thereon
2. Directors (i) To pass the Ordinary Resolution numbered 2 (i) set out in the Notice of Meeting
(ii) To re-elect Mr G G Hemachandra who retires by rotation in Terms of Articles 24(6) of the Articles of Association of the Company
(iii) To elect Mr R S Egodage who retires in terms of Articles 24(2) of the Articles of Association of the Company
(iv) To elect Mr T Someswaran who retires in terms of Articles 24(2) of the Articles of Association of the Company
(v) To elect Mr K J C Perera who retires in terms of Articles 24(2) of the Articles of Association of the Company.
(vi) To elect Mr M S D Pinto who retires in terms of Articles 24(2) of the Articles of Association of the Company.
3. To authorise the Directors to determine and make donations (PLEASE CONFIRM)
4. To appoint the Auditors Messrs Ernst & Young, Chartered Accountants, to hold office until the conclusion of the next Annual General Meeting and to authorize the Directors to determine their remuneration.
As witness my/our hand this ______day of ______Two Thousand and Eleven.
______Signature of Shareholder
Notes: 1. If you wish your Proxy to speak at the Meeting you should insert the words “to speak and” in the place indicated with an asterisk and initial such insertion. 2. Please indicate with an “x” in the space provided how your Proxy is to vote. If there is in the view of the Proxyholder doubt (by reason of the way in which the instructions contained in the Proxy have been completed) as to the way in which the Proxyholder should vote, the Proxy holder shall vote as he thinks fit. 3. A Proxy holder need not be a member of the Company 4. Instructions as to completion appear on the reverse hereof INSTRUCTIONS AS TO COMPLETION 1. To be valid this Form of Proxy must be deposited at the Registered Office of the Company at No.106, Yatinuwara Veediya, Kandy not less than 48 hours before the time appointed for the holding of the Meeting.
2. The instrument appointing a Proxy shall in the case of an individual be signed by the appointor or by his Attorney and in the case of a Company/Corporation, the Proxy Form must be executed under its Common Seal, which should be affixed and attested in the manner prescribed by its Articles of As- sociation or other constitutional documents.
3. If the Proxy Form is signed by an Attorney, the relevant Power of Attorney or a notarially certified copy thereof, should also accompany the completed Form of Proxy if it has not already been regis- tered with the Company.
4. The full name and address of the Proxyholder and of the Shareholder appointing the Proxyholder should be entered legibly in the Form of Proxy. CORPORATE INFORMATION
COMPANY NAME Commercial Credit PLC
LEGAL STATUS A quoted Public Company with limited liability incorporated in Sri Lanka
COMPANY REGISTRATION NO. PB 269 PQ
Place of Incorporation Kandy, Sri Lanka
REGISTERED OFFICE No.106, Yatinuwara Vidiya, Kandy
Contact Information Tel: 081 2234963-4 Fax: 081 2234390 e mail: [email protected]
Website www.cclk.lk
BOARD OF DIRECTORS Mrs. V W Fernando - Chairperson Mr. R S Egodage - Chief Executive Officer Mr. G G Hemachandra Mr. C Perera Mr. I G S K Gunaratne Mr. M S D Pinto Mr. T Someswaran Mrs. G R Egodage
AUDIT COMMITTEE Mr. T Someswaran - Chairman Mr. I G S K Gunaratne Mr. C Perera
REMUNERATION COMMITTEE Mr. S Gunarathne – Chairman Mr. Cecil Perera Mr. G Hemachandra
INTEGRATED RISK Mr. T. Someswaran Mr. R S Egodage MANAGEMENT COMMITTEE Mr. Andrew Samuel Mr. Janaka Deshapriya Mr. Sebestian Nanayakkara Ms. Vathsala Sathyakeerthi
SECRETARIES & REGISTRARS Jacey & Company No. 9/5, Thambiah Avenue, Colombo 07 Tel: 4335159 - 62
AUDITORS M/s Ernst & Young, Chartered Accountants
LAWYERS Julies & Creasy No. 41, Janadhipathi Mawatha, Colombo 01
BANKERS Commercial Bank of Ceylon PLC Hatton National Bank PLC Sampath Bank PLC National Development Bank PLC Seylan Bank PLC People’s Bank Bank of Ceylon Nations Trust Bank PLC CONCEPT AND DESIGN BY ARUNA WICKRAMARACHCHI TEL: 071 4943864 PRINTED AT DESIGN SYSTEMS