SINHAPUTHRA FINANCE PLC
Soaring ..... to New Heights
ANNUAL REPORT 2013/2014 VISION
To instill a spirit of excellence in all our undertakings
MISSION CONTENTS To be the most secure and stable Finance Company in the sphere of our services
VISION, MISSION & GOALS 1 FINANCIAL REPORTS TEN YEAR SUMMARY 88 FINANCIAL HIGHLIGHTS 2 NOTICE OF MEETING 90 GRAPHICAL REVIEW 3 ANNUAL REPORT OF THE BOARD OF DIRECTORS 33 FORM OF PROXY 91 CHAIRMAN’S REVIEW 4 STATEMENT OF DIRECTORS’ RESPONSIBILITIES 37 CORPORATE INFORMATION GOALS SHARE INFORMATION 8 INTEGRATED RISK MANAGEMENT COMMITTEE REPORT 38 BACK INNER COVER To increase shareholder wealth STATEMENT OF VALUE ADDED 11 REMUNERATION COMMITTEE REPORT 41 PROFILE OF BOARD OF DIRECTORS 12 AUDIT COMMITTEE REPORT 42 To provide the finest financial services CORPORATE SOCIAL RESPONSIBILITY 15 DIRECTORS‘ STATEMENT ON INTERNAL CONTROL OVER To infuse in our employees a spirit of commitment and dedication HUMAN RESOURCES AND PRODUCTIVITY 19 FINANCIAL REPORTING 44 To be responsive to the needs of society CORPORATE GOVERNANCE 22 INDEPENDENT AUDITORS’ REPORT 46 RISK MANAGEMENT 25 STATEMENT OF COMPREHENSIVE INCOME 47 To maintain integrity in all we do
STATEMENT OF FINANCIAL POSITION 48 STATEMENT OF CHANGES IN EQUITY 49 STATEMENT OF CASH FLOWS 50 NOTES TO THE FINANCIAL STATEMENTS 52 SINHAPUTHRA FINANCE PLC Annual Report 2013 / 2014 Annual Report 2013 / 2014 SINHAPUTHRA FINANCE PLC
FINANCIAL HIGHLIGHTS GRAPHICAL REVIEW
2014 2013 CHANGE LOANS AND ADVANCES RS.'000 RS.'000 % GROSS INCOME Rs. Operating Results - Income Statements 5,000,000 Rs.
Income 1,065,687 857,085 24 4,000,000 1,500,000 Net Profit Before Tax 76,782 69,267 11
Income Tax on Profit 7,387 4,858 52 3,000,000 4,476,195
Net Profit After Taxation 84,169 74,125 14 1,000,000 3,915,825
Retained Profit 184,256 130,203 42 2,000,000 3,396,914 1,065,687 2,654,551 500,000 857,085 1,000,000 2,198,500 694,501 647,202 Financial Position 646,643 - - Shareholders’ Funds 968,132 826,139 17 2010 2011 2012 2013 2014 2010 2011 2012 2013 2014 Deposits from Customers 4,511,621 4,011,946 12 Borrowings 504,869 330,647 53 Gross Income Loans and Advances Lending Portfolio 4,476,195 3,915,825 14 Total Interest Earning Assets 5,036,146 4,395,539 15 Total Assets 6,425,200 5,488,350 17 Market Capitalization 830,428 540,817 54 EQUITY DEPOSITS
Ratios Rs. Rs.
Return on Average Assets % 1.41 1.43 -1 1,000,000 5,000,000 Return on Average Shareholders’ Funds % 9.38 9.27 1 900,000 4,500,000 Market Value at the Year End - Ordinary 131.9 85.90 54 800,000 4,000,000 968,132
700,000 3,500,000 Information Per Ordinary Share 4,511,621 826,139 600,000 3,000,000 4,011,946 Earnings Per Share (Rs.) 13.37 11.77 14 773,826
Net Assets Per Share (Rs.) 153.77 131.22 17 500,000 2,500,000 3,591,624
Price Earning (Times) - Ordinary Shares 9.87 7.30 35 400,000 2,000,000 2,955,261 300,000
482,060 1,500,000 2,435,524 Statutory Ratios (%) 443,774 200,000 1,000,000 Core Capital Ratio 5% 9.43 9.32 1 100,000 500,000 Total Risk Weighted Capital Ratio 10% 11.45 10.11 13 - - Liquid Assets 11.01 11.44 -4 2010 2011 2012 2013 2014 2010 2011 2012 2013 2014
Equity Deposits
2 3 SINHAPUTHRA FINANCE PLC Annual Report 2013 / 2014 Annual Report 2013 / 2014 SINHAPUTHRA FINANCE PLC
CHAIRMAN’S REVIEW ... CHAIRMAN’S REVIEW
Sinhaputhra Finance PLC ensured a profit As at 31st December 2013 there were fifty FOCUS ON IMMOVABLE ASSET-BACKED after tax of Rs. 84.1 million, and earnings eight (58) Licensed Finance Companies MORTGAGES AND TIGHTER CRITERIA of Rs. 13.37 per share against Rs. 11.77 the controlling Rs. 717 billion in assets. FOR CREDIT previous year. This is evidence of a significant 14% increase in performance. Fourteen (14) companies had over Rs. 10 To enhance collateral, the Company has billion in assets as at 30th September 2013 taken this step; a speedy process through The net income from operations increased in the large category, placing Sinhaputhra in in-house legal services which minimize the from Rs. 252 million to Rs. 311 million. This is the mid-sized group with a more conservative time for loan disbursement whilst ensuring due to the net difference of the decrease in credit growth policy. reliable collateral. interest cost vs the maintaining of earnings on interest on our lending. The provisions I wish to detail below some of our TREASURY MANAGEMENT increased only marginally from Rs. 56 million achievements and the introduction of new in the FYE 2013 to Rs. 82 million in the FYE services during the year under review. The Company has given special focus on 2014 due to a vastly improved debt portfolio effective monitoring of this area to ensure and having written-off past dues. CORPORATE GOVERNANCE maximum returns, optimum liquidity, mitigating risks and reducing the tax burden. J.R.J. Nanayakkara The Company attracted fresh public deposits The Company has now instated all in excess of Rs. 1.4 billion, a net growth of the regulatory Corporate Governance HUMAN RESOURCES Rs. 500 million with an average of 42 million requirements, and has benefited immensely per month was recorded during the year from the systems in place. This subject is We are geared up with a systematic under review displaying the goodwill it has discussed in length under the same heading. orientation program using multimedia acquired over the last thirty four of financial technology in a novel manner to speedily WE STOOD AS AT The Introduction of the International Financial Reporting service and the confidence of the Central FOCUS ON RECOVERIES absorb our new recruits to the Sinhaputhra Standards (IFRS) has been a key change in the financial industry. Bank Deposit Insurance Scheme offered to culture. We consider them our vital internal The accounts which have been prepared in accordance with the the sector. Our Fixed Deposit base stood at The introduction of the collection and customers and attempt to ignite keen 31ST MARCH 2014 Sri Lanka Accounting Financial Reporting Standards (SLFRS), Rs. 4.3 billion and bank borrowings stood at recoveries division last year provided the interest in them about our products as makes the Financial Position reflect a more current and futuristic Rs. 505 million. Your company’s fund raising desired attention on recovery of monies lent, an initiating process. Due to increased A COMPANY COMMANDING picture. possibilities are still wide open with a Rs. 1.1 which was previously the sole responsibility outreach, our staff strength has grown to billion unused buffer of debtors that can be of the lending division. This was further 203. Yet, our regulators have clearly indicated that they will be guided securitized to further our credit growth. strengthened by a collections call centre RS. 6.4 BILLION by the previous accounting standards for regulatory purposes. with software for record keeping and follow- EDUCATION AND TRAINING The 2014 budget has relaxed the exchange control regulations We stood as at 31st March 2014, a company up. However, the lending division was also IN ASSETS - A GROWTH OF for foreign borrowing amidst an escalating interest rate climate, commanding a Rs. 6.4 billion asset base - given the responsibility for the early stages As an ever-growing Company, we believe opening the international capital market to invest in our sector, a growth of 17% from last year. of the recovery of monies lent. Our in-house in the welfare of our staff. Hence, we have 17% FROM and your company envisages less pressure in interest rate Lawyer and arbitration processes are now an enrolled our key staff and granted incentives escalations and fund mobilization. In fact, a sudden surge in the We enhanced our total Equity to Rs. 968 integral step in assisting with recoveries. This for others to become diploma holders of net growth of Deposits has been experienced despite a fall in million and made a significant growth to has also resulted in further improvements of the Institute of Credit Management and LAST YEAR… interest rates at the time of sending this report to print. Hence, our net asset value from Rs. 131 per share to bad debt recoveries. joined hands with the Centre for Banking your company hopes this will materialize in lower costs of funds Rs. 154 per share. in the Financial Year 2014.
4 5 SINHAPUTHRA FINANCE PLC Annual Report 2013 / 2014 Annual Report 2013 / 2014 SINHAPUTHRA FINANCE PLC
... CHAIRMAN’S REVIEW ... CHAIRMAN’S REVIEW
Studies to deliver lectures from their current been given out on lease and on revenue TRAVEL DIVISION for our savings account holders to access have transferred the requisite sum of 20% programme calendar, to enhance the share basis to the British Council which a wider range of ATMs in Sri Lanka and of net earnings to our Statutory Reserve productivity of our staff and have arranged conducts London “O” Level and “A” Level Your company also made available a fleet worldwide, and experience a wider usage Fund and we are considering the retention to defray such costs by including other Exams including their seminars and to a of "Hybrid" vehicles for hire to reap the of this unique service. Our SMS withdrawal/ of all profits to speedily achieve our Rs. 500 Licensed Finance Company's staff in the Business Process Outsourcing company. benefits of both a local and foreign tourist deposit payment and fund transfer system million goal. Central province and regions further from The conference halls have been used by a clientele. This helped to position ourselves “SMS Cash”, was found to be more popular Colombo. The programme is conducted in wide range of institutions and associations at an entry point of a lucrative market with in rural markets than in the city. I would like to take this opportunity to a “not-for-profit” manner as a service not for various functions. We hope to maintain high growth potentials. thank our valued depositors, regulators, only for our staff but also the industry as a these public spaces, such as the twin Sinhaputhra which identified social media consultants, auditors, software providers, whole. In addition we provide facilities to the auditoriums and a roof top terrace now We have also embarked on a new venture as a viable platform has today one of bankers, our shareholders and our staff for Finance Houses Association to carry out their under cover, complimented with a car/ converting buses that cannot be easily sold the largest “Likes” base with 37,838 fans the important roles they play within the seminars in our state-of-the-art conference goods lift to make the facility readily useable from our yards into motorable caravans as on Facebook in Sri Lanka. The website Company, their unrelenting service and facilities at the Kandy head office. envisaging wider public patronage resulting an experiment. www.sinhaputhra.lk surpassed 40,000 in their spirit of optimism that places us in the in greater visibility of our services. visits with the convenience of accessing their forefront, continuing to make us a stronger CORPORATE SOCIAL RESPONSIBILITY FOREIGN CURRENCY EXCHANGE savings accounts, downloading application company which is responsible to all its IMPORTS, USED VEHICLES AND LAND material and viewing promotional material stakeholders. The Company was determined to make SALES DIVISION Sinhaputhra has become the Second as useful applications of our dynamic a difference. Therefore, we partnered Finance Company in Sri Lanka to cater website. As the first Sri Lankan Financial service organizations which have a track Sinhaputhra became a pioneer of Hybrid to the request of the Central Bank of Sri Institution to advertise on Facebook which record of choosing worthy projects and vehicle imports to Sri Lanka from the UK Lanka to avail itself as a foreign currency has 1,320,000 users (57% growth from last executing them to the optimum benefit of and Japan boldly taking on negative market exchange counter to benefit foreign visitors year’s target audience) in Sri Lanka, we have the community; giving prominence to the sentiments. Your company is now identified and local travelers. The competitive rates in once again used innovative tools to promote J.R.J. Nanayakkara armed forces was the chosen method. Blood with expertise of these types of vehicles. comparison to banks have attracted a new our products. Chairman donation programs, eye donation programs, Therefore your company commenced clientele to the Company. prosthetic limbs for the disabled through operating leases on these vehicles with Your Company is now open 365 days of the 25th June 2014 parking fee levies, books and clothes confidence with a "buy-back and replace for EXPANDING OUR OUTREACH year at the head office in Kandy until 9 p.m. distribution to re-settled families in the new options after three years" policy. The However, restricted hours for limited services North and East were some of our hallmark Sinhaputhra yards where customer vehicles We concentrated on focusing on our brand including foreign currency exchange, projects. are repossessed for negotiated settlement and strengthening our branch efficiency and receipting, savings withdrawals etc. are or re-sale were re-organized for effective internal controls prior to further expansion. carried out on Sundays and on mercantile MAXIMIZING BENEFITS FROM THE NEW management and to ensure achieving holidays. SINHAPUTHRA COMPLEX regular sales targets. A convenient option PHONE BANKING, SMS PAYMENTS AND for people intending to sell their lands was ATM NETWORKS The Core Capital base of the Company The new complex which has won acclaim also introduced. A marketing package worth reached Rs. 539 million, a sum that far from several town planning authorities more than Rs. 20,000 is provided at Rs. 1,000 Phone Banking in Sinhala, Tamil and English exceeds the proposed statutory minimum for its heritage architecture has given you once the multitude of advertising costs are was introduced to customers to access requirement of Rs. 300 million from 01st an asset which was revalued to capture its summed, attracting potentially high net- vital information through password security January 2013. We embrace the ideology market value as required by SLFRS. Parts worth individuals to the Company. 24/7. By combining both SMS and ATM that the core strength of a company is based of the 33,000 square foot complex have technologies we have provided an option on its capital adequacy on its risk assets and
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SHARE INFORMATION ... SHARE INFORMATION
GENERAL 20 LARGEST PREFERENCE SHAREHOLDERS AS AT 31ST MARCH 2014 Stated Capital Rs. 80,379,055 6,295,893 The Number of Shares Representing the Stated Capital are - Ordinary NAME NO. OF SHARES % NAME NO. OF SHARES % Preference 670,765 STOCK EXCHANGE LISTING 1. Mr. K.R.B. Wijeyeratne 50,062 7.46 13. Ms. V.R. Dandeniya 12,000 1.79 Sinhaputhra Finance PLC, is a quoted public company and the issued Ordinary Shares of which are listed in the Colombo Stock Exchange of Sri Lanka 2. Dr. C. Wijeyeratne 21,230 3.17 14. Mrs. N.N. Fernando 11,356 1.69 with effect from 2nd June 2010. Shares held by the public was 40.46% as at 31st March 2014. 3. Mr. A.M.G. Weerakoon 20,265 3.02 15. Mr. K.G.D.S.J. De Alwis 11,297 1.68 4. Mr. T.K. Hemachandra 20,248 3.02 16. Mr. P. Aluwihare 10,661 1.59 DISTRIBUTION OF SHAREHOLDING 5. Mr. J.A.M.U. Jayakody 20,000 2.98 17. Mrs. S.S. Amanulla 10,386 1.55 There were 508 Ordinary Shareholders and 183 Preference Shareholders as at 31st March 2014. 6. Central Finance Co. PLC 20,000 2.98 18. Mrs. A.K.M. Udurawana 10,263 1.53 7. Mrs. C.M. Balalle 19,571 2.92 19. Mr. A.E. Nugawela 10,000 1.49 8. Mr. G.G. Hemachandra 18,001 2.68 20. Mr. R. Manivannan 10,000 1.49 20 LARGEST ORDINARY SHAREHOLDERS AS AT 31ST MARCH 2014 9. Mr. S. Waas 14,268 2.13 326,978 48.75 NAME NO. OF SHARES % NAME NO. OF SHARES % 10. Mrs. S.A. Gunawardene 13,067 1.95 Others 343,787 51.25 11. Mrs. I.M.C. Abeyratne 12,303 1.83 Total 670,765 100.00 1. Mr. K.R.B. Wijeyeratne 3,189,287 50.66 13. Mr. M.C.B. Talwatte 29,124 0.46 12. Mrs. S. Weerakoon 12,000 1.79 2. Mr. D.G. Wijemanne 1,015,705 16.13 14. Mr. R.P. Weerasooriya 28,743 0.46 3. Mutiara Holdings (Private) Ltd. 558,000 8.86 15. Mr. D.G.P. Abeygunawardane (Deceased) 28,282 0.45 4. Mr. L. Karunatilake 112,331 1.78 16. Mr. L.P.B. Talwatte 26,569 0.42 PREFERENCE SHARES ANALYSIS REPORT OF PREFERENCE SHAREHOLDERS 5. Mrs. V.W. Fernando 101,300 1.61 17. Mr. P.C.B. Talwatte 26,569 0.42 AS AT 31ST MARCH 2014 AS AT 31ST MARCH 2014 6. Mr. T.K. Hemachandra 67,492 1.07 18. Mrs. L.D.K. Mediwake 26,569 0.42 NO. OF % OF TOTAL 7. Mrs. C.M. Balalle 65,237 1.04 19. Mrs. G.K. Tennakoon 25,000 0.40 NO. OF TOTAL CATEGORY NO. OF % OF TOTAL TOTAL SHAREHOLDERS SHAREHOLDERS HOLDING 8. Mr. P.W. Mediwake 58,400 0.93 20. Dr. H.P.M. Gunasena 21,225 0.34 SHARES HELD HOLDING % SHAREHOLDERS SHAREHOLDERS HOLDING HOLDING % 57,764 0.92 5,564,845 88.39 9. Mr. D.B. Tennakoon 1 - 1,000 81 44.26 32,239 4.81 Individual 177 96.72 630,765 94.04 56,634 0.90 731,048 11.61 10. Mrs. L.Y.K.N. Perera Others 1,001 - 10,000 84 45.90 331,548 49.43 Institutional 6 3.28 40,000 5.96 36,000 0.57 6,295,893 100.00 11. First Capital Markets Ltd. / Total 10,001 - 100,000 18 9.84 306,978 45.76 Total 183 100.00 670,765 100.00 Mr. T.R. Moonemalle 100,001 - 1,000,000 - - - - Resident 183 100.00 670,765 100.00 34,614 0.55 12. Mr. T.K. Bandaranayake Over 1,000,000 - - - - Non-Resident - - - - Total 183 100.00 670,765 100.00 Total 183 100.00 670,765 100.00 ORDINARY SHARES ANALYSIS REPORT OF ORDINARY SHAREHOLDERS AS AT 31ST MARCH 2014 AS AT 31ST MARCH 2014 MARKET STATISTICS OF THE ORDINARY SHARES NO. OF NO. OF % OF TOTAL TOTAL CATEGORY NO. OF % OF TOTAL TOTAL SHARES HELD SHAREHOLDERS SHAREHOLDERS HOLDING HOLDING % SHAREHOLDERS SHAREHOLDERS HOLDING HOLDING % AS AT 31ST MARCH 2014 2013
1 - 1,000 379 74.60 70,231 1.12 Individual 489 96.26 5,636,822 89.53 Number of Ordinary Shares 6,295,893 6,295,893 1,001 - 10,000 87 17.12 351,677 5.58 Institutional 19 3.74 659,071 10.47 Earning Per Share (Rs.) 13.37 11.77 10,001 - 100,000 37 7.29 897,362 14.25 Total 508 100.00 6,295,893 100.00 Net Asset Per Share (Rs.) 153.77 131.22 100,001 - 1,000,000 3 0.60 771,631 12.26 Resident 501 98.62 6,177,811 98.13 Dividend Per Share (Rs.) - - Over 1,000,000 2 0.39 4,204,992 66.79 Non-Resident 07 1.38 118,082 1.87 Highest Share Price (Rs.) 155.00 96.50 Total 508 100.00 6,295,893 100.00 Total 508 100.00 6,295,893 100.00 Lowest Share Price (Rs.) 67.00 67.60 Closing Share Price (Rs.) 131.90 73.50
Preference Shares Held by Public, amounts to 49.32%.
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... SHARE INFORMATION STATEMENT OF VALUE ADDED
HISTORY OF DIVIDEND, RIGHTS AND BONUS ISSUES FOR THE YEAR ENDED 31ST MARCH 2014 % 2013 % Rs. Rs.
YEAR ENDED ISSUE BASIS SHARES NO. OF STATED OF DIVIDEND DIVIDEND Interest Income 989,758,829 797,799,424 PAID (RS.) 31ST MARCH ISSUED SHARES CAPITAL (RS.) % Fee Based Income 38,471,014 24,600,213 Non-Financial Income 37,456,931 34,684,946 1979 -1986 - - - 62,680 626,800 - - 1,065,686,774 857,084,583 1987 Bonus 03:02 94,020 156,700 - - - Depositors and Lenders as Interest (664,652,985) (542,124,676) Rights 01:1 153,300 310,000 3,100,000 5 155,000 1988 - - - 310,000 3,100,000 10 310,000 Cost of Sales and Services (71,564,468) (54,731,686) 1989 - - - 310,000 3,100,000 17.5 620,000 Impairment (Charges)/Reversal for Loans and Other Losses (82,085,014) (56,160,573) 1990 Rights 01:10 31,000 341,000 3,410,000 - - Value Added 247,384,307 204,067,648 Bonus 06:11 186,000 527,000 5,270,000 15 395,250 1991 - - - 527,000 5,270,000 8.5 447,950 DISTRIBUTION OF VALUE ADDED 1992 - - - 527,000 5,270,000 15 790,500 Value Allocated to the Employees 790,500 1993 - - - 527,000 5,270,000 15 Remuneration and Other Benefits 123,290,904 51 101,589,722 50 1994 Bonus 527,000 1,054,000 10,540,000 10 1,054,000 01:01 1995 - - - 1,054,000 10,540,000 15 1,581,000 To Providers of Capital 1996 - - - 1,054,000 10,540,000 20 2,108,000 Shareholders as Dividends - - - - 1996/97 Bonus 01:01 1,054,000 2,108,000 21,080,000 17.5 3,689,000 1998 Bonus 01:06 351,333 2,459,333 24,593,330 20 4,918,666 1999 - - - 2,459,333 24,593,330 10 2,459,333 To Government 2000 - - - 2,459,333 24,593,330 12.5 3,074,166 Debit Tax - - - - 2001 - - - 2,459,333 24,593,330 10 2,459,333 VAT on Financial Services 13,705,627 6 11,364,958 6 2002 - - - 2,459,333 24,593,330 5 1,299,666 Income Tax 26,498,362 11 16,242,317 8 2003 - - - 2,459,333 24,593,330 15 3,688,999 - 2003 Bonus 01:04 614,833 3,074,164 30,714,660 - To Expansion and Growth 2003 Rights 180,834 3,255,000 32,550,000 - - 01:17 Retained Profit 84,169,121 35 74,125,352 37 2004 - - - 3,255,000 - 20 6,510,000 Depreciation 27,938,401 12 21,846,099 11 2004 Rights 01:25 130,200 3,385,200 33,852,000 - - Deferred Taxation (28,218,108) -14 (23,894,188) -12 2004 Bonus 01:05 677,040 4,062,240 40,622,400 - - 2005 - - - 4,062,240 - 25 9,478,560 Total 83,889,414 100 72,077,263 100 2006 Rights 02:15 541,632 4,603,872 46,038,720 - - 2006 Bonus 01:07 657,696 5,261,568 52,615,680 25 12,825,072 2007 Rights 01:13 404,736 5,666,304 56,663,040 10 5,981,098 - - 2007 Bonus 01:09 629,589 6,295,893 62,958,930 2013/2014 2012/2013 2008 Rights 03:10 670,765 6,966,658 80,379,055 Rs. 0.50 3,497,718 (Non-voting Rs. 0.60 447,177 (preference) Preference (Re-distribution) Shares)
2009 - - - 6,966,658 80,379,055 Rs. 0.50 2,819,017 32% Mr. K.R.B. Wijeyeratne 36% has claimed only 51% 50% Rs. 0.40 per Share Rs. 0.60 2,819,017 (preference) 2010 - - - 6,966,658 80,379,055 Rs. 0.25 1,573,973 17% Rs. 0.35 234,768 (preference) 14% 2011 - - - 6,966,658 80,379,055 Rs. 0.75 4,721,920 Rs. 0.85 570,150 (preference)
Value Allocated to the Employees 2012 - 6,966,658 80,379,055 Rs. 2.00 12,591,786 - - To Government (preference) Rs. 2.10 1,408,606 To Expansion and Growth
10 11 SINHAPUTHRA FINANCE PLC Annual Report 2013 / 2014 Annual Report 2013 / 2014 SINHAPUTHRA FINANCE PLC
BOARD OF DIRECTORS ... BOARD OF DIRECTORS
MR. J.R.J. NANAYAKKARA MR. K.R.B. WIJEYERATNE Former Director of Sinhaputhra CHAIRMAN / INDEPENDENT MANAGING DIRECTOR / Computers, Traders and Securities. He NON-EXECUTIVE DIRECTOR EXECUTIVE DIRECTOR counts over 25 years of Audit, Banking and Finance experience with Ernst &
Appointed to the Board on 1st April 2014. Appointed to the Board on 28th July 1995. Whinney, Kandy, Sri Lanka, Credit Holds a Bachelor of Arts Degree from the He has over 26 years experience in the Lyonnais, NYC, USA and Sinhaputhra University of Peradeniya. A Member of the Finance Industry. Finance PLC, Sri Lanka. Royal Institute of Public Administration, UK. Principal, Stafford Sri Lankan School in Doha. Holds a BA (Economics & Math Degree from Oxford University, UK J.R.J. Nanayakkara Chairman / Independent Non-Executive Director K.G.D.S.J. De Alwis - Executive Director Counts more than 25 years as an and Kenyon College, USA. International Civil Servant, United Nations. MR. K.G.D.S.J. DE ALWIS Former Head of Administration, South He has been serving as an Executive EXECUTIVE DIRECTOR Centre, Switzerland. Chief, Documents Committee Member of the Finance and Publications Section, Department of Houses Association of Sri Lanka, the Appointed to the Board on 1st August General Assembly and Security Council, representative body of licensed 2009. Holds 26 years experience in the field United Nations, Geneva. Former Banker, Finance Companies of Sri Lanka of Finance. He is a Member of Institute of Bank of Ceylon and Teacher at St. Thomas' since 1997. Business Management. Prep. School, Bandarawela & Trinity College, Kandy. Member and former Director of the Leasing Association of Sri Lanka, a body representing Banks and Financial Institutions engaged in MR. E.A.D.P. EKANAYAKE K.R.B. Wijeyeratne - Managing Director / Executive Director the activity of Finance and INDEPENDENT NON-EXECUTIVE Operational Leasing in Sri Lanka. DIRECTOR
Board Member, GVR Lanka (Pvt) Ltd., Appointed to the Board on 29th December Developers of Dynasty Residence. 2011. A reputed Entrepreneur, Chief Executive Officer of Huluganga Trading Former Chairman of Sinhaputhra Company from 1987 to 1999 and Ekra Finance PLC. Constructions Company from 1983 to 2001, Committee Member of Cancer Treatment Former Director Kandy Hotels Centre - Kandy and a noted Philanthropist. Corporation (1938) the owning Counts nearly 36 years of experience as an company of Queens Hotel and Entrepreneur. Suisse Hotel, Kandy.
E.A.D.P. Ekanayake - Independent Non-Executive Director Dr. A.R. Karunaratna - Independent Non-Executive Director
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... BOARD OF DIRECTORS CORPORATE SOCIAL RESPONSIBILITY
DR. A.R. KARUNARATNA SENIOR CONSULTANTS TO THE BOARD INDEPENDENT NON-EXECUTIVE AN INTRODUCTION DIRECTOR MR. K.H.K. WIJAYADASA Corporate Social Responsibility (CSR) being the process to achieve sustainable development in societies, we too have made it our Appointed to the Board on 19th January SENIOR CONSULTANT - FINANCE process with which we embrace responsibility for the Company's actions and encourage a positive impact through its activities on 2012. Holds a PhD from the University of the environment, consumers, employees, communities, stakeholders and all other members of the public sphere who may also be Sydney N.S.W., Australia, MCom from Fellow Member of the Institute of Chartered considered as stakeholders. Bond University, Gold Coast, Qld. Australia, Accountants of Sri Lanka. Former Chairman MBA from the University of Adelaide, of Sinhaputhra Finance PLC. He has over This includes monetary donations and aid given to local and non-local non-profit organizations and communities, including S.A., Australia, BSc. (Hons), from Flinders 34 years management experience in the field of donations in areas such as the arts, education, housing, health, social welfare, and the environment, among others, but excluding University, S.A, Australia. Finance in Sri Lanka and overseas. political contributions and commercial sponsorship of events.
Currently an Associate Professor (Adjunct), School of Business, University of Adelaide, S.A. Australia, CEO of Breakthrough MR. A.M.G. WEERAKOON
Business Intelligence, Colombo and Part- SENIOR CONSULTANT - LEGAL BLOOD DONATION Time Faculty at the Post Graduate Institute of Management, Colombo, Sri Lanka. Attorney-at-Law & Notary Public. One of former "BLOOD CANNOT BE MADE Directors of Sinhaputhra Finance PLC. Member OR HARVESTED, THERE IS NO He has publications in international of Legal Panels of leading banks. He has over SUBSTITUTE" journals, presented papers in international 31 years experience in the legal field.
conferences and 20 years teaching Once again for the 7th consecutive year, experience at Undergraduate and Post Sinhaputhra successfully completed a Blood Graduate levels and extensive consulting Donation Campaign for its 35th Birthday on experience. the 11th of March 2014. This noble move was held under the supervision of the Blood Bank of the General Hospital (Teaching), Kandy with the participation of 110 donors, making a grand donation of 533 pints of blood by Sinhaputhra for the past 7 years.
The Police Training School in Kundasale joined hands with us and Mr. W. Weerasekara (OIC) Police Training Centre, Kundasale was the Chief Guest.
14 15 SINHAPUTHRA FINANCE PLC Annual Report 2013 / 2014 Annual Report 2013 / 2014 SINHAPUTHRA FINANCE PLC
... CORPORATE SOCIAL RESPONSIBILITY ... CORPORATE SOCIAL RESPONSIBILITY
EYE DONATION VESAK DANSALA
We extended our “lending hand” in a great Sinhaputhra celebrated Vesak this year too humane gesture by organizing an Eye Donation preserving traditions and customs that added Campaign for the 4th time with the approval of a unique glow to its character. A large Vesak the Sri Lanka Eye Donation Society. Dansala was organized for the benefit of the thousands that came to view the Vesak The event was made possible by the remarkable illuminations in the city of Kandy. While providing turn up of more than 278 participants and 125 kgs of "Kadala" and 7500 cups of coffee, the whole hearted dedication of the staff of the Company also dressed its headquarters Sinhaputhra who worked from behind the scene. with illuminations and Buddhist flags exuding an atmosphere that was decidedly religion- Sinhaputhra was recognised by the Sri Lanka Eye social. Catering to thousands required the hard Donation Society at their annual “Eye Donation work and dedication of the entire staff, and even Day” celebration. The Company was one among sightseers in vehicles were not overlooked. six companies/individuals recognised for their continued support for the cause of giving sight.
DONATING A DEPARTURE DISPLAY FOR KANDY RAILWAY STATION
DISABLED PAST EMPLOYEE On a CSR bid Sinhaputhra Finance PLC provided a large LED screen to the Kandy Railway Station. We donated a laptop from the proceeds of our The display is a trilingual display of departure Annual Staff Christmas party to a past employee times in a 24 hour format. It carries details in a who is disabled due to an accident. chronological format for the day, and is looped with mention of non-daily trains with their days We also contribute monetarily to this employee of travel. Sinhaputhra considered it a great and another who is also disabled due to an advantage to be of service, to a Government accident, every month. Sector that has made tremendous progress in its service to both Sri Lankans and Foreign visitors of all walks of life.
16 17 SINHAPUTHRA FINANCE PLC Annual Report 2013 / 2014 Annual Report 2013 / 2014 SINHAPUTHRA FINANCE PLC
... CORPORATE SOCIAL RESPONSIBILITY HUMAN RESOURCES & PRODUCTIVITY
BEAUTIFYING THE CITY OF KANDY Our most valued asset is our 'Human joins in for an expedition to enhance constant attention to staff welfare and Resource' and we are blessed with an togetherness among fellow employees, entertainment. The regular CSR activities, Sinhaputhra Finance PLC joined forces with efficient, talented and committed team both engaging themselves in games and banter death donation benefits, Medical and the Kandy Municipal Council this time by at our Head Office and our 08 Branches and and enjoying themselves away from work. Insurance benefits, Company trips, Annual providing paper bags made of re-cycled paper 02 Collection Centers. Our staff cadre at all The trip is fully sponsored by the Company Dinner Dances etc., unite the spirit of the for a thousand spectators of the Annual Kandy levels are dedicated and devoted to the as a measure of appreciation for the service employees and reassures the team spirit. Perahera to dispose their garbage. duties entrusted to them. of the staff. Our industrial relations have been optimized The new recruits of Sinhaputhra are exposed The Annual Get-together of the Company by our representation in the FHA (Finance to an In-house orientation program to too is an experience thoroughly enjoyed Houses Association) at which forum the introduce the Company to the employee by the staff which an event is organized to Company has been a Council member for and vise versa. This enables the employee establish comradeship among the staff out over 21 years, and at the LASL (Leasing to learn about the vision, mission, goals, of their daily role of duty. The event falls Association Sri Lanka). These bodies culture & traditions of the Company and be towards the end of the annual calendar in discuss common issues that benefit the aware of their tasks ahead. order to round up the year with a light edge industry as a whole. The Company also for the coming year. The get-together is affords its conference facilities for CBSL The title “Employee of the Month” is given made colorful with music, dancing, singing, and FHA seminars that help the standard of to the employee who brings in the most games by the staff and a dinner sponsored knowledge to the industry through seminars.
FOSTERING SPORTS AND TALENT AMONG number of deposits per month. This scheme by the Company as a gesture of goodwill. The Company also accommodates the STUDENTS is implemented on a monthly basis to regulators during their scheduled on-site encourage performance among the staff The Company now has a staff of 203 at examinations and furnishes them with
We sponsored the Pilimathalawa Central whilst recognizing them for their dedication its headquarters in Kandy and branches timely information as required and regularly College Junior Boxing Team for the All Island and hard work. in Colombo, Trincomalee, Kurunegala, attends meetings for which the company is Boxing Tournament, and they were runners-up. Anuradhapura, Bandarawela, Dambulla, invited for. A free eye testing camp was organized Kundasale and Katugastota and two by Sinhaputhra along with Eye Solutions, collection centers in Matale and Colombo for the members of staff and Mahiyanganaya. Personnel are distributed their families on 15th of August 2013. The in 15 departments and are each expected to staff and their families had the privilege of not only take its sections forward but also testing their sight and some were found with co-operate with other departments. In this, defective vision and recommended to wear the Company maintains open-door policy spectacles. Our Company paid the cost where all employees have access to each of the spectacles and made interest free other's expertise and knowledge. DONATION BOXES OF THE CENTER FOR HANDICAPPED (CFH) AT OUR BRANCHES deductions from the staff member’s monthly emoluments. The company has no material concerns Eight of our Branches have collection boxes of the Center for Handicapped and we hope that the collection at the end of each year will with regard to employee issues either by facilitate donations of artificial limbs to recipients in localities of the said eight branches. Another HR event most popular and way of litigation against them or employee looked forward to by the staff is the - management relationships due to the Company’s Annual Trip. The entire staff vigilant attention of our legal division and
18 19 SINHAPUTHRA FINANCE PLC Annual Report 2013 / 2014 Annual Report 2013 / 2014 SINHAPUTHRA FINANCE PLC
... HUMAN RESOURCES & PRODUCTIVITY ... HUMAN RESOURCES & PRODUCTIVITY
STAFF STRENGTH STAFF STRENGTH SERVICE ANALYSIS OF THE STAFF
YEARS AS AT MARCH 31 2014 2013 1% 6% Executive Directors 16% Snr. AGMs / AGMs & Consultants 10% SERVICE GROUP ABOVE 20 16-20 11-15 6-10 5 & BELOW TOTAL Managers / Asst. Managers
Executive Directors 2 2 4% Snr. Executives 6% Snr. AGMs / AGMs & Consultants 12 13 Executives 9% Jnr. Executives Executive Directors 1 1 - - - 2 Managers / Asst. Managers 21 23 Officers 3% Snr. AGMs /AGMs & Consultants 6 1 - 2 3 12 Snr. Executives 7 8 Assistants Office Assistants / Drivers 34% 11% Executives 18 15 & Security Officers Managers / Asst. Managers 3 1 4 - 13 21 Jnr. Executives 7 7 Trainee Assistants Snr. Executives 1 1 1 3 1 7 Officers 23 21 Executives 3 1 3 2 9 18 Assistants 69 61 AGE ANALYSIS OF THE STAFF Office Assistants / Drivers & Security Officers 12 11 Jnr. Executives - 1 2 4 - 7 Trainee Assistants 32 29 1% 2% 7% Officers 1 - - 4 18 23 Total 203 190 Assistants 2 - - 1 66 69 Above - 60 14% 51 - 60 Office Assistants / Drivers & Security Officers 1 - - - 11 12 52% 41 - 50 31 - 40 Trainee Assistants - - - - 32 32 21 - 30 20 & below 2014 18 6 10 16 153 203
24% 2013 14 4 11 15 146 190 AGE ANALYSIS OF THE STAFF
YEARS GENDER AGE GROUP ABOVE 60 51-60 41-50 31-40 21-30 20 & BELOW TOTAL 2014 MARCH
Executive Directors - 1 1 - - - 2 Male - 114 Female - 89 Snr. AGMs / AGMs & Consultants 3 1 7 - 1 - 12 Managers / Asst.Managers 1 2 5 13 - - 21 - - 1 5 1 - 7 Snr. Executives SERVICE ANALYSIS OF THE STAFF GENDER Executives - 1 7 7 3 - 18 Jnr. Executives - - - 4 3 - 7 9% Officers - 2 1 12 8 - 23 3% 5% Above 20 Assistants - 2 3 5 59 - 69 8% 16 - 20 Office Assistants / Drivers & Security Officers 1 5 3 2 1 - 12 11 - 15 44% Male Trainee Assistants - - - - 30 2 32 56% 06 - 10 Female 2014 5 14 28 48 106 2 203 5 & below 2013 7 12 27 49 94 1 190 75%
20 21 SINHAPUTHRA FINANCE PLC Annual Report 2013 / 2014 Annual Report 2013 / 2014 SINHAPUTHRA FINANCE PLC
CORPORATE GOVERNANCE ... CORPORATE GOVERNANCE
The stakeholders of a company expect an Inland Revenue Act No. 10 of 2006 at regular Board meetings. Furthermore, To ensure that an efficient and timely management information system is available for Following the best practices of Good acceptable standard of corporate behavior video conferencing is used to ensure 100% effective decision making within the Company. Corporate Governance the two positions of from the Company. It is the firm belief of Finance Business Act No. 42 of 2011 participation whenever possible. the Chairman and the Managing Director the Directors that the implementation of To ensure that Board Committees are functioning and reporting to the main Board of are held by separate persons thus enabling Good Corporate Governance practices will Prevention of Money Laundering Act THE BOARD RESPONSIBILITIES ARE: Directors. balance of power, better accountability ensure creation of shareholder wealth and No. 5 of 2006 which enhances the independence of the the long-term stability of the institution. The To drive the business of the BOARD MEETINGS Board. Company maintains the highest standards Financial Transactions Reporting Act Company towards a satisfactory of Corporate Governance Practices and No. 6 of 2006 financial performance that will ensure a The results of the Company are regularly evaluated and monitored against the budgets at THE CHAIRMAN is committed to ensure the prevalence of long-term sustainable value and Board Meetings at which a standard agenda is discussed together with any other matters that such practices. The Board of Directors lays All subsequent Amendments to the growth. require the attention of the Board of Directors. The Board meets once a month and wherever The Chairman of the Company is Mr. J.R.J. down the Policies of Good Governance above Acts necessary Special Meetings of the Board are held. Nanayakkara. Holds a Bachelor of Arts and expends its energy in safeguarding the For the formulation of policies, the Degree from the University of Peradeniya. interests of the Company. The maintenance Listing Rules of the Colombo Stock setting up of strategies clearly During the year ended 31st March 2014, 12 meetings of the Board of Directors were held and A Member of the Royal Institute of Public of accountability and transparency is a Exchange defined management goals that the attendance is set out below: Administration, UK. Principal, Stafford Sri priority in the agenda of the Board. The uphold the Company’s Vision, Lankan School in Doha. Directors provide for the promotion Sri Lanka Accounting Standards of Mission, Values and Objectives.
of business practices that at all times the Institute of Chartered NUMBER OF MEETINGS THE MANAGING DIRECTOR safeguards the interest of the Company Accountants of Sri Lanka For the identification of major NAME OF DIRECTOR DIRECTORSHIP STATUS MEETINGS HELD ATTENDED whilst maintaining the dignity and integrity business opportunities and risks and IN F/Y 2014 IN F/Y 2014 Mr. K.R.B. Wijeyeratne has been the of employees in addition to the building of Other Rules of Compliance Issued by providing of effective controls as well Managing Director of the Company since N.N. Ratnayake * Chairman 12 8 confidence of its stakeholders. the CBSL as the employment of a timely 2009. (Independent Non-Executive Director) reporting mechanism. Chairman J.R.J. Nanayakkara ** 12 - Further to what is reported, our reference This statement describes the application of (Independent Non-Executive Director) COMMITTEES OF THE BOARD to key terminology is based on the the Corporate Governance practiced within For approval of large facilities K.R.B. Wijeyeratne Managing Director 12 12 requirements envisaged in the following the Company during the year under review. beyond the limits delegated to the The Audit Committee, Remuneration K.G.D.S.J. De Alwis Executive Director 12 12 statutes and the Company’s practices are Corporate Management and the Committee and Integrated Risk Dr. A. R. Karunaratna 12 11 within their confines. BOARD OF DIRECTORS Executive Directors. Independent Non-Executive Director Management Committee are the main E.A.D.P. Ekanayake Independent Non-Executive Director 12 12 Committees of the Board. Please refer Finance Companies (Corporate The Board of Directors consists of three For the adoption, monitoring and their specific reports to understand their Governance) Direction, No. 03 of Independent Non-Executive Directors implementation of budgets and * Resigned as Chairman/Board in January 2014 functions and compositions. 2008, issued by the Monetary Board and two Executive Directors. Furthermore, strategic plans formulated by ** Joined the Board of Directors as Chairman from April 2014 two Senior Consultants in the fields of Executive Directors and the Finance Companies Act No. 78 of Accountancy and Law are invited. The Corporate Management. 1988 and directions, rules, Company conducts monthly Board determinations, notices and Meetings and, where necessary special To ensure that effective systems of guidelines issued there under e-Board Meetings are convened in order Risk Management and robust to transact special business decisions. internal controls are in place at all Companies Act No. 07 of 2007 Decisions made at such meeting are ratified times.
22 23 SINHAPUTHRA FINANCE PLC Annual Report 2013 / 2014 Annual Report 2013 / 2014 SINHAPUTHRA FINANCE PLC
... CORPORATE GOVERNANCE RISK MANAGEMENT
FINANCIAL DISCLOSURES AND training programs and workshops, that they present a true and fair view of the Risk is inherent in any Finance Company's understanding the potential risk relevant to the division. An illustrative TRANSPARENCY in-house and outside acts as a catalyst, to Company’s affairs and these practices have activities. Therefore effective Risk the Company faces by making risk representation of the Risk Management the internal learning process, in addition been further strengthened as per the code Management is fundamental for the assessments and measuring risk levels. structure at Sinhaputhra is given below Financial Statements are prepared in to the orientation of the staff on ethical of best practice on Corporate Governance, success and the sustainability of each The Risk Management process entails the and explained in depth in the ensuing accordance with the Sri Lanka Accounting professional conduct. Listing Rules of Colombo Stock Exchange financial institution. The major risks that implementation of policies and procedures paragraphs. The structure maps the Standards, the Companies Act, the Finance and Directions issued under the Finance are encountered by the Company include laid down to counter risk at various levels and importance of specific committees and the Companies Act and the Directions and STATUTORY PAYMENTS Companies Act. Credit Risk, Interest Rate Risk, Liquidity to monitor the level of risk continuously and audit function in keeping together a well Rules issued there under. The unaudited Risk, Operational Risk, Legal Risk, to evaluate the effectiveness of techniques balanced Risk Management framework that provisional quarterly statements of accounts All Statutory Payments due to the A summary of Board of Directors’ Technological Risk and Reputational Risk. adopted in risk mitigation. requires governance from Board level to are presented in compliance with the Listing Government, which have fallen due, have Responsibilities in respect of Financial The established policies, procedures, independent reviews being carried out on Rules of the Colombo Stock Exchange. been made or where relevant provided Statements is given on page 37. internal controls and balances act as The Company has adopted its own policies an ongoing basis. for, except for certain assessments a catalyst in mitigating risks that are and procedures that have evolved over M/s KPMG acts as External Auditors of against which appeals have been lodged. encountered by the Company in its area of the years coupled with the industry’s BOARD OF DIRECTORS' the Company. Auditors are allowed to act Retirement gratuities have been provided By Order of the Board operations. best practices to create an effective Risk GOVERNANCE IN MEETING RISK independently and without intervention for, in accordance with Sri Lanka Accounting Management system. These processes MANAGEMENT OBLIGATIONS from the Management or the Board of Standards LKAS-19 Employee Benefits. Transactions related to finance industry revolve around achieving an appropriate
Directors of the Company to express an evolve daily and have become complex trade-off between risk and rewards to deliver The Board of Directors has ultimate opinion on the Financial Statements of the COMPLIANCE WITH CENTRAL BANK Priyanka Dilhani (Mrs.) over the years. This has created additional a superior shareholder value. Annually, we responsibility for proactive Risk Management Company. All the required information is REGULATIONS Company Secretary risks to the sector and has brought about deploy a considerable level of resources to practice in the Company. The Board in provided for examination to the Auditors. the need to adopt sound Risk Management maintain this process in an effective manner. discharging its obligations towards Risk As a Licensed Finance Company and a 25th June 2014 techniques to prevent or mitigate core risks We continuously review Risk Management Management has established two key sub- ETHICAL STANDARDS Registered Finance Leasing Establishment, and to safeguard annual profits and assets practices to ensure that it is streamlined to committees to monitor key risks attributable the Company is governed by the Non-Bank of a company. Risk Management objectives achieve objectives of our Risk Management to the Company, i.e., the Audit Committee The Board of Directors believe that the Financial Institutions Directions & Rules of companies are therefore aligned to strike system. Other than meeting shareholder and the Integrated Risk Management maintenance of the highest level of ethical issued by the Monetary Board of the Central an appropriate balance between risk and perception, Risk Management objectives Committee (IRMC). These subcommittees conduct from employees is essential as Bank of Sri Lanka. rewards in order to maximize shareholder are aimed at ultimately meeting customer have adequate representation of Board part of practices of Good Governance and wealth. To prevent losses of stakeholders expectations and obligations while members who are well-conversant on the expects employees to act fairly, honestly and Accordingly, the Company has to carry of Finance Companies, a multitude preserving the solvency of the enterprise subject and have the guidance of Senior with loyalty. All employees are expected to out and maintain business activities in of regulations were introduced by the according to the risk profile expectations Consultants with professional expertise and provide their best services for customers, compliance with the Directions from time to regulator in recent years to counter eminent preliminarily laid down. wide experience. The Board of Directors shareholders and the community at large in time issued by the Central Bank of Sri Lanka. risks. These new regulations along with the is able to obtain first-hand information on conducting business operations. The weekly Deposit Insurance Scheme have revitalized To execute the Risk Management process, specific risks and closely monitors risks Senior Management Committee Meetings to ACCOUNTABILITY AND DISCLOSURE public confidence once again. Sinhaputhra adopts a formal top down through these committees and review which employees at all levels are invited acts hierarchical approach which commences measures taken at sub-committee level and as a forum to communicate to employees, In the year ended 31st March 2014, COMPANY'S STRATEGY FOR RISK from Board level and passes down to the at management level in mitigating such risks the values, culture and expectations of the the members of the Board of Directors MANAGEMENT next level being the Senior Management on an ongoing basis. Company. The continuous interaction of have reviewed in detail the Quarterly level. Senior Management is entrusted with
the Management and the staff strengthens Financial Statements and Annual Financial Sinhaputhra adopts a Risk Management the task of managing risk within their area this position. Further, exposure to staff Statements in order to satisfy themselves strategy that focuses initially on of duty while carrying out routine functions
24 25 SINHAPUTHRA FINANCE PLC Annual Report 2013 / 2014 Annual Report 2013 / 2014 SINHAPUTHRA FINANCE PLC
... RISK MANAGEMENT ... RISK MANAGEMENT
IRMC’S ROLE IN RISK MANAGEMENT our operations and processes to safeguard the Company’s assets and to counter risks at CREDIT COMMITTEE SENIOR MANAGEMENT’S ROLE IN programme, the Company has been able to transaction level as well as risks at macro level. The Committee reviews quarterly reports of RISK MANAGEMENT guide new recruits and staff with new roles The primary purpose of the IRMC is to Internal Auditors to obtain a feedback of the Management’s compliance to procedures and The Committee is entrusted to monitor the to fit into their assigned positions quite assist the Company’s Board of Directors in controls laid-down including adherence to laws and regulations. quality of credit granted and to manage The responsibility to actually implement efficiently minimising operational lapses. fulfilling its responsibilities on all aspects of risks inherent to lending. The Committee the established Risk Management policies Risk Management practices adopted by the The Audit Committee maintains its independence as it comprises of independent Non- monitors high value overdue accounts, and and procedures is ultimately passed COMPANY'S APPROACH TO Company. Executive Directors and Senior Consultants to the Board, who, when the need arises, report to establishes strategies to improve credit down to the Senior Management of the MANAGING SIGNIFICANT RISKS the Board on significant matters, they would come across when discharging their obligations. quality and reduce overdue levels. It also Company. Sinhaputhra Finance’s corporate The Committee meets on a quarterly As part of its scope, the Committee meets the External Auditors on the annual statutory audit approves disbursements involving higher management structure has been established CREDIT RISK basis and carries out risk assessments on to discuss any significant risks and reviews reporting requirements of the Company. volumes based on levels of exposure. with clear separation of organisational key risks including liquidity risk, interest functions and responsibilities, on a set of Credit Risk arises when a borrower is unable THE COMPANY'S RISK MANAGEMENT STRUCTURE rate risk and operational risk by studying MANAGEMENT COMMITTEE tools and procedures that encompasses to meet his financial obligations towards reports and statistics tabled by respective a system of in-house control checks that the lender. Being in the business of lending,
heads of divisions. This includes reviewing BOARD OF DIRECTORS The Management Committee was set direct the needed precision in carrying out credit risk is regarded as the most potential the maturity profile of Sinhaputhra Finance up with the intention of monitoring the operations. To execute this structure in an risk facing the sector. Managing credit risk assets and liabilities and current strategies Company’s performance very closely and efficient manner, the Company possesses is considered a priority, since, if handled that have been put forward to address OTHER COMMITTEES INTEGRATED RISK MANAGEMENT commenced meeting on a weekly basis. The highly competent and experienced staff who inappropriately, it could result in bad AUDIT COMMITTEE CREDIT COMMITTEE COMMITTEE existing mismatches in the short and MANAGEMENT COMMITTE E Committee reviewed actual results against have the precise management orientation debts that will eventually bring down the long-term. The Committee in meeting targets on lending, deposit canvassing, needed to perform given tasks. profitability of a company. To counter credit its obligations reviewed interest rates recoveries, other business, borrowing rates, risk, the Company has laid down stringent on lending and deposits together INTERNAL AUDIT & EXTERNAL AUDIT costs and profitability. The Committee The Senior Management is required to procedures for disbursement of credit which while correlating information on their comprises of key members of divisions, carry out risk assessments related to their requires documents that speeds up recovery applicable periods. These studies enable headed by the Managing Director. The departmental functions and to implement and reduces inherent legal risks of the the Committee to assess anticipated rate weekly credit committee decisions made the appropriate risk mitigation techniques. nation’s legal system and uses this strong ASSISTANT GENERAL MANAGE RS changes and its impact to profitability. To by circulation are tabled for review at this Each division is expected to constantly position as an advantage until the borrower assess operational risk, the Committee meeting. review existing processes and controls completes his payments in full. recently reviewed the adequacy of current and the extent of its implementation in procedures and policies that have been The Senior Management of the Company the light of the changing environment and REPUTATIONAL This approval process takes into account CREDIT INTEREST LIQUIDITY OPERATIONAL LEGAL TECHNOLOGICAL adopted by respective core operational RISK RATE RISK RISK RISK RISK RISK RISK was able to gather up-to-date information take appropriate precautions by updating relevant staff members’ work experience divisions including the Credit and Recoveries more frequently which enabled them to existing procedures and controls when and skill level. The credit policies outline divisions and did restructuring wherever be more proactive in a volatile setting. By necessary. The Company’s ‘Manual of authorisation limits that extend up-to necessary. having a close monitoring process on core Procedure’ with the recent amendments Director level, depending on the value and SIGNIFICANCE OF OTHER COMMITTEES IN SUPPORTING RISK MANAGEMENT activities the Company was able to resolve is a significant development that enabled complexity of the credit to be disbursed. AUDIT COMMITTEE’S ROLE IN RISK matters speedily and reduce risks more senior management to communicate
MANAGEMENT Specific committees that meet at management level periodically focus on core aspects of effectively than before. standard practices to their subordinates As means of credit control, proposed business more closely and lends support in managing risks, associated with their respective in their respective divisions. Through clear facilities are subjected to an independent The Audit Committee assists the Board areas. Namely: communication of operational guidelines review by the next level of authority. in reviewing the adequacy of internal to staff and a constantly updated individual Significant lendings that have experienced controls that have been incorporated in duty list and an in-house orientation deterioration in repayment are regularly
26 27 SINHAPUTHRA FINANCE PLC Annual Report 2013 / 2014 Annual Report 2013 / 2014 SINHAPUTHRA FINANCE PLC
... RISK MANAGEMENT ... RISK MANAGEMENT
subject to credit examinations. The Credit lending is backed by realisable security and Cash and Cash Equivalent The Company’s Net Interest Margin (NIM) Liquidity management objectives of Sinhaputhra liquidity management policy Committee which reviews, provides its is carried out in accordance with prevailing Immovable Property is monitored for variance and appropriate Sinhaputhra primarily focus on maintaining approved by the Board of Directors entrusts expert knowledge by reviewing accounts regulations to maximize the speed of Quoted Shares in CSE remedial actions are taken to mitigate a consistent cash flow that is adequate to the routine management of liquidity with needing their attention which are generally disposing such securities. Motor Vehicles the risk. In managing associated risk, fund operations and meet obligations and the Finance Division that is responsible for of high value. They cover the adequacy Machinery the Management Committee monitors other commitments on a timely manner, in a all Treasury-related activities. To manage of existing credit policies, procedures To improve skills in credit disbursement, Company’s rate structure against market cost-effective way. We are financially sound liquidity, the department daily reviews the and compliance including adherence officers attached to the Credit and Marketing As stipulate in lending policies the Company rates weekly and evaluates any potential and strong in liquidity. Having cash, other funding position against cash commitments to credit regulation. Their observations are afforded training programmes that considered 85% of the cash held as the fair adverse effects that may arise from liquid assets and possessing easy access to and bridges funding needs through and suggestions on improving existing cover aspects on credit appraisal, credit value of cash and cash equivalent collaterals. situations when the cost of funding rises at a money markets enable us to meet ongoing available funding sources in the short and control systems and processes, especially procedures and focus on enhancing quality In the case of immovable property, relatively higher pace than the yield earned operational cash outflows arising from medium-term. In addition, the Integrated related to credit, are informed to the Audit of credit decisions. The Recoveries Division assessment of fair value will be based on an on lending and other investments. obligations including overhead expenses. Risk Management Committee, as a part Committee via periodic reports. The Audit of Sinhaputhra Finance works hand in hand independent professional valuation report, Furthermore, the Company has the needed of their primary objectives oversees and Committee in turn reviews the adequacy of with the Credit and Marketing Division to the amount varies between 50% - 70% based LIQUIDITY RISK flexibility to incur capital expenditure for monitors liquidity risk, especially on a long existing controls on behalf of the Board and ensure a smooth collection of installments on the type of the property. Shares quoted necessary growth when the need arises. term perspective. The Committee meets follows up on such audit observations and with special attention given to overdue in the share market accepted as a collateral Liquidity Risk is the risk of not having Other than our lending portfolio, we quarterly and studies maturity mismatches recommendations. accounts. are considered at 50%. Motor vehicles are sufficient resources, at a reasonable cost, to possess a share investment portfolio that is enabling them to identify maturity gaps early accepted as a main mitigant but considered meet financial obligations as and when they liquid and can be traded at any moment in and implement strategies in the medium Prior to disbursement, Sinhaputhra Finance To support the credit and recovery process, at 60% - 80%, based on the conservative arise. There are different types of liquidity the Colombo Stock Market. We maintained and long term. To identify associated risks, Credit Division follows a checklist of the Finance Division together with IT Division company valuation report by a registered risk which the Company should continually our statutory liquid assets ratio above the the Committee reviews the maturity profile standard verifications to ensure the quality provides daily, weekly and monthly statistics valuer of the Leasing Association of Sri monitor and control to retain the required regulatory limit during the period under of assets and liabilities, growth rates in of lending is safeguarded. This encompasses and financial reports for recovery officers to Lanka. degree of liquidity at all times. review. As a practice, we ensure that our lending, deposits and the status of our review of a customer’s credit worthiness assess collection performance levels and to statutory liquid assets position is monitored borrowings and gathers knowledge on the including reference to past track records, plan recovery targets. The Key Performance INTEREST RATE RISK Funding liquidity risk refers to the potential daily especially in the light of a steeply rising prevailing trends in the sector for our main Credit Information Bureau (CRIB), internal Indicator of the credit staff is reported daily that the Company will not be able to deposit base. lines of business. Infosys system (if a previous customer) and assessing the quality of the staff. These Interest Rate Risk is the risk where changes liquidate assets or obtain adequate funding carrying out primary investigations. At the practices have enabled management to cut in the market interest rates may adversely to meet its obligations when they become The Company’s Finance Division is entrusted OPERATIONAL RISK preliminary stage, information is gathered down Sinhaputhra Finance non-performing affect a company’s financial condition. The due for payment. The funding risk should with the task of monitoring daily liquidity on the borrower’s financial position, lending levels significantly within the last immediate impact of variation in interest be managed to being able to constantly requirements and is responsible for all The Operational Risk has been identified assessing the current financial position and two years. rates is on the net interest income and maintain or acquire funds at a reasonable treasury-related activities. as a distinct category of risk with a growing the repayment capacity through a formal interest rate spreads. price when the need arises for such funds. importance in the Finance Industry. ‘credit appraisal’. Thereafter, the credit CREDIT RISK MITIGATING The Finance Division is responsible for Management of Operational Risk is a key approval process takes into account the These changes can lead to fluctuations in Mismatch risk often caused by funding gaps managing and controlling the overall feature of sound Risk Management practices type of credit arrangement, either for a The Company uses and accepts various net interest income, eventually affecting the arising from the maturity transformation liquidity of the Company and reviews the in the financial market. given transaction or total exposure to the types of collateral as credit risk mitigants bottom line and cash flows of the Company. function performed by company leading to impact of the strategic decision on the client or to a particular industry. To minimise even for leases and hire purchase facilities Managing interest rate risk therefore is vital holding long dated assets funded by short Company’s liquidity. This process ensures Operational Risk arises from failed or the Company’s exposure to credit risk, which have the asset as collateral. However, in maintaining the required margins for dated liabilities. Maturity mismatches have the maintenance of sufficient resources to inadequate internal processes, people and appropriate collateral is obtained as an the Company is conservative and assigns a businesses to remain profitable. to be managed with the required access to meet daily liquidity obligations and ability systems or from external events leading additional safeguard covering the required fair value only to the following collaterals: funding lines to avoid the liquidity position to withstand a period of the Company’s to losses for an organization. To mitigate exposure levels. The Company ensures that from being constrained. specific liquidity stress. risk arising from operations, appropriate
28 29 SINHAPUTHRA FINANCE PLC Annual Report 2013 / 2014 Annual Report 2013 / 2014 SINHAPUTHRA FINANCE PLC
... RISK MANAGEMENT ... RISK MANAGEMENT
controls have been installed by the for Management, so that Management events. All legal documents executed on TECHNOLOGY RISK providing a service that is gratifying, creating targets, labour unrest and environmental management to detect possible human is proactive in its actions thus avoiding behalf of the Company are initially prepared the right playing field to face competition. breaches etc. errors, fraud, faulty internal processes and operational losses. Furthermore, embedded by the legal department which consists The Company is highly reliant on its Efficient use of technology has brought systems, non-adherence to procedures and as part of our corporate culture, each staff of experienced and competent in-house Information Technology (IT) infrastructure Sinhaputhra's high service standards and The Company has identified reputational risk non-compliance of regulations. Sinhaputhra member understands the need to follow legal officers. Services of the external and the information they contain for its with it improved results and has supported as one of major types of risk the Company adopts a company-wide internal control organizational procedures at all times. lawyers are obtained whenever required day-to-day operations and its long-term us in minimizing cost. Use of advanced is exposed to in achieving its strategic system that has evolved over the years. and reviewed monthly. Progress of the legal strategies. Consequently, Risk Management technology has been customary whenever objectives. Further, we have a comprehensive ‘Manual Information Technology plays a major role actions are under the close scrutiny of the plays a critical role in protecting the new technology is available with notable of Procedure’ for the organization which in Operational Risk Management since Legal Division. External lawyers are selected Company’s information system. Realizing investments made to our core information provides clear policies and procedures for required controls could be coupled to our carefully by studying their track records and the increasing importance of IT risk as a system especially to improve features to each key division so that staff is guided when main system through the use of state-of- capabilities on relevant subjects. growing component of total operational the modules it encompasses. Sinhaputhra's executing tasks. the-art technology. To avoid unauthorised risk, the Company has taken an initiative to branch network is interconnected with an access, infiltration of data and system errors, The Board of Directors of Sinhaputhra establish the blade center. Internet Protocol Virtual Private Network Sinhaputhra's Operational Risk Management numerous security controls have been in- has established an effective management (IPVPN) that enables a speedy secured techniques involve the segregation of built to the main systems. Specific limits system to handle legal risk entrusting the IT RISK MITIGATING, MONITORING transaction channel, on line processing of duties, job rotation, staff training and have been placed for various user levels for Legal Division to provide assistance to AND REPORTING balances and provides many other features keeping back-up of significant documents authorisation of a transaction and in certain other divisions when executing transactions that support the staff in providing an
and staff functions. Respective divisions instances a system of dual control is in- in the light of imposed regulations. As a Virtualized Application Servers provide efficient service. are responsible to execute and monitor built to provide better control over system prudent measure, relevant core divisions higher availability with IBM Intelligent internal controls linked to their activities and transactions. Various management reports refer customer agreements, additional Cluster to protect the data losses and Since heavy reliance is placed on to evaluate their acceptability over time. are available in the system for management clauses and changes to agreements for the high redundancy. Implementation of technology, the organization takes related This is done through self-assessment and to monitor transactions on a routine advice of the Legal Division. Depending high-end Information Technology in risks seriously. The Company therefore established monitoring mechanisms within basis. Standard practices ensure that new on the complexity, newly introduced laws year 2012, has simplified the system resorts to strict policies and procedures that divisions. Management committee meetings modules introduced are tested in the test and regulations are implemented by the administration and provides better error have been designed to address associated deliberate on key operational matters and environment and reports are produced for respective divisions in co-ordination with the handing through Unified Extensible risks specifically in the area of Information identify issues and risky operations so that user department’s verification, prior to their Legal Division for matters that require legal Firmware Interface (UEFI). This helps to technology. specific courses of action can be put forth to live implementation. Daily backing-up of the clarification and advice. Independently, sustain the operational continuity of mission mitigate related risk and thereafter establish database in a secure off-site location secures the Board of Directors of Sinhaputhra critical IT systems and resources of the REPUTATIONAL RISK methods to monitor its progress. company data from system malfunction monitors compliance to applicable laws and Company, whereby all significant IT risk are and corruption. Sinhaputhra systems are regulations through the Audit Committee identified through the predictive failure Reputational Risk is multidimensional and Independent verifications carried out by the outsourced and appraised closely by well- that in turn obtains feedback on the level of analysis, light path diagnostic, monitoring it exists in the overall business model of Internal Auditors on operational activities trained and experienced internal IT staff compliance by respective divisions through capabilities and alert system issue etc. the Company. Further, it refers to potential improve current business processes and who are conversant in the field of IT systems. reports furnished by Internal Audit, at least adverse effects, which can arise from the practices. They recommend best operational quarterly. We continue to adopt technology as a key Company’s reputation being tarnished due practices to Corporate Management with LEGAL RISK element in our strategies in such a way that it to a wide array of actions, including failure the intention of overcoming related risks. is combined together with our core activities to comply regulatory or legal obligations, The audit function also provides insight Legal Risk is an integral part of operational to deliver a superior service. Technology failure to deliver expected standards of into any operational lapses that may risk, which arises out of the legal implications has been a material feature in our business service and products, unethical practices, prevail and is an early warning mechanism of faild systems, people, processes or eternal in meeting needs of our customers and in failure to achieve financial performance
30 31 SINHAPUTHRA FINANCE PLC Annual Report 2013 / 2014 Annual Report 2013 / 2014 SINHAPUTHRA FINANCE PLC
ANNUAL REPORT OF THE BOARD OF DIRECTORS
In compliance with the provisions of the SIGNIFICANT ACCOUNTING POLICIES RISK MANAGEMENT Companies Act No. 07 of 2007, the Board of Directors have pleasure in presenting to Significant Accounting Policies adopted An ongoing process is in place to identify the shareholders their report together with in the preparation of Financial Statements and manage the risks that are faced by the the Audited Financial Statements for the are given on pages 52 to 60 of this Annual Company. The Directors review this process year ended 31st March 2014 of Sinhaputhra Report. through the Audit Committee and the Finance PLC, a Public Limited Liability Integrated Risk Management Committee. Company incorporated in Sri Lanka on 6th DIRECTORS’ INTEREST REGISTER November 1978 and listed in the Colombo CORPORATE GOVERNANCE Stock Exchange in June 2010. Sinhaputhra The Interest Register is maintained by the Finance PLC is a Finance Company Company as required by the Companies The report on Corporate Governance registered with the Central Bank of Sri Lanka Act No. 07 of 2007. All Directors have as given on pages 22 to 24 of this report under the Finance Companies Act No. 78 made declarations as required by Section highlights details of systems and procedures of 1988 and a registered Finance Leasing 192 (1) and (2) of the Companies Act No. that are in place to ensure that Corporate Establishment in terms of the Finance 07 of 2007. All related entries were made Governance is properly practiced. Leasing Act No. 56 of 2000. This report in the interest register for the year under was approved by the Board of Directors on review. The Interest register is available AUDIT COMMITTEE REPORT 25th June, 2014. for inspection by shareholders or their authorized representatives as required by The Audit Committee Report is given on PRINCIPAL ACTIVITIES the Section 119 (1)(d) of the Companies Act page 42 of this report. No. 07 of 2007. The principal activities of the Company are INCOME acceptance of Time and Savings Deposits DIRECTORS’ REMUNERATION from the general public and the investment The Income of the Company as at FINANCIAL REPORTS of such mobilized funds on instruments such The Board of Directors’ Remuneration in 31st March 2014 was Rs. 1,065,686,774/-. as Finance Leasing, Hire Purchase, Business respect to the financial year ended 31st ANNUAL REPORT OF THE BOARD OF DIRECTORS 33 Loans, Personal Loans, Pawn Broking, Real March 2014 are given in the Statement of STATEMENT OF DIRECTORS' RESPONSIBILITIES 37 Estate, Vehicle Imports and in Capital Comprehensive Income to the Financial INTEGRATED RISK MANAGEMENT COMMITTEE REPORT 38 Market Operations. Statements. The remuneration amount to REMUNERATION COMMITTEE REPORT 41 Rs. 9,185,633/-. AUDIT COMMITTEE REPORT 42 FINANCIAL STATEMENTS DIRECTORS' STATEMENT ON INERNAL CONTROL INTERNAL CONTROLS OVER FINANCIAL REPORTING 44 Financial Statements of the Company are INDEPENDANT AUDITORS' REPORT 46 given on pages 47 to 87 of this Annual The Board has instituted an effective and STATEMENT OF COMPREHENSIVE INCOME 47 Report. comprehensive system of Internal Controls covering financial operations, compliance STATEMENT OF FINANCIAL POSITION 48 AUDITORS’ REPORT control and risk management, to safeguard STATEMENT OF CHANGES IN EQUITY 49 its assets and secure as far as possible the STATEMENT OF CASH FLOWS 50 The Auditors’ Report on the Financial accuracy and reliability of the records to NOTES TO THE FINANCIAL STATEMENTS 52 Statements are given on page 46 of this ensure that the business of the Company in Annual Report. carried out in an orderly manner.
32 33 SINHAPUTHRA FINANCE PLC Annual Report 2013 / 2014 Annual Report 2013 / 2014 SINHAPUTHRA FINANCE PLC
... ANNUAL REPORT OF THE BOARD OF DIRECTORS ... ANNUAL REPORT OF THE BOARD OF DIRECTORS
PROFITS STATED CAPITAL DIRECTORS’ INTEREST IN SHARES CONTINGENT LIABILITIES
The summarized details relating to the profits of the Company are given below: Stated Capital of the Company as at 31st The shareholdings of the Board of Directors together with their spouses at the beginning Except as disclosed in Note 41.1 to the March 2014 was Rs. 80,379,055/- consisting and as at 31st March 2014 were as follows: Financial Statements on page 78 there were
2013/14 2012/13 of 6,295,893 Ordinary Shares and 670,765 no material Contingent Liabilities as at the RS. RS. Non-Voting, Non-Redeemable, Non- Statement of Financial Position Date. ORDINARY SHARES PREFERENCE SHARES Cumulative, participating Preference Shares. Net Profit Before Taxation 76,781,825 69,266,869 NAME OF DIRECTOR EVENTS AFTER THE REPORTING PERIOD Taxation 7,387,296 4,858,483 31/03/2014 31/03/2013 31/03/2014 31/03/2013 SHAREHOLDINGS
Net Profit After Taxation 84,169,121 74,125,352 K.R.B. Wijeyeratne 3,189,287 3,187,287 50,062 50,062 There have not been any material events that Acturial Loss on Defined Benefit Plans (1,697,458) (7,921,135) The distribution of Shareholding is given on K.G.D.S.J. De Alwis 327 327 11,297 11,297 have occurred subsequent to the date of Additional Depreciation on Revaluation 6,079,549 5,866,022 pages 8 to 10 of this report. E.A.D.P. Ekanayake 98 - 4,000 4,000 Statement of Financial Position that require Retained Profit Brought Forward 130,203,155 94,829,014 adjustments to the Financial Statements, Balance Available for Appropriation 218,754,367 166,899,253 Dr. A.R. Karunaratna - - 1,000 1,000 SHARE INFORMATION Mrs. A.R.I. Wijeyeratne - - 800 800 other than those disclosed in Note 42 to the Appropriations: Financial Statements. Transfer to Statutory Reserve Fund (28,398,574) (14,972,925) Information relating to earnings, dividends Transfer to Statutory Investment Fund (6,099,628) (7,722,781) and net assets per share is given in Financial GOING CONCERN Dividend Paid - (14,000,392) DIRECTORS’ RESPONSIBILITY FOR FINANCIAL REPORTING Highlights on page 9. Retained Profit Carried Forward 184,256,165 130,203,155 The Board of Directors is responsible for the preparation of Financial Statements of the The Board of Directors is satisfied that The movement of these reserves is shown in the Statement of Changes in Equity given on MAJOR SHAREHOLDERS Company to reflect a true and fair view of the state of its affairs. The Directors are of the view the Company has adequate resources to page 49. that these Financial Statements have been prepared in conformity with the requirements of continue its operations in the foreseeable The twenty largest shareholders of the the Sri Lanka Accounting Standards. future. Accordingly, the Financial Statements PROPERTY, PLANT AND EQUIPMENT Company as at 31st March 2014 are given on are prepared based on the Going Concern pages 8 & 9. COMPLIANCE WITH LAWS AND REGULATIONS concept. Details of Land and Building, Plant and Equipment with additions made during the year and
the depreciation charges for the year are shown in Note 27 to the Financial Statements. RESIGNATIONS / NEW APPOINTMENTS The Company has not engaged in any activities contravening the laws and regulations. AUDITORS All officers responsible for ensuring compliance with the provisions of various laws and INVESTMENTS Mr. N.N. Ratnayake, Chairman of the regulations confirm their compliance to the Board of Directors monthly. The retiring Auditors, M/s KPMG has shown Company resigned from the Board of their willingness to continue in office and a Details of the Company’s quoted and unquoted investments as at 31st March 2014 are given Directors and the Chairmanship with effect STATUTORY PAYMENTS resolution to re-appoint them as Auditors in Note 23 to the Financial Statements on pages 69 & 70. from 17th January 2014 and Mr. J.R.J. and authorizing the Board of Directors to fix Nanayakkara was appointed to the Board The Board of Directors, to the best of their knowledge and belief are satisfied that all statutory their remuneration will be proposed at the RESERVES of Directors as Chairman with effect from payments due to the Government and in relation to employees have been made on time. Annual General Meeting. 01st April 2014. Total Reserves including the Statutory Reserve Fund and Fair Value Reserve of the Company as at 31st March, 2014 amounts to Rs. 703,496,396/- (Rs. 615,556,538/- in 2013) details of which are given in Notes 36 to 39 to the Accounts.
34 35 SINHAPUTHRA FINANCE PLC Annual Report 2013 / 2014 Annual Report 2013 / 2014 SINHAPUTHRA FINANCE PLC
... ANNUAL REPORT OF THE BOARD OF DIRECTORS STATEMENT OF DIRECTORS' RESPONSIBILITIES
ANNUAL GENERAL MEETING The Board of Directors is required by the Company and in that context to have proper Companies Act No. 07 of 2007 to prepare regard to the establishment of appropriate The 36th Annual General Meeting of the Financial Statements for each financial systems of internal control with a view to Company will be held on 29th August 2014 year, which give a true and fair view of the prevention and detection of fraud and other at the Registered Office of the Company, statement of affairs of the Company as at irregularities. No. 11, Hill Street, Kandy at 9.30 a.m. Notice the end of the financial year and the income of Meeting relating to the 36th Annual and expenditure of the Company for the The Board of Directors continues to adopt General Meeting is given on page 90. financial year. the Going Concern basis in preparing the Financial Statements. The Directors, The Board of Directors is also responsible after making inquiries and review of the For and on Behalf of the Board to ensure that the Financial Statements Company’s Business Plan for the financial comply with any regulations made under year 2013/2014, including cash flows and the Companies Act which specifies the form borrowing facilities, consider that the and content of Financial Statements and any Company has adequate resources to other requirements which to the Company’s continue in operation. K.R.B. Wijeyeratne K.G.D.S.J. De Alwis Financial Statements under any other law. Managing Director Director The Board of Directors considers that By Order of the Board the Financial Statements presented in Sinhaputhra Finance PLC By Order of the Board this Annual Report have been prepared using appropriate Accounting Policies, consistently applied and supported by reasonable and prudent judgments and Priyanka Dilhani (Mrs.) Priyanka Dilhani (Mrs.) estimates and in compliance with the Sri Company Secretary Company Secretary Lanka Accounting Standards, Companies Act No. 07 of 2007, Sri Lanka Accounting 25th June 2014 25th June 2014 and Auditing Standards Act No. 15 of 1995 and Finance Business Act No. 42 of 2011 and the Directions issued there under.
The Board of Directors is responsible for ensuring that the Company keeps sufficient accounting records, which disclose the Financial Position of the Company with reasonable accuracy and enable them to ensure that the Financial Statements have been prepared and presented as aforesaid. They are also responsible for taking measures to safeguard the assets of the
36 37 SINHAPUTHRA FINANCE PLC Annual Report 2013 / 2014 Annual Report 2013 / 2014 SINHAPUTHRA FINANCE PLC
INTERGRATED RISK MANAGEMENT COMMITTEE REPORT ... INTERGRATED RISK MANAGEMENT COMMITTEE REPORT
THE COMPOSITION OF THE INTEGRATED RISK MANAGEMENT COMMITTEE The Committee held four meetings, for the year under review. The attendance of each member at meetings is illustrated in the table given below: The Board of Directors appointed Integrated Risk Management Committee (BIRMC) as at the end of the year comprised of the following members: NAME OF COMMITTEE MEMBER STATUS NUMBER OF MEETINGS MEETINGS ATTENDED MEMBER HELD IN F/Y 2014 IN F/Y 2014
K.R.B. Wijeyeratne Upali Hangawatte K.R.B. Wijeyeratne Executive Director 4 4 (Managing Director and Chairman of the Committee) (AGM Branches) (Chairman of the Committee) K.G.D.S.J. De Alwis Gamini Pussepitiya K.G.D.S.J. De Alwis Executive Director 4 4 (Executive Director-Director Operations) (AGM Loans) N.N. Ratnayake * Independent Non-Executive Director 4 2 Dr. A.R. Karunaratna Independent Non-Executive Director 4 3 Dr. A.R. Karunaratna Menaka Rambukwella E.A.D.P. Ekanayake Independent Non-Executive Director 4 4 (Independent Non-Executive Director) (AGM Leasing) Pandula Aluwihare Snr. AGM Leasing 4 4 E.A.D.P. Ekanayake Shirani Dodanwala Sabriya Amanulla Snr. AGM Recoveries 4 4 (Independent Non-Executive Director) (AGM Collection) Naleen Jayaratne ** Chief Financial Officer 4 1 Upali Hangawatte AGM Branches 4 4 Pandula Aluwihare Prabath Medagedara Deepani Bandara *** Legal Officer 4 3 (Snr. AGM Leasing) (AGM Legal) Gamini Pussepitiya AGM Loans 4 3 Sabriya Amanulla Iresha Perera Menaka Rambukwella AGM Leasing 4 4 (Snr. AGM Recoveries) (CFO) Shirani Dodanwala AGM Collection 4 4 Prabath Medagedara AGM Legal 4 4 Iresha Perera **** Chief Financial Officer 4 1
INTEGRATED RISK MANAGEMENT COMMITTEE (IRMC) * Resigned from the Integrated Risk Management Committee in January 2014 ** Resigned from the Integrated Risk Management Committee in November 2013 *** Resigned from the Integrated Risk Management Committee in December 2013 The IRMC was established by the Board of Directors to be in line with Sections 8.1 and 8.3 of the Finance Companies (Corporate Governance) **** Joined the Committee from December 2013 Direction, No. 3 of 2008 issued by the Monetory Board under the Finance Business Act No. 42 of 2011. The scope and functions of the Committee conforms with the provisions of Section 8.3 b of the aforesaid Direction.
38 39 SINHAPUTHRA FINANCE PLC Annual Report 2013 / 2014 Annual Report 2013 / 2014 SINHAPUTHRA FINANCE PLC
... INTERGRATED RISK MANAGEMENT COMMITTEE REPORT REMUNERATION COMMITTEE REPORT
APPROACH ADOPTED BY THE INTEGRATED RISK MANAGEMENT COMMITTEE The Remuneration Committee comprises of to recruitment of Key Management personnel to ensure that the management and staff at two Independent Non-Executive Directors, all levels are adequately rewarded for their performance and commitment to the Company’s The Committee has the right blend of members who currently represent core divisions and a Senior Consultant. Members of the goals on a competitive basis. covering areas in Credit, Recoveries and Finance. Committee are Mr. E.A.D.P. Ekanayake - Chairman, Dr. A.R. Karunaratna & Remuneration Committee meetings held for the year including details on member During this financial period, the Committee activities revolved around the following activities: Mr. A.M.G. Weerakoon - Senior Consultant participation is shown below: to the Board. The Managing Director DIRECTORSHIP / NUMBER OF MEETINGS Assessed risk related to liquidity, credit, market and operations by re-evaluating and the Executive Directors as well as the NAME OF DIRECTOR MEMBERSHIP STATUS MEETINGS HELD ATTENDED important decisions taken by the Senior Management Committee at their weekly Senior Management attend meetings of IN F/Y 2014 IN F/Y 2014 meetings. the Committee by invitation and provide relevant information and their views to E.A.D.P. Ekanayake Independent Non-Executive 1 1 Ensured that the risks of the Company are within prudent levels accepted by the the Committee for its deliberations, (Chairman of the Committee) Director Committee. Where necessary, the Committee deliberated and adopted a corrective except when the Executive Directors’ own course of action to mitigate risk to prudent levels. remuneration packages and other matters N.N. Ratnayake* Independent Non-Executive 1 1 relating to them are discussed. Director Communicated with the relevant Heads of Divisions on the needed course of action, to A.M.G. Weerakoon Snr. Consultant 1 1 improve the overall effectiveness of Risk Management and set time frames. The Committee deliberates and determines the policies and criteria relevant to fees Dr. A.R. Karunaratna** Independent Non-Executive 1 - The Strategic Plan developed in 2005 was reviewed to understand the main risks and of Directors, emoluments of Executive Director counter strategies were proposed to have a dynamic focus on emerging sectors and Directors, salaries and prerequisites of
tasks laid to present a new Strategic Plan. Corporate Management and the Senior * Resigned from the Committee in January 2014 Management. These are based on ** Joined the Committee from January 2014 Reviewed compliance status of Sinhaputhra to prevailing laws and regulations with profitability, projected budgets, target specific focus on CBSL requirements. achievements, market conditions and retention priorities and collective monthly appraisals. E.A.D.P. Ekanayake A primary objective of the remuneration Chairman - Remuneration Committee policy of the Company is to attract and K.R.B. Wijeyeratne retain our professionally qualified and/or 25th June 2014 Chairman - Integrated Risk Management Committee experienced workforce and reward their performance, bearing in mind the individual 25th June 2014 performance and long-term service to the Company.
The Committee meets as often as necessary and makes re-commendations on compensation structures, bonuses, increments and also on matters pertaining
40 41 SINHAPUTHRA FINANCE PLC Annual Report 2013 / 2014 Annual Report 2013 / 2014 SINHAPUTHRA FINANCE PLC
AUDIT COMMITTEE REPORT ... AUDIT COMMITTEE REPORT
THE COMPOSITION OF THE COMMITTEE ROLE OF THE COMMITTEE requirements of the new Sri Lanka Meeting the External Auditors at the The Audit Committee has recommended Accounting Standards. conclusion of the annual audit to to the Board that M/s KPMG be re- The Audit Committee is appointed by the Board and as at the end of the year comprised of The Audit Committee assists the Board discuss their findings. appointment as External Auditors for the the following Independent Non-Executive Directors and a Senior Consultant to the Board of Directors in fulfilling its responsibilities Selection of most appropriate financial year ending 31st March 2015 and a Fellow of the Chartered Accountants of Sri Lanka (FCA). over the accounting and financial reporting accounting policies and other Reviewing the Management Letter of subject to the approval of shareholders at process and audit of the Financial significant accounting estimates used the external auditors together with the Annual General Meeting. Mr. J.R.J. Nanayakkara (B.A) (Committee Chairman) - Independent Non-Executive Director Statements of the Company by monitoring in preparation of Financial the management responses in Dr. A.R. Karunaratna - Independent Non-Executive Director the : Statements. relation to issues highlighted. Mr. E.A.D.P. Ekanayake - Independent Non-Executive Director Mr. K.H.K. Wijayadasa (FCA) - Senior Consultant (Finance) to the Board Integrity and reliability of Financial The effectiveness in the financial Reviewing non-audit services provided Statements. reporting systems including the by the Auditors to ensure that such On invitation as needed are the Managing Director, Chief Financial Officer, Director management accounts to ensure functions do not fall within the J.R.J. Nanayakkara Operations, Representatives from Internal/ External Auditors, Members of the Senior Quality and the appropriateness of the reliability of information provided restricted services and provision of Chairman - Audit Committee Management. accounting Policies and their adherence to the Board and other stakeholders such services will not impair the to statutory and regulatory compliance of the Company. External Auditors’ Independence and 25th June 2014 MEETINGS requirements and applicable objectives. Accounting Standards. Adequacy and effectiveness of The Committee held five meetings during the financial year ended 31st March 2014. The the Internal Controls & Systems INTERNAL AUDIT summary proceedings of these meetings are regularly reported to the Board of Directors. Independence and qualifications of and Procedures to provide the External Auditor reasonable assurance that all The Committee provides a forum for the Audit Committee meetings held for the year including details on member participation is transactions are accurately and review of Internal Audit Reports and any shown below: Performance of the Internal and completely recorded in the books of operational deficiencies and shortcomings External Auditors accounts. highlighted are followed up. Major
NAME OF DIRECTOR DIRECTORSHIP / NUMBER OF MEETINGS findings of internal audits and responses MEMBERSHIP STATUS MEETINGS HELD ATTENDED Effectiveness of the system of Internal EXTERNAL AUDIT of the management were considered and IN F/Y 2014 IN F/Y 2014 Controls of the Company appropriate directions issued. The internal In regard to the External Audit Function audit representatives of the audit firm were
Dr. A.R. Karunaratna * Independent Non-Executive 5 5 Effectiveness of the Corporate of the Company, the role played by the present at these discussions. Director Governance Report Committee is as follows: CONCLUSION N.N. Ratnayake ** Independent Non-Executive 5 3 REPORTING OF FINANCIAL POSITION Assisting the Board of Directors to Director AND PERFORMANCE implement the process of engaging The Committee reports to the Board, E.A.D.P. Ekanayake Independent Non-Executive 5 5 External Auditors and agreeing on identifying any matters in respect of which Director The committee supports the Board of their remuneration. it considers the requirement of action or Directors in discharging its responsibility in improvement and makes recommendations K.H.K. Wijayadasa Snr. Consultant to the Board 5 5 relation to financial reporting by reviewing: Discussing with the auditors their as to the steps to be taken.
J.R.J. Nanayakkara *** Independent Non- Executive 5 - audit plan, scope and procedures to (Committee Chairman) Director Preparation of Financial Statements in be used in the annual audit.
* Resigned from the Committee Chairmanship in May 2014 accordance with the stipulated ** Resigned from the Committee in January 2014 *** Joined the Committee from January 2014 and appointed as the Committee Chairman in May 2014
42 43 SINHAPUTHRA FINANCE PLC Annual Report 2013 / 2014 Annual Report 2013 / 2014 SINHAPUTHRA FINANCE PLC
DIRECTORS’ STATEMENT ON INTERNAL CONTROL ... DIRECTORS’ STATEMENT ON INTERNAL CONTROL OVER FINANCIAL REPORTING OVER FINANCIAL REPORTING
RESPONSIBILITY internal control system over financial representation of the other for external purposes and has been done reporting, identified officers of the Company Committee Reports and Senior in accordance with Sri Lanka Accounting In line with the Section 10(2)(b) of the Finance collated all procedures and controls that are Management Team of the Standards and the regulatory requirements Companies (Corporate Governance) connected with significant accounts and Company who assists the Board of the Central Bank of Sri Lanka. Direction No. 03 of 2008, the Board of disclosures of the financial statements of the in the implementation of policies, Directors present this report on internal Company. procedures and controls identified by control over financial reporting. the Board. By Order of the Board These in turn are being observed and The Board of Directors (“Board”) is checked by the internal auditors of the The Audit Committee of the responsible for the adequacy and Company for suitability of design and Company reviews internal control effectiveness of the internal control effectiveness on an on-going basis. issues identified by the internal J.R.J. Nanayakkara K.R.B. Wijeyeratne mechanism in place at Sinhaputhra Finance auditors and external auditors, Chairman Managing Director PLC’s, (“The Company”). KEY INTERNAL CONTROL PROCESSES regulatory authorities and Audit Committee / Chairman Management and evaluates the The Board has established an ongoing The key process that has been established adequacy and effectiveness of risk 25th June 2014 process for identifying, evaluating and in reviewing the adequacy and integrity of management and internal controls. managing the significant risks faced by the system of internal controls include the They also review the internal audit the Company and this process includes following: function focusing on the scope enhancing the system of internal controls of audits and quality of reporting. as and when there are changes to business The Board has established The minutes of the audit committees environment or regulatory guidelines. committees to assist the Board in meetings are tabled for the The process is regularly reviewed by the monitoring the effectiveness of the information of the Board on a Board. The Board is of the view that the Company’s operations and ensuring quarterly basis. system of internal controls over financial that they are in accordance with the reporting in place is sound and adequate corporate objective, strategies and CONFIRMATION to provide reasonable assurance regarding the budgetary targets as well as the the reliability of financial reporting, and policies and business directions that Based on the above processes, the Board that the preparation of financial statements have been approved. confirms that the financial reporting system for external purposes is in accordance of the Company has been designed to with relevant accounting principles and The Board Integrated Risk provide reasonable assurance regarding regulatory requirements. Management Committee (IRMC) the reliability of financial reporting and is established by the Board to the preparation of financial statements The management assists the Board in the assist the Board to oversee the implementation of the Board’s policies and overall management of major areas procedures pertaining to internal control of risk. The IRMC includes over financial reporting. In assessing the
44 45 SINHAPUTHRA FINANCE PLC Annual Report 2013 / 2014 Annual Report 2013 / 2014 SINHAPUTHRA FINANCE PLC
INDEPENDENT AUDITORS’ REPORT STATEMENT OF COMPREHENSIVE INCOME
RESTATED FOR THE YEAR ENDED 31ST MARCH 2014 2013 KPMG Tel : +94 81 223 4610 NOTE RS. RS. Kandy Branch +94 81 563 1181 (Chartered Accountants) +94 81 563 1187 Gross Income 1,065,686,774 857,084,583 483 A 1/4, William Gopallawa Mawatha, +94 81 563 1189 Kandy 02000, Fax : +94 81 223 4610 Sri Lanka. E-Mail : [email protected] Interest Income 8 989,758,829 797,799,424 Interest Expenses (664,652,985) (542,124,676) Net Interest Income 325,105,844 255,674,748 TO THE SHAREHOLDERS OF SINHAPUTHRA on these financial statements based on our subsequent realization we are of the view that FINANCE PLC audit. We conducted our audit in accordance the values may be significantly overstated. Fee and Commission Income 9 38,471,014 24,600,213 REPORT ON THE FINANCIAL STATEMENTS with Sri Lanka Auditing Standards. Those We are unable to satisfy ourselves as to Fee and Commission Expenses (8,197,094) (6,312,623) standards require that we plan and perform the adequacy of the provision made as the Net Fee and Commission Income 30,273,920 18,287,590 We have audited the accompanying the audit to obtain reasonable assurance Company has considered collateral values Net (Loss) / Gain from Trading 10 (844,756) 591,851 financial statements of Sinhaputhra Finance about whether the financial statements are which are higher than the realizable market free from material misstatement. values, and this cannot be quantified in the PLC (“the Company”) which comprise the Net Loss from Financial Instruments 11 (148,423) - absence of a proper valuation considering statements of financial position as at March Other Operating Income 12 38,450,110 34,093,095 An audit includes examining, on a test 31, 2014, the statements of comprehensive the existing market conditions. Impairment Charges for Loans and Other Losses 13 (82,085,014) (56,160,573) basis, evidence supporting the amounts and income, changes in equity and cash flows for Net Operating Income 310,751,681 252,486,711 disclosures in the financial statements. An In our opinion, so far as appears from our the year then ended, and notes, comprising audit also includes assessing the accounting examination, except for the effects on the Less: a summary of significant accounting policies policies used and significant estimates financial statements due to the matter Personnel Expenses 14 (123,290,904) (101,589,722) and other explanatory information set out on Other Expenses 15 (96,973,325) (70,265,162) made by management, as well as evaluating referred to in preceding paragraph, the pages 47 to 87 of the Financial Statements. Operating Profit Before Tax and VAT on Financial Services 90,487,452 80,631,827 the overall financial statement presentation. Company maintained proper accounting
records for the year ended March 31, 2014 Value Added Tax on Financial Services (13,705,627) (11,364,958) MANAGEMENT’S RESPONSIBILITY FOR THE Except as discussed in the opinion paragraph and the financial statements give a true FINANCIAL STATEMENTS we have obtained all the information and and fair view of the financial position of the Profit Before Income Tax 76,781,825 69,266,869 Management is responsible for the explanations which to the best of our Company as at March 31, 2014, and of its Income Tax Expenses 16 7,387,296 4,858,483 preparation and fair presentation of knowledge and belief were necessary for the financial performance and its cash flow for Profit for the Year 84,169,121 74,125,352 these financial statements in accordance purposes of our audit. We therefore believe the year then ended in accordance with Sri that our audit provides a reasonable basis with Sri Lanka Accounting Standards. Lanka Accounting Standards. Profit for the Year 84,169,121 74,125,352 This responsibility includes: designing, for our qualified opinion. implementing and maintaining internal REPORT ON OTHER LEGAL AND REGULATORY Other Comprehensive Income Net Change in Fair Value of Available for Sale Financial Assets 1,205,259 109,051 control relevant to the preparation and OPINION REQUIREMENTS Revaluation Surplus During the Year 63,983,496 - fair presentation of financial statements The Company has repossessed a significant These financial statements also comply with Deferred Tax Charge on Revaluation Surplus (5,667,550) - that are free from material misstatement, number of vehicles during the year resulting the requirements of Sections 151(2) of the Actuarial Loss on Defined Benefit Plans (1,697,458) (7,921,135) whether due to fraud or error; selecting and in a receivable against repossessed stock of Companies Act No. 07 of 2007. Total Comprehensive Income for theYear 141,992,868 66,313,268 applying appropriate accounting policies; Rs. 419,421,240/- as at the yearend which and making accounting estimates that are were available as collateral against non- Basic Earnings Per Share 17 13.37 11.77 reasonable in the circumstances. performing loans and advances. These have been considered for provisioning purposes. Chartered Accountants AUDITOR’S RESPONSIBILITY Figures in brackets indicate deductions. However considering the distressed market Kandy The Financial Statements are to be read in conjunction with the related Notes on pages 52 to 87 which form an integral part of these Financial Statements of the Our responsibility is to express an opinion conditions and based on evidence of June 25, 2014 Company.
KPMG, a Sri Lankan Partnership and a member firm M.R. Mihular FCA P.Y.S. Perera FCA C.P. Jayatilake FCA of the KPMG network of independent member firms T. J. S. Rajakarier FCA W.W.J.C. Perera FCA Ms. S. Joseph FCA affiliated with KPMG International cooporative Ms. S.M.B. Jayasekara ACA W.K.D.C. Abeyrathne ACA S.T.D.L. Perera FCA (“KPMG International“), a Swiss entity. G.A.U. Karunarathne ACA R.M.D.B. Rajapakse ACA Ms. B.K.D.T.N. Rodrigo ACA Principals - S.R.I. Perera ACMA, LLB, Attorney-at-Law, H.S. Goonawardene ACA 46 47 SINHAPUTHRA FINANCE PLC Annual Report 2013 / 2014 Annual Report 2013 / 2014 SINHAPUTHRA FINANCE PLC
STATEMENT OF FINANCIAL POSITION STATEMENT OF CHANGES IN EQUITY
AS AT 31ST MARCH 2014 2013 FOR THE YEAR ENDED 31ST MARCH STATED CAPITAL NOTE RS. RS. ORDINARY PREFERENCE STATUTORY REVALUATION GENERALINVESTMENT FAIR VALUE RETAINED TOTAL SHARES SHARES RESERVE FUND RESERVE RESERVE FUND RESERVE EARNINGS Assets RS. RS. RS. RS. RS. RS RS RS. RS. Cash and Cash Equivalents 20 72,246,753 61,587,852 Balances with Central Bank - Held to Maturity 21 317,467,507 274,736,615 Balance as at 1st April 2012 63,609,930 16,769,125 102,121,168 360,485,127 129,013,127 10,408,478 (3,410,097) Placements with Banks 170,237,356 143,389,954 94,829,014 773,825,872 Loans and Advances 22 4,476,194,958 3,915,824,597 Profit for the Year ------74,125,352 74,125,352 Financial Assets - Available for Sale 23 35,927,075 31,944,666 Other Comprehensive Income Tax Receivable 24 12,424,362 42,535,640 Actuarial Loss on Defined Benefit Plans ------(7,921,135) (7,921,135) Other Receivables 25 53,297,474 50,356,312 Other Assets 26 425,191,519 189,549,801 Net Change in Fair Value of Available ------109,051 - 109,051 Real Estate Stocks 123,093,879 109,156,220 for Sale Financial Assets Property, Plant and Equipment 727,784,344 656,510,634 27 Dividend for the Year Ended 31st March 2012 ------(14,000,392) (14,000,392) Intangible Assets 28 11,335,254 12,757,298 Transfer to Investment Fund Account During the Year - - - - - 7,722,781 - (7,722,781) - Total Assets 6,425,200,481 5,488,349,589 Transfers During the Year - - 14,972,925 - - - - (14,972,925) -
Liabilities Additional Depreciation on Revaluation - - - (5,866,022) - - - 5,866,022 - Deposits from Customers 29 4,511,620,534 4,011,946,241 Balance as at 31st March 2013 63,609,930 16,769,125 117,094,093 354,619,105 129,013,127 18,131,259 (3,301,046) 130,203,155 826,138,748 Other Borrowings 30 504,868,773 330,646,789 Finance Lease Liability 31 8,320,950 - Retirement Benefit Obligation 32 29,843,686 14,456,546 Balance as at 1st April 2013 63,609,930 16,769,125 117,094,093 354,619,105 129,013,127 18,131,259 (3,301,046) 130,203,155 826,138,748 Deferred Tax Liability 33 48,464,289 76,682,397 Profit for the Year ------84,169,121 84,169,121 Other Liabilities 34 353,950,633 228,478,868 Other Comprehensive Income Total Liabilities 5,457,068,865 4,662,210,841 Actuarial Loss on Defined Benefit Plans ------(1,697,458) (1,697,458)
Equity Net change in fair value of available ------1,205,259 - 1,205,259
Stated Capital 35 80,379,055 80,379,055 for Sale Financial Assets Statutory Reserve Fund 36 145,492,667 117,094,093 Revaluation Surplus During the Year - - - 63,983,496 - - - - 63,983,496 Revaluation Reserve 37 406,855,502 354,619,105 General Reserve 38 129,013,127 129,013,127 Deferred Tax Charge on Revaluation Surplus - - - (5,667,550) - - - - (5,667,550) Investment Fund Reserve 39 24,230,887 18,131,259 Transfer to Investment Fund Account During the Year - - - - - 6,099,628 - (6,099,628) - Retained Earnings 40 184,256,165 130,203,155 Transfers During the Year - - 28,398,574 - - - - (28,398,574) - Fair Value Reserve (2,095,787) (3,301,046) - - - (6,079,549) - - - 6,079,549 - Total Equity 968,131,616 826,138,748 Additional Depreciation on Revaluation Total Liabilities & Equity 6,425,200,481 5,488,349,589 Balance as at 31st March 2014 63,609,930 16,769,125 145,492,667 406,855,502 129,013,127 24,230,887 (2,095,787) 184,256,165 968,131,616
The Financial Statements are to be read in conjunction with the related Notes on pages 52 to 87 which form an integral part of these Financial Statements of the Company. It is certified that the Financial Statements have been prepared in compliance with the requirements of the Companies Act No. 07 of 2007.
Figures in brackets indicate deductions. Iresha Perera (Miss) The Financial Statements are to be read in conjunction with the related Notes on pages 52 to 87 which form an integral part of these Financial Statements of the Chief Financial Officer Company. The Board of Directors is responsible for the preparation and presentation of these Financial Statements. Approved and signed for and on behalf of the Board,
K.G.D.S.J. De Alwis K.R.B. Wijeyeratne Director Operations Managing Director
Kandy - 25th June 2014
48 49 SINHAPUTHRA FINANCE PLC Annual Report 2013 / 2014 Annual Report 2013 / 2014 SINHAPUTHRA FINANCE PLC
STATEMENT OF CASH FLOWS ... STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 31ST MARCH 2014 2013 FOR THE YEAR ENDED 31ST MARCH 2014 2013 NOTE RS. RS. RS. RS.
Cash Flows from Operating Activities Note A Interest and Commission Receipts 989,758,829 797,799,424 Interest Payments (664,199,985) (542,124,676) Reconciliation of Operating Profit Before Changes in Operating Assets and Liabilities Other Income 75,644,703 56,537,773 Profit Before Income Tax 76,781,825 69,266,869 Operating Expenditure (186,642,677) (148,797,794) Depreciation - Property, Plant and Equipment 27,938,401 21,846,099 Payment of Retirement Gratuity (190,563) (7,130,035) Impairment Charges for Loans and Receivables 82,085,014 56,160,573 Value Added Tax on Financial Services (13,705,627) (11,364,958) Dividend Income (283,242) (286,136) Operating Profit Before Changes in Operating Assets and Liabilities A 200,664,680 144,919,734 Reversal of Retiring Gratuity Expense 13,880,245 6,733,834 Interest Paid on Finance Lease 453,000 - (Increase)/Decrease in Operating Assets Payment of Retirement Gratuity (190,563) (7,130,035) Funds Advanced to Customers (642,455,375) (575,070,672) Profit on Sale of Property, Plant and Equipment - (2,461,250) Real Estate Stocks (13,937,659) (37,257,960) Write-off of Investment in Associate Companies - 789,780 Other Assets (231,786,473) (14,742,121) Total 200,664,680 144,919,734
Increase/(Decrease) in Operating Liabilities Deposits from Customers 499,674,293 420,321,782 Other Liabilities (5,280,220) (22,786,257) Figures in brackets indicate deductions. Net Cash Used in Operating Activities Before Income Tax (193,120,754) (84,615,494) The Financial Statements are to be read in conjunction with the related Notes on pages 52 to 87 which form an integral part of these Financial Statements of the Company.
Income Tax Paid (3,021,973) (4,992,758) Net Cash Used in Operating Activities (196,142,727) (89,608,252)
Cash Flows from Investing Activities Dividend Income 283,242 (286,136) Investments in Treasury Bills and Bonds (46,851,091) (65,618,516) Purchase of Property, Plant and Equipment (33,078,040) (20,035,960) Proceeds from Sale of Property, Plant and Equipment - 2,753,000 Net Cash Used in Investing Activities (79,645,889) (83,187,612)
Net Cash Generated from/(Used in) Financing Activities Dividend Paid - (14,000,393) Bank Loans Obtained 300,235,000 150,000,000 Repayment of Bank Loans (126,013,016) (74,744,859) Finance lease Obtained 10,148,846 - Repayment of Finance Lease (1,827,896) - Net Cash Generated from Financing Activities 182,542,934 61,254,748
Net Decrease in Cash and Cash Equivalents (93,245,682) (111,541,116) Cash and Cash Equivalents at the Beginning of the Year 15,465,337 127,006,453 Cash and Cash Equivalents at the End of the Year (77,780,345) 15,465,337
Reconciliation of Cash and Cash Equivalents at the End of the Year Cash and Short-term Funds 72,246,753 61,587,852 Deposits with Banks 170,237,356 143,389,954 Bank Overdraft (320,264,454) (189,512,469) Total (77,780,345) 15,465,337
50 51 SINHAPUTHRA FINANCE PLC Annual Report 2013 / 2014 Annual Report 2013 / 2014 SINHAPUTHRA FINANCE PLC
NOTES TO THE FINANCIAL STATEMENTS ... NOTES TO THE FINANCIAL STATEMENTS
1. CORPORATE INFORMATION 1.4 APPROVAL OF FINANCIAL 2.3 BASES OF MEASUREMENT Statements as they affect the application of 2.5.3 IMPAIRMENT LOSSES ON LOANS AND The Company also records impairment charges STATEMENTS BY DIRECTORS accounting policies and the recorded amounts ADVANCES on available for sale equity investments when there The Financial Statements have been prepared on 1.1 REPORTING ENTITY in the Financial Statements. The Company has been a significant or prolonged decline in the The Financial Statements were authorized for the historical cost basis and applied consistently The Company reviews its individually significant believes its estimates including the valuation of fair value below their cost. The determination Sinhaputhra Finance PLC was incorporated on issue by the Board of Directors on 25th June 2014. with no adjustments being made for inflationary loans and advances including rental receivable assets and liabilities are appropriate. Estimates of what is ‘significant’ or ‘prolonged’ requires 16th November 1978 and domiciled in Sri Lanka factors affecting the Financial Statements, except at each statement of financial position date and underlying assumptions are reviewed on a judgment. In making this judgment, the Company and governed by the Finance Companies Act 2. BASIS OF PREPARATION for the following: to assess whether an impairment loss should continuous basis. However the actual results may evaluates, among other factors, historical share No. 78 of 1988 replaced by the Finance Business be recorded in the comprehensive income. In differ from those estimates. The most significant price movements and duration and extent to Act No. 42 of 2011. The registered office of 2.1 STATEMENT OF COMPLIANCE Land and buildings are measured at cost at the particular, management's judgment is required in uses of judgments and estimates are as follows: which the fair value of an investment is less than the Company is situated at No. 11, Hill Street, time of acquisition and subsequently at revalued the estimation of the amount and timing of future The Financial Statements of the Company have its cost. Kandy. The Company was re-registered under amounts, which are the fair values at the date of cash flows when determining the impairment loss. been prepared in accordance with Sri Lanka 2.5.1 GOING CONCERN the Companies Act No. 07 of 2007. The Ordinary revaluation less accumulated depreciation and These estimates are based on assumptions about Financial Reporting Standards (SLFRS) and Lanka 2.5.5 TAXATION shares of the Sinhaputhra Finance PLC are listed impairment losses, if any. The Directors have made an assessment on a number of factors and actual results may differ, Accounting Standards (LKAS) as issued by The on the Diri Savi Board on the Colombo Stock the Companies ability to continue as a going resulting in future changes to the allowance. The Company is subject to income tax and Institute of Chartered Accountants of Sri Lanka and Exchange. Available for sale financial assets are measured at concern and is satisfied that it has the resources other taxes including VAT on financial services. comply with the requirements of the Companies fair value. to continue in business for the foreseeable future. Loans and advances including rental receivable Significant judgment was required to determine Act No. 07 of 2007, and Finance Business Act As a registered finance company, it is supervised Furthermore, management is not aware of any that have been assessed individually and found the total provision for current, deferred and other No. 42 of 2011 and amendments thereto. by the Department of Supervision of Non Bank Assets held for trading are measured at fair value. material uncertainties that may cast significant not to be impaired and all individually insignificant taxes pending the issue of tax guidelines on the
Financial Institutions of the Central Bank of Sri doubt upon the Company's ability to continue loans and advances are then assessed collectively, treatment of the adoption of SLFRS in the Financial The formats used in the preparation of the Lanka. Liability for defined benefit obligation is carried as a going concern. Therefore, the Financial in groups of assets with similar risk characteristics, Statements and the taxable profit for the purpose Financial Statements and the disclosures made at present value of defined benefit obligation less Statements continue to be prepared on the going to determine assessed collectively, in groups of of imposition of taxes. Uncertainties exist, with therein also comply with the specified format 1.2 NUMBER OF EMPLOYEES unrecognized actuarial losses. concern basis. assets with similar risk characteristics, to determine respect to the interpretation of the applicability of prescribed by the Central Bank of Sri Lanka for whether provision should be made due to incurred tax laws, at the time of the preparation of these The staff strength of the Company as at 31st the preparation, presentation and publication of 2.4 FUNCTIONAL AND PRESENTATION 2.5.2 FAIR VALUE OF FINANCIAL loss events for which there is objective evidence, Financial Statements. The Company recognized March 2014 was 204 (2013-190). Annual Audited Financial Statements of Non-Bank CURRENCY INSTRUMENTS but the effects of which are not yet evident. The assets and liabilities for current, deferred and other Financial Institutions. collective assessment takes account of data from taxes based on estimates of whether additional 1.3 PRINCIPAL ACTIVITIES The Financial Statements are presented in Sri Where the fair values of financial assets and the loan portfolio (such as levels of arrears, assets taxes will be due. Where the final tax outcome 2.2 PRESENTATION OF FINANCIAL Lankan Rupees and which is the functional financial liabilities recorded in the statement of The principal activities of the Company continued characteristic, etc.), and judgments on the effect of these matters is different from the amounts STATEMENTS currency. financial position cannot be derived from active to be financing and related activities such of concentrations of risks and economic data. The that were initially recorded, such differences will markets, they are determined using a variety as accepting deposits, providing of financial Financial assets and financial liabilities are offset impairment loss on loans and advances including impact the income and deferred tax amounts in 2.5 SIGNIFICANT ACCOUNTING of valuation techniques that include the use of accommodations in the form of finance lease, and the net amount reported in the statement rental receivable is disclosed in more detail in the period in which the determination is made. JUDGMENTS, ESTIMATES AND mathematical models. The inputs to these models hire purchase, personal loans, business loans, of financial position only when there is a legally Note 22. ASSUMPTIONS are derived from observable market data where pawning, deposit loans and real estate etc. enforceable right to offset the recognised 3. SIGNIFICANT ACCOUNTING POLICIES - In the process of applying the Company's possible, but if this is not available, judgment is amounts and there is an intention to settle on a 2.5.4 IMPAIRMENT OF AVAILABLE FOR SALE STATEMENT OF FINANCIAL POSITION accounting policies, management has exercised required to establish fair values. The judgments There were no significant changes in the nature of net basis, or to realize the assets and settle the INVESTMENTS judgment and estimates in determining the include considerations of liquidity and inputs such the principal activities of the Company during the liability simultaneously. Income and expenses are 3.1 CASH AND SHORT TERM FUNDS as discount rates. The Company reviews its debt securities classified financial period under review. not offset in the income statement unless required amounts recognised in the Financial Statements. as available for sale investments at each reporting Cash and cash equivalents comprise cash in hand, or permitted by any accounting standard or Use of available information, estimates and date to assess whether they are impaired. This balances with banks, and money at call & short interpretation, and as specifically disclosed in the assumptions and application of judgment is requires similar judgment as applied to the notice. For the purpose of the statement of cash accounting policies of the Company. inherent in the preparation of the Financial individual assessment of loans and advances.
52 53 SINHAPUTHRA FINANCE PLC Annual Report 2013 / 2014 Annual Report 2013 / 2014 SINHAPUTHRA FINANCE PLC
... NOTES TO THE FINANCIAL STATEMENTS ... NOTES TO THE FINANCIAL STATEMENTS
flows, cash and cash equivalents consist of cash 3.4.1 DATE OF RECOGNITION 3.4.4 RESCHEDULED LOANS initial rentals received, unearned hire purchase are an integral part of the EIR. The amortisation or loss on that asset that has been recognised and short-term deposits. income and the allowances for impairment. is included in ‘Interest and similar income’ in in equity is amortised to profit or loss over the All financial assets and liabilities are initially Where possible, the Company seeks to the income statement. The losses arising from remaining life of the investment using the EIR. Any recognised on the trade date, i.e., the date that reschedule loans rather than to take possession Cash and cash equivalents are carried at amortised 3.4.7 AVAILABLE FOR SALE impairment of such investments are recognised in difference between the new amortised cost and the Company becomes a party to the contractual of collateral. This may involve extending the cost in the statement of financial position. FINANCIAL ASSETS the income statement. If the Company were to sell the expected cash flows is also amortised over provisions of the instrument. This includes ‘regular payment arrangements and the agreement or reclassify more than an insignificant amount of the remaining life of the asset using the EIR. If the way trades’: purchases or sales of financial assets of new loan conditions. Once the terms have Available for sale assets are non-derivative Details of the cash and cash equivalents are given held to maturity investments before maturity (other asset is subsequently determined to be impaired, that require delivery of assets within the time frame been renegotiated, any impairment is measured investment that are designated as available for in Note. 20 to the Financial Statements. than in certain specific circumstances), the entire then the amount recorded in equity is recycled to generally established by regulation or convention using the original EIR as calculated before the sale or are not classified as another category of category would be tainted and would have to be the income statement. in the market place. modification of terms and the loan is no longer financial assets. Unquoted equity securities whose 3.2 BALANCES WITH CENTRAL BANK reclassified as available for sale. Furthermore, the considered past due after receipt of payments fair value cannot reliably be measured are carried Company would be prohibited from classifying 3.7 WRITE-OFF OF LOANS AND The Central Bank requires that all Finance 3.4.2 INITIAL MEASUREMENT OF continuously for a prescribed period. Management at cost. All other available for sale investments are any financial asset as held to maturity during the ADVANCES Companies to maintain assets in the form of Sri FINANCIAL INSTRUMENTS continuously reviews rescheduled loans to ensure carried at fair value. following two years. Lanka Government Treasury Bills equivalent to that all criteria are met and that future payments Loans (and the related impairment allowance The classification of financial instruments at 7.5% on all deposit liabilities on each period ends. are likely to occur. The loans continue to be Interest income on available for sale assets is accounts) are normally written off, either partially initial recognition depends on their purpose and 3.5 OTHER BORROWED FUNDS subject to an individual or collective impairment recognised in profit or loss using the effective or in full, when there is no realistic prospect of characteristics and the management’s intention 3.3 SECURITIES PURCHASED UNDER assessment, calculated using the loan’s original interest method (EIR). Dividend income is Financial instruments obtained by the Company recovery. Where loans are secured, this is generally in acquiring them. All financial instruments RE-SALE AGREEMENT EIR. recognised in profit or loss when the Company are classified as liabilities under ‘Other Borrowed after receipt of any proceeds from the realization are measured initially at their fair value plus becomes entitled to the dividend. Funds’, where the substance of the contractual of security. Securities purchased under re-sale agreements transaction costs, except in the case of financial 3.4.5 FINANCE LEASES arrangement results in the Company having an are the Government securities purchased subject assets and financial liabilities recorded at fair value Other fair value changes are recognised in other obligation either to deliver cash or another financial 3.8 COLLATERAL VALUATION to an agreement to sell at a predetermined price through profit or loss. Assets leased to customers which transfer comprehensive income until the investment is asset to the holder, or to satisfy the obligation at a future date. They are recorded separately in substantially all the risks and rewards associated The Company seeks to use collateral, where sold or impaired, whereupon the cumulative other than by the exchange of a fixed amount of the Financial Statements at the consideration 3.4.3 LOANS AND RECEIVABLES with ownership other than legal title, are classified possible, to mitigate its risks on financial assets. gains and losses previously recognised in other cash or another financial asset for a fixed number paid. The difference between the purchase as finance leases. Amounts receivable under The collateral comes in various forms such as cash, Loans and advances to customers’ include comprehensive income are classified to profit or of own equity shares. After initial measurement, and sale price represents interest income and finance leases are included under “Loans and securities, guarantees, real estate, land & building non–derivative financial assets with fixed or loss as a reclassification adjustment. Other Borrowings are subsequently measured is recognized in the income statement over the advances”. Leasing balances are stated in the receivables, inventories, other non-financial determinable payments that are not quoted in an at amortised cost using the EIR. Amortised cost period of the resale agreement. statement of financial position after deduction assets and credit enhancements. The fair value active market. After initial measurement, ‘loans 3.4.8 HELD TO MATURITY FINANCIAL is calculated by taking into account any discount of initial rentals received, unearned lease income of collateral is generally assessed, at a minimum, and advances to customers’ are subsequently ASSETS or premium on the issue and costs that are an 3.4 FINANCIAL INSTRUMENTS – INITIAL and the impairment allowances. at inception and based on the guidelines issued measured at amortised cost using the EIR, less integral part of the EIR. RECOGNITION AND SUBSEQUENT Held to maturity financial assets are non– by the Central Bank of Sri Lanka. Non-financial allowance for impairment. Amortised cost is MEASUREMENT 3.4.6 HIRE PURCHASE derivative financial assets with fixed or collateral, such as real estate, vehicle, land & calculated by taking into account any fees and 3.6 RECLASSIFICATION OF FINANCIAL determinable payments and fixed maturities, building is valued based on data provided by third Financial assets within the scope of LKAS 39 are costs that are an integral part of the EIR. The Assets hired to customers under the hire purchase ASSETS which the Company has the intention and ability parties such as independent valuers. classified as Financial Assets at Fair Value Through amortisation is included in ‘Interest income’ agreements, which transfer substantially all the to hold to maturity. After initial measurement, Reclassifications are recorded at fair value at the Profit or Loss, Loans and Receivables, Held-to- in the income statement. The losses arising risks and rewards associated with ownership as held to maturity financial assets are subsequently date of reclassification, which becomes the new 3.9 COLLATERAL REPOSSESSED Maturity Investments, Available-for-Sale Financial from impairment are recognised in the income well as the legal title at the end of such contracts measured at amortised cost using the Effective amortised cost. Assets as appropriate. The Company determines statement in ‘Impairment charge’. are classified as loans rentals. Amounts receivable Repossessed stock includes assets of facilities Interest Rate (EIR) less impairment. Amortised the classification of its financial assets at initial under Hire Purchase receivable are included under which were in default and are now repossessed. cost is calculated by taking into account any For a financial asset reclassified out of the recognition. Loans and receivables comprises of loans and “Loans and advances”, balances are stated in the Repossessed stocks are valued at outstanding discount or premium on acquisition and fees that 'available for sale’ category, any previous gain receivables to the Company. statement of financial position after deduction of facility balance at the time of closing the facility
54 55 SINHAPUTHRA FINANCE PLC Annual Report 2013 / 2014 Annual Report 2013 / 2014 SINHAPUTHRA FINANCE PLC
... NOTES TO THE FINANCIAL STATEMENTS ... NOTES TO THE FINANCIAL STATEMENTS
and net realizable value of the asset whichever is freehold land and building and records at cost 3.10.6 DERECOGNITION ASSETS % USEFUL Provision has been made for the defined benefit Liability in a transaction that is not a lower. Net realizable value is the estimated selling less accumulated depreciation and accumulated CATEGORY PER ANNUM LIFE plan from the first year of service for all employees business combination and, at the time of the The carrying amount of an item of property, plant price less the estimated cost necessary to make impairment if any. Computer software 10 10 Yrs. in conformity with LKAS 19 on "Employee transaction, affects neither the accounting and equipment is derecognized on disposal or the sale. License 10 10 Yrs. Benefits". profit nor taxable profit or loss when no future economic benefits are expected 3.10.4 REVALUATION MODEL from its use or disposal. The gain or loss arising 3.10 PROPERTY, PLANT AND EQUIPMENT However, under the Payment of Gratuity Act Deferred tax assets are recognised for all The Company applies the Revaluation Model for from the derecognition of an item of property, 3.11 RETIREMENT BENEFIT OBLIGATIONS No .12 of 1983 the liability to and employee arises deductible differences. Carry forward of unused Property, plant and equipment are recognised the entire class of freehold land and building for plant and equipment is included in the income only on completion of five years of continued tax credits and unused tax losses, to the extent if it is probable that future economic benefits measurement after recognition. Such properties statement when the item is derecognized. 3.11.1 DEFINED CONTRIBUTION PLANS – service. that it is probable that taxable profits will be associated with the assets will flow to the Company are carried at a revalued amount, being the fair When replacement costs are recognized in the EPF AND ETF available against which the deductible temporary and cost of the asset can be reliably measured. value of such properties as at the revaluation date carrying amount of an item of property, plant All employees who are eligible for Employees’ 3.12 CURRENT TAX differences and the carry forward of unused tax less any subsequent accumulated depreciation and equipment, the remaining carrying amount Provident Fund contributions and Employees’ credits and unused tax losses can be utilised. 3.10.1 BASIS OF RECOGNIZE and impairment. On revaluation of an asset, of the replaced part is derecognized. Gains and Current tax assets and liabilities consists of Trust Fund contributions are covered by relevant any increase in the carrying amount is credited losses on disposal of an item of property, plant amounts expected to be recovered from or Property, plant and equipment are recorded at contribution funds in line with respective statutes The carrying amount of a deferred tax asset is directly to equity under the revaluation reserve. and equipment are determined by comparing paid to the Commissioner General of Inland cost of purchase or construction or valuation and regulations. reviewed at each statement of financial position Revaluation surplus will be credited to the income the proceeds from disposal with the carrying Revenue in respect of the current as well as together with any incidental expenses thereon. date and reduced to the extent it is no longer statement to the extent that it reverses the amount of property, plant and equipment and are prior years. The tax rates and tax laws used to These assets are stated at cost or valuation less Contribution to Provident Funds and Trust Funds probable that sufficient taxable profit will be previously recognized revaluation loss of the same recognized net within “Other income” in income compute the amount are those that are enacted accumulated depreciation and any accumulated covering the employees are recognised as an available to allow all or part of the deferred tax asset in the income statement. Any decrease in statement. or subsequently enacted by the reporting date. impairment loss. expense in the income statement. asset to be utilised. Unrecognised deferred tax the carrying amount on revaluation will be debited Accordingly, provision for taxation is made on asset are reassessed at each statement of financial to the income statement. Revaluation deficit will 3.10.7 INTANGIBLE ASSETS the basis of the profit for the year as adjusted for 3.10.2 DEPRECIATION 3.11.2 DEFINED BENEFIT PLANS position date and are recognise to the extent that be debited to the revaluation reserve to the taxation purpose in accordance with the provision The intangible assets include the value of is probable that future taxable profit will allow the Depreciation is provided at the rates indicated extent that it reverses the previously recognized A defined benefit plan is a post employment of the Inland Revenue Act No. 10 of 2006 and the computer software cost of purchased licenses. deferred tax asset to be recovered. below on straight-line basis over the period revaluation surplus of the same asset. benefit plan other than a defined contribution amendment thereto, at the rates specified in the An intangible asset is recognised only when its appropriate to the estimated useful lives of the plan. The defined benefit obligation is calculated Financial Statements. cost can be measured reliably and it is probable Deferred tax assets and liabilities are measured at different types of assets. annually using the projected unit credit method. that the expected future economic benefits that the tax rate that are expected to apply in the year The service of a Qualified Actuary is obtained % PER ANNUM YEARS 3.10.5 SUBSEQUENT MEASUREMENT 3.13 DEFERRED TAX are attributable to it will flow to the Company. when the assets are realized or the liabilities are to determine the valuation of the define benefit Buildings 2.5 (40) The cost of replacing part of an item of property, The intangible assets are carried at cost less Deferred tax is provided using the liability method settled, based on tax rates and tax laws that have obligation for the Company that adopted the Office Equipment 25 (4) plant and equipment is recognized in the carrying accumulated amortisation and accumulated on temporary differences at the statement of been enacted or substantively enacted at the actuarial valuation method in computing the Furniture and Fittings 25 (4) amount of the item if it is probable that the future impairment losses if any. financial position date between the tax bases of statement of financial position date. provision required in accordance with LKAS 19 Computer Equipment 20 (5) economic benefits embodied within that part will assets and liabilities and their carrying amounts for on "Employee Benefits". The projected unit Freehold Motor Vehicles 25 (4) flow to the Company and its cost can be reliably 3.10.8 AMORTISATION OF financial reporting purpose. Deferred tax liabilities 3.14 VALUE ADDED TAX (VAT) credit method projects the current data using the Leasehold Motor Vehicles 25 (4) measured. The costs of day to day servicing of INTANGIBLE ASSETS are recognised for all temporary differences, actuarial assumptions and calculates projected During the year, the Companies total ‘value Leasehold Equipment 25 (4) property, plant and equipment are charged to except: Amortization is calculated using the straight–line benefits at the participants' assumed retirement addition’ was subjected to a 12% VAT on the income statement as incurred. The carrying method to write-down the cost of intangible date. The key assumptions used in determining financial services as per Section 25A of the Value amount of the item replaced will be derecognized Where the deferred tax liability arises from 3.10.3 COST MODEL assets to their residual values over their estimated the benefit obligations are given in Note 32 to Added Tax Act No. 14 of 2002 and amendments based on the derecognition criteria. the initial recognition of goodwill or of an useful lives as follows: these Financial Statements. thereto. The Company applies the cost model to all asset or property, plant and equipment except for
56 57 SINHAPUTHRA FINANCE PLC Annual Report 2013 / 2014 Annual Report 2013 / 2014 SINHAPUTHRA FINANCE PLC
... NOTES TO THE FINANCIAL STATEMENTS ... NOTES TO THE FINANCIAL STATEMENTS
3.15 DIVIDENDS ON ORDINARY SHARES to the above, following standards have also been been considered and appropriate disclosures are 5.2 OTHER FINANCIAL LIABILITIES 6.2 INTEREST INCOME AND EXPENSE 6.4 FEE INCOME EARNED FROM SERVICES issued and will be effective from 1st January 2014. made in Note 42 where necessary. THAT ARE PROVIDED OVER A CERTAIN Other financial liabilities including deposits, debt For all financial instruments interest income or Dividends on ordinary shares are recognised as PERIOD OF TIME issued by the Company and the other borrowed expense is recorded using the EIR. EIR is the a liability and deducted from equity when they SLFRS 10 - Consolidated Financial Statements 4.5 COMMITMENTS AND funds are initially measured at fair value less rate that exactly discounts estimated future cash Fees earned for the provision of services over are approved by the Companies’ shareholders. SLFRS 11 - Joint Arrangements CONTINGENCIES transaction cost that are directly attributable to payments or receipts through the expected life a period of time are accrued over that period. Dividends for the year that are approved after the SLFRS 12 - Disclosure of Interests in Other All discernible risks are accounted for in the acquisition and subsequently measured at of the financial instrument or a shorter period, Credit related fees are deferred and recognised reporting date are disclosed as an event after the Entities determining the amount of all known liabilities. amortised cost using the EIR method. Amortised where appropriate, to the net carrying amount as an adjustment to the EIR of the loan. reporting date. cost is calculated by taking into account any of the financial asset or financial liability. The 4.2 EARNINGS PER SHARE Contingent liabilities are possible obligations discount or premium on the issue and costs that calculation takes into account all contractual 6.5 DIVIDEND INCOME 3.16 DIRECTORS’ RESPONSIBILITY The Company presents basic and diluted whose existence will be confirmed only by are an integral part of the EIR. terms of the financial instrument (for example, STATEMENT Dividend income is recognised when the earnings per share for its ordinary shares. Basic uncertain future events or present obligations prepayment options) and includes any fees or Company’s right to receive the payment is The Board of Directors takes the responsibility EPS is calculated by dividing the profit or loss where the transfer of economic benefit is not 5.3 DE-RECOGNITION OF FINANCIAL incremental costs that are directly attributable to established. for the preparation and presentation of these attributable to ordinary shareholders of the probable or cannot be reliably measured. LIABILITIES the instrument and are an integral part of the EIR,
Financial Statements. Company by the weighted average number of Contingent liabilities are not recognised in the but not future impairment losses. The carrying A financial liability is de-recognised when the 6.6 NET TRADING INCOME ordinary shares outstanding during the period. Statement of Financial Position but are disclosed amount of the financial asset or financial liability obligation under the liability is discharged or 4. RESPONSIBILITY FOR FINANCIAL Diluted EPS is determined by adjusting the profit unless they are remote. is adjusted if the Company revises its estimates Results arising from trading activities include all cancelled or expires. Where an existing financial REPORTING or loss attributable to ordinary shareholders and of payments or receipts. The adjusted carrying gains and losses from changes in fair value and liability is replaced by another from the same the weighted average number of ordinary shares 5. SIGNIFICANT ACCOUNTING POLICIES- amount is calculated based on the original EIR related interest income or expense and dividends lender on substantially different terms, or the terms 4.1 STANDARDS ISSUED BUT NOT YET outstanding for the effects of all dilutive potential STATEMENT OF FINANCIAL POSITION and the change in carrying amount is recorded as for financial assets and financial liabilities ‘held of an existing liability are substantially modified, EFFECTIVE ordinary shares. ‘Interest income’ for financial assets and ‘Interest for trading’. This includes any ineffectiveness such an exchange or modification is treated 5.1 FINANCIAL LIABILITIES expense’ for financial liabilities. recorded in hedging transactions. The following SLFRS have been issued by the as a de-recognition of the original liability and 4.3 RELATED PARTY TRANSACTIONS Institute of Chartered Accountants of Sri Lanka that Initial recognition and measurement of financial the recognition of a new liability. The difference Once the recorded value of a financial asset or a 6.7 RENTAL INCOME have an effective date in the future. Those SLFRS Disclosure has been made in respect of the liabilities within the scope of LKAS 39 are classified between the carrying value of the original financial group of similar financial assets has been reduced will have an effect on the accounting policies transactions in which one party has the ability as deposits from customers, debt issued and other liability and the consideration paid is recognised Rental income is recognized on an accrual basis. due to an impairment loss, interest income currently adopted by the Company and may have to control or exercise significant influence over borrowed funds as appropriate. The Company in profit or loss. continues to be recognised using the rate of an impact on the future Financial Statements. the financial and operating policies/decisions of determines the classification of its financial 6.8 OTHER INCOME interest used to discount the future cash flows for SLFRS 9-Financial Instruments: Classification the other, irrespective of whether a price being liabilities at initial recognition. The Company 6. SIGNIFICANT ACCOUNTING POLICIES - the purpose of measuring the impairment loss. Other income is recognized on an accrual basis. and Measurement SLFRS 9, as issued reflects the charged. The relevant disclosure are given in classifies financial liabilities in to financial liabilities RECOGNITION OF INCOME AND EXPENSES first phase of work on replacement of LKAS 39 Note 44 to the Financial Statements. as other financial liabilities in accordance with the 6.3 FEE AND COMMISSION INCOME 6.9 OTHER EXPENSES and applies to classification and measurement substance of the contractual arrangement and the 6.1 REVENUE RECOGNITION of financial assets and liabilities. SLFRS 13-Fair 4.4 EVENTS AFTER THE REPORTING PERIOD definitions of financial liabilities. The Company earns fee and commission income All other expenses have been recognized in Revenue is recognised to the extent that it is Value Measurement SLFRS 13 establishes a from a diverse range of services it provides to its the Financial Statements as they are incurred in Events after the reporting period are those events, probable that the economic benefits will flow to single source of guidance under SLFRS for all The Company recognizes financial liabilities in the customers. Fee income can be divided into the the period to which they relate. All expenditure favorable and unfavorable, that occur between the the Company and the revenue can be reliably fair value measurements. SLFRS 13 provides statement of financial position when the Company following two categories: incurred in the operation of the business and reporting date and the date when the Financial measured. The following specific recognition guidance on all fair value measurements under becomes a party to the contractual provisions of in maintaining the capital assets in a state of Statements are authorised for issue. criteria must also be met before revenue is SLFRS. SLFRS 9 and SLFRS 13 will be effective the financial liability. Finance Charges efficiency has been charged to revenue in arriving recognised. for financial periods beginning on or after 1st Commission Income at the Company’s profit for the year. In this regard, all material and important events January 2015 and 2014 respectively. In addition that occurred after the reporting period have
58 59 SINHAPUTHRA FINANCE PLC Annual Report 2013 / 2014 Annual Report 2013 / 2014 SINHAPUTHRA FINANCE PLC
... NOTES TO THE FINANCIAL STATEMENTS ... NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31ST MARCH 2014 2013 RS. RS. 6.10 STATEMENT OF CASH FLOWS Segment capital expenditure is the total cost incurred during the period to acquire segment 8. INTEREST INCOME The statement of cash flows has been prepared by assets that are expected to be used for more than using the ‘Direct Method’ in accordance with LKAS Finance Leases 297,598,359 195,405,232 one accounting period. 7 - Statement of Cash Flows, whereby gross cash Hire Purchases 241,199,587 230,337,122 receipts and gross cash payments of operating Business Loans 263,523,214 220,018,481 Personal Loans 216,736 242,580 activities, financing activities and investing Pawning Advances 17,478,694 24,681,167 activities have been recognized. Cash and cash Fixed Deposit Loans 15,849,454 14,430,378 equivalents comprise mainly cash balances, call Overdue Interest 99,760,417 63,242,053 placements, balances with the Central Bank of Sri Treasury Bills and Bonds 34,398,056 30,751,426 Lanka, highly liquid investments of which original Deposits with Banks 18,861,515 18,065,325 Savings Accounts 447,886 246,745 maturity of 3 months or less and net amount due Staff Loans 424,911 378,915 from banks. Total 989,758,829 797,799,424
7. SEGMENT REPORTING Notional Tax Credit for Withholding Tax on Government Securities on Secondary Market Transactions Section 137 of the Inland Revenue Act No. 10 of 2006, provides that a company which derives interest income from the secondary market transactions in Government securities would be entitled to a notional tax The Company’s segmental reporting is based credit (being one ninth of net interest income) provided such interest income forms part of the statutory income of the Company for that year of assessment. on the following operating segments: lease, hire purchase, personal loans, business loans, pawning Accordingly the net income earned from secondary market transactions in Government securities for the year, has been grossed up in the Financial Statements, and investment. and the resulting notional tax credit amounts, to Rs. 3,439,806/- (2012/13 - Rs. 3,075,143/-) for the Company.
7.1 SEGMENT REPORTING 2014 2013 A segment is a distinguishable component of the RS. RS.
Company that is engaged in providing services Interest Expenses
(Business Segment). Customer Deposits 584,594,604 487,990,872 Medium and Long-term Borrowings 60,868,890 43,535,103 In accordance with Sri Lanka Financial Reporting Short-term Borrowings 18,736,491 10,598,701 Standard SLFRS No. 8 – Operating Segments, Finance Lease 453,000 - Sub Total 664,652,985 542,124,676 segmental information is presented in respect of the Company. The segments comprise of Net Interest Income 325,105,844 255,674,748 financing and investing segments. 9. FEE AND COMMISSION INCOME AND EXPENSES Segment results, assets and liabilities include 9.1 FEE AND COMMISSION INCOME those items directly attributable to a segment as well as those that can be allocated on a reasonable Finance Charges 28,912,992 18,696,031 Insurance Commissions 9,558,022 5,904,182 basis. Total 38,471,014 24,600,213
9.2 FEE AND COMMISSION EXPENSES
Commissions Paid to Brokers 8,197,094 6,312,623 Total 8,197,094 6,312,623
60 61 SINHAPUTHRA FINANCE PLC Annual Report 2013 / 2014 Annual Report 2013 / 2014 SINHAPUTHRA FINANCE PLC
... NOTES TO THE FINANCIAL STATEMENTS ... NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31ST MARCH 2014 2013 FOR THE YEAR ENDED 31ST MARCH 2014 2013 RS. RS. NOTE RS. RS.
10. NET (LOSS)/GAIN FROM TRADING 16. INCOME TAX EXPENSES
Vehicle Trading Income (844,756) 591,851 Current Tax Expense 16.1 26,498,362 16,242,317 Total (844,756) 591,851 Under Provision for the Year 2011/12 - 2,793,388 Deferred Tax Expense 16.2 (33,885,658) (23,894,188) 11. NET (LOSS)/GAIN FROM FINANCIAL INVESTMENTS Total (7,387,296) (4,858,483)
Assets Available for Sale (Loss)/Gain on Sale of Dealing Securities (148,423) - 16.1 RECONCILIATION OF EFFECTIVE TAX RATE
Total (148,423) - Tax charge is based on taxable profit which differs from profit for financial reporting purposes. These differences are explained in the following reconciliation 12. OTHER OPERATING INCOME (NET) statement.
Gain/(Loss) on Sale of Property, Plant and Equipment 2,461,250 - Net Profit Before Income Tax 76,781,825 69,266,869 Gain/(Loss) on Revaluation on Foreign Exchange 150,703 57,035 Gain/(Loss) on Sale of Real Estate 1,055,000 1,136,044 Add: Disallowable Expenses 69,793,564 73,261,002 Bad Debts Recoveries 26,023,560 30,309,814 Less: Allowable Expenses (205,093,296) (277,767,858) Rent Income 3,127,718 4,238,119 (58,517,907) (135,239,987) Other Income 1,082,396 2,332,188 Add/(Less) - Adjustments Dividend Income 286,136 283,242 Tax Loss from Lease Business During the Year 153,154,914 193,248,262 Total 34,093,095 38,450,110 Business Loss Claimed During the Year - - Taxable Income 94,637,007 58,008,275 13. IMPAIRMENT CHARGES ON LOANS AND OTHER LOSSES
Current Tax @ 28% 26,498,362 16,242,317 Loans and Receivables Charge/(Write Back) to the Income Statement on Individual Impairment 24,257,061 32,178,614 Effective Tax Rate 35% 23% Charge/(Write Back) to the Income statement on Collective Impairment 54,313,931 23,981,959 Provision for Other receivables - 3,514,022 16.2 DEFERRED TAX EXPENSE Total 82,085,014 56,160,573 Reversal of Deferred Taxation for the Year (33,885,658) (23,894,188) Total (33,885,658) (23,894,188) 14. PERSONNEL EXPENSES
17. EARNINGS PER SHARE Salaries and Bonus 73,392,580 62,006,072
Directors Emoluments 9,185,633 11,952,151 17.1 BASIC EARNINGS PER SHARE Contribution to Employees’ Provident Fund 7,913,352 5,907,407 Basic Earnings Per Share has been calculated by dividing the net profit attributable to equity holders of the Company, by the weighted average number of Contribution to Employees’ Trust Fund 1,187,003 886,111 ordinary shares in issue during the year. Retirement Benefit Obligations 13,880,245 6,733,834 Other Personnel Costs 17,732,091 14,104,147 Total 123,290,904 101,589,722 Profit Attributable to the Equity Holders of the Company (Rs.) 84,169,121 74,125,352 Weighted Average Number of Ordinary Shares 6,295,893 6,295,893 15. OTHER EXPENSES Basic Earnings Per Share (Rs.) 13.37 11.77
External Auditors’ Remuneration 635,250 577,500 Internal Audit Fee 525,000 271,114 Depreciation of Property, Plant and Equipment 27,938,401 21,846,099 Advertising and Marketing Expenses 3,763,723 2,866,448 Professional and Legal Expenses 1,959,648 536,132 Establishment and Administration Expenses 62,151,303 44,167,869 Total 96,973,325 70,265,162
62 63 SINHAPUTHRA FINANCE PLC Annual Report 2013 / 2014 Annual Report 2013 / 2014 SINHAPUTHRA FINANCE PLC
... NOTES TO THE FINANCIAL STATEMENTS ... NOTES TO THE FINANCIAL STATEMENTS
18. MEASUREMENT OF FINANCIAL INSTRUMENTS AS AT 31ST MARCH 2013 DESIGNATED HELD TO LOAN AND AVAILABLE OTHERS TOTAL AS MATURITY RECEIVABLES FOR SALE AS AT 31ST MARCH 2014 DESIGNATED AS HELD TO LOAN AND RE- AVAILABLE OTHERS TOTAL (FVTPL) (HTM) (L&R) (AFS) FAIR VALUE THROUGH MATURITY CEIVABLES FOR SALE RS. RS. RS. RS. RS. RS. PROFIT OR LOSS (FVTPL) (HTM) (L&R) (AFS) RS. RS. RS. RS. RS. RS. Assets Cash and Cash Equivalents - - 61,587,852 - - 61,587,852 Assets Balances with Central Bank - 274,736,615 - - - 274,736,615 Cash and Cash Equivalents - - 72,246,753 - - 72,246,753 Placement with Banks - - 143,389,954 - - 143,389,954 Balances with Central Bank - 317,467,507 - - - 317,467,507 Loans and Advances - - 3,915,824,597 - - 3,915,824,597 Placement with Banks - - 170,237,356 - - 170,237,356 Financial Assets - Available for Sale - - - 31,944,666 - 31,944,666 Loans and Advances - - 4,476,194,958 - - 4,476,194,958 Tax Receivable - - - - 42,535,640 42,535,640 Financial Assets - Available for Sale - - - 35,927,075 - 35,927,075 Other Receivables - - - - 50,356,312 50,356,312 Tax Receivable - - - - 12,424,362 12,424,362 Other Assets - - - - 189,549,801 189,549,801 Other Receivables - - - - 53,297,474 53,297,474 Real Estate Stocks - - - - 109,156,220 109,156,220 Other Assets - - - - 425,191,519 425,191,519 Property, Plant and Equipment - - - - 656,510,634 656,510,634 Real Estate Stocks - - - - 123,093,879 123,093,879 Intangible Assets - - - - 12,757,298 12,757,298 Property, Plant and Equipment - - - - 727,784,344 727,784,344 Total Assets - 274,736,615 4,120,802,403 31,944,666 1,060,865,905 5,488,349,589 Intangible Assets - - - - 11,335,254 11,335,254 Total Assets - 317,467,507 4,718,679,067 35,927,075 1,353,126,832 6,425,200,481
AS AT 31ST MARCH 2013 DESIGNATED AMORTIZED OTHERS TOTAL AS COST AS AT 31ST MARCH 2014 DESIGNATED AMORTIZED OTHERS TOTAL (FVTPL) AS (FVTPL) COST RS. RS. RS. RS. RS. RS. RS. RS. Liabilities Liabilities Deposits from Customers - 4,011,946,241 - 4,011,946,241 Deposits from Customers - 4,511,620,534 - 4,511,620,534 Other Borrowings - 330,646,789 - 330,646,789 Other Borrowings - 504,868,773 - 504,868,773 Retirement Benefit Obligation - - 14,456,546 14,456,546 Finance Lease Liability - 8,320,950 - 8,320,950 Deferred Tax Liability - - 76,682,397 76,682,397 Retirement Benefit Obligation - - 29,843,686 29,843,686 Other Liabilities - - 228,478,868 228,478,868 Deferred Tax Liability - - 48,464,289 48,464,289 Total Liabilities - 4,342,593,030 319,617,811 4,662,210,841 Other Liabilities - - 353,950,633 353,950,633 Total Liabilities - 5,024,810,257 432,258,608 5,457,068,865
19 FAIR VALUE OF FINANCIAL INSTRUMENTS
19.1 FINANCIAL ASSETS AVAILABLE FOR SALE
The Company uses the following hierarchy for determining and disclosing the fair value of financial instruments by valuation technique.
Level 1: quoted prices in active markets for assets or liabilities Level 2: other techniques for which all inputs which have a significant effect on the recorded fair value are observable, either directly or indirectly Level 3: techniques which use inputs that have a significant effect on the recorded fair value that are not based on observable market data
64 65 SINHAPUTHRA FINANCE PLC Annual Report 2013 / 2014 Annual Report 2013 / 2014 SINHAPUTHRA FINANCE PLC
... NOTES TO THE FINANCIAL STATEMENTS ... NOTES TO THE FINANCIAL STATEMENTS
The following table shows an analysis of financial instruments recorded at fair value. AS AT 31ST MARCH 2014 2013 NOTE RS. RS.
AS AT 31ST MARCH 2014 LEVEL 1 LEVEL 2 LEVEL 3 TOTAL 20. CASH AND CASH EQUIVALENTS RS. RS. RS. RS.
Cash in Hand 36,781,346 16,729,995 Financial Assets Balances with Licensed Commercial Banks 35,465,407 44,857,857 Available for sale 35,927,075 - - 35,927,075 Total 72,246,753 61,587,852 Total 35,927,075 - - 35,927,075
21. BALANCES WITH CENTRAL BANK - HELD TO MATURITY Financial Liabilities - - - - Total - - - - Statutory Balances with Central Bank 317,467,507 274,736,615 Non-Statutory Balances with Central Bank - - Total 317,467,507 274,736,615 19.2 FINANCIAL ASSETS AND LIABILITIES AT OTHER THAN FAIR VALUE
This information does not include the fair values on non-financial assets and non-financial liabilities. Further, the following table contained the comparison, by 22. LOANS AND RECEIVABLES TO OTHER CUSTOMERS class, of the carrying amounts and fair values of the Company financial instruments that are not carried at fair value in the Financial Statements.
Gross Loans and Receivables 22.1 4,649,807,173 4,076,050,415 AS AT 31ST MARCH 2014 CARRYING AMOUNT FAIR VALUE Less: Allowance for Individual Impairment 22.2.1 (28,082,470) (69,010,003) RS. RS. Allowance for Collective Impairment 22.2.2 (145,529,745) (91,215,815) Net Loans and Receivables 4,476,194,958 3,915,824,597 Financial Assets Cash and Cash Equivalents 72,246,753 72,246,753 22.1 LOANS AND RECEIVABLES BY PRODUCT Placements with Banks 170,237,356 170,237,356 Loans and Advances 4,476,194,958 3,988,997,282 Personal Loans 10,214,452 10,792,854 Financial Assets - Available for Sale 35,927,075 35,927,075 Business Loans 1,721,379,595 1,368,559,666 Balances with Central Bank - Held to Maturity 317,467,507 317,467,507 Leasing 22.4 1,488,968,953 1,312,585,855 Total 5,072,073,649 4,584,875,973 Hire Purchase 22.5 1,198,125,005 1,196,410,315 Pawning Advances 132,659,716 96,418,465 Financial Liabilities Fixed Deposit Loans 94,751,096 87,598,449 Other Borrowings 504,868,773 504,868,773 Staff Loans 3,708,356 3,684,811 Deposit from Customers 4,511,620,534 4,511,620,534 Total 4,649,807,173 4,076,050,415 Total 5,016,489,307 5,016,489,307 22.2 IMPAIRMENT LOSSES 22.2.1 INDIVIDUAL IMPAIRMENT Methodologies and Assumptions
Loans 22.3.1 21,032,511 34,278,592 Financial assets and liabilities that have a short term maturity (less than three months) is assumed that the carrying amounts approximate their fair values. Leases 2,771,424 16,407,626 The same assumption is also applied to demand deposits, and savings accounts without specific maturity Hire Purchases 4,278,535 18,323,785
Total 28,082,470 69,010,003 The fair value of fixed rate financial assets and liabilities carried at amortised cost are estimated by comparing market interest rates when they were first recognised with current market rates for similar financial instruments. 22.2.2 COLLECTIVE IMPAIRMENT
The estimated fair value of fixed interest bearing deposits is discounted cash flows using prevailing current market rates for similar financial instruments. Loans 22.3.2 55,507,054 27,867,440
Leases 59,783,944 42,264,187 The estimated fair value of fixed interest bearing loans is discounted cash flows using prevailing current market rates. Hire Purchases 30,238,747 21,084,188
Total 145,529,745 91,215,815 The fair values of unquoted investments are estimated carrying amounts approximate their fair value if there is no situation of impairments.
66 67 SINHAPUTHRA FINANCE PLC Annual Report 2013 / 2014 Annual Report 2013 / 2014 SINHAPUTHRA FINANCE PLC
... NOTES TO THE FINANCIAL STATEMENTS ... NOTES TO THE FINANCIAL STATEMENTS
AS AT 31ST MARCH 2014 2013 AS AT 31ST MARCH 2014 2013 NOTE RS. RS. NOTE RS. RS.
22.3 IMPAIRMENT LOSSES FOR LOANS 22.5 HIRE PURCHASE 22.3.1 MOVEMENT IN ALLOWANCE FOR INDIVIDUAL IMPAIRMENT Gross Investment in Hire Purchase Receivable Within One Year 477,115,990 636,815,245 Balance at the Begining of the Year 34,278,592 57,282,183 Gross Investment in Hire Purchase Receivable Between One and Five Years 1,033,751,313 924,146,860 (Write Back)/Charged to the Income Statement (13,246,081) 44,998,243 Gross Investment in Hire Purchase Receivable After Five Years 79,519,332 22,363,904 Net Write-off/(Recoveries) During the Year - (68,001,834) 1,590,386,635 1,583,326,009 Balance at the End of the Year 21,032,511 34,278,592 Unearned Interest Income (392,261,630) (386,915,694) 1,198,125,005 1,196,410,315 22.3.2 MOVEMENT IN ALLOWANCE FOR COLLECTIVE IMPAIRMENT Impairment Losses Balance at the Begining of the Year 27,867,440 47,169,613 Provision for Individual Impairment 22.5.1 (4,278,535) (18,323,785) Charge/(Reversal) for the Year 27,639,614 (19,302,173) Provision for Collective Impairment 22.5.2 (30,238,747) (21,084,188) Net Write-offs for the Year - - Net Investment in Hire Purchase After Impairment 1,163,607,723 1,157,002,342 Balance at the End of the Year 55,507,054 27,867,440
22.5.1 MOVEMENT IN INDIVIDUAL IMPAIRMENT LOSSES 22.4 NET INVESTMENTS IN LEASES Balance at the Beginning of the Year 18,323,785 23,240,766 614,304,127 636,238,083 Gross Investment in Leases Receivable Within One Year Written-off During the Year - (14,637,257) Gross Investment in Leases Receivable Between One and Five Years 1,330,992,274 1,143,167,750 Provision Made During the Year (14,045,250) 9,720,276 Gross Investment in Leases Receivable After Five Years 102,384,021 21,862,023 Balance at the End of the Year 4,278,535 18,323,785 2,047,680,422 1,801,267,856
Unearned Interest Income (558,711,469) (488,682,001) 1,488,968,953 1,312,585,855 22.5.2 MOVEMENT IN COLLECTIVE IMPAIRMENT LOSSES
Impairment Losses Balance at the Beginning of the Year 21,084,188 17,214,908 Provision for Individual Impairment Losses (2,771,424) (16,407,626) 22.4.1 Written-off During the Year - - Provision for Collective Impairment Losses 22.4.2 (59,783,944) (42,264,187) Provision Made During the Year 9,154,559 3,869,280 Net Investment in Finance Leases After Impairment 1,426,413,585 1,253,914,042 Balance at the End of the Year 30,238,747 21,084,188
22.4.1 MOVEMENT IN INDIVIDUAL IMPAIRMENT LOSSES 23. FINANCIAL ASSETS - AVAILABLE FOR SALE
Balance at the Beginning of the Year 16,407,626 24,124,911 Government Securities - Treasury Bonds 23,789,095 19,668,896 Written-off During the Year - (34,078,560) Quoted Shares Held by the Company 23.1 11,887,687 12,025,477 Provision Made Dring the Year (13,636,202) 26,361,275 Unquoted Shares Held by the Company 23.2 250,293 250,293 Balance at the End of the Year 2,771,424 16,407,626 Total 35,927,075 31,944,666
22.4.2 MOVEMENT IN COLLECTIVE IMPAIRMENT LOSSES
Balance at the Beginning of the Year 42,264,187 70,732,474 Written-off During the Year - - Provision Made During the Year 17,519,757 (28,468,287) Balance at the End of the Year 59,783,944 42,264,187
68 69 SINHAPUTHRA FINANCE PLC Annual Report 2013 / 2014 Annual Report 2013 / 2014 SINHAPUTHRA FINANCE PLC
... NOTES TO THE FINANCIAL STATEMENTS ... NOTES TO THE FINANCIAL STATEMENTS
23.1 QUOTED SHARES NO. OF TOTAL COST MARKET VALUE NO. OF TOTAL COST MARKET VALUE AS AT 31ST MARCH 2014 2013 SHARES 31.03.14 31.03.14 SHARES 31.03.13 31.03.13 NOTE RS. RS. 31.03.14 RS. RS. 31.03.13 RS. RS. 24. TAX RECEIVABLE Hotels and Travels 3,924,362 27,400,751 Kandy Hotels Company PLC 200 17,878 1,340 200 17,878 1,780 Income Tax Receivable 24.1 8,500,000 15,134,889 Mahaweli Reach Hotels PLC 167,200 2,924,795 2,792,240 167,200 2,924,795 3,293,840 Economic Service Charges 24.2 12,424,362 42,535,640 Aitken Spense Hotels Limited 3,800 403,468 266,000 3,800 403,468 281,200 Total Total 171,200 3,346,141 3,059,580 171,200 3,346,141 3,576,820
24.1 INCOME TAX RECEIVABLE Bank, Finance and Insurance Seylan Bank PLC (Non-Voting) 300 30,185 19,110 300 30,185 19,560 Balance at Beginning of the Year 27,400,751 41,761,022 Commercial Bank of Ceylon PLC 38,400 1,119,860 3,724,800 38,400 1,119,860 3,720,960 W.H.T. Deducted on Fixed Deposits, Treasury Bills and Bonds for the Year 3,021,973 4,675,434 DFCC Bank PLC 10,000 1,946,560 1,439,000 10,000 1,946,560 1,311,000 30,422,724 46,436,456 Union Bank 700 17,500 13,090 700 17,500 11,900 Current Tax Liability for the Year (26,498,362) (19,035,705) Nations Trust Bank 10,000 854,464 649,000 10,000 854,464 610,000 Balance at the End of the Year 3,924,362 27,400,751 Vanik 100,050 294,253 - 100,050 294,253 -
Merchant Bank 5,000 79,874 67,500 5,000 79,874 80,500
Janashakthi Insurance Corporation 5,000 102,000 67,500 5,000 102,000 61,500 24.2 ECONOMIC SERVICE CHARGES DFCC Vardana PLC 78,942 1,033,510 2,212,744 78,942 1,033,510 1,836,191 Total 248,392 5,478,206 8,192,744 248,392 5,478,206 7,651,611 Balance at the Beginning of theYear 15,134,889 15,134,889 Written-off During the Year (6,634,889) - Diversified Holdings Balance at the End of the Year 8,500,000 15,134,889 Richard Pieris 95 557 627 95 557 627 Total 95 557 627 95 557 627 25. OTHER RECEIVABLES Chemicals and Pharmaceuticals CIC 9 - 336 9 - 419 Other Receivables 37,973,840 38,555,494 Total 9 - 336 9 - 419 Deposits and Advances 13,997,781 10,838,786 Sundry Debtors 1,325,853 962,032 Manufacturing Total 53,297,474 50,356,312 Royal Ceramics Lanka PLC 8,000 1,310,515 634,400 8,000 1,310,515 796,000 Total 8,000 1,310,515 634,400 8,000 1,310,515 796,000 26. OTHER ASSETS Total Cost and Market Value 427,696 10,135,418 11,887,687 427,696 10,135,418 12,025,477 Net Carrying Amount of Quoted Investments 427,696 10,135,418 11,887,687 427,696 10,135,418 12,025,477 Repossessed Stocks 26.1 419,421,240 170,031,385 Stock of Gift Items 124,457 387,575
23.2 Unquoted Shares Stock of Stationary 1,763,233 1,122,706 Vehicle Stocks 3,862,341 17,659,993 Regulatory Institutions Trading Stocks 20,248 348,142 Finance Houses Consortium (Pvt) Limited - 200,000 200,000 - 200,000 200,000 Total 425,191,519 189,549,801 Credit Information Bureau of Sri Lanka 100 50,293 50,293 100 50,293 50,293 Total 100 250,293 250,293 100 250,293 250,293 26.1 REPOSSESSED STOCKS
Balance at the End of the Year 481,340,871 188,960,349 Provision for Fall in Value of Repossessed Stocks 26.2 (61,919,631) (18,928,964) Sector classification and market value per share are based on official valuations list published by Colombo Stock Exchange as at current week closing price of year end Balance at the End of the Year 419,421,240 170,031,385 31st March 2014.
70 71 SINHAPUTHRA FINANCE PLC Annual Report 2013 / 2014 Annual Report 2013 / 2014 SINHAPUTHRA FINANCE PLC
... NOTES TO THE FINANCIAL STATEMENTS ... NOTES TO THE FINANCIAL STATEMENTS
27.1 DETAILS OF LAND AND BUILDINGS LOCATION AND ADDRESS AS AT 31ST MARCH 2014 2013 NOTE RS. RS. EXTENT LAND BUILDINGS 2014 2013 OF LAND TOTAL TOTAL 26.2 PROVISION FOR FALL IN VALUE OF REPOSSESSED STOCKS PERCH RS. RS. RS. RS.
Balance at the Beginning of the Year 18,928,964 23,928,964 11 A, Hill Street, Kandy and 128/5 & 128/6, Kotugodalla Vidiya, Kandy 19.475 P 126,587,500 37,909,469 164,496,969 135,076,877 Provision/(Reversal) Made During the Year 42,990,667 (5,000,000) 09, Hill Street, Kandy 5.8 P 37,700,000 3,817,500 41,517,500 36,566,366 Balance at the End of the Year 61,919,631 18,928,964 15 A, Hill Street, Kandy 17.5 P 113,750,000 360,235,531 473,985,531 460,251,763 Total 42.775 P 278,037,500 401,962,500 680,000,000 631,895,006 27. PROPERTY, PLANT AND EQUIPMENT The cost of fully-depreciated Property, Plant and Equipment of the company which are still in use as at the Financial Position date is as follows:
AS AT 31ST MARCH LAND BUILDINGS OFFICE FURNITURE COMPUTER FREEHOLD LEASEHOLD CAPITAL 2014 2013 EQUIP. & EQUIP. MOTOR MOTOR WORK IN TOTAL TOTAL 2014 2013 FITTINGS VEHICLES VEHICLES PROGRESS RS. RS. RS. RS. RS. Rs. Rs. RS. RS. RS. RS. RS. Furniture & Fittings 7,390,008 6,481,288 Office Equipment 14,934,794 13,769,586 Cost / Valuation 233,842,500 Computer Equipment 12,578,552 12,362,311 Balance at the Beginning of the Year 500,000 400,696,202 21,233,170 12,900,989 20,716,419 36,660,362 - - 726,049,642 709,299,555 Company Vehicle 2,504,667 4,615,644 Additions - 146,872 1,682,157 1,175,586 2,233,704 17,349,333 10,305,600 395,819 33,789,071 19,525,957 Total 37,408,022 37,228,829 Disposals 43,695,000 ------(2,775,870) Revaluation Reserve - 1,119,426 - - - - - 44,814,426 - Transfers 278,037,500 ------Balance at the End of the Year 401,962,500 22,915,327 14,076,575 22,950,123 54,009,695 10,305,600 395,819 804,653,139 726,049,642 27.2 INFORMATION OF FREEHOLD LAND AND BUILDINGS OF THE COMPANY - VALUATIONS
Land and buildings of the Company were revalued on 25th February 2014 by an independent professional valuer Mr.H.M.N.Herath based on the Contractor's Accumulated Depreciation - method and Investment method. Details of the revaluation is as follows: Balance at the Beginning of the Year - 10,273,791 16,865,457 9,788,539 13,787,705 18,823,517 - - 69,539,009 51,870,700 Charge for the Year - 10,023,684 1,658,073 1,448,102 1,802,159 10,098,643 1,468,196 - 26,498,857 14,578,155 Depreciation on Disposals ------(2,775,870) Transfer to Revaluation - (19,169,071) ------(19,169,071) 5,866,023 LOCATION & ADDRESS NET BOOK VALUE REVALUED REVALUATION GAIN Balance at the End of the Year 1,128,404 18,523,530 11,236,641 15,589,864 28,922,160 1,468,196 - 76,868,795 69,539,008 BEFORE REVALUATION AMOUNT OF RECOGNISED ON Net Book Value LAND BUILDING LAND BUILDING LAND BUILDING As at 31st March 2014 278,037,500 400,834,096 4,391,797 2,839,934 7,360,259 25,087,535 8,837,404 395,819 727,784,344 - RS. RS. RS. RS. RS. RS.
As at 31st March 2013 233,842,500 390,422,411 4,367,713 3,112,450 6,928,714 17,836,845 - - - 656,510,634 11 A, Hill Street, Kandy and 128/5 & 128/6, 101,032,500 381,674,003 126,587,500 37,909,469 25,555,000 20,288,497 Kotugodalla Vidiya, Kandy 09, Hill Street, Kandy 33,560,000 - 37,700,000 3,817,500 4,140,000 - 15 A, Hill Street, Kandy 99,750,000 - 113,750,000 360,235,531 14,000,000 - Total 234,342,500 381,674,003 278,037,500 401,962,500 43,695,000 20,288,497
27.3 SECURITIES PLEDGED
Land and buildings situated at No.11A, Hill Street, has been mortgaged as security for overdraft facilities shown in Note 30 to these Financial Statements. Land situated at No.15A, Hill Street, has been mortgaged as security for bank loans shown in Note 30.1 to these Financial Statements.
72 73 SINHAPUTHRA FINANCE PLC Annual Report 2013 / 2014 Annual Report 2013 / 2014 SINHAPUTHRA FINANCE PLC
... NOTES TO THE FINANCIAL STATEMENTS ... NOTES TO THE FINANCIAL STATEMENTS
Book debtors of lease agreements have been pledged as security for the above loans. In addition to the book value of lease agreements, personal guarantee AS AT 31ST MARCH 2014 2013 of Mr. K.R.B.Wijeyeratne has been given for Seylan Bank loan and Land situated at No. 15 A, Hill Street, Kandy, has been mortgaged as security for the Seylan NOTE RS. RS. Bank loan.
28. INTANGIBLE ASSETS Computer Software AS AT 31ST MARCH 2014 2013 Cost NOTE RS. RS. Balance at the Beginning of the Year 14,386,707 13,876,707 Additions During the Year 17,500 510,000 31. FINANCE LEASE LIABILITY Balance at the End of the Year 14,404,207 14,386,707 Balance at the Beginning of the Year - - Amortization Obtained During the Year 12,534,144 - Balance at the Beginning of the Year 1,629,409 227,487 12,534,144 - Charge for the Year 1,439,544 1,401,922 Repayments During the Year (1,827,896) - Balance at the End of the Year 3,068,953 1,629,409 Balance at the End of the Year 10,706,248 - Net Book Value 11,335,254 12,757,298 Interest in Suspense (2,385,298) - Finance Lease Liability at the End of the Year 31.1 8,320,950 -
29. DEPOSITS FROM CUSTOMERS 31.1 Finance Lease Payable within one Year 2,185,171 - Fixed Deposits 4,395,667,452 3,900,825,465 Finance Lease Payable between one and Five Years 6,135,779 - Certificate of Deposits - 907,959 Total 8,320,950 - Special Fixed Deposit 139,014 150,271 Savings Deposits 115,814,068 110,062,546 32. RETIREMENT BENEFIT OBLIGATION Total 4,511,620,534 4,011,946,241
Present Value of Defined Benefit Obligations 14,456,546 12,754,265 30. SECURITIES PLEDGED Unrecognised Actuarial (Loss)/Gain - (9,483,326) Actuarial Loss During the Year 1,697,458 7,921,135 Fixed Deposit amounting to Rs. 5,000,000/- has been pledged against Commercial Bank overdraft facility. Gain Arising from Change in the Assumption - 4,206,177 Current Service Cost/Charge for the Year 11,486,258 1,174,990 Balance at the Beginning of the Year 330,646,789 255,391,648 Interest Cost 2,393,987 1,813,543 Obtained During the Year 300,235,000 150,000,000 Benefit Paid by the Gratuity Fund (190,563) (3,930,238) 630,881,789 405,391,648 Net Retirement Benefit Obligations 29,843,686 14,456,546 Repayments During theYear (126,013,016) (74,744,859) Balance at the End of the Year 30.1 504,868,773 330,646,789 32.1 CONTRIBUTION FOR DEFINED BENEFIT PLAN RECOGNISED IN THE INCOME STATEMENT
30.1 BANK AND NON-BANK LOANS Current Service Cost/Charge for the Year 11,486,258 4,920,291 Interest Cost 2,393,987 1,813,543 Seylan Bank (TLN/11/HP3598) 28,464,982 55,132,523 Total 13,880,245 6,733,834 Seylan Bank (TLN/07/P1978B) 54,166,667 66,666,666 Seylan Bank - Loan (Revolving) 130,000,000 - As per the report of the Qualified Actuary, Mr. Piyal S. Goonathilake, dated 10th May 2014, the retirement benefit obligation of the Company as at 31st March Seylan Bank Loan (RL) 100,000,000 - 2014 was Rs. 29,843,646/- (31st March 2013 - Rs. 14,456,546/-) Sampath Bank 35,000,000 45,000,000 Sampath Bank 76,620,000 96,660,000 Sampath Bank 21,875,180 34,375,100 Sampath Bank 14,062,500 32,812,500 Foreign Currency Loan 235,000 - Ceylease Finance Services Loan 44,444,444 - Total 504,868,773 330,646,789
74 75 SINHAPUTHRA FINANCE PLC Annual Report 2013 / 2014 Annual Report 2013 / 2014 SINHAPUTHRA FINANCE PLC
... NOTES TO THE FINANCIAL STATEMENTS ... NOTES TO THE FINANCIAL STATEMENTS
AS AT 31ST MARCH 2014 2013 AS AT 31ST MARCH 2014 2013 RS. RS. RS. RS.
Details of Actuarial Assumptions are as follows: 34. OTHER LIABILITIES Discount Rate Per Annum 10% 10% Future Salary Increases 10% 10% Bank Overdraft 320,264,454 189,512,469 Retirement Age (Years) 55 55 Accrued Expenditure - Non-Interest 33,686,179 38,966,399 Total 353,950,633 228,478,868
Discount rate and future salary increment have a significant effect on the amounts recognized in Income Statement. A 1% change in either one of the assumptions would have the following effects. 35. STATED CAPITAL
Ordinary Shares FUTURE SALARY INCREASES DISCOUNT RATE 6,295,893 Ordinary Shares 63,609,930 63,609,930 1% INCREEASE 1% DECREASE 1% INCREEASE 1% DECREASE RS. RS. RS. RS. Preference Shares Non-Voting, Non-Cumulative, Non-Redeemable, Participating 670,765 Preference Shares 16,769,125 16,769,125 Present Value of Defined the Benefit Obligation 32,054,658 27,840,324 27,965,681 31,952,019 Stated Capital at the End of the Year 80,379,055 80,379,055
670,765 Listed, non-voting, non-cumulative, non-redeemable and participating Preference Shares were issued by the Company on 18th February 2008 Preference AS AT 31ST MARCH 2014 2013 Shareholders are entitled to receive a premium of 10 cents over the dividend per Ordinary Share, this is executed only after declaring dividends to Ordinary RS. RS. Shareholders.
33. DEFERRED TAX LIABILITY 36. STATUTORY RESERVE FUND Balance at the Beginning of the Year 76,682,397 100,576,585
Amount Reversal During the Period (28,218,108) (23,894,188) Balance at the Beginning of the Year 117,094,093 102,121,168 Balance at the End of the Year 48,464,289 76,682,397 Transfers During the Year 28,398,574 14,972,925 Balance at the End of the Year 145,492,667 117,094,093
31.03.2014 31.03.2013 TEMPORARY TAX EFFECT TEMPORARY TAX EFFECT The Company's statutory reserve fund was created according to the Direction No. 1 of 2003 (Capital Funds) of Central Bank Regulations. During the year a sum DIFFERENCE DIFFERENCE equivalent to 20% of the net profit for the year was transferred to the fund. RS. RS. RS. RS. 37. REVALUATION RESERVE Taxable Temporary Differences on Leases 310,017,704 86,804,957 404,070,867 113,139,843
Taxable Temporary Differences on Fixed Assets 58,887,719 16,488,562 59,936,497 16,782,219 Balance at the Beginning of the Year 354,619,105 360,485,127 Deductible Temporary Difference on Retirement Benefit Obligation (29,843,686) (8,356,232) (14,456,546) (4,047,833) Depreciation Charged to Income Statement on Revalued Assets (6,079,549) (5,866,022) Income Tax Loss Carry Forward (408,934,732) (114,501,725) (404,435,906) (113,242,054) Deferred Tax Effect on Revaluation Surplus on Free Hold Building (5,667,550) - Deferred Tax Effect on Revaluation Surplus on Property 242,959,739 68,028,727 228,750,791 64,050,222 Revaluation Surplus on Free Hold Land and Building 63,983,496 - Balance at the End of the Year 406,855,502 354,619,105 Total 173,086,744 48,464,289 273,865,703 76,682,397
38. GENERAL RESERVE
Balance at the Beginning of theYear 129,013,127 129,013,127 Appropriations Made During the Year - - Balance at the End of the Year 129,013,127 129,013,127
76 77 SINHAPUTHRA FINANCE PLC Annual Report 2013 / 2014 Annual Report 2013 / 2014 SINHAPUTHRA FINANCE PLC
... NOTES TO THE FINANCIAL STATEMENTS ... NOTES TO THE FINANCIAL STATEMENTS
AS AT 31ST MARCH 2014 2013 AS AT 31ST MARCH 2013 RS. RS. RS.
Restated Profit for the Year Ended 31st March 2013 39. INVESTMENT FUND RESERVE Profit for the Year as Previously Reported 72,070,239 Less : Adjustment for Depreciation (5,866,022) Balance at the Beginning of the Year 18,131,259 10,408,478 Reclassification of Actuarial Loss to OCI 7,921,135 Appropriations Made During the Year 6,099,628 7,722,781 Restated Profit for theYear 74,125,352 Balance at the End of the Year 24,230,887 18,131,259
The investment fund reserve account is credited in accordance with the Central Bank guidelines issued to create an investment fund reserve which comprise, Company had charged the additional deprecation on revalued assets in the statement of changes in equity in the previous year. This error was corrected by 8% of the profits calculated for the payment of Value Added Tax (VAT) on financial services on dates as specified in the VAT Act for payment of VAT and 5% of restating the previous year's depreciation. the profit before tax calculated for payment of income tax purposes on dates specified in Section 113 of the Inland Revenue Act for the self assessment payment of tax. The Company had charged Actuarial gains and losses to the profit and loss in the previous years. With the introduction of the revised accounting standard LKAS 19 - Employee benefits the Company has changed its accounting policy from charging actuarial gains and losses to the profit & loss to charging the same to other comprehensive income. 39.1 DETAILS OF INVESTMENT FUND ACCOUNT
Due to the immaterial net effect of the above, the Company has not presented a statement of financial position as at the beginning of the earliest comparative Investments in Government Treasury Bills 24,230,887 18,131,259 period. Total 24,230,887 18,131,259
40. RETAINED EARNINGS 44. RELATED PARTY TRANSACTIONS
Balance at the Begining of the Year 130,203,155 94,829,014 44.1 TRANSACTIONS WITH RELATED ENTITIES Comprehensive Income 140,787,609 66,204,217 Transfer to Reserves (86,734,599) (16,829,684) Mr. K.R.B. Wijeyeratne, Managing Director of the Company and Mr. A.M.G. Weerakoon, a Consultant to the Board of the Company are also Directors of the Dividend - (14,000,392) Sinhaputhra Traders Ltd., Sinhaputhra Securities Ltd. and Sinhaputhra Computers Ltd. Balance at the End of the Year 184,256,165 130,203,155 The Company holds approximately 37% , 39% and 33% of the issued share capital of Sinhaputhra Traders Ltd., Sinhaputhra Securities Ltd., and Sinhaputhra Computers Ltd., respectively. These companies are under voluntary liquidation. 41. CAPITAL COMMITMENTS AND CONTINGENT LIABILITIES
41.1 CONTINGENT LIABILITIES 44.2 TRANSACTIONS WITH KEY MANAGEMENT PERSONNEL (KMP) OF THE COMPANY
The Company has given a guarantee to Seylan Bank PLC in respect of VISA international credit cards amounting to Rs. 50,000,000/- According to Sri Lanka Accounting Standard - LKAS 24 Related Party Disclosures, Key management personnel, are those having authority and responsibility for planning, directing and controlling the activities of the entity. Accordingly, the members of the Board of Directors (including executive and non-executive 41.2 CAPITAL COMMITMENTS Directors) have been classified as key managementpersonnel of the Company.
There were no material capital commitments that require adjustment in or disclosure to the Financial Statements as at the reporting date. AS AT 31ST MARCH 2014 2013
RS. RS.
42. EVENTS AFTER THE REPORTING PERIOD Consequent to the Central Bank's proposal for consolidation of Banks and Finance Leasing Companies of Sri Lanka, few strategic investors have shown their 44.3 COMPENSATION OF KEY MANAGEMENT PERSONNEL interest for possible merger or acquisition of the Company and the consolidation process is still in progress. Short-term Employee Benefits 20,390,983 23,883,470
Post Employment Benefit Plan 43. COMPARATIVE INFORMATION Contributions to Provident Fund and Trust Fund 938,404 1,219,592
RESTATEMENT The following comparative figures have been restated in the Financial Statements for the year ended 31st March 2013. 44.4 DEPOSITS HELD BY KEY MANAGEMENT PERSONNEL 27,957,519 15,576,717
78 79 SINHAPUTHRA FINANCE PLC Annual Report 2013 / 2014 Annual Report 2013 / 2014 SINHAPUTHRA FINANCE PLC
... NOTES TO THE FINANCIAL STATEMENTS ... NOTES TO THE FINANCIAL STATEMENTS
45. SEGMENT REPORTING
REVENUE FINANCE LEASING HIRE PURCHASE LOANS & ADVANCES PAWNING INVESTMENTS OTHER UNALLOCATED TOTAL
2014 2013 2014 2013 2014 2013 2014 2013 2014 2013 2014 2013 2014 2013 RS. RS. RS. RS. RS. RS. RS. RS. RS. RS. RS. RS. RS. RS.
Income from Operation Interest Income 338,363,253 214,391,987 277,610,040 256,814,596 302,599,385 252,848,178 17,478,694 24,681,167 53,707,457 49,063,496 - - 989,758,829 797,799,424 Interest Expenses 227,221,157 145,684,721 186,423,537 174,511,946 203,204,638 171,816,665 11,737,472 16,771,471 36,066,182 33,339,873 - - 664,652,985 542,124,676 Net Interest Income 111,142,096 68,707,266 91,186,503 82,302,650 99,394,747 81,031,513 5,741,222 7,909,696 17,641,275 15,723,623 - - 325,105,844 255,674,748
Investment Income Fees and Commission Income 2,789,063 5,939,492 12,407,043 9,901,608 21,858,060 6,463,544 1,416,848 2,295,569 - - - - 38,471,014 24,600,213 Other Income ------37,456,931 34,684,946 37,456,931 34,684,946 Total Operating Income 113,931,159 74,646,758 103,593,546 92,204,258 121,252,807 87,495,057 7,158,070 10,205,265 17,641,275 15,723,623 37,456,931 34,684,946 401,033,789 314,959,907
Expenses Credit Loss Expenses 31,192,305 16,874,947 17,237,853 13,589,556 33,654,856 25,696,070 ------82,085,014 56,160,573 Depreciation ------27,938,401 21,846,099 27,938,401 21,846,099 Unallocated Expenses 68,551,637 42,008,124 56,243,172 50,320,441 61,305,958 49,543,259 3,541,144 4,836,046 10,881,011 9,613,538 - - 200,522,922 156,321,408 Total Expenses 99,743,943 58,883,071 73,481,025 63,909,997 94,960,813 75,239,329 3,541,144 4,836,046 10,881,011 9,613,538 27,938,401 21,846,099 310,546,337 234,328,080
Segment Results 14,187,217 15,763,687 30,112,521 28,294,261 26,291,994 12,255,728 3,616,926 5,369,219 6,760,265 6,110,085 9,518,530 12,838,847 90,487,452 80,631,827
VAT on Financial Services ------(13,705,627) (11,364,958) Profit on Ordinary Activities Before Income Tax ------76,781,825 69,266,869 Income Tax Expense ------7,387,296 4,858,483 Profit for the Year ------84,169,121 74,125,352
Total Assets 1,426,413,585 1,253,914,042 1,163,607,723 1,157,002,342 1,753,513,934 1,408,489,748 132,659,716 96,418,465 523,631,938 450,071,235 1,425,373,585 1,122,453,757 6,425,200,481 5,488,349,589
Total Liabilities 1,211,485,492 1,065,167,505 988,278,497 982,843,526 1,489,299,256 1,196,475,564 112,670,913 81,904,989 444,732,511 382,323,858 1,210,602,196 953,495,398 5,457,068,865 4,662,210,841
80 81 SINHAPUTHRA FINANCE PLC Annual Report 2013 / 2014 Annual Report 2013 / 2014 SINHAPUTHRA FINANCE PLC
... NOTES TO THE FINANCIAL STATEMENTS ... NOTES TO THE FINANCIAL STATEMENTS
46. MATURITY ANALYSIS 47. FINANCIAL RISK MANAGEMENT
47.1 INTRODUCTION 46.1 DEFINITION OF MATURITY
Risk is inherent in the Company’s activities but is managed through a process of ongoing identification, measurement and monitoring, subject to risk limits and Time interval between Financial Position date and contractual maturity dates. other controls. This process of risk management is critical to the Company’s continuing profitability and each individual within the Company is accountable for
the risk exposures relating to his or her responsibilities. The key financial risk faced by the Company is; 46.2 ALLOCATION OF AMOUNTS Interest rate risk Amounts are allocated to respective maturity groupings based on instalments falling due as per contract. The amounts therefore represent total amount Credit risk receivable or payable in each maturity grouping. Market risk Liquidity risk 46.3 PROFILE Operational risk
UP TO 3 - 12 1 - 3 3 - 5 > 5 UNALLOCATED TOTAL 47.2 RISK MANAGEMENT FRAMEWORK 3 MONTHS MONTHS YEARS YEARS YEARS 2014 RS. RS. RS. RS. RS. RS. RS. The Board of Directors has overall responsibility for the establishment and oversight of the Company's risk engagement framework. The Board has delegated its authority to Board Integrated Risk Management Committee (IRMC) which is responsible for developing and monitoring the Company’s risk management Assets with Contractual Maturity policies. The Committee comprises of executive and non-executive directors and senior Management. Meetings of IRMC are held regularly, and the Board of (Interest Bearing Assets) Directors is duly updated of its activities and concentrates mainly on liquidity management, Interest rates and statement of financial position optimization and Cash and Cash Equivalent 12,311,603 - - - - - 12,311,603 new business. The Company's risk management policies are established to identify and analyse the risks faced by the Company, to set appropriate risk limits and Placements with Banks 161,887,668 8,349,688 - - - - 170,237,356 controls, and to monitor adherence to established limits. Risk management policies and systems are reviewed regularly to reflect changes in market conditions, Balance with Central Bank 191,700,087 104,050,282 - - 21,717,138 - 317,467,507 products and services offered. The Companies all employees are assigned and made to understand their respective roles and responsibilities. Loans and Advances 505,855,258 670,323,560 1,849,086,420 821,158,720 629,771,000 - 4,476,194,958 Other Assets 47.3 CREDIT RISK (Non-Interest Bearing Assets) Cash and Short-term Funds 59,935,150 - - - - - 59,935,150 Credit risk is the risk of financial loss to the Company if a borrower or counterparty to a financial instrument, fails to meet its contractual obligations, and Financial Investment - Available for Sale - - - - - 35,927,075 35,927,075 arises principally from the Company’s loans and advances to customers and investments in debt securities. In addition to the credit risk from direct funding Tax Receivable - - - - - 12,424,362 12,424,362 exposure, the Company would also be exposed to indirect liabilities such as guarantees etc., which would carry credit risk. Other Receivables - - - - - 53,297,474 53,297,474 Other Assets - - - - - 425,191,519 425,191,519 The Company considers and consolidates all elements of credit risk exposure (such as individual obligor default risk, country and sector concentration risks) to Real Estate Stock - - - - - 123,093,879 123,093,879 ensure stringent Credit Risk Management. Property, Plant and Equipment - - - - - 727,784,344 727,784,344 Intangible Assets - - - - - 11,335,254 11,335,254 The amount and type of collateral required depends on an assessment of the credit risk of the counterparty. Guidelines are in place covering the acceptability Total Assets as at 31st March 2014 931,689,766 782,723,530 1,849,086,420 821,158,720 651,488,138 1,389,053,907 6,425,200,481 and valuation of each type of collateral. The main types of collateral obtained are, as follows:
Interest Bearing Liabilities For corporate lending, charges over real estate properties, inventory and fixed deposits Deposits from Customers 1,385,175,649 1,918,994,145 660,614,852 431,021,820 115,814,068 - 4,511,620,534 For retail lending, mortgages over residential properties, vehicles Borrowings 42,393,789 121,840,282 222,468,036 118,166,666 - - 504,868,773 Bank Overdraft 320,264,454 - - - - - 320,264,454 The Company also obtains guarantees from corporate and individuals for lease, hire purchase and loans. Management monitors the market value of collateral Non-Interest Bearing Liabilities and will request additional collateral in accordance with the underlying agreement. It is the Company’s policy to dispose of repossessed properties in an orderly Creditors & Accrued Expenses 1,224,426 18,972,722 9,351,486 12,458,495 - - 42,007,129 fashion. The proceeds are used to reduce or repay the outstanding claim. In general, the Company does not occupy repossessed properties for business use. Retirement Benefit Obligations - - - - - 29,843,686 29,843,686 Deferred Tax - - - - - 48,464,289 48,464,289 Stated Capital - - - - - 80,379,055 80,379,055 47.4 IMPAIRMENT ASSESSMENT Statutory Reserves - - - - - 145,492,667 145,492,667 General Reserves - - - - - 129,013,127 129,013,127 The Company uses Net Flow Rate model for the recognition of losses on impaired financial assets. The losses can only be recognized when objective evidence Revaluation Reserves - - - - - 406,855,502 406,855,502 of a specific loss event has been observed. This includes, Investment Fund Account - - - - - 24,230,887 24,230,887 Retained Earnings - - - - - 184,256,165 184,256,165 Significant financial difficulty of the customer Fair Value Reserves - (2,095,787) (2,095,787) A breach of contract such as a default of payment Total Liabilities as at 31st March 2014 1,749,058,318 2,059,807,149 892,434,374 561,646,981 115,814,068 1,046,439,591 6,425,200,481
82 83 SINHAPUTHRA FINANCE PLC Annual Report 2013 / 2014 Annual Report 2013 / 2014 SINHAPUTHRA FINANCE PLC
... NOTES TO THE FINANCIAL STATEMENTS ... NOTES TO THE FINANCIAL STATEMENTS
It becomes probable that the customer will enter bankruptcy or other financial reorganization 47.10 OPERATIONAL RISK Observable data that suggest that there is a decrease in the estimated future cash flow from the loans Operational risk is the risk of losses resulting from inadequate or failed internal processes, people, and system or from external events. This identification 47.5 INDIVIDUALLY ASSESSED ALLOWANCES include legal risk, but exclude strategic and reputational risk. The legal risk includes but is not limited to, exposure to fines, penalties or damages resulting from supervisory actions, as well as private settlement. The allowances appropriate for each individually significant loan or advance is determined on an individual basis, including any overdue payments of interests, credit rating downgrades, or infringement of the original terms of the contract. Items considered when determining allowance amounts include the The Company identified that operational risk is inherent in all business activities and can bring unprecedented losses or damages to its business through direct sustainability of the counterparty’s business plan, its ability to improve performance if it is in a financial difficulty. Projected receipts and the expected payout or indirect financial loss, brand or reputational damage, customer dissatisfaction, or legal or regulatory penalties if such risk are not objectively managed. should bankruptcy ensue, the availability of other financial support, the realizable value of collateral and the timing of the expected cash flows. Impairment allowances are evaluated at each reporting date, unless unforeseen circumstances require more careful attention. Operational Risks of the Company are mitigated and managed through a control framework which consists of monitoring and responding to potential risks such as segregation of duties, access, authorization and reconciliation procedures, staff education and assessment processes, Business Continuity Planning etc. 47.6 INTEREST RATE RISK 47.11 REGULATORY RISK Interest rate risk arises from the possibility that changes in interest rates will affect future cash flows or the fair values of financial instruments. Interest rate risk is mainly managed with Maturity Gap Analysis that distributes interest rate sensitive assets, liabilities and their reprising during the periods of changes in market Regulatory risk is the risk of non-compliance with applicable legislation, regulation and regulatory directives, Sinhaputhra Finance PLC manages day by day interest rates. Interest rate sensitivity is measured as a ratio of interest rate sensitivity assets divided by interest rate sensitivity liabilities. If the ratio is above one regulatory risk primarily by educating and training employees about regulatory requirements, establishing and maintaining appropriate policies and procedures, demonstrates an assets sensitive position. An assets sensitive position in a rising interest rate environment will benefit the Company with widening interest rate and monitoring for compliance. The Company has appointed a Compliance Officer for communicating regulatory requirements to each business unit, ensuring margin. that business units have appropriate policies and procedures in place and that staff are trained to meet regulatory requirements and for tracking, escalating and reporting significant issues and finding to senior management and the Board. 47.7 EQUITY PRICE RISK In this latter process, the Compliance Officer is supported and assisted by the Company’s internal auditors, Messrs. SJMS who also report on any issues of non- Equity price risk is that the fair value of equities decreases as the result of changes in the level of equity indices and individual stocks. The non-trading equity compliance, with both internal and external regulations. Compliance with regulatory requirements is also documented through formal procedure manuals for price risk exposure arises from equity securities classified as available for sale. each business unit.
47.8 MARKET RISK 47.12 REPUTATION RISK
Market risk is the likelihood of the Company incurring losses as a result of values of assets and liabilities or revenues being adversely affected by changes Reputation risk is the risk to earning, capital or brand arising from negative public or employee opinion. A company’s reputation is a valuable business asset in its in financial market conditions such as movements in interest rates, exchange rates, equity prices or commodity prices. The Companies exposure to market own right, essential to optimising shareholder value. Reputation risk cannot be managed in isolation from other forms of risks, since all risks can have an impact risk arises as a result of dealing in financial products including lease, hire purchase, loans, fixed deposits, treasury bill, short term borrowings and long term on reputation, which in turn can impact the brand, earning and capital. Credit, liquidity, interest rate, operational, and regulatory risk must all be managed borrowings to facilitate both customer driven and proprietary transaction. effectively in order to safeguard the Company’s reputation.
47.9 LIQUIDITY RISK 47.13 CAPITAL ADEQUACY AND MANAGEMENT
Liquidity risk is the risk that the Company will encounter difficulties in meeting its financial commitments that are settled by delivering cash or another financial Capital adequacy measures the Company's aggregate capital in relation to the risk, which may arise from its assets and off Financial Position transactions, its asset. Hence the Company may be unable to meet its payment obligations when they fall due under both normal and stress circumstances. To limit this risk, dealing operations and its human activities, technology and natural incidents. The Central Bank of Sri Lanka has prescribed the minimum risk sensitive capital management has arranged diversified funding sources in addition to its core deposit base, and adopted a policy of continuously managing assets with liquidity with effective from January 2006. This guidelines required Company's to maintained minimum capital ratio of 5% and minimum risk weighted core capital of 10%. in mind and of monitoring future cash flows and liquidity on a daily basis. The Company has developed internal control processes and contingency plans for managing liquidity risk. This incorporates an assessment of expected cash flows and the availability of high grade collateral which could be used to secure CAPITAL AND RISK WEIGHTED ASSETS additional funding if required.
MINIMUM The Company maintains a portfolio of highly marketable and diverse assets assumed to be easily liquidated in the event of an unforeseen interruption of 2014 2013 AS AT 31 MARCH REQUIREMENT expected cash flow. The Company also has committed lines of credit that could be utilized to meet liquidity needs. Further, the Company maintains a statutory deposit with the Central Bank of Sri Lanka equal to 7.5% of customer deposits. In accordance with the Company’s policy, the liquidity position is assessed and Capital to Risk Weighted Asset Ratio managed under a variety of scenarios, giving due consideration to stress factors relating to both the market in general and specific to the Company. The most Tier I (%) 9.43 9.32 important of these is to maintain the required ratio of liquid assets to liabilities, to meet the regulatory requirement. Liquid assets consist of cash, short–term Deduction - Tier I (%) - - bank deposits and liquid debt securities available for immediate sale. Core Capital 5.00 9.43 9.32
RATIO 2014 2013 Tier II (%) 2.02 0.79
Deduction - Tier II (%) - - Liquidity Ratio 11.01% 11.44% Total Capital Base 10.00 11.45 10.11
84 85 SINHAPUTHRA FINANCE PLC Annual Report 2013 / 2014 Annual Report 2013 / 2014 SINHAPUTHRA FINANCE PLC
... NOTES TO THE FINANCIAL STATEMENTS ... NOTES TO THE FINANCIAL STATEMENTS
47.13 CAPITAL ADEQUACY AND MANAGEMENT (CONTD..) 48. SENSITIVITY ANALYSIS
DETAILS OF COMPUTATION The graph below depicts the sensitivity analysis carried out on the statement of financial position as at 31st March 2014, on the changes of interest rate right CAPITAL BASE across the market in a hypothetical situation. The Company is exposed to interest rate fluctuations due to the availability of short term and floating rate funding. The exposure will partly diminish by the short term, rate sensitive investments. The time horizon of the study is restricted to a 12 months period. The Company AS AT 31ST MARCH 2014 2013 undertakes varying degrees of such rate shocks and evaluate them to ensure that the risk exposures are within the risk appetite of the Company as compared RS.‘000 RS.‘000 to the anticipated market rate movements.
Tier I: Core Capital Stated Capital 80,379 80,379 Statutory Reserve Fund 145,493 117,094 IMPACT ON NII -RATE SHOCK OF 100 BP Retained Profits 184,256 130,203 General and Other Reserves 129,013 129,013 539,141 456,689 0 r. y . Jan. Less: Deductions Ap Ma Jun. Jul Aug. Oct. Nov. Dec. Feb. Mar. Other Intangible Assets - - -500,000 Total Tier I Capital 539,141 456,689
-1000,000 Tier II: Supplementary Capital General Provisions - - -1500,000 Revaluation Reserve (Approved by Central Bank of Sri Lanka) 115,729 38,494 2013 / 2014 2012 / 2013 Less: Deductions -2000,000 50% Investment in the Capital of Other Banks and Financial Institutions - -
-2500,000 Eligible Tier II Capital 115,729 38,494 Capital Base 654,870 495,183 -3000,000
2013/2014 2012/2013 COMPUTATION OF TOTAL RISK WEIGHTED ASSETS
SENSITIVITY TO PROJECTED NET INTEREST INCOME (NII) AS AT 31 MARCH RISK WEIGHTS 2014 2013 RS.’000 RS.’000 RS.’000 RS.’000 100 BP PARALLEL INCREASE / DECREASE* Cash in Hand & Bank Balances 0% 72,247 - 61,588 - AS AT 31 MARCH 2014 2013 Fixed Deposit with Banks 20% 170,237 34,047 143,390 28,678 RS.'000 RS.'000 Sri Lanka Government Treasury Bills 0% 317,468 - 274,737 - Loans against Fixed Deposits with the Company 0% 94,751 - 87,597 - Average for the Year +/- 2479 +/- 2173 Pawning Less than 10% in Total Advances 0% 132,660 - 96,418 - Maximum for the Year +/- 2265 +/- 1974 Staff Loans Secured by Provident Fund Balance 0% 3,708 - 4,138 - Minimum for the Year +/- 2753 +/- 2352 Other Loans & Advances 100% 4,245,076 4,245,076 3,727,671 3,727,671 Property, Plant and Equipment 100% 739,120 739,120 669,267 669,267 Other Assets 100% 649,934 649,934 423,543 423,543 6,425,200 5,668,177 5,488,349 4,849,159 * - Parallel increase in rates would have a positive impact on earning whereas parallel decrease have a negative effect in arriving at the above result the Guarantee Issued 100% 50,000 50,000 50,000 50,000 Company considered only rate sensitive asset and liabilities. Total Risk Weighted Assets 6,475,200 5,718,177 5,538,349 4,899,159
86 87 SINHAPUTHRA FINANCE PLC Annual Report 2013 / 2014 Annual Report 2013 / 2014 SINHAPUTHRA FINANCE PLC
TEN YEAR SUMMARY ... TEN YEAR SUMMARY
FOR THE YEAR 2004/2005 2005/2006 2006/2007 2007/2008 2008/2009 2009/2010 2010/2011 2011/2012 2012/2013 2013/2014 RS. ’000 RS. ’000 RS. ’000 RS. ’000 Rs. ’000 Rs. ’000 Rs. ’000 RS. ’000 RS. ’000 RS. ’000 (Restated) (Restated)
Assets Cash and Cash Equivalents 29,512 15,966 131,368 69,960 64,232 93,962 69,515 62,832 61,588 72,247 Balances with Central Bank 161,901 131,232 163,235 253,446 185,424 245,751 256,938 218,781 274,736 317,468 Placements with Banks 104,929 243,807 240,759 218,333 82,518 81,249 87,211 131,178 143,390 170,237 Loans and Advances 1,322,138 1,846,972 2,359,794 2,213,017 2,365,693 2,198,500 2,654,551 3,396,914 3,915,825 4,476,195 Financial Assets - Available for Sale 13,272 10,863 26,006 25,445 29,592 25,507 20,088 21,690 31,945 35,927 Investments in Associate Companies 790 790 790 790 790 790 790 790 - - Tax Receivable 4,431 6,119 20,764 30,431 42,199 52,311 48,604 56,896 42,536 12,424 Other Receivables 230,014 136,463 175,302 191,249 257,460 236,844 86,068 73,146 50,356 53,297 Other Assets 548 21,369 76,148 83,426 58,204 101,620 219,176 152,018 189,550 425,192 Real Estate Stocks 12,065 9,961 8,891 7,599 8,769 37,186 65,987 71,898 109,156 123,094 Property, Plant and Equipment 72,654 76,308 210,749 309,332 345,901 337,338 336,542 657,429 656,511 727,784 Intangible Assets ------13,649 12,757 11,335 Total Assets 1,952,254 2,499,850 3,413,806 3,403,028 3,440,782 3,411,058 3,845,470 4,857,221 5,488,350 6,425,200
Liabilities Deposits from Customers 1,106,811 1,538,194 2,055,704 2,274,304 2,148,588 2,435,524 2,955,261 3,591,624 4,011,946 4,511,621 Other Borrowings 490,996 516,966 764,380 475,377 618,443 325,320 261,942 255,392 330,647 504,869 Finance Lease Liability ------8,321 Retirement Benefit Obligation ------2,535 7,046 14,457 29,844 Deferred Tax Liability 120 88,644 60,087 31,390 34,606 34,645 9,428 100,577 76,683 48,464 Other Liabilities 146,347 170,197 178,595 200,087 200,245 171,795 134,243 128,757 228,479 353,950 Total Liabilities 1,744,274 2,314,001 3,058,766 2,981,158 3,001,882 2,967,284 3,363,409 4,083,396 4,662,212 5,457,069 Equity Stated Capital 40,622 52,616 62,959 80,379 80,379 80,379 80,379 80,379 80,379 80,379 Statutory Reserve Fund 42,900 55,400 71,620 82,009 84,350 85,905 91,291 102,121 117,094 145,493 Revaluation Reserve - 15,664 115,089 112,032 111,745 111,745 112,414 360,485 354,619 406,855 General Reserve 110,328 129,664 129,664 129,013 129,013 129,013 129,013 129,013 129,013 129,013 Investment Fund Reserve ------10,408 18,131 24,231 Retained Earnings 14,130 (67,495) (24,292) 18,437 33,413 36,732 68,964 91,419 130,203 184,256 Fair Value Reserve ------(3,301) (2,096) Total Equity 207,980 185,849 355,040 421,870 438,900 443,774 482,061 773,825 826,138 968,131 Total Liabilities & Equity 1,952,254 2,499,850 3,413,806 3,403,028 3,440,782 3,411,058 3,845,470 4,857,221 5,488,350 6,425,200
Income Statement Interest Income 316,560 418,181 583,025 672,620 695,069 628,064 582,141 640,431 797,799 989,759 Interest Expenses (159,809) (229,025) (346,042) (462,160) (527,252) (480,175) (396,281) (399,720) (542,125) (664,653) Net Interest Income 156,751 189,156 236,983 210,460 167,817 147,889 185,860 240,711 255,674 325,106 Fees and Other Income 32,759 48,368 65,102 39,066 22,613 29,173 64,402 59,679 59,286 75,928 Net Income from Operations 189,510 237,524 302,085 249,526 190,430 177,062 250,262 300,390 314,960 401,034 Operating Expenses Personnel Expenses (34,113) (38,636) (43,465) (50,449) (47,672) (41,970) (45,968) (71,784) (89,638) (114,105) Directors’ Remuneration (5,366) (6,987) (8,259) (7,336) (6,476) (7,563) (11,305) (11,632) (11,952) (9,186) Other Overhead Expenses (46,710) (53,939) (86,033) (38,855) (34,235) (40,653) (46,909) (45,062) (54,731) (77,232) Depreciation of Property, Plant and Equipment (5,864) (8,202) (8,949) (7,991) (15,820) (17,816) (17,791) (17,427) (21,846) (27,938) Operating Profit Before Taxation & Possible Losses 97,457 129,760 155,379 144,895 86,227 69,060 128,289 154,485 136,793 172,573 Impairment Charges for Loans and Other Losses (44,054) (55,094) (93,791) (105,692) (55,475) (42,949) (91,576) (60,865) (56,161) (82,085) Operating Profit After Provision for Possible Losses 53,403 74,666 61,588 39,203 30,752 26,111 36,713 93,620 80,632 90,488 VAT on Financial Services - (6,418) (9,046) (10,521) (10,063) (10,059) (14,312) (12,947) (11,365) (13,706) Profit Before Taxation 53,403 68,248 52,542 28,682 20,689 16,052 22,401 80,673 69,267 76,782 Less: Taxation (1,575) (7,634) 28,557 23,264 (8,982) (8,279) 4,527 (27,780) 4,858 7,387 Profit for the Year 51,828 60,614 81,099 51,946 11,707 7,773 26,928 52,893 74,125 84,169
Earnings Per Share (Rs.) 14.68 11.88 14.79 8.25 1.86 1.23 4.28 8.40 11.77 13.37 Dividends Per Share (Rs.) 1.73 2.03 2.62 0.00 0.50 0.40 0.75 2.00 - -
88 89 SINHAPUTHRA FINANCE PLC Annual Report 2013 / 2014 Annual Report 2013 / 2014 SINHAPUTHRA FINANCE PLC
NOTICE OF MEETING FORM OF PROXY
NOTICE IS HEREBY GIVEN THAT THE COMPLIANCE WITH RULES *I/we...... of...... THIRTY SIXTH ANNUAL GENERAL ...... MEETING of Sinhaputhra Finance PLC, Notwithstanding anything to the contrary being a *member/members of Sinhaputhra Finance PLC hereby appoint: will be held at the Registered Office of the contained in the Articles of Association of Company, No. 11, Hill Street, Kandy on the Company, so long as the Company is Mr. J.R.J. Nanayakkara of Kandy or failing him Friday, 29th August 2014 at 9.30 a.m. for the listed on the Colombo Stock Exchange, Mr. K.R.B. Wijeyeratne of Kandy or failing him following purpose: the Company shall comply with the Rules of Mr. K.G.D.S.J. De Alwis of Kandy or failing him Colombo Stock Exchange and the Central Mr. E.A.D.P. Ekanayake of Kandy or failing him I. To receive and consider the Financial Depository Systems, which shall be in force Dr. A.R. Karunaratna of Kandy or failing him Statements of the Company for the from time to time. year ended 31st March 2014 together *Mr/Mrs...... of...... with the Report of the Directors and ...... as *my/our proxy to vote for *me/us on *my/our Auditors thereon. By Order of the Board of behalf at the Thirty Sixth Annual General Meeting of the Company to be held at the Registered Office of the Company, No. 11, Hill Sinhaputhra Finance PLC Street, Kandy on the 29th day of August 2014 at 9.30 a.m. and at any adjournment thereof, and at every poll which may be taken in ll. To re-appoint the retiring Auditors consequence thereof. M/s. KPMG for the ensuing year and to authorise the Directors to FOR AGAINST determine their remuneration. Priyanka Dilhani (Mrs) Company Secretary 1. To adopt the Financial Statements of the Company for the Year ended 31st March 2014. lll. To authorise the Directors to determine donations for the year 25th June 2014 2. To re-appoint retiring Auditors M/s KPMG and to authorise the Directors to fix their remuneration. ending 31st March 2014 and up to the Kandy NOTE date of the next Annual General 3. To authorise the Directors to determine donations for the year ending 31st March 2014 and up to the Meeting. i. A Member entitled to attend and vote date of the next Annual General Meeting. at the Meeting is entitled to appoint a Proxy who need not be a member, to attend instead of him/her. A Proxy may vote on a poll or on a show of hands and to Signed this ...... day of ...... Two Thousand and Fourteen. speak at the meeting.
ii. The Shareholders and the Proxy holders are kindly requested to bring this report along ………………………………… with an acceptable form of identity. Signature of Shareholder
iii. A Form of Proxy is enclosed in this Report.
NOTE iv. The completed Form of Proxy should be deposited at the Registered office of * Please delete the inappropriate words. the Company at No. 11, Hill Street, Kandy (Instructions as to completion are noted on the reverse hereof.) not less than 48 hours before the appointed time for the meeting.
90 91 SINHAPUTHRA FINANCE PLC Annual Report 2013 / 2014 CORPORATE INFORMATION
BOARD OF DIRECTORS NAME OF COMPANY ... FORM OF PROXY J.R.J. Nanayakkara – Chairman Sinhaputhra Finance PLC K.R.B. Wijeyeratne – Managing Director K.G.D.S.J. De Alwis COMPANY REGISTRATION NO. Dr. A.R. Karunaratna PB/PQ 259 E.A.D.P. Ekanayake REGISTERED OFFICE SENIOR CONSULTANTS TO THE BOARD 11, Hill Street, Kandy. K.H.K. Wijayadasa Tel: 081 555 5555 / 222 3235 Fax: 081 220 3403 / 223 9064 A.M.G. Weerakoon INSTRUCTIONS AS TO COMPLETION OF PROXY E-mail: [email protected] / [email protected] Website: www.sinhaputhra.lk BRANCHES Colombo : Unit No. F 160 (250/1/10), First Floor, Liberty Plaza, Colombo 03. Tel: 011 237 5688 1. Kindly perfect the Form of Proxy after filling in legibly your Trincomalee : 366, Central Road, Trincomalee. Tel: 026 567 4674 PRINCIPAL LINES OF BUSINESS Acceptance of Time Deposits name in full and address and by signing in the space provided. Kurunegala : 16, Kandy Road, Kurunegala. Tel: 037 564 8111 Acceptance of Savings Deposits Please fill in the date of signature. Bandarawela : 348, Badulla Road, Bandarawela. Tel: 057 567 7797 Finance Leasing Anuradhapura : 07, Maithreepala Senanayake Mawatha, Hire Purchase 2. A member entitled to attend and vote at the meeting is Anuradhapura. Tel: 025 562 0620 Business / Personal Loans entitled to appoint a Proxy who need not be a member, Katugastota : 34, Kurunegala Road, Katugastota. Tel: 081 567 1671 Pawn Broking to attend and vote instead of him/her. Kundasale : 94/B/1, Warapitiya Junction, Kundasale. Vehicle Imports Tel: 081 563 4111 Real Estate Developers 3. In the case of corporate member, the Form of Proxy must be Dambulla : 633/1, Anuradhapura Road, Dambulla. Foreign Currency Exchange completed under its Common Seal, which should be Tel: 066 570 2703 Sub-Agents for Insurance Sub-Agents for Western Union Money Transfer affixed and attested in the manner prescribed by the Articles COLLECTION CENTRES of Association. Matale : 553 A1, Trincomalee Road, Matale. Tel: 066 570 1701 Mahiyanganaya : 22, Vidanagamage Shopping Complex, Mahiyanganaya. Tel: 055 570 2802 4. If the Form of Proxy is signed by an Attorney, the relevant AUDIT COMMITTEE Power-of-Attorney should also accompany the completed J.R.J. Nanayakkara – Chairman LEGAL FORM Form of Proxy, in the manner prescribed by the Articles of E.A.D.P. Ekanayake Quoted Public Company, Incorporated in Sri Lanka on 06th November 1978. Association. Dr. A.R. Karunaratna Licensed under “The Finance Companies Act No. 78 of 1988” An approved K.H.K. Wijayadasa – Snr. Consultant to the Board Credit Agency under: “The Mortgage, Act No. 06 of 1949” and “The Trust 5. The completed Form of Proxy should be deposited at the Receipts Ordinance No. 12 of 1947”. Registered Office of the Company No. 11, Hill Street, Kandy REMUNERATION COMMITTEE not less than Forty Eight (48) hours before the appointed time E.A.D.P Ekanayake – Chairman A Registered Finance Leasing Establishment under the “Finance Leasing Act for the meeting. Dr. A.R. Karunaratna No. 56 of 2000.” Registered under the New Companies Act No. 07 of 2007. A.M.G. Weerakoon – Snr. Consultant to the Board Sinhaputhra Finance Limited listed in Colombo Stock Exchange on 2nd June 2010 and the Company changed it’s name to “Sinhaputhra Finance PLC”. INTEGRATED RISK MANAGEMENT COMMITTEE K.R.B. Wijeyeratne – Chairman Upali Hangawatte BANKERS K.G.D.S.J. De Alwis Prabath Medagedara Seylan Bank NDB Bank Dr. A.R. Karunaratna Gamini Pussepitiya Sampath Bank Bank of Ceylon E.A.D.P. Ekanayake Mrs. Shirani Dodanwala Hatton National Bank People’s Bank Pandula Aluwihare Menaka Rambukwella Commercial Bank DFCC Vardhana Bank Mrs. Sabriya Amanulla Ms. Iresha Perera Nations Trust Bank Pan Asia Bank Union Bank
SECRETARY EXTERNAL AUDITORS INTERNAL AUDITORS Mrs. Priyanka Dilhani – Attorney-at-Law KPMG Kandy Branch (Chartered Accountants) SJMS Associates – Kandy, Chartered Accountants, 92 11, Hill Street, Kandy. 483A, 4th Floor, William Gopallawa Mawatha, Kandy. 25/1/1, George E. De Silva Mawatha, Kandy. Designed & Produced by Smart Connections. Printed Printel. Designed & Produced Visit - www.sinhaputhra.lk
11, Hill Street, Kandy