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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

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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

50

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


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.


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.)


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.


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



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.


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



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


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


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


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


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.


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.)


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


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


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


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.)


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


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.


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


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.)


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


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.





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.





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.






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.





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.






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.





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.



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.


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.




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.





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.




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.



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.


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.


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 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


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


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


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


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


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


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.


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


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.


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.


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


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


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


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


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


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


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


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



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.


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


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.


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.


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


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.


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.


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


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


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


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.


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.


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


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).


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).


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



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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




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


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



(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



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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.


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


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


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



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


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



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


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




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


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


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


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.


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.



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



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.


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.


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).



41

Mat

urit

y A

naly

sis

An

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l

31

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31

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2011

31

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2010

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Rs.’0

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M

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Ana

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31

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31

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31

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2011

31

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2010

31

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2011

31

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2010

31

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2011

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2010

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011

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Rs

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Rs

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Rs

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0.00

%

100.

00%



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.


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 - -


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

S.V.

Wan

igas

eker

a

E.H

. Wije

naik

e

G.S

.N. P

eiris

M.S

. Wije

naik

e

C. K

iriel

la

U.L

. Kad

urug

amuw

a

G.C

.B. W

ijeye

sing

he

R.E.

Ram

bukw

elle

A.K.

Gun

arat

ne

T.K.

Ban

dara

naya

ke




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.


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



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


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


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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

Y PR

OFI

LEBO

ARD

OF

DIR

ECTO

RS


Group Companies (contd.)

Group Companies

Subsidiaries

Central Mineral Central Homes ( Pvt ) Ltd CF Growth Fund Ltd CF Insurance Industries (Pvt) Ltd Brokers ( Pvt ) Ltd


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


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


R.E. Rambukwelle G.S.N. Peiris G.S.N. Peiris


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

Y PR

OFI

LEBO

ARD

OF

DIR

ECTO

RS


Group Companies

Subsidiaries

Dehigama Hotels Expanded Plastic Hedges Court Kandy Private Hospitals Ltd Company Ltd Products Ltd Residencies (Pvt) Ltd


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


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


C.D. Paranagama U.B. Elangasinha C. Kiriella S. Kapuwatte


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

COM

PAN

Y PR

OFI

LEBO

ARD

OF

DIR

ECTO

RS


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


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


Kemal De Soysa


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

COM

PAN

Y PR

OFI

LEBO

ARD

OF

DIR

ECTO

RS


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


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

5

10

15

20

25

30Shareholders’ Funds and Market Capitalisation. (Rs.Mn.)

Shareholders' FundsMarket Capitalisation

Financial Year06/07 07/08 08/09 09/10 10/11

Mill

ion

0

300

600

900

1200

1500Net Asset Value per share and Market Value per share (Rs.)

Net Asset Value per shareMarket Value per share

Financial Year06/07 07/08 08/09 09/10 10/11


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


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


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


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


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


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


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


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.)


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


Notes


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.


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.

Designed & Produced by

2010-11A N N U A L R E P O R T

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