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2010-11A N N U A L R E P O R T
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NAME OF COMPANYCentral Finance Company PLC
LEGAL FORMA Quoted Public Company with limited liability incorporated in Sri Lanka on 5th December 1957 and re-registered under the Companies Act No.07 of 2007 on 9th August 2007.
Registered under Finance Companies Act No.78 of 1988 and Finance Leasing Act No.56 of 2000.
Approved Credit Agency under:* Mortgage Act No.6 of 1949* Trust Receipt Ordinance No.12 of 1947
COMPANY REGISTRATION NUMBERPQ 67
TAX PAYER IDENTIFICATION NUMBER (TIN)104017258
C. Wijenaike - President
DIRECTORSS.V. Wanigasekera - ChairmanE.H. Wijenaike - Managing DirectorG.S.N. Peiris - Director (Finance)C. Kiriella - Director (Legal)M.S. Wijenaike U.L. Kadurugamuwa G.C.B. Wijeyesinghe R.E. Rambukwelle - Director (Marketing and Operations)A.K. Gunaratne - Director (Group Co-ordination)T.K. Bandaranayake
STOCK EXCHANGE LISTINGThe ordinary shares of the Company are listed on the Colombo Stock Exchange of Sri Lanka.
HEAD/ REGISTERED OFFICE84, Raja Veediya, Kandy.Telephone : 081- 2227000Facsimile : 081- 2232047
CITY OFFICE270, Vauxhall Street,Colombo 2.Telephone : 011 - 2300555Facsimile : 011 - 2300441E-mail : [email protected] : www.cf.lk
BANKERSBank of CeylonCiti Bank N.A.Commercial Bank of Ceylon PLCICICI Bank Ltd.Hatton National Bank PLCHongkong & Shanghai Banking Corporation Ltd.NDB Bank PLCNations Trust Bank PLCPeople’s BankSampath Bank PLCSeylan Bank PLCStandard Chartered BankUnion Bank PLCHabib Bank Ltd
AUDITORSJMS Associates,Chartered Accountants,2, Castle Lane,Colombo 04.
LEGAL ADVISERSF.J & G. de Saram,Attorneys-at-Law,P.O. Box 212,Colombo.
COMPANY SECRETARIESCorporate Services (Pvt) Limited,216, De Saram Place,Colombo10.Telephone : 011- 4605100Facsimile : 011- 4718220
ADMINISTRATIONIf you receive more than one copy of the Annual Report at the same address, we will appreciate such information of duplication communicated to the Company Secretaries in order to update the mailing list and minimize wasted expenditure in the future.
Corporate Information
VISIONCentral Finance shall be the first choice for progressive customers in delivering innovative financial solutions.
MISSIONTo be the leader in our industry, conducting business with responsibility, using our expertise in helping customers grow and prosper whilst creating lasting value for our shareholders.
Designed & Produced byDigital Plates by Imageline (Pvt) Ltd.Printed by Aitken Spence Printing and Packaging (Pvt) Ltd.
Central Finance Company PLC - Annual Report 2010-11 1
Financial Highlights 2
Managing Director’s Report 3
Board of Directors 9
Corporate Management Team 11
Management Discussion and Analysis 12
Financial Review 15
Branch Network 17
Risk Management 20
Corporate Governance 23
Corporate Social Responsibility 37
Financial Reports
Annual Report of the Board of Directors 42
Directors’ Responsibility for Financial Reporting 47
Remuneration Committee Report 48
Audit Committee Report 49
Statement of Internal Control by the Board 50
Report of the Auditor 51
Income Statement 52
Balance Sheet 53
Statement of Changes in Equity 54
Cash Flow Statement 55
Accounting Policies 56
Notes to the Financial Statements 64
Directors’ Interests in Contracts with the Company 94
Group Companies 95
Group Value Added Statement 99
Share Information 100
Decade at a Glance 102
Employees of the Year 104
Glossary of Financial Terms 107
Notice of Meeting 109
Form of Proxy 111
Corporate Information IBC
Central Finance Company PLC - Annual Report 2010-112
Financial Highlights
Group Company
2010/11 2009/10 2010/11 2009/10
Rs.Mn. Rs.Mn. Rs.Mn. Rs.Mn.
Financial performance
Income 8,094 7,537 7,647 7,057
Profit before income tax 3,242 2,026 2,608 1,525
Provision for taxation 1,330 901 998 584
Profit after income tax 1,911 1,125 1,610 941
Net profit attributable to ordinary shareholders 1,827 1,046 1,610 941
Gross dividends - - 213.15 121.80
Financial position
Total assets 41,163 35,477 39,040 33,335
Gross loans and advances to customers 28,660 21,733 29,638 22,647
Deposits 18,757 17,233 18,958 17,397
Shareholders’ funds 10,898 9,127 9,444 7,897
Information per ordinary share
Earnings Rs. 90.00 51.53 79.32 46.34
Dividends Rs. - - 10.50 6.00
Market value Rs. - - 1,273.70 390.00
Net assets Rs. 536.83 449.60 465.23 389.01
Ratios
Dividend cover (times) - - 7.55 7.72
Statutory ratios
Liquid assets (%) - - 12.25 21.22
Shareholders’ funds to deposits (%) - - 49.81 45.39
Capital adequacy ratios
Core capital ratio % (Tier 1) - - 23.59 23.79
Total risk weighted capital ratio % (Tier 1 & 11) - - 23.85 24.25
Staff strength (No.) 1,818 1,771 1,347 1,279
Total Assets (Rs.Mn.) - 41,163
0
10,000
20,000
30,000
40,000
50,000
2007 2008 2009 2010 2011
Shareholders Funds (Rs.Mn.) - 10,898
0
2,000
4,000
6,000
8,000
10,000
12,000
2007 2008 2009 2010 2011
Gross Dividends (Rs.Mn.) - 213
0
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100
150
200
250
2007 2008 2009 2010 2011
Total Deposits(Rs.Mn.) - 18,757
0
5,000
10,000
15,000
20,000
2007 2008 2009 2010 2011
Net Profit (Rs.Mn.) - 1,911
0
500
1,000
1,500
2,000
2007 2008 2009 2010 2011
Central Finance Company PLC - Annual Report 2010-11 3
I have much pleasure in presenting on
behalf of the Board of Directors, the report
and accounts for the year ended 31st
March 2011. Significant achievements for
the period under review as compared to
the previous year are highlighted below:
Year ended Year ended
31/03/2011 31/03/2010
(Rs.Million) (Rs.Million)
Income 7,647 7,057
Profit before Tax 2,608 1,525
Profit after Tax 1,610 941
Earnings per
share (Rs./share) 79.32 46.34
Deposit Base 18,958 17,397
Shareholders Funds 9,444 7,897
2010 was an excellent year for many
reasons:
• The economic recovery that began in
the last quarter of 2009 surged ahead,
recording a GDP growth of 8%, the
highest in the last three decades, with
all key sectors reporting strong results.
• Interest rate reductions to stimulate
credit growth ensured ample liquidity
enabling the finance industry to fund
itself at reasonable rates.
• Revision of import duties on vehicles
revitalised the leasing market. The
recovery was led by affordable prices,
higher incomes, stronger cash flows
and aspirations to own new vehicles.
These favourable conditions made it
possible for the Company to end the
financial year on a strong note, with total
assets growing by 17% to reach Rs.39.0
Billion (Rs.33.3 Billion in 2010) and an
operating profit before financial VAT and
income tax of Rs.2.9 Billion, an increase of
67% over the previous period. Liabilities
grew at a lower pace as the loan book
was largely funded through the robust
cash flows from core operations. New
borrowings were utilised to meet shortfalls
to support advances or manage interest
rate mismatches. In spite of the significant
growth in advances, liquidity remained
satisfactory with liquid assets of Rs.312
Million in excess of statutory requirements
and undrawn facilities of Rs.3.5 Billion
at year end. Operating expenses were
consistent with the expansion in business
(increase of 13% or Rs.258 Million).
Shareholders’ funds grew by Rs.1.54 Billion
and stood at Rs.9.4 Billion for the Company,
and at the group level, crossed a significant
threshold to reach Rs.10.9 Billion.
Fitch Ratings Lanka (FRL) affirmed the ‘A+
(lka)’ rating taking into consideration the
good financial profile of the Company. The
agency also assigned an ‘A(lka)’ rating to a
subordinated debt issue of Rs.500 Million
with a tenor of five years.
DividendThe Directors recommend a final dividend
of Rs.5.00 per share, thus making a total
Managing Director’s Report
Fitch Ratings Lanka (FRL) affirmed the ‘A+ (lka)’ rating taking into consideration the good financial profile of the Company. The agency also assigned an ‘A(lka)’ rating to a subordinated debt issue of Rs.500 Million with a tenor of five years.
Central Finance Company PLC - Annual Report 2010-114
dividend of Rs.10.50 per share for the
year ended 31.03.2011. The distribution
together with 10% WHT absorbs
Rs.213.15 Million – an increase of 75%
over last year.
Business The automotive sector recorded a strong
growth, reversing the declines in the
past three years (2007 to 2009). New
vehicle registrations at 359,243 units
were the highest ever recorded - an
increase of 155,168 over 2009. Although
private cars saw the greatest number of
new registrations (23,072), substantial
investment in goods haulage and
passenger transport was also evident with
23,557 commercial vehicles and 2,491
buses added to the country’s transport
infrastructure.
Leasing and Hire purchase industry
reported new inceptions of Rs.195
Billion, for the year ended 31.03.2011,
an increase of 80% over the previous
year. These exceptional results were
due to the imbalance in supply and
demand created by high import duties
and restricted credit for several years. Our
expectations are that growth rate would
not reach the historic high of the previous
year, but would remain buoyant, driven
by fundamental factors such as robust
economic growth and stronger cash flows.
The intensified initiatives to develop the
rural economy through construction of
highways, rebuilding rural roads, irrigation
schemes and strengthening power and
communication infrastructure will result in
broad based expansion in all key sectors.
In addition, a more favourable depreciation
allowance for equipment together with the
enactment of the Secured Transactions
Act will revitalise the dormant equipment
leasing business. These developments
promise a large and growing opportunity
for the Company with its strong rural
presence.
With business volumes of Rs.20.23
Billion as against Rs.9.7 Billion previously,
the Company performed exceptionally
well, achieving a growth of 108% in
disbursements for the year. The results
were achieved through continued
penetration into rural markets supported
by new delivery channels. The increase
of market share in medium and heavy
commercial vehicles with a growth of 88%
and a strong 137% year on year growth in
car finance contributed to this expansion.
The Company maintained its conservative
approach to credit risk while pursuing
strong lending growth. The rigorous
credit evaluation processes enabled the
Company to further improve its asset
quality measures in terms of both gross
and net Non-Performing Loan (NPL) ratios.
Asset quality was better than market,
with gross non-performing loans to total
advances (inclusive of operating leases)
on the core business at 2.6% and net
NPL of 0.3%. Provision cover increased
to 70% from 64.6% in the previous year.
Industry wide Gross NPL ratios in 2010 for
registered finance companies, banks and
specialised leasing companies were 9%,
5% and 5% respectively (CBSL Annual
Report). Recovery of debts previously
written off amounted to Rs.71.2 Million as
against Rs.70.7 Million last year.
Internal capital generation remained
strong, with a Tier 1 Capital Adequacy
ratio of 23.59% (minimum 5%) and
total capital to risk assets ratio of 23.85%
(minimum 10%).
Resource Mobilisation a) Deposits The deposit base reached Rs.18.96
Billion as at the year end, an increase
of 9% or Rs.1.56 Billion over the year.
Gross deposit mobilisation was Rs.5.24
Billion. The year under review also
witnessed the continuing realignment
of the deposit mix with approximately
84% of the base now in tenors of one
year and over. CF Savings continued to
perform well, with a gross mobilisation
of Rs.3.25 Billion and a year-end
balance of Rs.782 Million, an increase of
13.35% over the previous year.
b) Term Funding Increased liquidity in the banking sector
resulted in a decline in market interest
rates that were attractive to borrowers.
The Company utilised this opportunity
to secure competitive funding through
bank and non-bank sources. The
Company also issued a further Rs.250
Million in debentures with the tenure
of five years in March 2011. Bank and
Managing Director’s Report (contd.)
Central Finance Company PLC - Annual Report 2010-11 5
other institutional borrowings stood at
14% of the total borrowings compared
to the 8% recorded last year.
The Company constantly monitors
mismatches arising in its cash flows
and its exposure to changes in interest
rates in the market. The Company
is confident that these aspects are
well managed and to strengthen this
position further, it has entered into
interest rate swap transactions in order
to minimise exposures.
PERFORMANCE OF SUBSIDIARY AND ASSOCIATE COMPANIES
Subsidiaries
Central Industries PLCThere was no major resurgence of the
construction industry as envisaged.
However, mainly due to the overall
improvement of the economy as well
as the investments in the government
infrastructure projects, the company
recorded revenue of Rs.1.48 Billion
compared to Rs.1.24 Billion last year. The
raw material prices during the year were
substantially higher than the previous year,
due to the recovery of the global economy.
The impact of higher raw material costs
reflected on the profit before tax being
Rs.121.8 Million compared to Rs.141.2
Million last year. Profit after tax was Rs.74
Million compared to Rs.85.5 Million last
year.
Considering the improved economic
and social environment emerging in the
country, we believe that the Company has
the essential factors and financial stability
to benefit from new opportunities and to
feel optimistic about the future.
Mark Marine Services (Pvt) LtdThe turnover from hydro power generation
improved to Rs.166.25 Million in 2010/11
from Rs.130.83 Million achieved in
2009/10, an increase of 27%. Favourable
weather conditions that prevailed during
most parts of the year enabled the
Company to improve power generation
which significantly contributed towards the
increase in turnover.
Profit before tax increased from Rs.111.47
Million in 2009/10 to Rs.144.51 Million
during the period under review, recording
an increase of 29.6% whilst profit after tax
increased from Rs.71.47 Million achieved
during the previous financial year to
Rs.97.57 Million in 2010/11, an increase
of 36.5%. The dividend paid out by the
Company during the financial year ended
March 31, 2011, improved to Rs.8.50 per
share from Rs.6.00 paid during the prior
year.
CF Insurance Brokers (Pvt) Ltd. (CFIB)CFIB continued to perform well, and
according to the last published Annual
Report of the Insurance Board of Sri Lanka
(2009) is, as in the past many years,
the Island’s leading insurance broker.
The Company’s accounts are kept on a
calendar year basis in conformity with
Regulatory requirements.
The Company constantly monitors mismatches arising in its cash flows and its exposure to changes in interest rates in the market. The Company is confident that these aspects are well managed and to strengthen this position further, it has entered into interest rate swap transactions in order to minimise exposures.
Central Finance Company PLC - Annual Report 2010-116
The Company transacts mainly general
insurance business and the premium
turnover in 2010 was Rs.1.236 Billion
as compared to Rs.1.108 Billion in the
previous year, an increase of 12%. This
approximately corresponds to the market
growth in general insurance business.
Commission income increased to
Rs.143.27 Million in 2010 as compared to
Rs.127.82 Million recorded in the previous
year, a growth of Rs.15.45 Million.
The Company’s operating profit before tax
increased by Rs.8.9 Million from Rs.27.59
Million in 2009 to Rs.36.48 Million in
2010. A provision of Rs.4.14 Million was
made in regard to the investment in
Hedges Court Residencies (Pvt) Ltd. With
this provision the investment of HCR is
now fully provided for in the books of CFIB.
Profit after tax was Rs.30.13 Million in
2010, after the above provision, compared
to Rs.21.80 Million recorded in 2009.
Dehigama Hotels Company Ltd. (DHCL)Dehigama Building houses the Registered
Office of Central Finance Company PLC at
84, Raja Veediya, Kandy. The Company’s
turnover consists of rental income derived
from its anchor tenant Central Finance.
With full occupancy, revenue stood at the
same levels as there were no additions
to the floor area of the building. Interest
expenses decreased almost 50% over
the previous year with the completion of
renovation programme and reduction in
interest rates. Accordingly, Profit before tax
amounted to Rs.19.33 Million as against
Rs.17.82 Million recorded during the
previous financial year. Profit after tax also
increased to Rs.14.09 Million in the year
under review compared to Rs.11.30 Million
reported in the previous year.
Kandy Private Hospital Ltd. (KPHL)Turnover of the Company grew by
16% during year under review to
Rs.75.26 Million from Rs.64.78 Million in
2009/2010. However, profit before tax did
not improve in the same proportion due to
17% increase in administrative expenses
compared to last year. Profit before
tax improved to Rs.17.25 Million from
Rs.16.54 Million recorded in the previous
year. Profit after taxation decreased to
Rs.10.83 Million compared to Rs.11.02
Million posted in the corresponding period
of the previous financial year.
Hedges Court Residencies (Pvt) Ltd. (HCRL)19 apartment units were sold during the
year under review, amidst the relatively
sluggish condominium market. Total units
sold as at 31st March 2011 stands at 76.
Turnover improved to Rs.309 Million as
against Rs.274 Million recorded in the
previous financial year. Borrowing costs
decreased to Rs.25.8 Million from Rs.92.2
Million recorded in the previous financial
year with the borrowings being settled
utilising sale proceeds. As a direct result
of this reduction in borrowing costs, net
Loss after tax for the year was contained at
Rs.47.65 Million compared to the loss of
Rs.118.58 Million incurred in the previous
financial year. The Company expects a
revival in the industry to propel the sale of
remaining apartments early in the ensuing
financial year.
Associates
Tea Smallholder Factories PLC (TSFL)The Company recorded a pre-tax profit
of Rs.168.75 Million, a decrease of 25%
over the previous year, mainly due to
the increase in the cost of bought leaf.
The revenue for the year under review
was Rs.2,341 Million, a decrease of
Rs.2.25 Million over the previous year.
Tea production in 2010/2011 increased
to 5.86 Million Kilograms as against 5.64
Million Kilograms achieved in the previous
year. The Company declared a dividend
of Rs.8.00 per share for the financial year
ended 31st March 2011 as against Rs.9.00
per share for the previous year.
Nations Trust Bank PLC (NTB)The Bank crossed Rs.1 Billion milestones
in pre and after tax profits during the 2010
financial year. Net interest income of the
NTB group increased to Rs.4.56 Billion
compared to Rs.3.72 Billion recorded in
the previous year. Group profit after tax
for year ended 31st December 2010
amounted to Rs.2.02 Billion, an increase
of Rs.647.6 Million on Rs.1.38 Billion
recorded in the previous year. Deposit
base of the Bank grew by 9% over last
year to reach Rs.48.35 Billion at the year
end. Loans and advances grew by 26%
compared to a contraction of 8% in the
previous year. Growth was witnessed from
Managing Director’s Report (contd.)
Central Finance Company PLC - Annual Report 2010-11 7
across the business lines with corporate
banking accounting for the highest
contribution. Net non-performing loans
(NPL) ratio improved to 4.9% as at the
year-end compared to 8.5% recorded
in the previous year. The Bank paid a
dividend of Rs.2.00 per share for the year
ended 31st December 2010.
DirectorateI take this opportunity to welcome Messrs
Kumar Jayasuriya, Sunil Wickramasinghe
and Prasanna de Silva to the Board of
Central Finance.
Mr. Jayasuriya is the Executive Chairman
of Finlays Colombo PLC, part of the UK’s
Swire Group, and brings with him extensive
experience and expertise gained in a career
spanning over 33 years in a multinational
company. In addition to serving as a
Director of The Employees Trust Fund,
he also had the distinction of heading the
Employers’ Federation of Ceylon (EFC) as
its Chairman from 2008 – 2010.
Mr. Wickramasinghe is currently the
Chairman of Milco (Pvt) Limited, having
had a successful tenure at Nestlé Lanka
PLC where he served on the Board before
joining Nestlé Australia in 2005 as Sales
Director Pacific Islands. He has over 28
years of experience in marketing, sales
and general management with exposure
to emerging markets in India, Maldives,
Malaysia and Papua New Guinea.
Mr. de Silva joined Central Finance in
1991 as a Credit Executive and currently
functions as the Head of Credit in the
Company. He served as the Chairman of
the Leasing Association of Sri Lanka (LASL)
from 2007 – 2009 and continues as an
advisor to the Association. He also serves
as a Member of the Telecommunications
Regulatory Commission of Sri Lanka. His
association with the Company spans two
generations as his maternal grandfather Mr.
A.S. Karunaratne was a founder Director of
the Company.
Mrs. Charmaine Kiriella, Mr. M.S. Wijenaike
and Dr. G.C.B Wijeyesinghe retired from
the Board on 30th June 2011.
Mrs. Charmaine Kiriella, who joined the
Board as an Executive Director retired
after a tenure of 26 years during which
she contributed immensely towards the
growth and development of the Company.
She established the legal division within
the Company and spearheaded the
implementation of recovery and litigation
processes that enabled the Company
to successfully manage legal risks. The
development of a fully-fledged legal
department under her guidence facilitated
the early diversification of the Company’s
lending operations. While we will miss
her many contributions as a Director, Mrs.
Kiriella will continue as Consultant (legal)
enabling the Company to benefit from
her experience and perspective. She also
served as a founder Director of our associate
company, Nations Trust Bank PLC which was
established in 1999.
Central Finance Company PLC - Annual Report 2010-118
Joining the Board in 1997, Mr. M.S.
Wijenaike was instrumental in establishing
CF Insurance Brokers (Pvt) Ltd (CFIB), the
Company’s fully owned insurance broking
subsidiary. Prior to joining the Company he
funtioned for many years as the General
Manager of Sri Lanka Insurance Corporation
and also served on the Boards of Sri
Lanka Export Credit Insurance Corporation
and the Agricultural Insurance Board
before leaving for Thailand to take up the
post of CEO / GM of Asian Reinsurance
Corporation. His wide experience both
locally and internationally in insurance
made a significant impact in the success
of CFIB as the country’s leading insurance
broker.
A highly respected member of the Board
since 2001, Dr. G.C.B Wijeyesinghe’s
counsel reflects his experience as a senior
Chartered Accountant and extensive
knowledge gained on many prestigious
local and international Boards. Prior to
joining Central Finance he functioned as a
member of the Internal Audit Committee
of the Central Bank of Sri Lanka.
The Board of Directors join me in
acknowledging and thanking these senior
Directors for their wisdom, guidance
and steadfast support during their tenure
of office.
AcknowledgementThe Directors wish to place on record
their appreciation to all depositors and
shareholders for their continued trust and
confidence in CF. They also wish to thank
the many customers across the Island,
including the North and the East who gave
us the opportunity to serve their diverse
financial needs during the period in review.
My personal thanks go out to our staff at
every level for their passion, talent and
outstanding teamwork to make this a
remarkable year.
On behalf of the Board of Directors I
would like to thank the Governor and
Deputy Governor of the Central Bank of
Sri Lanka for the co-operation and support
extended to us. I also wish to record our
appreciation to the Director and Additional
Director who together with their officers
in the Department of Supervision of
Non-Bank Financial Institutions offered us
guidance and support towards the smooth
functioning of the Company.
In concluding this review, I wish to
express my gratitude for the guidance,
encouragement and support extended
to me by colleagues on the Board
of Directors. My sincere thanks and
appreciation are due to the Board
of Management and our corporate
management team in successfully guiding
the business in an exceptional year.
E. WijenaikeManaging Director
30th June 2011
Managing Director’s Report (contd.)
Central Finance Company PLC - Annual Report 2010-11 9
Stanley Vincent WanigasekeraStanley Vincent Wanigasekera, B.Com(London), F.C.A. (England and Wales), F.C.A (Sri Lanka) was appointed as Chairman of Central Finance Company PLC in the year 2006 consequent to the retirement of Chandra Wijenaike, a Founder Director of the Company. He has been a member of the Board since 1st February 1983. He has served as the First Sri Lankan Executive Chairman of Ceylon Tobacco Company PLC and was a Director of Hatton National Bank PLC, Richard Peiris & Company PLC, Associated Motorways PLC, Brown & Company PLC and Associated Newspapers of Ceylon (ANCL). He currently serves on the Board of Tokyo Cement Company (Lanka) PLC and is the Chairman of Central Industries PLC. He has over 54 years of finance and management experience in Sri Lanka.
Eranjith Harendra WijenaikeEranjith Wijenaike is the Managing Director of Central Finance Company PLC and has been a member on the Board since 1st April 1983. He is the Deputy Chairman of Nations Trust Bank PLC as well as a Director of several companies within and outside the Group including Tea Smallholder Factories PLC and Central Industries PLC. He has over 29 years of experience and holds a Bachelor’s Degree in Commerce and a Postgraduate Diploma in Finance and Management. He is a Member of the Chartered Institute of Management (UK).
Gerard Shamil Niranjan PeirisShamil Peiris is the Director (Finance) of Central Finance Company PLC and has been a Member on the Board since 1st April 1983. He serves on the Boards of many Companies within the Group and outside. He possesses over 33 years of post qualification management experience. He is a Fellow of the Institute of Chartered Accountants of Sri Lanka, Institute of Credit Management & Society of Certified Management Accountants - Sri Lanka, Chartered Institute of Management Accountants, British Institute of Management and Association of Corporate Treasurers - UK.
Charmaine KiriellaCharmaine Kiriella is the Director (Legal) of Central Finance Company PLC and has been a member on the Board since 15th November 1985. She is a Director of several companies within the Group. She qualified as an Attorney-at-Law with a First Class in 1974 in Sri Lanka and also as a Solicitor in the UK in 1978. She possesses over 26 years of management experience. Having completed 26 years service as an Executive Director, C.Kiriella retired from the Board with effect from 30th June 2011.
Mahanagage Sidantha WijenaikeSidantha Wijenaike is the Managing Director of CF Insurance Brokers (Pvt) Ltd., a wholly owned subsidiary of the Central Finance Group. He was appointed to the Board of Central Finance Company PLC on 17th November 1997. He holds a Bachelor’s Degree in Arts from the University of Ceylon, and is a Fellow of the Chartered Insurance Institute of London. Sidantha Wijenaike was formerly General Manager, Insurance Corporation of Sri Lanka, and later Chief Executive Officer of the UN established Asian Reinsurance Corporation, Bangkok. He retired in 1995 to establish CF Insurance Brokers (Pvt) Ltd. which has been the Broker with the largest turnover over the past several years. He has over 50 years of experience, both locally and internationally in Insurance and Management. Having served on the Board for more than nine years, M.S.Wijenaike retired with effect from 30th June 2011 under the provisions of Finance Companies Direction No.03 of 2008 on Corporate Governance.
Gamini Christopher Bernard WijeyesingheGamini Wijeyesinghe is a Fulbright Scholar of the graduate school of management of the Ohio State University, U.S.A and a Fellow of the Institute of Chartered Accountants of Sri Lanka and a Fellow of the Society of Certified Management Accountants of Sri Lanka. He was appointed to the Board of Central Finance Company PLC on 1st June
2001. He possesses over 43 years of management experience at very senior levels both locally and internationally. He was a Past President of the Institute of Chartered Accountants of Sri Lanka and the Organisation of Professional Association of Sri Lanka and a fellow of the Certified Public Accountants (UK). He has served on the Boards of KPMG-Asia Pacific and on the External Audit Committee of the IMF and the Central Bank of Sri Lanka and holds Directorates in other public quoted companies. He was conferred a Doctorate (D.litt) Honoris Causa, by the Post Graduate Institute of Management affiliated to the University of Sri Jayawardenapura for his contributions in the field of Management Science. Having served on the Board for more than nine years, G.C.B.Wijeyesinghe retired with effect from 30th June 2011 under the provisions of Finance Companies Direction No.03 of 2008 on Corporate Governance.
Ravindra Erle RambukwelleRavi Rambukwelle is the Director (Marketing and Operations) of Central Finance Company PLC and was appointed to the Board on 20th February 2002. He has over 31 years of management experience, both locally and internationally. He holds a Bachelor’s Degree in Economics and Political Science from the University of Peradeniya, a Diploma in Marketing from the Chartered Institute of Marketing UK and a Diploma in Commerce from the Institute of Commerce UK. He serves as a Director in several companies within the Group.
Arjuna Kapila GunaratneArjuna Gunaratne, Director (Group Co-ordination) of the Company, has been a member on the Board since 20th February 2002. He oversees the functions of Strategic Planning and Risk Management of the Company. He also serves on Boards of Nations Trust Bank PLC, Central Industries PLC and Union Assurance PLC. He is a Fellow of the Institute of Chartered Accountants of Sri Lanka and the Chartered Institute of Management Accountants of UK.
Board of Directors
Central Finance Company PLC - Annual Report 2010-1110
Udaya Lankadikara KadurugamuwaUdaya Kadurugamuwa is the Precedent Partner of F.J & G. de Saram, Attorneys-at-Law.
Tissa Kumara BandaranayakeTissa Bandaranayake, a Fellow of the Institute of Chartered Accountants of Sri Lanka, was appointed to the Board on 27th May 2009. He was in public practice with Ernst & Young for 27 years since 1982 where he was a Senior Partner managing a large portfolio of clients both local and multinational in various industries. He serves as the First Chairman of the newly created Quality Assurance Board of Sri Lanka. He is a Director of DFCC Bank, Nawaloka Hospitals PLC, Laugfs Gas PLC, Micro Holdings Ltd., Coco Lanka PLC, Renuka Holdings PLC and Samson International PLC and also works in the capacity of Advisor/Consultant of the Audit Committee of DFCC Vardhana Bank and of the Board of Directors of Noritake Lanka Porcelain (Pvt) Ltd.
Dhammika Prasanna de SilvaPrasanna de Silva was appointed to the Board with effect from 01st July 2011 as an Executive Director. Having joined the Company as a Credit Executive in 1991 De Silva headed the Credit Division of the Company as General Manager Credit at the time of appointment to the Board. He served as the Chairman of the Leasing Association of Sri Lanka from 2007 – 2009. At present he is an advisor to the Association. He also serves as a Member of the Telecommunication Regulatory Commission of Sri Lanka. Prasanna de Silva is an Associate Member of the Chartered Institute of Management Accountants (UK) and has also completed all examinations of Chartered Financial Analyst (CFA) programme.
Chandima Lalith Kumar Perera JayasuriyaKumar Jayasuriya, Executive Chairman and Managing Director of Finlays Colombo PLC was appointed to the Board with effect from 01st July 2011 as an Independent Non-Executive Director. A Fellow member of the Chartered Institute of Management Accountants, UK (FCMA) and the Association of Certified Chartered Accountants, UK (FCCA), he is the immediate past Chairman of the Employers’ Federation of Ceylon and serves as the Chairman of the Mercantile Services Provident Society and a Director of the Employees Trust Fund. Kumar Jayasuriya is a member of the Board of the Chartered Institute of Management Accountants – Sri Lanka Division, and the Sri Lanka Accounting and Auditing Standards Monitoring Board and also serves on the Committee of the Ceylon Chamber of Commerce.
Sunil Chandra Sillapana WickramasingheSunil Wickramasinghe is the Chairman of Milco (Pvt) Limited. He possesses 28 years of experience at Nestlé, holding various positions in the fields of Technical, Sales, Marketing and General Management in Sri Lanka and abroad. Served as an Executive Director at Nestlé Sri Lanka, prior to leaving for Australia in 2005 to take up appointment as Sales Director for Nestlé Pacific Islands and later on General Manager – Nestlé Papua New Guinea. He has wide exposure to sales and marketing especially in emerging markets such as India, Sri Lanka, Maldives and Malaysia. He was appointed to the Board as an Independent Non-executive Director with effect from 01st July 2011.
Board of Directors
Central Finance Company PLC - Annual Report 2010-11 11
1 D P De Silva ACMA (UK)
General Manager – Credit
(Appointed as an Executive Director w.e.f.
01.07.2011)
2 U B Elangasinha FCA (SL)
General Manager – Finance
3 P A A R Perera BA (University of Peradeniya), MIPM (SL)
General Manager – HR & D
4 I M J B Ilangakoon AICM (SL)
General Manager – Branches
5 Mrs. H S Fernando MBA (University of Colombo), FCMA (UK)
General Manager – Internal Audit
6 A F Goonetillake Dip in Marketing (UK), MCIM (UK),
Dip in IDPM (UK)
Senior Assistant General Manager
– Marketing Services
7 S Ekanayake Senior Assistant General Manager
– Fleet Management
8 S Tennakoon Senior Assistant General Manager – Sales
9 A P B Rajanayake Senior Assistant General Manager – Deposits
10 C K Hettiarachchi MBA (University of Wales), ACMA (UK)
Senior Assistant General Manager
– Credit & Product Development
11 B A C K Jayawardena Senior Assistant General Manager – Recoveries
12 G A R De Zoysa BSc (Hons) University of Manchester
Metropolitan (UK), Dip in Computer System Design - NIBM (SL), MBA-University of Sri Jayewardenepura
Senior Assistant General Manager – IT
13 G A Bandaranayake Senior Assistant General Manager – Credit
14 H K Amarasinghe MCIA (UK), MIBK (UK), MAAT (UK), ASCA (UK),
MBIM
Assistant General Manager – Audit
15 C A Goonawardene BSc (University of Peradeniya), AICM (SL) Dip in Mgt-Open University of Sri Lanka
Senior Regional Manager – Region1
16 H G Wijeratne Senior Regional Manager – Region 4
17 D M Warnakulasuriya Assistant General Manager – Recoveries
18 C S Hettiarachchi MBA (University of Sri Jayewardenepura), LLB (University of Colombo), Attorney-at-Law
Assistant General Manager
– Recoveries & Acquired Assets Management
19 M A M Farook BSc (Hons) University of London Guildhall (UK), Dip in Computer System Design NIBM (SL)
Assistant General Manager – IT
Corporate Management Team
Central Finance Company PLC - Annual Report 2010-1112
OverviewYear 2010 had been a remarkable year
for the nation, which recorded a full year
of operation after the conclusion of the
internal conflict which bitterly bruised
the nation for over three decades. In the
global context emerging economies grew
strongly while the advanced economies
struggled to fully recover from the deepest
recessions experienced in the history.
Amidst this backdrop Sri Lanka’s economy
has recorded an impressive 8% growth
with improved performance demonstrated
in all sectors such as Agriculture, Industry
and Services. This was the highest
annual rate of growth reported in the last
three decades. Sound macroeconomic
environment created in the country will
help this rebound of performance to be
sustained in the medium and long term
horizon.
Although, the county was affected by
adverse weather conditions and increased
global energy prices, domestic inflation
remained low at around mid-single digit
level. This enabled Central Bank of Sri
Lanka to further ease its monetary policy
stance during 2010. The social welfare
of the country, improved significantly as
indicated by the poverty headcount index
which halved from 15.2% in 2006/07
to 7.6% according to the household
income and expenditure survey 2009/10
conducted by the Department of Census
and Statistics. The improvement was
more prominent in the rural and estate
sectors, which was a direct impact of the
improved income generated form the price
advantages of agricultural based industrial
raw materials such as natural rubber and
the increased production of paddy, tea
and minor export crops along with the
significant improvements in the fisheries
sector output.
Unemployment rate excluding North
and East which was 8.8% in 2002 had
declined to 4.9%, reflecting the increased
availability of employment opportunities
alongside the enhanced economic activities
in the country.
Finance IndustryFinance sector gradually recovered during
2010 from the liquidity problems carried
forward from 2009, as a repercussion of
the collapse of a large unregulated finance
company.
The RFC sector has recorded improvement
in all aspects such as growth of
accommodations, deposits, credit quality
and profits. Deterioration of capital and
shortfall of liquidity were seen in some
distressed finance providers, which
were subsequently rescued by the
implementation of “stimulus package” by
Central Bank. This helped the depositors to
regain confidence in the small scale players
in particular, and in the industry in general.
It had been a successful year for the sector
with the inclusion of two RFCs registered,
while the industry branch network
expanded threefold supported with the
opening of North and East markets .
Capital and Liquidity of RFCsThe sector liquidity has improved during
2010, although some of the RFCs recorded
liquidity shortfalls. Similar trend was
exhibited with the capital funds, with a
marginal increase in the balance sheets,
while the regulatory capital defined for the
maintenance of liquidity ratios continued to
erode during 2010, due to losses posted
by distressed companies affecting the
entire sector negatively.
However, statutory adequacy ratios mostly
remained above the required minimum
levels during the year.
Asset Growth of RFCsAssets of RFCs grew by 26% during the
year compared to 6% marginal growth
in 2009. Main contributing factor was
the increase in accommodations (hire
purchase and finance lease facilities),
which accounted for 57% of the growth of
RFC assets.
Deposit Growth RFCsThe restoration of public confidence in the
RFC sector was evident by the increase
of total deposits of RFCs by 22% during
2010, compared to 16% growth in 2009.
Time deposits remained to be the most
popular product among the clients which
contributed 96% of the total deposits,
compared to a lower percentage of other
deposit products such as savings.
Profitability of RFCsThe widening interest rate margin
contributed positively to the improvement
of RFC profitability. While the overall
interest rate structure declined in the
market, the net interest income as a
percentage of the total assets increased to
5% in 2010, as compared to 3% in 2009.
This increase in profitability is reflected
in both the Return on Assets (ROA) and
Return on Equity (ROE) of RFCs.
Regulatory ChangesDuring the period under review, the
Monetary Board of the Central Bank of
Sri Lanka issued the following Directions to
Registered Finance Companies.
• Finance Companies (Interest) Direction No. 1 of 2010
The Monetary Board issued this
direction to revise the maximum
annual rate of interest paid by
registered finance companies on
time and savings deposits accepted
or renewed during the period under
review. The Direction superseded the
earlier Direction issued in this regard.
• Finance Companies (Insurance of Deposit Liabilities) Direction No. 2 of 2010
The objective of this direction was to
provide a well-accepted safety net to
protect and promote public confidence
and stability of Registered Finance
Companies. The Deposit Insurance
scheme operated by Monetary Board
Management Discussion and Analysis
Central Finance Company PLC - Annual Report 2010-11 13
came into operation with effect from
01.10.2010.
• Finance Companies (Registration and Licensing – Amendment) Rule No. 1 of 2010
The above Rule repealed the Clauses
5 and 6 of the Finance Companies
(Registration and Licensing) Rule
No. 1 of 2005. In terms of this rule,
the annual license fee payable by a
registered finance company to the
Central Bank of Sri Lanka is linked to
its total assets as shown in the balance
sheet as at end of the preceding
financial year.
During the period under review, the
Mediation Boards Act No. 72 of 1988
was amended. Accordingly, all money
recovery actions below the threshold
of Rs.250,000/= should be referred to
the Mediation Boards.
Tax changes in 2010 relevant to the industrySome positive steps were taken by the
Government through its Budget Proposals
for 2011 in reducing the high tax burden
and the anomalies the financial services
sector has had to undergo for several years.
Among the salient positive features are:
• Reduction of corporate tax rate from
35% to 28%
• Rationalising of tax depreciation slabs
on machinery making machinery a
viable option for finance leasing
• Reduction in Financial VAT rate from
20% to 12% coupled with elimination
of tax on tax thereon
• Elimination of Social Responsibility Levy
• Reduction of threshold on Deemed
Dividend Tax from 25% to 10% of
distributable profits
• Elimination of withholding tax on
specified fees which relieves us of an
administrative burden
• Elimination of Debits Tax thus once
again encouraging the use of checking
accounts
• Reduction of Nation Building Tax
(NBT) from 3% to 2% and making
it a deductible expense in computing
income tax
• Elimination of Provincial Council
Turnover Tax and bringing wholesale
and retail trade under the scope of NBT
• Removal of luxury rate classification in
regard to VAT thus applying a uniform
VAT rate
• Increasing VAT input credit allowable
limit up to 100% of output tax
• Exemption from VAT on lease rentals
on public passenger busses, lorries and
tractors making leasing a viable option
for used vehicles in these categories
• Removal of VAT withholding tax by
Govt. agencies thus relieving us of an
administrative burden
Operating and Financial Performance of the CompanyProfit before tax improved from Rs.1,524
Million in the previous year to Rs.2,608
Million in the year under review and profit
after tax also reflected an increase from
Rs.941 Million to Rs.1,610 Million. Other
operating income decreased from Rs.877
Million to Rs.796 Million in the year under
review due to volumes not keeping pace
with the drop in rates during the early part
of the year. Business volumes picked up
sharply in the second half of the year as
a result of intensified marketing and the
fulfillment of pending orders with suppliers
enabling the company to grow business by
120% over the previous year.
The net interest income of Rs.3,947 Million
reflects an increase of 47% compared to
Rs.2,680 Million in the previous financial
year. Other income for the financial year
under review was Rs.530 Million, an
increase of 28 % compared to Rs.415
Million earned in the previous year.
Operating expenses at Rs.2,207 Million
reflects an increase of 13% over Rs.1,949
Million in the previous financial year due
to increase in personnel costs and other
overheads. The Financial Value Added Tax,
calculated on the basis of 20% of pre-tax
profit attributable to financial services,
adjusted for value added items such as
staff emoluments, amounted to Rs.273
Million which was an increase of 36%
compared to Rs.201 Million charged last
year. The provision for losses on loans
and advances was Rs.803 Million, which
represents 2.48% of the total portfolio
including operating leases compared
to 3.19% in the previous financial year.
The rigorous credit evaluation process
enabled the company to further improve
its asset quality measures with gross
non-performing loans to total advances
at 4.6%, which is well below the Industry
wide NPL ratio in 2010 for registered
finance companies of 9%. The ratio of
gross non-performing loans to advances on
the core business excluding pledge loans
and dealer advances at the year end was
2.6% with a net NPL on core business
recoded at 0.3%. Interest bearing liabilities
accounted this year for 56.61% of the
total liabilities and shareholders’ funds, a
marginal decrease compared to 56.82% in
the previous year. Deposits from customers
grew from Rs.17,397 Million in the last
year to Rs.18,958 Million in the current
year, an increase of 9%.
DividendsThe Company continues with the tradition
of making three dividend payments. First
interim dividend of Rs.2.50 per share and
Second Interim dividend of Rs.3.00 per
share have already been paid and your
Board of Directors have recommended
a final dividend of Rs.5.00 per share
for approval of the shareholders at the
Annual General Meeting, making a total
dividend of Rs.10.50 per share, amounting
to Rs.213.15 Million, and an increase of
Rs.4.50 per share over the total dividend
declared in the previous year.
Central Finance Company PLC - Annual Report 2010-1114
Information Technology (IT)The Information Technology Department
undertook some key projects to improve
the efficiency of the IT systems and
further consolidate IT infrastructure. These
initiatives would result in a reduction in
costs over a period of time. .
The application migration project which
was initiated in the previous year was
completed successfully in the year under
review. All key application systems now run
on the latest Oracle 11g database platform.
With this migration multiple databases
were amalgamated to a single database
which facilitated faster management
reporting, and reduced operational
expenditure. A further benefit of this
amalgamation was the relocation of all IT
applications to a single data center which
reduced the hardware and licensing costs
as well as the operational costs.
All critical application and database
servers were replaced with new servers
with the latest blade servers. These
replacements enabled the IT systems
to keep pace with the demands of the
business units in delivering significantly
improved performance and availability. The
adaptation of blade server configurations
enabled better utilisation of space, and
reduced power consumption leading to a
reduction in the overall operational costs.
During the latter part of the year we
obtained the consultancy services of
a reputed overseas service provider
specialised in IT audit and IT security. The
project scope included a comprehensive
IT Audit covering the application security,
network security, systems and database
security audits and physical security.
Improvements are currently being
implemented based on outcomes of the
analyses Replication of databases relevant to
many applications at the Disaster Recovery
(DR) site which carried out on phased
manner was completed during the year.
In the software application development
area, a new system was developed and
implemented across the branch network to
automate the CF Insurance Brokers (CFIB)
operational process to enhance the efficiency
and streamlining the reporting process.
Business OutlookWith the ending of internal conflict,
the country has undertaken ambitious
development projects to create the
superstructure for long term growth. This
is supported by the political stability and
long term vision of the Government, which
has given the business community the
required confidence and direction for new
investments. The GDP growth is predicted
to be over 8 to 9% in the coming years
which is a positive sign of continuance of
the present strategies.
The Government’s multifaceted long
term development vision aims to raise Sri
Lanka as the Naval, Aviation, Commercial,
Energy and Knowledge hub of South
East Asia. Public sector participation in
this endeavour will provide a sustainable
growth foundation for the future, where the
collaboration of the private sector will be an
integral part of this economic resurgence.
The wide ranging development taking place
in the areas of transportation, ports, power
and energy along with the opening of new
unexplored business territories provide a
tremendous opportunity for the business
community.
Transportation sector demonstrate
noticeable improvement, predominantly
in road development namely construction
of highways, expressways, bridges and
rehabilitation of existing roads specifically
focused on roads in North and East. This
opening up of the length and breadth
of road ways will attract investments in
all modes of transportation to facilitate
the fast and efficient transport of goods
and passengers across the country, and
will pave way for accelerated economic
activities within the county.
The much awaited oil exploration in the
Mannar Basin started in 2010, and the
drilling is expected to commence in 2011
according to the plans. This will enable the
county to rise as an upcoming industrial
nation with capital flows and expertise
flowing in this area of new investment.
The capital market of Sri Lanka emerged as
one of the world’s best performing markets
during 2010, with higher level turnover
levels, market indices and market price
earnings ratios. This well organised capital
market with the new developments in the
areas of regulation will positively help the
emerging companies to raise funds for new
projects and the providers of finance can
develop additional business lines such as
margin trading and stock clearing house
services, while giving further opportunity
to develop Sri Lanka as a Capital Hub to
attract international fund flows.
Our organisation is built on the pillars
of five decades of a legacy of business
success. To harness the above business
opportunities, we have developed a
strategic branch network, with well-trained
and motivated staff, who are capable of
providing efficient and caring customer
services focused on specific customer
needs. We will increase our presence in
the rural sector with the expansion of our
branch network in the newly liberated
areas, equipped with innovative product
lines which provide a one stop facility
for financial services. The local tourism
sector is booming and private investment
is growing in the tourist transport sector,
refurbishment of hotels and in the
supply chain for the tourism industry. We
continue to provide our services for the
high end corporate clients in the same
way and plan to extend facilities to the
second tier customer base also, especially
in the automotive sectors. New product
lines specifically designed to cater, for
differentiated niché markets are in the
pipeline. We as a leading financial provider
will strategically extend our innovative
product lines further, thereby bringing
prosperity to our loyal customers.
Management Discussion and Analysis (contd.)
Central Finance Company PLC - Annual Report 2010-11 15
Industry OverviewAfter the slowdown in the economic
activities in the preceding years, the
financial services industry started to re-
build the trust among the stakeholders
in 2010/11. Most sectors in the industry
outperformed the market expectations.
Central Finance is no exception. The growth
in business volumes was characterised by
the strong focus placed by the Company
on the fundamentals such as credit quality
management, risk management and capital
management.
Company Performance in 2010/11
Income Company’s topline recorded a growth of
Rs.590 Million over the preceding year,
which is an 8% rate of growth. Interest
income stood at Rs.6.32 Billion for the year
an increase of 10% compared to last year’s
Rs.5.76 Billion.
Easing of monetary policy and increased
liquidity resulted in a gradual decline in
interest rates and reduced volatility in the
money market.
Company’s interest cost declined by 23%
during the year under review in line with
the low interest rate regime that prevailed
in the market. This led to an improvement
in the net interest margin, as the deposit
base of the Company was re-priced faster
than the asset base, in line with the change
in interest rate structure of the market.
Operating ExpensesThe Company’s cost management
strategies reaped dividends this year, as the
operating expenses, other than employee
related expenses, increased by a meagre
8.5 % in line with inflation rates that
prevailed during the period. Increase in
salary bill by 22% is due to the expansion
of the branch network and recruitment
and retention strategies adopted by the
Company.
Taxation Reduction in financial services VAT and
rationalisation of the overall tax regime in
the last budget contributed to the reduction
in tax expense to a significant level.
Effective rate of current tax for the year on
profit before tax stands at 28.98% and
is significantly less compared to 41.17%
recorded in the corresponding period.
Leases and Loans & AdvancesNet investment in leases and loans &
advances stood at Rs.16.14 Billion and
13.50 Billion, recording a growth of
42.40% and 19.31% from the last year
levels of Rs.11.33 Billion and Rs.11. 31
Billion, respectively.
Gross Non-performing Advances (NPA)
ratio stood at 4.6% and the net Non-
performing Advances ratio (net of interest-
in-suspense and provisions) was 1.41%
as at 31.03.2011. While the core area
of business of vehicle financing through
Leasing and Hire purchase, the Company
achieved a gross NPA of 2.6% and net
NPA of 0.3% as against 4.4% and 0.8%
recorded in the previous year. This was
due to the rigorous recovery efforts of
the Company and the general economic
recovery during the period.
Open credit exposure ratio (Net NPA/
Equity) stood at 4.53% as at 31.03.2011.
DepositsCF mobilised fresh total deposits of Rs.8.49
Billion in 2010/11 and the deposit base
stood at Rs.18.96 Billion at the year-
end, an increase of 9% from the last
year’s level. The deposit mix also saw a
gradual shift from short tenure to longer
tenures, due to the risk management
policy initiatives taken by the Company to
curb the maturity mismatch of assets and
liabilities.
Financial Review
Income (Rs.Mn.)
0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
8,000
2007 2008 2009 2010 2011
ROA %
0.00
1.00
2.00
3.00
4.00
5.00
2007 2008 2009 2010 2011
ROE (%)
0.00
5.00
10.00
15.00
20.00
25.00
2007 2008 2009 2010 2011
Central Finance Company PLC - Annual Report 2010-1116
Return on Assets & Return on EquityROA and ROE were naturally impressive
in line with the income statement
performance. ROA which measures the
efficiency of the Company stood at 4.5%
compared to the previous year’s 2.9%
while the Return on Equity was 18.57% an
impressive 600 basis points growth over
the last year.
Market capitalisationShareholders fund grew by 19.60 %
mainly due to increased retained profit.
Market capitalisation was Rs.25.85 Billion
as at 31st March 2011, an increase of
226% compared to Rs.7.92 Billion as at
31st March 2010. Details of the share
prices are given on page 101.
Group PerformanceFinancial results of the Central Finance
Group, which comprises of the Company,
thirteen Subsidiaries and three Associates,
were impressive. The Group income rose
to Rs.8.09 Billion recording a 7% increase
YoY and the bottom line stands at Rs.1.83
Billion. Details of the individual company
performance can be found in the Managing
Director’s review on pages 3 to 8.
LiquidityLiquid Assets stood at Rs.2.32 Billion, at the
year-end which is well above the ceiling set
by the regulator, Central Bank of Sri Lanka.
Capital AdequacyCF remains as one of the well capitalised
Finance Companies, with Tier I Capital
Adequacy ratio of 23.59 % and Total
Capital to Risk Assets ratio of 23.85 % as
at 31.03.2011, which are well above the
statutory minimum requirements of 5%
and 10% set by the Central Bank of
Sri Lanka.
Future outlookThe Country is stepping in to a new
era of Growth and Development. CF is
well poised to reap dividends from the
opportunities to unfold. The Company
will venture deeper into the Northern
and Eastern markets to serve this section
of the society and to capitalise on the
reconstruction and development projects
of the Government, currently underway.
Financial Review (contd.)
EPS (Rs.)
0
10
20
30
40
50
60
70
80
2007 2008 2009 2010 2011
Market Capitalisation (Rs.Bn.)
0
5
10
15
20
25
30
2007 2008 2009 2010 2011
Operating Expenses (Rs.Mn.)
0
500
1,000
1,500
2,000
2,500
2007 2008 2009 2010 2011
Central Finance Company PLC - Annual Report 2010-11 17
CENTRALPROVINCE
NORTHERN PROVINCE
UVA PROVINCE
SABARAGAMUWA PROVINCE
NORTH CENTRAL PROVINCE
SOUTHERN PROVINCE
NORTH WESTERNPROVINCE
WESTERNPROVINCE
EASTERNPROVINCE
Branch Network
KANDY - Head Office 84, Raja Vidiya, Kandy, Sri Lanka. Tel : 94-8-2227000 Fax : 94-8-2232047
COLOMBO - City OfficeNo: 270, Vauxhall Street, Colombo 02, Sri Lanka. Tel : 94-11-2300555 Fax : 94-11-2300441, 2541212
KATUGASTOTA - Showroom No: 254, Katugastota Road, Kandy.Tel : 074-470182, 08-2234309, 08-2234234-5Fax : 074-470182, 08-2228468
Central Finance Company PLC - Annual Report 2010-1118
WESTERN PROVINCE
AVISSAWELLA No. 1/79, Ratnapura road, Avissawella.Tel : 036-2232750, 036-2232750 GAMPAHA No:129, Ja-ela Road, Gampaha.Tel : 033-2225289
HANWELLA No.131/1/A, Pahala Hanwella, Hanwella.Tel : 036-2253945
HOMAGAMA No.119/1/, Katuwana Rd, Homagama.Tel : 011-2892334
HORANA No. 163, Panadura Road,Horana.Tel : 034-2265065
JA-ELA No. 171, Negombo Rd, Ja-ela.Tel : 011-2229180
KIRIBATHGODA No. 541, New Hunupitiya Rd, Dalugama, Kelaniya.Tel : 011-2918217
MAHARAGAMA No. 218A,/1/1,1st Floor, High level Rd, Maharagama.Tel : 011-2845855, 011-4319961
MALABE No. 824C, Thalangama North, Malabe.Tel : 011-4413916, 011-2760893
MATUGAMA No. 17/1, Pasqual Street, Matugama.Tel : 034-2248790
NEGOMBO 367, Main Street, Negombo.Tel : 031-4871200, 031-2233456
NITTAMBUWA No. 43 Kandy Road, Nittambuwa.Tel : 033-2296615
NUGEGODA No. 312, High Level Road, Nugegoda.Tel : 01-2815800, 2815801, 2815803, 2815804
PANADURA No. 292, Galle Road, Panadura.Tel : 0384-281010,
PILIYANDALA No. 329/3, Colombo Road, Piliyandala.Tel : 011-2609000
RATMALANA No. 259/1/1,Galle Road, Ratmalana.Tel : 011-2715617
EASTERN PROVINCE
AMPARA No, 09, 5th Avenue, Ampara.Tel : 063-4890117
BATTICALOA No. 48, Station Rd, Batticaloa.Tel: 065-2227823
DEHIATTAKANDIYA No. 18E, New Town Complex, Dehiattakandiya.Tel : 027-2250189
KANTALE No. 63/2 Trincomalee Rd, Kantale.Te l : 026-2234447
POTTUVIL No. 230 Arugambay Rd, Pottuvil.Tel : 063-2248080
SOUTHERN PROVINCE
AMBALANGODA No. 21B,Wickramasooriya Rd, Ambalangoda.Tel : 091-2255802
GALLE No. 151A, Matara Rd, Galle.Tel : 091-2223315, 091-4385676
HAMBANTOTA No. 1/3, New Tangalle Rd, Hambantota.Tel : 047-2222651
MATARA No. 78, Kumaratunga Mawatha, Matara.Tel : 041-2227314, 041-2222914
TISSAMAHARAMANo. 173, Hambanthota Rd, Kachcheriyagama, Tissamaharama.Tel : 047-2239145
NORTHERN PROVINCE
JAFFNA No. 364, Main St, Jaffna.Tel : 021-2221608
VAVUNIYA No. 166, Station Rd, Vavuniya.Tel : 024-2225813
Branch Network (contd.)
Central Finance Company PLC - Annual Report 2010-11 19
NORTH WESTERN PROVINCE
CHILAW No. 54, Kurunegala Rd, Chilaw.Tel : 032-2220636,032-2221660
GIRIULLA No. 119, Negombo Road, Giriulla.Tel : 037-2289512,
KULIYAPITIYA No. 107, Kurunegala Road, KuliyapitiyaTel : 037-2284553,037-2283725,
KURUNEGALA No. 38, Mihindu Mawatha, Kurunegala.Tel : 037-2232313, 037-2222200
MELSIRIPURA No. 177, Karandagolla Junction,Melsiripura.Tel : 037-2250014
NIKAWERATIYA No. 200, Puttalam Road, Nikaweratiya.Tel : 037-2260871
PUTTALAM No. 628 Colombo Rd, Puttalam.Tel : 032-2269328
WENNAPPUWA No. 349, Colombo Road, Wennappuwa.Tel : 031-2245260
NORTH CENTRAL PROVINCE
ANURADHAPURA No. 6C, Wasantha Motors (Second Floor), Maha Veediya, Anuradhapura.Tel : 025-4581244, 025-2223560
BAKAMUNA No. 11, Elehera Road, Bakamuna.Tel : 066-2256000
HINGURAKGODA No. 20, Airport Road, Hingurakgoda.Tel : 027-2247214,
POLONNARUWA No. 13, Hospital Junction, Polonnaruwa.Tel : 027-2225176
TAMBUTTEGAMA No. 29 Kurunegala Road, Tambuttegama.Tel : 025-2275151
CENTRAL PROVINCE
DAMBULLA No. 21 Kurunegala Rd, Dambulla.Tel : 066-2283021, 066-4925374
HATTON No. 62, Dunbar Road, Hatton.Tel : 051-2222760
MATALE No. 622 Trincomalee Street, Matale.Tel : 066-2231225, 066-2223005
NUWARAELIYA No. 169, Badulla Rd, Nuwaraeliya.Tel : 052-2235422, 052-2235433
NAWALAPITIYA 125, Ambagamuwa Rd, Nawalapitiya.Tel : 054-4922792
SABARAGAMUWA PROVINCE
EMBILIPITIYA Rasika Building, Pallegama, Embilipitiya.Tel : 047-2261923
KEGALLE No. 450A, 5th & 4th Floor, Kandy Rd, Mepitiya, KegalleTel : 035-2221083
RATNAPURA No. 143, Colombo Road, Ratnapura.Tel : 045-2231409, 045-2222028
WARAKAPOLA No. 236, Kandy Rd, Warakapola.Tel : 035-2267010
UVA PROVINCE
BADULLA No. 04,Udayaraja Mawatha, Badulla.Tel : 55-2229701, 055-4499643
BANDARAWELA No. 03, Thanthiriya, Badulla Road, Bandarawela.Tel : 0572233241, 0572233240
MAHIYANGANANo. 112, Giradurukotte Rd, Mahiyangana.Tel : 055-2258335
MONERAGALA No. 150A, Wellawaya Road, Moneragala.Tel : 055-2277374
Central Finance Company PLC - Annual Report 2010-1120
Managing Risk ResponsiblyThe Board of Central Finance is conscious
of its responsibility to manage risk within
the pre-set risk appetite, which ensures
that risk oversight is a critical focus for all
our Directors. The overall adequacy and
effectiveness of the risk management
framework is reviewed through the recently
formulated Integrated Risk Management
Committee (IRMC), Board Audit
Committee (BAC), which solely comprises
of Non-Executive Directors and the Assets
and Liability Management Committee
(ALCO) which comprises of key Executive
Directors in charge of related functions and
senior level staff members. Acting within
an authority delegated by the Board, these
Committees review specific risk areas and
receive regular reports on internal controls,
risk management, portfolio trends, policies,
limits and standards.
The management of risk lies at the heart
of CF’s business. One of the main risks
we incur arises from extending credit to
customers through our lending operations.
Beyond credit risk, we are also exposed to
a range of other risk types such as liquidity
risk, market risk which includes the interest
rate risk, operational, strategic and other
risks which are inherent to our strategy,
product range and geographical coverage.
Risk Management FrameworkEffective risk management is fundamental
to being able to generate profits
consistently and be sustainable.
The Company’s strategy is to break down
risk management into five discrete separate
processes: direct, assess, control, report
and manage. Each of these processes
is broken down further, to establish
comprehensive coverage within the risk
management process.
Credit riskCredit risk is that the risk that counterparty
to a financial transaction will fail to
discharge an obligation, resulting in
financial loss to the Company. Credit risk
is managed through a framework that sets
out policies and procedures covering the
measurement and management of credit
risk. There is a clear segregation of duties
between transaction originators in the
businesses and approvers in the Credit
Function. All credit exposure limits are
approved within a defined credit approval
authority framework. Risk indicators are also
set by the Credit Division and monitored
through the Board of Management (BOM)
and ALCO on a monthly basis.
Credit policiesCompany-wide credit policies and
procedures are considered and approved
by BOM, with the inputs of the Credit
and Recoveries Departments. BOM also
oversees the delegation of credit approval
and loan loss provisioning process
through the regular review of operations.
These policies are adequate to reflect the
different risk environments and portfolio
characteristics of Central Finance.
Credit approvalMajor credit exposures to individual
counterparties, groups of counterparties
and product categories are reviewed and
approved by the designated officers under
the delegated approving limits set by BOM,
with the oversight of the Board. The credit
approving limits in place are structured
Risk Management
Process Activity
Direct – Understand the principal risks in achieving our strategy.
– Establish and communicate the risk management framework including responsibilities, authorities and key
controls throughout the Company.
Assess – Establish the process for identifying and analysing business-level risks.
– Agree and implement measurement and reporting standards and methodologies.
Control – Establish key control processes and practices, including limit structures, standards and reporting requirements.
– Monitor the operation of the controls and adherence to risk direction and limits.
– Provide early warning of control breaches.
– Ensure that risk management practices and conditions are appropriate for the business environment.
Report – Interpret and report on risk exposures, concentrations and risk-taking outcomes.
– Interpret and report on sensitivities and Key Risk Indicators.
– Communicate with risk owners.
Manage – Review and challenge all aspects of the risk profile.
– Assess new risk-return opportunities.
– Advise on optimising the risk profile.
– Review and challenge risk management practices.
Central Finance Company PLC - Annual Report 2010-11 21
based on the need of delegation required
to manage the network of branches,
without compromising the risk appetite of
the Company.
Credit concentration Credit concentration risk is managed within
concentration limits set by counterparty
or groups of connected counterparties,
asset type, industry sectors etc. Credit
concentrations are monitored by ALCO in
each of the product type categories and
concentration limits that are material to
the Company are reviewed and approved
by ALCO. We have a diversified portfolio
with low exposure to high risk asset classes
and segments. Thus the concentration risk
is very minimal. ALCO also reviews the
top 20 lending exposures in its’ monthly
meetings. The performance of the large
lending exposures is reviewed periodically.
Credit monitoringWe regularly monitor credit exposures,
portfolio performance, and external trends
which may impact risk management
outcomes. Internal management reports
are presented to various committees,
containing information on key
environmental, political and economic
trends. Portfolio delinquency and loan loss
provisioning as well as portfolio quality are
monitored by the Recoveries Department
constantly.
SecuritiesMost of our lending activities are fully
secured by tangible assets, majority of
them are motor vehicles and equipment.
Hence the Company has a fall back in the
event of default.
Market riskWe at Central Finance recognise market risk
as the risk of loss resulting from changes
in market prices and rates. Our exposure
to market risk arises principally from
customer-driven transactions. The objective
of our market risk management and
processes is to obtain the best balance of
risk and return whilst meeting customers’
requirements. The primary categories of
market risk for CF are:
• Interest rate risk: arising from changes
in yield curves and credit spreads
• Equity price risk: arising from changes
in the prices of equities and equity
indices
Market risks arising from interest rate
volatility is managed with direction from
ALCO which continuously monitors the cost
of funds of the Company and addresses
the necessary action to be initiated to
maintain the margins for the Company.
Organisation and structureThe Board approves risk appetite for
market risks. The Director (Finance) is
responsible for the funding operations,
under delegated authority from the Board,
sets a limit framework within the context
of the approved market risk appetite. The
Company has a strong control environment
facilitated by a well-structured oraganisation
which has enabled it to strengthen
segregation of duties in respect of critical
functions.
Interest rate derivativesThe Company’s principal interest rate
related contracts are interest rate SWAPs.
An interest rate SWAP is an agreement
between two parties to exchange fixed
rate and floating rate interest by means of
periodic payments based upon a notional
principal amount and the interest rates
defined in the contract. The interest rate
swaps are mechanisms used to manage
the interest rate volatility of the maturity
mismatch, typically associated with finance
company business.
Equity price risk Central Finance is exposed to market
movements in equity price fluctuations
through the trading and investment
securities portfolios. ALCO consciously
reviews the exposure limits and also takes
decisions on limits. A comprehensive
evaluation process is also carried out
prior to investment decisions. Regular
monitoring of price levels is done through
the investment function within the
Finance Department to withstand adverse
movements in the stock market.
Operational riskOperational risk is the risk of direct or
indirect loss due to an event or action
resulting from the failure of internal
processes, people and systems or from
external events. We seek to minimise
exposure to operational risk, subject to
cost trade-offs. Operational risk exposures
are managed through a consistent set of
management processes that drive risk
identification, assessment, control and
monitoring. The Board Audit Committee
(BAC) oversees the management of
operational risks across the network
and at center, with the support of the
independent internal audit department
which is separate from the business
functions. In addition the BAC also
receives and reviews the management
letter of the external auditor. This formal
structure of governance provides the
Board with confidence that operational
risks are being proactively identified and
effectively managed. All business units are
responsible for setting and maintaining
standards for operational risk management
and measurement. During the year the
Board as part of the risk strategy engaged
an overseas IT consultancy firm to review
the Business Continuity Plan (BCP) of the
Company. A comprehensive BCP for the
Company is being developed with the
assistance of the consultants.
Liquidity riskLiquidity risk is the risk that we either do
not have sufficient financial resources
available to meet all our obligations and
commitments as they fall due, or are only
able to access these financial resources at
Central Finance Company PLC - Annual Report 2010-1122
excessive cost. It is our policy to maintain
adequate liquidity at all times and be
in a position to meet all obligations as
they fall due. We manage liquidity risk
taking both short-term and medium-
term requirement into consideration. In
the short-term, our focus is on ensuring
that the cash flow demands can be met
through asset maturities, customer deposits
and bank funding where required. In the
medium-term, the focus is on ensuring
a structurally sound balance sheet. ALCO
is the responsible governing body that
oversees our liquidity management
policies. The Treasury Department receives
direction from ALCO and is responsible for
managing liquidity limits. Liquidity risk is a
standing agenda item at our monthly ALCO
meetings. We also have strong advances–
to-deposit ratio, which is testament to our
liquidity management capabilities. The
pricing of deposit maturities are done in
a way to curb the maturity mismatches
between our lending and borrowing
portfolio.
Liquidity asset ratio (LAR)This is the ratio of liquid assets to total
deposits. The significant level of holdings of
liquid assets in the balance sheet reflects
the application of our liquidity policies and
practices. The following table shows the
ratio of liquid assets to total deposits:
31 March 2011 2010
Liquid assets to
total deposits ratio % 12.25 21.22
Strategic riskThe Company is continuously following
developments taking place in the business
environment and formulates its strategies
to optimise from the opportunities
available whilst attempting to manage risks
associated with such strategies. Business
strategies are adopted after evaluating the
overall risks associated with such strategies.
Risk Management (contd.)
Central Finance Company PLC - Annual Report 2010-11 23
We at Central Finance place a strong emphasis on adopting and implementing sound principles and practices of good Corporate
Governance. Corporate Governance is the system by which the Company and its subsidiaries are directed and managed and which
influences the manner in which the objectives of the Company are formulated, communicated and achieved. Corporate Governance
policies and practices of the Company have been designed to ensure that the Company is focused on its responsibilities to its stakeholders
and on creating long term shareholder value.
This year we report our governance practices and initiatives in three sections.
SECTION ONE covers the level of adoption of the Code of Best Practice on Corporate Governance issued jointly by the Securities and
Exchange Commission of Sri Lanka and the Institute of Chartered Accountants of Sri Lanka.
SECTION TWO covers the level of compliance with the Finance Companies Act Direction No 03 of 2008 and subsequent amendments
thereto on Corporate Governance for Registered Finance Companies issued by the Central Bank of Sri Lanka.
SECTION THREE covers the level of conformity with the Continuing Listing Rules - Section 7.10 on Corporate Governance for Listed
Companies issued by the Colombo Stock Exchange.
CORPORATE GOVERNANCE FRAMEWORKOur comprehensive governance framework which is set out in the diagram below, encompasses governance structures that are strategically
linked with performance management enabling us to focus on the areas that drive our strategy.
Corporate Governance
Audit Committee
Shareholders
Board of Management
Management Committees
Board of Directors(Non-Executive Chairman, 5 Executive Directors and 4 Non-Executive Directors 3
of whom are Independent)
External Auditor
Integrated Risk Management Committee
Remuneration Committee
Central Finance Company PLC - Annual Report 2010-1124
Corporate Governance (contd.)
SECTION ONECODE OF BEST PRACTICE ON CORPORATE GOVERNANCE ISSUED BY THE SECURITIES AND EXCHANGE COMMISSION OF
SRI LANKA & THE INSTITUTE OF CHARTERED ACCOUNTANTS OF SRI LANKA.
The disclosures below reflect the level of adoption of the above voluntary Code which comprises of six fundamental principles. These are
namely Directors, Director’s Remuneration, Relations with Shareholders, Accountability and Audit, Institutional Shareholders and
Other Investors.
Corporate Governance Principles
ICASL Code Reference/ Adoption status
Extent of Adoption by Central Finance
A. DIRECTORSA.1. The BoardMeetings A.1.1
AdoptedDuring the year the Board met 12 times, at approximately monthly intervals. Details of the meetings and the individual attendance are given on page 36.
Board responsibilities
A.1.2Adopted
The Board of Directors is responsible for strengthening the safety and soundness of Central Finance, safeguarding the depositors, prudent management of risks, ensuring good governance and compliance to rules and regulations. Whereas the Non-Executive Directors are responsible for bringing independent judgment and scrutiny to decisions taken by the Board. The Board formulates strategy and ensures the implementation of same.
Access to independent professional advice
A.1.3Adopted
The procedure for Directors to seek independent professional advice, in furtherance of their duties, at the Company’s expense, is in place as and when it is necessary.
Company Secretary
A.1.4Adopted
The Company Secretary’s service is available for the Directors as and when required. The Company secretary is responsible for supporting and advising the Chairman and the Board on all Corporate Governance matters, Board procedures and compliance with applicable laws and regulations.
Independent judgment
A.1.5Adopted
Directors bring independent judgment and scrutiny in the decisions taken by the Board on issues of strategy, performance, resources and business conduct.
Dedication of adequatetime and effort by Directors
A.1.6Adopted
All Directors dedicate adequate time for the fulfillment of their duties as Directors of the Company. In addition to attending Board meetings, they attend sub-committee meetings.
Training for new Directors
A.1.7Adopted
During the year there were no new appointments to the Board.
A .2 Chairman & Chief Executive Officer (MD)Division of responsibilitiesof Chairman & MD(CEO)
A.2.1Adopted
The roles of the Chairman and MD (CEO) are separated to ensure that no individual has unfettered powers of decision.
A.3. Chairman’s RoleRole of the Chairman
A.3.1Adopted
The Chairman’s role is to lead and manage the Board, ensuring that it discharges its’ legal and regulatory responsibilities effectively and completely. He preserves order and facilitates the effective discharge of the Board function.Chairman’s role includes but is not limited to;- Approving the agenda prepared by the Company Secretary and conducting Board Meetings.- Ensuring that the Directors are informed adequately and timely of the issues arising at Board Meetings. - Encourage Directors to make full and active contribution to the Board.- Ensuring effective contribution of the Non-Executive Directors.- Ensuring regular meetings, the minutes of which are accurately recorded and where appropriate include
the individual and collective views of the Directors. - Maintain effective communication with shareholders and convey their views to the Board.
Central Finance Company PLC - Annual Report 2010-11 25
Corporate Governance Principles
ICASL Code Reference/ Adoption status
Extent of Adoption by Central Finance
A.4. Financial AcumenAvailability of sufficientfinancial acumen and knowledge
A.4Adopted
The Chairman is a fellow member of the Institute of Chartered Accountants in England & Wales and the Institute of Chartered Accountants of Sri Lanka. In addition, the Board includes four fellow members of the Institute of Chartered Accountants of Sri Lanka and two of them are also fellow members of the Chartered Institute of Management Accountants of UK. These members of the Board have the ability to offer guidance on matters of finance to the Board.
A.5 Board BalancePresence of a strong independent element on the Board
A.5.1Adopted
Half the Board members are Non-Executives. Chairman’s and CEO’s (MD) roles are not vested in one person.
Independent Directors
A.5.2Adopted
A.5.3Adopted
More than half of the Non-Executive Directors are independent as defined by CSE Listing rule section 7.10.
Signed declaration of independence by the Non- Executive Directors
A.5.4Adopted
Non-Executive Directors have made written submissions as to their independence.
Determination of independence of the Directors by the Board
A.5.5Adopted
The Board has determined that the submission of declaration by the Non-Executive Directors, as to the independence of them, as a fair representation and will continue to evaluate their submission annually. The names of the Independent Non-Executive Directors are given on page 36.
Senior IndependentDirector
A.5.6Not Applicable
The requirement to appoint a Senior Independent Director does not arise as the roles of Chairman and CEO (MD) are separate.
Confidential discussion with the Senior Independent Director
A.5.7Not Applicable
Please refer the above comment.
Meeting of Non-Executive Directors
A.5.8Adopted
Chairman meets with the Non-Executive Directors without the presence of the Executive Directors as and when it is necessary.
Recording of concerns in Board minutes
A.5.9Not Applicable
Circumstances did not arise for the Board to record in minutes any concerns as all issues were resolved unanimously.
A.6. Supply of InformationInformation to the Board by the management
A.6.1Adopted
The management provides timely and appropriate information to the Board by way of Board papers and proposals. The Board sought additional information as and when necessary. The Chairman ensured that all Directors were briefed on issues arising at Board meetings.
Adequate time for Board Meetings
A.6.2Adopted
The Board papers were sent to the Directors at least seven days before the respective Board meetings, giving adequate time for Directors to study the related papers and prepare for a meaningful discussion at Board Meetings.
Central Finance Company PLC - Annual Report 2010-1126
Corporate Governance Principles
ICASL Code Reference/ Adoption status
Extent of Adoption by Central Finance
A.7. Appointment to the BoardNomination Committee
A.7.1Not adopted
The Board as a whole decides on the selection of new Directors. The Board believes that this process is more meaningful and transparent due to its importance in appointing Directors to the Board.
Assessment of Board composition
A.7.2Adopted
The Board carries out continuous reviews of the composition, which includes identifying, evaluating and recommending candidates for the Board.
Disclosure of details of new Directors to shareholders
A.7.3Adopted
Details of new Directors are disclosed to the shareholders on their appointment by way of public announcements as well as in the Annual Report. Notice on appointment of new Directors is given to the Colombo Stock Exchange as well as to the Director of the Department of Supervision of Non-Bank Financial Institutions of CBSL simultaneously.
A.8. Re-electionAppointment of Non- Executive Directors
A.8.1Adopted
The Company’s Articles of Association provides that at every Annual General Meeting of the Company, one-third of the Non-Executive Directors shall retire from office. The Directors to retire in each year are the Directors who have been longest in office since their appointment or re-appointment, subject to the transitional provisions of the CBSL Direction on Corporate Governance. Total period of service of Non-Executive Directors shall not exceed nine years and any Director who has reached the age of 70 retires from the Board.
Election of Directors by the shareholders
A.8.2Adopted
Please refer comments above.
A.9. Appraisal of Board PerformanceAppraisal of Board Performance
A.9.1Adopted
The performance of the Board is evaluated by the Chairman. The sub Committees carry out a self assessment process annually to ensure they function effectively and efficiently with the objective of facilitating continuous improvement.
Annual self evaluation of the Board and its Committees
A.9.2Adopted
Refer comments above.
Method of Board and sub-committee performance appraisal
A.9.3Adopted
Refer comments given for Section A 9.1.
A.10. Disclosure of Information in respect of DirectorsDetails in respect of Directors
A.10.1Adopted
Details of the Directors are given on pages 9 and 10.
A.11. Appraisal of the CEOFinancial targets for MD (CEO)
A.11.1Adopted
At the commencement of the year, performance targets for MD (CEO) are set by the full Board which is in line with the Annual plan.
Evaluation of the Performance of the MD (CEO)
A.11.2Adopted
There is an ongoing process to evaluate the performance of MD (CEO) against the financial and non financial targets set as described above.
Corporate Governance (contd.)
Central Finance Company PLC - Annual Report 2010-11 27
Corporate Governance Principles
ICASL Code Reference/ Adoption status
Extent of Adoption by Central Finance
B. DIRECTORS’ REMUNERATIONB.1. Remuneration ProceduresRemuneration Committee
B.1.1Adopted
The Remuneration Committee is responsible for assisting the Board with regard to the remuneration policy for the Executive Directors and other Senior Level Staff Members. The Committee determines and agrees with the Board, the broad policy framework for the remuneration of the Executive Directors. The Executive Directors participate in meetings by invitation in deciding the remuneration of the Corporate Management in order to retain and motivate the Corporate Management Team.
Composition of the Remuneration Committee
B.1.2 Adopted
B.1.3Adopted
Please refer the Remuneration Committee Report given on page 48 for details.
Remuneration of the Non- Executive Directors
B.1.4Adopted
The Board as a whole decides the remuneration of the Non-Executive Directors. The Non-Executive Directors receive a fee for being a Director on the Board.
Consultation of the Chairman and access to professional advice
B.1.5Adopted
Chairman of the Board is also the Chairman of the Remuneration Committee. External professional advice is sought by the Remuneration Committee, by way of an external consultant.
B.2. Level and make up of the RemunerationLevel and makeup of the remuneration of Executive Directors
B.2.1Adopted
The remuneration framework for the Directors is designed to create and enhance value for all stakeholders and to ensure there is strong alignment between the short term and long term interest of the Company and the Directors.
Comparison of remuneration with other companies
B.2.2Adopted
The Remuneration Committee in deciding the remuneration of the Directors takes into consideration the level of remuneration paid by other comparable companies.
Comparison of Remuneration with other companies in the Group
B.2.3 Not Adopted
The size and scale of Central Finance is not comparable with any other Group Company.
Performance related payment to Executive Directors
B.2.4 Adopted
Please refer item B 2.1 above.
Executive share options
B.2.5 Not Applicable
There are no share option plans for Executives.
Designing the Executive Directors remuneration
B.2.6 Adopted
The Remuneration Committee considered the Schedule D to this code in deciding the remuneration of the Executive Directors.
Early termination of Directors
B.2.7 Adopted
Executive Directors are employees of the Company and their terms of reference are governed by the contract of employment. The Remuneration Committee has considered the compensation commitments given in the contract of employment of each Executive Director, if any.
Central Finance Company PLC - Annual Report 2010-1128
Corporate Governance Principles
ICASL Code Reference/ Adoption status
Extent of Adoption by Central Finance
Early termination not included in the initial contract
B.2.8 Adopted
Refer comments given for section B.2.7 on page 27.
Remuneration of the Non- Executive Directors
B.2.9 Adopted
Non-Executive Directors receive fees in line with the market practices.
B.3. Disclosure of RemunerationDisclosure ofremuneration
B.3.1Adopted
Remuneration Committee’s Report setting out the policy of the Committee is given on page 48.The remuneration paid to the Board of Directors is disclosed in aggregate in note no. 6 to the financial statements on page 65.
C. RELATIONS WITH SHAREHOLDERSC.1 Constructive use of the Annual General Meeting and Conduct of General MeetingsUse of proxy votes
C.1.1Adopted
The Company has a mechanism to record all proxy votes and proxy votes lodged on each resolution.
Separate resolution for all separate issues
C.1.2Adopted
The Company proposes a separate resolution for each item of business, giving shareholders the opportunity to vote on each such issue.
Availability of the Chairmen
C.1.3Adopted
The Chairman of the Board, who is also the Chairman of the Audit and the Remuneration Committees, is present at the AGM to answer any questions of shareholders.
Adequate notice of the AGM
C.1.4Adopted
Notice of the meetings is given as per statutes. The Annual Report including financial statements and the notice of the meeting is sent to shareholders at least 15 workings days prior to the date of the AGM.
Procedures of voting at General Meetings
C.1.5Adopted
Notice of the Annual General Meetings and business to be transacted at the General Meeting are circulated to the shareholders along with the Annual Report.
C.2 Major TransactionsMajor transactions
C.2.1Adopted
During the year there were no major transactions as defined in the Companies Act No 7 of 2007.
D. ACCOUNTABILITY AND AUDITD.1 Financial ReportingStatutory and Regulatory reporting
D.1.1Adopted
In the preparation of quarterly and annual financial statements, Central Finance has strictly complied with the requirements of the Companies Act No 07 of 2007, the Finance Companies Act No.78 of 1988 and amendments thereto, and are prepared and presented in conformity with Sri Lanka Accounting Standards and complied with the reporting requirements prescribed by the regulatory authorities such as the Central Bank and Colombo Stock Exchange.
Directors’ report in the Annual Report
D.1.2Adopted
The Directors’ report is given on pages 42 to 46 of the Annual Report
Statement of Directors’ responsibility for financial statements
D.1.3Adopted
The Statement of Directors’ responsibility for financial statements is given on page 47 of the Annual Report.Auditor’s report given on page 51 states their reporting responsibility.
Management Discussions and Analysis
D.1.4Adopted
The Management Discussion and Analysis is given on pages 12 to 14 of the Annual Report.
Corporate Governance (contd.)
Central Finance Company PLC - Annual Report 2010-11 29
Corporate Governance Principles
ICASL Code Reference/ Adoption status
Extent of Adoption by Central Finance
Declaration by the Board that the business as a going concern
D.1.5Adopted
This is given in the Directors’ report on page 42 to 46 of the Annual Report.
Summoning an EGM to notify serious loss of capital
D.1.6Not Applicable
Should the situation arise, an EGM will be called for and shareholders will be notified.
D.2 Internal ControlAnnual evaluation of the internal control system
D.2.1Adopted
The Board is responsible for establishing a sound framework of internal controls and monitoring its’ effectiveness on a continuous basis. The Directors report on the internal controls is given on page 50.
Need for internal audit function
D.2.2Adopted
Internal audit function is managed by the Internal Audit Department of the Company.
D.3 Audit Committee Composition and terms & conditions of the Audit Committee
D.3.1Adopted
The Audit Committee is comprised of four Non-Executive Directors, three of them are independent. The said committee met three times during the year. The General Manager - Internal Audit functions as the Secretary to the Audit Committee. Managing Director, Director (Finance), Director (Group Co-ordination) GM-Finance and External Auditor attend meetings by invitation.
Duties of the Audit Committee
D.3.2Adopted
The duties of the Audit Committee are given in the Audit Committee Report given on page 49.
Terms of reference of the Audit Committee
D.3.3 Adopted
The Audit Committee functions within its terms of reference.
Disclosures of the Audit Committee
D.3.4 Adopted
The names of the members of the Audit Committee and the way in which the external auditor’s independence is determined are given on page 49 of the Annual Report.
D.4. Code of Business Conduct & EthicsCode of business conduct and ethics
D.4.1 Adopted
Central Finance has developed a code of business conduct for all staff members which addresses conflict of interest, corporate opportunities, confidentiality of information, fair dealing, protecting and proper use of the Company’s assets and compliance with laws and regulations.
Affirmation of the code of conduct & ethics
D.4.2Adopted
Chairman, by this section, confirms that he is not aware of any material violations of the Code of Conduct.
D.5. Corporate Governance DisclosuresCorporate Governance Report
D.5.1Adopted
This report satisfies the requirement.
Central Finance Company PLC - Annual Report 2010-1130
Corporate Governance Principles
ICASL Code Reference/ Adoption status
Extent of Adoption by Central Finance
E. INSTITUTIONAL INVESTORSE.1. Shareholder votingInstitutional shareholders
E.1.1Adopted
Annual General Meeting is used to have an effective dialogue with the shareholders on matters which are relevant and of concern to the general membership.
E.2. Evaluation of Governance DisclosuresEvaluation of the Corporate Governance initiatives
E.2Adopted
Institutional investors are encouraged to give due weight to all relevant factors in Board structure and composition.
F. OTHER INVESTORS F.1. Investing/Divesting decisionOther Investors F.1
AdoptedIf the need arises individual shareholders are encouraged to carry out adequate analysis or seek independent advice on investing or divesting decisions.
E.1. Shareholder VotingIndividual shareholders voting
F.2Adopted
Individual shareholders are encouraged to participate in General Meetings and exercise their voting rights.
Corporate Governance (contd.)
Central Finance Company PLC - Annual Report 2010-11 31
SECTION TWOFINANCE COMPANIES DIRECTION No 03 OF 2008 (AND SUBSEQUENT AMENDMENTS THERETO) ON CORPORATE GOVERNANCE
FOR REGISTERED FINANCE COMPANIES IN SRI LANKA
Central Bank of Sri Lanka issued the Direction on Corporate Governance (Finance Companies Direction No 03 of 2008 and subsequent
amendments thereto), to be complied with from January 1, 2009 except where extended compliance dates have been specifically
provided for in the Direction, in order to improve and sustain the Corporate Governance processes and practices of the Registered Finance
Companies.
The above Direction which comprises of nine fundamental principles, namely The responsibilities of the Board, Meetings of the Board,
Composition of the Board, Criteria to assess the fitness and propriety of Directors, Management functions delegated by the Board,
the Chairman and the Chief Executive officer, Board appointed Committees, Related party transactions and Disclosures. The
structures in place and the conformance to the requirement are tabulated below under the said nine fundamental principles.
Corporate Governance Principles
CBSL Rule /Compliance status
Level of Compliance
2 The responsibilities of the Board of DirectorsStrengthening the safety and soundness of the Finance Company
2 (1)Compliant
The Board is responsible for approving and overseeing strategic objectives, ensuring the adequacy of the risk management processes, review the internal control system and defining the responsibility of the Key Management Personnel. Overseeing the Key Management Personnel and exercise due diligence in hiring and oversight of the external auditor.
Chairman & CEO (MD)
2 (2)Compliant
The roles of the Chairman and the CEO (MD) are separate.
Independent Advice
2 (3)Compliant
Please refer item A 1.3 of the SEC & ICASL Code table on page 24 for details.
Directors’ Votings in matters of interests
2 (4)Compliant
Procedure is in place to avoid conflicts of interest and Directors abstain from voting when matters in which a Director or his relatives or any concern in which he/she has substantial interest.
Formal Schedule of Matters to the Board
2 (5)Compliant
The Board has a formal schedule of matters specifically reserved for it, to ensure the direction and control of the Company.
Situation of Insolvency
2 (6)Compliant
This situation has not arisen.
Corporate Governance Report
2 (7)Compliant
This report addresses the requirement.
Self-assessment by Directors
2 (8)Compliant
Each Director performs a self-assessment based on the predefined criteria set by the Board.
3 Meetings of the BoardNo. of Meetings
3 (1)Compliant
Please refer item A 1.1 of the ICASL & SEC table code on page 24 for details.
Inclusion of proposals by all Directors in the agenda
3 (2)Compliant
Proposals from all Directors on promotion of business and management of risk and other areas relevant to the progress of Central Finance are included in the agenda for regular meetings.
Notice of meetings
3 (3)Compliant
Directors are given adequate time and at least 7 days of notice for Board meetings.
Non-attendance of Directors
3 (4)Compliant
This situation has not arisen.
Central Finance Company PLC - Annual Report 2010-1132
Corporate Governance Principles
CBSL Rule /Compliance status
Level of Compliance
Board Secretary
3 (5)Compliant
The Board has appointed the Board Secretary to handle the secretarial services and to carry out other functions required by Statutes.
Agenda for Board Meetings
3 (6)Compliant
The Board Secretery prepares the Agenda, which has been delegated by the Chairman.
Access to the Board Secretary
3 (7)Compliant
Service of the Board Secretary is available for all Directors in discharging their duties to the Company.
Minutes of the Meetings
3 (8)Compliant
Directors have full access to the Minutes of the Board Meetings.
Details of Minutes
3 (8)Compliant
Minutes of the Board meetings are maintained in sufficient detail by the Board Secretary.
4 Composition of the Board Number of Directors
4 (1)Compliant
The Board comprised of ten Directors as at the year end.
Period of service of a Director
4 (2)Not Applicable
This section of the Direction is not applicable for the year under review and will become effective from 1 January 2012.
Appointment of an employee as a Director
4 (3)Compliant
This situation has not arisen during the year. In the current composition of the Board the number of Executive Directors does not exceed one half of the Board.
Independent Non-Executive Director
4 (4)Not Applicable
This section of the Direction becomes applicable from January 1, 2012.
Alternative Director
4 (5)Compliant
During the year this situation has not arisen.
Credibility, skills & experience of Non-Executive Directors
4 (6)Compliant
Details of the Directors are given on pages 9 and 10.
Meetings of Board without Non- executive Directors
4 (7)Not Applicable
This section of the Direction is applicable only from January 1, 2012.
Details of Directors
4 (8)Compliant
Please refer page 36 for the details of the Directors and their categories.
Appointment of new Directors
4 (9)Compliant
The Board has a formal and transparent procedure in place when appointing Directors to the Board.
Appointment to fill a casual vacancy
4 (10)Not Applicable
This situation has not arisen during the year.
Resignation/removal of a Director
4 (11)Not Applicable
This situation has not arisen during the year.
Corporate Governance (contd.)
Central Finance Company PLC - Annual Report 2010-11 33
Corporate Governance Principles
CBSL Rule /Compliance status
Level of Compliance
5 Criteria to assess the fitness and propriety of directors Directors over 70 Years of age
5 (1)Not Applicable
This section of the Direction is not applicable for the year under review and will become effective from January 1, 2012.
Holding of office in more than 20 companies
5 (2) Compliant
Although this section of the Direction is not applicable for the year under review and will become effective from January 1, 2012, Directors have complied with this section.
6 Management function delegated by the Board Delegation of work to the management
6 (3) Compliant
The Board of Central Finance annually evaluates the delegated authority process to ensure that the delegation of work does not materially affect the ability of the Board as a whole in discharging its functions.
Evaluation of the delegated process
6 (4) Compliant
Please refer comments above.
7. The Chairman and Chief Executive OfficerDivision of responsibilities of the Chairman & MD (CEO)
7 (1) Compliant
The roles of Chairman and Chief Executive Officer (MD) are separate.
Chairman preferably be an Independent Director and if not, appoint a Senior Director
7 (2) Compliant
The Chairman is not considered as independent as per the definition set out in the Direction on Corporate Governance. The Board has appointed U L Kadurugamuwa, an Independent Non-Executive Director, as the Senior Director, as required by the said Rule, with suitable terms.
Relationship between Chairman and MD (CEO) & other Directors
7 (3)Compliant
There are no material relationship between the Chairman and MD (CEO) and other members of the Board which will impair their respective roles.
Role of the Chairman
7 (4) to 7(11) Compliant
Detailed information of the role of the Non-Executive Chairman is given on the SEC & ICASL Code table section A 3.1 on page 24.
8. Board appointed CommitteesBoard appointed sub committees
8 (1)Non-Compliant
There are two Board appointed Sub-committees namely Audit Committee and Remuneration Committee. Integrated Risk Management Committee was not constituted as at the year-end. The Board has taken note of this and formally constituted the Integrated Risk Management subsequent to the year end. However, all key business risks are assessed and addressed on a continuous basis by the Asset and Liability Committee and Board of Management.
Audit Committee
8 (2)Compliant
For details of the Audit Committee please refer the Audit Committee Report given on page 49.
Integrated Risk Management Committee
8 (3)Non-Compliant
Please refer comments given for section 8 (1) above.
Central Finance Company PLC - Annual Report 2010-1134
Corporate Governance Principles
CBSL Rule /Compliance status
Level of Compliance
9. Related Party TransactionAvoiding conflict of interest in related party transactions and favourable treatment
9 (2) to9 (4)
Compliant
The Board has taken necessary steps to avoid any conflict of interests that may arise, in transacting with related parties as per the definition of this Direction. The Board also ensures that no related party benefits from favourable treatment.
10. DisclosuresFinancial reporting, Statutory and regulatory reporting
10 (1)Compliant
The unaudited financial statements for the year ended 31st March 2011 are in conformity with all rules and regulatory requirements and have been published in all three languages in the news papers.
Minimum disclosure in the Annual Report
10 (2)Compliant
(a) A statement to the effect that the annual audited financial statements have been prepared in line with applicable accounting standards and regulatory requirements has been given in the Directors Responsibility Statement for Financial Reporting on page 47.
(b) Statement of Internal Control by the Board is given on page 50.
(c) Refer the Statement of Internal Control on page 50 for details.
(d) Details of the Directors are given on pages 9 and 10. Directors remuneration is disclosed on page 65. Deposits made by the Directors is given on note no. 30 of the financial statements on page 82. Temporary refunds against fixed deposits placed by Directors amounts to Rs.11.49 Million under standard terms and conditions applicable to other depositors of the Company.
(e) Fees and Remuneration paid in aggregate to the Directors is given on page 65.
(f) The net accommodation outstanding from the related parties and their percentage of capital funds are given below:
ACCOMODATION CATEGORY AMOUNTS (Rs.‘000) As a % of Capital Funds
1. Subsidiaries 859,986 10
2. Associates 21,386 0.25
3. Key Management Personnel 1,590 0.02
Other than the above there were no other category of related party accommodations.
(g) KMP transactions with the Company such as remuneration paid, accommodation granted, deposits made are given in note no. 44 of the financial statements on pages 88 to 91. Investment made by the KMPs in the Company amounts to 148,433 ordinary shares.
(h) There were no material non-compliance to prudential requirements, laws and internal controls.
(i) There were no supervisory concerns on lapses in risk management, non-compliance with the Act and rules and directions that have been pointed out by the Director-SNBFI and requested by the Monetary Board to be disclosed to the public.
(j) The auditor will issue this certificate once a suitable framework is developed by the ICASL for this engagement.
Corporate Governance (contd.)
Central Finance Company PLC - Annual Report 2010-11 35
SECTION THREECONTINUING LISTING RULES SECTION 7.10 ON CORPORATE GOVERNANCE OF THE COLOMBO STOCK EXCHANGE
The Continuing Listing Rule Section 7.10 of the Colombo Stock Exchange (CSE) mandates companies listed in the Colombo Stock
Exchange to publish a Table in the Annual Report commencing from 01 April 2007, confirming that as at the date of the annual report they
comply with the Corporate Governance rules. The rule addresses the following areas Non-Executive Directors, Independent Directors,
Disclosures relating to Directors, Remuneration and Audit committees.
Corporate Governance Principles
RuleReference
Compliant status
Level of Compliance
Non-ExecutiveDirectors
7.10.1 (a) Compliant More than one third of the Directors are Non-Executives. 7.10.2 (a) Compliant More than one third of the Non-Executive Directors are independent.7.10.2 (b) Compliant All Non-Executive Directors have submitted their independence declaration as per the
requirements.
Disclosures relating to Directors
7.10.3 (a) Compliant Declarations of Independence by the Directors were assessed by the Board and determined the Directors who are independent and disclosed same on page 36.
7.10.3 (b) Compliant The criteria not met by the Independent Directors and the circumstances that led the Board to decide that such Directors are independent are given below this table.
7.10.3 (c) Compliant Please refer pages 9 and 10 for the brief resume of each Director.7.10.3 (d) Compliant Information relating to new appointments to the Board is disclosed to the Colombo Stock
Exchange, when appointments are made to the Board.Remuneration Committee
7.10.5 (a) Composition
Compliant The Remuneration Committee solely comprises of Non-Executive Directors and the majority of the members are independent.
7.10.5 (b) Function
Compliant Please refer the Remuneration Committee report on page 48 for details of the functions of the Committee.
7.10.5 (c) Disclosure in the Annual
Report
Compliant The report of the Remuneration Committee is given on page 48 and the remuneration paid to Directors is given in the note no. 6 to the financial statements on page 65.
Audit Committee
7.10.6 (a)Composition
Compliant The Audit Committee is comprised of four Non-Executive Directors, three of whom are independent.
7.10.6 (b)Function
Compliant Functions of the Audit Committee are given in detail in the Audit Committee Report on page 49.
7.10.6 (c) Disclosure in the Annual
Report
Compliant The names of the Directors comprising the Audit Committee and the basis of determination of the independence of the auditor are given in the Audit Committee report on page 49.
Determination of IndependenceU.L Kadurugamuwa was appointed to the Board of Central Finance Company PLC on the 12th of November 1998 and has served on the
Board for more than nine years. He was appointed as a member of the Audit Committee of the Company on 25th November 2008.
He is the precedent partner of F.J. & G. De Saram, the lawyers for the Central Finance Group of companies and also a Director of Corporate
Services (Pvt) Limited, an associate Company of F.J. & G. De Saram who are the Company secretaries of Central Finance Company PLC and
the trustees of the Central Finance Employee Share Trust.
U.L. Kadurugamuwa does not hold any shares in Central Finance Company PLC or in any of its subsidiaries or associate companies. He
receives a fee for participating at Board Meetings and Audit Committee meetings and does not receive any other perquisites or benefits.
As a Non-Executive Director of the Company he does not participate in the day to day business or management affairs of the Company. He
does not perform any supervisory or executive functions in any of the companies in the Central Finance Group.
Central Finance Company PLC - Annual Report 2010-1136
The other members of the Board value his participation in the deliberations of the Board because of his wide experience in legal and
commercial matters gained from being a corporate lawyer for more than 40 years.
G.C.B.Wijeyesinghe (Retired on 30th June 2011) was appointed to the Board of Central Finance Company PLC on 01st June 2001 and has
served on the Board for more than nine years .He does not hold any shares in Central Finance Company PLC or in any of its subsidiaries
or associate companies. He receives a fee for participating at Board and Audit Committee meetings and does not receive any other cash or
non-cash benefits.
As a Non-Executive Director of the Company he does not participate in the day to day business or management affairs of the Company. He
does not perform any supervisory or executive functions in any of the companies in the Central Finance Group.
Having considered all of the above, the other members of the Board continue to be of the opinion that U.L. Kadurugamuwa and
G.C.B.Wijesinghe are Independent Directors, notwithstanding the fact that they have served on the Board for more than nine years and that
they should continue in office as such because it is beneficial to the Company and its shareholders.
MEETINGSThe number of meetings of the Board, Board appointed sub-committees and individual attendance by members are given below.
Names Directorship Status BoardAudit
CommitteeRemuneration
Committee
Number of meetings held 12 3 1
S.V. Wanigasekera Non-Executive Chairman 12 3 1
E.H. Wijenaike Managing Director 12 - -
G.S.N. Peiris Director (Finance) 12 - -
C. Kiriella Director (Legal) 10 - -
M.S. Wijenaike Non-Executive Director 09 - -
U.L. Kadurugamuwa Independent Non-Executive Director 12 3 1
G.C.B. Wijeyesinghe Independent Non-Executive Director 12 3 1
R.E. Rambukwelle Director (Marketing and Operations) 12 - -
A.K. Gunaratne Director (Group Co-ordination) 12 - -
T.K. Bandaranayake Independent Non-Executive Director 11 3 -
Corporate Governance (contd.)
Central Finance Company PLC - Annual Report 2010-11 37
Corporate Social Responsibility has always been an integral part
of Central Finance culture and the cornerstone of our core values
of good corporate citizenship. Our focus today has evolved to
include social and environmental responsibilities towards the
society at large in our corporate culture.
This year, we have continued our focus in providing financial
assistance to “Api Wenuwen Api“ programme initiated by
the Ministry of Defence. The “Api Wenuwen Api” fund is a
collaboration between the Ministry of Defence and the Central
Bank of Sri Lanka to build 50,000 houses for the serving
Tri-service personnel. The gift of housing is one of the best
and most tangible ways to demonstrate our gratitude and
appreciation to the war heroes who were instrumental in bringing
in sustainable peace to our Motherland.
We have launched a special financing scheme named “Viru Diri”
in which, a contribution of Rs.2,500 was made to the fund on
every three wheeler financed under this scheme. During the year
2010/11 the Company has contributed a total of Rs.6.8Million to
the “Api Wenuwen Api” fund. This special financing scheme has
also helped Disabled Armed Service Personnel to acquire three
wheelers at concessionary rates.
Creating awareness in protecting our heritageSri Lanka has been blessed with a great diversity and abundance
of natural habitats and wildlife. Sri Lanka’s underwater attractions
and marine bio-diversity remain largely unknown, and despite
being an island the marine environment has failed to capture the
imagination of most Sri Lankans. Central Finance was associated
with the National Trust Sri Lanka, in the production of the book
“Coral Reefs of Sri Lanka” by Nishan Perera, a renowned Marine
Biologist who has an enormous interest in coral reef ecology and
fish behavior.
Corporate Social Responsibility
Senior officials handing over the Company’s
contributions to the Defence Secretary
“Coral Reefs of Sri Lanka” by Nishan Perera
Central Finance Company PLC - Annual Report 2010-1138
Corporate Social Responsibility (contd.)
The National Trust was established in mid 2006 with an intention
of providing a forum to enlighten the public, policy makers and
professionals to subscribe for the heritage values of the country
whether it be tangible or intangible, covering both cultural and
natural components of aesthetic or historical value.
Helping the needy through Micro FinanceCF Micro Finance has extended its operations to Pottuvil area by
providing financial assistance to less privileged farmers. The Micro
Finance Unit has initiated several social welfare projects for the
well being of underprivileged persons in villages. A programme
was organised to distribute Wheel chairs / Walking aids to
handicapped needy people in the Dambulla area. The project
was organised by the CF Dambulla Branch and the Micro Finance
Field Unit jointly with the Center for Handicapped who supplied
the equipment.
Enhancing crop management knowledge of farmersAn awareness programme to enhance the knowledge of farmers
was held in the village of Wewala in Dambulla. The project was
organised by the CF Dambulla Branch and Micro Finance Field
Unit. The programme focused on educating farmers on selecting
the right crop and managing their finances.
Blood DonationCentral Finance organised a blood donation campaign in
association with The National Blood Bank at Sri Dharmarama
Temple, Nugegoda. Over 150 donors participated in the event.
Wheel chair donation function held in Dambulla
An awareness programme held in Dambulla
Blood donation campaign at Nugegoda
Central Finance Company PLC - Annual Report 2010-11 39
Sri Lanka Cancer Society - “Walk for Cancer“Despite having the infrastructure for preventing, detecting and
curing cancer, Sri Lanka face the challenge of educating and
creating awareness among the general public
“Walk for Cancer” was an initiative of the Sri Lanka Cancer Society
to bring community awareness, nurture courage, encouragement
and respect among families affected by cancer. The Company
supported this initiative by way of providing financial assistance.
Employee Welfare
As in the past, we continued to extend several welfare schemes
across the Company to all Members of Staff. CF inhouse journal
had been a huge attraction and contributions by the staff are
noteworthy. The Journal had been published uninterrupted during
the year, every quarter.
ScholarshipsWe continue to offer scholarships to children of staff who attain
high standards of achievements at grade 5, GCE Ordinary Level
and University admissions.
Service Analysis 2010/11
Below 1 Year - 19%1 - 2 Years - 20%3 - 5 Years - 23%6 - 10 Years - 17%11 - 15 Years - 6%16 - 20 Years - 6%21 - 25 Years - 6%26 - 30 Years - 3%31 - 35 Years - 0%36 - 40 Years - 0%Over 40 Year - 0%
Cover page of Staff Jounral - August 2010
Central Finance Company PLC - Annual Report 2010-1140
Corporate Social Responsibility (contd.)
Central Finance provides a range of benefits and welfare schemes
to motivate and assist staff to meet exigencies and critical
illnesses . Welfare schemes include provision of health insurance,
loans at concessionary rates, housing loan subsidies. In addition,
two unique schemes in operation are:
a) The Chairman’s Relief Fund under which financial assistance
is provided to employees to meet unforeseen and defined
critical illnesses and
b) Financial Assistance to staff to acquire appropriate professional
qualifications to enhance their career opportunities.
Enhancing Human Capital TrainingThe commitment displayed and contribution made by Members
of Staff at all levels for the continued growth and success of the
Company is praise worthy, and appreciated by the Management.
The Company continued to place high priority on human capital.
Through a comprehensive Training plan based on Training needs
and competency gaps, training was provided to all levels of staff
to enhance their competencies and skills for higher productivity
and personal development. Training included overseas as well as
local tailor made programmes utilising external resources.
Employee AppraisalDuring the year the performance appraisal system was reviewed
and a more effective scheme was implemented through the
Balance Scorecard system.
Every effort is made to recruit, train and deploy competent staff
and motivate and retain them by constantly analysing market
trends and meeting competitor challenges.
Age Analysis 2010/11
18 - 25 Years - 19%26 - 30 Years - 27%31 - 35 Years - 17%36 - 40 Years - 11%41 - 45 Years - 8%46 - 50 Years - 8%51 - 55 Years - 5%56 - 60 Years - 2%Over 60 Years - 3%
Gender Analysis 2010/11
Male - 72%Female - 28%
Scholarships to children of staff
Capacity development programme
Central Finance Company PLC - Annual Report 2010-11 41
Financial ReportsAnnual Report of the Board of Directors 42
Directors’ Responsibility for Financial Reporting 47
Remuneration Committee Report 48
Audit Committee Report 49
Statement of Internal Control by the Board 50
Report of the Auditor 51
Income Statement 52
Balance Sheet 53
Statement of Changes in Equity 54
Cash Flow Statement 55
Accounting policies 56
Notes to the Financial Statements 64
Financial Calendar 2010/11 First Quarter Results 2010/11 13th August 2010
Final Dividend 2009/10 - paid 01st September 2010
Second Quarter Results 2010/11 08th November 2010
First Interim Dividend 2010/11 - paid 18th November 2010
Third Quarter Results 2010/11 08th February 2011
Second Interim Dividend 2010/11 - paid 05th May 2011
Fourth Quarter Results 2010/11 24th May 2011
Annual Report 2010/11 28th July 2011
53rd Annual General Meeting 19th August 2011
Final Dividend 2010/11 - proposed to be paid 30th August 2011
Central Finance Company PLC - Annual Report 2010-1142
The Directors have pleasure in presenting
to the members their report together with
the audited financial statements of Central
Finance Company PLC, and the audited
consolidated financial statements of the
Group for the year ended March 31,2011.
Central Finance Company PLC is a public
limited liability company incorporated in
Sri Lanka on 5th December 1957, quoted
on the Colombo Stock Exchange in 1969,
registered as a finance company under the
Finance Companies Act No. 78 of 1988,
registered under the Finance Leasing Act
No. 56 of 2000, and the Companies Act
No.07 of 2007 on 9th August 2007.
The Board of Directors approved the
financial statements on 30th June 2011.
Principal activities and review of operations
CompanyThe principal activities of the Company
during the year continued to be leasing,
hire purchase financing, consumer credit,
vehicle hire, deposit mobilisation, vehicle
trading, providing money transfer facilities
and provision of other financial services.
SubsidiariesName of company Principal activities
Central Industries PLC Manufacture and
distribution of PVC
pipes and fittings
Central Mineral Manufacture of
Industries Ltd. mineral products
Central Construction and
Development (Pvt) Ltd. Investment company
Expanded Plastic
Products Ltd. Investment company
Central Homes (Pvt) Ltd. Property development
and sale of real estate
Hedges Court Construction and
Residencies (Pvt) Ltd. sale of apartments
Mark Marine Generation of hydro
Services (Pvt) Ltd. power
Central Developments Ltd. Investment company
CF Insurance
Brokers (Pvt) Ltd. Insurance broking
Central Transport and
Travels Ltd. Hiring of vehicles
Dehigama Hotels Renting of commercial
Company Ltd. property
CF Growth Fund Ltd. Importation and
Assembly of hand
tractors
Kandy Private Provision of healthcare
Hospitals Ltd. services
AssociatesName of company Principal activities
Nations Trust Bank PLC Commercial,
and private
banking, trade services,
leasing, factoring,
treasury and capital
market services and
fee- based activities.
Tea Smallholder Processing tea from
Factories PLC green leaf purchased
from small holders
and sale of processed
black tea.
Capital Suisse Asia Ltd. Provision of
management services
There have been no significant changes
in the nature of the principal activities of
the Company and of the Group during the
financial year under review.
Financial StatementsThe financial statements of the Group and
the Company are given on pages 52 to 93
of the Annual Report.
Auditor’s ReportThe auditor’s report on the financial
statements is given on page 51 of the
Annual Report.
Significant Accounting PoliciesDetails of significant accounting policies
adopted in the preparation of the financial
statements are given on pages 56 to 63 of
the Annual Report. The accounting policies
adopted during the financial year under
review were consistent with those of the
preceding financial year and hence there
were no changes in the accounting policies
adopted during the year under review.
Interests RegisterThe interests register is maintained by
the Company, as per the Companies Act
No.07 of 2007. All Directors have made
declarations as provided for in Section
192 (2) of the Companies Act No.07 of
2007. The related entries were made in
the Interests Register during the year under
review.
Directors’ Interests in SharesDirectors of the Company and its
subsidiaries who have relevant interest in
the shares of the respective companies
have disclosed their shareholdings and any
acquisitions/disposals to their respective
Boards in compliance with Section 200 of
the Companies Act.
The shareholdings of the Directors and
their spouses, of the Company at the
beginning and at the end of the year were
as follows:
31st March 31st March
2011 2010
E.H. Wijenaike 3,128,540 3,053, 540
G.S.N. Peiris 352,446 277,446
S.V. Wanigasekera 203,833 149,833
C. Kiriella 187,332 142,332
R.E. Rambukwelle 190,000 115,000
A.K. Gunaratne 161,666 86,666
M.S. Wijenaike 35,000 35,000
Spouses
A.J. Wijenaike 633,166 633,166
I.R. Peiris 86,193 86,193
All the employees including Directors are
entitled to purchase shares through a
Share Trust established by a trust deed
dated 20th August 1984. In June 2010
Annual Report of the Board of Directors
Central Finance Company PLC - Annual Report 2010-11 43
and March 2011, shares were allotted to
employees at Rs.390.00 and Rs.790.00
per share respectively.
Details of shares allotted to Directors during
the financial year 2010/11 are given below.
Name of Director No of shares
E.H.Wijenaike 75,000
G.S.N.Peiris 75,000
S.V.Wanigasekera 54,000
C.Kiriella 45,000
R.E.Rambukwelle 75,000
A.K.Gunaratne 75,000
Balances due from Directors to Central
Finance Company PLC Share Trust in
respect of share purchases are as follows:
31st March 31st March
2011 2010
Rs. Rs.
E.H. Wijenaike 56,049,373 9,269,373
G.S.N. Peiris 54,406,873 9,269,373
S.V. Wanigasekera 42,800,581 8,793,005
C. Kiriella 32,321,885 6,359,385
R.E. Rambukwelle 54,308,737 7,123,737
A.K. Gunaratne 54,736,873 7,581,873
M.S. Wijenaike 2,427,157 4,655,657
Given below are the Directors’
shareholdings in Group companies as at
31st March 2011.
Central Industries PLCS.V. Wanigasekera 903 (31.03.2010-301)
E.H. Wijenaike 9,003 (31.03.2010-3,001)
G.S.N. Peiris 03 (31.03.2010-01)
Increase in number of shares is due to sub
division of shares in the proportion of 01
by 03.
Nations Trust Bank PLCE.H. Wijenaike 10,598 (31.03.2010-9,635)
A.K. Gunaratne19,432 (31.03.2010-17,666)
Increase in number of shares is due to
conversion of share warrants to shares in
March 2011.
Tea Smallholder Factories PLCR.E.Rambukwelle 2,300 (31.03.2010-2,300)
Related Party TransactionsThe Directors have disclosed such
transactions in terms of Sri Lanka
Accounting Standard 30, Related Party
Disclosures (revised 2005) and such
transactions are given in note 44 to the
financial statements forming part of the
Annual Report of the Board of Directors.
Directors’ interests in transactionsDirectors of the Company have made the
general disclosures provided for in Section
192(2) of the Companies Act No.07 of
2007. Particulars of those transactions are
set out on page 94 of the Annual Report.
Insurance and IndemnityThe Company has obtained a Directors
and Officers Liability Insurance Policy from
Chartis Insurance Co.Ltd. up to a limit of
US$ 3Million for the period covering 01st
March 2011 to 29th February 2012.
Directors’ RemunerationDirectors’ remuneration in respect of the
Group and the Company for the financial
year ended March 31, 2011 is given in
Note 6 to the financial statements.
Corporate DonationsDuring the year, the company made
donations amounted to Rs.7.31 Million
(2009/10 Rs.19.07 Million) in terms of
the resolution passed at the last Annual
General Meeting. Donations made to
Government approved charities from
the above amounted Rs.7.14 Million
(2009/10 Rs.18.37 Million).
Total donations of the Group during
the year amounted to Rs.7.36 Million
(2009/10 - Rs.19.85 Million) of which
Rs.7.14 Million (2009/10-Rs.18.45
Million) had been made to Government
approved charities.
Internal controlsThe Board has instituted an effective and
comprehensive system of Internal Controls
covering financial operations, compliance,
control and risk management required to
carry on the business of the Company in
an orderly manner, safeguard its assets and
secure as far as possible the accuracy and
reliability of the records.
Corporate GovernanceThe Directors place great emphasis on
instituting and maintaining effective
corporate governance practices and
principles in respect of the management
and operations of the Company. Accordingly,
systems and structures have been
introduced and improved from time to time
to enhance risk management measures and
to improve accountability and transparency.
The corporate governance report is given
on pages 23 to 36 of the Annual Report.
Board Sub-committeesThe Board of Directors of the Company has
formed the following sub committees;
Audit CommitteeS.V. Wanigasekera (Chairman)
G.C.B. Wijeyesinghe
U.L. Kadurugamuwa
T.K. Bandaranayake
The report of the Audit Committee is given
on page 49 of the Annual Report.
Remuneration CommitteeS.V. Wanigasekera (Chairman)
U.L. Kadurugamuwa
G.C.B. Wijeyesinghe
The report of the Remuneration Committee
is given on page 48 of the Annual Report.
Review of BusinessA review of the Company’s and Group’s
operations during the year, with
comments on the financial results and
future developments is contained in the
Managing Director’s report on pages 3 to
8 and the Management Discussion and
analysis on pages 12 to 14 of the annual
report, which form an integral part of the
Directors’ report.
Central Finance Company PLC - Annual Report 2010-1144
Annual Report of the Board of Directors (contd.)
IncomeIncome of the group excluding associates
during the year was Rs 8,094.37 Million
(2009/10 - Rs.7, 536.52 Million), an
analysis of which is given in Note 1 to the
financial statements.
Results and Appropriations Profit after tax of the Company was
Rs.1,610.14 Million (2009/10-Rs.940.60
Million) whilst the Group profit attributable
to equity holders of the parent for the year
under review was Rs.1,827.03 Million
(2009/10-Rs.1,046.11 Million)
A detailed description of the results and
appropriations are given below:
2010/11 2009/10
Rs. ‘000 Rs. ‘000
Group profit for the
year before income
tax after payment of
all expenses, provision
for depreciation, VAT
on financial services
and loan losses 3,241,593 2,025,534
Provision for taxation (1,330,155) (900,699)
Group profit
after taxation 1,911,438 1,124,835
Minority interest (84,404) (78,723)
Net profit for the year 1,827,034 1,046,112
Unappropriated profit
brought forward from
previous year 821,687 714,790
Transfer from
revaluation reserve/
deferred tax 6,386 5,487
Effect on gratuity
transitional provision
due to change in
corporate tax rate ( 2,642) -
Other adjustments 4,298
Profit available for
appropriation 2,652,465 1,770,687
Appropriations
Transfer to reserve fund (81,000) (47,500)
Transfer to
general reserve ( 1,379,000) (800,000)
Dividends
distributed during
the year (147,175) (101,500)
Unappropriated
profit to be carried
forward 1,045,290 821,687
DividendsThe Directors recommend the payment of
a final dividend of Rs.5.00 per share for the
year ended 31st March 2011. (2009/10 -
Rs.3.50 per share) This dividend together
with the two interim dividends of Rs.2.50
per share and Rs.3.00 per share paid on
18th November 2010 and 05th May 2011
respectively amount to a total dividend of
Rs.213.15 Million for the year (2009/10-
Rs.121.80 Million). The interim dividends
represented a redistribution of dividends
received by the Company and therefore
were not subject to the 10% withholding
tax.
The final dividend proposed will be paid
substantilly out of taxable profit and
the balance out of dividends received.
Component of dividends paid-out of profits
will be exposed to the 10% withholding
tax. The Directors have confirmed that
the Company satisfies the solvency test
requirement under Section 56 of the
Companies Act No.07 of 2007 for both
interim dividends paid in November 2010
and May 2011 and the final dividend
proposed. Solvency certificates were
obtained from the auditor in respect
of interim dividends paid and the final
dividend of Rs.5.00 per share proposed to
be paid on 30th August 2011.
Property, Plant and EquipmentCapital expenditure on property, plant
and equipment and capital work-in-
progress amounted to Rs.1,136.03 Million
(2009/10-Rs.612.37 Million) details of
which are given in note 28 to the financial
statements. Capital expenditure approved
and contracted for as at year end is
included in note 40(b) to the financial
statements.
Market Value of Freehold PropertiesThe value of freehold properties owned
by the Group as at 31st March 2011 is
included in the accounts at Rs.2,060.85
Million (31st March 2010 - Rs.2,066.39
Million) based on valuations undertaken
by a panel of Chartered Valuers/Licensed
Surveyors in March 2007 and March 2009
and cost of subsequent improvements. The
Directors are of the opinion that this value
is not in excess of the current market value.
The details are provided in note 28 to the
financial statements.
ReservesThe total Group reserves as at 31st March
2011 amounted to Rs.10,694.57 Million
(31st March 2010 - Rs.8,923.93 Million)
details of which are given in notes 36 to
38 to the financial statements.
Stated CapitalThe stated capital of the Company
consisting of 20,300,000 ordinary shares
amounts to Rs.203.02 Million. There were
no share issues during the year under
review and there was no change in the
stated capital during the year.
ShareholdingsAs at 31st March 2011 there were 2,516
registered shareholders and the distribution
of shareholding is indicated on page 100.
Share InformationInformation relating to earnings, dividends,
net assets and market value per share is
given in financial highlights on page 2.
Information pertaining to trading in the
Company’s shares is given in note no. 6 on
page 101 of the Annual Report.
Major ShareholdersThe twenty largest shareholders of the
Company as at 31st March 2011 together
with an analysis of the shareholdings are
given on page 101.
Central Finance Company PLC - Annual Report 2010-11 45
Employee Share TrustThe Board of Directors believes in
encouraging employees to become
involved in the Company and in its
financial performance, where they are
actively invited to acquire shares in the
Company. Consequently all employees
of the Company are entitled to purchase
shares through a share trust established
by a Trust Deed dated 20th August 1984
and managed independently by Corporate
Services (Pvt) Ltd., an associate of F.J. &
G. de Saram, Attorneys-at-Law & Notaries
Public. Purchase of shares is on a fixed /
variable installment plan where deductions
are made monthly from the employees’
emoluments. Allotment price is always
equivalent to that of prevailing market price
at the time of allotment and employees
are entitled to a loan scheme granted by
Central Finance Company PLC Share Trust
subject to a maximum repayment period of
fifteen years.
There were two allotments during the
financial year 2010/11, details of which
are given below:
Price per share (Rs.) No.of shares allotted
390.00 288,650
790.00 1,004,011
Directorate
List of DirectorsThe Board of Central Finance Company
PLC consists of ten Directors as at end of
the financial year with wide financial and
commercial knowledge and experience.
The qualifications and experience of the
directors are given on pages 9 and 10 of
the Annual Report. The following were the
Directors of the Company as at the end of
the financial year:
S.V. Wanigasekera (Non-Executive Chairman)
E.H. Wijenaike (Managing Director)
G.S.N. Peiris (Executive Director)
C. Kiriella (Executive Director)
R.E. Rambukwelle (Executive Director)
A.K. Gunaratne (Executive Director)
M.S. Wijenaike (Non-Executive Director)
U.L. Kadurugamuwa (Independent Non-
Executive Director)
G.C.B. Wijeyesinghe (Independent Non-
Executive Director)
T.K. Bandaranayake (Independent Non-
Executive Director)
Retirements/New appointments during the financial year There was no change in the composition of
the Board during the year under review.
Retirements/New appointments subsequent to the financial year endG.C.B.Wijeyesinghe and M.S.Wijenaike
having served on the Board for more
than nine years retired with effect from
30.06.2011 under the Finance Companies
Act Direction No.03 of 2008 on Corporate
Governance.
C. Kiriella, Director( Legal) retired from
the Board with effect from 30 06.2011
on completion of 26 years service as an
Executive Director of the Company.
D.P. De Silva was appointed to the Board
as an Executive Director with effect from
01.07.2011.
S.C.S. Wickramasinghe and C.L.K.P.
Jayasuriya were appointed to the Board as
Independent Non-Executive Directors with
effect from 01.07.2011.
Recommendations for Re-electionS.V. Wanigasekera who attained the age of
87 prior to the forthcoming Annual General
Meeting retires pursuant to Section 210 of
the Companies Act No.07 of 2007, and
a resolution that the age limit of 70 years
referred to in section 210 of Companies
Act No.07 of 2007 shall not apply to S.V.
Wanigasekera will be proposed at the
forthcoming Annual General Meeting.
In accordance with Article 105 of the
Articles of Association, T.K. Bandaranayake
retires by rotation and is eligible for re-
election at the forthcoming Annual General
Meeting.
D.P. De Silva, S.C.S. Wickramasinghe
and C.L.K.P. Jayasuriya retire in terms of
article 111 of the Articles of Association
and being eligible for re-election have
offered themselves for re-election at the
forthcoming Annual General Meeting.
Directors’ Responsibility for Financial ReportingThe Directors are responsible for the
preparation of financial statements of the
Company to reflect a true and fair view of
the state of its affairs. The Directors are of
the view that these financial statements
have been prepared in conformity with the
requirements of the Sri Lanka Accounting
Standards, Companies Act No.07 of 2007,
Finance Companies Act No.78 of 1988,
Sri Lanka Accounting and Auditing
Standards Act No.15 of 1995, Inland
Revenue Act No.10 of 2006 and
amendments thereto and the Listing Rules
of the Colombo Stock Exchange.
The detailed report is given on page 47 of
the Annual Report.
EnvironmentThe Company has not engaged in any
activities detrimental to the environment.
The Company has used its best efforts to
comply with the environmental laws and
regulations.
Human ResourcesThe employment policies of the Company
are based on recruiting the best available
people, training them to enhance their skills
and offering equal career opportunities
regardless of gender, race or religion.
Central Finance Company PLC - Annual Report 2010-1146
Annual Report of the Board of Directors (contd.)
Compliance with Laws and Regulations The Company has not engaged in
any activities contravening laws and
regulations. All officers responsible for
ensuring compliance with the provisions of
various laws and regulations confirm their
compliance to the Board on a monthly basis.
Statutory PaymentsThe Directors, to the best of their
knowledge and belief are satisfied that all
statutory payments due to the Government
and in relation to the employees have
been made in full and on time.
Events after the balance sheet dateThere have not been any material events
that occurred subsequent to the date of
the balance sheet that require adjustments
to the financial statements, other than
those disclosed in note 43 to the financial
statements.
Going ConcernThe Board of Directors is satisfied that
the Company has adequate resources to
continue its operations in the foreseeable
future. Accordingly, the financial statements
are prepared based on the going concern
concept.
AuditorThe Audit Committee of the Company
has recommended the re-appointment of
SJMS Associates, Chartered Accountants
as auditor of the Company and a
resolution relating to their re-appointment
and authorising the Directors to fix their
remuneration as recommended by the
Audit Committee will be proposed at the
Annual General Meeting.
The Audit Committee reviews the
appointment of the auditor, their
effectiveness, independence and
relationship with the group.
The auditor, SJMS Associates, was paid
Rs.1.45 Million (2009/10 Rs.1.36 Million)
as audit fees. In addition, they were paid
Rs.0.16 Million (2009/10- Rs. 0.042
Million) for permitted non-audit related
services.
The Group works with three other firms
of chartered accountants as well, namely;
Ernst & Young, KPMG Ford, Rhodes,
Thornton & Co., and LM Associates. They
were paid Rs.1.54 Million (2009/10
- Rs.1.37 Million) and Rs.0.35 Million
(2009/10 - Rs.0.56 Million) respectively
for audit and permitted non audit related
services.
The auditors have confirmed that they do
not have any relationships with or interests
in the Company or subsidiaries other than
those disclosed above.
Annual General MeetingThe fifty third Annual General Meeting of
the Company will be held at the registered
office, 84, Raja Veediya, Kandy on 19th
August 2011. The notice of meeting
relating to the fifty third Annual General
Meeting is given on page 109.
For and on behalf of the Board
S.V. Wanigasekera G.S.N. Peiris Chairman Director
Corporate Services (Pvt) Ltd.Secretaries
30th June 2011
Central Finance Company PLC - Annual Report 2010-11 47
The Directors of the Company are
responsible for the preparation and
presentation of the financial statements
to the shareholders in accordance with
the relevant provisions of the Companies
Act No.07 of 2007 and other statutes
which are applicable in the preparation of
financial statements.
The financial statements comprise of:
• a balance sheet, which presents a true
and fair view of the state of affairs of
the company and its subsidiaries as at
the end of the financial year and
• an income statement, which presents a
true and fair view of the profit and loss
of the company and its subsidiaries for
the financial year
The Directors confirm that the financial
statements of the Company and its
Subsidiaries for the year ended 31st March
2011 incorporated in this report have
been prepared in accordance with the
Companies Act No.07 of 2007, Sri Lanka
Accounting Standards, Finance Companies
Act No.78 of 1988, the Listing Rules of the
Colombo Stock Exchange and generally
accepted accounting policies. The Directors
consider that, in preparing the financial
statements exhibited on pages 52 to 93,
they have adopted appropriate accounting
policies on a consistent basis, supported by
reasonable and prudent judgements and
estimates.
The Directors have also taken such steps as
are reasonably open to them to safeguard
the assets of the Company and to prevent
and detect frauds and other irregularities.
In this regard, the Directors have instituted
an effective and comprehensive system
of internal controls comprising of internal
checks, internal audit and financial and
other controls required to carry on the
Company’s business in an orderly manner
and to safeguard its assets and ensure as
far as practicable the accuracy and reliability
of the records.
The Directors’ are of the view that the
Company and its Subsidiaries have
adequate resources to continue operations
in the foreseeable future and have applied
the going concern basis in the preparation
of these financial statements.
To the best of the knowledge and belief
of the Directors, the Company’s auditor
SJMS Associates has carried out reviews
and sample checks on the effectiveness
of the system of internal controls as they
consider appropriate and necessary in
providing their opinion on the financial
statements. SJMS Associates has examined
the financial statements made available
together with all other financial records,
minutes of shareholders’ and Directors’
meetings and related information and have
expressed their opinion which appears on
page 51 of the Annual Report.
The Directors have provided the Auditor
with every opportunity to carry out any
reviews and tests that they consider
appropriate and necessary for the
performance of their responsibilities.
Further, as required by Section 56(2) of
the Companies Act No.07 of 2007, the
Board of Directors have confirmed that
the Company, based on the information
available, satisfies the solvency test
immediately after the distribution, in
accordance with Section 57 of the
Companies Act No.07 of 2007, and has
obtained a certificate from the auditor,
prior to recommending a final dividend of
Rs.5.00 per share for this year which is to
be approved by the shareholders at the
Annual General Meeting to be held on
19th August 2011.
The Directors are of the view that they
have discharged their responsibilities as set
out in this statement.
The Directors confirm to the best of
their knowledge that all taxes, levies and
financial obligations of the Group have
been either paid or adequately provided for
in the financial statements.
By Order of the Board
Corporate Services (Pvt) LimitedSecretaries
30th June 2011
Colombo
Directors’ Responsibility for Financial Reporting
Central Finance Company PLC - Annual Report 2010-1148
The Remuneration Committee, appointed
by the Board of Directors comprises of
three Non-Executive Directors, of whom,
two are Independent.
CompositionS.V. Wanigasekara (Chairman) (NED)
G.C.B. Wijeyesinghe (IND/NED)
U.L. Kadurugamuwa (IND/NED)
Brief profiles of the members are given on
pages 9 and 10 of the Annual Report.
PolicyThe Company remuneration policy aims
to attract, motivate and retain talent in a
highly competitive environment with the
appropriate professional, managerial and
operational expertise necessary to achieve
the objectives of the Company.
The Company remuneration framework for
the Managing Director, Executive Directors
and Corporate Management Team is
designed to create and enhance the value
for all stakeholders of the Company and to
ensure alignment between short and long-
term interests of the Company.
Scope The Committee reviews all significant
human resource policies and initiatives,
salary structures and terms and conditions
relating to staff at senior executive
level. The Committee deliberates and
recommends to the Board of Directors the
remuneration packages, annual increments
and bonuses of the Managing Director,
Executive Directors, members of the
Corporate Management and senior level
staff.
The Managing Director who is responsible
for the overall management of the
Company attends meetings by invitation
and participates in the deliberations except
when his own interest, performance and
compensation are discussed.
FeesAll Non-Executive Directors receive a
fee for attendance at Board meetings
and serving on sub-committees and/or
subsidiary Boards.
Committee MeetingsA formal meeting of the committee was
held in May 2010. The decisions taken
are circulated and ratified by the Board of
Directors.
Attendance at the meetings are given on
page 36 of the Annual Report.
Access to Professional AdviceThe Committee has retained a consultant
to seek external professional advice on a
neet basis.
S.V. WanigasekaraChairman
Remuneration Committee
Colombo,
Sri Lanka
30th June 2011
Key:
IND- Independent Director
NED- Non-Executive Director
Remuneration Committee Report
Central Finance Company PLC - Annual Report 2010-11 49
The Audit Committee comprises the
Non-Executive Chairman and three
Independent Non-Executive Directors
of the Company. The Non-Executive
Chairman, S.V. Wanigasekera is a Fellow of
the Institutes of the Chartered Accountants
in England and Wales and of Sri Lanka.
The Independent Non–Executive Director,
G.C.B. Wijeyesinghe is a Fellow of both,
the Institute of Chartered Accountants,
Sri Lanka and the Institute of Certified
Management Accountants, Sri Lanka
and holds FAPA(UK)-Retired. The
Independent Non-Executive Director, T.K.
Bandaranayake is a Fellow of the Institute
of Chartered Accountants of Sri Lanka.
The Independent Non-Executive Director,
U.L. Kadurugamuwa is a Senior Corporate
Lawyer, and the Precedent Partner of F.J.&
G De Saram, Attorneys-at-Law. The General
Manager-Internal Audit functions as its
Secretary. The Managing Director, Director
(Finance), Director (Group Co-ordination),
GM (Finance) and External Auditor attend
the meetings by invitation when necessary.
The Audit Committee is empowered,
among other things, to examine internally
any matters relating to the financial affairs
of the Company. These include reviews
of internal control procedures and risk
management, accounting policies and
emerging accounting issues and disclosures
in accordance with Sri Lanka Accounting
Standards. The Audit Committee is assisted
by the Internal Audit Division which
performs continuous audits of Company
operations and the Chief Compliance
Officer who monitors compliance with
statutory & regulatory requirements. The
Committee also reviewed compliance with
information requirements of the Companies
Act No.07 of 2007 and other financial
reporting requirements and regulations.
Thereby, the Audit Committee ensures that
the Company’s operations conform to rules
and regulations to meet the Company’s
policies.
The Audit Committee is also empowered
to recommend the appointment and fees
of the External Auditor. The Committee
is satisfied that there is no conflict of
interests between the Company and the
Auditor. A statement to this effect has
been received from the Auditor in terms
of the Section 163(3) of the Companies
Act No.07 of 2007. The Committee is thus
satisfied that there is no impairment of
the independence and objectivity of the
Auditor. The Audit Committee will ensure
that the rotation of the audit partner takes
place at the end of 5 years (in 2011/12),
as per section 8 (2)c of the Direction
No.3 of 2008 issued under the Finance
Companies Act. No 78 of 1988.
During the financial year ended 31st March
2011, three Audit Committee meetings
were held. The financial statements for
2nd & 3rd quarter were approved by the
committee by circulation. Proceedings
of the Audit Committee meetings are
reported regularly to the Board.
The attendance of the members at Audit
Committee meetings is as follows:
Member No.of meetings
S.V. Wanigasekera 3
G.C.B. Wijeyesinghe 3
T.K. Bandaranayake 3
U.L. Kadurugamuwa 3
The Committee reviewed the Company’s
interim and annual financial statements
and recommended their issue to the
Board. The Audit Committee which
reviewed the operations and monitored
the effectiveness of internal controls and
procedures is of the view that adequate
controls and procedures are in place to
generate the required information and
provide reasonable assurance to the
Board that the assets of the Company are
safeguarded, disclosure requirements are
met and the financial position is adequately
monitored.
The Audit Committee with the concurrence
of the Board enlisted the services of a
leading firm of Chartered Accountants to
supplement the internal audit division in
carrying out branch audits. The Committee
also met with the External Auditor before
the commencement and at the conclusion
of the annual audit and reviewed their
Management Letter and Management’s
responses thereto. The Committee also
met with the External Auditor separately
without the presence of Management to
discuss sensitive issues and difficulties
experienced during the audit.
S.V. Wanigasekera (B.Com.),F.C.A. (England & Wales),
F.C.A (Sri Lanka)
Chairman
Audit Committee30th June 2011
Audit Committee Report
Central Finance Company PLC - Annual Report 2010-1150
ResponsibiltiyThe Board of Directors (“Board”) is
responsible for the adequacy and
effectiveness of the system of internal
controls of Central Finance Company
PLC (the Company). Such a system is
designed to manage the Company’s key
areas of risk within an acceptable risk
profile, rather than eliminate the risk of
failure to achieve the policies and business
objectives of the Company. Accordingly,
the system of internal controls can only
provide reasonable but not absolute
assurance against material misstatement of
management and financial information and
records or against financial losses or fraud.
The Board has established an ongoing
process for identifying, evaluating and
managing the significant risks faced by
the Company and this process includes
enhancing the system of internal controls
as and when there are changes to business
environment or regulatory guidelines.
The Management assists the Board in the
implementation of the Board’s policies
and procedures on risk and controls by
identifying and assessing the risks faced by
the Company, and in the design, operation
and monitoring of suitable internal controls
to mitigate risks. The Board is of the view
that the system of internal controls in
place is sound and adequate to provide
reasonable assurance regarding the
reliability of financial reporting, and that
the preparation of financial statements
for external purposes is in accordance
with relevant accounting principles and
regulatory requirements.
Key Internal Control Processes of the CompanyThe key processes that have been
established in reviewing the adequacy and
integrity of the system of internal controls
include the following:
• Various Management Committees are
established by the Board to assist the
Board in ensuring the effectiveness of
the Company’s daily operations and
that the Company’s operations are in
accordance with the corporate objectives,
strategies and the annual budget as well
as the policies and business directions
that have been approved.
• The Internal Audit division of the
Company checks for compliance
with policies and procedures and the
effectiveness of the internal control
system and highlights findings in respect
of any non-compliance. Audits are
carried out on all business units and
branches, the frequency of which is
determined by the level of risk assessed,
to provide an independent and objective
report on operational and management
activities of these business units and
branches. The annual audit plan is
reviewed and approved by the Audit
Committee and the findings of the audits
are submitted to the Audit Committee
for review at their periodic meetings.
• The Audit Committee of the Company
reviews internal control issues identified
by the Internal Audit Division, the external
auditor, regulatory authorities and
management, and evaluates the adequacy
and effectiveness of the risk management
and internal control system. It also reviews
the internal audit function with particular
emphasis on the scope of audits and
quality of the same. The minutes of the
Audit Committee meetings are tabled for
the information of the Board on a periodic
basis. Further details of the activities
undertaken by the Audit Committee of
the Company are set out in the Audit
Committee Report on page 49.
• Operational committees have also
been established with appropriate
empowerment to ensure effective
management and supervision of the
Company’s core areas of business
operations. In assessing the internal
control system, identified officers of
the Company collate all procedures
and controls that are connected with
significant accounts and disclosures of
the financial statements of the Company.
These in turn are observed and checked
by the Internal Audit Division for
suitability of design and effectiveness on
an ongoing basis.
Confirmation by the BoardBased on the above processes, the Board
confirms that the financial reporting system
of the Company has been designed to
provide reasonable assurance regarding
the reliability of financial reporting and
the preparation of financial statements
for external purposes has been done in
accordance with Sri Lanka Accounting
Standards and regulatory requirements of
the Central Bank of Sri Lanka.
Review of the Statement By the External AuditorExternal auditor’s certification on the
effectiveness of Directors’ Statement on
Internal Control for the year ended 31
March 2011 was not obtained since a
suitable framework for same for finance
companies has not yet been issued by
the Institute of Chartered Accountants
of Sri Lanka. The Company will obtain
this certificate when the external auditor
is ready to issue same under a specific
auditing framework
For and on behalf of the Board
S.V. WanigasekaraChairman
E.H. Wijenaike G.S.N. PeirisManaging Director Director (Finance)
Colombo,
Sri Lanka
30th June 2011
Statement of Internal Control by the Board
Central Finance Company PLC - Annual Report 2010-11 51
Central Finance Company PLC - Annual Report 2010-1152
Income Statement Group CompanyFor the year ended 31st March 2011 2010 2011 2010 Notes Rs.’000 Rs.’000 Rs.’000 Rs.’000
Income 1 8,094,371 7,536,516 7,647,201 7,057,483
Interest income 2 6,269,481 5,723,338 6,320,455 5,765,261 Less: Interest expenses 3 2,355,263 3,058,745 2,373,125 3,084,920
Net interest income 3,914,218 2,664,593 3,947,330 2,680,341 Other operating income 4 1,413,023 1,470,952 796,194 876,808 Other income 5 411,867 342,226 530,552 415,414
5,739,108 4,477,771 5,274,076 3,972,563
Less: Operating expenses 6 Personnel expenses 916,114 756,676 758,141 630,824 Premises, equipment and establishment expenses 1,183,015 1,086,928 1,118,288 1,023,826 Employee retirement benefit expenses 7 91,134 66,633 79,390 56,746 Other expenses 354,878 425,538 250,834 238,090
2,545,141 2,335,775 2,206,653 1,949,486
Profit before loan losses and provisions 3,193,967 2,141,996 3,067,423 2,023,077 Less: Loan losses and provisions 8 186,822 299,479 186,221 297,231
3,007,145 1,842,517 2,881,202 1,725,846 Share of profit of associates 9 507,781 383,868 - -
Profit before VAT on financial services and income tax 3,514,926 2,226,385 2,881,202 1,725,846 Less: VAT on financial services 273,333 200,851 273,333 200,851
Profit before income tax 10 3,241,593 2,025,534 2,607,869 1,524,995 Less: Income tax expense 11 1,330,155 900,699 997,733 584,394
Profit after income tax 1,911,438 1,124,835 1,610,136 940,601
Attributable to equity holders of the parent 1,827,034 1,046,112 1,610,136 940,601 Attributable to minority interest 84,404 78,723 - -
Net profit for the year 1,911,438 1,124,835 1,610,136 940,601
Basic/diluted earnings per share - Rs. 12 90.00 51.53Dividend per share - Rs. 13 Paid 5.50 2.50 Proposed 5.00 3.50
The accounting policies and notes from pages 56 to 93 form an integral part of these financial statements.
Central Finance Company PLC - Annual Report 2010-11 53
Balance Sheet Group CompanyAs at 31st March 2011 2010 2011 2010 Notes Rs.’000 Rs.’000 Rs.’000 Rs.’000
ASSETSCash in hand and at banks 345,681 309,866 273,197 275,283 Investments in Government securities 1,954,393 2,787,000 1,954,393 2,787,000 Deposits with banks 95,000 630,500 95,000 630,500 Dealing securities 14 32,000 2,200 32,000 2,200 Tax receivable 2,851 - - - Inventories 15 240,153 202,120 - - Investment securities 16 180,331 121,176 173,971 111,564 Net investment in leases 17 16,141,201 11,334,823 16,141,201 11,334,823 Corporate debt securities 18 313,414 402,813 313,414 402,813 Loans and advances 19 12,518,772 10,398,580 13,496,307 11,312,264 Trade and other receivables 20 1,485,024 1,249,818 1,106,588 856,237 Investments in real estate 21 594,204 988,430 107,811 211,255 Vehicles, spare parts and other stocks 427,814 769,944 433,014 781,784 Investments in associates 23 1,908,947 1,584,724 523,458 482,054 Investments in subsidiaries 24 - - 312,987 296,204 Other assets 25 8,259 10,937 8,259 10,937 Deferred tax asset 26 8,929 2,309 - - Intangible assets 27 46,491 48,992 43,991 48,504 Property, plant and equipment 28 4,859,631 4,633,049 4,024,580 3,791,179
Total assets 41,163,095 35,477,281 39,040,171 33,334,601
LIABILITIESBank overdrafts 505,932 357,760 502,367 273,771 Tax payable 323,795 279,063 275,939 226,654 Trade and other payables 29 5,735,556 4,669,124 5,488,142 4,453,795 Amounts due to subsidiaries - - 185,210 199,148 Deposits 30 18,757,201 17,233,458 18,957,838 17,397,134 Bank loans 31 986,167 445,908 901,167 187,500 Non bank loans 32 1,340,661 952,987 1,340,661 932,487 Debentures 33 400,000 150,000 400,000 150,000 Retirement benefit obligations 34 403,982 340,951 345,411 290,620 Deferred tax liability 26 1,264,795 1,414,570 1,199,214 1,326,518
Total liabilities 29,718,089 25,843,821 29,595,949 25,437,627
SHAREHOLDERS’ FUNDSStated capital 35 203,020 203,020 203,020 203,020 Capital reserves 36 1,385,463 1,377,177 979,072 974,847 Reserve fund 37 682,000 601,000 682,000 601,000 Revenue reserves 38 8,627,110 6,945,757 7,580,130 6,118,107
Funds attributable to equity holders of the parent 10,897,593 9,126,954 9,444,222 7,896,974 Minority interest 547,413 506,506 - -
11,445,006 9,633,460 9,444,222 7,896,974
Total liabilities, shareholders’ funds and minority interest 41,163,095 35,477,281 39,040,171 33,334,601
Net assets per share - Rs. 536.83 449.60 465.23 389.01
The accounting policies and notes from pages 56 to 93 form an integral part of these financial statements.I certify that the financial statements comply with the requirements of the Companies Act No. 07of 2007.
U.B. Elangasinha Chief Financial Officer
The Board of Directors is responsible for the preparation and presentation of these financial statements.Approved and signed for and on behalf of the Board.
E.H. Wijenaike G.S.N. Peiris Managing Director Director (Finance)
30th June 2011Colombo
Central Finance Company PLC - Annual Report 2010-1154
Statement of Changes in EquityGroup equity statement for the Attributable to Equity Holders of the Company year ended 31st March 2011 Stated Other Reserves Reserve General Retained Minority Total Capital Revaluation Other Fund Reserve Earnings Interest Reserves Capital Reserves Rs.’000 Rs.’000 Rs.’000 Rs.’000 Rs.’000 Rs.’000 Rs.’000 Rs.’000
Balance as at 1st April 2009 203,020 1,363,799 18,865 553,500 5,338,516 714,790 459,453 8,651,943 Net profit for the year ended 31st March 2010 - - - - - 1,046,112 78,723 1,124,835 Write back of unclaimed dividends - - - - - 3,742 - 3,742 Provision for loan losses - - - - (14,446) - - (14,446)Transfers during the year - - - 47,500 800,000 (847,500) - - Liquidation of subsidiary - Central Concrete Industries Ltd. - - - - - 556 203 759 Depreciation on revaluation surplus - (5,487) - - - 5,487 - -Dividends for the year ended 31st March 2009 - - - - - (76,125) (31,873) (107,998)Interim dividends for the year ended 31st March 2010 - - - - - (25,375) - (25,375)
Balance as at 31st March 2010 203,020 1,358,312 18,865 601,000 6,124,070 821,687 506,506 9,633,460
Net profit for the year ended 31st March 2011 - - - - - 1,827,034 84,404 1,911,438 Reversal of provision for loan losses - - - - 78,750 - - 78,750 Transfers during the year - - - 81,000 1,379,000 (1,460,000) - - Deferred tax attributable to revaluation surplus due to change in corporate tax rate - 10,894 - - - - 1,011 11,905 Effect on gratuity transitional provision due to change in corporate tax rate - - - - - (2,642) - (2,642)Deferred tax on brought forward tax losses - - - - - 405 - 405 Deferred tax attributable to revaluation surplus due to change in corporate tax rate-associate company - 3,019 - - - 354 - 3,373 Depreciation on revaluation surplus - (5,627) - - - 5,627 - - Dividends for the year ended 31st March 2010 - - - - - (96,425) (44,508) (140,933)Interim dividends for the year ended 31st March 2011 - - - - - (50,750) - (50,750)
Balance as at 31st March 2011 203,020 1,366,598 18,865 682,000 7,581,820 1,045,290 547,413 11,445,006
Company equity statement for the Stated Revaluation Reserve General Retained Total year ended 31st March 2011 Capital Reserve Fund Reserve Earnings Rs.’000 Rs.’000 Rs.’000 Rs.’000 Rs.’000 Rs.’000
Balance as at 1st April 2009 203,020 978,801 553,500 5,327,335 5,921 7,068,577 Net profit for the year ended 31st March 2010 - - - - 940,601 940,601 Write back of unclaimed dividends - - - - 3,742 3,742 Provision for loan losses - - - (14,446) - (14,446)Transfers during the year - - 47,500 800,000 (847,500) - Depreciation on revaluation surplus - (3,954) - - 3,954 - Dividends for the year ended 31st March 2009 - - - - (76,125) (76,125)Interim dividends for the year ended 31st March 2010 - - - - (25,375) (25,375)
Balance as at 31st March 2010 203,020 974,847 601,000 6,112,889 5,218 7,896,974
Net profit for the year ended 31st March 2011 - - - - 1,610,136 1,610,136 Reversal of provision for loan losses - - - 78,750 - 78,750 Transfers during the year - - 81,000 1,379,000 (1,460,000) - Depreciation on revaluation surplus - (3,954) - - 3,954 - Deferred tax attributable to revaluation surplus - 8,179 - - - 8,179 Effect on gratuity transitional provision due to change in corporate tax rate - - - - (2,642) (2,642)Dividends for the year ended 31st March 2010 - - - - (96,425) (96,425)Interim dividends for the year ended 31st March 2011 - - - - (50,750) (50,750)
Balance as at 31st March 2011 203,020 979,072 682,000 7,570,639 9,491 9,444,222
Figures in brackets indicate deductions.The accounting policies and notes from pages 56 to 93 form an integral part of these financial statements.
Central Finance Company PLC - Annual Report 2010-11 55
Cash Flow Statement Group CompanyFor the year ended 31st March 2011 2010 2011 2010 Rs.’000 Rs.’000 Rs.’000 Rs.’000
Cash flows from operating activitiesInterest receipts 5,776,514 5,415,930 5,828,700 5,457,241Interest payments (2,290,037) (2,695,759) (2,292,970) (2,628,213)Recoveries on loans previously written off 69,960 58,880 69,960 58,880Receipts from other operating activities 4,155,052 3,296,219 440,215 531,697Cash payments to employees and suppliers (4,620,404) (3,953,329) (1,651,866) (1,509,037)
Operating profit before changes in operating assets 3,091,085 2,121,941 2,394,039 1,910,568(Increase)/decrease in operating assets:(Investments)/divestments in Government securities and bank deposits maturing after 90 days 672,949 (955,992) 672,949 (955,992)Funds advanced to customers (21,734,460) (13,185,950) (21,839,807) (13,570,855)Capital component of recoveries from customers 15,723,293 12,049,417 15,765,364 12,111,089Others 363,133 430,400 436,997 408,637Increase/(decrease) in operating liabilities:Deposits 2,013,711 4,336,244 2,039,870 4,416,504
Net cash from operating activities before income tax 129,711 4,796,060 (530,588) 4,319,951Income tax paid (1,183,159) (699,463) (1,043,543) (615,471)
Net cash inflow/(outflow) from operating activities (1,053,448) 4,096,597 (1,574,131) 3,704,480
Cash flows from investing activitiesDividends received from subsidiaries and associates 70,393 42,608 74,537 53,316Dividends received from other companies 14,996 19,224 14,991 12,423Purchase of securities (148,836) (100,000) (148,836) (100,000)Proceeds from sale of securities 104,897 17,706 120,339 17,706Investments in associates (146,751) (251,572) (41,404) (108,898)Purchase of property, plant and equipment (1,020,759) (382,448) (977,485) (347,504)Proceeds on disposal of property, plant and equipment 372,884 661,699 368,624 658,141
Net cash inflow/(outflow) from investing activities (753,176) 7,217 (589,234) 185,184
Cash flows from financing activitiesBorrowings 3,485,129 811,409 3,400,129 498,553 Repayment of borrowings (2,298,396) (4,398,428) (2,019,488) (3,728,770)Dividends paid to equity holders of the parent (145,958) (100,391) (145,958) (100,391)Dividends paid to minority shareholders (44,508) (31,873) - -
Net cash inflow/(outflow) from financing activities 996,267 (3,719,283) 1,234,683 (3,330,608)
Net increase(decrease) in cash and cash equivalents (810,357) 384,531 (928,682) 559,056Cash and cash equivalents at the beginning of the period 1,982,106 1,597,575 2,031,512 1,472,456
Cash and cash equivalents at the end of the period 1,171,749 1,982,106 1,102,830 2,031,512
Analysis of cash and cash equivalentsCash in hand and at banks 345,681 309,866 273,197 275,283Investments in Government securities-maturing within 90 days 1,237,000 1,580,000 1,237,000 1,580,000Deposits with banks-maturing within 90 days 95,000 450,000 95,000 450,000Bank overdrafts (505,932) (357,760) (502,367) (273,771)
Cash and cash equivalents at the end of the period 1,171,749 1,982,106 1,102,830 2,031,512
The accounting policies and notes from pages 56 to 93 form an integral part of these financial statements.Figures in brackets indicate deductions.
Central Finance Company PLC - Annual Report 2010-1156
Accounting Policies1 General1.1 Reporting entity Central Finance Company PLC is a public limited liability
company incorporated on 5th December 1957 and domiciled in Sri Lanka. Its registered office and principal place of business is at 84, Raja Veediya, Kandy. Ordinary shares of the Company are listed on the Colombo Stock Exchange.
The staff strength of the Company as at 31st March 2011 was 1,347 (1,279 as at 31st March 2010)
1.2 Consolidated financial statements The consolidated financial statements of Central Finance
Company PLC for the year ended 31st March 2011 comprise those of the Company (parent company) and of its subsidiaries (together referred to as the “Group”) and of the Group’s interest in associates.
The consolidated financial statements of all companies in the Group other than CF Insurance Brokers (Pvt) Ltd, Nations Trust Bank PLC and Capital Suisse Asia Ltd are prepared for a common financial year, which ends on 31st March. The above referred companies have a common financial year ending 31st December.
1.3 Approval of the consolidated financial statements by Board of Directors
The consolidated financial statements for the year ended 31st March 2011 were authorised for issue on 30th June 2011.
1.4 Parent enterprise Central Finance Company PLC does not have an identifiable
parent of its own.
2 Principal activities and nature of operations2.1 Company The principal activities of the Company are leasing, hire
purchase-financing, consumer credit, vehicle hire, deposit mobilisation, vehicle trading, providing money transfer facilities and provision of other financial services.
2.2 Subsidiaries Name of company Principal activities
Central Industries PLC Manufacture and distribution of PVC pipes and fittings
Central Mineral Manufacture of mineral Industries Ltd. products
Central Construction and Investment companyDevelopment (Pvt) Ltd.
Expanded Plastic Investment company Products Ltd.
Central Homes (Pvt) Ltd. Property development and sale of real estate
Mark Marine Generation of hydro power Services (Pvt) Ltd.
Central Developments Ltd. Investment company
CF Insurance Insurance broking Brokers (Pvt) Ltd.
Central Transport and Hiring of vehicles Travels Ltd.
Hedges Court Construction and sale of Residencies (Pvt) Ltd. apartments
Dehigama Hotels Renting of commercial Company Ltd. property
CF Growth Fund Ltd. Importation and assembly of hand tractors
Kandy Private Provision of healthcare services Hospitals Ltd.
2.3 Associates Name of company Principal activities
Nations Trust Bank PLC Commercial and private banking, trade services, leasing, factoring, treasury and capital market services and fee- based activities.
Tea Smallholder Processing tea from green leaf Factories PLC purchased from small holders and sale of processed black tea.
Capital Suisse Asia Ltd. Provision of management services
There were no significant changes in the nature of the principal activities of the Company and the Group during the financial year under review.
3 Basis of preparation of the consolidated Financial Statements
3.1 Statement of compliance The consolidated financial statements (balance sheets,
income statements, statements of changes in equity, cash flow statements and notes comprising a summary of significant accounting policies and the other explanatory notes) have been prepared in accordance with Sri Lanka Accounting Standards (SLAS) issued by the Institute of Chartered Accountants of Sri Lanka, and with the requirements of the Companies Act No. 7 of 2007 and the Finance Companies Act No.78 of 1988 and provide appropriate disclosures as required by the listing rules of the Colombo Stock Exchange.
3.2 Basis of measurement The consolidated financial statements have been prepared
on the historical cost convention except in respect of, land
Central Finance Company PLC - Annual Report 2010-11 57
and buildings, which are carried at revalued amounts and dealing securities, which are stated at market value, as explained in the note no. 28 and 14 to the consolidated financial statements.
3.3 Going concern In preparing the consolidated financial statements, the
Directors have made an assessment of the ability of the constituents of the group to continue as a going concern in the foreseeable future, and they do not foresee a need for liquidation or cessation of trading, taking into account all available information about the future.
3.4 Functional and presentation currency The consolidated financial statements are presented in
Sri Lankan Rupees, which is the Group’s functional and presentation currency. All financial information presented in Sri Lankan Rupees has been given to the nearest thousand, unless otherwise stated.
4 Significant accounting judgments, estimates and assumptions
The preparation of consolidated financial statements in conformity with SLAS requires management to make judgments, estimates and assumptions that influence the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Judgments and estimates are based on historical experience and other factors, including expectations that are believed to be reasonable under the circumstances and assumptions based on such knowledge and expectation of future events. Hence, actual experience and results may differ from these judgments and estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimates are revised if the revision affects only that period or in the period of the revision and future periods as well, if the revision affects both current and future periods. Information about significant areas of estimation and uncertainty that have the most significant effect on the amounts recognised in the consolidated financial statements are described in note no. 4.1 to 4.3.
Revisions to accounting estimates are dealt with in accordance with Sri Lanka Accounting Standard No.10 - (Revised 2005) Accounting Policies, Changes in Accounting Estimates and Errors.
4.1 Deferred tax assets Deferred tax assets are recognised for all deductible
temporary differences, unused tax losses and tax credits to the extent it is probable that taxable profits will be available against which these losses can be utilised. Significant
management judgments are required to determine the amount of deferred tax assets that can be recognised, based on the likely timing and level of future taxable profits together with future tax planning strategies.
4.2 Provision for losses on loans and advances In addition to the provisions made for possible loan losses
based on the parameters and directives for specific and general provisions on loans and advances as issued by the Central Bank of Sri Lanka, the Company reviews its loans and advances portfolio at each reporting date or more frequently, if events or changes in circumstances necessitate, to assess whether a further provision is required for the amount of potential losses not specifically included but the experience indicates are present in the portfolio.
Management judgment is required in the estimation of these amounts and estimations are based on assumptions concerning a number of factors though actual results may differ, resulting in future changes to the provisions.
4.3 Classification of dealing and investment securities In classifying securities as ‘dealing’ the Group has
determined that it meets the description set out in note 6.3 and 6.4.
In classifying securities as ‘investment’, the Group has determined that it has both, the positive intention and ability to hold the securities until their maturity date.
4.4 Impairment of assets The group assesses at each reporting date whether there
is an indication of objective evidence of impairment. If any such indication exists the Company makes an estimate of the asset’s recoverable amount. An asset’s recoverable amount is the higher of an asset’s or cash generating unit’s fair value less costs to sell and its value in use and is determined for an individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets or groups of assets. Where the carrying amount of an asset exceeds its recoverable amount, the asset is considered impaired and is reduced to its recoverable amount. Impairment losses of operations are recognised in the income statement in those expense categories consistent with the function of the impaired asset, except for property previously revalued, where the revaluation was taken to equity. In this case, the impairment is recognised against the revaluation reserve to the extent that it reverses a previous revaluation surplus. An assessment is made at each reporting date as to whether there is any indication that previously recognised impairment losses may no longer exist or may have decreased. Previously recognised impairment losses, other than in respect of goodwill, are reversed only if there has been an increase in the recoverable amount of such asset.
Central Finance Company PLC - Annual Report 2010-1158
Accounting Policies
Such increased carrying amount of an asset attributable to a reversal of an impairment loss is recognised only up to the carrying amount that would have been determined had no impairment loss been recognised for the asset in prior years.
5 Basis of consolidation5.1 Subsidiaries Subsidiaries included in the consolidated financial
statements are those companies in which the group directly or indirectly has an interest of over 50% of the voting rights and/or has the power to govern the financial and operating policies of the companies so as to obtain benefits from their activities. Central Industries PLC with equity control of 49.98% has been consolidated as a subsidiary company based on the power to govern the financial and operating policies of that company.
The financial statements of subsidiaries are included in the consolidated financial statements from the date on which the control commences until the date the control ceases. The profit or loss and net assets of a subsidiary attributable to equity interests that are not owned by the parent, directly or indirectly, through subsidiaries are disclosed separately as “Minority Interest”.
Intra-group transactions and balances and any unrealised gains and losses arising from such intra group transactions have been eliminated in preparing the consolidated financial statements. Losses applicable to the non-controlling interests in excess of the minority’s interest in the subsidiary’s equity are allocated against the interests of the group, except to the extent that the controlling interests has a binding obligation and is able to make an additional investment to cover the losses.
The consolidated financial statements are prepared to a common financial year ending 31st March. All subsidiaries in the group other than CF Insurance Brokers (Pvt) Ltd. have a common financial year ending 31st March. The financial year end for CF Insurance Brokers (Pvt) Ltd. is 31st December; and hence, adjustments were made based on unaudited financial statements for the effect of significant transactions or events for the purpose of consolidation.
A listing of the group’s subsidiaries is set out in Note 24 to the consolidated financial statements.
5.2 Associates Associates are those enterprises in which the group
has significant influence, but no control over financial and operating policies. Investments in associates are accounted for using the equity method and are initially recognised at cost except when the investment is classified as held for sale, in which case it is accounted for in accordance with SLAS 38 - Non-current Assets Held for
Sale and Discontinued Operations. The consolidated financial statements include the group’s share of gains and losses accounted under the equity method from the date that significant influence commences until the date that significant influence ceases. When the group’s share of losses exceeds its investment in an equity accounted investee, the carrying amount of that interest is derecognised and the recognition of further losses is discontinued except to the extent that the group has an obligation or has made payments on behalf of the investee.
The audited consolidated financial statements of Nations Trust Bank PLC and Capital Suisse Asia Ltd are drawn up to 31st December; and hence, adjustments were made based on unaudited financial statements drawn up to 31st March for the purpose of consolidation.
5.3 Other long- term investments Where the group’s interest in the equity capital is less
than 20%, and/or in companies where the group does not exercise significant influence and/or control over their financial and operating policies, investments are valued at cost, with a provision being made for any decline that is other than temporary, such reductions being determined and made for each investment individually.
6 Assets and bases of their valuation6.1 Cash and cash equivalents Cash and cash equivalents comprise cash, bank balances
and Treasury Bills and deposits placed with banks, maturing within three months. Bank overdrafts that are repayable on demand are also included as a component of cash and cash equivalents for the purpose of the cash flow statement.
6.2 Investment in Government Securities Investments in Treasury Bills, Treasury Bonds and
Repurchase Agreements are stated at cost.
6.3 Dealing securities These are marketable securities acquired and held with
the intention of re-sale over a short period of time. Such securities are recorded at market value on an aggregate portfolio basis as at the balance sheet date. Changes in market value are dealt with through the income statement.
6.4 Investment securities These are acquired and held for yield or capital appreciation.
Investment securities are carried in the balance sheet at cost less any provision made for diminution in value. Where such carrying amounts are impaired, to recognise a decline other than temporary in the value of such investments, such impairments have been recognised for each investment individually. Changes in market values of these securities are not taken into account, unless the decline is other than temporary.
Central Finance Company PLC - Annual Report 2010-11 59
6.5 Rentals receivable on leased assets Assets leased to customers, which transfer substantially
all the risks and rewards incidental to the ownership other than the legal title are accounted for as finance leases in accordance with Sri Lanka Accounting Standard No.19 (Revised 2005) - Leases, and are reflected in the balance sheets after eliminating unearned interest income, and provision for doubtful debts.
6.6 Hire purchase assets Assets hired to customers under hire purchase agreements,
which transfer all the risks and rewards incidental to ownership as well as the legal title at the end of such contractual period, are classified as hire purchase receivables. Such assets are accounted for in a similar manner as those of finance leases.
6.7 Loans and advances and trade and other receivables Loans and advances and trade and other receivables are
stated in the balance sheet net of provision for bad and doubtful debts and interest in suspense.
6.8 Provision for loan losses Provision for possible loan losses is made on the basis
of a continuous review of all advances to customers in accordance with the Finance Companies Direction No. 3 of 2006 (Provision for bad and doubtful debts) issued by the Central Bank of Sri Lanka. Accordingly, specific provisions have been made as follows:
All advances in arrears for a period of 6 to 12 months 50%
All advances in arrears for over 12 months 100%
In addition, wherever it is considered prudent, further provisions are made on specifically identified loans and advances.
6.9 Inventories Inventories are valued at the lower of cost and net realisable
value. The cost of raw materials is determined at purchase price including all expenses incurred in sourcing. The cost of work-in-progress is the value of raw material transferred to production. The cost of finished goods includes raw material cost and all direct and indirect expenses incurred in production.
Inventories are regularly assessed and impairement in value where identified is effected.
6.10 Investments in real estate, vehicles, spare parts and other stocks
Investments in real estate, vehicles, spare parts and other stocks are valued at cost and net realisable value whichever is lower. Net realisable value is the estimated selling price
less estimated cost of completion and the estimated cost necessary to make the sale.
6.11 Investments in subsidiaries and associates Investments in subsidiaries and associates are stated at cost
less accumulated impairment losses, if any, in the financial statements of the Company.
In the consolidated financial statements, investments in associate companies are accounted under equity method reduced by accumulated impairment losses, if any.
Provision for impairment is made, where the decline in value is other than temporary, and such impairment is made for investments individually.
6.12 Intangible assets An intangible asset is recognised if it is probable that future
economic benefits that are attributable to the asset will flow to the enterprise and the cost of the asset can be measured reliably in accordance with Sri Lanka Accounting Standard No. 37 - Intangible Assets. Accordingly, these assets are stated in the balance sheet at cost less accumulated amortisation and impairment losses if any. Subsequent expenditure on acquisition and improvement of intangible assets is capitalised only when it increases the standard of performance of these assets, and the future economic benefits embodied in these assets will flow to the Company. Intangible assets with finite lives are amortised over their useful lives, and are assessed for impairment whenever there is an indication that the intangible asset may be impaired. The amortisation period and the amortisation method for an intangible asset with a finite useful life are reviewed at the end of the financial year. Computer software is stated at cost less accumulated amortisation and any accumulated impairment loss. Amortisation is charged over a period of five years on a straight-line basis.
6.13 Property, plant and equipment6.13.1 Cost/ Valuation Property, plant and equipment are stated at cost or revalued
amounts less accumulated depreciation and accumulated impairment losses, if any. Subsequent expenditure incurred for the purpose of acquiring, extending or improving assets of a permanent nature by means of which to carry on the business or to increase the earning capacity of the business is treated as capital expenditure. The carrying values of property, plant and equipment are reviewed for impairment when events or changes in circumstances indicate that the carrying value may not be recoverable. All items of property, plant and equipment are initially recorded at cost. Where items of property, plant and equipment are subsequently revalued, the entire class of asset is revalued. When an asset is revalued, any increase in the carrying value is credited to the revaluation reserve, except to the extent
Central Finance Company PLC - Annual Report 2010-1160
Accounting Policies
that it reverses a revaluation decrease of the same asset previously recognised in the income statement, in which case the increase is recognised in the income statement. Any revaluation deficit that offsets a previous surplus on the same asset is directly set off against the surplus in the revaluation reserve and any excess recognised as an expense. The difference in depreciation based on the revalued carrying amount and cost is transferred from revaluation reserve to retained earnings. The carrying amount of an item of property, plant and equipment is derecognised on disposal or when no further economic benefits are expected from its use or disposal. Where group companies occupy a significant portion of the investment property of a subsidiary, such investment properties are treated as property, plant and equipment in the consolidated financial statements and accounted for as per SLAS 18 (Revised 2005) Property, Plant and Equipment.
6.13.2 Operating lease assets Operating lease assets are classified under property, plant
and equipment at cost less accumulated depreciation and impairment losses, if any. The cost of the asset net of residual value is depreciated over the estimated useful life. Residual value is the estimated net amount that the Company would currently obtain from disposal of the asset at the end of its estimated useful life
6.13.3 Depreciation Provision for depreciation is calculated using straight-line
method on the cost or other amount substituted for cost of all property, plant and equipment other than freehold land in order to allocate depreciable amounts over the estimated useful life of such assets. The estimated useful lives of assets are as follows:
Years
Freehold buildings 40
Furniture & office equipment 10
Motor vehicles and lifts 05
Plant, machinery & other equipment 08
Air conditioners & computer servers 08
Generators 15
Computers 05
Other assets 10
Depreciation of an asset begins when it is available for use and ceases at the earlier of the date that the asset is classified as held for sale and the date that the asset is derecognised.
6.14 Liabilities and provisions6.14.1 Income tax The liability for taxation has been computed on the basis
of the profit for the year as adjusted for taxation purposes in accordance with the provisions of the Inland Revenue Act No.10 of 2006 and amendments thereto as well as relevant Board of Investment (BOI) regulations in respect of subsidiary Hedges Court Residencies (Pvt) Limited.
6.14.2 Deferred tax Deferred tax is recognised using the liability method,
providing for temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred tax is measured at the tax rates that are expected to apply for the temporary differences when they reverse, based on the tax laws that have been enacted or substantively enacted as at the reporting date. A deferred tax asset is recognised for all deductible temporary differences, carry forward unused tax credits and unused tax losses, only to the extent that it is probable that future taxable profits will be available against which the asset can be utilised. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be realised. Deferred tax assets and deferred tax liabilities are offset, if a legally enforceable right exists to set off current tax assets against current tax liabilities and when the deferred taxes relate to the same taxable entity and the same taxation authority. Deferred tax arising on items recognised in equity is dealt with through the equity statement.
6.15 Trade and other payables and amounts due to subsidiaries
Trade and other payables and amounts due to subsidiaries are stated at cost.
6.16 Employee Benefits6.16.1 Defined benefit plans A defined benefit plan is a post employment benefit plan
other than a defined contribution plan.
The estimation of this liability, determined by an independent, qualified actuary necessarily involves long-term assumptions, which have been disclosed in Note 34. The defined benefit obligation is calculated annually using the projected unit credit method. The services of a qualified actuary is obtained once in every 3 years to determine the valuation of the defined benefit obligation for the Company as well as those subsidiary companies within the group that adopted the actuarial valuation method in computing the provision required in accordance with Sri Lanka Accounting
Central Finance Company PLC - Annual Report 2010-11 61
Standard No.16 (Revised 2006) - Employee Benefits. The revised standard also provides a formulaic method, which approximates the actuarial valuation, which has been adopted by the other companies within the Group that have not adopted the actuarial valuation method. The projected unit credit method projects the current data using the actuarial assumptions and calculates projected benefits at the participants’ assumed retirement date. The key assumptions used in determining the defined benefit obligations are given in Note 34.
The defined benefit obligation recognised in the balance sheet represents the present value of the defined benefit obligation as adjusted for unrecognised actuarial gains and losses and unrecognised past service cost, and as reduced by the fair value of plan assets. Any asset resulting from this calculation is limited to unrecognised actuarial losses and past service cost, plus the present value of available refunds and reductions in future contributions to the plan.
Actuarial gains and losses that exceed 10% of the greater of the present value of the Group’s defined benefit obligation and the fair value of plan assets as at the end of the prior year are amortised over the expected average remaining working lives of the participating employees.
Past service cost is recognised immediately to the extent that the benefits are already vested, and otherwise is amortised on a straight-line basis over the average period until the benefits become vested.
The gratuity liability of the parent Company is externally funded by a gratuity fund established in 1987, with the investments of the fund being mainly in Government securities. Gratuity liabilities of the other companies in the Group are not funded externally.
Provision has been made for the defined benefit plan from the first year of service for all employees in conformity with SLAS 16 (Revised 2006) - Employee Benefits.
This liability of the parent company is computed on the following basis:
Length of service (years) No of months’ salary for each completed year
Up to 15 1/2
15 up to 30 1
30 up to 35 1 1/2
35 up to 40 2
Over 40 2 1/2
However, under the Payment of Gratuity Act No.12 of 1983, the liability to an employee arises only on completion of five years of continued service. Liabilities for the other companies in the Group are computed on the basis of half a month salary for each year of completed service.
6.16.2 Defined contribution plans A defined contribution plan is a post employment benefit
plan under which an entity pays fixed contributions into a separate entity and will have no legal or constructive obligation to pay further amounts. Obligations for contributions to the Employees’ Provident Fund and Employees’ Trust Fund covering all employees are recognised as an expense in the income statement as incurred.
6.17 Provisions In accordance with Sri Lanka Accounting Standard No.36
- Provisions, Contingent Liabilities and Contingent Assets, recognition of a provision in the balance sheets is made when the Company has a present legal or constructive obligation as a result of past events and it is probable that an outflow of economic benefits will be required to settle the obligation.
6.18 Capital commitments and contingencies Capital commitments and contingent liabilities as at the date
of the balance sheet are disclosed in the respective notes to the consolidated financial statements. Contingent assets are disclosed, where an inflow of economic benefit is probable.
6.19 Foreign currency transactions Transactions in foreign currencies are translated to
Sri Lankan Rupees at the exchange rates that prevailed at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies as at the balance sheet date are re-translated to Sri Lankan Rupees using the closing rates that prevailed at the balance sheet date. Foreign exchange differences arising on re-translation are recognised in the income statement.
7 Income statement7.1 Revenue recognition7.1.1 Lease In accordance with Sri Lanka Accounting Standard No. 19
(Revised 2005) on Leases, recognition of finance income on leasing is accounted based on a pattern reflecting a constant periodic rate of return on capital outstanding. The excess of aggregate lease rentals receivable over the cost of the leased asset constitutes the total unearned interest income at the commencement of the contract. The unearned interest income is taken into revenue on an accrual basis over the term of the lease commencing from the month in which the first rental is due, in proportion to
Central Finance Company PLC - Annual Report 2010-1162
Accounting Policies
the reducing capital outstanding balance. Non-performing leases are those leases where the rentals are overdue for 6 months or more. Interest income accrual is suspended from the date on which a lease is classified as non-performing and credited to “Interest in suspense”. Thereafter such income is recognised on a cash basis until the lease is reclassified as performing.
7.1.2 Hire purchase Recognition of interest income from hire purchase facilities
is similar to that of leases, which recognises interest income based on a pattern reflecting a constant periodic rate of return on the capital outstanding.
Interest income is taken into revenue on an accrual basis over the term of the contract commencing from the month in which the first rental is due, in proportion to the reducing capital outstanding balance. Non-performing hire purchase facilities are those in which the rentals are overdue for 6 months or more. Interest income accrual is suspended from the date on which the facility is classified as non-performing and credited to “Interest in suspense”. Thereafter, such income is recognised on a cash basis until the hire purchase facility is reclassified as performing.
7.1.3 Interest income on loans and advances Interest receivable on loans and advances is recognised
on accrual basis. When rentals are overdue for 6 months or more such loans are categorised as Non-performing loans and advances and interest income accrual is suspended from the date on which the facility is classified as non-performing and credited to “Interest in suspense”. Thereafter, such income is recognised on a cash basis until the loan is reclassified as performing
7.1.4 Overdue interest Overdue interest on lease, hire purchase, loans and other
advances is recognised on a cash basis.
7.1.5 Vehicle hire income Minimum payments receivable under a hire contract consist
of the hire charges receivable over the term of the contract. Rental income from all performing vehicle hire contracts are accounted for on an accrual basis.
7.1.6 Interest income on investments in Government securities
Interest receivable is taken to the income statement on an accrual basis, based on a pattern reflecting a constant periodic rate of return. Interest on Government securities is grossed up with the notional tax credit available under the Inland Revenue Act No. 10 of 2006 and amendments thereto as disclosed in note no. 2.
7.1.7 Interest income on deposits with banks Interest receivable is taken to the income statement on an
accrual basis.
7.1.8 Dividend income Dividend income is recognised in the income statement
on the date, that the group’s right to receive payment is established.
7.1.9 Income on housing projects and real estate income Income on housing projects and real estate income is
recognised on an accrual basis.
7.1.10 Rental income on rent-purchase facilities for real estate
Rental income on rent-purchase facilities provided on sale of real estate is recognised on an accrual basis.
7.1.11 Commission income Commission income relating to specific transactions or
events is recognised in the income statement in the period in which they are earned.
7.1.12 Profit or loss on sale of securities Profit or loss arising from the sale of marketable securities is
accounted for in the income statement on the date of the transaction.
7.1.13 Profit/loss from sale of property, plant and equipment
Profit/loss from sale of property, plant and equipment is recognised in the period in which the sale occurs.
7.1.14 Expenditure recognition Expenses are recognised in the income statement on the
basis of a direct association between the cost incurred and the earning of specific items of income. All expenses incurred in the running of the business and in maintaining property, plant and equipment in a state of efficiency are charged to the income statement. In terms of the provisions of Sri Lanka Accounting Standard No.33 - Revenue Recognition and Disclosures in the Financial Statements of Finance Companies, interest and other expenses payable are recognised on an accrual basis.
7.1.15 Borrowing costs Borrowing costs are recognised as an expense in the period
in which they are incurred, except to the extent that they are directly attributable to the acquisition, construction or production of a qualifying asset, in which case they are capitalised as part of the cost of that asset.
7.1.16 Recovery of bad debts Bad debts recovered are recognised as and when the debts
are recovered.
Central Finance Company PLC - Annual Report 2010-11 63
8 Off balance sheet transactions The Company enters into off balance sheet transactions
such as interest rate SWAPs. Net interest receipt or payment is accrued in the Income Statement.
9 Earnings per share The group presents basic and diluted earnings per share
(EPS) for its ordinary shares. Basic EPS is calculated by dividing the profit or loss attributable to ordinary shareholders of the Company by the weighted average number of ordinary shares outstanding during the period. Diluted EPS is determined by adjusting the profit or loss attributable to ordinary shareholders and the weighted average number of ordinary shares outstanding for the effects of all dilutive potential ordinary shares.
10 Cash flow statement The cash flow statement has been prepared using the direct
method in accordance with Sri Lanka Accounting Standard No. 9 - Cash Flow Statements.
11 Segmental reporting A segment is a distinguishable component of the group
that is engaged in providing an individual product or service (Business segment) or in providing services within a particular economic environment (Geographical segment) which is subject to risks and rewards that are different from those of other segments. In accordance with the Sri Lanka Accounting Standard No 28 Segmental Reporting, segmental information is presented in respect of the group. The business segments comprise of leasing, hire purchase, vehicle hire, power generation, manufacturing, medical services and insurance broking. Segment results, assets and liabilities include items directly attributable to a segment as well as those that can be allocated on a reasonable basis.
12 Events after the balance sheet date All material events after the balance sheet date have
been considered and where appropriate adjustments to/or disclosures in the respective notes to the consolidated financial statements have been made.
13 New Accounting Standards issued but not yet effective as at balance sheet date
The following accounting standards have been issued by the Institute of Chartered Accountants of Sri Lanka to be effective from the financial periods beginning on or after 01st January 2012.
Sri Lanka Accounting Standard - LKAS 32 - Financial Instruments: Presentation
Sri Lanka Accounting Standard - LKAS 39 - Financial Instruments: Recognition and Measurement
Sri Lanka Accounting Standard - SLFRS 2 – Share Based Payments
Sri Lanka Accounting Standard - SLFRS 1- First time adoption of Sri Lanka Accounting Standards (SLFRSs)
Sri Lanka Accounting Standard - SLFRS 4 – Insurance Contracts
Sri Lanka Accounting Standard - SLFRS 6 - Exploration of Mineral Resources
Sri Lanka Accounting Standard - SLFRS 7 - Financial Instruments: Disclosures
Sri Lanka Accounting Standard - SLFRS 8 - Operating Segments
Sri Lanka Accounting Standard - LKAS 29 - Financial Reporting in Hyperinflationary Economics
Following the convergence of Sri Lanka Accounting Standards with the International Financial Reporting Standards, all existing Sri Lanka Accounting Standards will be prefixed as SLFRS (corresponding to IFRS) or LKAS (corresponding to IAS). The Council of the Institute of Chartered Accountants of Sri Lanka has mandated all specified business enterprises to adopt these new standards for the financial periods beginning on or after 01st January 2012.
Disclosure requirements under SLAS 10.30 and 10.31 have been exempted by the ICASL and therefore all differences and impacts arising from the new Standards are not presented in these consolidated Financial Statements.
Also the impact of the above requirements has not been quantified as exempted by the ICASL.
Central Finance Company PLC - Annual Report 2010-1164
Notes to the Financial Statements Group Company 2010/11 2009/10 2010/11 2009/10 Rs.’000 Rs.’000 Rs.’000 Rs.’000
1 Income Interest income (Note 2) 6,269,481 5,723,338 6,320,455 5,765,261 Other operating income (Note 4) 1,413,023 1,470,952 796,194 876,808 Other income (Note 5) 411,867 342,226 530,552 415,414 8,094,371 7,536,516 7,647,201 7,057,483
2 Interest income Leases 2,662,308 2,473,088 2,662,308 2,473,088 Hire purchases 2,476,292 2,068,589 2,476,292 2,068,589 Government securities and deposits with banks 234,017 375,581 234,017 375,581 Loans, advances and others 896,864 806,080 947,838 848,003 6,269,481 5,723,338 6,320,455 5,765,261
Notional credit for withholding tax on Government Securities on secondary market transactions
The Inland Revenue Act No 10 of 2006, provides that a company which derives interest income from secondary market transactions in Government securities would be entitled to a notional tax credit (being one ninth of the net interest income), provided such interest income forms part of the statutory income of the company for that year of assessment.
Accordingly, the net interest income earned from secondary market transactions in Government securities for the year has been grossed up in the financial statements. The resulting notional tax credit amounts to Rs.24.01 Million (2009/10 - Rs.18.77 Million) for the Company and the Group.
Group Company 2010/11 2009/10 2010/11 2009/10 Rs.’000 Rs.’000 Rs.’000 Rs.’000
3 Interest expenses Deposits 2,072,875 2,561,737 2,090,737 2,587,912 Bank loans and overdrafts 183,119 331,043 183,119 331,043 Non- bank loans 80,606 142,679 80,606 142,679 Interest on debentures 18,663 23,286 18,663 23,286 2,355,263 3,058,745 2,373,125 3,084,920
4 Other operating income Vehicle hiring income 698,925 790,981 699,386 791,042 Manufacturing and trading income 270,965 291,011 - - Insurance broking 130,833 129,605 - - Medical services 49,240 42,758 - - Power generation 166,252 130,831 - - Budget hire income 28,816 22,158 28,816 22,158 Income from temporary hiring vehicles 67,992 63,608 67,992 63,608 1,413,023 1,470,952 796,194 876,808
Central Finance Company PLC - Annual Report 2010-11 65
Group Company 2010/11 2009/10 2010/11 2009/10 Rs.’000 Rs.’000 Rs.’000 Rs.’000
5 Other income Commissions 3,373 3,873 3,373 3,873 Profit on sale of shares 38,014 10,285 56,707 13,230 Profit on sale of vehicles 39,199 47,516 32,559 58,189 Recovery of bad debts 71,446 69,837 71,234 70,700 Profit on sale of property, plant and equipment 131,414 50,095 124,802 47,654 Dividend income from quoted investment securities 14,140 52 14,135 48 Dividend income from unquoted investment securities 857 20,466 857 12,384 Dividend income from subsidiaries - - 49,860 34,799 Dividend income from associates - - 62,724 45,875 Profit on real estate operations 29,397 38,950 10,878 14,912 Appreciation in value of dealing securities and reversal
of provision for impairment of long term investments 8,218 11,440 25,001 21,886 Profit on repair of vehicles 17,980 1,512 17,980 1,512 Income from vehicle maintenance contracts 18,699 18,308 18,699 18,308 Others 39,130 69,892 41,743 72,044 411,867 342,226 530,552 415,414
6 Operating expenses Operating expenses include the following: Directors’ emoluments 109,813 88,205 91,425 74,685 Legal expenses 7,468 6,316 6,969 6,254 Depreciation 493,275 499,564 446,882 456,063 Amortisation of intangible assets 20,583 14,341 20,403 14,209 Auditor’s remuneration - Audit 2,996 2,742 1,448 1,367 - Non audit 511 611 163 42 Donations 7,366 19,851 7,312 19,075 Employees’ Provident Fund contributions 77,030 63,925 62,565 54,768 Employees’ Trust Fund contributions 18,119 15,037 14,557 12,782
7 Employee retirement benefit expenses Current service cost 33,212 24,191 29,598 21,176 Interest cost 67,105 56,293 60,588 50,173 Gratuity charge for the year 1,613 752 - - Expected return on assets (10,796) (14,603) (10,796) (14,603) 91,134 66,633 79,390 56,746
All relevant companies in the Group have either obtained actuarial valuations or used the formula method to determine the present value of retirement benefit obligations and current sevice cost as required by SLAS-16-Retirement Benefits (Revised-2006).
Central Finance Company PLC - Annual Report 2010-1166
Notes to the Financial Statements
8 Loan losses and provisions Group Company 2010/11 2009/10 2010/11 2009/10 Rs.’000 Rs.’000 Rs.’000 Rs.’000
Increase/(decrease) in provision over the previous year (6,089) 157,851 (6,089) 157,851 Transfer (to)/from revenue reserves 78,750 (14,446) 78,750 (14,446) Provision charged to income statement 72,661 143,405 72,661 143,405 Bad debts written off 115,133 26,483 114,532 24,235 Loss on sale of repossessed vehicles 28,341 41,418 28,341 41,418 Loss/(reversal of loss) on revaluation of repossessed
vehicles and miscellaneous stocks (29,313) 87,807 (29,313) 87,807 Provision for fall in value for repossessed miscellaneous stocks - 366 - 366 186,822 299,479 186,221 297,231
9 Share of profit of associates Tea Smallholder Factories PLC 49,444 66,032 Nations Trust Bank PLC 433,248 297,156 Capital Suisse Asia Ltd 25,089 20,680 507,781 383,868
10 Group profits/(losses) before income tax Central Finance Company PLC 2,607,869 1,524,995 Central Industries PLC 121,814 141,236 Central Developments Ltd. 18,341 5,758 Dehigama Hotels Company Ltd. 19,330 17,824 Expanded Plastic Products Ltd. 7,033 1,273 Central Mineral Industries (Pvt) Ltd. 631 2,234 Central Transport & Travels Ltd. 9,786 7,501 Central Construction & Development (Pvt) Ltd. (43) (28) CF Growth Fund Ltd. 27,571 34,291 Kandy Private Hospitals Ltd. 17,258 16,554 CF Insurance Brokers (Pvt) Ltd. 43,848 25,715 Central Homes (Pvt) Ltd. 554 1,840 Mark Marine Services (Pvt) Ltd. 144,505 111,468 Hedges Court Residencies (Pvt) Ltd. (47,521) (118,522) 2,970,976 1,772,139 Inter-group adjustments (237,164) (130,474) Share of profit of associates 507,781 383,868 3,241,593 2,025,534
11 Income tax expense The provision for the year is made up as follows: Current tax charge 887,874 745,764 755,754 627,860 Under provision of current tax relating to previous years 363,776 73,469 363,746 72,937 Over provision of current tax relating to previous years (489) - - - Social Responsibility Levy 1,979 1,765 - - Deemed dividend tax 59 1 - - 10% Withholding tax on inter-company dividends 17,398 11,262 - - Deferred tax reversal (Note 26.1 & 26.2) (146,727) (117,853) (121,767) (116,403) Current and deferred tax share of associates 206,285 186,291 - - 1,330,155 900,699 997,733 584,394
11.1 Income tax on profit of the Company has been computed at the rate of 35% (2009/10 - 35%) on the taxable income. The Group companies other than Hedges Court Residencies (Pvt) Ltd. has also computed its income tax at 35% for the financial year 2010/11 (2009/10 - 35%). Hedges Court Residencies (Pvt) Ltd. is entitled to a five year tax holiday ending 31st March 2013 on operating income under BOI regulations.(Other income of Hedges Court Residencies (Pvt) Ltd. was liable at 35% for income taxes during 2010/11 and 2009/10).
Central Finance Company PLC - Annual Report 2010-11 67
11.2 As stated in the Annual Reports for the years 2007/08 and 2008/09, the Company filed amended tax returns from year of assessment 2003/04 onwards on account of a change in basis of treatment of capital allowances on leased assets and took credit for reduction in tax charge arising out of same. Tax liabilities up to and including year of assessment 2008/09 have now been agreed upon and settlements reached with the Department of Inland Revenue. Arising out of such settlements a sum of Rs.363.7 Million, being shortfall in amounts charged for prior years, is charged to income in the current financial year.
11.3 A reconciliation between tax expense and the product of accounting profit multiplied by the statutory tax rate is as follows: Group Company 2010/11 2009/10 2010/11 2009/10 Rs.’000 Rs.’000 Rs.’000 Rs.’000
Profit before tax (net of losses) 3,241,593 2,025,534 2,607,869 1,524,995 Losses before tax 47,564 118,550 - - Share of results of associates (507,781) (383,868) - - Other consolidation adjustments 237,164 130,474 - - Accounting profit / (loss) chargeable for income tax 3,018,540 1,890,690 2,607,869 1,524,995 Tax effect on chargeable profits (35%) 1,056,489 661,742 912,754 533,748 Tax effect on allowable credits (1,913,093) (1,715,000) (1,882,101) (1,702,884) Tax effect on exempt profits (138,918) (54,345) (118,223) (32,587) Tax effect on non-deductible expenses 1,875,580 1,857,843 1,843,324 1,829,583 Tax effect on allowable items (1,391) - - - Tax effect on adjustments 9,616 (57) - - Tax effect on losses claimed (409) (4,419) - - 887,874 745,764 755,754 627,860 Social Responsibility Levy 1,979 1,765 - - Under provision for previous years 363,776 73,469 363,746 72,937 Over provision for previous years (489) - - - Deemed dividend tax 59 1 - - Deferred tax (146,727) (117,853) (121,767) (116,403) 10% WHT on inter-company dividends 17,398 11,262 - - Current and deferred tax share of associates 206,285 186,291 - - Charged to income statement 1,330,155 900,699 997,733 584,394 Effective tax rate (Excluding deferred tax) 29.41% 39.44% 28.98% 41.17%
12 Earnings per share The calculation of basic /diluted earnings per share is based on the net profit for the year attributable to ordinary shareholders and
the weighted average number of ordinary shares outstanding during the year.
Group 2010/11 2009/10
Profit attributable to equity holders of the parent 1,827,034 1,046,112 Number of shares used as denominator (‘000) 20,300 20,300 Earnings per share (Rs.) 90.00 51.53
13 Dividends Paid: First interim Rs.2.50 (2009/10: Rs.1.25) 50,750 25,375 Second interim Rs.3.00 (2009/10: Rs.1.25) 60,900 25,375 Proposed: Final Rs.5.00 (2009/10: Rs. 3.50) 101,500 71,050 213,150 121,800 Dividend per share (Rs.) - Paid and proposed 10.50 6.00
Central Finance Company PLC - Annual Report 2010-1168
Notes to the Financial Statements
14
Dea
ling
secu
riti
es
G
roup
Com
pany
No.
of
Cost
M
arke
t N
o. o
f Co
st
Mar
ket
No.
of
Cost
M
arke
t N
o. o
f Co
st
Mar
ket
Shar
es
Va
lue
Shar
es
Va
lue
Shar
es
Va
lue
Shar
es
Va
lue
31
.03.
2011
31
.03.
2011
31.0
3.20
10
31.0
3.20
10
31
.03.
2011
31
.03.
2011
31.0
3.20
10
31.0
3.20
10
Rs.’0
00
Rs.’0
00
Rs
.’000
Rs
.’000
Rs.’0
00
Rs.’0
00
Rs
.’000
Rs
.’000
B
anks
, Fin
ance
& In
sura
nce
N
atio
nal D
evel
opm
ent B
ank
PLC
100
,000
2
6,00
0
32,
000
-
-
-
100
,000
2
6,00
0
32,
000
-
-
-
Man
ufac
turi
ng
Pira
mal
Gla
ss C
eylo
n PL
C (R
e.1/
-)
-
-
- 1
,000
,000
3,
593
2,20
0 -
-
-
1,0
00,0
00
3,59
3 2,
200
26
,000
3
2,00
0
3,
593
2,20
0
26,
000
3
2,00
0
3,
593
2,20
0
(Dim
inut
ion)
/app
reci
atio
n in
val
ue o
f dea
ling
secu
ritie
s
Ba
lanc
e at
the
begi
nnin
g of
the
year
(1,
393)
(
3,88
8)
(1,
393)
(
3,88
8)
Ap
prec
iatio
n fo
r the
yea
r
7,3
93
2,4
95
7,3
93
2,4
95
Ba
lanc
e at
the
end
of th
e ye
ar
6
,000
(
1,39
3)
6,0
00
(1,
393)
Net
car
ryin
g am
ount
32,
000
2
,200
3
2,00
0
2,2
00
15
Inve
ntor
ies
G
roup
3
1.03
.201
1 3
1.03
.201
0
R
s.’0
00
Rs
.’000
Ra
w m
ater
ials
1
22,4
66
7
5,86
4
Wor
k-in
-pro
gres
s
1
0,40
4
1
8,85
3
Fini
shed
goo
ds
83,
384
70,
411
M
achi
nery
spa
res
17,
270
15,
606
O
ther
inve
ntor
ies
3,5
06
3
,738
Goo
ds-in
-tran
sit
14,
275
29,
093
251
,305
213
,565
Sp
ecifi
c pr
ovis
ion
for i
nven
tory
obs
oles
cenc
e
(
11,1
52)
(
11,4
45)
N
et c
arry
ing
amou
nt
240
,153
202
,120
Th
ere
wer
e no
writ
e do
wn
of in
vent
orie
s re
cogn
ised
as
an e
xpen
se d
urin
g th
e cu
rrent
and
pre
cedi
ng fi
nanc
ial y
ears
.
Inve
ntor
ies
with
a c
arry
ing
valu
e of
Rs.
0.34
Mill
ion
(200
9/10
- Rs
.0.9
2Mill
ion)
hav
e be
en p
ledg
ed a
s se
curit
y fo
r ove
rdra
ft fa
cilit
ies.
In
vent
orie
s ca
rried
at n
et re
alis
able
val
ue a
s at
31s
t Mar
ch 2
011
amou
nted
to R
s.2.
96M
illio
n (a
s at
31.
03.2
010
- Rs.
3.04
Mill
ion.
).
Central Finance Company PLC - Annual Report 2010-11 6916
In
vest
men
t se
curi
ties
G
roup
Com
pany
31
.03.
2011
31
.03.
2010
31
.03.
2011
31
.03.
2010
Rs.’0
00
Rs
.’000
Rs.’0
00
Rs
.’000
Q
uote
d se
curit
ies
16(
a)
161,
613
10
3,28
3
161
,583
100
,001
Unq
uote
d se
curit
ies
16(b
)
18
,718
17,8
93
1
2,38
8
1
1,56
3
Net
car
ryin
g va
lue
of in
vest
men
t sec
uriti
es
18
0,33
1
121,
176
1
73,9
71
1
11,5
64
(a)
Quo
ted
secu
riti
es
G
roup
Com
pany
No.
of
Cost
M
arke
t N
o. o
f Co
st
Mar
ket
No.
of
Cost
M
arke
t N
o. o
f Co
st
Mar
ket
Shar
es
Va
lue
Shar
es
Va
lue
Shar
es
Va
lue
Shar
es
Va
lue
31
.03.
2011
31
.03.
2011
31.0
3.20
10
31.0
3.20
10
31
.03.
2011
31
.03.
2011
31.0
3.20
10
31.0
3.20
10
Rs.’0
00
Rs.’0
00
Rs
.’000
Rs
.’000
Rs.’0
00
Rs.’0
00
Rs
.’000
Rs
.’000
B
anks
, Fin
ance
& In
sura
nce
Se
ylan
Ban
k PL
C
-
-
-
5 -
-
-
-
-
-
-
-
N
atio
nal D
evel
opm
ent B
ank
PLC
-
-
-
75
13
16
-
-
-
-
-
-
-
-
13
16
-
-
-
-
Cons
truc
tion
& E
ngin
eeri
ng
Sam
uel S
ons
& C
o. P
LC
143
,697
1
,198
-
14
3,69
7 1,
198
-
-
-
-
-
-
-
Div
ersi
fied
Hol
ding
s
Aitk
en S
penc
e &
Co.
PLC
-
-
-
66
14
91
-
-
-
-
-
Hay
leys
PLC
-
-
-
8
1 2
-
-
-
8
1
2
H
emas
Hol
ding
s PL
C
750
3
0
34
75
0 30
90
-
-
-
-
-
John
Kee
lls H
oldi
ngs
PLC
-
-
-
93
2
17
-
-
-
-
-
-
30
3
4
47
20
0
-
-
1
2
Man
ufac
turi
ng
ACL
Cab
les
PLC
-
-
-
83
5
6
-
-
-
-
-
-
Cey
lon
Gra
in E
leva
tors
PLC
-
-
-
71
,900
1,
647
1,2
22
-
-
-
-
-
-
Roya
l Cer
amic
s La
nka
PLC
(Re.
1/-)
-
-
-
75
0 2
85
-
-
-
-
-
-
-
-
1,65
4 1
,313
-
-
-
-
Po
wer
& E
nerg
y
Lank
a IO
C P
LC
-
-
-
108,
800
5,96
9 1,
986
-
-
-
-
-
-
Stor
es a
nd S
uppl
ies
E
B C
reas
y &
Co.
PLC
-
-
-
87
5
24
-
-
-
-
-
-
Clos
ed E
nd F
unds
N
amal
Acu
ity V
alue
Fun
d 2
,744
,900
1
61,5
83
233
,865
2,0
00,0
00
100
,000
1
06,0
00 2
,744
,900
1
61,5
83
233
,865
2,0
00,0
00
100
,000
1
06,0
00
162
,811
2
33,8
99
1
08,8
86
109
,539
161
,583
2
33,8
65
1
00,0
01
106
,002
(Dim
inut
ion)
/app
recia
tion
in v
alue
of q
uote
d in
vest
men
t sec
uriti
es
Bala
nce
at th
e be
ginn
ing
of th
e ye
ar
(
5,60
3)
(7,
581)
-
(
6)
Ap
prec
iatio
n fo
r the
yea
r
4,4
05
1,9
78
-
6
Ba
lanc
e at
the
end
of th
e ye
ar
(
1,19
8)
(5,
603)
-
-
Net
car
ryin
g am
ount
of q
uote
d
inve
stm
ent s
ecur
ities
161
,613
1
03,2
83
161
,583
1
00,0
01
Central Finance Company PLC - Annual Report 2010-1170
Notes to the Financial Statements
(b)
Unq
uote
d se
curi
ties
Gro
up
Co
mpa
ny
N
o. o
f Co
st
Dire
ctor
s’ N
o. o
f Co
st
Dire
ctor
s’ N
o. o
f Co
st
Dire
ctor
s’ N
o. o
f Co
st
Dire
ctor
s’
Sh
ares
Valu
atio
n Sh
ares
Valu
atio
n Sh
ares
Valu
atio
n Sh
ares
Valu
atio
n
31.0
3.20
11
31.0
3.20
11
31
.03.
2010
31
.03.
2010
31.0
3.20
11
31.0
3.20
11
31
.03.
2010
31
.03.
2010
Rs
.’000
Rs
.’000
Rs.’0
00
Rs.’0
00
Rs
.’000
Rs
.’000
Rs.’0
00
Rs.’0
00
Cre
dit I
nfor
mat
ion
Bure
au
o
f Sri
Lank
a. (
Rs.1
00/-
) 4
,727
4
73
15,
644
4,
727
473
1
1,06
1
4,7
27
473
1
5,64
4
4,7
27
473
1
1,06
1
Fitc
h Ra
tings
Lan
ka L
td.
62,
500
6
25
870
62
,500
6
25
870
6
2,50
0
625
8
70
62,
500
6
25
870
Fina
nce
Hou
ses
C
onso
rtium
(Pv
t) L
td.
20,
000
2
00
525
20
,000
2
00
525
2
0,00
0
200
5
25
20,
000
2
00
525
Raja
wel
la H
oldi
ngs
(Pvt
) Lt
d.
54,
600
5
46
-
54,6
00
546
-
-
-
-
-
-
-
Te
lsha
n N
etw
ork
(Pvt
) Lt
d.
972
,000
9
,720
-
97
2,00
0 9
,720
-
9
72,0
00
9,7
20
-
972
,000
9
,720
-
Zy
rex
Pow
er C
o Lt
d.
1,7
96,3
23
16,
920
3
4,30
9 1
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1
6,92
0
23,
622
1,0
58,9
92
10,
590
2
0,25
8 1
,058
,992
1
0,59
0
13,
926
Si
nhap
uthr
a Fi
nanc
e PL
C
(
pref
eren
ce s
hare
s)
20,
000
5
00
1,0
92
20,0
00
500
1
,092
2
0,00
0
500
1
,092
2
0,00
0
500
1
,092
2
8,98
4
52,
440
28,
984
3
7,17
0
2
2,10
8
38,
389
22,
108
2
7,47
4
(Pro
visio
n fo
r im
pairm
ent o
f
inve
stm
ents
)/re
vers
al o
f pro
visio
n
for i
mpa
irmen
t in
valu
e of
unqu
oted
inve
stm
ent s
ecur
ities
Ba
lanc
e at
the
begi
nnin
g of
the
year
(11
,091
)
(
19,9
66)
(10
,545
)
(
19,4
90)
Re
vers
al o
f pro
visi
on fo
r
impa
irmen
t for
the
year
825
8
,945
8
25
8,9
45
Pr
ovis
ion
for i
mpa
irmen
t of
in
vest
men
ts fo
r the
yea
r
-
(70
)
-
-
Bala
nce
at th
e en
d of
the
year
(10
,266
)
(
11,0
91)
(9,
720)
(
10,5
45)
N
et c
arry
ing
amou
nt o
f
unq
uote
d in
vest
men
t sec
uriti
es
1
8,71
8
17,
893
1
2,38
8
11,
563
Central Finance Company PLC - Annual Report 2010-11 71
Group Company 31.03.2011 31.03.2010 31.03.2011 31.03.2010 Rs.’000 Rs.’000 Rs.’000 Rs.’000
17 Net investment in leases Gross investment in leases 21,525,736 15,267,966 21,525,736 15,267,966 Unearned interest income (5,269,388) (3,765,172) (5,269,388) (3,765,172) 16,256,348 11,502,794 16,256,348 11,502,794 Provision for loan losses (115,147) (167,971) (115,147) (167,971) 16,141,201 11,334,823 16,141,201 11,334,823
17.1 Rentals receivable on leased assets Not later than one year Gross investment in leases 7,148,628 5,930,913 7,148,628 5,930,913 Unearned interest income (2,585,628) (1,995,575) (2,585,628) (1,995,575) Provision for loan losses (69,448) (79,136) (69,448) (79,136) 4,493,552 3,856,202 4,493,552 3,856,202 Later than one year and not later than five years Gross investment in leases 14,094,765 9,188,259 14,094,765 9,188,259 Unearned interest income (2,683,374) (1,769,581) (2,683,374) (1,769,581) Provision for loan losses (45,699) (88,835) (45,699) (88,835) 11,365,692 7,329,843 11,365,692 7,329,843 Later than five years Gross investment in leases 282,342 148,794 282,342 148,794 Unearned interest income (385) (16) (385) (16) 281,957 148,778 281,957 148,778
18 Corporate debt securities Trust Certificates 313,414 402,813 313,414 402,813 313,414 402,813 313,414 402,813
Receivable within one year 162,984 133,120 162,984 133,120 Receivable after one year 150,430 269,693 150,430 269,693 313,414 402,813 313,414 402,813
19 Loans and advances Stock out on hire purchase 10,531,373 8,302,562 10,531,373 8,302,562 Amounts due from hirers 1,364,225 1,595,488 1,364,225 1,595,488 Sub loans 105,856 197,207 105,856 197,207 Term loans 464,507 573,983 1,450,567 1,453,602 Dealer advances 250,121 16,801 250,121 16,801 Temporary refunds against fixed deposits 553,049 463,806 553,049 506,972 Housing and land 19,511 22,130 19,511 22,130 Loans to employees (Note 19.1) 65,673 64,078 57,148 54,977 13,354,315 11,236,055 14,331,850 12,149,739 Provision for loan losses (659,073) (612,693) (659,073) (612,693) Interest in suspense (176,470) (224,782) (176,470) (224,782) 12,518,772 10,398,580 13,496,307 11,312,264
Receivable within one year 5,803,338 5,047,594 5,799,141 5,086,535 Receivable after one year 6,715,434 5,350,986 7,697,166 6,225,729 12,518,772 10,398,580 13,496,307 11,312,264
Central Finance Company PLC - Annual Report 2010-1172
Notes to the Financial Statements
Group Company 31.03.2011 31.03.2010 31.03.2011 31.03.2010 Rs.’000 Rs.’000 Rs.’000 Rs.’000
19.1 Loans to employees Movement of loans given to employees are given below: At the beginning of the year 64,078 59,007 54,977 51,015 Loans granted/transfers during the year 62,251 55,054 56,033 47,821 Loans recovered during the year (60,656) (49,983) (53,862) (43,859) At the end of the year 65,673 64,078 57,148 54,977
Receivable within one year 32,825 32,546 28,628 28,321 Receivable after one year 32,848 31,532 28,520 26,656 65,673 64,078 57,148 54,977
20 Trade & other receivables Trade & other receivables 1,549,998 1,314,142 1,133,900 883,194 Provision for bad and doubtful debts (64,974) (64,324) (27,312) (26,957) 1,485,024 1,249,818 1,106,588 856,237
The above amount includes advances of Rs. 357.64 Million granted to Central Finance Company PLC Share Trust (31.03.2010 - Rs. 374.59 Million). Loans provided by Central Finance Share Trust to employees under share purchase plan amounted to Rs.165.19 Million (31.03.2010 - Rs.103.69 Million) the details of which are given below:
Company 31.03.2011 31.03.2010 Rs.’000 Rs.’000
At the beginning of the year 103,697 139,317 Loans granted during the year 112,574 - Loans recovered during the year (51,081) (35,620) At the end of the year 165,190 103,697 Receivable within one year 24,561 18,385 Receivable after one year 140,629 85,312 165,190 103,697
Group Company 31.03.2011 31.03.2010 31.03.2011 31.03.2010 Rs.’000 Rs.’000 Rs.’000 Rs.’000
21 Investments in real estate (a) Investments in lands Balance at the beginning of the year 63,545 27,462 63,545 27,462 Additions/transfers during the year 2,091 47,288 2,091 47,288 Disposals/transfers during the year (57) (11,205) (57) (11,205) Balance at the end of the year 65,579 63,545 65,579 63,545
Central Finance Company PLC - Annual Report 2010-11 73
Group Company 31.03.2011 31.03.2010 31.03.2011 31.03.2010 Rs.’000 Rs.’000 Rs.’000 Rs.’000
(b) Investment in housing projects Balance at the beginning of the year 925,959 1,226,209 148,784 153,204 Additions during the year 3,760 11,414 3,760 11,414 Disposals/transfers during the year (400,020) (311,664) (109,238) (15,834) 529,699 925,959 43,306 148,784 Provision for impairment (1,074) (1,074) (1,074) (1,074) Balance at the end of the year 528,625 924,885 42,232 147,710 594,204 988,430 107,811 211,255 Borrowing costs were not capitalised during the current and the preceding financial years.
22 Provision for losses on loans and advances and interest in suspense Company 31.03.2011 31.03.2010 Rs.’000 Rs.’000
Provision for losses on loans and advances Balance at the beginning of the year 808,695 650,844 Net increase during the year 108,443 182,086 Loans written off during the year (114,532) (24,235) Balance at the end of the year (note 22.1) 802,606 808,695 Interest in suspense: Balance at the beginning of the year 224,782 134,606 Net increase(decrease) during the year (48,312) 90,176 Balance at the end of the year 176,470 224,782 Total 979,076 1,033,477
Increase/(decrease) in provision against advances over the previous year (6,089) 157,851 Provision charged to/(reversed from) revenue reserves 78,750 (14,446) Provision (reversed) / charged to income statement 72,661 143,405 Non-performing loans and advances 1,406,929 1,037,273 Interest in suspense (176,470) (224,782) Net non-performing loans and advances 1,230,459 812,491 Provision for losses on loans and advances (802,606) (808,695) Net exposure 427,853 3,796
22.1 Provision for losses on loans and advances Net investment in leases 115,147 167,971 Loans and advances 659,073 612,693 Trade & other receivables 27,312 26,957 Investments in real estate 1,074 1,074 Total for the Company 802,606 808,695 Trade and other receivables - subsidiaries 37,662 37,367 Total for the Group 840,268 846,062
Central Finance Company PLC - Annual Report 2010-1174
Notes to the Financial Statements
23
Com
pany
/ G
roup
inve
stm
ent
in a
ssoc
iate
s
Inve
stor
In
vest
ee
% H
oldi
ng
N
o. o
f sha
res
Co
st
M
arke
t Val
ue/
D
irect
ors’
Valu
atio
n
31.0
3.20
11
31.0
3.20
10
31.0
3.20
11
31.0
3.20
10
31.0
3.20
11
31.0
3.20
10
31.0
3.20
11
31.0
3.20
10
Rs.’0
00
Rs.’0
00
Rs.’0
00
Rs.’0
00
Cent
ral F
inan
ce C
o PL
C Te
a Sm
allh
olde
r Fac
torie
s PL
C 22
.85%
22
.85%
3,
427,
407
3,42
7,40
7 9
9,33
7
99,
337
6
10,7
63
514
,111
N
atio
ns T
rust
Ban
k PL
C 8.
98%
9.
32%
20,
715,
400
19,5
32,4
40
394
,631
3
53,2
27
1,5
80,5
85
683
,635
Unq
uote
d in
vest
men
ts
Cent
ral F
inan
ce C
o PL
C Ca
pita
l Sui
sse
Asia
Ltd
. 16
.29%
16
.29%
2,
949,
000
2,94
9,00
0 2
9,49
0
29,
490
3
9,81
0
38,
809
Co
mpa
ny in
vest
men
t in
asso
ciate
s (a
t cos
t)
5
23,4
58
482
,054
2
,231
,158
1
,236
,555
Dim
inut
ion
in v
alue
of i
nves
tmen
ts
-
(
18,7
27)
Ap
prec
iatio
n in
val
ue o
f inv
estm
ents
-
18,
727
Co
mpa
ny in
vest
men
t in
asso
ciate
s
5
23,4
58
482
,054
2
,231
,158
1
,236
,555
CF
Gro
wth
Fun
d Lt
d.
Tea
Smal
lhol
der F
acto
ries
PLC
6.45
%
6.45
%
966,
839
966,
839
30,
361
3
0,36
1
172
,290
1
45,0
25
Nat
ions
Tru
st B
ank
PLC
6.42
%
6.42
% 1
4,81
3,27
3 13
,466
,612
3
47,6
15
300
,482
1
,130
,252
4
71,3
31
Capi
tal S
uiss
e As
ia L
td.
8.29
%
8.29
%
1,50
0,00
0 1,
500,
000
15,
000
1
5,00
0
20,
235
1
9,74
0
CF In
sura
nce
Brok
ers
(Pvt
) Lt
d.
Nat
ions
Tru
st B
ank
PLC
4.60
%
4.26
% 1
0,59
2,85
7 8,
929,
612
268
,807
2
10,5
93
808
,234
3
12,5
36
Gro
up in
vest
men
t in
asso
ciate
s (a
t cos
t)
1
,185
,241
1
,038
,490
4
,362
,169
2
,185
,187
G
roup
sha
re o
f ass
ocia
te c
ompa
nies
’ ret
aine
d pr
ofits
Te
a Sm
allh
olde
r Fac
torie
s PL
C
114
,009
1
10,4
25
Nat
ions
Tru
st B
ank
PLC
5
48,1
07
391
,146
Ca
pita
l Sui
sse
Asia
Ltd
.
61,
590
4
4,66
3
Gro
up in
vest
men
t in
asso
ciate
s (e
quity
bas
is)
1
,908
,947
1
,584
,724
Su
mm
aris
ed fi
nanc
ial i
nfor
mat
ion
of a
ssoc
iate
s
As
at 3
1st M
arch
2011
20
10
Rs.0
00
Rs.0
00
Asse
ts a
nd li
abili
ties
To
tal a
sset
s
9
1,48
6,88
0 7
6,33
1,76
6
Tota
l lia
bilit
ies
83,
001,
089
69,
337,
642
N
et a
sset
s
8,4
85,7
91
6,9
94,1
24
Fo
r the
yea
r end
ed 3
1st M
arch
To
tal r
even
ue
14,
778,
426
17,
362,
897
Pr
ofit
befo
re ta
x
2,5
06,2
78
1,8
59,2
06
Prof
it af
ter t
ax
1
,482
,009
9
54,4
61
Central Finance Company PLC - Annual Report 2010-11 7524
G
roup
/com
pany
inve
stm
ent
in s
ubsi
diar
ies
Mar
ket V
alue
/
% H
oldi
ng
No.
of S
hare
s
Cost
Dire
ctor
s’ Va
luat
ion
G
roup
Com
pany
Com
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Central Finance Company PLC - Annual Report 2010-1176
Notes to the Financial Statements
Group Company 31.03.2011 31.03.2010 31.03.2011 31.03.2010 Rs.’000 Rs.’000 Rs.’000 Rs.’000
25 Other assets Loan front end fees suspended 10,937 13,615 10,937 13,615 Amortised during the year (2,678) (2,678) (2,678) (2,678) 8,259 10,937 8,259 10,937
Loan front end fees suspended represents expenses incidental to obtaining long term borrowings. These charges are written off over the period of the loan as the Directors are of the opinion that these form part of the financing costs of long term borrowings.
Group Company 31.03.2011 31.03.2010 31.03.2011 31.03.2010 Rs.’000 Rs.’000 Rs.’000 Rs.’000
26 Deferred tax assets and liabilities Deferred tax liability At the beginning of the year 1,414,570 1,532,965 1,326,518 1,442,921 Transfer from / (to) income statement (140,512) (118,395) (121,767) (116,403) Deferred tax effect on transitional liability 2,642 - 2,642 - Deferred tax on revaluation reserve (11,905) - (8,179) - At the end of the year 1,264,795 1,414,570 1,199,214 1,326,518
Deferred tax assets At the beginning of the year 2,309 2,851 - - Transfer to / (from) income statement 6,215 (542) - - Transfer to equity statement 405 - - - At the end of the year 8,929 2,309 - -
26.1 Group Balance Sheet Income Statement Equity 31.03.2011 31.03.2010 2010/11 2009/10 31.03.2011 31.03.2010 Rs.‘000 Rs.‘000 Rs.‘000 Rs.‘000 Rs.‘000 Rs.‘000
Deferred tax assets and liabilities relate to the following:
Deferred tax liability Capital allowances for tax purposes 1,407,441 1,545,289 125,943 88,492 11,905 -
Deferred tax assets Defined benefit plans (142,646) (130,719) 14,569 33,318 (2,642) - Income tax losses - - 6,215 (3,957) (142,646) (130,719) Deferred tax income / (expense) 146,727 117,853 9,263 -
Net deferred tax liability 1,264,795 1,414,570
Central Finance Company PLC - Annual Report 2010-11 77
26.2 Company Balance Sheet Income Statement Equity 31.03.2011 31.03.2010 2010/11 2009/10 31.03.2011 31.03.2010 Rs. ‘000 Rs. ‘000 Rs. ‘000 Rs. ‘000 Rs. ‘000 Rs. ‘000
Deferred tax assets, liabilities and income tax relate to the following:
Deferred tax liability Capital allowances for tax purposes 1,332,613 1,447,367 106,575 85,004 8,179 -
Deferred tax assets Defined benefit plans (133,399) (120,849) 15,192 31,399 (2,642) - (133,399) (120,849) Deferred tax income / (expense) 121,767 116,403 5,537 -
Net deferred tax liability 1,199,214 1,326,518
Group Company 31.03.2011 31.03.2010 31.03.2011 31.03.2010 Rs.’000 Rs.’000 Rs.’000 Rs.’000
27 Intangible assets Computer software at cost At the beginning of the year 98,415 63,396 97,717 62,698 Additions 18,080 35,019 15,889 35,019 At the end of the year 116,495 98,415 113,606 97,717
Amortisation At the beginning of the year (49,423) (35,082) (49,213) (35,004) Charge for the year (20,581) (14,341) (20,402) (14,209) At the end of the year (70,004) (49,423) (69,615) (49,213)
Carrying amount At the end of the year 46,491 48,992 43,991 48,504 At the beginning of the year 48,992 28,314 48,504 27,694
Central Finance Company PLC - Annual Report 2010-1178
Notes to the Financial Statements
28 Property, plant and equipment Group Land and Furniture Motor Plant, Total Total Buildings and office vehicles & machinery 31.03.2011 31.03.2010 equipment lifts and other equipment Rs.’000 Rs.’000 Rs.’000 Rs.’000 Rs.’000 Rs.’000
Cost/valuation At the beginning of the year 2,157,251 164,096 3,189,431 885,703 6,396,481 6,824,862 Additions/transfers 9,888 13,157 1,041,892 67,320 1,132,257 610,780 Disposals/transfers - (30) (841,140) (4,460) (845,630) (1,039,161) At the end of the year 2,167,139 177,223 3,390,183 948,563 6,683,108 6,396,481
Accumulated depreciation At the beginning of the year 90,860 60,766 1,093,432 522,491 1,767,549 1,690,096 Charge/transfers for the year 16,194 16,042 381,522 78,860 492,618 519,152 Impairment for the year - 27 - 403 430 - On disposals/transfers - (17) (425,286) (3,928) (429,231) (441,699) At the end of the year 107,054 76,818 1,049,668 597,826 1,831,366 1,767,549 Net book value 2,060,085 100,405 2,340,515 350,737 4,851,742 4,628,932 Capital work-in-progress 7,889 4,117 Carrying amount at the end of the year 4,859,631 4,633,049
Company Land and Furniture Motor Plant, Total Total Buildings and office vehicles & machinery 31.03.2011 31.03.2010 equipment lifts and other equipment Rs.’000 Rs.’000 Rs.’000 Rs.’000 Rs.’000 Rs.’000
Cost/valuation At the beginning of the year 1,503,799 133,921 3,140,056 346,670 5,124,446 5,583,526 Additions/transfers 5,539 10,818 1,032,461 41,736 1,090,554 576,796 Disposals/transfers - (30) (830,198) (211) (830,439) (1,035,876) At the end of the year 1,509,338 144,709 3,342,319 388,195 5,384,561 5,124,446
Accumulated Depreciation At the beginning of the year 61,205 42,621 1,059,167 173,774 1,336,767 1,300,676 Charge/transfers for the year 8,386 13,949 376,788 47,322 446,445 475,652 On disposals/transfers - (17) (418,139) (67) (418,223) (439,561) At the end of the year 69,591 56,553 1,017,816 221,029 1,364,989 1,336,767 Net book value 1,439,747 88,156 2,324,503 167,166 4,019,572 3,787,679 Capital work-in-progress 5,008 3,500 Carrying amount at the end of the year 4,024,580 3,791,179
Central Finance Company PLC - Annual Report 2010-11 79
28 Property, plant and equipment (contd.) Information on the freehold land and buildings of the Company and the Group
Location Cost or Cost or Extent revaluation revaluation Accumulated Net book
(Perches) of land of buildings Total value depreciation value Rs.’000 Rs.’000 Rs.’000 Rs.’000 Rs.’000
Central Finance Company PLC City office No.270, Vauxhall Street, Colombo 02. 117.32 204,612 117,560 322,172 29,714 292,458 No.244, Vauxhall Street, Colombo 02. 13.21 20,760 25,183 45,943 6,058 39,885 Branches No.62, Maithripala Senanayake Mw, Anuradhapura. 40.20 24,306 4,879 29,185 932 28,253 No.367, Main Street, Negombo. 29.00 24,239 5,724 29,963 1,434 28,529 No.38, Mihindu Mawatha, Kurunegala. 54.63 34,700 3,564 38,264 871 37,393 Udaya Raja Mawatha, Badulla. 26.90 16,692 4,004 20,696 1,096 19,600 No.78, Kumarathunga Mawatha, Matara. 125.25 83,769 5,303 89,072 1,354 87,718 23, Kurunegala Road, Dambulla 21.00 1,777 5,024 6,801 585 6,216 No.143, Colombo Road,
Moragahayata, Ratnapura 46.00 18,281 6,169 24,450 1,082 23,368 No.312, Highlevel Road, Nugegoda. 15.70 27,075 20,816 47,891 3,577 44,314 Showrooms No.254,254/1, Katugastota Road, Kandy. 85.93 69,000 37,425 106,425 4,695 101,730 268, Vauxhall Street, Colombo 02. 21.67 31,619 - 31,619 - 31,619 Vehicle Yards No.249, Katugastota Road, Kandy. 165.38 114,239 3,796 118,035 1,403 116,632 313, Koholwila Road, Kelaniya. 348.50 17,636 7,313 24,949 1,803 23,146 Batalahenawatte Road, Gonawala, Kelaniya. 189.05 7,946 208 8,154 15 8,139 258/3, Katugastota Road, Kandy. 45.93 22,750 - 22,750 - 22,750 210, Sri Dhamma Mawatha,Colombo 10. 121.45 158,120 19,612 177,732 2,102 175,630 No.313, Madawala Road, Katugastota. 167.43 30,100 900 31,000 94 30,906 Kirindiwela Road, Pugoda. 1,600.00 15,834 2,209 18,043 55 17,988 Other properties Pahathgama Cross Road, Hanwella 180.00 3,811 295 4,106 - 4,106 Sarasavigama Road, Hindagala. 25.00 9,958 - 9,958 - 9,958 Hekiththa Road, Wattala 375.00 36,135 - 36,135 - 36,135 Bungalows No.8,Sukhastan Gardens, Ward Place,
Colombo 7. 38.14 66,642 16,724 83,366 5,023 78,343 No.25, Sri Rahula Road, Nuwara Eliya. 194.00 67,908 12,268 80,176 1,450 78,726 Indibedda, Moratuwa 251.10 37,562 35,541 73,103 6,248 66,855 Car Parks Yatinuwara Veediya, Kandy. 14.00 14,000 - 14,000 - 14,000 No.267 &269, Vauxhall Street, Colombo 02. 10.26 15,350 - 15,350 - 15,350 Total for the Company 1,174,821 334,517 1,509,338 69,591 1,439,747
Group companies Dehigama Hotels Company Ltd. 84, Raja Vidiya, Kandy. 85.00 125,000 96,760 221,760 22,584 199,176 Kandy Private Hospitals Ltd. 255/8, Katugastota Road, Kandy. 127.25 89,000 40,000 129,000 8,000 121,000 Central Mineral Industries Ltd. Diganatenna Estate,Gonawala, Rajawella, Digana 1916.25 30,774 2,859 33,633 286 33,347 Central Industries PLC Factory 195/4, Kerawalapitiya Road,
Hendala, Wattala. 522.10 130,525 61,372 191,897 4,209 187,688 Head office 312, Nawala Road, Rajagiriya. 18.00 36,000 45,511 81,511 2,384 79,127 Total for the Group 1,586,120 581,019 2,167,139 107,054 2,060,085
Central Finance Company PLC - Annual Report 2010-1180
Notes to the Financial Statements
28 Property, plant and equipment (contd.) Revaluations The freehold land and buildings of the Company and the Group, except for the freehold land and buildings of subsidiary Central
Industries PLC were revalued as at March 2007 by an independent qualified Valuer / Licensed Surveyor, resulting in the carrying amounts being written up by Rs.607.7 Million and Rs.669.28 Million respectively.
The freehold land and buildings of Central Industries PLC were revalued by an independent valuer/ Valuer of Real Estate, as at 31st March 2009, resulting in the carrying amounts being written up by Rs.166.9 Million.
The details of the above revaluations are given below:
Location/Address Valuation Net Book Revalued Revaluation Method Value before Amount Surplus/
Revaluation (deficit) Rs.’000 Rs.’000 Rs.’000
Central Finance Company PLC Office No. 270, Vauxhall Street, Comparison Land 162,814 204,612 41,798 Colombo -2. Contractor’s Building 79,193 95,387 16,194 No. 244,Vauxhall Street, Comparison Land 14,070 20,760 6,690 Colombo -2. Contractor’s Building 13,984 21,240 7,256 Branches No.62, Maithripala Senanayake Mw, Comparison Land 8,124 24,306 16,182 Anuradhapura. Contractor’s Building 1,866 4,444 2,578 No.367, Main Street, Comparison Land 8,650 24,239 15,589 Negombo Contractor’s Building 3,278 4,761 1,483 No.38, Mihindu Mw, Comparison Land 10,554 34,700 24,146 Kurunegala Contractor’s Building 2,015 3,050 1,035 Udaya Raja Mw, Comparison Land 10,187 16,692 6,505 Badulla Contractor’s Building 3,275 3,308 33 No.78, Kumarathunga Mw, Comparison Land 13,383 83,769 70,386 Matara Contractor’s Building 3,951 4,481 530 No.143, Colombo Road Comparison Land 2,300 18,281 15,981 Moragahayata, Ratnapura Contractor’s Building 3,141 5,719 2,578 No.312, Highlevel Road, Comparison Land 19,625 27,075 7,450 Nugegoda Contractor’s Building 10,985 12,925 1,940 Showrooms No.254,254/1, Katugastota Road, Comparison Land 31,845 69,000 37,155 Kandy Contractor’s Building 36,374 36,500 126 Vehicle Yards No.249, Katugastota Road, Comparison Land 85,398 114,239 28,841 Kandy. Contractor’s Building 3,568 2,761 (807) 313,Koholwila Road, Comparison Land 9,905 17,636 7,731 Kelaniya. Contractor’s Building 6,900 4,364 (2,233) Batalahenawatte Road, Gonawala, Comparison Land 6,248 7,946 1,698 Kelaniya Contractor’s Building 27 54 27 210, Siri Dhamma Mawatha, Comparison Land 41,577 158,492 116,915 Colombo 10 Contractor’s Building 4,214 17,659 13,445 No.313, Madawala Road, Comparison Land 20,646 30,100 9,454 Katugastota Contractor’s Building - 900 900 No.258/3, Katugastota Road, Kandy Comparison Land 11,512 22,750 11,238 Bungalows No.8, Sukhastan Gardens, Comparison Land 37,552 66,642 29,090 Ward Place, Colombo 7. Contractor’s Building 13,354 13,358 4 No.25, Sri Rahula Road Comparison Land 9,700 67,908 58,208 Nuwara Eliya Contractor’s Building 1,049 12,091 11,042 Indibedda, Moratuwa Comparison Land 10,541 37,562 27,021 Contractor’s Building 17,000 27,438 10,438 Car Park Yatinuwara Veediya, Comparison Land 10,071 14,000 3,929 Kandy Contractor’s Building 235 - - No.267 & 269, Vauxhall Street, Colombo 02 Comparison Land 10,270 15,350 5,080 Sub total Land 534,972 1,076,059 541,087 Building 204,409 270,440 66,569 Central Finance Company PLC 739,381 1,346,499 607,656
Central Finance Company PLC - Annual Report 2010-11 81
28 Property, plant and equipment (contd.) Location/Address Valuation Net Book Revalued Revaluation Method Value before Amount Surplus
Revaluation (deficit) Rs.’000 Rs.’000 Rs.’000
Kandy Private Hospitals Ltd. 255/8, Katugastota Road, Kandy. Comparison Land 56,114 89,000 32,886 Contractor’s Building 17,414 40,000 22,586 Central Mineral Industries Ltd. Diganatenna Estate, Gonawala, Comparison Land 24,954 30,673 5,719 Rajawella, Digana Contractor’s Building 2,512 2,950 438
Central Industries PLC Factory Kerawalapitiya Contractor’s Land 8,177 130,525 122,348 Contractor’s Building 41,038 56,814 15,776 Head office - Nawala Contractor’s Land 12,546 36,000 23,454 Contractor’s Building 40,171 45,512 5,341 Total for the Group Land 636,763 1,362,257 725,494 Building 305,544 415,716 110,710 942,307 1,777,973 836,204
Where properties have fallen in value, the decreases have been charged against revaluation reserve to the extent that it was credited previously and any decrease beyond such value was charged to revenue during the year of such revaluations.
The carrying value of freehold land and buildings of the Group, is carried at cost less accumulated depreciation and impairment, would amounts to Rs.783.97 Million as at 31st March 2011 (31st March 2010 Rs.791.65 Million).
The cost of fully depreciated assets of the Group and Company amounted to Rs.477.42 Million and Rs.445.78 Million respectively (Group Rs.235.97 Million and Company Rs.201.73 Million as at 31st March 2010).
The carrying value of land and buildings pledged as security for banking facilities obtained amounts to Rs.772.99 Million and Rs.651.98 Million for the Group and the Company repectively.
Movement of capital work-in-progress Group Company 31.03.2011 31.03.2010 31.03.2011 31.03.2010 Rs.’000 Rs.’000 Rs.’000 Rs.’000
Balance at the beginning of the year 4,117 2,523 3,500 2,316 Additions during the year 8,122 1,800 1,508 1,184 Transfer to property, plant and equipment (4,350) (206) - - Balance at the end of the year 7,889 4,117 5,008 3,500
Operating lease assets are classifed under property, plant and equipment. Rental receivable on operating lease assets are given below:
Rental receivable on operating leases Group Company 31.03.2011 31.03.2010 31.03.2011 31.03.2010 Rs.’000 Rs.’000 Rs.’000 Rs.’000
Within one year 605,920 640,074 605,920 640,074 After one year 1,077,599 911,846 1,077,599 911,846 Total 1,683,519 1,551,920 1,683,519 1,551,920
Central Finance Company PLC - Annual Report 2010-1182
Notes to the Financial Statements
Group Company 31.03.2011 31.03.2010 31.03.2011 31.03.2010 Rs.’000 Rs.’000 Rs.’000 Rs.’000
29 Trade and other payables Interest payable on deposits 1,240,202 1,227,999 1,247,037 1,239,053 Creditors 638,309 449,086 638,309 449,086 Prepaid rentals - lease finance 2,759,285 1,976,374 2,759,285 1,976,374 Prepaid rentals - hire purchase 10,135 6,551 10,135 6,551 Prepaid rentals - consumer finance 28 82 28 82 Advances on real estate projects 96,065 133,804 22,325 93,003 Accrued expenses 62,898 118,079 27,811 78,283 Others 928,634 757,149 783,212 611,363 5,735,556 4,669,124 5,488,142 4,453,795
30 Deposits Term deposits 17,966,844 16,529,723 18,167,352 16,693,269 Certificates of deposits 8,292 13,811 8,292 13,811 Savings deposits 782,065 689,924 782,194 690,054 18,757,201 17,233,458 18,957,838 17,397,134
The above includes a sum of Rs.186,813,837 (31.03.2010 - Rs.146,921,030) deposited with the Company by the Directors.
31 Bank Loans Borrower Lending Institution Nature of Facility Security 31.03.2011 31.03.2010
Rs.000 Rs.000
Central Finance NDB Bank PLC Money market loan Agreement to mortgage over lease receivables 697,000 - Company PLC Hatton National Bank PLC Revolving term loans Power of attorney over lease agreements
and hypothecation of hire purchase contracts 100,000 - Habib Bank Ltd. Term loan Mortgage over lease receivables 104,167 187,500 901,167 187,500 Hedges Court Commercial Bank PLC Term loan Primary mortgage over land - 48,408 Residencies(Pvt) Ltd Hatton National Bank PLC Term loan Corporate guarantee from
Central Finance Company PLC 85,000 - CITI Bank, N.A. Term loan Corporate guarantee from
Central Finance Company PLC - 200,000 Central Industries PLC Nations Trust Bank PLC Short term loan Pledge agreements - 10,000 85,000 258,408 986,167 445,908
Group Company 31.03.2011 31.03.2010 31.03.2011 31.03.2010 Rs.’000 Rs.’000 Rs.’000 Rs.’000
Payable within one year 880,333 341,741 880,333 83,333 Payable after one year 105,834 104,167 20,834 104,167 986,167 445,908 901,167 187,500
Central Finance Company PLC - Annual Report 2010-11 83
32 Non-bank Loans Borrower Lending Institution Nature of Facility Security 31.03.2011 31.03.2010
Rs.’000 Rs.’000
Central Finance FMO-Netherland Term Loan in Rupees Mortgage over Lease and Hire purchase receivables 573,768 765,024 Company PLC Central Bank of Sri Lanka Refinance loans Unsecured 449 1,188 Consortium of lenders Securitisation facility Trust deed, mortgage over lease receivables 16,444 - Consortium of lenders Securitisation facility Trust deed, mortgage over lease receivables - 139,175 Consortium of lenders Securitisation facility Trust deed, mortgage over lease receivables 750,000 27,100 1,340,661 932,487 Hedges Court Zyrex Power company Ltd. Term loan Promissory note - 15,000 Residencies (Pvt) Ltd Capital Suisse Asia Ltd. Term loan Promissory note - 5,500 - 20,500 1,340,661 952,987
Group Company 31.03.2011 31.03.2010 31.03.2011 31.03.2010 Rs.’000 Rs.’000 Rs.’000 Rs.’000
Payable within one year 212,149 362,326 212,149 341,826 Payable after one year 1,128,512 590,661 1,128,512 590,661 1,340,661 952,987 1,340,661 932,487
33 Debentures At the beginning of the year 150,000 150,000 150,000 150,000 Issued during the year 250,000 - 250,000 - At the end of the year 400,000 150,000 400,000 150,000
The Company issued unsecured redeemable unlisted debentures of Rs.1,000/- each during the financial year 2007/08 and were fully subscribed by National Savings Bank. During the financial year under review, a further issue of Rs.50,000,000 par valued unlisted, rated, unsecured redeemable debentures to the value of Rs.250,000,000 were issued and fully subcribed by Ceylinco Insurance PLC-Life Fund.
Group Company 31.03.2011 31.03.2010 31.03.2011 31.03.2010 Rs.’000 Rs.’000 Rs.’000 Rs.’000
34 Retirement benefit obligation Present value of defined benefit obligation 698,382 531,345 622,007 475,301 Fair value of plan assets (145,583) (130,017) (145,583) (130,017) Unfunded status 552,799 401,328 476,424 345,284 Unrecognised net actuarial gain (148,817) (60,377) (131,013) (54,664) Net retirement benefit obligation 403,982 340,951 345,411 290,620
The liability for retirement benefit obligation of the Group other than the parent is not externally funded.
Central Finance Company PLC - Annual Report 2010-1184
Notes to the Financial Statements
34 Retirement benefit obligation (contd.) Group Company 31.03.2011 31.03.2010 31.03.2011 31.03.2010 Rs.’000 Rs.’000 Rs.’000 Rs.’000
Movement of the retirement benefit obligation Present value of defined benefit obligation at the beginning of the year 531,345 380,979 475,301 337,200 Gratuity charge for the year 1,613 752 - - Interest cost 67,105 56,293 60,588 50,173 Current service cost 33,212 24,191 29,598 21,176 Payments made during the year (24,353) (8,415) (20,125) (6,619) Actuarial gain 89,460 77,545 76,645 73,371 Present value of defined benefit obligation at the end of the year 698,382 531,345 622,007 475,301
Movement of the plan assets Fair value of the plan assets at the beginning of the year 130,017 100,664 130,017 100,664 Contributions made to the plan 24,598 21,700 24,598 21,700 Benefits paid by the plan (20,125) (6,619) (20,125) (6,619) Expected return on plan assets 10,796 14,603 10,796 14,603 Actuarial gain/ (loss) 297 (331) 297 (331) Fair value of the plan assets at the end of the year 145,583 130,017 145,583 130,017
Retirement benefit obligation of Central Finance Company PLC is externally funded through a gratuity fund established in 1987 with the investment of the fund being mainly in treasury bills.
Retirement benefit obligation of Central Finance Company PLC, Central Industries PLC and CF Insurance Brokers (Pvt) Ltd have been determined as per the actuarial valuations carried out by Mr. Piyal S. Goonetilleke, a fellow of the Society of Actuaries (USA), Member of the American Academy of Actuaries Consulting Actuary. The employee benefit liability of Central Mineral Industries (Pvt) Ltd, Kandy Private Hospital Ltd, and Mark Marine Services (Pvt) Ltd are based on the gratuity formula of SLAS 16 (Revised 2006)-Employee Benefits.
Details of actuarial assumptions of the company are as follows 31.03.2011 31.03.2010 Actuarial assumptions Discount rate 10% 12% Expected return on plan assets 9% 15% Future salary increases 13% 13%
Mortality GA 1983 Mortality Table Age: 20 25 30 35 40 45 50 Turnover 10% 10% 10% 7.50% 5% 2.50% 1% Disability Age: 20 25 30 35 40 45 50 55 Disability 0.08% 0.09% 0.10% 0.12% 0.18% 0.29% 0.54% 0.00%
(Long term disability 1987 Soc .Sec.Table:Rates of disability at selected ages)
Retirement age - Normal retirement age or age at valuation date,if greater. Group Company 31.03.2011 31.03.2010 No.of shares Stated Capital No.of shares Stated Capital In ’000 Rs.’000 In ’000 Rs.’000
35 Stated Capital Issued and fully paid - ordinary shares At the beginning of the year 20,300 203,020 20,300 203,020 At the end of the year 20,300 203,020 20,300 203,020
Central Finance Company PLC - Annual Report 2010-11 85
Group Company 31.03.2011 31.03.2010 31.03.2011 31.03.2010 Rs.’000 Rs.’000 Rs.’000 Rs.’000
36 Capital reserves Revaluation reserve Balance at the beginning of the year 1,358,312 1,363,799 974,847 978,801 Depreciation on revaluation surplus (5,627) (5,487) (3,954) (3,954) Deferred tax attributable to revaluation surplus
due to change in corporate tax rate 13,913 - 8,179 - Balance at the end of the year 1,366,598 1,358,312 979,072 974,847
Capital redemption reserve 18,865 18,865 - - Total 1,385,463 1,377,177 979,072 974,847
Revaluation reserve consists of the net surplus on the revaluation of land and buildings. Capital redemption reserve comprises of reserve funds arising from the redemption of preference shares of subsidiaries.
Group Company 31.03.2011 31.03.2010 31.03.2011 31.03.2010 Rs.’000 Rs.’000 Rs.’000 Rs.’000
37 Reserve fund Balance at the beginning of the year 601,000 553,500 601,000 553,500 Reserved during the year 81,000 47,500 81,000 47,500 Balance at the end of the year 682,000 601,000 682,000 601,000
The Company’s Reserve fund is maintained in accordance with Direction No. 9 of 1991 as amended by Direction No. 1 of 2003 issued by the Central Bank of Sri Lanka under Section 9 of the Finance Companies Act No.78 of 1988.
Group Company 31.03.2011 31.03.2010 31.03.2011 31.03.2010 Rs.’000 Rs.’000 Rs.’000 Rs.’000
38 Revenue Reserves General Reserve: Balance at the beginning of the year 6,124,070 5,338,516 6,112,889 5,327,335 Reserved during the year 1,379,000 800,000 1,379,000 800,000 Transfer (to)/from provision for loan losses 78,750 (14,446) 78,750 (14,446) 7,581,820 6,124,070 7,570,639 6,112,889 Retained earnings 1,045,290 821,687 9,491 5,218 Balance at the end of the year 8,627,110 6,945,757 7,580,130 6,118,107
General reserve represents amounts set aside by the Directors for future expansions, and to meet any contingencies.
39 Secured liabilities Bank and other non-bank borrowings have been secured on the mortgage of specific land and buildings, pledge of specific quoted company
shares and assignment of specific lease receivables/book debts and hypothecation of hire purchase and lease contracts. The carrying value of the assets mortgaged/assigned as security amounted to Rs.3,891 Million as at 31st March 2011 (31st March 2010 - Rs.1,352 Million).
40 Commitments (a) The Company has entered into a fixed interest rate SWAP agreement as follows: Date of commencement 6-Jul-08 Date of termination 4-Jul-13 Notional principal amount Rs.1,000 Million (b) Capital expenditure Capital expenditure approved by the Board of Directors for which provision has not been made in the financial statements amounts
to approximately Rs.19.51 Million for the Group and Company. (2009/10 - Rs.27.48 Million for the Group and Rs.3.036 Million for the Company).
Central Finance Company PLC - Annual Report 2010-1186
Notes to the Financial Statements
41
Mat
urit
y A
naly
sis
An
ana
lysi
s of
the
tota
l ass
ets
empl
oyed
and
the
tota
l lia
bilit
ies
of th
e C
ompa
ny, b
ased
on
the
rem
aini
ng p
erio
d fro
m th
e ba
lanc
e sh
eet d
ate
to th
e re
spec
tive
cont
ract
ual m
atur
ity
date
s is
giv
en b
elow
:
Asse
ts a
re s
tate
d ne
t of p
rovi
sion
s
U
p to
3 m
onth
s
3 to
12
mon
ths
1
to 3
yea
rs
3
to 5
yea
rs
M
ore
than
5 y
ears
Tota
l
31
.03.
2011
31
.03.
2010
31
.03.
2011
31
.03.
2010
31
.03.
2011
31
.03.
2010
31
.03.
2011
31
.03.
2010
31
.03.
2011
31
.03.
2010
31
.03.
2011
31
.03.
2010
Rs.’0
00
Rs.’0
00
Rs.’0
00
Rs.’0
00
Rs.’0
00
Rs.’0
00
Rs.’0
00
Rs.’0
00
Rs.’0
00
Rs.’0
00
Rs.’0
00
Rs.’0
00
Inte
rest
ear
ning
ass
ets:
In
vest
men
ts in
Gov
ernm
ent s
ecur
ities
1
,237
,000
1
,580
,000
7
17,3
93
1,2
07,0
00
-
-
-
-
-
-
1,95
4,39
3
2,78
7,00
0
Dep
osits
with
ban
ks
95,
000
4
30,5
00
-
200
,000
-
-
-
-
-
-
9
5,00
0
630
,500
Net
inve
stm
ent i
n le
ases
1
,087
,363
9
76,1
83
3,3
42,0
84
2,8
80,0
19
7,8
03,8
74
5,6
34,4
67
3,6
28,2
83
1,6
95,3
75
279
,597
1
48,7
79 1
6,14
1,20
1 11
,334
,823
Corp
orat
e de
bt s
ecur
ities
3
7,01
3
30,
380
1
34,7
47
102
,740
1
41,6
54
269
,693
-
-
-
-
3
13,4
14
402
,813
Loan
s an
d ad
vanc
es
Stoc
k ou
t on
hire
pur
chas
e 8
68,4
77
700
,920
2
,514
,762
2
,199
,798
5
,699
,682
4
,422
,358
1
,359
,443
8
87,1
26
1,8
50
240
10,
444,
214
8,
210,
442
Am
ount
s du
e fro
m h
irers
9
15,8
11
1,0
87,5
48
-
-
-
-
-
-
-
-
915
,811
1
,087
,548
Sub
loan
s 2
8,75
1
52,
429
4
9,87
7
95,
046
2
3,40
5
46,
166
1
,735
2
20
-
-
103
,768
1
93,8
61
Te
rm lo
ans
105
,337
2
51,3
69
638
,609
2
90,8
53
350
,414
3
90,1
91
78,
009
2
56,3
55
-
53,
180
1,
172,
369
1,
241,
948
D
eale
r adv
ance
s 2
43,4
71
10,
265
5
,664
-
-
-
-
-
-
-
2
49,1
35
10,
265
Te
mpo
rary
refu
nds
aga
inst
fixe
d de
posit
s 1
39,0
77
135
,203
2
54,9
38
224
,031
1
30,9
11
102
,961
2
8,12
3
44,
777
-
-
5
53,0
49
506
,972
Hou
sing
and
land
8
07
4,6
61
5
1,1
13
1
476
-
-
-
-
8
13
6,2
50
St
aff l
oans
1
1,26
9
11,
059
2
2,28
7
22,
238
1
5,16
2
18,
762
3
,995
1
,061
4
,435
1
,858
5
7,14
8
54,
978
To
tal i
nter
est e
arni
ng a
sset
s 4
,769
,376
5
,270
,517
7
,680
,366
7
,222
,838
14,
165,
103
10,
885,
074
5,
099,
588
2,
884,
914
2
85,8
82
204
,057
32,
000,
315
26,4
67,4
00
Non
-inte
rest
ear
ning
ass
ets:
Ba
nk a
nd c
ash
bala
nces
2
73,1
97
275
,283
-
-
-
-
-
-
-
-
2
73,1
97
275
,283
Dea
ling
secu
ritie
s 3
2,00
0
2,2
00
-
-
-
-
-
-
-
-
32,
000
2
,200
Inve
stm
ent s
ecur
ities
-
-
-
-
-
-
-
-
1
73,9
71
111
,564
1
73,9
71
111
,564
Trad
e an
d ot
her r
ecei
vabl
es
615
,244
3
54,6
02
47,
662
4
3,47
1
62,
997
1
9,54
0
18,
533
2
,271
3
62,1
52
436
,353
1
,106
,588
8
56,2
37
In
vest
men
ts in
real
est
ate
107
,811
-
-
2
11,2
55
-
-
-
-
-
-
107
,811
2
11,2
55
Ve
hicle
s, sp
are
parts
and
oth
er s
tock
s 4
33,0
14
781
,784
-
-
-
-
-
-
-
-
4
33,0
14
781
,784
Inve
stm
ents
in a
ssoc
iate
s -
-
-
-
-
-
-
-
5
23,4
58
482
,054
5
23,4
58
482
,054
Inve
stm
ents
in s
ubsid
iarie
s -
-
-
-
-
-
-
-
3
12,9
87
296
,204
3
12,9
87
296
,204
Inta
ngib
le a
sset
s -
-
-
-
-
-
-
-
4
3,99
1
48,
504
4
3,99
1
48,
504
O
ther
ass
ets
670
6
70
2,0
09
2,0
08
5,3
57
8,2
59
223
-
-
-
8
,259
1
0,93
7
Prop
erty
, pla
nt a
nd e
quip
men
t -
-
-
-
-
-
-
-
4,
024,
580
3,
791,
179
4,
024,
580
3,
791,
179
To
tal n
on-in
tere
st e
arni
ng a
sset
s 1
,461
,936
1
,414
,539
4
9,67
1
256
,734
6
8,35
4
27,
799
1
8,75
6
2,2
71
5,4
41,1
39
5,1
65,8
58
7,0
39,8
56
6,8
67,2
01
To
tal a
sset
s 6
,231
,312
6
,685
,056
7
,730
,037
7
,479
,572
14,
233,
457
10,
912,
873
5,
118,
344
2,
887,
185
5,
727,
021
5,
369,
915
39,
040,
171
33,3
34,6
01
Pe
rcen
tage
15
.96%
20
.05%
19
.80%
22
.44%
36
.46%
32
.74%
13
.11%
8.
66%
14
.67%
16
.11%
10
0.00
%
100.
00%
Central Finance Company PLC - Annual Report 2010-11 8741
M
atur
ity
Ana
lysi
s (c
ontd
.)
U
p to
3 m
onth
s
3 to
12
mon
ths
1
to 3
yea
rs
3
to 5
yea
rs
M
ore
than
5 y
ears
Tota
l
31
.03.
2011
31
.03.
2010
31
.03.
2011
31
.03.
2010
31
.03.
2011
31
.03.
2010
31
.03.
2011
31
.03.
2010
31.
03.2
011
31.0
3.20
10
31.0
3.20
11
31.0
3.20
10
Rs
.’000
Rs
.’000
Rs
.’000
Rs
.’000
Rs
.’000
Rs
.’000
Rs
.’000
Rs
.’000
Rs
.’000
Rs
.’000
Rs
.’000
Rs
.’000
In
tere
st b
earin
g lia
bilit
ies:
D
epos
its
5,2
63,7
97
5,92
0,10
2
9,17
1,80
9
8,08
1,14
3
3,91
3,08
3
2,54
5,44
6
609
,149
8
50,4
43
-
- 18
,957
,838
17
,397
,134
Bank
ove
rdra
fts
502
,367
2
73,7
71
-
-
-
-
-
-
-
-
502
,367
2
73,7
71
Ba
nk lo
ans
817
,834
2
0,83
3
62,
500
6
2,50
0
20,
833
1
04,1
67
-
-
-
-
901
,167
1
87,5
00
N
on-b
ank
loan
s 1
6,70
8
44,
655
1
95,4
41
297
,171
4
72,9
12
399
,405
6
35,4
00
191
,256
2
0,20
0
-
1,34
0,66
1
932
,487
Amou
nts
due
to s
ubsid
iarie
s 1
09,6
31
35,
787
-
-
-
-
-
-
-
-
1
09,6
31
35,
787
To
tal i
nter
est b
earin
g lia
bilit
ies
6,7
10,3
37
6,2
95,1
48
9,4
29,7
50
8,4
40,8
14
4,4
06,8
28
3,0
49,0
18
1,2
44,5
49
1,0
41,6
99
20,
200
-
21,8
11,6
64
18,8
26,6
79
N
on-in
tere
st b
earin
g lia
bilit
ies:
Tr
ade
and
othe
r pay
able
s 1
,599
,579
1
,431
,588
7
20,5
65
658
,386
1
,741
,895
1
,391
,890
1
,202
,794
9
71,9
31
223
,309
-
5,
488,
142
4
,453
,795
Retir
emen
t ben
efit
oblig
atio
n -
-
6
,907
5
,865
1
0,36
3
8,7
17
17,
271
1
4,48
6
310
,870
2
61,5
52
345
,411
2
90,6
20
Am
ount
s du
e to
sub
sidia
ries
75,
579
1
63,3
61
-
-
-
-
-
-
-
-
75,
579
1
63,3
61
Ta
x pa
yabl
e 2
75,9
39
226
,654
-
-
-
-
-
-
-
-
2
75,9
39
226
,654
Def
erre
d Ta
x -
-
-
-
-
-
-
-
1,1
99,2
14
1,32
6,51
8
1,19
9,21
4
1,3
26,5
18
D
eben
ture
s 1
50,0
00
-
-
-
-
150
,000
2
50,0
00
-
-
-
400
,000
1
50,0
00
To
tal n
on-in
tere
st b
earin
g lia
bilit
ies
2,1
01,0
97
1,8
21,6
03
727
,472
6
64,2
51
1,7
52,2
58
1,5
50,6
07
1,4
70,0
65
986
,417
1,
733,
393
1,5
88,0
70
7,7
84,2
85
6,61
0,94
8
Tota
l lia
bilit
ies
8,8
11,4
34
8,1
16,7
51 1
0,15
7,22
2
9,10
5,06
5
6,15
9,08
6
4,59
9,62
5
2,71
4,61
4
2,02
8,11
6 1
,753
,593
1,
588,
070
29,
595,
949
25,4
37,6
27
Pe
rcen
tage
29
.77%
31
.91%
34
.32%
35
.79%
20
.81%
18
.08%
9.
17%
7.
97%
5.
93%
6.
24%
10
0.00
%
100.
00%
Central Finance Company PLC - Annual Report 2010-1188
Notes to the Financial Statements
42 Contingent liabilities Group Company 31.03.2011 31.03.2010 31.03.2011 31.03.2010 Contingent liabilities as at Rs.’000 Rs.’000 Rs.’000 Rs.’000
Guarantees Issued Guarantees issued to insurance companies on
account of CF Insurance Brokers (Pvt) Ltd. - 9,500 - 9,500 Guarantees issued on behalf of depositors/
fully secured on their deposits 24,940 13,465 24,940 13,465 Performance bonds and warranties in respect of letter of credit facilities 14,888 - 14,888 - Corporate guarantee issued on account of
Hedges Court Residencies (Pvt) Ltd. 85,000 200,000 85,000 200,000 124,828 222,965 124,828 222,965
43 Events after the balance sheet date43.1 Second interim dividend and proposed final dividend The Directors have recommended the payment of a final dividend of Rs.5.00 per share for the year ended 31st March 2011,
(2009/10 – Rs.3.50 per share) which requires the approval of shareholders at the Annual General Meeting to be held on 19th August 2011. In accordance with Sri Lanka Accounting Standards 12 (revised 2005) “Events after the balance sheet date”. This proposed final dividend and the second interim dividend of Rs.3.00 per share paid after the year-end have not been recognised as liabilities at the year-end.
As required by section 56 (2) of the Companies Act No.7 of the 2007, the Board of Directors has confirmed that the Company satisfies the solvency test in accordance with Section 57 of the Companies Act No.7 of 2007, and has obtained solvency certificates from the auditor prior to declaring the second interim dividend of Rs.3.00 and the final dividend of Rs.5.00 per share.
43.2 The Company has entered into a interest rate SWAP transaction on 05th April 2011 on a notional amount of Rs.200,000,000.
No other circumstances have arisen since the balance sheet date which would require adjustments to /or disclosue in the financial statements.
44 Related party disclosures44.1 Parent and ultimate parent The Company does not have an identifiable parent of its own. 44.2 Subsidiaries and associates Relationship with subsidiaries and associates are explained on the pages 95 to 98 of the Annual Report. The Directors of the Company are also directors of the following subsidiary and associate companies of the Group. The Company carried out transactions in the ordinary course of business at commercial rates with these related entities. Net outstanding balances as at the year end are secured.
Central Finance Company PLC - Annual Report 2010-11 89
44.2 Subsidiaries and associates (contd.)
Central Industries PLC X X X - - - - X X - Central Developments Ltd. X X - - X - - - - - Dehigama Hotels Company Ltd. - X X - X - - - - - Expanded Plastic Products Ltd. - X X - - - - - - - Central Mineral Industries (Pvt) Ltd. - X X - - - - - - - Central Transport & Travels Ltd. - X X - - - - - - - Central Construction & Development (Pvt) Ltd. - X X - - - - - - - CF Growth Fund Ltd. X X X - - - - - - - Kandy Private Hospitals Ltd. - X X - - - - - - - CF Insurance Brokers (Pvt) Ltd. X X X X X - - X - - Central Homes (Pvt) Ltd. - X X - X - - - - - Mark Marine Services (Pvt) Ltd. - - - - - - - X X - Hedges Court Residencies (Pvt) Ltd. X X X - X - - X - - Capital Suisse Asia Ltd. - X - X - - - - X - Nations Trust Bank PLC - X - - - - - - X - Tea Smallholder Factories PLC - X - - - - - X - -
Group Company 31.03.2011 31.03.2010 31.03.2011 31.03.2010 Rs.’000 Rs.’000 Rs.’000 Rs.’000
44.3 Amounts due from related parties Subsidiaries Loans and advances 986,060 922,785 Trade and other receivables 49,623 54,049 1,035,683 976,834 Provision for doubtful debts (175,697) (105,000) Net amount due from subsidiary companies 859,986 871,834 Associates Lease and hire purchase receivables 21,386 14,786 Key management personnel (KMP) and their close family members Loans and advances 50,034 1,435 27,538 126 Other related entities Central Finance Company PLC Share Trust 357,640 374,590 357,640 374,590 407,674 376,025 1,266,550 1,261,336 Amount due from KMPs to
Central Finance Company PLC Share Trust 343,840 54,801 343,840 54,801
Amounts due to related parties Subsidiaries Deposits - - 200,638 163,675 Interest payable - - 6,835 11,055 Amounts due to subsidiaries - - 185,210 199,148 Associates Bank overdraft 32,932 11,938 32,932 11,938 Non -bank borrowings - 5,500 - - Key management personnel(KMP) and their close family members Deposits - - 198,977 164,441 32,932 17,438 624,592 550,257
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Central Finance Company PLC - Annual Report 2010-1190
Notes to the Financial Statements
Group Company 31.03.2011 31.03.2010 31.03.2011 31.03.2010 Rs.’000 Rs.’000 Rs.’000 Rs.’000
44.4 Transactions with related parties Subsidiaries Collection of insurance premium - - 886,266 877,016 Rendering of services - - 89,369 84,669 Loan instalment recoveries - - 15,000 60,294 Rent paid - - 24,229 24,250 Vehicle hire rentals received - - 5,228 5,663 Administrative fees received - - 66 66 Management fees received - - 1,080 360 Loans given - - 121,440 403,675 Interest received - - 51,928 41,782 Interest paid - - 17,862 26,175 Rent received - - 3,654 3,654 Guarantees given - - 85,000 209,500
Associates Interest paid 1,471 3,237 1,379 2,380 Lease facilities given 12,790 22,814 12,790 22,814 Vehicle hire rentals received 11,276 13,434 11,276 13,434 Lease and hire purchase rentals received 9,823 4,154 9,823 4,154
Key management personnel (KMP) and their close family members Interest paid 19,237 11,354 19,237 11,354 Interest received 3 117 3 117 Installment recoveries on purchase of apartments 23,991 2,064 - -
Other related entities (Central Finance Company PLC Share Trust) Instalment recoveries from KMPs on loans granted to purchase CF shares 18,083 11,652 - - Loans granted by the Trust to KMPs to purchase Central Finance shares 306,675 - - -
Post employement benefit plan Contributions to providend fund 17,803 14,386 15,796 12,658 Contributions to gratuity fund 68,555 37,589 67,230 36,617
Compensation of key management personnel Short Term Employee Benefits 131,516 111,171 114,310 92,005
Related parties include key management personnel defined as those persons having authority and responsibility for planning, directing and controlling the activities of the Company. Such KMPs comprise members of the Board of Directors of the Company and key employees of the Company who are responsible for planning, directing and controlling the operations of the Company.
Central Finance Company PLC - Annual Report 2010-11 91
44.5 Inter subsidiary transactions Hedges Court Residencies (Pvt) Ltd. paid Rs.9.95 Million (2009/10 - Rs.13.16 Million) on account of interest expense to the
following subsidiary companies.
2010/11 2009/10 Rs.’000 Rs.’000
Central Homes (Pvt) Ltd. 1,132 2,100 Kandy Private Hospitals Ltd. 5,185 5,358 Central Transport & Travels Ltd. 3,227 5,174 Central Developments Ltd. 408 529
CF Insurance Brokers (Pvt) Ltd. paid Rs.100,000 (2009/10 - Rs.300,000) to Central Transport & Travels Ltd. on account of vehicle hiring charges.
Inter- company balances between subsidiaries Due from Due to 2010/11 2009/10 Rs.’000 Rs.’000
Central Industries PLC. Central Transport & Travels Ltd. 96 96 CF Growth Fund Ltd. Central Developments Ltd. - 1,973 Central Mineral Industries (Pvt) Ltd. Central Transport & Travels Ltd. 2,872 2,872 Central Construction & Development (Pvt) Ltd. Central Transport & Travels Ltd. 250 250 Central Construction & Development (Pvt) Ltd. Central Mineral Industries (Pvt) Ltd. 119 84 Hedges Court Residencies (Pvt) Ltd. Central Homes (Pvt) Ltd. 1,218 17,586 Hedges Court Residencies (Pvt) Ltd. Kandy Private Hospitals Ltd. 16,888 46,792 Hedges Court Residencies (Pvt) Ltd. Central Transport & Travels Ltd. 2,197 33,874 Hedges Court Residencies (Pvt) Ltd. Central Developments Ltd. 417 2,009 24,057 105,536
45 Certain balances in the income statement have been re-classified to enhance the inter-period comparability. The following list gives detais of the re-classification of items in the current year. However, this did not have any impact on the net profit reported in the previous financial year.
Previously reported Current year presented amount amount Rs.’000 Rs.’000 Group Company Group Company
Income 7,601,262 7,046,739 7,536,516 7,057,483 Other operating income 1,546,442 n/a 1,470,952 n/a Other income 331,482 404,670 342,226 415,414 Personnel expenses 777,053 n/a 756,676 n/a Premises, equipment and establishment expenses 1,085,188 1,013,082 1,086,928 1,023,826 Other expenses 471,647 n/a 425,538 n/a Share of profit of associates 197,577 n/a 383,868 n/a Income tax expense 714,408 n/a 900,699 n/a
Central Finance Company PLC - Annual Report 2010-1192
Notes to the Financial Statements
Business Segment Information For the year ended 31st March Leasing ,hire purchase Vehicle Hire Medical services Power generation Manufacturing Insurance broking Investments in Investments in Real estate Intra segmental Total and other advances Shares and Units Financial Instruments adjustments in excess of statutory requirementsAll figures in Rs.000 2011 2010 2011 2010 2011 2010 2011 2010 2011 2010 2011 2010 2011 2010 2011 2010 2011 2010 2011 2010 2011 2010
Revenue
Interest income 6,142,634 5,542,874 4,408 4,460 323 189 - - 616 1,389 - - - 314 116,914 174,082 4,586 30 - - 6,269,481 5,723,338
Other operating income - - 795,733 876,747 49,240 42,758 166,252 130,831 270,965 291,011 130,833 129,605 - - - - - - - - 1,413,023 1,470,952
Other income 215,881 205,296 107,363 52,046 406 246 - - 2,530 3,599 43,842 23,705 284,304 158,950 - - 29,397 44,447 (271,856) (146,062) 411,867 342,226
Income from external customers 6,358,515 5,748,170 907,504 933,253 49,969 43,193 166,252 130,831 274,111 295,999 174,675 153,310 284,304 159,264 116,914 174,082 33,983 44,477 (271,856) (146,062) 8,094,371 7,536,516
Inter segment income 55,624 47,541 8,555 12,226 11,437 13,394 9,438 12,165 20 3,373 - - 2,152 2,486 - - 26,848 27,189 (114,074) (118,374) - -
Total income 6,414,139 5,795,711 916,059 945,479 61,406 56,587 175,690 142,996 274,131 299,372 174,675 153,310 286,456 161,750 116,914 174,082 60,831 71,666 (385,930) (264,436) 8,094,371 7,536,516
Expenses
Interest expenses 2,035,141 2,595,175 139,751 220,096 - - - - - - - - 63,887 77,501 102,209 142,810 14,275 23,163 - - 2,355,263 3,058,745
Other operating and
administrative expenses 1,954,827 1,773,389 396,905 436,517 39,108 33,673 31,185 31,528 151,329 137,984 104,374 104,233 885 1,207 - - 53,350 123,902 - (7,179) 2,731,963 2,635,254
3,989,968 4,368,564 536,656 656,613 39,108 33,673 31,185 31,528 151,329 137,984 104,374 104,233 64,772 78,708 102,209 142,810 67,625 147,065 - - 5,087,226 5,693,999
Inter segment expense 47,937 56,222 - - 5,040 6,360 - - 400 144 26,453 23,362 23,342 17,230 - - 10,902 15,056 (114,074) (118,374) - -
Total expenses 4,037,905 4,424,786 536,656 656,613 44,148 40,033 31,185 31,528 151,729 138,128 130,827 127,595 88,114 95,938 102,209 142,810 78,527 162,121 (114,074) (125,553) 5,087,226 5,693,999
Segment results 2,376,234 1,370,925 379,403 288,866 17,258 16,554 144,505 111,468 122,402 161,244 43,848 25,715 198,342 65,812 14,705 31,272 (17,696) (90,455) (271,856) (138,883) 3,007,145 1,842,517
Share of profits of associates 507,781 383,868
Profit before VAT on financial
services and income tax 3,514,926 2,226,385
VAT on financial services (273,333) (200,851)
Profit before income tax 3,241,593 2,025,534
Income tax expenses (1,330,155) (900,699)
Profit after income tax 1,911,438 1,124,835
Minority interest 84,404 78,723
Profit for the year 1,827,034 1,046,112
Segment assets 35,632,838 28,614,977 2,264,380 2,090,938 226,344 244,090 232,494 217,668 963,348 923,624 600,285 572,390 912,524 727,847 - 1,584,011 962,287 1,325,443 (2,540,352) (2,408,431) 39,254,148 33,892,557
Investments in associate companies 1,908,947 1,584,724
Total assets 35,632,838 28,614,977 2,264,380 2,090,938 226,344 244,090 232,494 217,668 963,348 923,624 600,285 572,390 912,524 727,847 - 1,584,011 962,287 1,325,443 (2,540,710) (2,408,431) 41,163,095 35,477,281
Segment liabilities 26,576,668 21,654,325 2,135,765 1,829,778 41,228 70,673 47,450 57,431 130,817 142,121 370,461 376,172 968,502 717,171 - 990,109 965,073 1,270,926 (1,517,875) (1,264,885) 29,718,089 25,843,821
Central Finance Company PLC - Annual Report 2010-11 93
Business Segment Information For the year ended 31st March Leasing ,hire purchase Vehicle Hire Medical services Power generation Manufacturing Insurance broking Investments in Investments in Real estate Intra segmental Total and other advances Shares and Units Financial Instruments adjustments in excess of statutory requirementsAll figures in Rs.000 2011 2010 2011 2010 2011 2010 2011 2010 2011 2010 2011 2010 2011 2010 2011 2010 2011 2010 2011 2010 2011 2010
Revenue
Interest income 6,142,634 5,542,874 4,408 4,460 323 189 - - 616 1,389 - - - 314 116,914 174,082 4,586 30 - - 6,269,481 5,723,338
Other operating income - - 795,733 876,747 49,240 42,758 166,252 130,831 270,965 291,011 130,833 129,605 - - - - - - - - 1,413,023 1,470,952
Other income 215,881 205,296 107,363 52,046 406 246 - - 2,530 3,599 43,842 23,705 284,304 158,950 - - 29,397 44,447 (271,856) (146,062) 411,867 342,226
Income from external customers 6,358,515 5,748,170 907,504 933,253 49,969 43,193 166,252 130,831 274,111 295,999 174,675 153,310 284,304 159,264 116,914 174,082 33,983 44,477 (271,856) (146,062) 8,094,371 7,536,516
Inter segment income 55,624 47,541 8,555 12,226 11,437 13,394 9,438 12,165 20 3,373 - - 2,152 2,486 - - 26,848 27,189 (114,074) (118,374) - -
Total income 6,414,139 5,795,711 916,059 945,479 61,406 56,587 175,690 142,996 274,131 299,372 174,675 153,310 286,456 161,750 116,914 174,082 60,831 71,666 (385,930) (264,436) 8,094,371 7,536,516
Expenses
Interest expenses 2,035,141 2,595,175 139,751 220,096 - - - - - - - - 63,887 77,501 102,209 142,810 14,275 23,163 - - 2,355,263 3,058,745
Other operating and
administrative expenses 1,954,827 1,773,389 396,905 436,517 39,108 33,673 31,185 31,528 151,329 137,984 104,374 104,233 885 1,207 - - 53,350 123,902 - (7,179) 2,731,963 2,635,254
3,989,968 4,368,564 536,656 656,613 39,108 33,673 31,185 31,528 151,329 137,984 104,374 104,233 64,772 78,708 102,209 142,810 67,625 147,065 - - 5,087,226 5,693,999
Inter segment expense 47,937 56,222 - - 5,040 6,360 - - 400 144 26,453 23,362 23,342 17,230 - - 10,902 15,056 (114,074) (118,374) - -
Total expenses 4,037,905 4,424,786 536,656 656,613 44,148 40,033 31,185 31,528 151,729 138,128 130,827 127,595 88,114 95,938 102,209 142,810 78,527 162,121 (114,074) (125,553) 5,087,226 5,693,999
Segment results 2,376,234 1,370,925 379,403 288,866 17,258 16,554 144,505 111,468 122,402 161,244 43,848 25,715 198,342 65,812 14,705 31,272 (17,696) (90,455) (271,856) (138,883) 3,007,145 1,842,517
Share of profits of associates 507,781 383,868
Profit before VAT on financial
services and income tax 3,514,926 2,226,385
VAT on financial services (273,333) (200,851)
Profit before income tax 3,241,593 2,025,534
Income tax expenses (1,330,155) (900,699)
Profit after income tax 1,911,438 1,124,835
Minority interest 84,404 78,723
Profit for the year 1,827,034 1,046,112
Segment assets 35,632,838 28,614,977 2,264,380 2,090,938 226,344 244,090 232,494 217,668 963,348 923,624 600,285 572,390 912,524 727,847 - 1,584,011 962,287 1,325,443 (2,540,352) (2,408,431) 39,254,148 33,892,557
Investments in associate companies 1,908,947 1,584,724
Total assets 35,632,838 28,614,977 2,264,380 2,090,938 226,344 244,090 232,494 217,668 963,348 923,624 600,285 572,390 912,524 727,847 - 1,584,011 962,287 1,325,443 (2,540,710) (2,408,431) 41,163,095 35,477,281
Segment liabilities 26,576,668 21,654,325 2,135,765 1,829,778 41,228 70,673 47,450 57,431 130,817 142,121 370,461 376,172 968,502 717,171 - 990,109 965,073 1,270,926 (1,517,875) (1,264,885) 29,718,089 25,843,821
Central Finance Company PLC - Annual Report 2010-1194
Directors’ Interest in Contracts with the Company
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Central Finance Company PLC - Annual Report 2010-11 95
Group Companies Group Companies
Subsidiaries
Central Industries PLC Central Developments Ltd Central Transport and Central Construction and Travels Ltd Development (Pvt) Ltd
Year of incorporation 1984 1974 1990 1983
Stated Capital Rs.121,320,460 Rs.132,940,000 Rs.29,490,070 Rs.50,000
(9,884,214 Shares) (13,294,000 Shares) (2,949,007 Shares) (5000 Shares)
Group Holding 49.98% 99.99% 99.99% 99.90%
Status of the Company Quoted Unquoted Unquoted Unquoted
Principal Activities Manufacture and distribution Investment company Hiring of vehicles Investment company
of PVC pipes and fittings
Registered Office No. 312, Nawala Road, No. 270, Vauxhall Street, No. 84, Raja Veediya, No. 84, Raja Veediya,
Rajagiriya Colombo 02 Kandy Kandy
S.V. Wanigasekera S.V. Wanigasekera E.H. Wijenaike E.H. Wijenaike
(Resigned w.e.f 01.05.2011) (Resigned w.e.f 01.05.2011)
E.H. Wijenaike E.H. Wijenaike G.S.N. Peiris G.S.N. Peiris
(Resigned w.e.f 01.05.2011)
A.N.P. Wickramasuriya C. Kiriella R.E. Rambukwelle R.E. Rambukwelle
(Appointed w.e.f 01.05.2011) (Appointed w.e.f 01.05.2011)
G.S.N. Peiris G.S.N. Peiris U.B. Elangasinha U.B. Elangasinha
(Appointed w.e.f 01.05.2011) (Appointed w.e.f 01.05.2011) (Appointed w.e.f 01.05.2011)
E.M. Wijenaike R.E. Rambukwelle
(Resigned w.e.f 12.10.2010) (Appointed w.e.f 01.05.2011)
C.S.W. De Costa U.B. Elangasinha
(Appointed w.e.f 01.05.2011)
R.E. Rambukwelle
A.K. Gunaratne
N.J. Abeysekera
Company Secretary Corporate Services Ltd. Kandy Business Kandy Business Kandy Business
216, De Saram place, Consultants (Pvt) Ltd. Consultants (Pvt) Ltd. Consultants (Pvt) Ltd.
Colombo 10 80, Kings Street, Kandy 80, Kings Street, Kandy 80, Kings Street, Kandy
COM
PAN
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LEBO
ARD
OF
DIR
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Central Finance Company PLC - Annual Report 2010-1196
Group Companies (contd.)
Group Companies
Subsidiaries
Central Mineral Central Homes ( Pvt ) Ltd CF Growth Fund Ltd CF Insurance Industries (Pvt) Ltd Brokers ( Pvt ) Ltd
Year of incorporation 1990 1987 1992 1995
Stated Capital Rs.3,500,000 Rs.34,175,020 Rs.163,036,780 Rs.123,750,000
(350,000 Shares) (3,417,502 Shares) (16,303,678 Shares) (12,375,000 Shares)
Group Holding 99.99% 99.99% 99.99% 99.99%
Status of the Company Unquoted Unquoted Unquoted Unquoted
Principal Activities Manufacture of mineral Property development and Importation and assembly Insurance broking
products sale of real estate of hand tractors
Registered Office Diganatenna Estate, No. 270, Vauxhall Street, No. 270, Vauxhall Street, No. 270, Vauxhall Street,
Gonawala, Digana Colombo 02 Colombo 02 Colombo 02
E.H. Wijenaike E.H. Wijenaike S.V. Wanigasekera S.V. Wanigasekera
(Resigned w.e.f 01.05.2011)
G.S.N. Peiris G.S.N. Peiris E.H. Wijenaike M.S. Wijenaike
U.B. Elangasinha C. Kiriella E.M. Wijenaike E.H. Wijenaike
(Resigned w.e.f 20.07.2010)
R.E. Rambukwelle G.S.N. Peiris G.S.N. Peiris
(Appointed w.e.f 01.05.2011)
C. Kiriella
R.E. Rambukwelle
Company Secretary Kandy Business Kandy Business Kandy Business Kandy Business
Consultants (Pvt) Ltd. Consultants (Pvt) Ltd. Consultants (Pvt) Ltd. Consultants (Pvt) Ltd.
80, Kings Street, Kandy 80, Kings Street, Kandy 80, Kings Street, Kandy 80, Kings Street, Kandy
COM
PAN
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LEBO
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OF
DIR
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Central Finance Company PLC - Annual Report 2010-11 97
Group Companies
Subsidiaries
Dehigama Hotels Expanded Plastic Hedges Court Kandy Private Hospitals Ltd Company Ltd Products Ltd Residencies (Pvt) Ltd
Year of incorporation 1973 1978 2005 1967
Stated Capital Rs.8,280,700 Rs.64,000,000 Rs.50,000,000 Rs.6,084,750
(828,070 Shares) (6,400,000 Shares) (5,000,000 Shares) (550,500 Shares)
Group Holding 79.69% 99.99% 99.99% 66.35%
Status of the Company Unquoted Unquoted Unquoted Unquoted
Principal Activities Renting of commercial Investment company Construction and sale Provision of healthcare services
property of apartments
Registered Office No. 84, Raja Veediya, No. 270, Vauxhall Street, No. 270, Vauxhall Street, No. 255/8, Katugastota Road,
Kandy Colombo 02 Colombo 02 Kandy
E.H. Wijenaike E.H. Wijenaike S.V. Wanigasekera E.H. Wijenaike
(Resigned w.e.f 01.05.2011)
G.S.N. Peiris G.S.N. Peiris E.H. Wijenaike G.S.N. Peiris
C. Kiriella R.E. Rambukwelle G.S.N. Peiris S. Ranasinghe
(Appointed w.e.f 01.05.2011)
C.D. Paranagama U.B. Elangasinha C. Kiriella S. Kapuwatte
(Appointed w.e.f 01.05.2011)
L. Sirimanne R.E. Rambukwelle A.P.R. Aluwihare
A. Jayasinghe D.P. De Silva N.H.B. Mavilmada
(Alternate to C.D. Paranagama)
H.C.D. Divitotawela A.B. Abeysinghe
(Alternate to L. Sirimanne)
Company Secretary Corporate Services Ltd. Kandy Business Managers & Kandy Business
216, De Saram place, Consultants (Pvt) Ltd. Secretaries (Pvt) Ltd. Consultants (Pvt) Ltd.
Colombo 10 80, Kings Street, Kandy 08, Tickell Road, Colombo 08 80, Kings Street, Kandy
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Central Finance Company PLC - Annual Report 2010-1198
Group Companies (contd.)
Group Companies Group Companies
Subsidiaries Associates
Mark Marine Capital Suisse Asia Ltd. Nations Trust Bank PLC Tea Smallholder Factories PLC Services (Pvt) Ltd
Year of incorporation 1997 1995 1999 1991
Stated Capital Rs.85,611,980 Rs.182,644,922 Rs.5,101,369,000 Rs.150,000,000
(8,561,198 Shares) (18,100,007 Shares) (230,607,283 Shares) (15,000,000 Shares)
Group Holding 58.12% 24.58% 20.00% 29.30%
Status of the Company Unquoted Unquoted Quoted Quoted
Principal Activities Generation of hydro power Provision of management Commercial, Investment, Processing tea from green leaf
services and private banking purchased from small holders
Registered Office No. 4, Circular Lane, No. 244, Vauxhall Street, No. 242, Union Place, No. 320/1, Union Place,
Sapumal Place, Rajagiriya Colombo 02 Colombo 02 Colombo 02
A.A.A. Makalanda A.K. Gunaratne A.D. Gunewardene S.C. Ratnayake
G.C.J. Makalanda E.H. Wijenaike E.H. Wijenaike A.D. Gunewardene
A.K. Gunaratne M.S. Wijenaike J.R.F. Peiris J.R.F. Peiris
R.E. Rambukwelle S.T. Amarasuriya A.K. Gunaratne E.H. Wijenaike
U.B. Elangasinha P. Bottinelli C.H.S.K. Piyaratna R.E. Rambukwelle
D.P. De Silva G.N. Fernando A.R. Rasiah A.S. Jayathilleke
S.P.P. Makalanda N. Amarasuriya M.E. Wickremesinghe J.S. Ratwatte
(Alternate to A.A.A. Makalanda)
A.F. Goonetillake D. Weerakoon R. Seevaratnam
(Alternate to U.B. Elangasinha)
K.N.J. Balendra L.D. Ramanayake
S.G. Rajakaruna
M. Jafferjee
(Appointed w.e.f 15.12.2010)
Kemal De Soysa
(Appointed w.e.f 21.01.2011)
Company Secretary Management B.P. De Silva (Ceylon) Ltd. Theja Silva Keells Consultants Limited.
Applications (Pvt) Ltd. 234/4, Old Awissawella 130, Glennie Street,
12, Rotunda Gardens, Road, Orugodawatta Colombo 02
Colombo 03
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Central Finance Company PLC - Annual Report 2010-11 99
Group Value Added Statement For the year ended 31st March 2011 % 2010 % Rs.’000 Rs.’000
Value Added Operating Income earned by providing financial services 7,682,504 7,194,290 Cost of services (3,395,759) (4,043,590) Value added by financial services 4,286,745 3,150,700 Other Income 411,867 342,226 Provision for losses on loans, advances and assets (186,822) (299,479) Share of Associate companies’ profits before tax 507,781 383,868 5,019,571 3,577,315
Value Allocated To employees remuneration 1,007,248 20.07 823,309 23.01 To providers of capital Dividends to shareholders 147,175 2.93 101,500 2.84 Minority interest 84,404 1.68 78,723 2.20 To government revenue Income tax 1,330,155 26.49 900,699 25.18 Turnover tax and Debit tax 4,349 0.09 8,469 0.24 VAT on financial services 273,333 5.45 200,851 5.61 To expansion and growth Retained income 1,679,859 33.47 944,612 26.41 Depreciation 493,048 9.82 519,152 14.51 5,019,571 100.00 3,577,315 100.00
Consolidated sources & utilisation of income For the year ended 31st March 2011 % 2010 % Rs.’000 Rs.’000
Sources of income Interest and other operating income 7,682,504 89.31 7,194,290 90.83 Other Income 411,867 4.79 342,226 4.32 Share of associate companies’ profits before tax 507,781 5.90 383,868 4.85 8,602,152 100.00 7,920,384 100.00
Utilisation of income Interst expenses 2,355,263 27.38 3,058,745 38.62 Remuneration to employees 1,007,248 11.71 823.309 10.39 Other operating expenses including provision for bad debts,
diminition in value of investments and depreciation 1,720,366 20.00 1,803.476 22.78 Taxation 1,607,837 18.69 1,110,019 14.01 Dividends to shareholders 147,175 1.71 101,500 1.28 Retained income 1,679,859 19.53 944,612 11.93 Minority interest 84,404 0.98 78,723 0.99 8,602,152 100.00 7,920,384 100.00
Central Finance Company PLC - Annual Report 2010-11100
Share Information 1. Stock Exchange The Ordinary Shares of the Company are listed on the Colombo Stock Exchange.
The audited Income Statement for the year ended 31st March 2011 and the audited Balance Sheet of the Company and of the Group as at that date have been submitted to the Colombo Stock Exchange within five months of the Balance Sheet date.
2. Ordinary Shareholders as at 31st March 2011 - 2,516 (Stated capital of the Company solely represents voting ordinary shares.)
Number of shareholders (as at 31.03.2010 – 1,959)
No. of shares held Residents Non-residents Total No.of No.of % No.of No.of % No.of No.of % share shares share shares share shares holders holders holders
1 - 1,000 1,707 543,811 2.68 28 14,333 0.07 1,735 558,144 2.75 1,001 - 5,000 477 1,290,455 6.36 10 54,946 0.27 487 1,345,401 6.63 5,001 - 10,000 107 777,786 3.83 4 30,900 0.15 111 808,686 3.98 10,001 - 50,000 133 3,061,908 15.08 11 267,690 1.32 144 3,329,598 16.40
50,001 - 100,000 15 1,258,704 6.20 3 196,253 0.97 18 1,454,957 7.17 100,001 - 500,000 16 3,495,646 17.22 1 145,025 0.71 17 3,640,671 17.93 500,001 - 1,000,000 1 633,166 3.12 - - - 1 633,166 3.12 Over 1,000,000 3 8,529,377 42.02 - - - 3 8,529,377 42.02
2,459 19,590,853 96.51 57 709,147 3.49 2,516 20,300,000 100.00
There were 1,905 resident and 54 non-resident share holders as at 31st March 2010.
31st March 2011 31st March 2010 No of No of % No of No of % Share shares share shares holders holders
Individuals 2,310 11,786,921 58.06 1,818 10,504,119 51.74
Institutions 206 8,513,079 41.94 141 9,795,881 48.26
2,516 20,300,000 100.00 1,959 20,300,000 100.00
As per Rule No.7.6 (iv) of the Colombo Stock Exchange, the percentage of public holding as at 31st March 2011 was 58.03%. (31st March 2010 – 42.15%)
0
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15
20
25
30Shareholders’ Funds and Market Capitalisation. (Rs.Mn.)
Shareholders' FundsMarket Capitalisation
Financial Year06/07 07/08 08/09 09/10 10/11
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Net Asset Value per shareMarket Value per share
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Central Finance Company PLC - Annual Report 2010-11 101
3. Twenty largest shareholders as at 31st March 2011 31st March 2011 * 31st March 2010 No. of shares % No. of shares %
1. Corporate Services (Private) Ltd. 3,540,737 17.44 4,728,288 23.29 2. E.H. Wijenaike 3,128,540 15.41 3,053,540 15.04 3. Perpetual Capital (Private) Limited. 1,860,100 9.16 - - 4. A.J. Wijenaike 633,166 3.12 633,166 3.12 5. J.B. Cocoshell (Pvt) Ltd. 476,466 2.35 664,766 3.27 6. N.W. Wijegoonawardene 418,520 2.06 418,520 2.06 7. G.S.N. Peiris 352,446 1.74 277,446 1.37 8. N.M. Gunawardena 251,680 1.24 251,680 1.24 9. P.R. Munasinghe 237,480 1.17 237,480 1.17 10. C.R. Dunuwille 236,316 1.16 236,316 1.16 11. S.V. Wanigasekera 203,833 1.00 149,833 0.74 12. S.K. Wedande 198,467 0.98 199,851 0.98 13. P.M. Wijenaike 196,680 0.97 196,680 0.97 14. R.E. Rambukwelle 190,000 0.94 115,000 0.57 15. C. Kiriella 187,332 0.92 142,332 0.70 16. N.M. Wahab 145,025 0.71 145,025 0.71 17. The Ceylon Chamber of Commerce account No 02. 143,133 0.71 143,133 0.71 18. Janashakthi Insurance PLC (Shareholders) 132,900 0.65 - - 19. A.K. Gunaratne 161,666 0.80 86,666 0.43 20. Union Assurance PLC/No-01A/C. 108,100 0.53 - - 12,802,587 63.06 11,679,722 57.53 Others 7,497,413 36.94 8,620,278 42.47 Total 20,300,000 100.00 20,300,000 100.00 * Comparative shareholdings as at 31st March 2010 of the twenty largest shareholders as at 31st March 2011.
4. Market Value The market value of Central Finance Company PLC, ordinary shares.
2010/11 2009/10 2008/09 Rs. Rs. Rs. Highest 1,300.00 (on 23.03.2011) 410.00 (on 13.01.2010) 237.00 (on 08.05.2008) Lowest 388.75 (on 24.05.2010) 158.00 (on 11.05.2009) 148.00 (on 09.03.2009) Year End 1273.70 390.00 157.00
5. Dividend Payments 2010/11 2009/10 Rs. Rs. First Interim 2.50 1.25 Second Interim 3.00 1.25 Final Dividend 5.00 3.50 Total Dividend 10.50 6.00
6. Share Trading 2010/11 2009/10 2008/09 No. of shares traded 8,709,000 2,002,900 775,500 Value of shares traded (Rs.’000) 6,866,551 597,524 161,502 Market Capitalisation (Rs.’000) 25,856,110 7,917,000 3,187,100
Central Finance Company PLC - Annual Report 2010-11102
Year ended 31st March 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Rs.’000 Rs.’000 Rs.’000 Rs.’000 Rs.’000 Rs.’000 Rs.’000 Rs.’000 Rs.’000 Rs.’000
Group income 2,007,641 2,574,382 3,035,435 2,092,281 4,195,574 5,332,059 6,453,132 7,405,866 7,536,516 8,094,371
Income
Interest Income 1,646,303 1,820,790 2,095,301 2,208,204 2,704,715 3,651,989 4,662,008 5,520,829 5,723,338 6,269,481
Other operating Income 274,653 360,030 526,232 802,533 1,265,417 1,477,626 1,615,909 1,638,866 1,470,952 1,413,023
Other Income 86,685 393,562 413,902 81,544 225,442 202,444 175,215 246,171 342,226 411,867
Interest Expenses
Interest on deposits (1,078,306) (1,026,175) (1,045,773) (966,721) (1,063,482) (1,315,954) (1,751,728) (2,212,756) (2,561,737) (2,072,875)
Interest on bank and other borrowings (126,804) (102,335) (81,153) (101,024) (274,835) (538,298) (913,129) (1,001,190) (497,008) (282,388)
Operating expenses (482,973) (696,595) (693,304) (814,469) (1,447,632) (1,832,297) (2,008,313) (2,234,224) (2,335,775) (2,545,141)
Loan losses and provision (85,459) (161,543) (379,988) (224,031) (27,642) (48,357) (124,399) (220,189) (299,479) (186,822)
Share of profit of associate 6,859 29,103 70,489 69,865 85,909 102,150 168,434 163,953 383,868 507,781
VAT on financial services - - - - - (115,246) (107,803) (159,080) (200,851) (273,333)
Profit before income tax 240,958 616,837 905,706 1,055,901 1,467,892 1,584,057 1,716,194 1,742,380 2,025,534 3,241,593
Income tax expense (24,403) (22,141) (42,854) (284,149) (377,197) (419,634) (456,608) (561,336) (900,699) (1,330,155)
Net profit for the year 216,555 594,696 862,852 771,752 1,090,695 1,164,423 1,259,586 1,181,044 1,124,835 1,911,438
Attributable to equity holders of the parent 195,727 566,295 822,266 722,636 1,042,400 1,122,237 1,210,711 1,126,985 1,046,112 1,827,034
Attributable to minority interest 20,828 28,401 40,586 49,116 48,295 42,186 48,875 54,059 78,723 84,404
Balance Sheet
Stated capital 121,800 121,800 121,800 203,000 203,000 203,020 203,020 203,020 203,020 203,020
Capital reserves 761,491 757,511 732,895 728,514 725,677 1,308,366 1,326,647 1,382,664 1,377,177 1,385,463
Reserve fund 223,500 274,500 313,500 349,500 395,500 448,500 501,000 553,500 601,000 682,000
Unrealised income reserve 569,000 294,000 103,000 103,000 53,000 53,000 - - - -
Revenue reserves 868,619 1,381,365 2,162,643 2,118,195 3,038,516 4,040,699 5,107,037 6,053,306 6,945,757 8,627,110
Shareholders' funds 2,544,410 2,829,176 3,433,838 3,502,209 4,415,693 6,053,585 7,137,704 8,192,490 9,126,954 10,897,593
Minority interest 187,257 273,780 252,314 306,069 302,166 320,779 350,818 459,454 506,506 547,413
2,731,667 3,102,956 3,686,152 3,808,278 4,717,859 6,374,364 7,488,522 8,651,944 9,633,460 11,445,006
Decade at a Glance
Central Finance Company PLC - Annual Report 2010-11 103
Year ended 31st March 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Rs.’000 Rs.’000 Rs.’000 Rs.’000 Rs.’000 Rs.’000 Rs.’000 Rs.’000 Rs.’000 Rs.’000
Assets
Cash and other liquid assets 1,287,214 1,448,803 1,715,819 1,660,394 1,803,290 1,996,020 2,108,534 2,822,987 3,727,366 2,395,074
Dealing securities 28,121 19,830 21 61,296 8,208 7,322 8,168 7,444 2,200 32,000
Investment securities 324,942 199,156 69,652 72,746 8,219 8,319 7,949 10,338 121,176 180,331
Investments in associates 557,356 601,433 524,020 519,130 767,637 862,149 1,209,943 1,224,834 1,584,724 1,908,947
Advances to customers 5,859,843 7,223,095 9,406,020 12,859,872 14,143,703 18,704,532 20,768,506 21,353,518 21,733,403 28,659,973
Other assets 2,537,698 2,394,390 2,242,096 715,832 1,888,578 2,425,317 2,892,999 3,490,477 3,675,363 3,127,139
Property, plant and equipment 1,365,466 1,646,372 1,678,866 1,733,342 4,357,335 5,490,668 5,453,522 5,137,289 4,633,049 4,859,631
Total Assets 11,960,640 13,533,079 15,636,494 17,622,612 22,976,970 29,494,327 32,449,621 34,046,887 35,477,281 41,163,095
Liabilities
Deposits 7,241,743 8,112,617 9,433,518 9,614,073 10,406,456 11,765,897 12,172,031 13,354,133 17,233,458 18,757,201
Bank and other borrowings 504,699 794,679 715,316 1,227,910 3,854,109 6,299,135 6,963,437 5,866,646 1,756,655 2,832,760
Other liabilities 1,482,531 1,522,827 1,801,508 2,972,351 3,998,546 5,054,931 5,825,631 6,174,164 6,853,708 8,128,128
Total Liabilities 9,228,973 10,430,123 11,950,342 13,814,334 18,259,111 23,119,963 24,961,099 25,394,943 25,843,821 29,718,089
Key Indicators
Earnings per share (Rs.) 9.64 27.90 40.51 35.60 51.35 55.28 59.64 55.52 51.53 90.00
Net assets per share (Rs.) 128.30 142.32 172.11 175.48 220.48 298.21 351.61 403.57 449.60 536.83
Adjusted market value per share (Rs.) 30.00 60.00 134.70 143.75 205.00 236.00 200.00 157.00 390.00 1,273.70
Price earnings ratio (no. of times) 3.11 2.15 3.33 4.04 3.99 4.27 3.35 2.83 7.57 14.15
Gross dividends paid (Rs.'000) 21,315 36,540 48,720 57,855 71,050 91,350 91,350 101,500 121,800 213,150
Dividend cover (times covered) 9.18 15.5 16.88 12.49 14.67 12.28 13.25 11.10 7.72 7.55
Market price per share (Rs.) 50.00 100.00 224.50 143.75 205.00 236.00 200.00 157.00 390.00 1,273.70
Central Finance Company PLC - Annual Report 2010-11104
Employees of the Year
Head Office 2010/11
April N. Sudarshan
AugustA. Gray
December H. M. S. B. Herath
May A. Sugathadasa
September A. Hennayake
January S. Vithanage
JuneG. G. S. Chaminda
October A. M. Mudiyanse
February N. Jayalath
July S. Chadrasekara
November K. M. P. A. Bandara
March T. R. Dias
Central Finance Company PLC - Annual Report 2010-11 105
City Office 2010/11
April A. D. B. C. Athapaththu
AugustW. D. Priyantha
December V. S. Sasidaran
May P. A. Gunesekera
September R. A. A. D. Ranasinghe
January R. A. S. Nishantha
JuneD. M. T. R. Dissanayake
October T. R. Watawala
February P. D. A. I. Chandradasa
July R. A. Upali
November Y. S. Niroshana
March G. Manabarana
Central Finance Company PLC - Annual Report 2010-11106
April W. A. R. P. Wijeweera
Mahiyanganaya
AugustSaman Ratnayake
Batticaloa
December Bernard WijeratneMahiyanganaya
May H. B. Ajith Kumara
Anuradhapura
September W. Lasanthi Sandaleka
Nikaweratiya
JanuaryShalitha Wickramanayake
Wennappuwa
JuneNuwan Sameera
Hanwella
October S. K. NilushaMaharagama
February A. S. Kothalawala
Homagama
July Sameera Thushantha
Bandarawela
November R. Samadhi Dissanayake
Tissamaharamaya
March A. D. Nagahawatte
Galle
Employees of the Year (contd.)
Branches 2010/11
Central Finance Company PLC - Annual Report 2010-11 107
Accrual basis - the system of
accounting wherein revenue is recognised
at the time it is earned and expenses at
the time they are incurred, regardless of
whether cash has actually been received or
paid out.
Associate company - an associate
is an entity, including an unincorporated
entity such as a partnership, over which the
investor has significant influence and that
is neither a subsidiary nor an interest in a
joint venture.
Cash equivalents - short-term,
highly liquid investments that are readily
convertible to known amounts of cash and
which are subject to an insignificant risk of
changes in value.
Consolidated financial statements - financial statement of a holding company
and its subsidiaries based on their combined
assets, liabilities and operating results.
Contingencies - a condition or situation
existing at the balance sheet date where
the outcome will be confirmed only by the
occurrence or non-occurrence of one or
more future events.
Corporate governance - process by
which corporate entities are governed to
promote stakeholder interest. Shareholders
exert collective pressure on management
to ensure equitable decision making on
matters that may affect the value of their
holdings and base their response on
statutory requirements or on so called
“Best Practice”.
Dealing securities - marketable
securities that are acquired and held with
the intention of reselling them in the short
term.
Dividend cover - profit attributable to
ordinary shareholders divided by gross
dividends to ordinary shares; this indicates
number of times dividend is covered by
current year’s distributable profits.
Dividend per share - value of the total
dividend paid out and proposed to ordinary
shareholders divided by the number of
ordinary shares in issue; this indicates
the proportion of current year’s dividend
attributable to an ordinary share in issue.
Earnings per share (EPS) - profit
attributable to ordinary shareholders
divided by the number of ordinary shares
in issue; this indicates the proportion of
current year’s earnings attributable to an
ordinary share in issue.
Equity method - a method of
accounting whereby the investment is
initially recognised at cost and adjusted
thereafter for the post-acquisition change
in the investor’s share of net assets of the
investee. The profit or loss of the investor
includes the investor’s share of the profit or
loss of the investee.
Finance lease - a lease that transfers
substantially all the risks and rewards
incidental to the ownership of an asset to
the lessee. Title may or may not eventually
be transferred.
Gross dividend - the proportion of
profit distributed to shareholders including
the tax withheld.
Hire purchase - a contract between
hirer and financier where the hirer takes on
hire a particular article from the financier,
with the option to purchase the article
at the conclusion of the agreed rental
payments.
Interest cover - earnings before interest
and tax divided by interest expenses; this
indicates the ability to cover or service
interest charges of the debt holders.
Interest in suspense - interest
suspended on non-performing loans and
advances.
Interest rate SWAP - an interest rate
SWAP is a contract, whereby two parties
agree to exchange a set of interest cash
flows based on a notional principle on
pre-arranged dates. Normally fixed rate is
exchanged for a floating rate.
Lease - an agreement whereby the
lessor conveys to the lessee in return for a
payment or series of payments the right to
use an asset for an agreed period of time.
Market capitalisation - number of
ordinary shares in issue multiplied by
market value of a share and indicates total
market value of all ordinary shares in issue.
Minority interest - portion of the profit
or loss and net assets of a subsidiary
attributable to equity interests that are
not owned, directly or indirectly through
subsidiaries, by the parent.
Net asset value per ordinary share - ordinary shareholders’ funds divided by
the number of ordinary shares in issue.
Non-performing advances - loans
and advances of which rentals are in
arrears for six months or more.
Operating lease - an operating lease is
a lease other than a finance lease.
Provision - amounts set aside against
possible losses on net receivable of facilities
Glossary of Financial Terms
Central Finance Company PLC - Annual Report 2010-11108
granted to customers as a result of their
becoming partly or wholly uncollectible.
Related parties - parties are considered
to be related if one party has the ability
to control the other party or exercise
significant influence over the other party in
making financial and operating decisions.
Related party transactions - is a
transfer of resources, services or obligations
between related parties, regardless of
whether a price is charged or not.
Return on average assets (ROA) - profit after tax expressed as a percentage of
average total assets.
Return on average equity (ROE) - profit after tax less preference share
dividends if any, expressed as a percentage
of average ordinary shareholders’ equity.
Segmental Analysis - analysis of
financial information by segments of
an enterprise specifically the different
industries and the different geographical
areas in which it operates.
Shareholders’ funds (Equity) - total
of issued and fully paid ordinary share
capital and capital and revenue reserves
attributable to ordinary shareholders.
Subsidiary company - an entity,
including an unincorporated entity such
as a partnership, which is controlled by
another entity, known as the parent.
Substance over form - the
consideration that the accounting
treatment and the presentation in financial
statements of transactions and the events
are governed by their financial reality and
not merely by its legal form.
Tier I capital - core capital representing
permanent share holders’ equity
and reserves created or increased by
appropriations of retained earnings or other
surpluses.
Tier II capital - supplementary capital
representing revaluation reserves, general
provisions and other capital instruments,
which combine certain characteristics of
equity and debts, such as, hybrid capital
instruments and unsecured subordinate
term debts.
Glossary of Financial Terms (contd.)
Central Finance Company PLC - Annual Report 2010-11 109
Notice is hereby given that the Fifty Third Annual General Meeting of Central Finance Company PLC will be held at the Registered Office of
the Company, 84, Raja Veediya, Kandy on 19th day of August 2011 at 11.00 a.m. for the following purposes.
1. To receive and consider the Annual Report of the Board together with the Financial Statements of the Company for the year ended
31st March 2011 and Report of the Auditors thereon.
2. To approve a final dividend of Rs.5.00 per share as authorised by the Directors.
3. To re-elect as a Director T.K. Bandaranayake who retires by rotation in terms of Article 105 of the Articles of Association of the
Company.
4. To propose the following resolution as an ordinary resolution for the reappointment of S.V. Wanigasekera who has reached the
age of 87 years.
“IT IS HEREBY RESOLVED that the age limit referred to in section 210 of the Companies Act No.07 of 2007 shall not apply
to S.V.Wanigasekera who has reached the age of 87 years prior to this Annual General Meeting and that he be reappointed
as a director of the Company”.
5. To re-elect S.C.S. Wickramasinghe a Director who retires in terms of Article 111 of the Articles of Association of the Company,
and being eligible has offered himself for re-election.
6. To re-elect C.L.K.P. Jayasuriya a Director who retires in terms of Article 111 of the Articles of Association of the Company,
and being eligible has offered himself for re-election.
7. To re-elect D.P. De Silva a Director who retires in terms of Article 111 of the Articles of Association of the Company, and being
eligible has offered himself for re-election.
8. To re-appoint SJMS Associates, Chartered Accountants, as Auditor of the Company, to hold office until the conclusion of the
next Annual General Meeting of the Company at a remuneration to be agreed with by the Board of Directors and to audit the
Financial Statements of the Company for the accounting period ending 31st March 2012.
9. To authorise the Directors to determine contributions to charities for the ensuing year.
By Order of the Board,
Director
Corporate Services (Pvt) LimitedSecretaries
Central Finance Company PLCColombo on this 30th day of June 2011
Note:
(1) Any member entitled to attend and vote is entitled to appoint a proxy instead.
A proxy need not be a member, instruments appointing proxies must be lodged with the Company not less than 48 hours before the
meeting.
(2) It is proposed to dispatch the dividend warrants on 30th August 2011 in accordance with the rules of the Colombo Stock Exchange,
the shares of the Company will be quoted ex-dividend with effect from 22nd August 2011.
Notice of Meeting
Central Finance Company PLC - Annual Report 2010-11110
Notes
Central Finance Company PLC - Annual Report 2010-11 111
Form of Proxy*I/We …………………………………………………………………………………………………….……………………………………………
of ………………………………………………………..……………………………………………………………………………………………...
being *a member/members of CENTRAL FINANCE COMPANY PLC do hereby appoint
1. Stanley Vincent Wanigasekera or failing him,
2. Eranjith Harendra Wijenaike or failing him,
3. Gerard Shamil Niranjan Peiris or failing him,
4. Udaya Lankadikari Kadurugamuwa or failing him,
5. Ravindra Erle Rambukwelle or failing him,
6. Arjuna Kapila Gunaratne or failing him,
7. Tissa Kumara Bandaranayake or failing him,
8. Sunil Chandra Sillapana Wickramasinghe or failing him,
9. Chandima Lalith Kumar Perera Jayasuriya or failing him,
10. Dhammika Prasanna De Silva or failing him,
……………………………………………………………………………………………………………………………………………………… of
…………………………………………………………………………………………………………………………………………………………
as *my/our Proxy to vote/speak for me/us on *my/our behalf at the 53rd Annual General Meeting of the Company to be held at the
registered office of the Company, No.84, Raja Veediya,Kandy on the 19th day of August 2011 at 11.00 a.m. and at any adjournment
thereof, and at every poll which may be taken in consequence thereof.
For Against
1. To receive and consider the Annual Report of the Board together with the Financial Statements of the
Company
2. To approve a final dividend of Rs.5.00 per share as authorized by the Directors
3. To re-elect as a Director T.K. Bandaranayake in terms of Article 105 of the Articles of Association
4. To re-elect as a Director S.V. Wanigasekera in terms of section 210 of the Companies Act No.07 of 2007
5. To re-elect as a Director S.C.S. Wickramasinghe in terms of Article 111 of the Articles of Association
6. To re-elect as a Director C.L.K.P. Jayasuriya in terms of Article 111 of the Articles of Association
7. To re-elect as a Director D.P. De Silva in terms of Article 111 of the Articles of Association
8. To appoint SJMS Associates as Auditor of the Company to audit the financial statements and authorize the
Directors to fix their remuneration
9. To authorise the Directors to determine contributions to charities
Signed this ………………… day of ………………… Two Thousand and Eleven.
……………………………….
*Signature/s
Note: Please delete the inappropriate words
Instructions as to completion are noted on the reverse hereof.
Central Finance Company PLC - Annual Report 2010-11112
Instructions as to Completion
1. Kindly perfect the Form of Proxy after filling in legibly your full name and address and sign in the space provided. Please fill in the date
of signature.
2. A Member entitled to attend and vote at the Meeting is entitled to appoint a Proxy who need not be a member, to attend and vote
instead of him.
3. In the case of a Corporate Member, the Form of Proxy must be completed under its Common Seal, which should be affixed and
attested in the manner prescribed by Articles of Association.
4. If the Form of Proxy is signed by an Attorney, the relevant Power of Attorney should also accompany the completed Form of Proxy, in
the manner prescribed by the Articles of Association.
5. The completed Form of Proxy should be deposited at the Registered Office of the Company, No.84, Raja Veediya, Kandy not less
than forty eight (48) hours before the appointed time for the Meeting.
Printed by Aitken Spence Printing and Packaging (Pvt) Ltd.
NAME OF COMPANYCentral Finance Company PLC
LEGAL FORMA Quoted Public Company with limited liability incorporated in Sri Lanka on 5th December 1957 and re-registered under the Companies Act No.07 of 2007 on 9th August 2007.
Registered under Finance Companies Act No.78 of 1988 and Finance Leasing Act No.56 of 2000.
Approved Credit Agency under:* Mortgage Act No.6 of 1949* Trust Receipt Ordinance No.12 of 1947
COMPANY REGISTRATION NUMBERPQ 67
TAX PAYER IDENTIFICATION NUMBER (TIN)104017258
C. Wijenaike - President
DIRECTORSS.V. Wanigasekera - ChairmanE.H. Wijenaike - Managing DirectorG.S.N. Peiris - Director (Finance)C. Kiriella - Director (Legal)M.S. Wijenaike U.L. Kadurugamuwa G.C.B. Wijeyesinghe R.E. Rambukwelle - Director (Marketing and Operations)A.K. Gunaratne - Director (Group Co-ordination)T.K. Bandaranayake
STOCK EXCHANGE LISTINGThe ordinary shares of the Company are listed on the Colombo Stock Exchange of Sri Lanka.
HEAD/ REGISTERED OFFICE84, Raja Veediya, Kandy.Telephone : 081- 2227000Facsimile : 081- 2232047
CITY OFFICE270, Vauxhall Street,Colombo 2.Telephone : 011 - 2300555Facsimile : 011 - 2300441E-mail : [email protected] : www.cf.lk
BANKERSBank of CeylonCiti Bank N.A.Commercial Bank of Ceylon PLCICICI Bank Ltd.Hatton National Bank PLCHongkong & Shanghai Banking Corporation Ltd.NDB Bank PLCNations Trust Bank PLCPeople’s BankSampath Bank PLCSeylan Bank PLCStandard Chartered BankUnion Bank PLCHabib Bank Ltd
AUDITORSJMS Associates,Chartered Accountants,2, Castle Lane,Colombo 04.
LEGAL ADVISERSF.J & G. de Saram,Attorneys-at-Law,P.O. Box 212,Colombo.
COMPANY SECRETARIESCorporate Services (Pvt) Limited,216, De Saram Place,Colombo10.Telephone : 011- 4605100Facsimile : 011- 4718220
ADMINISTRATIONIf you receive more than one copy of the Annual Report at the same address, we will appreciate such information of duplication communicated to the Company Secretaries in order to update the mailing list and minimize wasted expenditure in the future.
Corporate Information
VISIONCentral Finance shall be the first choice for progressive customers in delivering innovative financial solutions.
MISSIONTo be the leader in our industry, conducting business with responsibility, using our expertise in helping customers grow and prosper whilst creating lasting value for our shareholders.
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