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2011-12A N N U A L R E P O R T
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CENTRAL FINANCE COMPANY PLC
NAME OF COMPANYCentral Finance Company PLC
LEGAL FORMA Quoted Public Company with limited liability incorporated in Sri Lanka on 5th December 1957 and registered under the Companies Act No.07 of 2007.
Registered under Finance Business Act No.42 of 2011 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
DIRECTORSJ.D. Bandaranayake - ChairmanE.H. Wijenaike - Managing DirectorG.S.N. Peiris - Director (Finance)R.E. Rambukwelle - Director (Marketing and Operations)A.K. Gunaratne - Director (Group Co-ordination)T.K. BandaranayakeD.P. de Silva - Director (Credit)C.L.K.P. JayasuriyaS.C.S. WickramasingheF. Mohideen
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 LimitedNDB Bank PLCNations Trust Bank PLCPeople’s BankSampath Bank PLCSeylan Bank PLCStandard Chartered BankHabib Bank Ltd.
AUDITORSJMS Associates,Chartered Accountants,2, Castle Lane,Colombo 04.
LEGAL ADVISERF.J. & G. De Saram,Attorneys-at-Law,P.O.Box 212,Colombo.
COMPANY SECRETARYCorporate 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 and produced by emagewiseDigital plates by Imageline (Pvt) LtdPrinted by Aitken Spence Printing & Packaging (Pvt) Ltd.
Central Finance Company PLC - Annual Report 2011-12 1
Financial Highlights 4
Chairman’s Statement 5
Managing Director’s Report 7
Board of Directors 13
Corporate Management Team 15
Management Discussion and Analysis 16
Financial Review 20
Branch Network 22
Risk Management 25
Corporate Governance 29
Corporate Social Responsibility 43
Financial Reports
Annual Report of the Board of Directors 50
Directors’ Responsibility for Financial Reporting 56
Remuneration Committee Report 57
Intergrated Risk Management Committee Report 58
Audit Committee Report 59
Directors’ Statement on Internal Control 61
Independent Assurance Report 62
Independent Auditor’s Report 63
Income Statement 64
Balance Sheet 65
Statement of Changes in Equity 66
Cash Flow Statement 68
Accounting Policies 69
Notes to the Financial Statements 77
Directors’ Interests in Contracts with the Company 108
Group Companies 109
Group Value Added Statement 113
Share Information 114
Decade at a Glance 116
Income Statement in US Dollars 118
Balance Sheet in US Dollars 119
Employees of the Year 120
Glossary of Financial Terms 123
Notice of Meeting 125
Form of Proxy 127
Investor Feedback Form 129
Corporate Information IBC
Central Finance Company PLC - Annual Report 2011-122
Chandra Wijenaike 25th January 1927 – 27th July 2011
Mr.Chandra Wijenaike founded the Company in 1957, served as the Managing Director upto 1999 and as Chairman until his retirement in 2006. Mr. Wijenaike was an exceptional human being and an outstanding leader. A man far ahead of his times, he epitomised the dauntless entrepreneurial spirit. His life and achievements prove what confidence, courage and hard work can achieve in a lifetime. The CF Group is a living testimony to his indomitable will, single-minded dedication and an unrelenting commitment to his goals.
We were fortunate to have had a man of Mr. Chandra Wijenaike’s stature in our midst. His leadership qualities, extraordinary foresight, uncompromising integrity, humility and remarkable capacity to motivate people will continue to guide and inspire future generations at CF. We are proud and privileged to inherit this invaluable legacy and would like to share some insights that defined his character, as expressed by his friends and associates.
Wil l iam Campbel l“Our paths crossed rather late in life but I believe that Chandra and
I shared a special relationship for a time that has left memories to
cherish.
I found that in conversations we would often anticipate each
other’s thoughts and conclusions. His dry wit was in complete
accord with mine; my dry wit was in complete accord with his.
There were occasions when all it took to generate much laughter
was a look, a raised eyebrow or just a pause in conversation.
As I continued my journey of discovery about Sri Lanka, Chandra
was supportive of all my pro-bono efforts. As I came to appreciate
his integrity and to trust his judgments, I was able to take on
additional responsibilities, knowing that I could turn to him for
advice and assistance at any time.”
Central Finance Company PLC - Annual Report 2011-12 3
Aji t Gunewardene“It was Mr. Wijenaike who first mooted the idea of forming Nations
Trust Bank with John Keells group. A visionary in his time Mr.
Wijenaike believed that together the two companies could create
a unique institution. He was a key member of the Bank’s Board
during its formative years.”
Chandra Jayaratne“Mr. Chandra Wijenaike was a benchmark to us of steadfast
commitment to principles, courageous decision making and in
following ethical business practices. I sought his advice and was
guided by his wise counsel in my early career and in Ceylon
Chamber of Commerce leadership actions.”
Sega Nagendra“He was always the epitome of charm and kindness, he never
failed to greet me with a smile whenever we met. His kind and
encouraging words were an inspiration to us all. He will be sadly
missed by his many circles of friends, but his memory will always
linger in our hearts.“
J ivaka Weeratunge“Chandra Wijenaike left an indelible mark on Sri Lanka’s business
and financial sectors. I was fortunate enough to be associated with
him from 1982 to the late 90’s during times which were both
exhilarating and challenging for all of us! I have much to thank
him for and he inspired me greatly with his simplicity, business
acumen, sense of fair play and caring for all those around him. The
financial sector has been subject to many trials and tribulations
during this period and what he built stands today as a testimony to
his greatness.”
Nimesh Udeshi“His thoughtful and regular contributions at Board Meetings
especially during the formative years of Siedles TV Industry Ltd.
was most helpful in guiding the operations of this pioneering
venture, his amiable disposition and cooperative nature enabled
him to also secure the lasting admiration of all colleagues on the
Board”
Pal i tha Udurawana “On Saturdays the villagers from the surrounding areas used to
gather and ask his assistance on various matters like loans, and
employment for their children. Rural small holders of tea sought
him for financial help as well. Never did he turn down any of these
requests. He had such a phenomenal memory that he would
remember every one of these requests, and he was kind enough
to help all of them out. Furthermore, some would ask him for
help with financing cars, vans or trucks. He would request them to
come to his Kandy office and would help them out to the best of
his ability.
He helped people who had nothing make their ambitions and
dreams come true. They came from all walks of life and all castes
and creeds. Some of them became very successful businessmen
setting up enterprises in many parts of Sri Lanka. He was a person
with a large heart. Kandy would miss him forever, as would the
rural people of Harispattuwa and Central Province.“
Oswin Si lva“Chandra was the 2nd president of the Lions club of Kandy. As
the Club was not functioning properly the District Governor at the
time suggested that dedicated Lion, Chandra, carry on for a second
term and he did a great job which resulted in the Kandy Lions
Club becoming a leading club in the country. He was President
of the Kandy Garden Club for over 25 years. He also took a keen
interest in sports especially rugby, and CFC sponsored many sports
activities which included building grandstands for Kandy Sports
Club and Bogambara. Truly he was an accomplished businessman,
very much respected by all. He will long be remembered for his
commitment to honesty, justice and fair-play”
F.C.B Marapane“Chandra is credited to have been the driving force in coming into
being the now prestigious Central Finance Company. He was its
Managing Director and Chairman over the years, and today it is
one of the leading financial institutions in the country.
He was also on the Boards of many companies where his vast
knowledge in the sphere of finance and business acumen were
greatly in demand. It can truly be said of him that he could move
with kings without losing the common touch.
He was well known as a philanthropist who helped many people
and causes in their hour of need. He stood up to his own and
others’ rights, and called a spade a spade and did not mince his
words when it came to matters where principles were involved.
His innate good nature and simplicity endeared him to his fellow
men with whom he had a good rapport.
Chandra was one of the all-time greats of our country and a
gentleman to his fingertips.”
Central Finance Company PLC - Annual Report 2011-124
Financial Highlights
Non-financial highlights
Employees
10/11: 1,347 09/10: 1,2791,439
Branches
10/11: 53 09/10: 5164
Group Company
2011/12 2010/11 2011/12 2010/11
Rs.Mn. Rs.Mn. Rs.Mn. Rs.Mn.
Financial performance
Income 9,260 8,094 8,737 7,647
Profit before income tax 3,891 3,242 3,257 2,608
Provision for taxation 1,120 1,330 911 998
Profit after income tax 2,771 1,911 2,345 1,610
Net profit attributable to ordinary shareholders 2,677 1,827 2,345 1,610
Gross dividends - - 262.21 213.15
Financial position
Total assets 53,558 41,163 51,166 39,040
Gross loans and advances to customers 40,603 28,660 41,170 29,638
Deposits 21,428 18,757 21,585 18,958
Shareholders’ funds 13,346 10,898 11,555 9,444
Information per ordinary share
Earnings Rs. 25.52 17.42 22.36 15.35
Dividends Rs. - - 2.50 2.04
Market value Rs. - - 171.30 1,273.70
Normalised Market value Rs. - - 171.30 246.84
Net assets Rs. 127.25 103.90 110.17 90.05
Dividend ratios
Dividend cover (times) - - 8.94 7.52
Dividend pay out (%) - - 11.18 13.29
Statutory ratios
Liquid assets (%) - - 14.82 12.25
Shareholders’ funds to deposits - - 53.53 49.82
Capital adequacy ratios
Core capital ratio % (Tier 1) - - 22.43 23.59
Total risk weighted capital ratio % (Tier 1 & 11) - - 22.62 23.85
TOTAL ASSETSRs.Mn
09/10 10/11 11/12
35,47741,163
53,558
+30%
TOTAL DEPOSITSRs.Mn
09/10 10/11 11/12
17,23318,757
+14%
21,428
SHAREHOLDERS’ FUNDSRs.Mn
09/10 10/11 11/12
9,127
10,898
13,346
+22%
Customers
10/11: 67,495 09/10: 59,83780,285
Central Finance Company PLC - Annual Report 2011-12 5
I have much pleasure in presenting to you
on behalf of the Board of Directors, the
Annual Report and Audited Accounts for
the Financial Year ended 31st March 2012.
Despite the uncertainties that affected the
pace of global economic recovery,
Sri Lankan macroeconomic fundamentals
encouraged confidence while the
investment climate remained optimistic
during the period under review. In fact, the
Sri Lankan economy moved decisively to
a higher growth phase with the end of the
conflict. The economic growth of 8.3% in
2011 is in line with this trend, with all key
sectors contributing to growth.
The intensified initiatives over the
last couple of years, for fast-tracking
growth and development of the
rural economy have seen large scale
infrastructure projects undertaken by the
Government. These include development
of national expressways, rural roads,
telecommunications and power generation.
The exposure and awareness of rural
markets have increased rapidly with the
advent of telecommunications and travel
infrastructure which in turn, have resulted
in a substantial difference in their lifestyles
and living standards. These developments
offer numerous opportunities to expand
our delivery network.
Overall, there was an impressive increase
in the demand for credit, stimulated by
reduced interest rates and intensified focus
on retail lending by banks, leasing and
licenced finance companies. However,
with the depreciation of the Rupee since
January 2012, restricted liquidity and
higher interest rates, credit expansion is
showing signs of moderation as of the date
of this review.
I am pleased to report that the Company
has notched an important milestone by
crossing Rs. 2.3 Billion in profit after tax
with shareholders’ funds of Rs.11.6 Billion
during the period under review.
Group Profit benefited from higher
contributions from subsidiaries and
associates to reach Rs. 2.8 Billion after Tax,
compared to Rs. 1.9 Billion previously.
CF Insurance Brokers (Pvt) Ltd., contributed
Rs. 156 Million to top line growth. Central
Industries PLC had a successful year of
operations and achieved revenues of Rs.
1.6 Billion Nations Trust Bank PLC had
a record year, with a strong contribution
of Rs.312 Million to Group Profits. The
Hydro power generation and plantation
segments of the Group did not perform up
to expectations due to unfavorable weather
and market conditions.
Notwithstanding the record increase in
advances, prudent portfolio management
has enabled CF to reduce the gross non-
performing loan ratio on the core business
to 1.65%. In addition, all key risk indicators
are monitored, regularly to ensure that they
are well within the risk-reward parameters
of the Company.
Chairman’s Statement
I am pleased to report that the Company has notched an important milestone by crossing Rs. 2.3 Billion in profit after tax with shareholders’ funds of Rs.11.6 Billion during the period under review.
Central Finance Company PLC - Annual Report 2011-126
During the period under review, service
delivery through the branch network was
further enhanced with the expansion of
IT network connectivity. This provided the
systems and internal controls for efficient
and effective operational requirements.
The Disaster Recovery Site was also
commissioned at our Nugegoda Branch
supplementing the Business Continuity
Plan initiated last year.
At the last Annual General Meeting, CF
announced a sub division of every share
into five shares and a Bonus issue which
has increased our Issued Stated Capital
to Rs. 568 Million from Rs. 203 Million
Notwithstanding this increase CF continues
with its policy of regular distribution of
dividends, amounting to Rs. 2.50 per share
this year as well and a dividend payout of
Rs. 262.2 Million, reflecting an increase of
Rs. 49.1 Million over the previous year.
The economic and business confidence
that appeared on the horizon after
emerging from three decades of war, still
remains. If the Middle East oil and Iranian
crises could be contained Sri Lanka’s
growth momentum can be maintained.
The current devaluation of the Rupee
has had its inherent effects on prices,
especially on motor vehicles and operating
costs. The sharp increase in imports and
slower growth of exports to countries
affected by the recession in the West
has resulted in a widening trade deficit.
The current Monetary Policy stance is
intended to mitigate the adverse impact
of these developments while maintaining
economic and price stability in the medium
term. The projections are for growth at a
lower trajectory during the current year,
and the Company expects to maintain
profitability through selectively growing its
assets, focusing on asset quality and cost
management.
On behalf of the Board, I would like
to express our thanks to Mr. S.V.
Wanigasekera and Mr. U.L. Kadurugamuwa,
who retired during the year, for their
invaluable contribution during their long
service to the Company. I would also
like to welcome Mr. F. Mohideen as an
Independent Non-executive Director, who
joined us in January 2012.
May I conclude by expressing my thanks
to the Governor of the Central Bank
of Sri Lanka and the officials at the
Department of Supervision of Non-bank
Financial Institutions for their guidance and
directions, my colleagues on the Board,
the Managing Director, the Management
and Employees at all levels for their
dedication and loyalty. I must also thank
the shareholders and all our other stake
holders for their continued confidence and
trust.
J.D. BandaranayakeChairman
12th June, 2012
Chairman’s Statement (contd.)
Central Finance Company PLC - Annual Report 2011-12 7
I have much pleasure in presenting an
overview of operations of the Company
and the Group for the year ended 31st
March 2012. Key achievements for the
period are summarised below:
Year ended Year ended
31/03/2012 31/03/2011
(Rs.Million) (Rs.Million)
Income 8,737 7,647
Profit before Tax 3,257 2,608
Profit after Tax 2,345 1,610
Earnings per
share (Rs./share) 25.52 17.42
Deposit Base 21,585 18,958
Shareholders Funds 11,555 9,444
2011 began on a very positive note.
Strengthened consumer confidence
increased demand for our services enabling
the Company to achieve record earnings
and operating cash flows. In particular, the
Company attained significant growth in
after- tax profits, while at Group level, profit
after tax was Rs.2.8 Billion, an increase of
45% over the previous year. Several factors
made this performance possible, most
notably:
• Theconsistenteconomicexpansion
for two consecutive years, with
2011 recording a growth of 8.3%,
the highest since Sri Lanka’s year of
independence.
• Asignificantcontribution(23.7%)to
growth from the private sector aided
by the ample flow of credit from banks
and non-banks.
• Theincreasedregionalimpacton
national output reflecting the broad
based economic activity taking place
in the Eastern, North Western and
Northern provinces.
Given these favourable conditions, the
Company grew its asset book by 31%
to reach Rs.51.2 Billion and achieved an
operating profit before financial VAT and
income tax of Rs.3.4 Billion, an increase of
18.4% over the previous year. Liabilities
grew at 34% on a lower base, to fund the
loan book and also to manage the asset/
liability match. Although cash flows from
core operations remained strong, the
focus was on maintaining liquidity to meet
market opportunities. Consequently the
Company ended the year with a surplus of
Rs.991 Million over statutory requirements
and approved but not drawn down bank
facilities of Rs.2.4 Billion.
On the cost side, despite the expansion in
business and delivery network, operating
expenses were well managed, with an
increase of only Rs.214 Million as against
Rs.258 Million last year. The cost to
income ratio improving to 40.6% from
41.8% previously.
The Company increased its capital strength
with shareholders’ funds growing by Rs.2.1
Billion to reach Rs.11.6 Billion. At Group
level shareholders’ funds crossed Rs.13
Billion. In terms of capital adequacy,
Managing Director’s Report
Company grew its asset book by 31% to reach Rs.51.2 Billion and achieved an operating profit before financial VAT and income tax of Rs.3.4 Billion, an increase of 18.4% over the previous year. Liabilities grew at 34% on a lower base, to fund the loan book and also to manage the asset/liability match.
Central Finance Company PLC - Annual Report 2011-128
Tier 1 Capital was 22.43% (minimum 5%)
and total capital to risk assets at 22.62.%
(minimum 10%).
Credit Ratings During the year, Fitch Ratings Lanka Ltd
(FRL) assigned the following ratings for the
Company:
• NationalLong-TermratingofA+(lka)
Outlook stable
• NationalLong-TermratingofA+(lka)
for Senior Debentures of up to Rs.700
Million
• NationalLong-TermratingofA+(lka)
for existing subordinate debentures
• Nationalshort-termratingofF1(lka)for
existing commercial paper
Among the factors taken into consideration
when assigning these ratings were the
relatively strong financial profile of the
Company, its funding and liquidity profile,
the conservative management of interest
rate mismatches and access to bank
credit. The National Short-Term Rating of
F1(lka) for commercial paper signifies the
strongest capacity for payment of financial
commitments relative to other issuers or
issues.
DividendThe Directors recommend a final dividend
of Rs.1.10 per share, making a total
dividend of Rs.2.50 per share for the
year ended 31.03.2012. The distribution
together with 10% WHT absorbs Rs.262.2
Million (an increase of 23% over last year).
BUSINESS
AdvancesThe automotive sector continued to record
a healthy growth, aided by the reduction
in duties and benign interest rates. New
vehicle registrations at 525,421 bettered
the previous year, with an increase of
166,178 units. Private cars saw the greatest
number of new registrations (57,886)
in 2011. Investment in freight availability
continued vigorously, to meet the demands
of economic growth, with the addition of
52,584 commercial vehicles during this
period a year on year growth of 101%.
With the provision of more efficient
transport systems, improved social
infrastructure and widespread employment
opportunities the last two years have
witnessed a narrowing of regional
disparities in terms of contribution to
Gross National Product (GNP). In this
context, the Eastern, North Western and
Northern provinces cumulatively accounted
for 18.7% of the GNP in 2011. A good
indicator of the level of economic activity
in these areas would be new vehicle
registrations, which aggregated to 132,044
units or 25% of all registrations in 2011, an
increase of 32,759 over the previous year.
Leasing and Hire purchase industry
reported new inceptions of Rs.284.5
Billion, for the year ended 31st December
2011, an increase of Rs.100 Billion over
the previous year. Much of this demand
was driven by rural and semi urban
markets, demonstrating the benefits of
growth in their lifestyle patterns. Within
this environment are sectors such as
agribusiness, healthcare, pharmaceuticals,
and infrastructure that present new markets
for the industry. With its strong rural
presence, these structural changes offer
multiple opportunities for the Company to
scale up its delivery channels.
Advances registered another good year with
disbursements of Rs.27.6 Billion as against
Rs.20.2 Billion in 2010/11. This translates
to a year on year growth of 36.4%. The
volume increase in the light truck and lorry
segment, used for cargo transportation
showed a growth of 58%, followed by
three wheelers (14.6%) and motor cars
(5.6%). In unit terms, the Company
registered a growth of 10.8% over the
previous year, while maintaining net interest
margins despite intense competition.
Asset QualityDuring the period under review, The
Company maintained an excellent credit
profile through strong risk management.
With minimal loan impairments and
improvement in loan recovery rates, Non-
Performing Loans (NPL) in absolute terms,
reduced by Rs.46 Million to Rs.659 Million
at year end.
Asset quality was better than market,
with gross non-performing loans to total
advances (inclusive of operating leases)
on the core business at 1.65% (previously
2.6%) and net non- performing loan ratio
Managing Director’s Report (contd.)
Central Finance Company PLC - Annual Report 2011-12 9
of 0.15% (previously 0.3%). Provision
cover is maintained at 70.1 %. Industry
wide gross non-performing loan ratios
in 2011 for registered finance / leasing
companies and banks were 5.1% and
3.8% respectively. Recovery of debts
previously written off amounted to Rs.77.3
Million as against Rs.71.2 Million last year.
Resource Mobilisation a) Deposits Core customer deposits comprising
fixed deposits grew by 14.08% over the
last year to reach Rs.20.7 Billion, with
gross mobilisation of Rs.6.04 Billion.
Although depositor preference was
mainly for shorter tenures, the Company
maintained a stable deposit mix, with
83% of the deposit base in tenures of
one year and over. CF savings continued
to grow with gross mobilisations of Rs.4
Billion (Rs.3.2 Billion previously) and
year-end balances of Rs.855.8 Million,
an increase of 9.4%.
b) Term Funding Borrowings from bank and non-bank
sources stood at Rs.5.7 Billion and
Rs.1.8 Billion respectively.
The Company anticipated a certain
degree of volatility in market conditions
and maintained strong liquidity
throughout the year. It sourced several
credit lines in the form of securitisation,
commercial paper, debentures and
term loans. With these initiatives it
maintained a prudent asset/liability
match and successfully managed
interest costs. In addition to normal
borrowings, the Company secured
long term loans of Rs.1.1 Billion.
The strong credit rating helped the
Company to source these lines at
attractive rates. The Company’s funding
strategy remains focused on the
conversion of short term debt to long
term instruments with commensurate
savings in costs.
SUBSIDIARIES
Central Industries PLC (CIL)CIL recorded revenues of Rs.1.6 Billion
compared to Rs.1.3 Billion in the previous
year. Although there was no major
development in the construction industry
the small and medium construction sector
was very active in all parts of the country.
With the re-demarcation of distribution
channels, the dealer network experienced
improved volumes in sales. Profit before tax
was Rs.149.7 Million compared to Rs.121.8
Million last year, an increase of 22%. Profit
after tax was Rs.105.9 Million compared
to Rs.74 Million last year, an increase of
42%. The Company has planned to further
enhance production capacity of its range
of products during the forthcoming year in
anticipation of improved market demand.
In this context, development operations
have commenced with the acquisition of a
property for factory expansion.
The Board has recommended a dividend
of Rs.3.00 per share for the year ended
31st March 2012 which is an increase of
20% over the previous year.
Core customer deposits comprising fixed deposits grew by 14.08% over the last year to reach Rs.20.7 Billion, with gross mobilisation of Rs.6.04 Billion. Although depositor preference was mainly for shorter tenures, the Company maintained a stable deposit mix, with 83% of the deposit base in tenures of one year and over.
Central Finance Company PLC - Annual Report 2011-1210
Mark Marine Services (Pvt) Ltd. (MMSL)Dry weather conditions that prevailed
during most parts of the year affected
Company performance substantially. This
resulted in a 35% drop in the number of
Kwh generated during 2011/12. Decline
in power generation along with the 7%
reduction in average unit price resulted in
a 41% drop in Company’s total revenue.
This was the main reason for the decline
in profit before tax to Rs.70.3 Million from
Rs.144.5 Million in 2010/11. However
the profit after tax improved to Rs.74.87
Million due to the tax saving resulting from
the revision of tax rates, and reversal of
deferred tax liability.
The dividend paid out by the Company
during the financial year 31st March 2012
improved to Rs.11.50 per share from
Rs.8.50 paid in the prior year.
CF Insurance Brokers (Pvt) Ltd.(CFIB)The Company transacts mainly general
insurance business. The following results
relate to the financial year ending 31st
December 2011. The premium turnover
in 2011 was Rs.1.35 Billion compared
to Rs.1.23 Billion in the previous year, an
increase of 10%. Commission income
increased to Rs.156.6 Million in 2011 as
compared to Rs.143.2 Million recorded
in the previous year, a growth of Rs.13.3
Million. The Company’s operating profit
before tax increased by Rs.24.3 Million
from Rs.36.4 Million in 2010 to Rs.60.7
Million in 2011, an increase of 67%. A
provision for investment made in previous
years amounting to Rs.9.1 Million was
reversed during the year in line with the
Group policy to reflect the favourable
improvement in net assets of those
investments. Profit after tax was Rs.57.8
Million in 2011, after this one off reversal
on investment provisioning, compared to
Rs.30.1 Million recorded in 2010.
Dehigama Hotels Company Ltd.(DHCL)The Company owns the office complex
where the Registered Office of Central
Finance is located. The revenue consists
of rental income derived from its anchor
tenant which increased to Rs.26.7 Million
in the year under review from Rs.24.2
Million previously. This was due to the
expansion in rentable area by 700 square
feet. Interest expenses decreased by 38%
over the previous year, with the completion
of renovations and repayment of advances.
Profit after tax increased substantially to
Rs.24.1 Million in the year under review
compared to Rs.14.1 Million reported
in the previous year as a result of the
reduction in corporate tax rate from 28%
to 10%. A reversal of deferred tax liability
arising out of the change in the tax rate,
contributed Rs.4.7 Million towards these
results.
The Company paid an interim dividend of
Rs.3.00 per share and the Directors have
recommended a final dividend of Rs.22.00
per share, amounting to a total pay-out of
Rs.20.70 Million for the year under review.
Kandy Private Hospitals Ltd.(KPHL)Turnover of the Company witnessed a
marginal growth of 6% during the year
under review to Rs.79.8 Million from
Rs.75.2 Million in 2010/11. However,
profit before tax did not improve in the
same proportion due to a 31% decrease
in other income (consisting mainly of
interest income) and a 15% increase
in administrative, maintenance and
establishment expenses. Profit before tax
declined to Rs.15.2 Million from Rs.17.2
Million recorded in the previous year. Profit
after taxation increased to Rs.15.2 Million
compared to Rs.10.83 Million posted in
the previous financial year, solely due to
reduction in corporate tax rate from 28%
to 10%.
Hedges Court Residencies (Pvt) Ltd.(HCRL)Amidst slow demand in the condominium
market, the Company completed the
sale of all 88 units during the year under
review. Revenue from sales improved to
Rs.497 Million (as against Rs.309 Million
in the previous year) and was utilised to
reduce borrowings. With the settlement
of all bank loans, interest costs decreased
to Rs.1.6 Million from Rs.25.8 Million. Net
loss after tax for the year was contained
at Rs.7.7 Million compared to the loss of
Rs.47.6 Million incurred in the previous
financial year. The Company established a
Condominium Management Corporation as
required by the Apartment Ownership Law
Managing Director’s Report (contd.)
Central Finance Company PLC - Annual Report 2011-12 11
No.11 of 1973 to manage the apartment
complex for the future.
ASSOCIATES
Tea Smallholder Factories PLC (TSFL)Global tea production in 2011 established
a new milestone of 4.2 Billion Kilograms.
Sri Lanka’s tea production in 2011
recorded 328.3 Million Kilograms,
marginally down from the previous year’s
production of 331.4 Million Kilograms.
The low grown average in the financial
year under review decreased by Rs.23.90
per Kilogram compared to the previous
year, due to the unsettled conditions in
the Middle East, the prime destination
for Sri Lankan tea. Tea production of the
Company in 2011/12 declined to 5.4
Million Kilograms as against 5.8 Million
Kilograms achieved in the previous year.
Extremes of weather had a negative impact
on the production during the year. The
revenue for the year under review was
Rs.1,744 Million, a decrease of Rs.597
Million over the previous year. Pre-tax profit
of the Company was Rs.7.43 Million, a
decrease of 96% over the previous year,
primarily due to the volatile situation in the
market. Loss after tax of the Company was
of Rs.1.29 Million compared to profit after
tax of Rs.120.96 Million recorded in the
last year.
The Company declared a dividend of
Rs.1.00 per share for the year ended 31st
March 2012.
Nations Trust Bank PLC (NTB)The NTB Group had its best ever year
in 2011 posting an after tax profit of
Rs.1.5 Billion, an increase of 40% over
2010. Non-interest income increased to
Rs.6.74 Billion compared to Rs.6.69 Billion
recorded in the previous year. Interest
income marginally declined to Rs.9.95
Billion compared to Rs.10.09 Billion
posted in the previous year. Deposit base
of the Bank recorded a significant growth
of 38% over last year to reach Rs.66.43
Billion at year end. Loans and advances
grew by 37% compared to 26% growth
recorded in the previous year and total
assets of the Group recorded a significant
growth of 23% to cross the Rs.100 Billion
threshold. Prudent management of the
lending portfolio had a substantial impact
on the overall performance during the year,
which resulted in a reversal of provisions
of Rs.208 Million in contrast to a provision
of Rs.202 Million made in the last year,
enhancing the profits in 2011. Net non-
performing loans (NPL) ratio improved to
2.8% as at the year-end.
The Bank paid a dividend of Rs.2.10 per
share for the year ended 31st December
2011.
Changes to the BoardI take this opportunity to welcome our new
Chairman Mr. Jayampathi Bandaranayake
and Director Mr. Faiz Mohideen to the
Board. Both gentlemen are eminently
qualified and have distinguished
themselves in their respective careers.
Central Finance Company PLC - Annual Report 2011-1212
They bring with them a wealth of
knowledge and substantial experience
to contribute to the Company’s growth.
We are privileged to have them with us.
The structure of the Board has changed
significantly over the last two years and
reflects the process of succession that
ensures continuity and development of the
Company. I must also place on record our
appreciation to Messrs. S.V. Wanigasekera
and U.L. Kadurugamuwa who stepped
down from the Board in 2011, for their
guidance and valuable contribution
throughout their long association with the
Company.
AcknowledgementsI express my gratitude to the members on
the Board for the wide-ranging insights,
guidance and knowledge they bring to our
deliberations. Likewise, my appreciation for
the leadership, energy, and commitment
displayed by my colleagues on the Board
of Management and corporate team in
successfully steering the business during
the 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. Equally, our appreciation to the
Director and Additional Director and their
officers in the Department of Supervision
of Non-bank Financial Institutions for the
guidance and support given at all times
not only for the smooth functioning of the
Company but also for their perspective on
shaping process improvements.
My sincere appreciation to our
management and staff for their dedication
and hard work, for without their
contribution these results would not have
been possible. As always, a special word of
thanks to all our customers for their strong
support and confidence in the CF brand.
E. WijenaikeManaging Director
12th June, 2012
Managing Director’s Report (contd.)
Central Finance Company PLC - Annual Report 2011-12 13
Jayampathi Divale BandaranayakeNon-executive Chairman
Jayampathi Bandaranayake, a Graduate in
Law, a fellow of the Institute of Personnel
Management, SriLanka (FIPM), the Institute
of Chartered Secretaries and Administrators
of Sri Lanka and a Fellow of the Institute of
Certified Chartered Professional Managers
(CPM) was appointed as Chairman of
Central Finance Company PLC on 01st
January 2012. He is the Chairman of
Ceylon Tobacco Company PLC and also
serves on the Board of Finlays Colombo
PLC. He has served as a Chairman of
the Ceylon Chamber of Commerce and
the Employers’ Federation of Ceylon and
also functioned as the Chairman/Director
General of the Board of Investment (BOI)
of Sri Lanka.
Eranjith Harendra WijenaikeExecutive Director
Eranjith Wijenaike is the Managing Director
of Central Finance Company PLC and has
been a member on the Board since 1st
April 1983. He is a Director of several
companies within and outside the Group
including Tea Smallholder Factories PLC,
Equity One PLC and Central Industries
PLC. He served as a founder Director of
Nations Trust Bank PLC for a period of
12 years and retired in December 2011.
He has over 30 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 PeirisExecutive Director
Shamil 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 and outside the
Group. He possesses over 34 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. He is also a Chartered
Global Management Accountant.
Ravindra Erle RambukwelleExecutive Director
Ravi 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 33 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 on the Boards of Tea Smallholder
Factories PLC, Central Industries PLC and,
serves on several companies within the
Group.
Arjuna Kapila GunaratneExecutive Director
Arjuna Gunaratne, Director (Group
Coordination) 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 and
Central Industries PLC. He is a Fellow of
the Institute of Chartered Accountants
of Sri Lanka and the Chartered Institute
of Management Accountants of UK. He
is also a Chartered Global Management
Accountant.
Tissa Kumara BandaranayakeIndependent Non-executive Director/
Senior Director
Tissa Bandaranayake, a Fellow of the
Institute of Chartered Accountants of
Sri Lanka, was appointed to the Board
on 27th May 2009. He functions as the
Chairman of the Audit and Integrated Risk
Management Committees of the Company
and also a member of the Remuneration
Committee. 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, Overseas Realty
(Ceylon)PLC, Harischandra Mills 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 SilvaExecutive Director
Prasanna de Silva was appointed to the
Board on 01st July 2011. 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 and
on the Board of Nations Trust Bank PLC.
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. He is also a
Chartered Global Management Accountant.
Board of Directors
Central Finance Company PLC - Annual Report 2011-1214
Chandima Lalith Kumar Perera JayasuriyaNon-executive Director
Kumar Jayasuriya, Executive Chairman and
Managing Director of Finlays Colombo
PLC was appointed to the Board with
effect from 01st July 2011. A Fellow
member of the Chartered Institute of
Management Accountants, UK (FCMA)
and the Association of Certified Chartered
Accountants, UK (FCCA), and also a
Chartered Global Management Accountant.
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 Board. 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 WickramasingheIndependent Non-executive Director
Sunil Wickramasinghe, the Chairman of
Milco (Pvt) Limited was appointed to the
Board on 01st July 2011. He possesses
29 years of experience at Nestlé, holding
various positions in the fields of Technical,
Sales, Marketing and General Management
in Sri Lanka and abroad. He 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.
Faiz MohideenIndependent Non-executive Director
F. Mohideen, a former Deputy Secretary
to the Treasury and Director General,
External Resources Department, Ministry
of Finance and Planning was appointed
to the Board on 01st January 2012. He
served on the Boards of Bank of Ceylon,
Securities and Exchange Commission of
Sri Lanka and Pelwatte Sugar Company
PLC. He currently serves on the Boards
of Carsons Cumberbatch PLC, Dipped
Products PLC and Kelani Valley Plantations
PLC. He holds an M.Sc. in Econometrics
from the London School of Economics and
a B.Sc. in Mathematics from the University
of London.
Board of Directors
Central Finance Company PLC - Annual Report 2011-12 15
1 U B Elangasinha FCA
General Manager – Finance
2 P A A R Perera BA (University of Peradeniya), MIPM (SL)
General Manager – Human Resources and
Development
3 I M J B Illangakoon AICM (SL)
General Manager – Branches
4 H S Fernando (Mrs.) MBA (University of Colombo), FCMA (UK),
CGMA, ACCA
General Manager – Internal Audit
5 C K Hettiarachchi MBA (University of Wales), ACMA (UK), CGMA
Deputy General Manager – Credit & Product
Development
6 B A C K Jayawardena Deputy General Manager – Recoveries
7 A F Goonetillake Dip. in Marketing (UK), MCIM (UK), Dip in IDPM
(UK)
Senior Assistant General Manager – Marketing
Services
8 S Ekanayake Senior Assistant General Manager – Fleet
Management
9 S Tennekoon Senior Assistant General Manager – Sales
10 A P B Rajanayake Senior Assistant General Manager – Deposits
11 G A R De Zoysa BSc (Hons) University of Manchester
Metropolitan (UK), Dip. in Computer System Design – NIBM, MBA - University of Sri Jayewardenepura
Senior Assistant General Manager – IT
12 G A Bandaranayake Senior Assistant General Manager – Credit
13 C S Hettiarachchi MBA (University of Sri Jayewardenepura),
LLB (University of Colombo), Attorney-at-Law
Senior Assistant General Manager – Recoveries
& Acquired Asset Management
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)
BMS (Open University of Sri Lanka)
Senior Regional Manager – Region 1
16 H G Wijeratne Senior Regional Manager – Region 4
17 D M Warnakulasuriya Assistant General Manager – Recoveries
18 M A M Farook BSc (Hons) University of London Guildhall (UK), Dip. in Computer System Design NIBM
Assistant General Manager – IT
19 K Kandeepan ACA, ACMA (UK), CGMA
Assistant General Manager – Finance
Corporate Management Team
Central Finance Company PLC - Annual Report 2011-1216
OverviewThe Global economy recorded a moderate
growth of 3.8% in 2011, which is lower
than that forecasted by IMF, with emerging
economies performing as the main driving
force, and advanced economies lagging
behind recording a lower momentum in
growth. Expectation of a mild recession in
the Euro zone economies further limited
the global growth rate as a whole.
Amidst this global back drop Sri Lankas’
GDP grew at an unprecedented rate of
8.3% in 2011, exceeding 8% for the
second consecutive year. Per capita income
reached USD 2,836. Industry sector
growth was prominent at 10.3%, while the
agriculture sector had dropped compared
to the year 2010, due to poor weather
conditions. The Services sector remained to
be the dominant employer with a provision
of 42.8% of employment, and growing at
a slightly higher rate of 8.6% compared to
8% in 2010.
Domestic inflation remained within the
mid-single digit range, supported by the
supply side improvements seen in the
economy. Much emphasis was given
to food security during the period to
cushion the impact of increasing food and
commodity prices in the global context.
Accessibility to one third of the rich arable
land particularly in the Northern and
Eastern provinces gave an added boost to
the country’s agricultural output.
Significant pressure was mounted on
the external price of the Rupee, with the
general weakening of Asian currencies
throughout 2011. The infrastructure
development projects demanded a high
inflow of machinery, motor vehicles and
intermediate goods including petroleum
imports. However, the Central Bank policy
initiatives prevented excessive volatility in
the exchange rate.
The low interest rate regime resulted in
credit to the private sector expanding by
35% and by the 4th quarter the economy
had seen the signs of upward pressure
on the entire interest rate structure, which
prompted policy measures from February
2012 to moderate credit expansion.
The Country’s investments were,
mainly directed towards non-residential
infrastructure, ports and highways typically
important for the rebuilding of the nation.
Investment by both public and private
sectors as a percentage of GDP has
increased during the year to 29.9% as
compared to 27.6% in 2010. On the
other hand national savings declined from
25.4% in 2010 to 22.1% confirming
that the increase in investment is mainly
supported by foreign sources.
In an overall sense, the year 2011 gave
mixed signals on the direction of the
economy, and the private sector has had
to grapple with numerous challenges,
while experiencing ample opportunities.
As a result, success or failure was primarily
dependent upon an organisation’s
capability of strategic interpretation and
management of these multi facets of the
economy.
Non-Bank Financial IndustryWith the enactment of the Finance
Business Act, No. 42 of 2011, Registered
Finance Companies (RFCs) have been
termed as Licensed Finance Companies
(LFCs) and categorised under Non-Bank
Financial Institutions (NBFIs). During the
year 2011 the main indicators of financial
stability, profitability and growth of LFCs
have recorded impressive levels. Although
the CBSL took timely steps to restore
the few distressed Non-Bank Financial
Institutions in a diligent manner, the
continued erosion of capital and liquidity
shortages of those distressed companies
affected the overall indicators, masking the
better performing and stable companies
in the industry, which otherwise should
have achieved even stronger levels than
reported in 2011. The rapid expansion
of LFC branches in the Northern and
Eastern provinces, underscored their role in
delivering financial inclusiveness to support
economic growth in these regions.
Capital and liquidity The year was marked with capital inflows
through IPOs, rights issues, deposit
conversions, private placements and
strategic investments in the sector, and as
a result capital funds increased by 57%.
The core capital ratio declined to 15%
during the year compared to 2010, due to
the rapid increase in risk weighted assets
fueled by the credit boom, but remained
at a healthy position given the statutory
requirement of 5%. The improvement in
profitability of distressed finance companies
supported by the CBSL business revival
plan helped the maintenance of the
industry capital ratios at a healthy level.
Further, the total capital adequacy ratio
improved to a positive 14% due to
the above inflows, while the minimum
regulatory requirement is at 10%. The
capital funds of LFCs to total deposits
increased to 20% compared to 11% in
2010, while the statutory minimum level
remained at 10%.
Asset quality and growth Finance leasing, hire purchase and other
secured loans resulted in a high growth
of total accommodations to the tune
of 46% during the year. Approximately
43% of this growth in accommodations
came from Finance leasing, which grew
by 90%, compared to 2010. Total non-
performing assets (NPA) relative to the
facilities outstanding in the NBFI sector
decreased to 5.1% in 2011 compared to
7.9% in 2010, where 81% of such NPA
were mainly concentrated within distressed
companies.
The net NPA, when loan loss provisions
were adjusted, reduced to 1.9% in 2011,
while the provision coverage of NPA
marginally declined to 55% from 60% in
2010, mainly attributed to the growth of
Management Discussion and Analysis
Central Finance Company PLC - Annual Report 2011-12 17
accommodations and risk weighted assets
during the year.
Deposit Growth Growth of deposits in the LFC sector
reached a healthy level of 27% compared
to 22% in 2010 and 16% in 2009.
Deposit mobilisation remained the most
popular funding source of LFCs which
accounted for 38% of the liabilities, with
97% of it attributed to time deposits. This
was a clear sign of restored customers’
confidence in the sector during 2011,
given the liquidity issues seen in 2009 and
2010 within some distressed companies.
The measures taken by the CBSL
aimed at curbing unauthorised finance
businesses namely; conducting awareness
programmes, publication of details of
authorised LFCs and taking action against
institutions violating the legal framework;
has resulted in a renewed confidence for
the industry in general and the stronger
companies in particular. Further the Finance
Business Act has introduced provisions
prohibiting advertisements soliciting deposit
funds by unlicensed entities, accordingly
media organisations are now required to
verify the mandate of an advertiser to solicit
public deposits before publication of such
advertisements. These provisions will help
to create a well-informed public, which
will benefit the approved and more stable
LFCs to enhance deposit mobilisation in
the future.
Profitability Increased business volumes and the
favorable single digit interest rates helped
the sector to improve its profitability
during the year, with net interest income
as a percentage of total assets increasing
to 6.4%. The growth of core business
activities mainly in lease finance and
hire purchase, supported with improved
business conditions, aided the sector to
record remarkable profits after tax. Further
the improved level of recoveries of facilities
and reduction of NPAs resulted in reversals
of loan loss provisions. Due to these
favourable conditions the sector to achieve
a 24.7% return on equity, marking a 119%
growth in profitability.
Regulatory ChangesThe Finance Business Act No. 42 of
2011 was enacted on 9th November
2011 repealing and replacing the Finance
Companies Act No. 78 of 1988. The most
notable feature of the above Act. is, that
no entity other than a licensed finance
company shall use the words ‘finance,
‘financing’ or ‘financial’ as part of its name
or description. Accordingly, any entity
other than a licensed finance company
which uses the words ‘finance,’ financing’
or ‘financial’ or any of its derivatives or
its transliterations or their equivalent in
any other language as part of Its name or
description, shall remove such words from
its name and description on or before
9th May 2012. We believe that this is a
move in the right direction and would help
to safeguard the interests of the general
public from unscrupulous entities. During
the period under review, the Monetary
Board of the Central Bank of Sri Lanka
issued the following Directions to Licensed
Finance Companies.
• Finance Companies (Minimum Core
Capital) Direction No. 1 of 2011
This Direction stipulates the minimum
unimpaired core capital, a licensed finance
company shall maintain. Accordingly every
licensed finance company shall at all times
maintain an unimpaired core capital of not
less than Rupees Four Hundred Million.
• Finance Companies (Reporting
Requirements) Direction No. 2 of
2011
Under this direction every licensed finance
company shall submit specified information
to the Director of the Department of
Supervision of Non-Bank Financial
Institutions. The Schedule attached therein
provides the nature and periodicity of
reporting requirements.
• Finance Companies (Assessment of
Fitness and Propriety of Directors
and Officers Performing Executive
Functions) Direction No. 3 of 2011
The Fitness and Propriety of Directors and
Officers performing executive functions
is considered to be a fundamental
requirement to ensure good governance
and risk management on the conduct
of business of all financial institution. In
terms of the above direction, no person
shall be appointed as a director or an
officer performing executive functions of a
finance company unless such person is a
fit and proper person, as prescribed by the
direction, to hold office as a Director or an
Officer.
• During the period under review,
Guidelines on the Operations of the
Investment Fund Account proposed
in the 2011 Budget were also issued.
Duty changes on importation of vehicles The total vehicle imports had increased
by 147% and 121% in 2011 and 2010
respectively, as compared to 2009 figures.
Taking into consideration the increase
in vehicle imports since 2009, traffic
congestion and the high demand for
fuel, the Government revised the excise
duties on motor cars, three wheelers and
motorcycles to discourage import of such
vehicles in March 2012. However import
duties on commercial vehicles, namely
buses, Lorries, trucks and agricultural
vehicles remain unchanged.
The impact of these changes would
result in the deceleration of imports in
passenger cars after two successive years
of high growth. The off–take of commercial
vehicles which represent approximately
14% of total new vehicle registrations is
expected to remain, driven by demand for
infrastructure projects.
Operating and Financial Performance of the CompanyProfit before tax improved from Rs.2.6
Billion in the previous year to Rs.3.2 Billion
in the year under review and profit after
tax also reflected an increase from Rs.1.6
Billion to Rs.2.3 Billion. Other Operating
income decreased from Rs.796 Million to
Rs.743 Million in the year under review.
Operating income consists of operating
leases and contract hire business.
Intensified marketing efforts successfully
Central Finance Company PLC - Annual Report 2011-1218
Management Discussion and Analysis (contd.)
grew the operating lease volumes,
exceeding 2010 levels. However, as the
portfolio consists exclusively of corporate
clients, there was a certain degree of
margin compression which resulted in a
lower contribution from this business line.
The net interest income of Rs.4.7 Billion
reflects an increase of 18% compared
to Rs.3.9 Billion in the previous financial
year. Other income was Rs.540 Million, an
increase of 1.75% compared to Rs.530
Million earned in the previous year.
Operating expenses at Rs.2.4 Billion reflects
an increase of 9.68% over Rs.2.2 Billion
due to increase in employee retirement
benefit expenses and other overheads.
The Financial Value Added Tax, calculated
on the basis of 12% of pre-tax profit
attributable to financial services, adjusted
for value added items such as staff
emoluments, amounted to Rs.155 Million
which was a decrease of 43% compared
to Rs.273 Million charged last year due to
a decrease in the tax rate. The provision
for losses on loans and advances was
Rs.126.7 Million, which represents 0.30%
of the total portfolio including operating
leases compared to 0.60 % in the previous
financial year.
The rigorous credit evaluation process
enabled the company to further improve
its asset quality with gross non-performing
loans (NPL) to total advances recorded at
2.39%, which is well below the Industry
wide NPL ratio in 2011 for licensed finance
companies of 5.1%. The ratio of gross
non-performing loans to total advances
(inclusive of operating leases) on the core
business was 1.65%. Interest bearing
liabilities accounted for 58.38% of the
total liabilities and shareholders’ funds, a
marginal increase compared to 56.89% in
the previous year. Deposits from customers
grew from Rs.19 Billion to Rs.21.6 Billion in
the current year, an increase of 13.86%.
DividendsThe Company continues with the tradition
of making three dividend payments. The
First interim and Second Interim dividends
of Rs. 0.70 per share each have already
been paid and the Board of Directors have
recommended a final dividend of Rs.1.10
per share for approval of the shareholders
at the Annual General Meeting, making
a total dividend of Rs. 2.50 per share,
amounting to Rs.262.2 Million and an
increase of 23% over the dividend paid in
the previous year.
Information Technology (IT)During the year under review, the main
focus of the Information Technology
Department was the completion of the
new projects initiated in the previous
year and refinement of the technology
to support such projects. A key business
continuity initiative was a series of full
fail-over simulations, with all operations
running off the Disaster Recovery Site
(DRS) Further enhancements were done
to the in-house developed Customer
Relationship Management system and the
Document Management System to cater
to the new business requirements and
additional process improvements.
All key executives of the department
numbering 15 were sent for overseas
training to enhance their technical skills
which resulted in better productivity and
overall improvement in their individual
performance.
Towards the end of the year new
projects namely, development of mobile
applications and conversion of the key
applications to WEB technology was
initiated and these would be key areas of
focus for the coming year.
Business OutlookWith the completion of two years of
sustained growth, the country is poised
to embark on an ambitious development
programme to lay the superstructure for
long term growth. This is supported by the
long term vision of the Government, which
has given the business community the
much anticipated confidence and direction
for new investment. The GDP growth is
predicted to be at a healthy rate around
7.2% in the coming years which is a
positive sign of continuance on the present
strategies, but with a downward revision
from the impressive GDP growth of 8.3%
recorded in 2011, which is more realistic in
the current domestic and global context.
The Government’s multifaceted long term
development vision aims to position
Sri Lanka as “The Wonder of Asia”. Public
sector participation in this endeavor will
provide a sustainable growth foundation,
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 tremendous
opportunities for the business community.
Achievement of these policies in that
real economy is principally dependent
on a high rate of investment expenditure
sustained for a longer period, because
of the high positive correlation with
investments and GDP growth. The
investment expenditure the country
is currently looking at is 29.9% as a
percentage of GDP, with 23.7% of it
attributed to private investment. It is cited
that the fast growing economies such as
China, India and Vietnam account for over
30% of investments as a percentage of
GDP which is supported by a national
savings rate over 30%. Therefore, it is
important to see an improvement of
quantity and efficiency of private and
government investments which are
directed at improving factor productivity
Central Finance Company PLC - Annual Report 2011-12 19
and growth in the real economy, with
policy reforms to curtail unproductive
growth.
The transportation sector demonstrates
noticeable improvement, predominantly
in the construction of highways, rural road
networks, bridges and rehabilitation of
existing roads specifically focused in North
and East. This improvement in transport
infrastructure will attract investments in
multi modal transportation to facilitate
the fast and efficient carriage of goods
passengers across the country in a
greater volume, and will pave the way for
accelerated economic activities within the
country.
The much awaited oil exploration in the
Mannar Basin started in 2010, and the
drilling commenced in 2011. Natural gas
sources were discovered in the Mannar
basin and Cauvery off the Northern
Peninsula, raising hopes of oil discovery.
There are plans to commence bid rounds
to offer rights for new oil exploration blocks
to be finalised in the coming months. This
development will support Sri Lanka to
rise as an upcoming industrial nation with
capital and expertise flowing in this area
of new investment, and to curtail the large
amount from the import bill, incurred in the
form of petroleum inputs which had a cost
to the tune of USD 4.6 Billion in 2011.
The capital market of Sri Lanka emerged as
one of the worlds’ best performing markets
during the year 2010, but has shown a
much lower level of activity during 2011,
due to various reasons. A well-organised
and regulated capital market 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 opening
further opportunities to develop Sri Lanka
as a Capital Hub to attract international
fund flows.
Our organisation is built on pillars of
absolute integrity, fair-play and prudence.
To harness business opportunities, we
have developed a strategic branch network
staffed with well-trained and motivated
personnel, who are capable of providing
efficient and caring customer service
focused on specific needs. We will increase
our presence in the rural micro sector
with the expansion of our micro branch
network in the newly liberated areas of
the country, equipped with innovative
product lines which will provide a one stop
facility for financial services. The 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, which will
be harnessed as a business opportunity.
We continue to provide our services for
high end corporate clients and plan to
extend facilities to the second tier customer
base as well, especially in the automotive
sectors. New product lines specifically
designed to cater, for differentiated niche
markets were implemented during the
year, which achieved successful market
penetration. We, as a leading financial
provider will strategically extend our
innovative product lines further, thereby
bringing prosperity to our loyal customers.
Central Finance Company PLC - Annual Report 2011-1220
Industry overview
The non-bank financial industry saw an
exceptional year in 2011/12. All sub
sectors in the industry performed well
above expectations. The majority of the
industry participants were brought under
the regulatory umbrella by way of listing on
the Colombo Stock Exchange.
The industry asset base increased by 26%
compared to the preceding year and stood
at 490 Billion as at the end of 2011. The
loan portfolio also saw an impressive
growth and stood at Rs.388 Billion an
increase of 46% over the last year. The
NPA ratio of the sector improved to 5.1%
in comparison with the 7.9% recorded at
the end of 2010.
The major source of funding for LFCs;
Deposits, also increased in line with the
demand for credit at 27% reflecting the
growing public confidence in the LFC sector
Company performance in 2011/12
Income
Income increased by Rs.1.09 Billion or
14.26% over last year. Interest income
stood at Rs.7.5 Billion an increase of
17.94% compared to last year’s Rs.6.3
Billion.
The second half of the financial year saw
some volatility in the money market. Low
market liquidity coupled with noticeable
upward shifts in rates in all maturities in
the yield curve was witnessed during this
period.
Interest expense increased by 17.07%
during the year under review in line
with the market trend. The cost of term
borrowings was the major contributory
factor for this increase as the deposit
products were re-priced at maturity.
Operating Expense
The operating expenses, other than
employee related expenses, increased by
a marginal 8.29% in line with the general
increase in price levels. The increase in
salary bill by 11.95% includes cost of
additional staff required for the expanded
branch network together with the
recruitment and retention strategy of the
Company.
Taxation
Income tax expense for the year under
review at Rs.911 Million was lower than
the amount recorded for the preceding
year, primarily because the previous year’s
charge included some additional provisions
pertaining to prior years on settlements
reached with the Department of Inland
Revenue. The effective rate of current tax for
the year stands at 21.43% and is significantly
lower when compared to 28.98% recorded
in the previous period. The reduction in
VAT on Financial Services is mainly due to
the reduction in rate from 20% to12% and
elimination of tax on tax introduced in the
Government budget of 2011.
Leases, Loans & Advances
Net investment in Leases, Loans & Advances
recorded increases at 41.82% and 35.43%
and the year-end balances stood at Rs.22.9
Billion and Rs.18.3 Billion, respectively.
Along with the growth in business volume,
improvement in NPA was noted due to
the stringent Credit Risk Management
initiatives taken during the year. The NPA
volumes net of Interest -in-Suspense stood
at Rs.833.9 Million as against Rs.1,230.4
Million at the end of last year. Provisions
as at year end have exceeded the net NPA
amounts and the Company’s net exposure
to possible further provisions is zero.
Deposits
The Company grew its deposit book by
Rs.2.6 Billion reflecting an increase of
13.86%, despite the fierce competition
from both banks and other LFCs. The
deposit mix saw a shift towards the shorter
tenures due to the rate volatility that
prevailed in the market. The Company was
able to mop up fresh deposits of Rs.10.06
Billion during the year.
Borrowings
As part of the interest cost management
strategy, the Company increased its
borrowings from bank and non-bank
sources and the balances stood at Rs.5.7
Billion and Rs.1.8 Billion respectively.
Interest expenses relating to these
borrowings also saw substantial increases
Financial Review
IncomeRs.Mn
09/10 10/11 11/12
7,0577,647
8,737
+14%
OPERATING EXPENSESRs.Mn
09/10 10/11 11/12
1,9492,207
2,420
+10%
12.86%
5.67%1.35%0.65%6.08%0.84%
72.55%
Short Term Bank LoanBank OverdraftsCommercial PaperLong Term Bank LoansNon Bank LoansDebenturesDeposits
FUNDING MIX 2012
Central Finance Company PLC - Annual Report 2011-12 21
due to market conditions and resulted
in placing margins under persistent
pressure. Securitsation, Commercial Paper,
Debentures and Term Loans were some of
the borrowing sources utilised. The strong
creditratingofA+byFitchRatingsLanka
Ltd helped the Company to source these
lines at competitive rates.
Return on Assets & Return on Equity
ROA and ROE were encouraging in line
with the financial results. ROA which
measures the efficiency of the Company
stood at 5.20% compared to the previous
year’s 4.5% while the Return on Equity
was 22.34%, reflecting an impressive 20%
growth over the last year.
Market Capitalisation
CF remains as one of the largest capitalised
finance companies in the Colombo bourse.
Shareholders’ funds grew by 22.35%
mainly due to retained profits. The Share
price of the Company has seen a drop in
line with the overall market decline. Details
of the share prices are given on page 115.
Group Performance
Financial results of the Central Finance
Group, which comprises of the Company,
thirteen Subsidiaries and three Associates,
were impressive. The Group income rose
to Rs.9.26 Billion recording a 14.40%
increase YoY and the bottom line stands at
Rs.2.77 Billion as at the year-end. Details of
the performance of individual companies
are reflected in the Managing Director’s
review on pages 7 to 12.
Liquidity
Liquidity remained tight for most industry
participants. However, the Company
maintained satisfactory liquid assets of
Rs.991 Million in excess of the statutory
requirements. Liquid Assets of CF were at
Rs.3.20 Billion, at year-end, and represents
a Liquidity Assets Ratio of 14.82% which is
well above the minimum levels set by the
Regulator - Central Bank of Sri Lanka.
Earnings per Share
The normalised earnings per share
recorded an increase of 46.50% over the
corresponding year and stood at Rs.25.52
at year end, in line with the growth seen in
profit attributable to the equity holders of
the Company.
Capital Adequacy
Capital adequacy ratios remain very strong
for CF, with Tier I Capital Adequacy ratio of
22.43 % and Total Capital to Risk Assets of
22.62 % as at 31.03.2012, which are well
above the statutory minimum requirements
of 5% and 10% set by the Central Bank of
Sri Lanka. These ratios are marginally less
than the last year’s ratios.
Future Outlook
The Company will expand its network in
the rural areas, with specific concentration
in the Northern and Eastern markets as
part of its long-term strategy, despite the
subdued credit growth expected for the
ensuing year. The interest rate structure
seems to be volatile and will be a major
determinant which influences the future
growth of the industry. The market liquidity
is another important factor in this regard
and is expected to gain momentum
through foreign inflows, by way of
corporate debt, foreign direct investments
and remittances from expatriates.
DPS Rs.
1.16
2.04
2.50
+23%
09/10 10/11 11/12
ROE (%)
09/10 10/11 11/12
12.5
18.57
22.34
+20%
ROA (%)
09/10 10/11 11/12
2.9
4.45
5.2
+17%
LIQUID ASSETS(%)
09/10 10/11 11/12
21.22
12.2514.82
+21%
EPS Rs.
09/10 10/11 11/12
8.97
17.42
25.52+46%
Central Finance Company PLC - Annual Report 2011-1222
Branch Network
KANDY - Head Office 84, Raja Veediya, Kandy, Sri Lanka. Tel : 94-81-2227000 Fax : 94-81-2232047
COLOMBO - City OfficeNo: 270, Vauxhall Street, Colombo 02, Sri Lanka. Tel : 94-11-2300555 Fax : 94-11-2300441, 94-11-2541212
KATUGASTOTA - Showroom No: 254, Katugastota Road, Kandy.Tel : 94-81-2234309, 94-81-2234234-5Fax : 94-81-2228468
CENTRALPROVINCE
NORTHERN PROVINCE
UVA PROVINCE
SABARAGAMUWA PROVINCE
NORTH CENTRAL PROVINCE
SOUTHERN PROVINCE
NORTH WESTERNPROVINCE
WESTERNPROVINCE
EASTERNPROVINCE
Ja�na
Mannar
Vavunia
Tambuttegama
Anuradhapura
Kekirawa
Dambulla
Kantale
Trincomalee
Puttalam
Nikaweratiya Galewela Bakamuna
Hingurakgoda
Polonnaruwa
Batticaloa
MelsiripuraChilaw
KuliyapitiyaKurunegala
GiriullaWennappuwa
Negombo
Matale
Dehiattakandiya
Ampara
Pottuvil
Tissamaharama
Hambanthota
Embilipitiya
BalangodaRatnapura
Matara
Galle
Ambalangoda Elpitiya
Matugama
MonaragalaWellawaya
Badulla
Bandarawela
Welimada
Nuwara Eliya
Hatton
Mahiyanganaya
Nawalapitiya
GampolaRikillagaskada
Kandy
Katugastota
Horana
Panadura
Avissawella
Warakapola
Kegalle
Nittambuwa
GampahaJa-ela
ColomboKiribathgoda
RatmalanaMaharagamaNugegoda
Piliyandala
Malabe HanwellaHomagama
Central Finance Company PLC - Annual Report 2011-12 23
WESTERN PROVINCE - 16
AVISSAWELLA No. 1/79, Ratnapura Road, Avissawella.Tel : 036-2232750, 036-2232650 GAMPAHA No:129, Ja-ela Road, Gampaha.Tel : 033-2227621, 033-2234132, 033-4670442
HANWELLA No.131/1/B, Pahala Hanwella, Hanwella.Tel : 036-2253945, 036-2253966
HOMAGAMA No.119/1/1, Katuwana Road, Homagama.Tel : 011-2892334
HORANA No. 163, Panadura Road, Horana.Tel : 034-2265065, 034-2265066
JA-ELA No. 171, Negombo Rd, Ja-ela.Tel : 011-2229180, 011-2229181
KIRIBATHGODA No. 541, New Hunupitiya Rd, Dalugama, Kelaniya.Tel : 011-4967530, 011-4821442
MAHARAGAMA No. 218A,/1/1,1st Floor, High level Road, 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 : 034-224995
NEGOMBO 367, Main Street, Negombo.Tel : 031-2222579, 031-4871200, 031-2233456,031-2235111
NITTAMBUWA No. 43 Kandy Road, Nittambuwa.Tel : 033-2296615
NUGEGODA No. 312, High Level Road, Colombo 06.Tel : 011-2815800, 011-2815801, 011-2815803, 011-2815804
PANADURA No. 292, Galle Road, Panadura.Tel : 038-4281010, 038-2241533
PILIYANDALA No. 329/4, Colombo Road, Piliyandala.Tel : 011-2609000 Fax : 2609001
RATMALANA No. 259/1/1,Galle Road, Ratmalana.Tel : 011-2715617 Fax : 011-2715623
EASTERN PROVINCE - 6
AMPARA No, 09, 5th Avenue, Ampara.Tel : 063-4890117, 063-2222238
BATTICALOA No. 48, Station Road, Batticaloa.Tel: 065-2227823, 065-2227824
DEHIATTAKANDIYA No. 18E, New Town Complex, Dehiattakandiya.Tel : 027-2250189, 027-2250067
KANTALE No. 63/2 Trincomalee Rd, Kantale.Te l : 026-2234574, 026-2234447
POTTUVIL No. 230 Arugambay Road, Pottuvil.Tel : 063-2248080, 063-2248084
TRINCOMALEENo.272, 4th Mile Post, Kandy Road, TrincomaleeTel: 026-2242422, 026-2242423
SOUTHERN PROVINCE - 6
AMBALANGODA No. 21B,Wickramasooriya Road, Ambalangoda. Tel : 091-2255802, 091-2255799
GALLE No. 151A, Matara Road, Galle.Tel : 091-2223315, 091-4385676
HAMBANTOTA No. 1/3, New Tangalle Rd, Hambantota.Tel : 047-2222651, 047-2222652
MATARA No. 78, Kumaratunga Mawatha, Matara.Tel : 041-2227314, 041-2222914
TISSAMAHARAMANo. 173, Hambanthota Road, Kachcheriyagama, Tissamaharama.Tel : 047-2239145, 047-2239593
ELPITIYA No. 109, Ambalangoda Road, Igala, ElpitiyaTel: 091-4943533, 091-4943534
NORTHERN PROVINCE - 3
JAFFNA No. 364, Main St, Jaffna.Tel : 021-2221608, 021-2221942
VAVUNIYA No. 166, Station Rd, Vavuniya.Tel : 024-2225813, 024-2225814
MANNARNo. 45, Thalvupadu Road, MannarTel: 023-4920727, 023-4920728
Central Finance Company PLC - Annual Report 2011-1224
NORTH WESTERN PROVINCE - 8
CHILAW No. 54, Kurunegala Road, Chilaw.Tel : 032-2220636,032-2221660
GIRIULLA No. 119, Negombo Road, Giriulla.Tel : 037-2289512, 037-2289513
KULIYAPITIYA No. 107, Kurunegala Road, KuliyapitiyaTel : 037-2284553,037-2283725,
KURUNEGALA No. 38, Mihindu Mawatha, Kurunegala.Tel : 037-2232313, 037-2222200037-2228020
MELSIRIPURA No. 177, Karandagolla Junction,Melsiripura.Tel : 037-2250014, 037-2250013
NIKAWERATIYA No. 200, Puttalam Road, Nikaweratiya.Tel : 037-2260871, 037-2260872
PUTTALAM No. 628 Colombo Rd, Puttalam.Tel : 032-2269328, 032-2269357
WENNAPPUWA No. 349, Colombo Road, Wennappuwa.Tel : 031-2245260, 031-2255261
NORTH CENTRAL PROVINCE - 6
ANURADHAPURA No. 6C, Wasantha Motors (Second Floor), Maha Veediya, Anuradhapura.Tel : 025-2223560, 025-4930501
BAKAMUNA No. 11, Elehera Road, Bakamuna.Tel : 066-2256000, 066-2556001
HINGURAKGODA No. 20, Airport Road, Hingurakgoda.Tel : 027-2247214, 027-2245224
POLONNARUWA No. 13, Hospital Junction, Polonnaruwa.Tel : 027-4599210, 027-2225176
TAMBUTTEGAMA No. 29 Kurunegala Road, Tambuttegama.Tel : 025-2275151, 025-2276978
KEKIRAWA No.33, Yakalla Road, KekirawaTel: 025-4976002, 025-4928868, 025-4928868
CENTRAL PROVINCE - 8
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 Road, Nawalapitiya.Tel : 054-4922792, 054-4976001
GAMPOLANo.6B, Nidahas Mawatha, GampolaTel: 081-4945114 ,081-4945115
GALEWELANo.334/B, Dambulla Road, GalewelaTel: 066-4929890, 066-4929891
RIKILLAGASKADANo. 21, Ratmetiya Road, Rikillagaskada.Tel : 081-4945112, 081-4945113
SABARAGAMUWA PROVINCE - 5
RATNAPURA No.143, Colombo Road,Moragahayata, RathnapuraTel : 045-2231409,045-2222028, 045-43604478
WARAKAPOLA No. 236, Kandy Rd, Warakapola.Tel : 035-2267010, 035-2268941
EMBILIPITIYA Rasika Building, Pallegama, Embilipitiya.Tel : 047-2261923, 047-4379332
KEGALLE No. 450A, 5th & 4th Floor, Kandy Rd, Meepitiya, KegalleTel : 035-2221083, 035-2232956
BALANGODANo.149E, Baranes Ratwatta Road, Balangoda. Tel: 045-4928326, 045-4928327
UVA PROVINCE - 6
BADULLA No. 04,Udayarajah Mawatha, Badulla.Tel : 055-2230541, 055-2229701, 055-4499643, 055-2224666
MAHIYANGANANo. 112, Giradurukotte Road, Mahiyangana.Tel : 055-2258335, 055-2258100
BANDARAWELA No. 03, Thanthiriya, Badulla Road, Bandarawela.Tel : 0572233241, 0572233240
MONARAGALA No. 150A, Wellawaya Road, Moneragala.Tel : 055-2277374, 055-2277346
WELIMADA No.8/1/A&B, Wattegedara, Divithotawela, WelimadaTel: 057-4926923, 057-4926922
WELLAWAYA No. 208, Monaragala Road, WellawayaTel: 055-4929301, 055- 4929302
Branch Network (contd.)
Central Finance Company PLC - Annual Report 2011-12 25
Central Finance is committed to achieving
the highest standards of corporate
governance in every aspect of the business,
including risk management. In discharging
the governance responsibility the Board of
Central Finance is conscious of the need to
manage risk within the preset parameters,
which ensures that risk oversight is a
critical focus for all our Directors. The
overall adequacy and effectiveness of the
risk management framework is managed
through the 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 the Executive
Directors and senior level staff members
in charge of key related functions. Acting
within 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. We
focus on setting clear risk parameters
and embedding a strong culture of risk
management and control designed to
ensure the proactive identification of risks
which in turn will enable the Company to
be resilient and respond effectively to any
unforeseen shocks.
The management of risk lies at the heart of CF’s business. Our balance sheet is dominated by credit to customers through our lending
operations. Beyond credit risk, we are also exposed to a range of other risk types such as liquidity, market risk which includes 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 in a sustainable manner. Our risk management
framework which is set out in the diagram below, encompasses structures that are strategically linked with performance management
enabling us to focus on the areas that drive our risk strategy.
Risk Management
Committee Role Membership
Board Audit Committee The Audit Committee reviews the accounting policies
and practices, controls and procedures established
by management for compliance with regulatory and
financial reporting requirements. It operates under
delegated authority from the Board.
Solely comprised of Non-executive Directors and
the majority of them are Independent. Details of
the members is given in the Audit Committee
Report on page 59.
Integrated Risk
Management Committee
The Integrated Risk Management Committee was
formed to operate primarily as an oversight committee
monitoring risk types, concentrating particularly on
Credit, Market, Operational and Strategic risks and
issues.
Comprised of Non-executive and Executive
Directors and senior level staff, who are in-charge
of related functions. The committee is chaired by
an Independent Non-executive Director. Details
of the members is given in the Integrated Risk
Management Committee Report on page 58.
Assets and Liabilities
Committee
The Asset and Liability Management Committee
(ALCO) is responsible for identifying, managing
and controlling balance sheet risks in executing the
business strategy of CF.
Comprised of Executive Directors and senior
level staff who are in charge of Finance, Branch
Network Management, Recoveries and Treasury.
Board of Directors
RISK OWNERSHIP
Business line operations
Managing Director
Board of Management
Business Units
(Marketing, Credit, Vehicle Hire, Fleet
Management Services, Deposits,
Treasury)
RISK ASSURANCE
Audit & Assurance
Board Audit Committee
Internal Audit Division
Independent External Auditor
(Reporting directly to the
shareholders)
RISK CONTROL
Risk Management
Integrated Risk Management Committee
Assets and Liability Committee
Risk Management Division
1st l
ine
of D
efen
se
2nd
Line
of D
efen
se
3rd
Line
of D
efen
se
Central Finance Company PLC - Annual Report 2011-1226
Credit riskCredit risk is the potential for loss due
to the failure of a counterparty to meet
its obligations to pay the Company in
accordance with agreed terms. Credit risk
is managed through a framework that
sets out policies and procedures covering
the measurement and management
of credit risk. A well defined delegated
approval hierarchy supported by high
ethical standards, well established policies
& procedures provide a robust framework
for the organisation and management of
credit risk. There is a clear segregation
of duties between major transaction
originators in the businesses and approvers
in the Credit function. All credit exposure
limits are approved within a delegated
credit approval authority frame work.
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 processes
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
based on the need of delegation required
to manage the network of branches,
without compromising the risk appetite of
the Company.
Credit concentrationCredit concentration risk is managed
within 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 such 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
minimising concentration risk. The ALCO
also reviews the top 20 lending exposures
at its’ quarterly meetings. The performance
of the large lending exposures are also
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 with majority of
them being 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 arising from changes in interest
rates, foreign currency, equity prices
and risk related factors such as market
volatilities. The objective of our market
risk management 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
•Equitypricerisk:arisingfromchangesin
the prices of equities and equity indices
Market risks arising from interest rate
volatility is managed with direction from
Risk Management (contd.)
16%42%
5%
7%
11%
5% 6% 6%2%
CentralEasternNorth CentralNorth WesternNorthernSabaragamuwaSouthernUvaWestern
Geographic concentration of advances
0
%
0.5
1.0
1.5
2.0
2.5
Apr-
11
May
-11
Jun-1
1
Jul-1
1
Aug-
11
Sep-1
1
Oct
-11
Nov-
11
Dec
-11
Jan-1
2
Feb-1
2
Mar
-12
NPA Ratio
4%96%
Top 20Portfolio
Top 20 concentration
Central Finance Company PLC - Annual Report 2011-12 27
ALCO which continuously monitors the
cost of funds of the Company and initiates
necessary action to ensure the required
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,
which sets a framework of limits 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 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 which are used to manage
the interest rate volatility of maturity
mismatches, typically associated with
finance business.
Equity price risk
Central Finance is exposed to market
movements in equity price fluctuations
through the trading and investment
securities portfolios. IRMC and ALCO
consciously review the exposure 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 mitigate 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 appointed Board
Audit and Integrated Risk Management
Committees oversee the management
of operational risks across the network
and at the 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.
Possible losses to Company assets due to
unforeseen events have been covered with
comprehensive insurance policies.
Liquidity riskLiquidity risk is the risk that we either do not
have sufficient financial resources available
to meet our obligations as they fall due, or
can only access these financial resources
at excessive cost. Liquidity risk is heavily
influenced by the maturity profile and mix
of the Company’s funding base, as well as
the quality and liquidity value of its liquidity
assets portfolio. It is our policy to maintain
adequate liquidity at all times and be in
a position to meet all obligations as they
fall due. Diversification of the Company’s
funding base is central to its balance sheet
management strategy. Customer deposits
provide large pools of stable funding to
support the majority of lending. We access
market funding by way of debt issuances on
an unsecured and secured basis. We also
have a contingency funding plan by way of
undrawn approved bank lines.
We manage liquidity risk taking both
short 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 a strong advances–to-deposit
Index
ASPIMPICFPI
0
2000
4000
6000
8000
10000
12000
Apr-11
May
-11
Jun-1
1
Jul-1
1
Aug-
11
Sep-1
1
Oct
-11
Nov-
11
Dec-
11
Jan-1
2
Feb-1
2
Mar
-12
CF price index vs ASPI
%
0
2
4
6
8
10
12
14
16
Apr-11
May
-11
Jun-1
1
Jul-1
1
Aug-
11
Sep-1
1
Oct
-11
Nov-
11
Dec
-11
Jan-1
2
Feb-1
2
Mar
-12
Liquid Assets to Deposits
Central Finance Company PLC - Annual Report 2011-1228
Risk Management (contd.)
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 portfolios.
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.
Strategic riskThe Company is continuously following developments taking place in the business environment and formulates its strategies to optimise 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. A comprehensive three year strategic plan is being developed with quantitative targets. Risks in achieving such targets have also been mapped and will be monitored continuously.
Central Finance Company PLC - Annual Report 2011-12 29
Corporate GovernanceWe at Central Finance believe that good Corporate Governance is about creating the right culture throughout the entire organisation. Good
Corporate Governance contributes to the long-term success of a Company, creating trust and engagement between the Company and its
stakeholders. Our culture and values are deeply embedded within the organisation. Our culture stimulates transparency and accountability.
Corporate Governance is the system by which the Company is 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. We
continuously review and find ways to improve our Board’s effectiveness in this regard.
This year marks an important milestone in Corporate Governance both globally and locally. Our English counterparts have made considerable
changes to board room effectiveness by complying or explaining their level of adoption of the Corporate Governance Code of UK, which stems
from Sir David Walker’s review of Corporate Governance in UK banks and other financial industry entities in 2009. In Sri Lanka, this year all
financial services entities have to fully comply with the Corporate Governance Directions issued by the Central Bank of Sri Lanka. Your Board has
considered both pronouncements in reconstituting the Board. Key highlights, level of adoption and conformance to the rules and best practices
embraced by your Company are disclosed in this year’s report.
Highlights of 20111. Reconstituted the Board in line with the CBSL Corporate Governance Direction for Finance Companies.
2. Election of a new Chairman.
3. Formation of the Board Integrated Risk Management Committee.
4. Election of new Chairmen for the Audit and Remuneration Committees.
5. Oversight of the successful share subdivision and a bonus issue.
CORPORATE GOVERNANCE FRAMEWORKThe diagram below demonstrates our approach to Corporate Governance. It depicts the interactive nature of the elements we view as being
key in embracing the spirit of best practice Corporate Governance principles.
As in the previous year, this year too 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 Direction No. 03 of 2008 of Finance Business Act No. 42 of 2011 and subsequent
amendments thereto on Corporate Governance for Licensed 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.
THE BOARD OF DIRECTORS
BOARD APPOINTED COMMITTEES
OTHER MANAGEMENT COMMITTEES
AUDIT COMMITTEE
Oversight and review of financial, audit and internal
control issues
Oversight and review of prudential risks including
credit, market, operational and liquidity
Oversight and review of remuneration and other
incentives
REMUNERATION COMMITTEEINTEGRATED RISK MANAGEMENT COMMITTEE
Central Finance Company PLC - Annual Report 2011-1230
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, Other
Investors
Corporate Governance Principles
ICASL Code Reference/
Adoption statusExtent of Adoption by CF
A. DIRECTORS
A.1 The Board
Meetings A 1.1Adopted
During the year the Board met 12 times, at approximately monthly intervals. Details of the meetings and the individual attendance are given on page 42.
Boardresponsibilities
A 1.2 Adopted
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 with rules and regulations. 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 toindependentprofessionaladvice
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.
CompanySecretary
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 ofadequatetime and effortby 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 fornew Directors
A 1.7Adopted
All new Directors have undergone necessary training, including the CBSL Symposium for Directors of Finance Companies, both in the general aspects of directorship and matters specific to the financial services industry.
A.2 Chairman & Chief Executive Officer (MD)Division ofresponsibilitiesof 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. The 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.- encouraging 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.- maintaining effective communication with shareholders and convey their views to the Board.
Corporate Governance (contd.)
Central Finance Company PLC - Annual Report 2011-12 31
Corporate Governance Principles
ICASL Code Reference/
Adoption statusExtent of Adoption by CF
A.4 Financial AcumenAvailability of sufficientfinancial acumen and knowledge
A 4Adopted
The Board includes three 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. In addition the Board also includes two Members whom are Members of the Chartered Institute of Management Accountants of UK and one of them is also a Fellow Member of the Association of Chartered Certified Accountants. These Members of the Board have the ability to offer guidance on matters of finance to the Board.
A.5 Board BalancePresenceof a strongindependentelement onthe Board
A 5.1Adopted
Half the Board Members are Non-executives. The roles of the Chairman and CEO (MD) are not vested in one person.
IndependentDirectors
A 5.2Adopted
A 5.3Adopted
More than half of the Non-executive Directors are Independent as defined by this Code.
Signeddeclaration ofIndependenceby the Non-executiveDirectors
A 5.4Adopted
Non-executive Directors have made written submissions as to their Independence.
Determinationof Independenceof the Directors by the Board
A 5.5Adopted
The Board has determined that the submission of declaration by the Non-executive Directors, as to their independence is a fair representation and will continue to evaluate this annually. The names of the Independent Non-executive Directors are given on page 42.
SeniorIndependentDirector
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.
Confidentialdiscussionwith the SeniorIndependentDirector
A 5.7Not Applicable
Please refer the above comment.
Meeting ofNon-executiveDirectors
A 5.8Adopted
The Chairman meets with the Non-executive Directors without the presence of the Executive Directors as and when it is necessary.
Recording ofconcerns inBoard minutes
A 5.9Not Applicable
Circumstances did not arise for the Board to record in minutes any concerns, as all issues were resolved unanimously at Board Meetings.
A.6 Supply of InformationInformationto the Boardby 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.
Central Finance Company PLC - Annual Report 2011-1232
Corporate Governance (contd.)
Corporate Governance Principles
ICASL Code Reference/
Adoption statusExtent of Adoption by CF
Adequate time for Board meetings
A 6.2Adopted
The Board papers are 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 the importance in appointing Directors to the Board.
Assessmentof Boardcomposition & Succession planning for key Management personnel
A 7.2 Adopted
The Board carries out continuous reviews of the composition, which includes identifying, evaluating and recommending candidates for the Board. During 2011, the Board focused heavily on its future composition with an emphasis both on Executive and Non-executive succession planning. Non Board key management personnel are also covered with adequate succession planning.
Disclosure ofdetails of newDirectors toshareholders
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.
A.8 Re-electionAppointmentof Non- executiveDirectors
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, Period of service of Non- executive Directors shall not exceed nine years. Directors retire from the Board prior to reaching the age of 70 years.
Election ofDirectorsby theshareholders
A 8.2Adopted
Please refer comments above.
A.9 Appraisal of Board PerformanceAppraisalof BoardPerformance
A 9.1Adopted
The performance of the Board is evaluated by the Chairman. The Sub-committees carry out an assessment process annually to ensure they function effectively and efficiently with the objective of facilitating continuous improvement.
Annual selfevaluation ofthe Board andits Committees
A 9.2Adopted
Refer comments above.
Method ofBoard andsub-committeeperformanceappraisal
A 9.3 Adopted
Refer comments given for Section A 9.1
A.10 Disclosure of Information in respect of DirectorsDetails inrespect ofDirectors
A 10.1Adopted
Details of the Directors are given on pages 13 and 14.
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 Strategic Plan of the Company.
Central Finance Company PLC - Annual Report 2011-12 33
Corporate Governance Principles
ICASL Code Reference/
Adoption statusExtent of Adoption by CF
Evaluationof the Performanceof the MD (CEO)
A 11.2 Adopted
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 at meetings by invitation in deciding the remuneration of the Corporate Management in order to recruit, retain and motivate the Corporate Management Team.
Composition of the Remuneration Committee
B 1.2Adopted B 1.3
Adopted
Please refer the Remuneration Committee Report given on page 57 for details.
Remunerationof the Non-executiveDirectors
B 1.4Adopted
The Board as a whole decides the remuneration of the Non-executive Directors. The Non-executive Directors receive a fee for serving on the Board and its Sub-committees.
Consultation ofthe Chairmanand access toprofessionaladvice
B 1.5Adopted
Chairman of the Board is also the Chairman of the Remuneration Committee.
B.2 Level and makeup of the RemunerationLevel andmakeup of theremunerationof ExecutiveDirectors
B 2.1 Adopted
The remuneration framework for the Directors is designed to create and enhance value for all stakeholders and to ensure that there is strong alignment between the short term and long term interest of the Company and the Directors.
Comparison ofremunerationwith othercompanies
B 2.2 Adopted
The Remuneration Committee in deciding the remuneration of the Directors takes into consideration the level of remuneration paid by other comparable companies.
Comparison ofRemunerationwith othercompanies inthe Group
B 2.3 Not Adopted
The size and scale of Central Finance is not comparable with Subsidiary Companies.
Performancerelatedpayment toExecutiveDirectors
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.
Designingthe ExecutiveDirectorsremuneration
B 2.6 Adopted
The Remuneration Committee considered the Schedule D to this code in deciding the remuneration of the Executive Directors.
Central Finance Company PLC - Annual Report 2011-1234
Corporate Governance (contd.)
Corporate Governance Principles
ICASL Code Reference/
Adoption statusExtent of Adoption by CF
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 contracts of employment of Executive Directors, if any.
Early termination not included in the initial contract
B 2.8 Adopted
Refer comments above.
Remunerationof the Non-executiveDirectors
B 2.9 Adopted
Non-executive Directors receive fees in line with market practices.
B.3 Disclosure of RemunerationDisclosure ofremuneration
B 3.1Adopted
The Remuneration Committee’s Report setting out the policy of the Committee is given on page 57. The remuneration paid to the Board of Directors is disclosed in aggregate in note no. 6 to the financial statements on page 78.
C. RELATIONS WITH SHAREHOLDERSC.1 Constructive use of the Annual General Meeting and Conduct of General Meetings.Use of proxyvotes
C 1.1Adopted
The Company has a mechanism to record all proxy votes and proxy votes lodged on each resolution.
Separateresolution forall separateissues
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 Chairmen of the Board, Audit Committee, Remuneration Committee and Integrated Risk Management Committee are present at the AGM to answer any questions of shareholders.
Adequate notice of the AGM
C 1.4Adopted
Notice of the meeting is given as per the requirements of the Companies Act No. 7 of 2007. 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.
Procedureof votingat GeneralMeetings
C 1.5Adopted
Notice of the Annual General Meetings and business to be transacted at General Meetings 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 Business Act No. 42 of 2011, and are prepared and presented in conformity with Sri Lanka Accounting Standards and comply with the reporting requirements prescribed by the Regulatory Authorities such as the Central Bank of Sri Lanka and Colombo Stock Exchange.
Directors’ report inthe Annual Report
D 1.2Adopted
The Directors’ report is given on pages 50 to 55 of the Annual Report.
Statementof Directors’responsibilityfor financialstatements
D 1.3Adopted
The Statement of Directors’ responsibility for financial statements is given on page 56 of the Annual Report.
Auditor’s report given on page 63 states their reporting responsibility.
Central Finance Company PLC - Annual Report 2011-12 35
Corporate Governance Principles
ICASL Code Reference/
Adoption statusExtent of Adoption by CF
Management Discussions and Analysis
D 1.4 Adopted
The Management Discussion and Analysis is given on pages 16 to 19.
Declaration bythe Board thatthe businessas a goingconcern
D 1.5Adopted
This is given in the Directors’ report on page 55 of the Annual Report.
Summoningan EGM tonotify seriousloss 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 2.1 Adopted
The Board is responsible for establishing a sound framework of internal controls and monitoring its’ effectiveness on a continuous basis. The Directors Statement on internal controls is given on page 61. The Auditor’s report on same is given on page 62.
Need for internal audit function
D 2.2Adopted
The Internal Audit function is carried out by the Internal Audit Department of the Company.
D.3 Audit CommitteeComposition, terms &conditionsof the AuditCommittee
D 3.1 Adopted
The Audit Committee comprises of three Non-executive Directors, two of whom are Independent. The said committee met four times during the year. The General Manager - Internal Audit functions as the Secretary to the Audit Committee. Chairman, Managing Director, Director (Finance), Director (Group Co-ordination) GM - Finance and the External Auditor attend meetings by invitation.
Duties of the Audit Committee
D 3.2 Adopted
The duties of the Audit Committee are given in the Audit Committee Report given on page 59.
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 are given on page 59.
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, protection and proper use of the Company’s assets and compliance with laws and regulations.
Affirmation of the code of conduct & ethics
D 4.2 Adopted
The Chairman, by this section, confirms that he is not aware of any material violations of the Code of conduct.
D.5 Corporate Governance DisclosuresCorporateGovernanceReport
D 5.1Adopted
This report satisfies the requirement.
Central Finance Company PLC - Annual Report 2011-1236
Corporate Governance (contd.)
Corporate Governance Principles
ICASL Code Reference/
Adoption statusExtent of Adoption by CF
E. INSTITUTIONAL INVESTORSE.1 Shareholder voting Institutional shareholders
E 1.1Adopted
The 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 ofthe CorporateGovernanceinitiatives
E 2Adopted
Institutional investors are encouraged to give due weightage to all relevant factors in the 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.
F.2 Shareholder VotingIndividual shareholders voting
F 2 Adopted
Individual shareholders are encouraged to participate at General Meetings and exercise their voting rights.
Central Finance Company PLC - Annual Report 2011-12 37
SECTION TWOFINANCE COMPANIES DIRECTION NO 03 OF 2008 (AND SUBSEQUENT AMENDMENTS THERETO) ON CORPORATE GOVERNANCE
FOR LICENCED 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 01, 2009 in order to improve and sustain the Corporate Governance processes
and practices of the Licensed 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, Disclosures. The structures
in place and the conformance to the requirement are tabulated below under the said nine fundamental principles.
Corporate Governance Principles
CBSL Rule /Compliance
statusLevel of Compliance
2. The responsibilities of the Board of Directors
Strengthening 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. A strategic plan covering the next three years from 2012 is currently being developed.
Chairman & CEO (MD)
2 (2)Compliant
The roles of the Chairman and the CEO (MD) are separate.
Independent Advice
2 (3)Compliant
Please refer section A 1.3 of the SEC & ICASL Code table on page 30 for details.
Directors Voting’s 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 is discussed.
Formal Schedule of Matters to the Board
2 (5)Compliant
The Board has a formal schedule of matters specifically reserved for it.
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 Board
No. of Meetings
3 (1)Compliant
Please refer section A 1.1 of the ICASL & SEC table code on page 30 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 as and when they arise.
Notice of meetings
3 (3)Compliant
Directors are given adequate time and at least 7 days of notice for Board Meetings and a reasonable time period for other meetings to study the relevant papers and proposals for meaningful discussions.
Non-attendance of Directors
3 (4)Compliant
This situation has not arisen.
Central Finance Company PLC - Annual Report 2011-1238
Corporate Governance (contd.)
Corporate Governance Principles
CBSL Rule /Compliance
statusLevel 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 Secretary 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 (9)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)Applicable
Non-executive Directors serving on the Board after the transitional period have not served on the Board for more than nine years.
Appointment of an employee as a Director
4 (3)Compliant
During the year an employee of the Company was appointed as an Executive Director. However, the number of Executive Directors does not exceed one half of the number of Directors of the Board inclusive of this appointment.
Independent Non-executive Director
4 (4)Compliant
The number of Independent Non-executive Directors on the Board is in excess of one fourth of the total number of Directors.
Alternative Director
4 (5)Compliant
This situation of appointing an alternative Director to an Independent Non-executive Director has not arisen during the year.
Credibility, skills& experience of Non-executive Directors
4 (6)Compliant
Biographic details of the Directors are given on pages 13 and 14.
Meetings of Boardwithout Non- executive Directors
4 (7)Not Applicable
This situation has not arisen during the year.
Details of Directors
4 (8)Compliant
Please refer pages 13 and 14 for the biographic details of the Directors and the 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)Compliant
Directors who were appointed during the year to fill casual vacancies will be standing for election by shareholders at the forthcoming Annual General Meeting.
Central Finance Company PLC - Annual Report 2011-12 39
Corporate Governance Principles
CBSL Rule /Compliance
statusLevel of Compliance
Resignation/removal of a Director
4 (11)Compliant
Notifications of resignation of Directors of the Company were given to the shareholders by way of the Annual Report, Quarterly Financial Statements and Newspaper announcement and to the Director – DSNBFI of CBSL. During the year, four Non-executive Directors resigned in accordance with the Corporate Governance Direction No. 3 of 2008 and an Executive Director resigned from the Board after serving the Company for twenty six years. These resignations were not due to disagreement with the Board.
5. Criteria to assess the fitness and propriety of directors
Directors over 70 Years of age
5 (1)Not Applicable
Directors serving on the Board after the transitional period have not reached the age of 70.
Holding of office in more than 20 entities
5 (2) Non-compliant
Mr. C.L.K.P. Jayasuriya a Non-executive Director of the Company is the Executive Chairman / Managing Director of Finlays Colombo PLC. By virtue of being the Chairman of the Finlays Group, he serves as a Board Member of the 11 fully owned subsidiaries in the Finlays Group and as a result, he exceeds the limits set by this Direction. He relinquishes his Executive Chairman’s post of Finlays Group in August 2013. On this basis, the Company has written to the CBSL seeking an extension to comply with this requirement for Mr. Jayasuriya. All other Directors have complied with 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 Officer
Division of Responsibilities of the Chairman & MD (CEO)
7 (1) Compliant
The roles of Chairman and Chief Executive Officer / Managing Director 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 Mr. T. K. Bandaranayake, an Independent Non-executive Director, as the Senior Director, as required by this Rule, with suitable terms to provide a sounding board for the Chairman and to serve as a trusted intermediary for the Non-executive Directors, when necessary.
Relationship between Chairman and MD (CEO) & other Directors
7 (3) Compliant
There are no material relationships between the Chairman and MD (CEO) and other Members of the Board which will impair their respective roles.
Role of the Chairman
7 (5)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 30.
8. Board appointed committees
Board appointed Sub-committees
8 (1)Compliant
There are three Board appointed Sub-committees namely Audit Committee, Remuneration Committee and Integrated Risk Management Committee.
Central Finance Company PLC - Annual Report 2011-1240
Corporate Governance (contd.)
Corporate Governance Principles
CBSL Rule /Compliance
statusLevel of Compliance
Audit Committee
8 (2) Compliant
Please refer the Audit Committee Report given on page 59 for details.
Integrated Risk Management Committee
8 (3) Compliant
Please refer the Integrated Risk Management Committee Report given on page 58 for details. The discussions and conclusions reached at such meetings are circulated to the Board of Directors at the very next monthly Board Meeting.
9. Related Party Transactions
Avoidingconflict ofinterest inrelated partytransactionsand favourabletreatment
9 (2) to9 (4)
Compliant
The Board has taken necessary steps to avoid any conflicts 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. Disclosures
Financial reporting,Statutory and regulatory reporting
10 (1)Compliant
The financial statements for the year ended 31st March 2012 and the bi-annual financial statements 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 56.
(b) Directors’ Statement of Internal Control is given on page 61.
(c) Auditor’s report on the Directors’ Statement of Internal Control is given on page 62.
(d) Details of the Directors are given on pages 13 and 14. Directors’ remuneration is disclosed on page 78. Deposits made by the Directors is given on note no. 30 of the financial statements on page 95.
(e) Fees and Remuneration paid to the Directors in total is given on note no. 06 of the financial statements on page 78.
(f) The net accommodation outstanding from the related parties is given below as a percentage of capital funds.
Related Party Category Amount (Rs. 000) As a % of Capital Funds
1. Subsidiaries 403,521 3.81 2. Associates 48,974 0.46 3. Key Management Personnel 1,801 0.02
(g) Transactions with Key Management Personnel such as remuneration paid, accommodation granted, deposits made are given in note no. 45 of the financial statements on pages 102 to 105. Investment made by the KMPs in the Company amounts to 24,296,060 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 external auditor has issued an assurance report in this regard.
Central Finance Company PLC - Annual Report 2011-12 41
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 on 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 Committee, Audit committee.
Corporate GovernancePrinciples
CSE RuleReference
Compliant status Level of Compliance
Non-executiveDirectors
7.10.1 (a) Compliant Half the Board members are Non-executives, which is more than the requirement of the rule.
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 full Board. The Directors who are independent are disclosed on page 42.
7.10.3 (b) Compliant Circumstances did not arise for the Board to decide a Director as Independent beyond the criteria set by this rule.
7.10.3 (c) Compliant Please refer pages 13 and 14 for the brief biography of each Director.7.10.3 (d) Compliant Information relating to new appointments to the Board are disclosed to the Colombo
Stock Exchange, when appointments are made.
Remuneration Committee
7.10.5 (a) Composition
Compliant The Remuneration Committee solely comprises of Non-executive Directors and majority of the Members are independent.
7.10.5 (b)Function
Compliant Please refer the Remuneration Committee report on page 57 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 57 and the remuneration paid to Directors is given in note no. 6 to the financial statements on page 78.
Audit Committee
7.10.6 (a)Composition
Compliant The Audit Committee comprises of three Non-executive Directors, two 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 59.
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 independence of the Auditor are given in the Audit Committee report on page 59.
Central Finance Company PLC - Annual Report 2011-1242
Corporate Governance (contd.)
MEETINGSThe number of meetings of the Board, Board appointed Sub-committees and individual attendance by members are given below.
Names Directorship Status BoardAudit
Committee
Integrated Risk Management Committee
Remuneration Committee
Number of meetings held 12 4 3 1
J.D. Bandaranayake1 Non-executive Chairman 3/3 - 1/1 1/1*
E.H. Wijenaike Managing Director 11/12 - 3/3 -
G.S.N. Peiris Director (Finance) 12/12 - 3/3 -
R.E. Rambukwelle Director (Marketing and Operations) 12/12 - 3/3 -
A.K. Gunaratne Director (Group Co-ordination) 12/12 - 3/3 -
T.K. Bandaranayake Independent Non-executive Director
/Senior Director
12/12 4/4* 3/3* 1/1
D.P. de. Silva2 Director (Credit) 09/09 - 3/3 -
C.L.K.P. Jayasuriya2 Non-executive Director 09/09 3/3 - -
S. Wickramasinghe2 Independent Non-executive Director 07/09 - - 1/1
F. Mohideen1 Independent Non-executive Director 03/03 1/1 1/1 -
S.V. Wanigasekera3 Non-executive Chairman 08/09 3/3 - -
C. Kiriella (Mrs)4 Director (Legal) 03/03 - - -
M.S. Wijenaike4 Non-executive Director 01/03 - - -
U.L. Kadurugamuwa3 Independent Non-executive Director 08/09 3/3 - -
G.C.B. Wijeyesinghe (Dr)4 Independent Non-executive Director 03/03 1/1 - -
Key1 Appointed with effect from1st January 20122 Appointed with effect from1st July 20113 Resigned with effect from 31st December 20114 Resigned with effect from 30th June 2011
* Chairman of the Committee
Central Finance Company PLC - Annual Report 2011-12 43
Corporate Social ResponsibilityCentral Finance’s corporate vision endures within a sustainable
framework which satisfies present day’s needs without
compromising the future. Central Finance’s strategy was to create
an interactive and productive engagement with our stakeholders.
Our focus today has evolved to include social and environmental
responsibilities towards society at large in our corporate culture.
Financial InclusivenessDuring the year, the Company enhanced its presence in rural
areas by commissioning nine branches. Central Finance presently
operates 64 branches within its established network affording
customer accessibility to some remote rural communities as well.
The Company continued to offer its Savings customers the facility
of accessing their accounts through the Automated Teller Machines
(ATMs) of the Commercial Bank’s island-wide network which is also
further complemented by Central Finance’s own ATMs located at
Colombo, Nugegoda, Kandy, Kurunegala and Negombo.
In addition, Company has extended its micro finance operations to
Dehiattakandiya, Mahiyanganaya, Anuradhapura, Rikillagaskada &
Polonnaruwa areas during the year. We place emphasis on lending
to micro-entrepreneurs and small businesses, which limits access
to the conventional banking system due to lack of collateral and
high transaction costs. The Company extends services to these less
privileged sections of society and its approach is based on
(1) relationship-based financing for individual entrepreneurs and
small businesses; and
(2) group-based models, where several micro entrepreneurs come
together to apply for loans and other services as a group.
These services are offered to borrowers who are engaged in
agriculture, small scale trading, animal husbandry, fishing and other
cottage industries such as wood working, manufacture of cement
based products, sewing and a range of other economic activities.
A special loan programme was also established during the year
focusing on dairy farmers which provides funding for the purchase
of cows, developing dairy based infrastructure, growing of nutritious
grass, operation of bio gas systems etc.
Securing the depositors’ interestsCompany has initiated and performs best practices to safeguard
the interest of the deposit holders which includes maintaining a
healthy equity and liquidity position and strict compliance with
statutory & regulatory requirements. The Company offers a variety
of deposit products designed to meet the requirements of different
age groups. Special concern is given to senior citizens where the
scheme provide higher rates of interest and other benefits like
health insurance schemes.
The CF Super Savings account is a unique savings scheme that is
offered in combination with fixed deposits. Under this scheme, a
surplus balance in the Savings Account over a specified amount
is converted to term deposits which attract higher returns. This
account also gives an option to deposit holders to purchase
household items of their choice at Zero interest.
TrainingThe Company embraces the concept of being a learning
organisation with emphasis on the training and development
of employees from a technical as well as personal perspective.
Training also ensures that high standards are set, maintained and
enhanced and that we keep up with changes in the environment
and technology.
A Small scale entrepreneur & a dairy farmer in Anuradhapura District
Central Finance Company PLC - Annual Report 2011-1244
Central Finance follows the focussed approach in Training &
Development and considers the same as an integral part of Human
Capital development with weightage on continuous learning and
perceives as a necessity in a rapidly changing environment.
Continuous Professional Development is an inbuilt component
in Central Finance’s quest for knowledge enhancement. During
the year, overseas training was provided at prominent institutions
in the United Kingdom, Singapore and India for Senior Managers
covering a diverse range of subjects on technical and conceptual
skills. A range of Training Programs based on Training needs at
all levels were organised and successfully completed using in
house resources as well as external trainers. To ensure that training
initiatives add value to the individual employee and the organisation
as a whole, a structured approach is followed to ensure that
maximum value is derived from training based on a progressive
and continuous training programme for all employees. Training
requirements and objectives are assessed at the performance
evaluation stage and carried out on a pre-determined plan based
on learning principles to ensure that the participants gain the
desired outcome of the programme.
Training requirements of existing employees are continuously
assessed and re-oriented with changes in risk management
principles and compliance requirements.
New employees are provided with a series of orientation
programmes that covers the Company’s core risk management
principles and best practices imparting sound knowledge on
compliance requirements.
Out-bound training programme held in Dambulla
Skills development programme held for senior managers
Corporate Social Responsibility (contd.)
Pre – Training Phase Training Phase Post Training Phase
Training EvaluationImplementation
Identification of training needsSelection of target group Training design & methods
Central Finance Company PLC - Annual Report 2011-12 45
WelfareWelfare of employees has been and continues to be a focus area
at Central Finance. Reward and Recognition practices are continued
to encourage and foster effective employee engagement.
During the year, Central Finance has organised its Sports Carnival
which allowed employees to display their talents. The events
included six-a-side cricket tournament, rugby, netball, volleyball,
athletics, selection of CF Queen, tug-o‘-war and many more. The
event was immensely enjoyed by staff who attended from all
corners of the island.
The Company established an Employee Benefit Foundation Fund
with a view to further extending benefits to the staff. Special
financial grants to children of staff on school admissions to grade
one, on admission to state owned universities, subsidised interest
on housing loans and financial assistance on hospitalisation are
some of the notable benefits granted through the Employee
Benefit Foundation.
The Company continued to operate the welfare sales outlet during
the year for the benefit of employees where goods are offered at
subsided prices.
Employee Appraisal
The Human Resource strategy of Central Finance has been
developed with an objective of building “an empowered set of
dedicated individuals who are driven by an irrepressible desire to
work as one towards a common goal in the truest sense of team
spirit”.
The effectiveness and the efficiency of employees and
organisational activities are monitored by a performance
management system within the human resources management
policy. The Company follows the Balanced Scorecard (BSC)
appraisal system of staff as a strategic performance management
tool.
Recognition of employees completing 25 years of service
Events in the Sports Carnival 2012
Age Analysis 2011/12
18-25 Years - 20%26-30 Years - 26%31-35 Years - 17%36-40 Years - 11%41-45 Years - 8%46-50 Years - 7%51-55 Years - 5%56-60 Years - 3%over 61 Years - 3%
Central Finance Company PLC - Annual Report 2011-1246
Corporate Social Responsibility (contd.)
Creating a culture of learningCentral Finance Company PLC emphasis the importance of
strategic human resource development initiatives by means
of empathic engagement. Company has continued to invest
in providing financial assistance to staff to gain professional
qualifications to enhance their carrier opportunities.
Constructive communicationCompany continued to maintain an effective communication with
its employees. An in-house published journal, “CF Katha” is an
attractive means of expressing characterised views articulated by
the members of staff. Further, the Company has recently launched
the “CF HR e-alert” system to update the employees on Company
news and important notices via SMS, e-mail and on-call system.
Corporate social developmentIn line with global trends, CF has also commenced contributing to
the “Green Revolution”. Reducing wastage, recycling and adopting
environmentally friendly policies have enabled CF to be an
responsible corporate citizen. The Company has launched a Green
campaign with a view to;
Service Analysis 2011/12
Below 1 year - 19%1-2 year - 21%3-5 year - 20%6-10 year - 19%11-15 year - 6%16-20 year - 5%21-25 year - 5%26-30 year - 5%31-35 year - 0%
Gender Analysis 2011/12
Male - 71%Female - 29%
Training Analysis 2011/12
External - 28In-house - 18Oversease - 9
Scholarships to children of staff
Members of staff driving the “Green Campaign”
Central Finance Company PLC - Annual Report 2011-12 47
Conserving resources
Conserving energy
Reducing pollution
Protecting the environment
A team of volunteers has been appointed to drive this campaign.
The project commenced with a waste paper recycling programme
to encourage the conservation of resources through a disciplined
behavioral approach by staff.
The efforts have resulted in saving of,
284 fully grown trees
29,245 Liters of fuel
66KW of electricity
529,579 Liters of water
Curing cancerCentral Finance has initiated a project to build a dedicated iodine
treatment center attached to the Anuradhapura Hospital for patients
suffering from Thyroid Cancer. Radioactive iodine treatment is a
type of internal radiotherapy, used to treat patients suffering from
Thyroid Cancer. The project is expected to cost approximately Rs.20
Million.
A further sum of Rs.1.5 Million has been donated to the Sri Lanka
Cancer Society during the year which is a voluntary organisation
dedicated towards helping cancer patients.
Helping the flood victims of ThailandPeople of Thailand suffered the worst ever flooding in 50 years.
As a quick response, the Company donated fifty numbers of water
storage tanks to the victims.
Helping the needy through Micro FinanceCompany’s Micro Finance Unit continued to engage in several
welfare projects focusing less privileged and needy communities in
rural sectors. A programme was organised in Anuradhapura District
under “CF Navodya” programme to donate wheel chairs and
walking aids to handicapped people.
Contribution to “Presidential Book Project”“Nena Guna Thilina’ is a project conducted by the Presidential
Secretariat focused on donating books to schools with poor library
facilities mainly in rural areas. The project is focused on promoting
the habit of reading among children. Central Finance is committed
to contribute Rs. 1.5 Million for the project.
Donation to Maharagama Cancer Hospital
Wheel chair donation function held in Anuradhapura
529,579 Liters of water284 fully grown trees
Saving of:
29,245 Liters of fuel 66KW of electricity
Central Finance Company PLC - Annual Report 2011-1248
Our solutions to your needs
Financial ReportsAnnual Report of the Board of Directors 50
Directors’ Responsibility for Financial Reporting 56
Remuneration Committee Report 57
Intergrated Risk Management Committee Report 58
Audit Committee Report 59
Directors’ Statement on Internal Control 61
Independent Assurance Report 62
Independent Auditor’s Report 63
Income Statement 64
Balance Sheet 65
Statement of Changes in Equity 66
Cash Flow Statement 68
Accounting Policies 69
Notes to the Financial Statements 77
Financial Calendar 2011/12 Second Interim Dividend 2010/11 - paid 05th May 2011
First Quarter Results 2011/12 12th August 2011
Final Dividend 2010/11 - paid 30th August 2011
Second Quarter Results 2011/12 09th November 2011
First Interim Dividend 2011/12 - paid 14th December 2011
Third Quarter Results 2011/12 10th February 2012
Second Interim Dividend 2011/12 - paid 23rd April 2012
Fourth Quarter Results 2011/12 28th May 2012
Annual Report 2011/12 27th June 2012
54th Annual General Meeting 20th July 2012
Final Dividend 2011/12 - proposed and to be paid 31st July 2012
Central Finance Company PLC - Annual Report 2011-1250
Annual Report of the Board of DirectorsThe 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, 2012.
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 Business Act No. 42 of 2011,
registered under the Finance Leasing Act
No. 56 of 2000, and the Companies Act
No. 07 of 2007.
The Board of Directors approved the
financial statements on 12th June 2012.
Principal activities and review of operations
Company The principal activities of the Company
during the year continued to be leasing,
hire purchase financing, vehicle hire,
deposit mobilisation, vehicle trading,
providing money transfer facilities and
provision of other financial services.
SubsidiariesName of company Principal business activities
Central Industries PLC Manufacture and distribution of PVC pipes and fittings
Central Mineral Industries Ltd. Manufacture of 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
Mark Marine Services (Pvt) Ltd. Hydro power generation
Central Developments Ltd. Investment company
CF Insurance Brokers (Pvt) Ltd. Insurance broking
Central Transport and Travels Ltd. Hiring of vehicles
Hedges Court Residencies (Pvt) Ltd. Construction and sale of apartments
Dehigama Hotels Company Ltd. Renting of commercial property
CF Growth Fund Ltd. Investment company
Kandy Private Hospitals Ltd. Provision of healthcare services
AssociatesName of company Principal business activities
Nations Trust Bank PLC Corporate and retail banking, trade services, leasing, factoring,
treasury and capital market services and fee-based activities.
Tea Smallholder Factories PLC Processing tea from green leaf purchased from small holders and
sale of processed black tea
Capital Suisse Asia Ltd. Provision of management services
CF Growth Fund Ltd. whose principal
business activity was importation and
assembly of hand tractors ceased that
operation at the end of last financial
year, and continued as an investment
Company during the current financial year.
There were no other significant changes
in the nature of the principal activities of
the Company and the Group during the
financial year under review.
Financial StatementsThe financial statements of the Group and
the Company are given on pages 64 to
107 of the Annual Report.
Auditor’s ReportThe auditor’s report on the financial
statements is given on page 63 of the
Annual Report.
Significant Accounting PoliciesDetails of significant accounting policies
adopted in the preparation of the financial
statements are given on pages 69 to 76 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.
Central Finance Company PLC - Annual Report 2011-12 51
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
2012 2011
E.H. Wijenaike 16,164,123 3,128,540
G.S.N. Peiris 1,828,168 352,446
R.E. Rambukwelle 984,906 190,000
A.K. Gunaratne 835,274 161,666
D.P. de Silva 103,850 N/A
Spouses
A.J. Wijenaike 3,271,357 633,166
I.R. Peiris 445,330 86,193
Increase in number of shares is due to
sub division of shares and issue of bonus
shares in the proportion of 01 by 05 and
01 for 30 respectively in September 2011.
G.S.N. Peiris purchased 7,200 shares in
February 2012 which was duly disclosed to
the Colombo Stock Exchange.
Employee share ownership schemeNo allotments of shares or funding for
same was provided during this period.
Given below are the Directors’
shareholdings in Group companies as at
31st March 2012.
Central Industries PLC
E.H. Wijenaike 9,003 (31.03.2011 - 9,003)
G.S.N. Peiris 03 (31.03.2011 - 03)
Nations Trust Bank PLC
E.H. Wijenaike 10,598 (31.03.2011 - 10,598)
A.K. Gunaratne 19,432 (31.03.2011 - 19,432)
Tea Smallholder Factories PLC
R.E. Rambukwelle 4,600 (31.03.2011 - 2,300)
Increase in number of shares is due to sub
division of shares in the proportion of 01
by 01.
Related Party Transactions The 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 45 to the
financial statements forming part of the
Annual Report of the Board of Directors.
Directors’ interests in transactions Directors 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 108 of the Annual Report.
Insurance and IndemnityThe Company has obtained a Directors
and Officers Liability Insurance Policy from
Union Assurance PLC up to a limit of
Rs.350 Million for the period covering 28th
February 2012 to 27th February 2013.
Directors’ Remuneration Directors’ remuneration in respect of the
Group and the Company for the financial
year ended March 31, 2012 is given in
Note 6 to the financial statements.
Corporate DonationsDuring the year, the Company made
donations amounting to Rs. 2.89 Million
(2010/11 Rs. 7.31 Million) in terms of
the resolution passed at the last Annual
General Meeting. Donations made to
Government approved charities from
the above amounted Rs. 1.66 Million
(2010/11 Rs. 7.14 Million).
Total donations of the Group during
the year amounted to Rs.3.06 Million
(2010/11 - Rs.7.36 Million) of which
Rs.1.68 Million (2010/11- Rs.7.14 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.
Director’s statement of internal controlThe Board of Directors has issued a report
on the internal control mechanism of the
Company as per the Section 10 of the
Direction No. 03 of 2008 on Corporate
Governance. The Board has confirmed
that the financial reporting system has
been designed to provide a reasonable
assurance regarding the reliability of
financial reporting, and that the preparation
of financial statements has been done
in accordance with relevant accounting
principles and regulatory requirements.
The above report is given on page 61 of
the Annual Report. The Board has also
obtained an assurance report from the
external auditor on Director’s Statement of
Internal Control which is given on page 62
of the Annual Report.
Convergence with SLFRS/LKASThe Institute of Chartered Accountants
of Sri Lanka has issued a new volume of
Sri Lanka Accounting Standards that are
effective from financial periods beginning
on or after 01st January 2012. These
Sri Lanka Accounting Standards comprise
of Accounting Standards prefixed both
Central Finance Company PLC - Annual Report 2011-1252
Annual Report of the Board of Directors (contd.)
SLFRS (corresponding to IFRS) and LKAS
(corresponding to IAS).
These new standards have become
applicable for the Company from 01st
April 2012 and accordingly the reporting
framework for the year ending 31st March
2013 will be in accordance with SLFRS.
Due to complexity and technical expertise
required in the convergence process, the
Company carried out an initial impact
analysis with the assistance of an external
consultant based on 2011 balances to
assess the approximate potential impact on
the financial statements had these standards
been applied for the year ended 31st
March 2012. This analysis was based on a
few assumptions and approximations. The
Company will publish its first quarter results
of 2012/13 financial year in accordance
with the transitional arrangement allowed by
the institute of Chartered Accountants of Sri
Lanka, in adopting SLFRS.
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 29 to 42 of the Annual Report.
Board Sub-committeesThe Board of Directors of the Company has
formed the following sub committees;
Audit CommitteeT.K. Bandaranayake (Chairman) -
Independent Non-executive Director
C.L.K.P. Jayasuriya - Non-executive Director
F. Mohideen - Independent Non-executive
Director
The report of the Audit Committee is given
on pages 59 to 60 of the Annual Report.
Remuneration CommitteeMr.J.D. Bandaranayake (Chairman) -
Non-executive Director
Mr.T.K. Bandaranayake - Independent
Non-executive Director
Mr.S.C.S. Wickramasinghe - Independent
Non-executive Director
The report of the Remuneration Committee
is given on page 57 of the Annual Report.
Integrated Risk Management CommitteeComposition of the CommitteeMr.T.K. Bandaranayake - (Chairman)
Independent Non-executive Director
Mr.F. Mohideen - Independent
Non-executive Director
Mr.E.H. Wijenaike Managing Director
Mr.G.S.N. Peiris Executive Director
Mr.A.K. Gunaratne Executive Director
Mr.R.E. Rambukwelle Executive Director
Mr.D.P. de Silva Executive Director
The report of the Integrated Risk
Management Committee is given on page
58 of the Annual Report.
Review of BusinessA review of the Company and Group
operations during the year, with comments
on the financial results and future
developments is contained in the Managing
Director’s report on pages 7 to 12 and the
Management Discussion and analysis on
pages 16 to 19 of the annual report, which
form an integral part of the Directors’ report.
IncomeIncome of the Group excluding associates
during the year was Rs.9,260.02 Million
(2010/11 - Rs. 8,094.37 Million), an
analysis of which is given in Note 1 to the
financial statements.
Results and AppropriationsProfit after tax of the Company was
Rs.2,345.41 Million (2010/11 - Rs.
1,610.14 Million) whilst the Group profit
attributable to equity holders of the parent
for the year under review was Rs. 2,676.61
Million (2010/11 - Rs. 1, 827.03 Million)
Central Finance Company PLC - Annual Report 2011-12 53
A detailed description of the results and appropriations are given below:2011/12 2010/11
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 3,890,541 3,241,593
Provision for taxation (1,119,544) (1,330,155)
Group profit after taxation 2,770,997 1,911,438
Minority interest (94,382) (84,404)
Net profit for the year 2,676,615 1,827,034
Unappropriated profit brought forward from previous year 1,045,290 821,687
Transfer from revaluation reserve/deferred tax 8,825 6,386
Effect on gratuity transitional provision due to change in corporate tax rate - (2,642)
Profit available for appropriation 3,730,730 2,652,465
Appropriations
Transfer to reserve fund (118,000) (81,000)
Transfer to general reserve (1,776,000) (1,379,000)
Transfer to investment fund account (223,492) -
Dividends distributed during the year (235,818) (147,175)
Unappropriated profit to be carried forward 1,377,420 1,045,290
Dividends The Directors recommend the payment of a final dividend of. Rs. 1.10 per share for the year ended 31st March 2012 (2010/11 - Rs. 0.97 per share). This dividend together with the two interim dividends of Rs.0.70 each per share paid on 14th December 2011 and 23rd April 2012 respectively amount to a total dividend of Rs.262.21 Million for the year (2010/11- Rs. 213.15 Million). The first interim dividend represented a redistribution of dividends received by the Company and therefore was not subject to the 10% withholding tax. A major portion of the second interim dividend was paid out of dividends received and the balance out of taxable profit. Component of dividends paid out of profits was liable to 10% withholding tax.
The final dividend proposed will be paid entirely out of taxable profit and therefore will be liable 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 December 2011 and April 2012 and the final dividend proposed. Solvency certificates were obtained from the auditor in respect of interim dividends paid and the final dividend of Rs.1.10 per share proposed to be paid on 31st July 2012.
Property, Plant and EquipmentThe total capital expenditure on property, plant and equipment, intangible assets and capital work-in progress of the Company and the Group amounted to Rs. 893.52 Million and Rs.1,004.05 Million respectively. (2010/11-Company Rs. 1,107.95 Million and Rs.1,158.46 Group) details of which are given in notes 27 and 28 to the financial statements. Capital expenditure approved and contracted for as at year end is included in note 41(b) to the financial statements.
Market Value of Freehold Properties The value of freehold properties owned by the Group as at 31st March 2012 is included in the accounts at Rs.2,090.71 Million (31st March 2011 - Rs.2,060.85
Million) based on valuations undertaken by a panel of Chartered Valuers/Licensed Surveyors in March 2007 and March 2009 and cost of subsequent improvements. The Directors are of the opinion that this value is not in excess of the current market value. The details are provided in note 28 to the financial statements.
ReservesThe total Group reserves as at 31st March 2012 amounted to Rs.12,777.57 Million (31st March 2011 - Rs. 10,694.57 Million) details of which are given in notes 36 to 39 to the financial statements.
Stated CapitalThe stated capital of the Company consisting of 104,883,333 ordinary shares amounts to Rs.568.42 Million.
Sub-division of shares and capitalisation of reservesCompany’s ordinary shares were increased by subdividing each existing shares into 5 shares in September 2011. Subsequent to the sub-division, reserves amounting to Rs.365.4 Million were also capitalised at
Central Finance Company PLC - Annual Report 2011-1254
Annual Report of the Board of Directors (contd.)
the rate of Rs.108/- per share through the issue of bonus shares in the proportion of 01 share for 30 shares. As a result, the number of shares increased to 104,883,333.
ShareholdingsAs at 31st March 2012 there were 2,823 registered shareholders and the distribution of shareholding is indicated on page 114.
Share InformationInformation relating to earnings, dividends, net assets and market value per share is given in financial highlights on page 4. Information pertaining to trading in the Company’s shares is given in note no. 6 on page 115 of the Annual Report.
Major Shareholders The twenty largest shareholders of the Company as at 31st March 2012 together with an analysis of the shareholdings are given on page 115.
Directorate
List of Directors The 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 13 and 14 of the Annual Report. The following were the Directors of the Company as at the end of the financial year:
J.D. Bandaranayake (Non- executive Chairman)E.H. Wijenaike (Managing Director)G.S.N. Peiris (Executive Director)R.E. Rambukwelle (Executive Director)A.K. Gunaratne (Executive Director)T.K. Bandaranayake (Independent Non- executive Director)D.P. de Silva (Executive Director)C.L.K.P. Jayasuriya ( Non- executive Director)S.C.S. Wickramasinghe (Independent Non- executive Director)F. Mohideen (Independent Non- executive Director)
Resignations/New appointments of Directors G.C.B. Wijeyesinghe and M.S. Wijenaike resigned with effect from 30.06.2011 in accordance with the requirements of the Finance Business Act Direction No.03 of 2008 on Corporate Governance.C. Kiriella ,Director (Legal) resigned from the Board with effect from 30.06.2011 on completion of 26 years of service as an Executive Director of the Company. S.V. Wanigasekera and U.L. Kadurugamuwa resigned with effect from 31.12.2011 in accordance with the requirements of the Finance Business Act Direction No.03 of 2008 on Corporate Governance. D.P. de Silva was appointed to the Board as an Executive Director with effect from 01.07.2011.S.C.S. Wickramasinghe as an Independent Non-executive Director and C.L.K.P. Jayasuriya as a Non-executive Director were appointed to the Board with effect from 01.07.2011.J.D. Bandaranayake as a Non-executive Director and F. Mohideen as an Independent Non-executive Director were appointed to the Board with effect from 01.01.2012. J.D. Bandaraneyake was elected as Chairman of the Company on 01.01.2012.
Recommendations for Re-electionJ.D. Bandaranayake and F. Mohideen 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.
In accordance with Article 105 of the Articles of Association, S.C.S. Wickramasinghe retires by rotation and is eligible for re-election at the forthcoming Annual General Meeting.
In terms of the Finance Business Act No. 42 of 2011,the Company has obtained the approval of the Monetary Board of the Central Bank of Sri Lanka for the above mentioned directors nominated for re-appointment.
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 Business Act No. 42 of 2011, 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 56 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.
Compliance with Laws and RegulationsThe 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.
Central Finance Company PLC - Annual Report 2011-12 55
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 44 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.1.68 Million (2010/11 Rs. 1.45 Million) as audit fees. In addition, they were paid Rs. 0.14 Million (2010/11- Rs. 0.16 Million) for permitted non-audit related services.
The Group works with two other firms of chartered accountants as well, namely; Ernst & Young and KPMG Ford, Rhodes, Thornton & Co. They were paid Rs.1.67 Million (2010/11 - Rs. 1.54 Million) and Rs.0.31 Million (2010/11 - Rs.0.35 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 Fourth Annual General Meeting of the Company will be held at the registered office, 84, Raja Veediya, Kandy on 20th July 2012. The notice of meeting relating to the Fifty Fourth Annual General Meeting is given on page125.
For and on behalf of the Board
J.D. BandaranayakeChairman
G.S.N. Peiris Director
Corporate Services (Pvt) Ltd. Secretaries
12th June 2012
Central Finance Company PLC - Annual Report 2011-1256
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, Finance Business
Act No.42 of 2011 and other statutes
which are applicable in the preparation of
financial statements.
The financial statements comprise of:
• abalancesheet,whichpresentsatrue
and fair view of the state of affairs of
the Company and its subsidiaries as at
the end of the financial year
• anincomestatement,whichpresentsa
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
2012 incorporated in this report have
been prepared in accordance with the
Companies Act No.07 of 2007, Finance
Business Act No.42 of 2011, Sri Lanka
Accounting Standards and the Listing Rules
of the Colombo Stock Exchange. The
Directors consider that, in preparing the
financial statements exhibited on pages
64 to 107, they have adopted appropriate
accounting policies on a consistent basis,
supported by reasonable and prudent
judgments and estimates.
The Directors are responsible for ensuring
that the Company keeps sufficient
accounting records, which disclose the
financial position of the Company with
reasonable accuracy and enable them to
ensure that the financial statements have
been prepared and presented as aforesaid.
They are also responsible for taking
measures to safeguard the assets of the
Company and to prevent and detect frauds
and other irregularities. In this regard, the
Directors have instituted an effective and
comprehensive system of internal controls
comprising of internal checks, internal audit
and financial and other controls required
to carry on the Company’s business in
an orderly manner and to safeguard its
assets and ensure as far as practicable the
accuracy and reliability of the records.
The Directors’ are of the view that the
Company and its Subsidiaries have
adequate resources to continue operations
in the foreseeable future and have applied
the going concern basis in the preparation
of these financial statements.
To the best of the knowledge and belief
of the Directors, the Company’s Auditor
SJMS Associates has carried out reviews
and sample checks on the effectiveness
of the system of internal controls as they
consider appropriate and necessary in
providing their opinion on the financial
statements. SJMS Associates has examined
the financial statements made available
together with all other financial records,
minutes of shareholders’ and Directors’
meetings and related information and have
expressed their opinion which appears on
page 63 of the annual report.
The Directors have provided the Auditor
with every opportunity to carry out any
reviews and tests that they consider
appropriate and necessary for the
performance of their responsibilities.
Further, as required by Section 56(2) of
the Companies Act No.07 of 2007, the
Board of Directors has confirmed that
the Company, based on the information
available, satisfies the solvency test
immediately after the distribution of
the final dividend, 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.1.10 per share for
this year which is to be approved by
the shareholders at the Annual General
Meeting to be held on 20th July 2012.
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
12th June 2012
Colombo
Directors’ Responsibility for Financial Reporting
Central Finance Company PLC - Annual Report 2011-12 57
The Remuneration Committee, appointed
by the Board of Directors comprises of
three Non-executive Directors, of whom,
two are Independent.
Composition
J.D. Bandaranayake (Chairman) / (NED)
T.K. Bandaranayake (IND/NED)
S.C.S. Wickramasinghe (IND/NED)
PolicyThe Company remuneration policy aims to
attract, motivate and retain talent with the
appropriate professional, managerial and
operational expertise necessary to achieve
the objectives of the Company.
The Company remuneration framework
for the Executive Directors and Corporate
Management Team is designed to
ensure alignment between short and
long term interests of the Company and
thereby create and enhance value for all
stakeholders of the Company.
Scope
The Committee reviews all significant
Human Resource policies and initiatives.
The Committee deliberates and
recommends to the Board of Directors
annual increments and bonuses of the
Executive Directors and Members of
the Corporate Management based on
individual and corporate performance. The
committee also reviews salary structures
and terms and conditions of service to
ensure compatibility with the market.
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.
Fees
All Non-executive Directors receive a
fee for attendance at Board meetings
and serving on sub-committees and/or
subsidiary Boards.
Committee Meetings
A formal meeting of the committee was
held in March 2012 to review primarily
remuneration matters. The decisions of
the committee based on the policy and
scope outlined were ratified by the Board
of Directors.
J.D. BandaranayakeChairman
Remuneration Committee
Colombo,
12th June 2012
Key:
IND- Independent Director
NED- Non-executive Director
Remuneration Committee Report
Central Finance Company PLC - Annual Report 2011-1258
The Integrated Risk Management Committee (IRMC) as at the end
of the financial year comprised of the following members:
T.K. Bandaranayake - Chairman
F. Mohideen - Independent Non-executive Director
J.D. Bandaranayake - Non-executive Director attends by invitation
Management Representatives:
E. H. Wijenaike - Managing Director
G.S.N. Peiris - Director (Finance)
R. E. Rambukwella -Director (Marketing and Operations)
A.K. Gunaratne - Director (Group Co-ordination)
D.P. de Silva - Director (Credit)
U. B. Elangasinha - General Manager (Finance)
J. Illangakoon - General Manager (Branches)
B.A.C.K. Jayawardena - Deputy General Manager (Recoveries)
K. Kandeepan - Assistant General Manager (Finance)
Brief profiles of the Directors representing the Committee are given
on pages 13 to 14 of the Annual Report.
Terms of Reference
The Terms of Reference set out by the Board of Directors, include
the following
• toensurethattheCompanyhasacomprehensiverisk
management framework, appropriate compliance policies and
systems in place.
• toassessallrisktypes,includingbutnotlimitedtocredit,
market, liquidity, operational and strategic risks to the
Company through appropriate risk indicators and management
information.
• toensureriskdecisionsaretakeninaccordancewith
established delegated authorities and corrective action is
taken to mitigate risks taken beyond the tolerance set by the
Committee, on the basis of Company’s policies and regulatory
and supervisory requirements.
• tomonitorandassesstheeffectivenessoftheCompany’s
risk management system and the robustness of the risk
management function.
• toperiodicallyassessperformanceagainstinternallydefined
risk appetite.
The primary responsibility of the Committee is to assist the Board
of Directors in understanding and exercising regular risk oversight
on risk management measures adopted by the Management in
operating the Company’s business. The Committee determines the
adequacy and effectiveness of measures taken by the Management
in order to ensure that the overall risk of the Company conforms to
parameters approved by the Board.
Meetings
The Committee meets on a quarterly basis and the attendance at
the meetings is given on page 42 of the Annual Report.
The discussion and conclusions reached at the meeting are
recorded in minutes and circulated to the Board of Directors for
information and advice. A risk assessment report is also submitted
quarterly.
T. K. BandaranayakeChairman
Integrated Risk Management Committee
Colombo
12th June 2012
Integrated Risk Management Committee Report
Central Finance Company PLC - Annual Report 2011-12 59
Committee Composition
The Audit Committee is comprised of three Non-executive Directors
of the Company. The Committee is chaired by T.K. Bandaranayake,
a Senior Fellow Member of the Institute of Chartered Accountants
of Sri Lanka.
The members of the Board appointed Audit Committee are:
T.K. Bandaranayake Chairman (IND/NED) - appointed in May 2009
C.L.K.P. Jayasuriya (Non-IND/NED) - appointed in July 2011
F. Mohideen (IND/NED)-appointed in January 2012
(IND-Independent Director, Non-IND-Non-Independent Director
and NED-Non-executive Director)
Brief Profiles of the members are given on pages 13 to 14 of the
Annual Report.
T.K. Bandaranayake was appointed the Chairman of the
Audit Committee in January 2012, on the resignation of S.V.
Wanigasekera as Chairman of the Company in December 2011.
G.C.B. Wijeyesinghe and U.L. Kadurugamuwa who were members
of the Committee relinquished their services upon resignation from
the Board in June 2011 and December 2011 respectively.
The General Manager-Internal Audit functions as its Secretary.
Meetings
The Audit Committee met four times during the year. The
attendance of the members at Audit Committee Meetings is as
follows:Member Status No. of Meetings
S.V. Wanigasekera (retired) Non-IND /NED 3
G.C.B. Wijesinghe (retired) IND/NED 1
T.K. Bandaranayake IND/NED 4
U.L. Kadurugamuwa (retired) Non-IND/NED 3
C.L.K.P. Jayasuriya Non-IND/NED 3
(Non-independent since Jan’12)
F. Mohideen IND/NED 1
The eligible members attended the respective Audit Committee
meetings.
The Chairman, Managing Director, Director (Finance), Director
(Group Co-ordination), General Manager (Finance) and External
Auditor participate at meetings by invitation. Proceedings of the
Audit Committee meetings are reported regularly to the Board of
Directors.
Role of the Audit Committee:
The Audit Committee assists the Board of Directors in fulfilling
effectively its responsibilities relating to financial and other related
affairs of the Company. The Committee has been empowered to:
• Examineinternallyanymatterrelatingtothefinancialaffairsof
the Company
• Monitorandfollow-uptheInternalandExternalAudit
programmes and plans, review the Internal Audit and External
Audit reports
• Analyseandreviewrisksandexaminetheadequacy,
efficiency and effectiveness of the Internal Control System and
procedures in place to avoid or mitigate such risks.
• ReviewAccountingPolicies,emergingaccountingissuesand
disclosures according to SLAS / SLFRS
• ReviewinformationrequirementofCompaniesActNo.7of
2007 and other financial reporting requirements and SEC and
CBSL regulations
• ReviewandapproveAnnualFinancialStatementsandInterim
Financial Statements prepared for the shareholders, prior to
submission to the Board.
An Audit Committee Charter was introduced to guide the workings
of the Committee.
Financial Reporting
The Committee assists the Board of Directors to discharge
their responsibility for the preparation of Financial Statements
that portray a true and fair view of the affairs of the Company
in accordance with the Company’s accounting records and in
conformity with the Sri Lanka Accounting Standards, the Companies
Act No.7 of 2007 and Central Bank Directions.
Acting with the other Board members, the Committee reviewed
the Company’s interim and annual financial statements and
recommended their issue to shareholders. 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 provide reasonable
assurance to the Board that the assets of the Company are
safeguarded and the financial position is monitored according to
information made available.
Audit Committee Report
Central Finance Company PLC - Annual Report 2011-1260
Audit Committee Report
External Audit
The Committee assists the Board of
Directors in engaging External Auditor
for audit services in compliance with the
statutes.
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
other than for the payment of the auditor’s
fees. The Committee is thus satisfied
that there is no cause to compromise on
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 as per section
8 (2) of the Direction No.3 of 2008 issued
under the Finance Business Act. No 42 of
2011.
The Committee also met with the External
Auditor before the commencement and
at the conclusion of the annual audit
and reviewed their Engagement and
Management Letter and Management’s
responses thereto. The interim (end
Feb’12) and annual financial statements
were reviewed with the External Auditor
present.
The Committee also meets with the
External Auditor without the presence of
the Company management to discuss
any sensitive or critical issues and any
difficulties experienced during the audit.
Internal AuditDuring the year, the Audit Committee
reviewed the performance of the internal
audit function, the findings of the internal
audits completed and their evaluation of
the Company’s internal control system.
The Audit Committee also reviewed and
approved the adequacy of coverage of the
internal audit programme. It also assessed
the department’s resource requirements.
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.
T.K. Bandaranayake FCA
Chairman
Audit Committee
Colombo
12th June 2012
Central Finance Company PLC - Annual Report 2011-12 61
Responsibiltiy
The Board of Directors (‘Board’) is
responsible for the adequacy and
effectiveness of Central Finance Company
PLC’s (“the Company”) system of Internal
Controls. Such a system is designed
to manage the Company’s key areas
of risk within an acceptable risk profile
in achieving the policies and business
objectives of the Company, rather than
eliminating the risk of failure. 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
process is regularly reviewed by the Board.
The management assists the Board in the
implementation of the Board’s policies
and procedures on risk and control by
identifying and assessing the risks faced by
the Company and in the design, operation
and monitoring of suitable Internal Controls
to mitigate and control these 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 Features of the Process Adopted in Reviewing the Design and Effectiveness of the Internal Control System
The key processes that have been
established in reviewing the adequacy and
integrity of the System of Internal Controls
with respect to financial reporting include
the following
• Sub-committeesareestablishedtoassist
the Board in ensuring the effectiveness
of the Company’s daily operations in
accordance with the corporate objectives,
strategies and the annual budget as well
as the policies and business directions
that have been approved.
• TheInternalAuditDivisionofthe
Company checks for compliance
with policies and procedures and the
effectiveness of the Internal Control
System on an ongoing basis using
samples and rotational procedures and
highlight significant findings in respect
of any non-compliance. Audits are
carried out on all units and branches,
the frequency of which is determined
by the level of risk assessed, to provide
an independent and objective report.
The annual audit plan is reviewed and
approved by the Audit Committee.
Findings of the Internal Audit Division are
submitted to the Audit Committee for
review at their periodic meetings.
• TheAuditCommitteeoftheCompany
reviews Internal Control issues identified
by the Internal Audit Division, regulatory
authorities and management, and
evaluate the adequacy and effectiveness
of the Internal Control System. They also
review the Internal Audit function with
particular emphasis on the quality of
audits performed. The minutes of the
Audit Committee meetings are tabled
for the information of the Board on a
periodic basis.
• InassessingtheInternalControlSystem,
identified officers of the Company
collated all procedures and controls
that are connected with significant
accounts and disclosures of the Financial
Statements. The Internal Audit Division
checks for suitability of design and
effectiveness of these procedures and
controls on an ongoing basis during their
Audit Process.
Confirmation
Based 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 External Auditor
The External Auditor has reviewed the
Directors’ Statement on Internal Control
included in the Annual Report of the
Company for the year ended 31 March
2012 and reported to the Board that
nothing has come to their attention that
causes them to believe that the statement
is inconsistent with their understanding of
the process adopted by the Board in the
review of the design and effectiveness
of the Internal Control system of the
Company.
For and on behalf of the Board
J.D. BandaranayakeChairman
T.K. BandaranayakeChairman - Audit Committee
E. WijenaikeManaging Director/Chief Executive Officer
Colombo,
12th June 2012
Directors’ Statement on Internal Control
Central Finance Company PLC - Annual Report 2011-1262
To the Board of Directors of Central Finance Company PLC
Introduction
We were engaged by the Board of Directors of Central Finance Company PLC (“Central Finance”) to provide assurance on the Directors’ Statement on Internal Control (“the Statement”) included in the annual report for the year ended 31st March 2012.
Management’s responsibility
Management is responsible for the sufficiency and reliability of internal controls in place at the company as specified in the Finance Companies (Corporate Governance) Direction, No. 3 of 2008 (“the direction”) and to prepare and present the statement as required by paragraph 10 (2) (b) in accordance with the direction.
Our responsibilities and compliance with SLSAE 3050
Our responsibility is to issue a report to the board on the Statement based on the work performed. We conducted our engagement in accordance with Sri Lanka Standard on Assurance Engagements 3050 – Assurance Report for Banks on Directors’ Statement on Internal Control (SLSAE 3050), issued by the Institute of Chartered Accountants of Sri Lanka.
Summary of work performed
Our engagement has been conducted to assess whether the Statement is both supported by the documentation prepared by or for directors and appropriately reflects the process the directors have adopted in reviewing the system of internal control for the company.
The procedures performed were limited mainly to inquiries of the Central Finance personnel and existence of the documentation on a sample basis that supports the basis adopted by the board of directors.
SLSAE 3050 does not require us to consider whether the Statement covers all risks and controls, or to form an opinion on the effectiveness of the company’s risk and control procedures. It also does not require us to consider whether the processes described to deal with material internal control aspects of any significant problems disclosed in the annual report will, in fact, remedy the problems.
Our conclusion
Based on the procedures performed, nothing has come to our attention that causes us to believe that the Statement included in the annual report is inconsistent with our understanding of the process the Board of Directors have adopted in the review of the design and effectiveness of internal control of Central Finance.
SJMS Associates
Chartered Accountants
Colombo12th June 2012
Independent Assurance Report
Central Finance Company PLC - Annual Report 2011-12 63
TO THE SHAREHOLDERS OF CENTRAL FINANCE COMPANY PLC
Report on the Financial Statements
We have audited the accompanying financial statements of
Central Finance Company PLC, the consolidated financial
statements of the Company and its subsidiaries which
comprise the balance sheet as at 31st March 2012, and the
income statement, statement of changes in equity and cash
flow statement for the year then ended, and a summary of
significant accounting policies and other explanatory notes.
Management’s Responsibility for the Financial Statements
Management is responsible for the preparation and fair
presentation of these financial statements in accordance with
Sri Lanka Accounting Standards. This responsibility includes:
designing, implementing and maintaining internal control
relevant to the preparation and fair presentation of financial
statements that are free from material misstatement, whether
due to fraud or error; selecting and applying appropriate
accounting policies; and making accounting estimates that
are reasonable in the circumstances.
Scope of Audit and Basis of Opinion
Our responsibility is to express an opinion on these
financial statements based on our audit. We conducted
our audit in accordance with Sri Lanka Auditing Standards.
Those standards require that we plan and perform the
audit to obtain reasonable assurance whether the financial
statements are free from material misstatement.
An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting
principles used and significant estimates made by
management, as well as evaluating the overall financial
statement presentation.
We have obtained all the information and explanations
which to the best of our knowledge and belief were
necessary for the purposes of our audit. We therefore
believe that our audit provides a reasonable basis for our
opinion.
Opinion
In our opinion, so far as appears from our examination, the
Company maintained proper accounting records for the
year ended 31st March 2012 and the financial statements
give a true and fair view of the Company’s state of affairs
as at 31st March 2012 and its profit and cash flows for the
year then ended in accordance with Sri Lanka Accounting
Standards.
In our opinion, the consolidated financial statements give
a true and fair view of the state of affairs as at 31st March
2012 and the profit and cash flows for the year then
ended, in accordance with Sri Lanka Accounting Standards,
of the Company and its subsidiaries dealt with thereby, so
far as concerns the shareholders of the Company.
Report on Other Legal and Regulatory Requirements
In our opinion, these financial statements also comply
with the requirements of Section 151 (2) and 153(2) to
153(7) of the Companies Act No. 07 of 2007 and the
Finance Business Act No. 42 of 2011.
SJMS ASSOCIATES
Chartered Accountants
Colombo.12th June 2012
Independent Auditor’s Report
Central Finance Company PLC - Annual Report 2011-1264
Income Statement Group CompanyFor the year ended 31st March 2012 2011 2012 2011 Notes Rs.’000 Rs.’000 Rs.’000 Rs.’000
Income 1 9,260,026 8,094,371 8,737,392 7,647,201
Interest income 2 7,407,431 6,269,481 7,454,354 6,320,455 Less: Interest expenses 3 2,755,184 2,355,263 2,778,250 2,373,125
Net interest income 4,652,247 3,914,218 4,676,104 3,947,330 Other operating income 4 1,379,546 1,413,023 743,225 796,194 Other income 5 473,049 411,867 539,813 530,552
6,504,842 5,739,108 5,959,142 5,274,076
Less: Operating expenses 6 Personnel expenses 1,026,436 916,114 844,210 758,141 Premises, equipment and establishment expenses 1,271,571 1,183,015 1,173,707 1,118,288 Employee retirement benefit expenses 7 107,155 91,134 93,424 79,390 Other expenses 392,008 354,878 308,979 250,834
2,797,170 2,545,141 2,420,320 2,206,653
Profit before loan losses and provisions 3,707,672 3,193,967 3,538,822 3,067,423 Less: Loan losses and provisions 8 127,255 186,822 126,777 186,221
3,580,417 3,007,145 3,412,045 2,881,202 Share of profit of associates 9 465,552 507,781 - -
Profit before VAT on financial services and income tax 4,045,969 3,514,926 3,412,045 2,881,202 Less: VAT on financial services 155,428 273,333 155,428 273,333
Profit before income tax 10 3,890,541 3,241,593 3,256,617 2,607,869 Less: Income tax expense 11 1,119,544 1,330,155 911,206 997,733
Profit after income tax 2,770,997 1,911,438 2,345,411 1,610,136
Attributable to equity holders of the parent 2,676,615 1,827,034 2,345,411 1,610,136Attributable to minority interest 94,382 84,404 - -
Net profit for the year 2,770,997 1,911,438 2,345,411 1,610,136
Basic and diluted earnings per share - Rs. 12 25.52 17.42 Dividend per share - Rs. 13 Paid 1.40 1.07 Proposed 1.10 0.97 The accounting policies and notes from pages 69 to 107 form an integral part of these financial statements.
Central Finance Company PLC - Annual Report 2011-12 65
Balance Sheet Group CompanyAs at 31st March 2012 2011 2012 2011 Notes Rs.’000 Rs.’000 Rs.’000 Rs.’000
ASSETSCash in hand and at banks 356,483 345,681 307,421 273,197 Investments in government securities 1,568,257 1,954,393 1,568,257 1,954,393 Deposits with banks 1,500,000 95,000 1,500,000 95,000 Dealing securities 14 24,560 32,000 24,560 32,000 Tax receivables 36,726 2,851 - - Inventories and other stocks 15 819,257 667,967 555,554 433,014 Investment securities 16 180,331 180,331 173,971 173,971 Net investment in leases 17 22,891,794 16,141,201 22,891,794 16,141,201 Corporate debt securities 18 181,850 313,414 181,850 313,414 Loans and advances 19 17,710,991 12,518,772 18,278,528 13,496,307 Trade and other receivables 20 1,252,836 1,485,024 819,791 1,106,588 Investments in real estate 21 92,438 594,204 72,364 107,811 Investments in associates 23 2,104,030 1,908,947 523,458 523,458 Investments in subsidiaries 24 - - 312,987 312,987 Other assets 25 18,252 8,259 18,252 8,259 Deferred tax asset 26 128 8,929 - - Intangible assets 27 38,316 46,491 36,109 43,991 Property, plant and equipment 28 4,781,476 4,859,631 3,901,006 4,024,580
Total assets 53,557,725 41,163,095 51,165,902 39,040,171
LIABILITIESBank overdrafts 1,711,728 505,932 1,687,625 502,367 Tax payable 111,608 323,795 111,256 275,939 Commercial paper 400,496 - 400,496 - Trade and other payables 29 7,914,095 5,735,556 7,702,364 5,488,142 Amounts due to subsidiaries - - 224,296 185,210 Deposits 30 21,428,425 18,757,201 21,584,908 18,957,838 Bank loans 31 4,067,767 986,167 4,019,167 901,167 Non bank loans 32 1,809,812 1,340,661 1,809,812 1,340,661 Debentures 33 250,000 400,000 250,000 400,000 Retirement benefit obligations 34 480,040 403,982 409,734 345,411 Deferred tax liability 26 1,450,094 1,264,795 1,411,451 1,199,214
Total liabilities 39,624,065 29,718,089 39,611,109 29,595,949
SHAREHOLDERS’ FUNDSStated capital 35 568,420 203,020 568,420 203,020 Capital reserves 36 1,384,240 1,385,463 972,611 979,072 Reserve fund 37 800,000 682,000 800,000 682,000 Investment fund 38 223,492 - 223,492 - Revenue reserves 39 10,369,840 8,627,110 8,990,270 7,580,130
Funds attributable to equity holders of the parent 13,345,992 10,897,593 11,554,793 9,444,222 Minority interest 587,668 547,413 - -
13,933,660 11,445,006 11,554,793 9,444,222
Total liabilities, shareholders’ funds and minority interest 53,557,725 41,163,095 51,165,902 39,040,171
Net assets per share - Rs. 127.25 103.90 110.17 90.05
The accounting policies and notes from pages 69 to 107 form an integral part of these financial statements. I certify that the financial statements comply with the requirements of the Companies Act No. 07 of 2007.
U.B. Elangasinha Chief Financial OfficerThe 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)
12th June 2012Colombo
Central Finance Company PLC - Annual Report 2011-1266
Statement of Changes in Equity
At
tribu
tabl
e to
Equ
ity H
olde
rs o
f the
Com
pany
Gro
up e
quity
sta
tem
ent f
or th
e
yea
r end
ed 3
1st M
arch
201
2 St
ated
Ca
pita
l Res
erve
s
Rese
rve
Inve
stm
ent
Gen
eral
Re
tain
ed
Min
ority
To
tal
C
apita
l Re
valu
atio
n O
ther
F
und
F
und
R
eser
ves
E
arni
ngs
Inte
rest
R
eser
ve
Cap
ital
R
eser
ves
Rs.’
000
R
s.’00
0
Rs.’
000
R
s.’00
0
Rs.’
000
R
s.’00
0
Rs.’
000
R
s.’00
0
Rs.’0
00
Bala
nce
as a
t 1st
Apr
il 20
10
203
,020
1
,358
,312
1
8,86
5
601
,000
-
6
,124
,070
8
21,6
87
506
,506
9
,633
,460
N
et p
rofit
for t
he y
ear e
nded
31s
t Mar
ch 2
011
-
-
-
-
-
-
1
,827
,034
8
4,40
4
1,9
11,4
38
Reve
rsal
of p
rovis
ion
for l
oan
loss
es
-
-
-
-
-
78,
750
-
-
7
8,75
0 D
efer
red
tax
attri
buta
ble
to re
valu
atio
n su
rplu
s
due
to c
hang
e in
cor
pora
te ta
x ra
te
-
10,
894
-
-
-
-
-
1,0
11
11,
905
Effe
ct o
n gr
atui
ty tr
ansit
iona
l pro
visio
n
due
to c
hang
e in
cor
pora
te ta
x ra
te
-
-
-
-
-
-
(2,
642)
-
(
2,64
2)D
efer
red
tax
on b
roug
ht fo
rwar
d ta
x lo
sses
-
-
-
-
-
-
4
05
-
405
D
efer
red
tax
attri
buta
ble
to re
valu
atio
n su
rplu
s
due
to c
hang
e in
cor
pora
te ta
x ra
te-a
ssoc
iate
com
pany
-
3
,019
-
-
-
-
3
54
-
3,3
73
Dep
recia
tion
on re
valu
atio
n su
rplu
s -
(
5,62
7)
-
-
-
-
5,6
27
-
-
Tran
sfer
s du
ring
the
year
-
-
-
8
1,00
0
-
1,3
79,0
00
(1,
460,
000)
-
-
D
ivide
nds
for t
he y
ear e
nded
31s
t Mar
ch 2
010
-
-
-
-
-
-
(96
,425
) (
44,5
08)
(14
0,93
3)D
ivide
nds
for t
he y
ear e
nded
31s
t Mar
ch 2
011
-
-
-
-
-
-
(50
,750
) -
(
50,7
50)
Bala
nce
as a
t 31s
t Mar
ch 2
011
203
,020
1
,366
,598
1
8,86
5
682
,000
-
7
,581
,820
1
,045
,290
5
47,4
13
11,
445,
006
Net
pro
fit fo
r the
yea
r end
ed 3
1st M
arch
201
2
- -
- -
- -
2,6
76,6
15
94,
382
2
,770
,997
Ca
pita
lisat
ion
of re
serv
es
365
,400
-
-
-
-
(
365,
400)
-
-
-
Re
valu
atio
n su
rplu
s re
alise
d on
de
-reco
gniti
on o
f bui
ldin
g -
(
3,49
4)
-
-
-
-
3,4
94
-
-
Def
erre
d ta
x at
tribu
tabl
e to
reva
luat
ion
surp
lus
on
de-
reco
gniti
on o
f bui
ldin
g -
9
78
-
-
-
-
-
-
978
D
efer
red
tax
attri
buta
ble
to re
valu
atio
n su
rplu
s
due
to c
hang
e in
cor
pora
te ta
x ra
te
-
6,6
24
-
-
-
-
-
2,4
55
9,0
79
Dep
recia
tion
on re
valu
atio
n su
rplu
s -
(
5,33
1)
-
-
-
-
5,3
31
-
-
Tran
sfer
s du
ring
the
year
-
-
-
1
18,0
00
223
,492
1
,776
,000
(
2,11
7,49
2)
-
-
Divi
dend
s fo
r the
yea
r end
ed 3
1st M
arch
201
1 -
-
-
-
-
-
(
162,
400)
(
56,5
82)
(21
8,98
2)D
ivide
nds
for t
he y
ear e
nded
31s
t Mar
ch 2
012
-
-
-
-
-
-
(73
,418
) -
(
73,4
18)
Bala
nce
as a
t 31s
t Mar
ch 2
012
568
,420
1
,365
,375
1
8,86
5
800
,000
2
23,4
92
8,9
92,4
20
1,3
77,4
20
587
,668
1
3,93
3,66
0
Figu
res
in b
rack
ets
indi
cate
ded
uctio
ns.
The
acco
untin
g po
licie
s an
d no
tes
from
pag
es 6
9 to
107
form
an
inte
gral
par
t of t
hese
fina
ncia
l sta
tem
ents
.
Central Finance Company PLC - Annual Report 2011-12 67
Com
pany
equ
ity s
tate
men
t for
the
y
ear e
nded
31s
t Mar
ch 2
012
Stat
ed
Reva
luat
ion
Re
serv
e In
vest
men
t G
ener
al
Reta
ined
To
tal
C
apita
l Re
serv
e F
und
F
und
R
eser
ves
E
arni
ngs
R
s.’00
0 Rs
.’000
R
s.’00
0
Rs.’
000
R
s.’00
0
Rs.’
000
Rs
.’000
Bala
nce
as a
t 1st
Apr
il 20
10
203
,020
9
74,8
47
601,
000
-
6
,112
,889
5
,218
7,
896,
974
Net
pro
fit fo
r the
yea
r end
ed 3
1st M
arch
201
1
-
-
-
-
-
1,6
10,1
36
1,61
0,13
6 Re
vers
al o
f pro
visio
n fo
r loa
n lo
sses
-
-
-
-
7
8,75
0
-
78,
750
Def
erre
d ta
x at
tribu
tabl
e to
reva
luat
ion
surp
lus
due
to c
hang
e in
cor
pora
te ta
x ra
te
-
8,1
79
-
-
-
-
8,1
79
Effe
ct o
n gr
atui
ty tr
ansit
iona
l pro
visio
ndu
e to
cha
nge
in c
orpo
rate
tax
rate
-
-
-
-
-
(
2,64
2)
(2,
642)
Dep
recia
tion
on re
valu
atio
n su
rplu
s
-
(
3,95
4)
-
-
-
3,9
54
-
Tran
sfer
s du
ring
the
year
-
-
8
1,00
0
- 1
,379
,000
(
1,46
0,00
0)
-
Divi
dend
s fo
r the
yea
r end
ed 3
1st M
arch
201
0
-
-
-
-
-
(
96,4
25)
(96
,425
)D
ivide
nds
for t
he y
ear e
nded
31s
t Mar
ch 2
011
-
-
-
-
-
(50
,750
) (
50,7
50)
Bala
nce
as a
t 31s
t Mar
ch 2
011
203
,020
9
79,0
72
682
,000
-
7
,570
,639
9
,491
9
,444
,222
Net
pro
fit fo
r the
yea
r end
ed 3
1st M
arch
201
2
-
-
-
-
-
2,3
45,4
11
2,3
45,4
11
Capi
talis
atio
n of
rese
rves
36
5,40
0
-
-
-
(36
5,40
0)
-
-
Reva
luat
ion
surp
lus
real
ised
on d
e-re
cogn
ition
of b
uild
ing
-
(3,
494)
-
-
-
3
,494
-
D
efer
red
tax
attri
buta
ble
to re
valu
atio
n su
rplu
son
de-
reco
gniti
on o
f bui
ldin
g
-
9
78
-
-
-
-
978
D
epre
ciatio
n on
reva
luat
ion
surp
lus
-
(3,
945)
-
-
-
3
,945
-
Tr
ansf
ers
durin
g th
e ye
ar
-
-
118
,000
2
23,4
92
1,7
76,0
00
(2,
117,
492)
-
D
ivide
nds
for t
he y
ear e
nded
31s
t Mar
ch 2
011
-
-
-
-
-
(16
2,40
0)
(16
2,40
0)D
ivide
nds
for t
he y
ear e
nded
31s
t Mar
ch 2
012
-
-
-
-
-
(73
,418
) (
73,4
18)
Bala
nce
as a
t 31s
t Mar
ch 2
012
568
,420
9
72,6
11
800
,000
2
23,4
92
8,9
81,2
39
9,0
31
11,
554,
793
Figu
res
in b
rack
ets
indi
cate
ded
uctio
ns.
The
acco
untin
g po
licie
s an
d no
tes
from
pag
es 6
9 to
107
form
an
inte
gral
par
t of t
hese
fina
ncia
l sta
tem
ents
.
Central Finance Company PLC - Annual Report 2011-1268
Cash Flow Statement Group CompanyFor the year ended 31st March 2012 2011 2012 2011 Rs.’000 Rs.’000 Rs.’000 Rs.’000
Cash flows from operating activitiesInterest receipts 6,509,975 5,776,514 6,557,318 5,828,700 Interest payments (2,288,725) (2,290,037) (2,306,263) (2,292,970)Recoveries on loans previously written off 60,255 69,960 60,255 69,960 Receipts from other operating activities 4,862,558 4,155,052 380,628 440,215 Cash payments to employees and suppliers (5,870,712) (4,620,404) (2,081,791) (1,651,866)
Operating profit before changes in operating assets 3,273,351 3,091,085 2,610,147 2,394,039(Increase)/decrease in operating assets: (Investments)/divestments in government securities and bank deposits maturing after 90 days (341,929) 672,949 (341,929) 672,949 Funds advanced to customers (28,004,432) (21,734,460) (28,048,678) (21,839,807)Capital component of recoveries from customers 18,605,995 15,723,293 19,026,128 15,765,364 Others 787,346 363,133 736,657 436,997 Increase/(decrease) in operating liabilities:Deposits 3,053,593 2,013,711 3,060,584 2,039,870
Net cash from operating activities before income tax (2,626,076) 129,711 (2,957,091) (530,588)Income tax paid (966,439) (1,183,159) (840,379) (1,043,543)
Net cash outflow from operating activities (3,592,515) (1,053,448) (3,797,470) (1,574,131)
Cash flows from investing activitiesDividends received from subsidiaries and associates 118,174 70,393 119,370 74,537Dividends received from other companies 16,521 14,996 13,919 14,991 Purchase of securities - (148,836) - (148,836)Proceeds from sale of securities - 104,897 - 120,339 Investments in associates - (146,751) - (41,404)Purchase of property, plant and equipment (849,715) (1,020,759) (747,139) (977,485)Disposal of property, plant and equipment 321,610 372,884 319,967 368,624
Net cash outflow from investing activities (393,410) (753,176) (293,883) (589,234)
Cash flows from financing activitiesBorrowings 7,534,426 3,485,129 7,485,826 3,400,129 Repayment of borrowings (3,695,415) (2,298,396) (3,634,589) (2,019,488)Dividends paid to equity holders of the parent (317,918) (145,958) (232,918) (145,958)Dividends paid to minority shareholders (52,162) (44,508) - -
Net cash inflow from financing activities 3,468,931 996,267 3,618,319 1,234,683
Net decrease in cash and cash equivalents (516,994) (810,357) (473,034) (928,682)Cash and cash equivalents at the beginning of the period 1,171,749 1,982,106 1,102,830 2,031,512
Cash and cash equivalents at the end of the period 654,755 1,171,749 629,796 1,102,830
Analysis of cash and cash equivalentsCash in hand and at banks 356,483 345,681 307,421 273,197 Investments in government securities-maturing within 90 days 1,020,000 1,237,000 1,020,000 1,237,000Deposits with banks-maturing within 90 days 990,000 95,000 990,000 95,000 Bank overdrafts (1,711,728) (505,932) (1,687,625) (502,367)
Cash and cash equivalents at the end of the period 654,755 1,171,749 629,796 1,102,830
The accounting policies and notes from pages 69 to 107 form an integral part of these financial statements. Figures in brackets indicate outflows.
Central Finance Company PLC - Annual Report 2011-12 69
1 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 2012 was 1,439 (1,347 as at 31st March 2011)
1.2 Consolidated financial statements The consolidated financial statements of Central Finance
Company PLC for the year ended 31st March 2012 comprise those of the Company (parent Company) and 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 three companies referred to above have a common financial year ending 31st December.
1.3 Approval of the consolidated financial statements by the Board of Directors
The consolidated financial statements for the year ended 31st March 2012 were authorised for issue on 12th June 2012.
1.4 Parent enterprise Central Finance Company PLC does not have a parent of its
own.
2 Principal activities and nature of operations2.1 Company The principal activities of the Company are leasing, hire
purchase financing, vehicle hire, deposit mobilisation, vehicle trading, providing money transfer facilities and provision of other financial services.
2.2 Subsidiaries Name of the company Principal business activities
Central Industries PLC Manufacture and distribution of PVC pipes and fittings
Central Mineral Industries Ltd. Manufacture of 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
Mark Marine Services (Pvt) Ltd. Hydro power generation
Central Developments Ltd. Investment company
CF Insurance Brokers (Pvt) Ltd. Insurance broking
Central Transport and Travels Ltd. Hiring of vehicles
Hedges Court Residencies (Pvt) Ltd. Construction and sale of apartments
Dehigama Hotels Company Ltd. Renting of commercial property
CF Growth Fund Ltd. Investment company
Kandy Private Hospitals Ltd. Provision of healthcare services
2.3 Associates Name of the company Principal business activities
Nations Trust Bank PLC Corporate and retail 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
CF Growth Fund Ltd. whose principal business activity was importation and assembly of hand tractors ceased that operation at the end of last financial year, and continued as an investment company during the current financial year. There were no other 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 Business Act No. 42 of 2011 and provide appropriate disclosures as required under the listing rules of the Colombo Stock Exchange.
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3.2 Basis of measurement The consolidated financial statements have been prepared
on the historical cost convention except in respect of the following which are treated as shown;
• Landandbuildingsaremeasuredatcostatthetimeof acquisition and subsequently at revalued amounts being fair values at the date of revaluation
• Dealingsecuritiesarestatedatmarketvalue
• Retirementbenefitobligationsarerecognisedatpresent value of the defined benefit obligation less the net total of the plan assets plus unrecognised actuarial gains less unrecognised past service cost and unrecognised actuarial losses as explained in the note 34 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 going concerns 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 Sri Lanka Accounting Standards 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 on-going 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 notes 4.1 to 4.5.
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 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 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 so made.
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 notes 6.4 and 6.5. 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 of assets. 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
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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. Such increased carrying amount of an asset attributable to 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.
4.5 Defined benefit plans The cost of defined benefit plans, viz: gratuity obligations is
determined using actuarial valuations. The actuarial valuation involves making assumptions about discount rates, expected rates of return on assets, future salary increases and mortality rates. Due to the long-term nature of these plans, such estimates are subject to significant uncertainty.
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 an 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 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”.
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 drawn up to 31st March for the effect of significant transactions or events for purposes 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 (Revised 2006)- 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 purposes of consolidation.
5.3 Transactions eliminated on consolidation Intra-group transactions and balances, income, expenses and
any unrealised gains arising from intra-group transactions are eliminated in preparing the consolidated financial statements. Unrealised gains arising from transactions with associates are eliminated to the extent of the Group’s interest in the associates against the investment in the associate. Unrealised losses are eliminated in the same way as unrealised gains except that they are eliminated only to the extent that there is no evidence of impairment.
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 Investments in associates Investments in associates are accounted for at cost less
provision for impairment in the Company financial statements, and in the Group financial statements under the equity method. Under the equity method, the investment is initially accounted for at cost less provision for any impairment losses and the carrying amount is adjusted for post-acquisition changes in the Group’s share of net assets of the associates.
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6.4 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.
6.5 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, such impairments have been recognised for each investment individually to recognise a decline other than temporary. Changes in market values of these securities are not taken into account, unless the decline is other than temporary.
6.6 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 19 (Revised 2005) - Leases, and are reflected in the balance sheets after eliminating unearned interest income, and provision for loan losses.
6.7 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.
6.8 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.
6.9 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:
50% on all advances in arrears for a period of 6 to 12 months
100% on all advances in arrears for over 12 months
In addition, wherever it is considered prudent, further provisions are made on specifically identified loans and advances.
6.10 Inventories and other stocks 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. 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 Inventories are regularly assessed for impairment and provisions are made accordingly.
6.11 Investments in real estate Investments in real estate 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.
6.12 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.
6.13 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 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 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, which is not an integral part of hardware, 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.
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6.14 Property, plant and equipment6.14.1 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. Carrying values of property, plant and equipment are reviewed for impairment when events or changes in circumstances indicate that such 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 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 Sri Lanka Accounting Standard 18 (Revised 2005) Property, Plant and Equipment.
6.14.2 Operating lease assets Operating lease assets are classified under property, plant
and equipment at cost less accumulated depreciation and impairment losses, if any. 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
6.14.3 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.
7 Liabilities and provisions7.1 Deposits from customers Deposits include term deposits and certificates of deposit
accepted under various tenures ranging from one month to five years and savings deposits. They are accounted for at the gross value of the outstanding balance as at the balance sheet date.
7.2 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.
7.3 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.
7.4 Trade and other payables and amounts due to subsidiaries Trade and other payables and amounts due to subsidiaries
are stated at cost.
7.5 Employee Benefits7.5.1 Defined benefit plans A defined benefit plan is a post-employment benefit plan
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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 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 defined benefit obligation and the fair value of plan assets 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 fixed deposits with approved banks. Gratuity liabilities of the other companies in the Group are not funded externally. Provision is made for defined benefit plan liability for all employees from the first year of service 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 ½ 35 up to 40 2 Over 40 2 ½
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’s salary for each year of completed service.
7.5.2 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.
7.6 Provisions In accordance with Sri Lanka Accounting Standard 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.
8 Investment fund account As introduced through the budget proposals - 2011, every
person or partnership that carries on the business of banking or financial services is required to establish and operate an Investment Fund Account. Licenced Finance Companies are required to transfer funds to the Investment Fund Account and build a permanent fund as and when taxes are paid after 01st January 2011 in the following manner:
8% of the profits calculated for the payment of Value Added Tax (VAT) on financial services on dates specified in the VAT Act for payment of VAT.
5% of the profit before tax calculated for income tax purposes on dates specified in Section 113 of the Inland Revenue Act for the self-assessment payments of tax.
Funds in the Investment Fund Account are to be utilised through investment in long-term Government Securities or lending in specified sectors at prescribed rates.
An Investment Fund Account has been created by the Company in compliance with the above and details of amounts reserved and invested are given in Note 38.
9 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.
10 Foreign currency transactions Transactions in foreign currencies are translated to Sri Lankan
Rupees at the exchange rates that prevailed at the date of the
Central Finance Company PLC - Annual Report 2011-12 75
transaction. Monetary assets and liabilities denominated in foreign currencies as at the balance sheet date are translated to Sri Lankan Rupees using the closing rates that prevailed at the balance sheet date. Foreign exchange differences arising on translation are recognised in the income statement.
11 Income statement11.1 Revenue recognition Revenue is recognised to the extent that it is probable that the
economic benefits will flow to the Company and the revenue and associated costs incurred or to be incurred can be reliably measured. Revenue is measured at the fair value of the consideration received or receivable net of trade discounts and sales taxes. The following specific criteria are used for the purpose of recognition of revenue.
11.1.1 Lease In accordance with Sri Lanka Accounting Standard 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 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.
11.1.2 Hire purchase Recognition of interest income from hire purchase facilities is
similar to that of leases; where interest income is recognised 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 capital outstanding. 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.
11.1.3 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.
11.1.4 Overdue interest Overdue interest on lease, hire purchase, loans and other
advances is recognised on a cash basis.
11.1.5 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.
11.1.6 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.
11.1.7 Interest income on deposits with banks Interest receivable is taken to the income statement on an
accrual basis.
11.1.8 Dividend income Dividend income is recognised in the income statement
on the date that the Group’s right to receive payment is established.
11.1.9 Income on housing projects and real estate income Income on housing projects and real estate income is
recognised on an accrual basis.
11.1.10 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.
11.1.11 Commission income Commission income relating to specific transactions or events
is recognised in the income statement in the period in which they are earned.
11.1.12 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.
11.1.13 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.
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11.1.14 Significant accounting policies that are specific to the business of the subsidiaries
11.1.14.1 Sale of Services Revenue from energy supplied is recognised, upon delivery
of Energy to Ceylon Electricity Board and Delivery of Electrical Energy shall be completed when Electrical Energy meeting the specifications as set out in Power Purchase Agreement is received at the metering point.
11.1.14.2 Sale of apartments Revenue is recognised on percentage completion basis. For
this purpose, the property is deemed to be sold once 75% of sale proceeds have been collected.
11.1.14.3 Insurance broking The commission income of the Company is recognised on an
accrual basis and matched with related costs and expenses.
11.2 Expenditure recognition Expenses are recognised in the income statement on the
basis of a direct association between the cost incurred and the earnings 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 33 – Revenue Recognition and Disclosures in the Financial Statements of Finance Companies, interest and other expenses payable are recognised on an accrual basis.
11.2.1 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.
11.3 Recovery of bad debts Bad debts recovered are recognised as and when the debts
are recovered.
12 Off balance sheet transactions The Company enters into off balance sheet transactions
such as interest rate SWAPs as part of the risk management strategy. Net interest receipt or payment is accrued in the income statement.
13 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.
13 Cash flow statement The cash flow statement has been prepared using the direct
method in accordance with Sri Lanka Accounting Standard 9 - Cash Flow Statements.
14 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 Sri Lanka Accounting Standard 28 Segmental Reporting, segmental information is presented in respect of the Group. The business segments comprise of leasing, hire purchase and advances, vehicle hire, power generation, manufacturing, medical services and insurance broking, real estate and investments in shares and units. Segment results, assets and liabilities include items directly attributable to a segment as well as those that can be allocated on a reasonable basis.
15 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.
16 Related party transactions Disclosures are made In respect of the transactions in which
one party has the ability to control or exercise significant influence over the financial and operating policies of the other, irrespective of whether a price is charged.
17 New Accounting Standards issued but not yet effective as at balance sheet date
The Institute of Chartered Accountants of Sri Lanka has issued a new volume of Sri Lanka Accounting Standards that are effective from financial periods beginning on or after 01st January 2012. These Sri Lanka Accounting Standards comprise of Accounting Standards prefixed both SLFRS (corresponding to IFRS) and LKAS (corresponding to IAS).
These new standards have become applicable for the Company from 01st April 2012 and accordingly the reporting framework for the year ending 31st March 2013 will be in accordance with SLFRS. Due to complexity and technical expertise required in the convergence process, the Company carried out an initial impact analysis with the assistance of an external consultant based on 2011 balances to assess the approximate potential impact.
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Notes to the Financial Statements Group Company 2011/12 2010/11 2011/12 2010/11 Rs.’000 Rs.’000 Rs.’000 Rs.’000
1 Income Interest income (Note 2) 7,407,431 6,269,481 7,454,354 6,320,455 Other operating income (Note 4) 1,379,546 1,413,023 743,225 796,194 Other income (Note 5) 473,049 411,867 539,813 530,552 9,260,026 8,094,371 8,737,392 7,647,201
2 Interest income Leases 3,597,860 2,662,308 3,597,860 2,662,308 Hire purchase 2,778,306 2,476,292 2,778,306 2,476,292 Government securities and deposits with banks 184,225 234,017 184,225 234,017 Interest on loans granted under Investment Fund Account (IFA) 794 - 794 - Interest on treasury bills and treasury bonds under IFA scheme 7,920 - 7,920 - Loans, advances and others 838,326 896,864 885,249 947,838 7,407,431 6,269,481 7,454,354 6,320,455
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, interest income from secondary market transactions in government securities for the year has been grossed up in the financial statements with the value of such notional credit which amounts to Rs.13.32 Million (2010/11 - Rs.24.01 Million) for the Company and the Group.
Group Company 2011/12 2010/11 2011/12 2010/11 Rs.’000 Rs.’000 Rs.’000 Rs.’000
3 Interest expenses Deposits 2,142,449 2,072,875 2,165,515 2,090,737 Bank loans and overdrafts 517,378 183,119 517,378 183,119 Non- bank loans 56,406 80,606 56,406 80,606 Interest on other debt securities 38,951 18,663 38,951 18,663 2,755,184 2,355,263 2,778,250 2,373,125
4 Other operating income Vehicle hiring income 742,798 795,733 743,225 796,194 Manufacturing and trading income 327,648 270,965 - - Insurance broking 159,098 130,833 - - Medical services 52,312 49,240 - - Power generation 97,690 166,252 - - 1,379,546 1,413,023 743,225 796,194
Central Finance Company PLC - Annual Report 2011-1278
Group Company 2011/12 2010/11 2011/12 2010/11 Rs.’000 Rs.’000 Rs.’000 Rs.’000
5 Other income Commissions 2,589 3,373 2,589 3,373 Profit on sale of shares - 38,014 - 56,707 Profit on sale of vehicles 80,641 39,199 77,101 32,559 Recovery of bad debts 79,145 71,446 77,297 71,234 Profit on sale of property, plant and equipment 116,846 131,414 114,968 124,802 Dividend income from quoted investment securities 12,262 14,140 8,683 14,135 Dividend income from unquoted investment securities 5,237 857 5,237 857 Dividend income from subsidiaries - - 57,937 49,860 Dividend income from associates - - 62,800 62,724 Profit on real estate operations 65,806 29,397 21,973 10,878 Appreciation in value of dealing securities and reversal of provision for impairment of long term investments - 12,623 - 25,001 Profit on maintenance of vehicles 27,729 36,679 27,729 36,679 Others 82,794 34,725 83,499 41,743 473,049 411,867 539,813 530,552
6 Operating expenses Operating expenses include the following:
Directors’ emoluments 114,074 109,813 92,078 91,425 Legal expenses 7,917 7,468 7,420 6,969 Depreciation 550,140 493,275 492,994 446,882 Amortisation of intangible assets 13,116 20,581 12,520 20,402 Impairment of property, plant and equipment - 430 - - Auditor’s remuneration - Audit 3,346 2,996 1,678 1,448 Non-audit 447 511 143 163 Donations 3,067 7,366 2,894 7,312 Employees’ Provident Fund contributions 90,463 77,030 73,511 62,565 Employees’ Trust Fund contributions 21,331 18,119 17,159 14,557 Diminution in value of dealing securities 7,440 - 7,440 -
7 Employee retirement benefit expenses Current service cost 43,193 33,212 38,103 29,598 Interest cost 70,762 67,105 63,151 60,588 Gratuity charge for the year 1,030 1,613 - - Amortisation of actuarial loss 4,785 - 4,785 - Expected return on assets (12,615) (10,796) (12,615) (10,796) 107,155 91,134 93,424 79,390
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 service cost as required by SLAS-16-Retirement Benefits (Revised-2006).
Notes to the Financial Statements
Central Finance Company PLC - Annual Report 2011-12 79
8 Loan losses and provisions Group Company 2011/12 2010/11 2011/12 2010/11 Rs.’000 Rs.’000 Rs.’000 Rs.’000
Increase/(decrease) in provision over the previous year 53,756 (6,089) 53,756 (6,089) Transfer (to)/from revenue reserves - 78,750 - 78,750 Provision charged to income statement 53,756 72,661 53,756 72,661 Bad debts written off 478 115,133 - 114,532 Loss on sale of repossessed vehicles - 28,341 - 28,341 Loss/(reversal of loss) on revaluation of repossessed vehicles and miscellaneous stocks 73,021 (29,313) 73,021 (29,313) 127,255 186,822 126,777 186,221
9 Share of profit of associates Nations Trust Bank PLC 448,250 433,248 Tea Smallholder Factories PLC 2,177 49,444 Capital Suisse Asia Ltd. 15,125 25,089 465,552 507,781
10 Group profits/(losses) before income tax Central Finance Company PLC 3,256,617 2,607,869 Central Industries PLC 149,760 121,814 Central Developments Ltd. 3,324 18,341 Dehigama Hotels Company Ltd. 21,852 19,330 Expanded Plastic Products Ltd. 846 7,033 Central Mineral Industries (Pvt) Ltd. 1,341 631 Central Transport & Travels Ltd. 2,575 9,786 Central Construction & Development (Pvt) Ltd. 360 (43) CF Growth Fund Ltd. 16,486 27,571 Kandy Private Hospitals Ltd. 15,276 17,258 CF Insurance Brokers (Pvt) Ltd. 51,910 43,848 Central Homes (Pvt) Ltd. 1,113 554 Mark Marine Services (Pvt) Ltd. 70,281 144,505 Hedges Court Residencies (Pvt) Ltd. (7,141) (47,521) 3,584,600 2,970,976 Inter-group adjustments (159,611) (237,164) Share of profit of associates 465,552 507,781
3,890,541 3,241,593
11 Income tax expense The provision for the year is made up as follows: Current tax charge 756,337 887,874 697,991 755,754 Under provision of current tax relating to previous years - 363,776 - 363,746 Over provision of current tax relating to previous years - (489) - - Social Responsibility Levy - 1,979 - - Deemed dividend tax 11 59 - - 10% WHT on inter-company dividends 20,743 17,398 - - Increase/(decrease) in deferred tax liabilities (Note 26) 195,356 (140,512) 213,215 (121,767) (Increase)/decrease in deferred tax assets (Note 26) 8,801 (6,215) - - Current /deferred tax share of associates 138,296 206,285 - - 1,119,544 1,330,155 911,206 997,733
11.1 Income tax on profit of the Company has been computed at the rate of 28% (2010/11 - 35%) on the taxable income. Group companies other than Central Industries PLC and Hedges Court Residencies (Pvt) Ltd. have computed taxation at 10% for the financial year 2011/12 as per the provisions of Inland Revenue (Amendment) Act No. 22 of 2011 (2010/11 - 35%). Central Industries PLC has computed taxation at 28% (2010/11 - 35%) while 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. is liable to income tax at 28% for 2011/12 (2010/11 - 35%). Social Responsibility Levy was abolished in 2011.
Central Finance Company PLC - Annual Report 2011-1280
Notes to the Financial Statements
11.2 A reconciliation between tax expense and the product of accounting profit multiplied by the statutory tax rate is as follows: Group Company
2011/12 2010/11 2011/12 2010/11 Rs.’000 Rs.’000 Rs.’000 Rs.’000
Profit before tax (net of losses) 3,890,541 3,241,593 3,256,617 2,607,869 Losses before tax 7,141 47,564 - - Share of results of associates (465,552) (507,781) - - Other consolidation adjustments 159,611 237,164 - - Accounting profit chargeable for income taxes 3,591,741 3,018,540 3,256,617 2,607,869 Tax effect on chargeable profits at 28% and 10% (2010/11-35%) 975,254 1,056,489 911,853 912,754 Tax effect on allowable credits (1,967,459) (1,913,093) (1,954,432) (1,882,101) Tax effect on exempt profits (53,382) (138,918) (37,926) (118,223) Tax effect on non-deductible expenses 1,794,562 1,875,580 1,778,496 1,843,324 Tax effect on adjustments 7,565 8,225 - - Tax effect on losses claimed (203) (409) - - 756,337 887,874 697,991 755,754 Social Responsibility Levy - 1,979 - - Under provision for previous years - 363,776 - 363,746 Over provision of deemed dividend tax - (489) - - Deemed dividend tax 11 59 - - Increase/(decrease) in deferred tax liabilities (Note 26) 195,356 (140,512) 213,215 (121,767) (Increase)/decrease in deferred tax assets (Note 26) 8,801 (6,215) - - 10% WHT on inter company dividends 20,743 17,398 - - Current/deferred tax share of associates 138,296 206,285 - -
Charged to income statement 1,119,544 1,330,155 911,206 997,733
Effective tax rate (Excluding deferred taxation) 21.06% 29.41% 21.43% 28.98%
12 Earnings per share The calculation of basic and 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 2011/12 2010/11
Profit attributable to equity holders of the parent 2,676,615 1,827,034 Number of shares used as denominator (‘000) 104,883 104,883
Basic and diluted earnings per share (Rs.) 25.52 17.42 Company’s ordinary shares were increased by subdividing each existing share into 5 shares in September 2011. Subsequent to the
subdivision, reserves amounting to Rs.365.40 Million were also capitalised at the rate of Rs.108/- per share through the issue of bonus shares in the proportion of 01 share for 30 shares. As a result, the number of shares increased to 104,883,333. Earnings per share and net asset per share of the previous periods were adjusted accordingly.
13 Dividends Paid: First interim Rs.0.70 (2010/11: Rs.0.49) 73,418 50,750 Second interim Rs.0.70 (2010/11: Rs.0.58) 73,418 60,900 Proposed: Final Rs.1.10 (2010/11: Rs.0.97) 115,371 101,500 262,207 213,150 Dividend per share (Rs.) - Paid and proposed 2.50 2.04
Central Finance Company PLC - Annual Report 2011-12 8114
D
ealin
g se
curi
ties
Gro
up
Co
mpa
ny
N
o. o
f Co
st
Mar
ket
No.
of
Cost
M
arke
t N
o. o
f Co
st
Mar
ket
No.
of
Cost
M
arke
t
Sh
ares
Valu
e Sh
ares
Valu
e Sh
ares
Valu
e Sh
ares
Valu
e
31.0
3.20
12
31.0
3.20
12
31
.03.
2011
31
.03.
2011
31.0
3.20
12
31.0
3.20
12
31
.03.
2011
31
.03.
2011
Rs.’0
00
Rs.’0
00
Rs
.’000
Rs
.’000
Rs.’0
00
Rs.’0
00
Rs
.’000
Rs
.’000
B
anks
, Fin
ance
& In
sura
nce
N
atio
nal D
evel
opm
ent B
ank
PLC
200
,000
2
6,00
0
24,
560
1
00,0
00
26,
000
32,
000
200
,000
2
6,00
0 2
4,56
0 1
00,0
00
26,
000
3
2,00
0
26,0
00
24,
560
26,0
00
32,
000
26
,000
2
4,56
0
26,
000
3
2,00
0
(P
rovi
sion
for d
imin
utio
n) /
appr
ecia
tion
in
valu
e of
dea
ling
secu
ritie
s
Bala
nce
at th
e be
ginn
ing
of th
e ye
ar
6,
000
(1
,393
)
6,
000
(
1,39
3)
Appr
ecia
tion
(dim
inut
ion)
for t
he y
ear
(
7,44
0)
7,39
3
(7,
440)
7
,393
Ba
lanc
e at
the
end
of th
e ye
ar
(1
,440
)
6
,000
(1
,440
)
6,
000
Net
car
ryin
g am
ount
24,
560
32,0
00
24,5
60
32,0
00
15
In
vent
orie
s an
d ot
her
stoc
ks
Gro
up
Com
pany
3
1.03
.201
2 3
1.03
.201
1 31
.03.
2012
31
.03.
2011
Rs.
’000
Rs.’0
00
Rs
.’000
Rs.’0
00
Vehi
cles
5
51,9
36
4
11,0
74
5
51,9
36
4
11,0
74
Ra
w m
ater
ials
1
33,1
04
1
22,4
66
-
-
W
ork-
in- p
rogr
ess
10,
417
10,
404
-
-
Fini
shed
goo
ds
93,
530
83,
384
-
-
Mac
hine
ry s
pare
par
ts &
veh
icle
spa
re p
arts
40,
861
39,
210
20,
116
21,
940
O
ther
inve
ntor
ies
5,0
63
3
,506
-
-
Goo
ds-in
-tran
sit
12,
618
14,
275
-
-
847
,529
684
,319
572
,052
433
,014
Prov
isio
n fo
r sto
ck o
bsol
esce
nce
- spe
cific
pro
visi
on
(
28,2
72)
(
16,3
52)
(
16,4
98)
-
N
et c
arry
ing
amou
nt
819
,257
667
,967
555
,554
433
,014
In
vent
orie
s re
cogn
ised
as
an e
xpen
se d
urin
g th
e ye
ar in
rele
vant
Gro
up c
ompa
nies
am
ount
ed to
Rs.
984
.16
Mill
ion
(Rs.
798.
61 M
illio
n in
201
0/11
).
Writ
e do
wn
of in
vent
orie
s re
cogn
ised
as
an e
xpen
ses
durin
g 20
11/1
2 fin
anci
al y
ear a
mou
nted
to R
s.16
.49
Mill
ion
for t
he C
ompa
ny a
nd th
e G
roup
.
Ther
e w
ere
no w
rite
dow
n of
inve
ntor
ies
in th
e fin
anci
al y
ear 2
010/
11.
N
o in
vent
orie
s ha
ve b
een
pled
ged
as s
ecur
ity fo
r ban
king
faci
litie
s (i
n 20
10/1
1 in
vent
orie
s w
orth
Rs.
0.34
Mill
ion
had
been
ple
dged
as
secu
rity
for b
anki
ng fa
cilit
ies)
.
Inve
ntor
ies
carri
ed a
t net
real
isab
le v
alue
as
at 3
1st M
arch
201
2 am
ount
ed to
Rs.
15.3
6 M
illio
n fo
r the
Gro
up a
nd R
s.12
.85
Mill
ion
for t
he C
ompa
ny (
as a
t 31.
03.2
011
Rs.2
.96
Mill
ion
for t
he G
roup
and
Com
pany
).
Central Finance Company PLC - Annual Report 2011-1282
Notes to the Financial Statements
16
Inve
stm
ent
secu
riti
es
Gro
up
C
ompa
ny
31.0
3.20
12
31.0
3.20
11
31.0
3.20
12
31.0
3.20
11
Rs
.’000
Rs.’0
00
Rs
.’000
Rs.’0
00
Quo
ted
secu
ritie
s
16(a
)
16
1,61
3
161,
613
1
61,5
83
1
61,5
83
U
nquo
ted
secu
ritie
s 16
(b)
18,7
18
18
,718
12,
388
12,
388
N
et c
arry
ing
valu
e of
inve
stm
ent s
ecur
ities
180,
331
18
0,33
1
173
,971
173
,971
(a
) Q
uote
d
G
roup
Com
pany
No.
of
Cost
M
arke
t N
o. o
f Co
st
Mar
ket
No.
of
Cost
M
arke
t N
o. o
f Co
st
Mar
ket
Shar
es
Va
lue
Shar
es
Va
lue
Shar
es
Va
lue
Shar
es
Va
lue
31
.03.
2012
31
.03.
2012
31.0
3.20
11
31.0
3.20
11
31
.03.
2012
31
.03.
2012
31.0
3.20
11
31.0
3.20
11
Rs.’0
00
Rs.’0
00
Rs
.’000
Rs
.’000
Rs.’0
00
Rs.’0
00
Rs
.’000
Rs
.’000
B
anks
, Fin
ance
& In
sura
nce
C
omm
erci
al B
ank
of C
eylo
n PL
C
4,2
00
-
402
- -
-
4,20
0 -
402
- -
-
Co
nstr
ucti
on &
Eng
inee
ring
Sa
mue
l Son
s &
Co.
PLC
1
43,6
97
1,1
98
-
143,
697
1,19
8 -
-
-
-
-
-
-
Div
ersi
fied
Hol
ding
s
Hem
as H
oldi
ngs
PLC
7
50
30
20
75
0 3
0 34
-
- -
- -
-
Cl
osed
End
Fun
ds
Nam
al A
cuity
Val
ue F
und
2,7
44,9
00
161,
583
172,
929
2,74
4,90
0 16
1,58
3 2
33,8
65 2
,744
,900
16
1,58
3 17
2,92
9 2,
744,
900
161,
583
233,
865
16
2,81
1 1
73,3
51
16
2,81
1 23
3,89
9
161
,583
1
73,3
31
16
1,58
3 2
33,8
65
(P
rovis
ion
for d
imin
utio
n)/a
ppre
ciatio
n
in
val
ue o
f quo
ted
inve
stm
ent s
ecur
ities
Ba
lanc
e at
the
begi
nnin
g of
the
year
(1,
198)
(
5,60
3)
-
-
Appr
ecia
tion
for t
he y
ear
-
4
,405
-
-
Ba
lanc
e at
the
end
of th
e ye
ar
(
1,19
8)
(1,
198)
-
-
N
et c
arry
ing
amou
nt o
f
quot
ed in
vest
men
t sec
uriti
es
16
1,61
3
161
,613
16
1,58
3
16
1,58
3
Central Finance Company PLC - Annual Report 2011-12 83(b
) U
nquo
ted
Gro
up
Co
mpa
ny
N
o. o
f Co
st
Dire
ctor
s’ N
o. o
f Co
st
Dire
ctor
s’ N
o. o
f Co
st
Dire
ctor
s’ N
o. o
f Co
st
Dire
ctor
s’
Sh
ares
Valu
atio
n Sh
ares
Valu
atio
n Sh
ares
Valu
atio
n Sh
ares
Valu
atio
n
31.0
3.20
12
31.0
3.20
12
31
.03.
2011
31
.03.
2011
31.0
3.20
12
31.0
3.20
12
31
.03.
2011
31
.03.
2011
Rs
.’000
Rs
.’000
Rs.’0
00
Rs.’0
00
Rs
.’000
Rs
.’000
Rs.’0
00
Rs.’0
00
Cre
dit I
nfor
mat
ion
Bure
au o
f
Sr
i Lan
ka. (
Rs.1
00/-
) 4
,727
4
73
21,
636
4,
727
473
1
5,64
4
4,7
27
473
2
1,63
6
4,7
27
473
1
5,64
4
Fitc
h Ra
tings
Lan
ka L
td.
62,
500
6
25
903
62
,500
6
25
870
6
2,50
0
625
9
03
62,
500
6
25
870
Fina
nce
Hou
ses
Con
sorti
um (
Pvt)
Ltd
. 2
0,00
0
200
5
25
20,0
00
200
5
25
20,
000
2
00
525
2
0,00
0
200
5
25
Ra
jaw
ella
Hol
ding
s (P
vt)
Ltd.
5
4,60
0
546
-
54,6
00
546
-
-
-
-
-
-
-
Te
lsha
n N
etw
ork
(Pvt
) Lt
d.
972
,000
9
,720
-
9
72,0
00
9,7
20
-
972
,000
9
,720
-
9
72,0
00
9,7
20
-
Zy
rex
Pow
er C
o Lt
d.
1,7
96,3
23
16,
920
2
2,45
4 1
,796
,323
1
6,92
0
34,
309
1,0
58,9
92
10,
590
1
3,23
7 1
,058
,992
1
0,59
0
20,
258
Si
nhap
uthr
a Fi
nanc
e PL
C
(P
refe
renc
e Sh
ares
) 2
0,00
0
500
1
,168
20
,000
5
00
1,0
92
20,
000
5
00
1,1
68
20,
000
5
00
1,0
92
2
8,98
4
46,
686
28,9
84
52,
440
22,1
08
37,
469
22,
108
3
8,38
9
(Pro
visio
n fo
r im
pairm
ent o
f
inve
stm
ents
)/re
vers
al o
f pro
visio
n
for i
mpa
irmen
t in
valu
e of
unqu
oted
inve
stm
ent s
ecur
ities
Ba
lanc
e at
the
begi
nnin
g of
the
year
(10
,266
)
(
11,0
91)
(9,
720)
(
10,5
45)
Re
vers
al o
f pro
visio
n fo
r
im
pairm
ent f
or th
e ye
ar
-
82
5
-
825
Bala
nce
at th
e en
d of
the
year
(10
,266
)
(
10,2
66)
(9,
720)
(
9,72
0)
N
et c
arry
ing
amou
nt o
f
unq
uote
d in
vest
men
t sec
uriti
es
1
8,71
8
18,
718
1
2,38
8
12,
388
Central Finance Company PLC - Annual Report 2011-1284
Notes to the Financial Statements
Group Company 31.03.2012 31.03.2011 31.03.2012 31.03.2011 Rs.’000 Rs.’000 Rs.’000 Rs.’000
17 Net investment in leases Gross investment in leases 30,500,064 21,525,736 30,500,064 21,525,736 Unearned interest income (7,513,761) (5,269,388) (7,513,761) (5,269,388) 22,986,303 16,256,348 22,986,303 16,256,348 Provision for loan losses (Note 22.1) (94,509) (115,147) (94,509) (115,147) 22,891,794 16,141,201 22,891,794 16,141,201
17.1 Rentals receivable on leased assets Not later than one year Gross investment in leases 9,685,810 7,148,628 9,685,810 7,148,628 Unearned interest income (3,611,591) (2,585,628) (3,611,591) (2,585,628) Provision for loan losses (27,075) (69,448) (27,075) (69,448)
6,047,144 4,493,552 6,047,144 4,493,552 Later than one year and not later than five years Gross investment in leases 20,423,349 14,094,766 20,423,349 14,094,766 Unearned interest income (3,901,933) (2,683,375) (3,901,933) (2,683,375)
Provision for loan losses (67,434) (45,699) (67,434) (45,699) 16,453,982 11,365,692 16,453,982 11,365,692 Later than five years Gross investment in leases 390,905 282,342 390,905 282,342 Unearned interest income (237) (385) (237) (385) 390,668 281,957 390,668 281,957
18 Corporate debt securities At the beginning of the year 313,414 402,813 313,414 402,813 Repayments during the year (131,564) (89,399) (131,564) (89,399) 181,850 313,414 181,850 313,414
Receivable within one year 181,850 131,564 181,850 131,564 Receivable after one year - 181,850 - 181,850
181,850 313,414 181,850 313,414
19 Loans and advances Stock out on hire purchase 15,565,586 10,531,373 15,565,586 10,531,373 Amounts due from hirers 1,566,336 1,364,225 1,566,336 1,364,225 Term loans 844,014 820,484 1,420,854 1,806,544 Temporary refunds against fixed deposits 537,470 553,049 537,470 553,049 Housing and land receivables 19,489 19,511 19,489 19,511 Loans to employees (Note 19.1) 79,651 65,673 70,348 57,148
18,612,546 13,354,315 19,180,083 14,331,850 Provision for loan losses (Note 22.1) (733,276) (659,073) (733,276) (659,073) Interest in suspense (168,279) (176,470) (168,279) (176,470)
17,710,991 12,518,772 18,278,528 13,496,307
Receivable within one year 6,465,221 5,803,338 6,665,435 5,799,141 Receivable after one year 11,245,770 6,715,434 11,613,093 7,697,166
17,710,991 12,518,772 18,278,528 13,496,307
Central Finance Company PLC - Annual Report 2011-12 85
Group Company 31.03.2012 31.03.2011 31.03.2012 31.03.2011 Rs.’000 Rs.’000 Rs.’000 Rs.’000
19.1 Loans to employees Movement of loans to employees is given below: At the beginning of the year 65,673 64,078 57,148 54,977 Loans granted during the year 75,011 62,251 67,243 56,033 Loans recovered during the year (61,033) (60,656) (54,043) (53,862)
At the end of the year 79,651 65,673 70,348 57,148
Receivable within one year 39,010 32,825 35,119 28,628 Receivable after one year 40,641 32,848 35,229 28,520 79,651 65,673 70,348 57,148
20 Trade & other receivables Trade & other receivables 1,316,615 1,549,998 847,294 1,133,900 Provision for bad & doubtful debts (Note 22.1) (63,779) (64,974) (27,503) (27,312) 1,252,836 1,485,024 819,791 1,106,588 Group Company 31.03.2012 31.03.2011 31.03.2012 31.03.2011 Rs.’000 Rs.’000 Rs.’000 Rs.’000
21 Investments in real estate (a) Investments in land Balance at the beginning of the year 65,579 63,545 65,579 63,545 Additions/transfers during the year 1,079 2,091 1,079 2,091 Disposals/transfers during the year (259) (57) (259) (57) Balance at the end of the year 66,399 65,579 66,399 65,579
(b) Investment in housing projects Balance at the beginning of the year 529,699 925,959 43,306 148,784 Additions during the year 12 3,760 12 3,760 Disposals/transfers during the year (502,598) (400,020) (36,279) (109,238)
27,113 529,699 7,039 43,306 Provision for bad and doubtful debts (Note 22.1) (1,074) (1,074) (1,074) (1,074)
Balance at the end of the year 26,039 528,625 5,965 42,232 92,438 594,204 72,364 107,811
No borrowing costs were capitalised during the current and the preceding financial years.
Central Finance Company PLC - Annual Report 2011-1286
Notes to the Financial Statements
22 Provision for losses on loans and advances and interest in suspense Company 31.03.2012 31.03.2011 Rs.’000 Rs.’000
Provision for losses on loans and advances: Balance at the beginning of the year 802,606 808,695
Net increase during the year 53,756 (6,089) Balance at the end of the year (Note 22.1) 856,362 802,606 Interest in suspense: Balance at the beginning of the year 176,470 224,782 Net decrease during the year (8,191) (48,312)
Balance at the end of the year 168,279 176,470 Total 1,024,641 979,076
Increase/(decrease) in provision against advances over the previous year 53,756 (6,089)Provision reversed from revenue reserves - 78,750
Provision charged to income statement 53,756 72,661 Non-performing loans and advances 1,002,192 1,406,929 Interest in suspense (168,279) (176,470) Net non-performing loans and advances 833,913 1,230,459 Provision for losses on loans and advances (856,362) (802,606)
Net exposure - 427,853
22.1 Provision for losses on loans and advances Net investment in leases 94,509 115,147 Loans and advances 733,276 659,073 Trade & other receivables 27,503 27,312 Investments in real estate 1,074 1,074
Total for the Company 856,362 802,606 Trade and other receivables - subsidiaries 36,276 37,662
Total for the Group 892,638 840,268
Central Finance Company PLC - Annual Report 2011-12 8723
Co
mpa
ny /
Gro
up in
vest
men
t in
ass
ocia
tes
%
Hol
ding
No.
of s
hare
s
Cost
Mar
ket V
alue
/
Inve
stor
In
vest
ee
Dire
ctor
s’ Va
luat
ion
31
.03.
2012
31
.03.
2011
31
.03.
2012
31
.03.
2011
31
.03.
2012
31
.03.
2011
31
.03.
2012
31
.03.
2011
Rs
.’000
Rs
.’000
Rs
.’000
Rs
.’000
Ce
ntra
l Fin
ance
Com
pany
PLC
Q
uote
d in
vest
men
ts
Te
a Sm
allh
olde
r Fac
torie
s PL
C 22
.85%
22
.85%
6,
854,
814
3,42
7,40
7 9
9,33
7
99,
337
335
,885
6
10,7
63
Nat
ions
Tru
st B
ank
PLC
8.98
%
8.98
% 2
0,71
5,40
0 20
,715
,400
3
94,6
31
394
,631
1
,178
,706
1
,580
,585
U
nquo
ted
inve
stm
ents
Capi
tal S
uiss
e As
ia L
td.
16.2
9%
16.2
9%
2,94
9,00
0 2,
949,
000
29,
490
2
9,49
0
42,
465
39,
810
Co
mpa
ny in
vest
men
t in
asso
ciate
s
523
,458
5
23,4
58
1,5
57,0
56
2,2
31,1
58
CF
Gro
wth
Fun
d Lt
d.
Quo
ted
inve
stm
ents
Tea
Smal
lhol
der F
acto
ries
PLC
6.45
%
6.45
%
1,93
3,67
8 96
6,83
9 3
0,36
1 3
0,36
1 9
4,75
0
172
,290
N
atio
ns T
rust
Ban
k PL
C 6.
42%
6.
42%
14,
813,
273
14,8
13,2
73
347
,615
3
47,6
15
843
,023
1
,130
,252
U
nquo
ted
inve
stm
ents
Capi
tal S
uiss
e As
ia L
td.
8.29
%
8.29
%
1,50
0,00
0 1,
500,
000
15,
000
1
5,00
0
21,
600
2
0,23
5
CF In
sura
nce
Brok
ers
(Pvt
) Lt
d.
Quo
ted
inve
stm
ents
Nat
ions
Tru
st B
ank
PLC
4.60
%
4.60
% 1
0,59
2,85
7 10
,592
,857
2
68,8
07
268
,807
6
02,7
33
808
,234
Gro
up in
vest
men
t in
asso
ciate
s
1,1
85,2
41
1,1
85,2
41
3,1
19,1
62
4,3
62,1
69
G
roup
sha
re o
f ass
ocia
te c
ompa
nies
’ ret
aine
d pr
ofits
Te
a Sm
allh
olde
r Fac
torie
s PL
C
91,
660
1
14,0
09
Nat
ions
Tru
st B
ank
PLC
7
64,0
00
548
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Ca
pita
l Sui
sse
Asia
Ltd
.
63,
129
6
1,59
0
Gro
up in
vest
men
t in
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ciate
s (e
quity
bas
is)
2
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1
,908
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Su
mm
aris
ed fi
nanc
ial i
nfor
mat
ion
of a
ssoc
iate
s
As
at 3
1st M
arch
2012
20
11
Rs.0
00
Rs.0
00
Asse
ts a
nd li
abili
ties
To
tal a
sset
s
112
,383
,089
91
,486
,880
To
tal l
iabi
litie
s
102
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,909
83
,001
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N
et a
sset
s
9,4
37,1
80
8,4
85,7
91
Fo
r the
yea
r end
ed 3
1st M
arch
To
tal r
even
ue
1
4,96
4,51
3
14,7
78,4
26
Prof
it be
fore
tax
2
,352
,933
2
,506
,278
Pr
ofit
afte
r tax
1,6
64,8
89
1,4
82,0
09
Central Finance Company PLC - Annual Report 2011-1288
Notes to the Financial Statements
24
Gro
up/C
ompa
ny in
vest
men
t in
sub
sidi
arie
s
M
arke
t Val
ue/
%
Hol
ding
N
o. o
f Sha
res
Co
st
D
irect
ors’
Valu
atio
n
Gro
up
Co
mpa
ny
Co
mpa
ny
Co
mpa
ny
Co
mpa
ny
31.0
3.20
12
31.0
3.20
11
31.0
3.20
12
31.0
3.20
11
31.0
3.20
12
31.0
3.20
11
31.0
3.20
12
31.0
3.20
11
31.0
3.20
12
31.0
3.20
11
Rs
.’000
Rs
.’000
Rs
.’000
Rs
.’000
Q
uote
d in
vest
men
ts
Cent
ral I
ndus
tries
PLC
49
.98%
49
.98%
44
.06%
44
.06%
4
,354
,500
4
,354
,500
4
2,90
5
42,
905
3
04,8
15
418
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Unq
uote
d in
vest
men
ts
Cent
ral D
evel
opm
ents
Ltd
. 99
.99%
99
.99%
39
.79%
39
.79%
5
,289
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5
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5
2,90
0
52,
900
7
3,26
6
72,
261
D
ehig
ama
Hot
els
Com
pany
Ltd
. 79
.69%
79
.69%
79
.69%
79
.69%
6
59,8
54
659
,854
7
,443
7
,443
1
55,4
15
143
,604
Expa
nded
Pla
stic
Prod
ucts
Ltd
. 99
.99%
99
.99%
40
.00%
40
.00%
2
,559
,967
2
,559
,967
2
5,60
0
25,
600
2
3,09
1
22,
758
Ce
ntra
l Min
eral
Indu
strie
s (P
vt)
Ltd.
99
.99%
99
.99%
39
.99%
39
.99%
1
39,9
79
139
,979
1
,400
1
,400
1
5,69
9
15,
155
Ce
ntra
l Tra
nspo
rt &
Trav
els
Ltd.
99
.99%
99
.99%
39
.64%
39
.64%
1
,169
,000
1
,169
,000
1
1,69
0
11,
690
1
8,28
3
17,
406
Ce
ntra
l Con
stru
ctio
n &
Dev
elop
men
t (Pv
t) L
td.
99.9
0%
99.9
0%
0.10
%
0.10
%
5
5
-
-
-
-
CF G
row
th F
und
Ltd.
99
.99%
99
.99%
39
.87%
39
.87%
6
,500
,000
6
,500
,000
6
5,00
0
65,
000
9
9,25
5
97,
240
Ka
ndy
Priva
te H
ospi
tals
Ltd.
66
.35%
66
.35%
37
.00%
37
.00%
2
03,7
00
203
,700
2
,363
2
,363
7
5,64
8
68,
496
CF
Insu
ranc
e Br
oker
s (P
vt)
Ltd.
99
.99%
99
.99%
40
.00%
40
.00%
4
,949
,997
4
,949
,997
4
9,50
0
49,
500
1
10,5
83
91,
921
Ce
ntra
l Hom
es (
Pvt)
Ltd
. 99
.99%
99
.99%
38
.48%
38
.48%
1
,315
,000
1
,315
,000
1
3,15
1
13,
151
8
,903
8
,639
Mar
k M
arin
e Se
rvice
s (P
vt)
Ltd.
58
.12%
58
.12%
40
.00%
40
.00%
3
,424
,477
3
,424
,477
5
5,15
8
55,
158
6
4,58
6
74,
003
H
edge
s Co
urt R
esid
encie
s (P
vt)
Ltd.
99
.99%
99
.99%
40
.00%
40
.00%
2,
000,
000
2,00
0,00
0 20
,000
20
,000
-
-
347
,110
3
47,1
10
949
,544
1
,029
,950
Reve
rsal
of p
rovi
sion
for i
mpa
irmen
t in
valu
e of
inve
stm
ents
Ba
lanc
e at
the
begi
nnin
g of
the
year
(3
4,12
3)
(50,
906)
Re
vers
al o
f pro
visio
n fo
r im
pairm
ent f
or th
e ye
ar
-
16,7
83
Ba
lanc
e at
the
end
of th
e ye
ar
(34
,123
) (
34,1
23)
Co
mpa
ny in
vest
men
t in
subs
idia
ries
(net
of p
rovis
ion)
3
12,9
87
312
,987
Central Finance Company PLC - Annual Report 2011-12 89
Group Company 31.03.2012 31.03.2011 31.03.2012 31.03.2011 Rs.’000 Rs.’000 Rs.’000 Rs.’000
25 Other assets At the beginning of the year 8,259 10,937 8,259 10,937 Amount incurred during the year 15,717 - 15,717 - Amortised during the year (5,724) (2,678) (5,724) (2,678) 18,252 8,259 18,252 8,259
Other assets represent transaction costs incurred in obtaining long term borrowings. These charges are written off over the period of the loan as the Directors are of the opinion that these form part of the financing costs of long term borrowings.
Group Company 31.03.2012 31.03.2011 31.03.2012 31.03.2011 Rs.’000 Rs.’000 Rs.’000 Rs.’000
26 Deferred tax assets and liabilities Deferred tax liability At the beginning of the year 1,264,795 1,414,570 1,199,214 1,326,518 Transfer from/(to) income statement (Note 26.1) 195,356 (140,512) 213,215 (121,767) Deferred tax effect on gratuity transitional provision due to change in corporate tax rate - 2,642 - 2,642 Deferred tax attributable to revaluation surplus on de-recognition of building (978) - (978) - Deferred tax attributable to revaluation surplus due to change in corporate tax rate (9,079) (11,905) - (8,179)
At the end of the year 1,450,094 1,264,795 1,411,451 1,199,214 Deferred tax assets At the beginning of the year 8,929 2,309 - - Less: transfer from/(to) income statement 8,801 (6,215) - - Transfer to equity statement - 405 - - At the end of the year 128 8,929 - -
26.1 Group Balance Sheet Income Statement Equity 31.03.2012 31.03.2011 2011/12 2010/11 31.03.2012 31.03.2011 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 1,601,503 1,407,441 (204,119) 125,943 10,057 11,905 Deferred tax assets Defined benefit plans (151,409) (142,646) 8,763 14,569 - (2,642) Deferred tax income/(expense) (195,356) 140,512 10,057 9,263 Net deferred tax liability 1,450,094 1,264,795
Central Finance Company PLC - Annual Report 2011-1290
Notes to the Financial Statements
26.2 Company Balance Sheet Income Statement Equity 31.03.2012 31.03.2011 2011/12 2010/11 31.03.2012 31.03.2011 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 1,553,911 1,332,613 (222,276) 106,575 978 8,179 Deferred tax assets Defined benefit plans (142,460) (133,399) 9,061 15,192 - (2,642)
Deferred tax income/(expense) (213,215) 121,767 978 5,537 Net deferred tax liability 1,411,451 1,199,214
Group Company 31.03.2012 31.03.2011 31.03.2012 31.03.2011 Rs.’000 Rs.’000 Rs.’000 Rs.’000
27 Intangible assets Computer software at cost At the beginning of the year 116,495 98,415 113,606 97,717 Additions 4,941 18,080 4,638 15,889 At the end of the year 121,436 116,495 118,244 113,606
Amortisation At the beginning of the year (70,004) (49,423) (69,615) (49,213) Charge for the year (13,116) (20,581) (12,520) (20,402) At the end of the year (83,120) (70,004) (82,135) (69,615)
Carrying amount At the beginning of the year 46,491 48,992 43,991 48,504 At the end of the year 38,316 46,491 36,109 43,991
Central Finance Company PLC - Annual Report 2011-12 91
28 Property, plant and equipment Group Land and Furniture Motor Plant, Total Total Buildings and office vehicles & machinery 31.03.2012 31.03.2011 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 2,167,139 177,223 3,390,183 948,563 6,683,108 6,396,481 Additions/transfers 51,080 26,071 775,458 117,558 970,167 1,132,257 Disposals/transfers (4,899) (480) (958,859) (10,174) (974,412) (845,630)
At the end of the year 2,213,320 202,814 3,206,782 1,055,947 6,678,863 6,683,108
Accumulated depreciation At the beginning of the year 107,054 76,818 1,049,668 597,826 1,831,366 1,767,549 Charge/transfers during the year 16,583 16,328 428,942 88,287 550,140 492,618 Impairment for the year - - - - - 430 On disposals/transfers (1,023) (339) (443,960) (8,862) (454,184) (429,231) At end of the year 122,614 92,807 1,034,650 677,251 1,927,322 1,831,366
Net book value 2,090,706 110,007 2,172,132 378,696 4,751,541 4,851,742 Capital work-in-progress 29,935 7,889 Carrying amount at the end of the year 4,781,476 4,859,631
Company Land and Furniture Motor Plant, Total Total Buildings and office vehicles & machinery 31.03.2012 31.03.2011 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 1,509,338 144,709 3,342,319 388,195 5,384,561 5,124,446 Additions/transfers 12,872 21,673 775,325 56,374 866,244 1,090,554 Disposals/transfers (4,899) (480) (957,836) (2,571) (965,786) (830,439)
At the end of the year 1,517,311 165,902 3,159,808 441,998 5,285,019 5,384,561
Accumulated Depreciation At the beginning of the year 69,591 56,553 1,017,816 221,029 1,364,989 1,336,767 Charge/transfers during the year 8,568 13,728 423,556 47,142 492,994 446,445 On disposals/transfers (1,023) (339) (442,937) (2,029) (446,328) (418,223)
At the end of the year 77,136 69,942 998,435 266,142 1,411,655 1,364,989 Net book value 1,440,175 95,960 2,161,373 175,856 3,873,364 4,019,572 Capital work-in-progress 27,642 5,008 Carrying amount at the end of the year 3,901,006 4,024,580
Central Finance Company PLC - Annual Report 2011-1292
Notes to the Financial Statements
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. 117.32 204,612 129,497 334,109 33,325 300,784 No.244, Vauxhall Street, Colombo 02. 13.21 20,760 25,183 45,943 6,992 38,951
Branches No.62, Maithripala Senanayake Mw, Anuradhapura. 40.20 24,306 - 24,306 - 24,306 No.367, Main Street, Negombo. 29.00 24,239 5,724 29,963 1,554 28,409 No.38, Mihindu Mawatha, Kurunegala. 54.63 34,700 3,563 38,263 946 37,317 04, Udaya Raja Mawatha, Badulla. 26.90 16,692 4,004 20,696 1,179 19,517 No.78, Kumarathunga Mawatha, Matara. 125.25 83,769 5,303 89,072 1,464 87,608 23, Kurunegala Road, Dambulla 21.00 1,777 5,024 6,801 689 6,112 No.143, Colombo Road, Moragahayata, Ratnapura 46.00 18,281 6,169 24,450 1,210 23,240 No.312, Highlevel Road, Nugegoda. 15.70 27,075 20,860 47,935 4,011 43,924
Showrooms No.254,254/1, Katugastota Road, Kandy. 85.93 69,000 37,426 106,426 5,475 100,951 268, Vauxhall Street, Colombo 02. 21.67 31,619 163 31,782 3 31,779
Vehicle Yards No.249, Katugastota Road, Kandy. 165.38 114,239 3,795 118,034 1,482 116,552 313, Koholwila Road, Kelaniya. 348.50 17,636 7,313 24,949 1,955 22,994 Batalahenawatte Road, Gonawala, Kelaniya. 189.05 7,946 208 8,154 19 8,135 258/3, Katugastota Road, Kandy. 45.93 22,750 - 22,750 - 22,750 210, Siri Dhamma Mawatha,
Colombo 10. 121.45 158,120 19,736 177,856 2,514 175,342 No.313, Madawala Road, Katugastota. 167.43 30,100 900 31,000 113 30,887 Kirindiwela Road, Pugoda. 1,600.00 15,834 2,209 18,043 101 17,942
Other properties Pahathgama Cross Road, Hanwella 180.00 3,811 295 4,106 26 4,080 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 17,309 83,951 5,384 78,567 No.25, Sri Rahula Road, Nuwaraeliya. 194.00 67,908 12,268 80,176 1,706 78,470 Indibedda, Moratuwa 251.10 37,562 35,541 73,103 6,988 66,115
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 1,174,821 342,490 1,517,311 77,136 1,440,175 Group companies Dehigama Hotels Company Ltd. 84, Raja Veediya, Kandy. 85.00 125,000 99,025 224,025 25,041 198,984 Kandy Private Hospitals Ltd. 255/8, Katugastota Road, Kandy. 127.25 89,000 40,000 129,000 10,000 119,000 Central Mineral Industries Ltd. Diganatenna Estate,Gonawala, Rajawella, Digana 1,916.25 30,774 2,859 33,633 357 33,276 Central Industries PLC Factory 195/4, Kerawalapitiya Road,
Hendala, Wattala. 522.10 130,525 65,391 195,916 6,503 189,413 Head office 312, Nawala Road, Rajagiriya. 18.00 36,000 45,511 81,511 3,577 77,934 Yakkala land 1,440.00 31,924 - 31,924 - 31,924 Total for the Group 1,618,044 595,276 2,213,320 122,614 2,090,706
Central Finance Company PLC - Annual Report 2011-12 93
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, Land Comparison 162,814 204,612 41,798 Colombo-2. Building Contractor’s 79,193 95,387 16,194 No.244, Vauxhall Street, Land Comparison 14,070 20,760 6,690 Colombo -2. Building Contractor’s 13,984 21,240 7,256 Branches No.62, Maithripala Senanayake Mw, Land Comparison 8,124 24,306 16,182 Anuradhapura. Building Contractor’s 1,866 4,444 2,578 No.367, Main Street, Land Comparison 8,650 24,239 15,589 Negombo Building Contractor’s 3,278 4,761 1,483 No.38, Mihindu Mw, Land Comparison 10,554 34,700 24,146 Kurunegala Building Contractor’s 2,015 3,050 1,035 No. 04, Udaya Raja Mw, Land Comparison 10,187 16,692 6,505 Badulla Building Contractor’s 3,275 3,308 33 No.78, Kumarathunga Mw, Land Comparison 13,383 83,769 70,386 Matara Building Contractor’s 3,951 4,481 530 No. 143, Colombo Road Land Comparison 2,300 18,281 15,981 Moragahayata, Ratnapura Building Contractor’s 3,141 5,719 2,578 No. 312, Highlevel Road, Land Comparison 19,625 27,075 7,450 Nugegoda Building Contractor’s 10,985 12,925 1,940 Showrooms No. 254, 254/1, Katugastota Road, Land Comparison 31,845 69,000 37,155 Kandy Building Contractor’s 36,374 36,500 126 Vehicle Yards No. 249, Katugastota Road, Land Comparison 85,398 114,239 28,841 Kandy. Building Contractor’s 3,568 2,761 (807) 313, Koholwila Road, Land Comparison 9,905 17,636 7,731 Kandy. Building Contractor’s 6,900 4,364 (2,233) Batalahenawatte Road, Gonawala, Land Comparison 6,248 7,946 1,698 Kelaniya Building Contractor’s 27 54 27 210, Siri Dhamma Mawatha Land Comparison 41,577 158,492 116,915 Colombo 10 Building Contractor’s 4,214 17,659 13,445 No. 313, Madawala Road, Land Comparison 20,646 30,100 9,454 Katugastota Building Contractor’s - 900 900 No.258/3, Katugastota Road, Kandy Land Comparison 11,512 22,750 11,238 Bungalows No. 8, Sukhastan Gardens, Land Comparison 37,552 66,642 29,090 Ward Place, Colombo 7. Building Contractor’s 13,354 13,358 4 No. 25, Sri Rahula Road, Land Comparison 9,700 67,908 58,208 Nuwara Eliya Building Contractor’s 1,049 12,091 11,042 Indibedda, Moratuwa Land Comparison 10,541 37,562 27,021 Building Contractor’s 17,000 27,438 10,438 Car Parks Yatinuwara Veediya, Land Comparison 10,071 14,000 3,929 Kandy Building Contractor’s 235 - - No. 267 & 269, Vauxhall Street, Colombo 02 Land Comparison 10,270 15,350 5,080 Sub total Land 534,972 1,076,059 541,087 Building 204,409 270,440 66,569 Central Finance Company PLC 739,381 1,346,499 607,656
Central Finance Company PLC - Annual Report 2011-1294
Notes to the Financial Statements
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. Land Comparison 56,114 89,000 32,886 Building Contractor’s 17,414 40,000 22,586 Central Mineral Industries Ltd. Diganatenna Estate, Gonawala, Land Comparison 24,954 30,673 5,719 Rajawella, Digana Building Contractor’s 2,512 2,950 438
Central Industries PLC Factory Kerawalapitiya Land Contractor’s 8,177 130,525 122,348 Building Contractor’s 41,038 56,814 15,776 Head office - Nawala Land Contractor’s 12,546 36,000 23,454 Building Contractor’s 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.
Building at No. 62, Maithiripala Senanayake Mawatha was demolished during the year for the construction of a new building and was accordingly de-recognised as property.
The carrying value of freehold land and buildings of the Group, if carried at cost less accumulated depreciation and impairment, would amount to Rs.760.60 Million as at 31st March 2012 (31st March 2011 Rs.783.97 Million).
The cost of fully depreciated assets of the Group and Company amounted to Rs.631.72 Million and Rs.504.92 Million respectively (Group Rs.477.42 Million and Company Rs.445.78 Million as at 31st March 2011).
The carrying value of land and buildings pledged as security for banking facilities amounts to Rs.756.68 Million and Rs.637.68 Million for the Group and Company respectively.
Movement of capital work-in-progress Group Company 31.03.2012 31.03.2011 31.03.2012 31.03.2011 Rs.’000 Rs.’000 Rs.’000 Rs.’000
Balance at the beginning of the year 7,889 4,117 5,008 3,500 Additions during the year 28,946 8,122 22,634 1,508 Transfer to property, plant and equipment (6,900) (4,350) - - Balance at the end of the year 29,935 7,889 27,642 5,008
Operating lease assets are classified under property, plant and equipment. Rental receivable on operating lease assets are given below:
Rental receivable on operating leases Group Company 31.03.2012 31.03.2011 31.03.2012 31.03.2011 Rs.’000 Rs.’000 Rs.’000 Rs.’000
Within one year 439,332 434,149 439,332 434,149 After one year 712,174 749,069 712,174 749,069 Total 1,151,506 1,183,218 1,151,506 1,183,218
Central Finance Company PLC - Annual Report 2011-12 95
Group Company 31.03.2012 31.03.2011 31.03.2012 31.03.2011 Rs.’000 Rs.’000 Rs.’000 Rs.’000
29 Trade and other payables Interest payable on deposits 1,453,335 1,240,202 1,456,665 1,247,037 Creditors 1,077,455 643,551 1,072,235 638,309 Prepaid rentals - lease finance 3,808,633 2,759,285 3,808,633 2,759,285 Prepaid rentals - hire purchase 630,718 10,163 630,718 10,163 Advances on real estate projects 4,310 96,065 3,864 22,325 Accrued expenses 252,603 62,898 196,328 27,811 Others 687,041 923,392 533,921 783,212
7,914,095 5,735,556 7,702,364 5,488,142
30 Deposits Term deposits 20,570,554 17,966,844 20,725,288 18,167,352 Certificates of deposits 3,747 8,292 3,747 8,292 Savings deposits 854,124 782,065 855,873 782,194
21,428,425 18,757,201 21,584,908 18,957,838
The above includes a sum of Rs.100,624,758(31.03.2011- Rs.186.813,837) deposited with the Company by Directors.
31 Bank Loans Borrower Lending Institution Nature of Facility Security 31.03.2012 31.03.2011
Rs.000 Rs.000
Central Finance NDB Bank PLC Revolving short term loan Agreement to mortgage over lease receivables - 697,000 Company PLC Hatton National Bank PLC Revolving short term loan Power of attorney and mortgage bond over lease
agreements and hypothecation of hire purchase contracts 946,000 100,000
Term loan Power of attorney and mortgage bond over lease agreements and hypothecation of hire purchase contracts 177,333 - Habib Bank Ltd. Term loan Mortgage over lease receivables 20,834 104,167 Commercial Bank PLC Revolving short term loan Primary mortgage over land and buildings 1,000,000 - HSBC Revolving short term loan Mortgage over lease receivables 800,000 - Sampath Bank PLC Revolving short term loan Assignment of lease agreements 300,000 - Standard Chartered Bank Revolving short term loan Power of Attorney over lease receivables 700,000 - Bank of Ceylon Revolving short term loan Assignment of quoted company shares 75,000 - 4,019,167 901,167 Hedges Court Corporate guarantee from Central Residencies (Pvt) Ltd Hatton National Bank PLC Term loan Finance Company PLC - 85,000 Central Industries PLC Hatton National Bank PLC Short term loan Unsecured 45,900 - Nations Trust Bank PLC Short term loan Unsecured 2,700 -
48,600 85,000
4,067,767 986,167
Group Company 31.03.2012 31.03.2011 31.03.2012 31.03.2011 Rs.’000 Rs.’000 Rs.’000 Rs.’000
Payable within one year 3,885,834 880,333 3,885,834 880,333 Payable after one year 181,933 105,834 133,333 20,834 4,067,767 986,167 4,019,167 901,167
Central Finance Company PLC - Annual Report 2011-1296
Notes to the Financial Statements
32 Non-bank Loans Borrower Lending Institution Nature of Facility Security 31.03.2012 31.03.2011
Rs.’000 Rs.’000
Central Finance FMO Netherland Term Loan Mortgage over Lease and Company PLC Hire purchase receivables 382,512 573,768 Central Bank of Sri Lanka Refinance loans Unsecured - 449 Consortium of lenders Securitisation facility Trust deed, mortgage over lease receivables 1,427,300 16,444 Consortium of lenders Securitisation facility Trust deed, mortgage over lease receivables - 750,000
1,809,812 1,340,661 Group Company 31.03.2012 31.03.2011 31.03.2012 31.03.2011 Rs.’000 Rs.’000 Rs.’000 Rs.’000
Payable within one year 609,456 212,149 609,456 212,149 Payable after one year 1,200,356 1,128,512 1,200,356 1,128,512 1,809,812 1,340,661 1,809,812 1,340,661
33 Debentures At the beginning of the year 400,000 150,000 400,000 150,000 Issued during the year - 250,000 - 250,000 Redeemed during the year (150,000) - (150,000) -
At the end of the year 250,000 400,000 250,000 400,000
The Company issued 150,000 unsecured redeemable unlisted debentures of Rs.1,000/- each during the financial year 2007/08 which were fully subscribed. During the financial year 2010/11, a further issue of Rs.50,000,000 par valued unlisted, rated, unsecured redeemable debentures to the value of Rs.250,000,000 was made and fully subscribed. The debentures amounting to Rs.150,000,000 issued in 2007/08 were redeemed during the year.
Group Company 31.03.2012 31.03.2011 31.03.2012 31.03.2011 Rs.’000 Rs.’000 Rs.’000 Rs.’000
34 Retirement benefit obligation Present value of defined benefit obligation 766,645 698,382 683,340 622,007 Fair value of plan assets (174,812) (145,583) (174,812) (145,583)
Unfunded status 591,833 552,799 508,528 476,424 Unrecognised net actuarial gain (111,793) (148,817) (98,794) (131,013) Net retirement benefit obligation 480,040 403,982 409,734 345,411
The liability for retirement benefit obligation of the Group other than the parent is not externally funded.
Central Finance Company PLC - Annual Report 2011-12 97
34 Retirement benefit obligation (contd.) Group Company 31.03.2012 31.03.2011 31.03.2012 31.03.2011 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 698,382 531,345 622,007 475,301 Gratuity charge for the year 1,030 1,613 - - Interest cost 70,762 67,105 63,151 60,588 Amortisation of actuarial loss 4,785 - 4,785 - Current service cost 43,193 33,212 38,103 29,598 Payments made during the year (13,818) (24,353) (10,834) (20,125) Actuarial gain/(loss) (37,689) 89,460 (33,872) 76,645
Present value of defined benefit obligation at the end of the year 766,645 698,382 683,340 622,007
Movement of the plan assets Fair value of the plan assets at the beginning of the year 145,583 130,017 145,583 130,017 Contributions made to the plan 29,101 24,598 29,101 24,598 Benefits paid by the plan (10,833) (20,125) (10,833) (20,125) Expected return on plan assets 12,615 10,796 12,615 10,796 Actuarial gain/ (loss) (1,654) 297 (1,654) 297 Fair value of the plan assets at the end of the year 174,812 145,583 174,812 145,583
Retirement benefit liability of Central Finance Company PLC is partly funded externally through a gratuity fund established in 1987. Retirement benefit obligations of Central Finance Company PLC, Central Industries PLC and CF Insurance Brokers (Pvt) Ltd has
been determined as per the actuarial valuations carried out by Consulting Actuary, Mr. Piyal S Goonetilleke, Fellow of the Society of Actuaries (USA), Member of the American Academy of Actuaries. The employee benefit liabilities of Central Mineral Industries (Pvt) Ltd, Kandy Private Hospital Ltd., and Mark Marine Services (Pvt) Ltd., are computed based on the gratuity formula recommended in SLAS 16 (Revised 2006) - Employee Benefits.
Details of actuarial assumptions of the Company are as follows;
31.03.2012 31.03.2011 Actuarial assumptions Discount rate 11% 10% Expected return on plan assets 9% 9% Future salary increases 12.50% 13%
Mortality GA 1983 Mortality Table Age: 20 25 30 35 40 45 50 Turnover 10% 10% 10% 7.5% 5% 2.5% 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.
Central Finance Company PLC - Annual Report 2011-1298
Notes to the Financial Statements
Company 31.03.2012 31.03.2011 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 Subdivision of shares (01 into 05) 81,200 - - - Capitalisation of reserves (01 for 30) 3,383 365,400 - -
At the end of the year 104,883 568,420 20,300 203,020
Company’s ordinary shares were increased by subdividing each existing share into 5 shares in September 2011. Subsequent to the subdivision, reserves amounting to Rs.365.4 Million were also capitalised at the rate of Rs.108/- per share through the issue of bonus shares in the proportion of 01 share for 30 shares. As a result, the number of shares increased to 104,883,333. Earnings per share and net assets per share of the previous periods are adjusted accordingly.
Group Company 31.03.2012 31.03.2011 31.03.2012 31.03.2011 Rs.’000 Rs.’000 Rs.’000 Rs.’000
36 Capital reserves Revaluation reserve Balance at the beginning of the year 1,366,598 1,358,312 979,072 974,847
Depreciation on revaluation surplus (5,331) (5,627) (3,945) (3,954) Revaluation surplus realised on de-recognition of building (3,494) - (3,494) - Deferred tax attributable to revaluation surplus on de-recognition of building 978 - 978 - Deferred tax attributable to revaluation surplus due to change in corporate tax rate 6,624 13,913 - 8,179 Balance at the end of the year 1,365,375 1,366,598 972,611 979,072
Capital redemption reserve 18,865 18,865 - - Total 1,384,240 1,385,463 972,611 979,072
Revaluation reserve consists of the net surplus on the revaluation of land and buildings. Capital redemption reserve comprises of reserve funds arising from the redemption of preference shares of subsidiaries.
Group Company 31.03.2012 31.03.2011 31.03.2012 31.03.2011 Rs.’000 Rs.’000 Rs.’000 Rs.’000
37 Reserve fund Balance at the beginning of the year 682,000 601,000 682,000 601,000 Transfers during the year 118,000 81,000 118,000 81,000 Balance at the end of the year 800,000 682,000 800,000 682,000
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 the Finance Business Act No.42 of 2011.
Group Company 31.03.2012 31.03.2011 31.03.2012 31.03.2011 Rs.’000 Rs.’000 Rs.’000 Rs.’000
38 Investment fund account Balance at the beginning of the year - - - - Transfers during the year 223,492 - 223,492 -
Balance at the end of the year 223,492 - 223,492 -
As proposed in the Government Budget 2011, Finance Companies are required to establish and operate an Investment Fund Account (IFA) commencing January, 2011. According to the guidelines issued by the Central Bank of Sri Lanka (CBSL), Finance Companies are required to transfer 8% of the profits calculated for the payment of Value Added Tax (VAT) on financial services and 5% of the profits before tax calculated for payment of income tax.These funds have to be utilised for granting credit facilities for prescribed purposes or invested in long term government securities/bonds.
Central Finance Company PLC - Annual Report 2011-12 99
Details of investments in government securities and credit facilities granted utilising the proceeds of this fund as at 31.03.2012 are given below.
Instrument Rate of interest Maturity Amount invested (Rs.000)
Treasury bonds 8.50% 01.05.2019 92,449 Treasury bills 9.55% 20.04.2012 83,685
176,134
No.of loans granted Rate of interest Tenure of Amount granted Purpose of the loan (Rs.000) the loan
5 10.65%,11.00% and 04 and 47,358 Factory 12.75% 05 years modernisation
39 Revenue Reserves Group Company 31.03.2012 31.03.2011 31.03.2012 31.03.2011 Rs.’000 Rs.’000 Rs.’000 Rs.’000
General Reserve: Balance at the beginning of the year 7,581,820 6,124,070 7,570,639 6,112,889 Capitalisation of reserves (365,400) - (365,400) - Transfers during the year 1,776,000 1,379,000 1,776,000 1,379,000 Transfer (to)/from provision for loan losses - 78,750 - 78,750 8,992,420 7,581,820 8,981,239 7,570,639 Retained earnings 1,377,420 1,045,290 9,031 9,491 Balance at the end of the year 10,369,840 8,627,110 8,990,270 7,580,130
General reserve represents amounts set aside by the Directors for future expansions, and to meet any contingencies.
40 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.9,938 Million as at 31st March 2012 (31st March 2011 - Rs.3,891 Million).
41 Commitments(a) The Company has entered into fixed interest rate SWAP agreements as follows: (1) Date of commencement 06th July 2008 Date of termination 04th July 2013 Notional principal amount Rs.1,000 Million (2) Date of commencement 04th August 2011 Date of termination 04th August 2016 Notional principal amount Rs.200 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.30.54 Million for the Company and Rs.36.83 Million for the Group (2010/11- Rs.19.51 Million for the Group and Company).
Central Finance Company PLC - Annual Report 2011-12100
Notes to the Financial Statements
42
Mat
urit
y A
naly
sis
An
ana
lysi
s of
the
tota
l ass
ets
empl
oyed
and
the
tota
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bilit
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of th
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ased
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ate
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atur
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12
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31
.03.
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31
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31
.03.
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31
.03.
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31
.03.
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31
.03.
2011
31
.03.
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31
.03.
2011
31
.03.
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31
.03.
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31
.03.
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31
.03.
2011
Rs.’0
00
Rs.’0
00
Rs.’0
00
Rs.’0
00
Rs.’0
00
Rs.’0
00
Rs.’0
00
Rs.’0
00
Rs.’0
00
Rs.’0
00
Rs.’0
00
Rs.’0
00
Inte
rest
ear
ning
ass
ets:
In
vest
men
ts in
gove
rnm
ent s
ecur
ities
1
,020
,000
1
,237
,000
3
72,1
23
717
,393
-
-
-
-
-
-
1,
392,
123
1,
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393
In
vest
men
ts in
trea
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unde
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8
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5
-
-
-
-
-
-
-
92,
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-
1
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34
-
Dep
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990
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9
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-
-
-
-
-
-
-
1,
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9
5,00
0
Net
inve
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1
,476
,232
1
,087
,362
4
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,754
3
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,084
11,
813,
909
7,
803,
874
4,
703,
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3,
628,
283
3
39,8
91
279
,597
22,
891,
794
16,
141,
201
Co
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ate
debt
sec
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47,9
80
37,0
13
133,
870
134,
747
- 14
1,65
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- -
- 18
1,85
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3,41
4
Loan
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Stoc
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pur
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8
68,4
77
3,2
69,1
80
2,5
14,7
62
7,5
72,0
19
5,6
99,6
82
3,0
61,2
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1,3
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,917
1
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15,
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869
10,
444,
214
Am
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-
-
-
-
-
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1,16
7,03
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,811
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49,7
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377
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3
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,151
2
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373
,820
2
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51
79,
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8
5,89
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1,14
7,34
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5,27
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Tem
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140
,934
1
39,0
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228
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2
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124
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1
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11
43,
467
2
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-
-
537
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5
53,0
49
H
ousin
g an
d la
nd re
ceiva
bles
4
51
807
-
5
1
1
1
-
1
4
-
467
8
13
Lo
ans
to e
mpl
oyee
s 1
2,70
6
11,
269
2
5,55
1
22,
287
1
8,89
8
15,
162
5
,776
3
,995
7
,417
4
,435
7
0,34
8
57,
148
Tota
l int
eres
t ear
ning
ass
ets
6,2
70,3
52
4,7
69,3
76
9,4
16,5
91
7,6
80,3
66 1
9,73
4,09
9 1
4,16
5,10
4
8,10
1,80
7
5,09
9,58
8
897
,580
2
85,8
83 4
4,42
0,42
9 32
,000
,315
Non
-inte
rest
ear
ning
ass
ets:
Ba
nk a
nd c
ash
bala
nces
3
07,4
21
273
,197
-
-
-
-
-
-
-
-
3
07,4
21
273
,197
Dea
ling
secu
ritie
s 2
4,56
0
32,
000
-
-
-
-
-
-
-
-
2
4,56
0
32,
000
In
vest
men
t sec
uriti
es
-
-
-
-
-
-
-
-
173
,971
1
73,9
71
173
,971
1
73,9
71
Tr
ade
and
othe
r rec
eiva
bles
3
68,6
14
615
,244
8
7,59
3
47,
662
6
2,49
5
62,
997
8
7,81
2
18,
533
2
13,2
77
362
,152
8
19,7
91
1,1
06,5
88
In
vest
men
ts in
real
est
ate
-
107
,811
7
2,36
4
-
-
-
-
-
-
-
72,
364
1
07,8
11
In
vent
orie
s an
d ot
her s
tock
s 5
55,5
54
433
,014
-
-
-
-
-
-
-
-
5
55,5
54
433
,014
Inve
stm
ents
in a
ssoc
iate
s -
-
-
-
-
-
-
-
5
23,4
58
523
,458
5
23,4
58
523
,458
Inve
stm
ents
in s
ubsid
iarie
s -
-
-
-
-
-
-
-
3
12,9
87
312
,987
3
12,9
87
312
,987
Inta
ngib
le a
sset
s -
-
-
-
-
-
-
-
3
6,10
9
43,
991
3
6,10
9
43,
991
O
ther
ass
ets
1,4
62
670
4
,385
2
,009
9
,237
5
,357
3
,168
2
23
-
-
18,
252
8
,259
Prop
erty
, pla
nt a
nd e
quip
men
t -
-
-
-
-
-
-
-
3,
901,
006
4,
024,
580
3,
901,
006
4,
024,
580
Tota
l non
-inte
rest
ear
ning
ass
ets
1,2
57,6
11
1,4
61,9
35
164
,342
4
9,67
1
71,
732
6
8,35
4
90,
980
1
8,75
6
5,16
0,80
8
5,44
1,13
9
6,74
5,47
3
7,03
9,85
6
Tota
l ass
ets
7,5
27,9
63
6,2
31,3
11
9,5
80,9
33
7,7
30,0
37 1
9,80
5,83
1 1
4,23
3,45
7
8,19
2,78
7
5,11
8,34
4
6,05
8,38
8 5
,727
,022
51,
165,
902
39,
040,
171
Pe
rcen
tage
14
.71%
15
.96%
18
.73%
19
.80%
38
.71%
36
.46%
16
.01%
13
.11%
11
.84%
14
.67%
10
0.00
%
100.
00%
Central Finance Company PLC - Annual Report 2011-12 101
42
Mat
urit
y A
naly
sis
(con
td.)
Up
to 3
mon
ths
3
to 1
2 m
onth
s
1 to
3 y
ears
3 to
5 y
ears
Mor
e th
an 5
yea
rs
To
tal
31.0
3.20
12
31.0
3.20
11
31.0
3.20
12
31.0
3.20
11
31.0
3.20
12
31.0
3.20
11
31.0
3.20
12
31.0
3.20
11 3
1.03
.201
2 31
.03.
2011
31
.03.
2012
31
.03.
2011
Rs.’0
00
Rs.’0
00
Rs.’0
00
Rs.’0
00
Rs.’0
00
Rs.’0
00
Rs.’0
00
Rs.’0
00
Rs.’0
00
Rs.’0
00
Rs.’0
00
Rs.’0
00
Inte
rest
bea
ring
liabi
litie
s:
Dep
osits
6
,581
,234
5
,263
,797
10,
574,
395
9,
171,
809
3,
875,
623
3,
913,
083
5
53,6
56
609
,149
-
-
21,5
84,9
08
18,9
57,8
38
Ba
nk o
verd
rafts
1
,687
,625
5
02,3
67
-
-
-
-
-
-
-
-
1,68
7,62
5
502
,367
Com
mer
cial p
aper
1
40,0
66
-
260
,430
-
-
-
-
-
-
-
4
00,4
96
-
Ba
nk lo
ans
3,8
55,8
33
817
,834
3
0,00
0
62,
500
8
0,00
0
20,
833
5
3,33
4
-
-
-
4,01
9,16
7
901
,167
Non
-ban
k lo
ans
96,
500
1
6,70
8
512
,956
1
95,4
41
911
,656
4
72,9
12
288
,700
6
35,4
00
-
20,
200
1,
809,
812
1
,340
,661
Amou
nts
due
to s
ubsid
iarie
s 1
21,7
78
109
,631
-
-
-
-
-
-
-
-
1
21,7
78
109
,631
Deb
entu
res
-
150
,000
-
-
-
-
2
50,0
00
250
,000
-
-
2
50,0
00
400
,000
Tota
l int
eres
t bea
ring
liabi
litie
s 1
2,48
3,03
6
6,86
0,33
7 1
1,37
7,78
1
9,42
9,75
0
4,86
7,27
9
4,40
6,82
8
1,14
5,69
0
1,49
4,54
9
-
20,
200
29,
873,
786
22,
211,
664
Non
-inte
rest
bea
ring
liabi
litie
s:
Trad
e an
d ot
her p
ayab
les
2,2
36,1
06
1,5
99,5
79
1,1
35,1
19
720
,565
2
,158
,182
1
,741
,895
1
,827
,212
1
,202
,794
3
45,7
45
223
,309
7
,702
,364
5
,488
,142
Retir
emen
t ben
efit
oblig
atio
n -
-
8
,194
6
,907
1
2,29
3
10,
363
2
0,48
7
17,
271
3
68,7
60
310
,870
4
09,7
34
345
,411
Amou
nts
due
to s
ubsid
iarie
s 1
02,5
18
75,
579
-
-
-
-
-
-
-
-
1
02,5
18
75,
579
Ta
x pa
yabl
e 1
11,2
56
275
,939
-
-
-
-
-
-
-
-
1
11,2
56
275
,939
Def
erre
d Ta
x -
-
-
-
-
-
-
-
1,
411,
451
1,1
99,2
14
1,4
11,4
51
1,1
99,2
14
To
tal n
on-in
tere
st b
earin
g lia
bilit
ies
2,4
49,8
80
1,9
51,0
97
1,1
43,3
13
727
,472
2
,170
,475
1
,752
,258
1
,847
,699
1
,220
,065
2,
125,
956
1,7
33,3
93
9,7
37,3
23
7,3
84,2
85
To
tal l
iabi
litie
s 1
4,93
2,91
6
8,81
1,43
4 1
2,52
1,09
4 1
0,15
7,22
2
7,03
7,75
4
6,15
9,08
6
2,99
3,38
9
2,71
4,61
4 2
,125
,956
1,
753,
593
39,
611,
109
29,
595,
949
Perc
enta
ge
37.7
0%
29.7
7%
31.6
1%
34.3
2%
17.7
7%
20.8
1%
7.56
%
9.17
%
5.37
%
5.93
%
100.
00%
10
0.00
%
Central Finance Company PLC - Annual Report 2011-12102
Notes to the Financial Statements
43 Contingent liabilities Group Company 31.03.2012 31.03.2011 31.03.2012 31.03.2011 Contingent liabilities as at Rs.’000 Rs.’000 Rs.’000 Rs.’000
Guarantees Issued Fully secured guarantees issued on behalf of depositors 21,140 24,940 21,140 24,940 Performance bonds and warranties in respect of letter of credit facilities 57,926 14,888 57,926 14,888 Corporate guarantee issued on account of Hedges Court Residencies (Pvt) Ltd. - 85,000 - 85,000
79,066 124,828 79,066 124,828
44 Events after the balance sheet date Second interim dividend and proposed final dividend The Directors have recommended the payment of a final dividend of Rs.1.10 per share for the year ended 31st March 2012
(2010/11 – Rs.0.97 per share on enhanced number of shares) which requires the approval of shareholders at the Annual General Meeting to be held on 20th July 2012. 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.0.70 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 have confirmed that the Company satisfies the solvency test in accordance with Section 57 of the Companies Act No.7 of 2007, and have obtained solvency certificates from the auditor prior to declaring the final dividend of Rs.1.10 per share.
No other circumstances have arisen since the balance sheet date, which would require adjustments to / or disclosure in the financial
statements.
45 Related party disclosures45.1 Parent and ultimate parent The Company does not have a parent of its own. 45.2 Subsidiaries and associates Relationship with subsidiaries and associates are explained on the pages 109 to 112 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.
Central Finance Company PLC - Annual Report 2011-12 103
45.2 Subsidiaries and associates (contd.)
Central Industries PLC - X X X X - - - - - Central Developments Ltd. - - X X - - - - - - Dehigama Hotels Company Ltd. - 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 - - - - - - - Kandy Private Hospitals Ltd. - X X - - - - - - - CF Insurance Brokers (Pvt) Ltd. - - X X - - - - - - Central Homes (Pvt) Ltd. - - X - - - - - - - Mark Marine Services (Pvt) Ltd. - - - X X - X - - - Hedges Court Residencies (Pvt) Ltd. - - X X - - X - - - Capital Suisse Asia Ltd. - X - - X - - - - - Nations Trust Bank PLC - - - - X - X - - - Tea Smallholder Factories PLC - X - X - - - - - -
Group Company 31.03.2012 31.03.2011 31.03.2012 31.03.2011 Rs.’000 Rs.’000 Rs.’000 Rs.’000
45.3 Amounts due from related parties Subsidiaries Loans and advances - - 576,840 986,060 Trade and other receivables - - 29,730 49,623 606,570 1,035,683 Provision for doubtful debts (203,049) (175,697) Net amount due from subsidiary companies 403,521 859,986 Associates Lease and hire purchase receivables - - 48,974 21,386 Key management personnel (KMP) and their close family members Loans and advances 1,801 50,034 1,801 27,538 Other related entities CF employee benefit foundation 314,989 357,640 314,989 357,640 316,790 407,674 769,285 1,266,550 Amount due from KMPs to CF Employee Benefit Foundation 299,665 343,840 299,665 343,840
(Net outstanding balances as at the year end are secured)
Amounts due to related parties Subsidiaries Deposits - - 156,483 200,638 Interest payable on deposits - - 3,330 6,835 Amounts due to subsidiaries - - 224,291 185,210 Associates Bank overdraft 183,685 32,932 183,685 32,932 Key management personnel(KMP) and their close family members Deposits 118,055 198,977 118,055 198,977 Interest payable on deposits 18,873 49,144 18,873 49,144 320,613 281,053 704,717 673,736
J.D. B
anda
rana
yake
E.H
. Wije
naik
e
G.S
.N. P
eiris
R.E.
Ram
bukw
elle
A.K.
Gun
arat
ne
T.K.
Ban
dara
naya
ke
D.P
. de
Silv
a
C.L.
K.P.
Jaya
suriy
a
S.C.
S. W
ickra
mas
ingh
e
F. M
ohid
een
Central Finance Company PLC - Annual Report 2011-12104
Notes to the Financial Statements
Group Company 31.03.2012 31.03.2011 31.03.2012 31.03.2011 Rs.’000 Rs.’000 Rs.’000 Rs.’000
45.4 Transactions with related parties Subsidiaries Collection of insurance premium - - 1,064,659 886,266 Rendering of services - - 96,195 89,369 Loan instalment recoveries - - 409,220 15,000 Rent paid - - 26,779 24,229 Vehicle hire rentals received - - 4,934 5,228 Administrative fees received - - 66 66 Management fees received - - 1,800 1,080 Loans given - - - 121,440 Interest received - - 51,655 51,928 Interest paid on deposits - - 23,066 17,862 Rent received - - 3,654 3,654 Guarantees given - - - 85,000
Associates Interest paid on deposits 9,970 1,471 9,970 1,379 Lease facilities given 27,552 12,790 27,552 12,790 Vehicle hire rentals received 7,823 11,276 7,823 11,276 Lease and hire purchase rentals received 17,848 9,823 17,848 9,823
Key management personnel (KMP) and their close family members Interest paid on deposits 7,554 19,237 7,554 19,237 Loans given 2,470 2,470 - Interest received 272 3 272 3 Recovery of loans 2,438 - 2,438 - Instalment recoveries on purchase of apartments - 23,991 - -
Post employement benefit Contributions to providend fund 16,998 17,803 14,703 15,796 Contributions to gratuity fund 8,031 5,833 5,241 4,408
Compensation of key management personnel Short term employee benefits 130,837 131,516 109,020 114,310
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 KMP’s comprise members of the Board of Directors of the Company and key employees of the Company who are responsible for planning, directing and controlling the operations of the Company.
Central Finance Company PLC - Annual Report 2011-12 105
45.5 Inter subsidiary transactions Hedges Court Residencies (Pvt) Ltd. paid Rs.0.85 Million (2010/11-Rs.9.95 Million) on account of interest expense to the following
subsidiary companies.
2011/12 2010/11 Rs.’000 Rs.’000
Central Homes (Pvt) Ltd. 155 1,132 Kandy Private Hospitals Ltd. 548 5,185 Central Transport & Travels Ltd. - 3,227 Central Developments Ltd. 148 408
Inter- company balances between subsidiaries Due from Due to 31.03.2012 31.03.2011 Rs.’000 Rs.’000
Central Industries PLC Central Transport &Travels Ltd. - 96 Central Mineral Industries (Pvt) Ltd. Central Transport &Travels Ltd. 2,479 2,872 Central Construction & Development (Pvt) Ltd. Central Transport &Travels Ltd. - 250 Central Construction & Development (Pvt) Ltd. Central Mineral Industries (Pvt) Ltd. 8 119 Hedges Court Residencies (Pvt) Ltd. Central Homes (Pvt) Ltd. - 1,218 Hedges Court Residencies (Pvt) Ltd. Kandy Private Hospitals Ltd. - 16,888 Hedges Court Residencies (Pvt) Ltd. Central Transport &Travels Ltd. - 2,197 Hedges Court Residencies (Pvt) Ltd. Central Developments Ltd. - 417 2,487 24,057
Central Finance Company PLC - Annual Report 2011-12106
Notes to the Financial Statements
Business Segment Information For the year ended 31st March Leasing, hire purchase Vehicle Hire Medical services Power generation Manufacturing Insurance broking Investments in Investments in Real estate Intra segmental Total and other advances Shares and Units securities in excess adjustments of statutory requirementsAll figures in Rs.000 2012 2011 2012 2011 2012 2011 2012 2011 2012 2011 2012 2011 2012 2011 2012 2011 2012 2011 2012 2011 2012 2011
Revenue
Interest income 7,398,582 6,142,634 2,416 4,408 316 323 - - 4,416 616 - - - - - 116,914 1,701 4,586 - - 7,407,431 6,269,481
Other operating income - - 742,798 795,733 52,312 49,240 97,690 166,252 327,648 270,965 159,098 130,833 - - - - - - - - 1,379,546 1,413,023
Other income 263,729 215,881 117,098 107,363 328 406 350 - 4,289 2,530 38,848 43,842 178,514 284,304 - - 65,806 29,397 (195,913) (271,856) 473,049 411,867
Income from external customers 7,662,311 6,358,515 862,312 907,504 52,956 49,969 98,040 166,252 336,353 274,111 197,946 174,675 178,514 284,304 - 116,914 67,507 33,983 (195,913) (271,856) 9,260,026 8,094,371
Inter - segment income 55,309 55,624 4,934 8,555 7,662 11,437 10,171 9,438 32 20 - - 4,480 2,152 - - 30,187 26,848 (112,775) (114,074) - -
Total income 7,717,620 6,414,139 867,246 916,059 60,618 61,406 108,211 175,690 336,385 274,131 197,946 174,675 182,994 286,456 - 116,914 97,694 60,831 (308,688) (385,930) 9,260,026 8,094,371
Expenses
Interest expenses 2,552,648 2,035,141 129,355 139,751 - - - - - - - - 64,046 63,887 - 102,209 9,135 14,275 - - 2,755,184 2,355,263
Other operating and
administrative expenses 2,069,878 1,954,827 440,308 396,905 44,749 39,108 37,930 31,185 184,815 151,329 118,244 104,374 1,172 885 - - 27,329 53,350 - - 2,924,425 2,731,963
4,622,526 3,989,968 569,663 536,656 44,749 39,108 37,930 31,185 184,815 151,329 118,244 104,374 65,218 64,772 - 102,209 36,464 67,625 - - 5,679,609 5,087,226
Inter - segment expenses 56,152 47,937 - - 593 5,040 - - 358 400 27,792 26,453 26,409 23,342 - - 1,471 11,086 (112,775) (114,258) - -
Total expenses 4,678,678 4,037,905 569,663 536,656 45,342 44,148 37,930 31,185 185,173 151,729 146,036 130,827 91,627 88,114 - 102,209 37,935 78,711 (112,775) (114,258) 5,679,609 5,087,226
Segment results 3,038,942 2,376,234 297,583 379,403 15,276 17,258 70,281 144,505 151,212 122,402 51,910 43,848 91,367 198,342 - 14,705 59,759 (17,880) (195,913) (271,672) 3,580,417 3,007,145
Share of profits of associates 465,552 507,781
Profit before VAT on
financial services and income tax 4,045,969 3,514,926
Less:VAT on financial services 155,428 273,333
Profit before income tax 3,890,541 3,241,593
Less:Income tax expenses 1,119,544 1,330,155
Profit after income tax 2,770,997 1,911,438
Minority interest 94,382 84,404
Profit for the year 2,676,615 1,827,034
Segment assets 47,999,724 35,632,838 2,088,086 2,264,380 221,420 226,344 171,252 232,494 1,111,426 963,348 619,165 600,285 913,585 912,524 - - 406,920 962,287 (2,077,882) (2,540,352) 51,453,696 39,254,148
Investments in associate companies 2,104,030 1,908,947
Total assets 47,999,724 35,632,838 2,088,086 2,264,380 221,420 226,344 171,252 232,494 1,111,426 963,348 619,165 600,285 913,585 912,524 - - 406,920 962,287 (2,077,883) (2,540,352) 53,557,725 41,163,095
Segment liabilities 37,224,543 26,576,668 1,526,967 2,135,765 16,981 41,228 9,790 47,450 195,971 130,817 342,666 370,461 977,671 968,502 322,600 965,073 (993,124) (1,517,875) 39,624,065 29,718,089
Central Finance Company PLC - Annual Report 2011-12 107
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 securities in excess adjustments of statutory requirementsAll figures in Rs.000 2012 2011 2012 2011 2012 2011 2012 2011 2012 2011 2012 2011 2012 2011 2012 2011 2012 2011 2012 2011 2012 2011
Revenue
Interest income 7,398,582 6,142,634 2,416 4,408 316 323 - - 4,416 616 - - - - - 116,914 1,701 4,586 - - 7,407,431 6,269,481
Other operating income - - 742,798 795,733 52,312 49,240 97,690 166,252 327,648 270,965 159,098 130,833 - - - - - - - - 1,379,546 1,413,023
Other income 263,729 215,881 117,098 107,363 328 406 350 - 4,289 2,530 38,848 43,842 178,514 284,304 - - 65,806 29,397 (195,913) (271,856) 473,049 411,867
Income from external customers 7,662,311 6,358,515 862,312 907,504 52,956 49,969 98,040 166,252 336,353 274,111 197,946 174,675 178,514 284,304 - 116,914 67,507 33,983 (195,913) (271,856) 9,260,026 8,094,371
Inter - segment income 55,309 55,624 4,934 8,555 7,662 11,437 10,171 9,438 32 20 - - 4,480 2,152 - - 30,187 26,848 (112,775) (114,074) - -
Total income 7,717,620 6,414,139 867,246 916,059 60,618 61,406 108,211 175,690 336,385 274,131 197,946 174,675 182,994 286,456 - 116,914 97,694 60,831 (308,688) (385,930) 9,260,026 8,094,371
Expenses
Interest expenses 2,552,648 2,035,141 129,355 139,751 - - - - - - - - 64,046 63,887 - 102,209 9,135 14,275 - - 2,755,184 2,355,263
Other operating and
administrative expenses 2,069,878 1,954,827 440,308 396,905 44,749 39,108 37,930 31,185 184,815 151,329 118,244 104,374 1,172 885 - - 27,329 53,350 - - 2,924,425 2,731,963
4,622,526 3,989,968 569,663 536,656 44,749 39,108 37,930 31,185 184,815 151,329 118,244 104,374 65,218 64,772 - 102,209 36,464 67,625 - - 5,679,609 5,087,226
Inter - segment expenses 56,152 47,937 - - 593 5,040 - - 358 400 27,792 26,453 26,409 23,342 - - 1,471 11,086 (112,775) (114,258) - -
Total expenses 4,678,678 4,037,905 569,663 536,656 45,342 44,148 37,930 31,185 185,173 151,729 146,036 130,827 91,627 88,114 - 102,209 37,935 78,711 (112,775) (114,258) 5,679,609 5,087,226
Segment results 3,038,942 2,376,234 297,583 379,403 15,276 17,258 70,281 144,505 151,212 122,402 51,910 43,848 91,367 198,342 - 14,705 59,759 (17,880) (195,913) (271,672) 3,580,417 3,007,145
Share of profits of associates 465,552 507,781
Profit before VAT on
financial services and income tax 4,045,969 3,514,926
Less:VAT on financial services 155,428 273,333
Profit before income tax 3,890,541 3,241,593
Less:Income tax expenses 1,119,544 1,330,155
Profit after income tax 2,770,997 1,911,438
Minority interest 94,382 84,404
Profit for the year 2,676,615 1,827,034
Segment assets 47,999,724 35,632,838 2,088,086 2,264,380 221,420 226,344 171,252 232,494 1,111,426 963,348 619,165 600,285 913,585 912,524 - - 406,920 962,287 (2,077,882) (2,540,352) 51,453,696 39,254,148
Investments in associate companies 2,104,030 1,908,947
Total assets 47,999,724 35,632,838 2,088,086 2,264,380 221,420 226,344 171,252 232,494 1,111,426 963,348 619,165 600,285 913,585 912,524 - - 406,920 962,287 (2,077,883) (2,540,352) 53,557,725 41,163,095
Segment liabilities 37,224,543 26,576,668 1,526,967 2,135,765 16,981 41,228 9,790 47,450 195,971 130,817 342,666 370,461 977,671 968,502 322,600 965,073 (993,124) (1,517,875) 39,624,065 29,718,089
Central Finance Company PLC - Annual Report 2011-12108
Directors’ Interest in Contracts with the Company Directors’ interests in contracts with the Company Transactions with related parties as required by the Sri Lanka Accounting Standards No.30 on Related Party Disclosures (Revised 2005)
are detailed in Note 45 to the financial statements. In addition, the Company carried out transactions in the ordinary course of business on an arm’s length basis with entities where a director of the Company is also a director of such entities as detailed below:
Name of Director Company Relationship Nature of transaction Rentals received Balance outstanding2011/12 2010/11 31.03.2012 31.03.2011
Rs.000 Rs.000 Rs.000 Rs.000
T. K. Bandaranayake Laugfs Gas PLC Director Finance lease facility 522 697 - 522
J.D. Bandaranayake Finlays Colombo PLC Director Hire of vehicles 2,994 *N/A - *N/A C.L.K.P. Jayasuriya Chairman
C.L.K.P. Jayasuriya Hapugastenna Plantations PLC Director Hire of vehicles 16,069 *N/A 11 *N/A James Finlay Plantations
Holdings (Pvt) Ltd. Chairman Hire of vehicles 359 *N/A - *N/A Udupussellawa Plantations PLC Director Hire of vehicles 4,036 *N/A - *N/A Ceylon Chamber of Commerce Committee
Member Hire of vehicles 2,204 *N/A 130 *N/A Finlays Rentokil Ceylon (Pvt) Ltd. Chairman Finance lease facility 735 *N/A 955 *N/A Acme Printing & Packaging PLC Director Finance lease facility 754 *N/A 756 *N/A
* Name of Director Date of appointment J.D. Bandaranayake 01.01.2012
C.L.K.P. Jayasuriya 01.07.2011
Central Finance Company PLC - Annual Report 2011-12 109
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) (5,000 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 G.S.N. Peiris G.S.N. Peiris
E.H. Wijenaike C. Kiriella R.E. Rambukwelle R.E. Rambukwelle
A.N.P. Wickramasuriya G.S.N. Peiris U.B. Elangasinha U.B. Elangasinha
G.S.N. Peiris R.E. Rambukwelle
C.S.W. De Costa U.B. Elangasinha
R.E. Rambukwelle
A.K. Gunaratne
N.J. Abeysekera
Company Secretary Corporate Services (Pvt) 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
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Central Finance Company PLC - Annual Report 2011-12110
Group Companies (contd.)
Group Companies
Subsidiaries
Central Mineral Central Homes ( Pvt ) Ltd CF Growth Fund Ltd CF Insurance Industries (Pvt) Ltd Brokers ( Pvt ) Ltd
Year of incorporation 1990 1987 1992 1995
Stated Capital Rs.3,500,000 Rs.34,175,020 Rs.163,036,780 Rs.123,750,000
(350,000 Shares) (3,417,502 Shares) (16,303,678 Shares) (12,375,000 Shares)
Group Holding 99.99% 99.99% 99.99% 99.99%
Status of the Company Unquoted Unquoted Unquoted Unquoted
Principal Activities Manufacture of mineral Property development and Investment company Insurance broking
products sale of real estate
Registered Office Diganatenna Estate, No. 270, Vauxhall Street, No. 270, Vauxhall Street, No. 270, Vauxhall Street,
Gonawala, Digana Colombo 02 Colombo 02 Colombo 02
G.S.N. Peiris G.S.N. Peiris S.V. Wanigasekera S.V. Wanigasekera
U.B. Elangasinha C. Kiriella G.S.N. Peiris M.S. Wijenaike
R.E. Rambukwelle R.E. Rambukwelle A.K. Gunaratne
D.P. de Silva G.S.N. Peiris
C. Kiriella
R.E. Rambukwelle
D.P. de Silva
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
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Central Finance Company PLC - Annual Report 2011-12 111
Group Companies
Subsidiaries
Dehigama Hotels Expanded Plastic Hedges Court Kandy Private Hospitals Ltd Company Ltd Products Ltd Residencies (Pvt) Ltd
Year of incorporation 1973 1978 2005 1967
Stated Capital Rs.8,280,700 Rs.64,000,000 Rs.50,000,000 Rs.6,084,750
(828,070 Shares) (6,400,000 Shares) (5,000,000 Shares) (550,500 Shares)
Group Holding 79.69% 99.99% 99.99% 66.35%
Status of the Company Unquoted Unquoted Unquoted Unquoted
Principal Activities Renting of commercial Investment company Construction and sale Provision of healthcare services
property of apartments
Registered Office No. 84, Raja Veediya, No. 270, Vauxhall Street, No. 270, Vauxhall Street, No. 255/8, Katugastota Road,
Kandy Colombo 02 Colombo 02 Kandy
E.H. Wijenaike G.S.N. Peiris S.V. Wanigasekera E.H. Wijenaike
G.S.N. Peiris R.E. Rambukwelle G.S.N. Peiris G.S.N. Peiris
C. Kiriella U.B. Elangasinha C. Kiriella S. Ranasinghe
C.D. Paranagama R.E. Rambukwelle S. Kapuwatte
L. Sirimanne D.P. de Silva A.P.R. Aluwihare
A. Jayasinghe N.H.B. Mavilmada
(Alternate to C.D. Paranagama)
H.C.D. Divitotawela A.B. Abeysinghe
(Alternate to L. Sirimanne)
Company Secretary Corporate Services (Pvt) Ltd. Kandy Business Managers & Kandy Business
216, De Saram place, Consultants (Pvt) Ltd. Secretaries (Pvt) Ltd. Consultants (Pvt) Ltd.
Colombo 10 80, Kings Street, Kandy 08, Tickell Road, Colombo 08 80, Kings Street, Kandy
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Central Finance Company PLC - Annual Report 2011-12112
Group Companies (contd.)
Group Companies Group Companies
Subsidiaries Associates
Mark Marine Capital Suisse Asia Ltd. Nations Trust Bank PLC Tea Smallholder Factories PLC Services (Pvt) Ltd
Year of incorporation 1997 1995 1999 1991
Stated Capital Rs.85,611,980 Rs.181,000,070 Rs.5,101,369,000 Rs.150,000,000
(8,561,198 Shares) (18,100,007 Shares) (230,607,283 Shares) (30,000,000 Shares)
Group Holding 58.12% 24.58% 20.00% 29.30%
Status of the Company Unquoted Unquoted Quoted Quoted
Principal Activities Hydro power generation 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 J.R.F. Peiris S.C. Ratnayake
G.C.J. Makalanda E.H. Wijenaike S.G. Rajakaruna A.D. Gunewardene
A.K. Gunaratne M.S. Wijenaike A.K. Gunaratne J.R.F. Peiris
R.E. Rambukwelle S.T. Amarasuriya K.N.J. Balendra E.H. Wijenaike
U.B. Elangasinha P. Bottinelli M.E. Wickremesinghe R.E. Rambukwelle
D.P. de Silva G.N. Fernando A.R. Rasiah A.S. Jayathilleke
S.P.P. Makalanda N. Amarasuriya D. Weerakoon J.S. Ratwatte
(Alternate to A.A.A. Makalanda)
A.F. Goonetillake M. Jafferjee R. Seevaratnam
(Alternate to U.B. Elangasinha)
K. De Soysa R.S. Fernando
N.S. Panditaratne
D.P. de Silva
C.H.S.K. Piyaratna
Company Secretary Management B.P. De Silva (Ceylon) Ltd. Theja Silva Keells Consultants Limited.
Applications (Pvt) Ltd. 234/4, Old Awissawella 130, Glennie Street,
12, Rotunda Gardens, Road, Orugodawatta Colombo 02
Colombo 03
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Central Finance Company PLC - Annual Report 2011-12 113
Group Value Added Statement For the year ended 31st March 2012 % 2011 % Rs.’000 Rs.’000
Value Added Operating Income earned by providing financial services 8,786,977 7,682,504 Cost of services (3,867,184) (3,395,759) Value added by financial services 4,919,793 4,286,745 Other Income 473,049 411,867 Provision for losses on loans, advances and assets (127,255) (186,822) Share of Associate companies’ profits before tax 465,552 507,781 5,731,139 5,019,571
Value Allocated To employees remuneration 1,133,591 19.78 1,007,248 20.07 To providers of capital Dividends to shareholders 235,818 4.11 147,175 2.93 Minority interest 94,382 1.65 84,404 1.68 To government revenue Income tax 1,119,544 19.53 1,330,155 26.49 Turnover tax and Debits tax 1,439 0.03 4,349 0.09 VAT on financial services 155,428 2.71 273,333 5.45
To expansion and growth Retained income 2,440,797 42.59 1,679,632 33.47 Depreciation 550,140 9.60 493,275 9.82
5,731,139 100.00 5,019,571 100.00
Consolidated sources & utilisation of income For the year ended 31st March 2012 % 2011 % Rs.’000 Rs.’000
Sources of income Interest and operating income 8,786,977 90.35 7,682,504 89.31 Other Income 473,049 4.86 411,867 4.79 Share of associate companies’ profits before tax 465,552 4.79 507,781 5.90
9,725,578 100.00 8,602,152 100.00
Utilisation of income Interst expenses 2,755,184 28.33 2,355,263 27.38 Remuneration to employees 1,133,591 11.66 1,007,248 11.71 Other operating expenses including provision for loan losses, diminition in value of investments and depreciation 1,789,395 18.40 1,720,366 20.00 Taxation 1,276,411 13.12 1,607,837 18.69 Dividends to shareholders 235,818 2.42 147,175 1.71 Retained income 2,440,797 25.10 1,679,859 19.53 Minority interest 94,382 0.97 84,404 0.98 9,725,578 100.00 8,602,152 100.00
Central Finance Company PLC - Annual Report 2011-12114
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 2012 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 three months of the Balance Sheet date.
2. Ordinary Shareholders as at 31st March 2012 - 2,823 (Stated capital of the Company solely represents voting ordinary shares).
Number of share holders as at 31.03.2011 – 2,516 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 1,248 337,643 0.32 15 5,858 0.01 1,263 343,501 0.33 1,001 - 5,000 660 1,484,528 1.42 19 54,106 0.05 679 1,538,634 1.47 5,001 - 10,000 356 2,302,091 2.19 4 28,583 0.03 360 2,330,674 2.22 10,001 - 50,000 336 6,731,310 6.42 13 308,144 0.29 349 7,039,454 6.71 50,001 - 100,000 70 4,764,886 4.54 4 293,844 0.28 74 5,058,730 4.82 100,001 - 500,000 67 12,779,371 12.18 7 1,541,221 1.47 74 14,320,592 13.65 500,001 - 1,000,000 8 5,980,904 5.70 1 749,295 0.71 9 6,730,199 6.42 Over 1,000,000 13 65,164,702 62.13 2 2,356,847 2.25 15 67,521,549 64.38 Total 2,758 99,545,435 94.91 65 5,337,898 5.09 2,823 104,883,333 100.00
There were 2,459 resident and 57 non-resident share holders as at 31st March 2011.
31st March 2012 31st March 2011 No of No of % No of No of % Share shares share shares holders holders
Individuals 2,595 57,347,221 54.68 2,310 11,786,921 58.06
Institutions 228 47,536,112 45.32 206 8,513,079 41.94 Total 2,823 104,883,333 100.00 2,516 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 2012 was 59.02 (31st March 2011 – 58.03%).
** Company’s ordinary shares were increased by subdividing each existing share into 5 shares in September 2011. Subsequent to the subdivision, reserves amounting to Rs. 365.4 Million were also capitalised at the rate of Rs.108/- per share through the issue of bonus shares in the proportion of 01 share for 30 shares. As a result, the number of shares increased to 104,883,333.
* Net asset & Market value per share of the previous periods were not adjusted in line with the increase in shareholdings referred above.
0
200
400
600
800
1,000
1,200
1,400
Net Asset Value per share and Market Value per share (Rs.)
Net Asset Value per shareMarket Value per share
Financial Year07/08 08/09 09/10 10/11 11/12
0
5
10
15
20
25
30
Shareholders’ Funds and Market Capitalisation. (Rs.Mn.)
Shareholders' FundsMarket Capitalisation
Financial Year07/08 08/09 09/10 10/11 11/12
Mill
ion
Central Finance Company PLC - Annual Report 2011-12 115
3. Twenty largest shareholders as at 31st March 2012 31st March 2012 * 31st March 2011 No. of shares % No. of shares %
1. Corporate Services (Pvt) Ltd. 18,293,420 17.44 3,540,737 17.44 2. E.H. Wijenaike 16,164,123 15.41 3,128,540 15.413. Perpetual Capital (Pvt) Limited 9,854,740 9.40 1,860,100 9.16 4. Employees Provident Fund 6,194,693 5.91 - -5. A.J. Wijenaike 3,271,357 3.12 633,166 3.126. N.W. Wijegoonawardene 2,162,353 2.06 418,520 2.067. G.S.N. Peiris 1,828,168 1.74 352,446 1.748. J.B. Cocoshell (Pvt) Ltd. 1,749,483 1.67 476,466 2.359. C.R. Dunuwille 1,348,582 1.29 236,316 1.1610. N.M. Gunawardana 1,300,346 1.24 251,680 1.2411. P.R. Munasinha 1,226,980 1.17 237,480 1.1712. Thurston Investments Limited 1,056,501 1.01 - -13. S.V. Wanigasekera 1,053,136 1.00 203,833 1.0014. P.M. Wijenaike 1,016,180 0.97 196,680 0.9715. Employees Trust Fund Board 1,001,487 0.95 49,233 0.2416. R.E. Rambukwelle 984,906 0.94 190,000 0.9417. C. Kirielle 967,881 0.92 187,332 0.9218. S.K. Wedande 852,329 0.81 198,467 0.9819. A.K. Gunaratne 835,274 0.81 161,666 0.8020. N.M. Wahab 749,295 0.71 145,025 0.71 71,911,234 68.56 12,467,687 61.42 Others 32,972,099 31.44 7,832,313 38.58 Total 104,883,333 100.00 20,300,000 100.00 * Comparative shareholdings as at 31st March 2011 of the twenty largest shareholders as at 31st March 2012.
4. Market Value The market value of Central Finance Company PLC Ordinary shares.
2011/12 2010/11 2009/10 Rs. Rs. Rs. Highest 1895.00 (on 25.05.2011) 1,300.00 (on 23.03.2011) 410.00 (on 13.01.2010) Lowest 149.00 (on 15.02.2012) 388.75 (on 24.05.2010) 158.00 (on 11.05.2009) Year End 171.30 1,273.70 90.00
5. Dividend Payments 2011/12 2010/11 Rs. Rs. First Interim 0.70 0.49 Second Interim 0.70 0.58 Final 1.10 0.97 Total Dividend 2.50 2.04
6. Share Trading 2011/12 2010/11 2009/10 No. of shares traded 7,943,223 8,709,000 2,002,900 Value of shares traded (Rs.’000) 7,373,614 6,866,551 597,524 Market Capitalisation (Rs.’000) 17,966,515 25,856,110 7,917,000
Central Finance Company PLC - Annual Report 2011-12116
Year ended 31st March 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
Rs.’000 Rs.’000 Rs.’000 Rs.’000 Rs.’000 Rs.’000 Rs.’000 Rs.’000 Rs.’000 Rs.’000
Group income 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 9,260,026
Interest Income 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 7,407,431
Other operating Income 360,030 526,232 802,533 1,265,417 1,477,626 1,615,909 1,638,866 1,470,952 1,413,023 1,379,546
Other Income 393,562 413,902 81,544 225,442 202,444 175,215 246,171 342,226 411,867 473,049
Interest Expenses
Interest on deposits (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) (2,142,449)
Interest on bank and other borrowings (102,335) (81,153) (101,024) (274,835) (538,298) (913,129) (1,001,190) (497,008) (282,388) (612,735)
Operating expenses (696,595) (693,304) (814,469) (1,447,632) (1,832,297) (2,008,313) (2,234,224) (2,335,775) (2,545,141) (2,797,170)
Loan losses and provision (161,543) (379,988) (224,031) (27,642) (48,357) (124,399) (220,189) (299,479) (186,822) (127,255)
Share of profit of associates 29,103 70,489 69,865 85,909 102,150 168,434 163,953 383,868 507,781 465,552
VAT on financial services - - - - (115,246) (107,803) (159,080) (200,851) (273,333) (155,428)
Profit before income tax 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 3,890,541
Income tax expense (22,141) (42,854) (284,149) (377,197) (419,634) (456,608) (561,336) (900,699) (1,330,155) (1,119,544)
Net profit for the year 594,696 862,852 771,752 1,090,695 1,164,423 1,259,586 1,181,044 1,124,835 1,911,438 2,770,997
Attributable to equity holders of the parent 566,295 822,266 722,636 1,042,400 1,122,237 1,210,711 1,126,985 1,046,112 1,827,034 2,676,615
Attributable to Minority interest 28,401 40,586 49,116 48,295 42,186 48,875 54,059 78,723 84,404 94,382
Balance Sheet
Share capital 121,800 121,800 203,000 203,000 203,020 203,020 203,020 203,020 203,020 568,420
Capital reserves 757,511 732,895 728,514 725,677 1,308,366 1,326,647 1,382,664 1,377,177 1,385,463 1,384,240
Reserve fund 274,500 313,500 349,500 395,500 448,500 501,000 553,500 601,000 682,000 800,000
Unrealised income reserve 294,000 103,000 103,000 53,000 53,000 - - - - -
Investment fund - - - - - - - - - 223,492
Revenue reserves 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 10,369,840
Shareholders’ funds 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 13,345,992
Minority interest 273,780 252,314 306,069 302,166 320,779 350,818 459,454 506,506 547,413 587,668
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 13,933,660
Decade at a Glance
Central Finance Company PLC - Annual Report 2011-12 117
Year ended 31st March 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
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 1,448,803 1,715,819 1,660,394 1,803,290 1,996,020 2,108,534 2,822,987 3,727,366 2,395,074 3,424,740
Dealing securities 19,830 21 61,296 8,208 7,322 8,168 7,444 2,200 32,000 24,560
Investment securities 199,156 69,652 72,746 8,219 8,319 7,949 10,338 121,176 180,331 180,331
Investments in associates 601,433 524,020 519,130 767,637 862,149 1,209,943 1,224,834 1,584,724 1,908,947 2,104,030
Advances to customers 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 40,602,785
Other assets 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 2,439,803
Property, plant and equipment 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 4,781,476
Total Assets 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 53,557,725
Liabilities
Deposits 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 21,428,425
Bank and other borrowings 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 7,589,307
Other liabilities 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 10,606,333
Total Liabilities 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 39,624,065
Key Indicators
Earnings per share (Rs.) 27.90 40.51 35.60 51.35 55.28 59.64 55.52 51.53 17.42 25.52
Net assets per share (Rs.) 142.32 172.11 175.48 220.48 298.21 351.61 403.57 449.60 103.90 127.25
Gross dividends paid (Rs.’000) 36,540 48,720 57,855 71,050 91,350 91,350 101,500 121,800 213,150 262,208
Dividend cover (times covered) 15.5 16.88 12.49 14.67 12.28 13.25 11.10 7.72 7.55 10.38
Market price per share (Rs.) 100.00 224.50 143.75 205.00 236.00 200.00 157.00 390.00 1,273.70 171.30
Normalised market value per share (Rs.) * 60.00 134.70 143.75 205.00 236.00 200.00 157.00 390.00 246.84 171.30
Price earnings ratio 2.15 3.33 4.04 3.99 4.27 3.35 2.83 7.57 14.17 6.71
Market value of previous period has been adjusted in line with changes in stated capital subsequent to the subdivision & issue of bonus shares in September 2011.
Central Finance Company PLC - Annual Report 2011-12118
Income Statement in US Dollars Group CompanyFor the year ended 31st March 2012 2011 2012 2011
US$ 000 US$ 000 US$ 000 US$ 000
Income 72,429 73,279 68,341 69,230
Interest income 57,938 56,758 58,305 57,219
Less: Interest expenses 21,550 21,322 21,731 21,484
Net interest income 36,388 35,436 36,575 35,735
Other operating income 10,790 12,792 5,813 7,208
Other income 3,700 3,729 4,222 4,803
50,879 51,956 46,610 47,746
Less: Operating expenses
Personnel expenses 8,028 8,294 6,603 6,863
Premises, equipment and establishment expenses 9,946 10,710 9,180 10,124
Employee retirement benefit expenses 838 825 731 719
Other expenses 3,066 3,213 2,417 2,271
21,879 23,041 18,931 19,977
Profit before loan losses and provisions 29,000 28,915 27,679 27,770
Less: Loan losses and provisions 995 1,691 992 1,686
28,005 27,224 26,688 26,084
Share of profit of associates 3,641 4,597 - -
Profit before VAT on financial services and income tax 31,646 31,821 26,688 26,084
Less: VAT on financial services 1,216 2,474 1,216 2,474
Profit before income tax 30,431 29,346 25,472 23,609
Less: Income tax expense 8,757 12,042 7,127 9,033
Profit after income tax 21,674 17,304 18,345 14,577
Attributable to equity holders of the parent 20,936 16,540 18,345 14,577
Attributable to minority interest 738 764 - -
Net profit for the year 21,674 17,304 18,345 14,577
Basic and diluted earnings per share - US$ 0.20 0.16
Exchange rate of US$ 1 was Rs.127.85 as at 31st March 2012 (Rs.110.46 as at 31st March 2011)
The income statement given on this page is solely for the convenience of the shareholders, bankers, investors, customers and other users of financial statements and do not form part of the audited financial statements.
Central Finance Company PLC - Annual Report 2011-12 119
Balance Sheet in US Dollars Group CompanyAs at 31st March 31.03.2012 31.03.2011 31.03.2012 31.03.2011 US$ 000 US$ 000 US$ 000 US$ 000
ASSETSCash in hand and at banks 2,788 3,129 2,405 2,473 Investments in government securities 12,266 17,693 12,266 17,693 Deposits with banks 11,732 860 11,732 860 Dealing securities 192 290 192 290 Tax receivables 265 26 - - Inventories and other stocks 6,430 6,047 4,345 3,920 Investment securities 1,410 1,633 1,361 1,575 Net investment in leases 179,052 146,127 179,052 146,127 Corporate debt securities 1,422 2,837 1,422 2,837 Loans and advances 138,529 113,333 142,969 122,183 Trade and other receivables 9,821 13,444 6,412 10,018 Investments in real estate 701 5,379 566 976 Investments in associates 16,457 17,282 4,094 4,739 Investments in subsidiaries - - 2,448 2,833 Other assets 143 75 143 75 Deferred tax asset 1 81 - - Intangible assets 300 421 282 398 Property, plant and equipment 37,399 43,994 30,512 36,435
Total assets 418,911 372,652 400,203 353,433
LIABILITIESBank overdrafts 13,389 4,580 13,200 4,548 Tax payable 873 2,931 870 2,498 Commercial paper 3,133 - 3,133 - Trade and other payables 61,901 51,924 60,245 49,684 Amounts due to subsidiaries - - 1,754 1,677 Deposits 167,606 169,810 168,830 171,626 Bank loans 31,817 8,928 31,437 8,158 Non-bank loans 14,156 12,137 14,156 12,137 Debentures 1,955 3,621 1,955 3,621 Retirement benefit obligations 3,755 3,657 3,205 3,127 Deferred tax liability 11,342 11,450 11,040 10,857
Total liabilities 309,926 269,039 309,825 267,934
SHAREHOLDERS’ FUNDSStated capital 4,446 1,838 4,446 1,838 Capital reserves 10,827 12,543 7,607 8,864 Reserve fund 6,257 6,174 6,257 6,174 Investment fund 1,748 - 1,748 - Revenue reserves 81,109 78,102 70,319 68,623
Funds attributable to equity holders of the parent 104,388 98,656 90,378 85,499 Minority interest 4,597 4,956 - -
108,984 103,612 90,378 85,499
Total liabilities, shareholders’ funds and minority interest 418,911 372,652 400,203 353,433
Net assets per share - US$. 1.00 0.94 0.86 0.82
Exchange rate of US$ 1 was Rs.127.85 as at 31st March 2012 (Rs.110.46 as at 31st March 2011)
The balance sheet given on this page is solely for the convenience of the shareholders, bankers, investors, customers and other users of financial statements and do not form part of the audited financial statements.
Central Finance Company PLC - Annual Report 2011-12120
Employees of the Year
Head Office 2011/12
December Mrs. Harshanee Athauda
August Mr. Sarath Wijenayake
April Mr. Harsha Dasanayake
January Mrs. R.A.A. Chandrakanthi
September Mr. Prasad Weerasekara
May Mr. Amila Wijesena
February Miss. Chandrika Siriwardana
October Mr. Thusitha Abeysinghe
June Mrs. Thushari Kumarasinghe
March Mr. Keerthi Liyanagedara
November Mr. A.M.A. Nissanka
July Mr. V. G. S. Niroshan
Central Finance Company PLC - Annual Report 2011-12 121
City Office 2011/12
December Mr. K. A. S. T. Gunadasa
August Mr. I.H. Ranjith
April Mr. S. C. Weerasekera
January Mr. S. W. P. C. Fernando
September Ms. D. G. Gunasinghe
May Ms. K. A. R. W Rupasinghe
February Mrs. M.R. Deepani
October Ms. M. M. H. Kandamby
June Ms. R. K. Senanayake
March Mr. K.K. G. D. I. Wijethilake
November Mr. U.D. N. Ukwatta
July Mr. M. K. M. Muhandiramge
Central Finance Company PLC - Annual Report 2011-12122
Employees of the Year (contd.)
Branches 2011/12
December Mr. K.G.S. Madushan
Kantale
August Ms. I. M. Ariyatunga
Vavuniya
April Ms. Inoka Hettiarachchi
Kantale
January Mr. R. M. E.R Ratnayake
Kuliyapitiya
September Ms. Purnima Panditharatne
Negombo
May Ms. D. W. Nishadini Ruwangika
Gampaha
February Mr. Lalinda Rupasinghe
Hanwella
October Ms. I.K.R. Priyanthi
Homagama
June Mr. L.M.N. Silva
Matugama
March Mr. A.S. Maduwage
Ambalangoda
November Mr. Viraj Jayasekera
Avissawella
July Mr. H. H. I. Nalin Silva
Bandarawela
Central Finance Company PLC - Annual Report 2011-12 123
Accrual basis - the system of
accounting wherein revenue is recognised
at the time it is earned and expenses at
the time they are incurred, regardless of
whether cash has actually been received or
paid out.
Associate company - an associate
is an entity, including an unincorporated
entity such as a partnership, over which the
investor has significant influence and that
is neither a subsidiary nor an interest in a
joint venture.
Cash equivalents - short-term,
highly liquid investments that are readily
convertible to known amounts of cash and
which are subject to an insignificant risk of
changes in value.
Consolidated financial statements - financial statement of a holding company
and its subsidiaries based on their combined
assets, liabilities and operating results.
Contingencies - a condition or situation
existing at the balance sheet date where
the outcome will be confirmed only by the
occurrence or non-occurrence of one or
more future events.
Corporate governance - process by
which corporate entities are governed to
promote stakeholder interest. Shareholders
exert collective pressure on management
to ensure equitable decision making on
matters that may affect the value of their
holdings and base their response on
statutory requirements or on so called
“Best Practice”.
Dealing securities - marketable
securities that are acquired and held with
the intention of reselling them in the short
term.
Dividend cover - profit attributable to
ordinary shareholders divided by gross
dividends to ordinary shares; this indicates
number of times dividend is covered by
current year’s distributable profits.
Dividend per share - value of the total
dividend paid out and proposed to ordinary
shareholders divided by the number of
ordinary shares in issue; this indicates
the proportion of current year’s dividend
attributable to an ordinary share in issue.
Earnings per share (EPS) - profit
attributable to ordinary shareholders
divided by the number of ordinary shares
in issue; this indicates the proportion of
current year’s earnings attributable to an
ordinary share in issue.
Equity method - a method of
accounting whereby the investment is
initially recognised at cost and adjusted
thereafter for the post-acquisition change
in the investor’s share of net assets of the
investee. The profit or loss of the investor
includes the investor’s share of the profit or
loss of the investee.
Finance lease - a lease that transfers
substantially all the risks and rewards
incidental to the ownership of an asset to
the lessee. Title may or may not eventually
be transferred.
Gross dividend - the proportion of
profit distributed to shareholders including
the tax withheld.
Hire purchase - a contract between
hirer and financier where the hirer takes on
hire a particular article from the financier,
with the option to purchase the article
at the conclusion of the agreed rental
payments.
Interest cover - earnings before interest
and tax divided by interest expenses; this
indicates the ability to cover or service
interest charges of the debt holders.
Interest in suspense - interest
suspended on non-performing loans and
advances.
Interest rate SWAP - an interest rate
SWAP is a contract, whereby two parties
agree to exchange a set of interest cash
flows based on a notional principle on
pre-arranged dates. Normally fixed rate is
exchanged for a floating rate.
Lease - an agreement whereby the
lessor conveys to the lessee in return for a
payment or series of payments the right to
use an asset for an agreed period of time.
Market capitalisation - number of
ordinary shares in issue multiplied by
market value of a share and indicates total
market value of all ordinary shares in issue.
Minority interest - portion of the profit
or loss and net assets of a subsidiary
attributable to equity interests that are
not owned, directly or indirectly through
subsidiaries, by the parent.
Net asset value per ordinary share - ordinary shareholders’ funds divided by
the number of ordinary shares in issue.
Non-performing advances - loans
and advances of which rentals are in
arrears for six months or more.
Operating lease - an operating lease is
a lease other than a finance lease.
Provision - amounts set aside against
possible losses on net receivable of facilities
Glossary of Financial Terms
Central Finance Company PLC - Annual Report 2011-12124
granted to customers as a result of their
becoming partly or wholly uncollectible.
Related parties - parties are considered
to be related if one party has the ability
to control the other party or exercise
significant influence over the other party in
making financial and operating decisions.
Related party transactions - is a
transfer of resources, services or obligations
between related parties, regardless of
whether a price is charged or not.
Return on average assets (ROA) - profit after tax expressed as a percentage of
average total assets.
Return on average equity (ROE) - profit after tax less preference share
dividends if any, expressed as a percentage
of average ordinary shareholders’ equity.
Segmental Analysis - analysis of
financial information by segments of
an enterprise specifically the different
industries and the different geographical
areas in which it operates.
Shareholders’ funds (Equity) - total
of issued and fully paid ordinary share
capital and capital and revenue reserves
attributable to ordinary shareholders.
Subsidiary company - an entity,
including an unincorporated entity such
as a partnership, which is controlled by
another entity, known as the parent.
Substance over form - the
consideration that the accounting
treatment and the presentation in financial
statements of transactions and the events
are governed by their financial reality and
not merely by its legal form.
Tier I capital - core capital representing
permanent share holders’ equity
and reserves created or increased by
appropriations of retained earnings or other
surpluses.
Tier II capital - supplementary capital
representing revaluation reserves, general
provisions and other capital instruments,
which combine certain characteristics of
equity and debts, such as, hybrid capital
instruments and unsecured subordinate
term debts.
Glossary of Financial Terms (contd.)
Central Finance Company PLC - Annual Report 2011-12 125
Notice is hereby given that the Fifty Fourth Annual General Meeting of Central Finance Company PLC will be held at the Registered Office of
the Company, 84, Raja Veediya, Kandy on 20th day of July 2012 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 2012 and Report of the Auditor thereon.
2. To approve a final dividend of Rs.1.10 per share as authorised by the Directors.
3. To re-elect as a Director S.C.S. Wickramasinghe who retires by rotation in terms of Article 105 of the Articles of Association of the
Company.
4. To re-elect J.D. Bandaranayake 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.
5. To re-elect F. Mohideen 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-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 2013.
7. To consider, and if thought fit, pass the following resolution as a Special Resolution.
Special Resolution
“183 The Company may effect insurance for a Director or employee of the Company to the extent permitted by law, with the prior
approval of the Board.
For the purposes of this Article, the term ‘Director” includes a former Director and the term ‘employee’ includes a former employee
to the extent that the insurance or indemnity is provided in relation to any act or omission done in his/her capacity as a Director or
employee and is not in relation to any criminal liability”.
8. To authorise the Directors to determine contributions to charities for the ensuing year.
By Order of the Board,
Central Finance Company PLC
Secretaries
Corporate Services (Pvt) LimitedColombo on this 12th day of June 2012
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 31st July 2012 in accordance with the rules of the Colombo Stock Exchange, the
shares of the Company will be quoted ex-dividend with effect from 23rd July 2012.
Notice of Meeting
Central Finance Company PLC - Annual Report 2011-12126
Notes
Central Finance Company PLC - Annual Report 2011-12 127
Form of Proxy*I/We …………………………………………………………………………………………………….……………………………………………
of ………………………………………………………..……………………………………………………………………………………………...
being *a member/members of CENTRAL FINANCE COMPANY PLC do hereby appoint
1. Jayampathi Divale Bandaranayake or failing him,
2. Eranjith Harendra Wijenaike or failing him,
3. Gerard Shamil Niranjan Peiris or failing him,
4. Ravindra Erle Rambukwelle or failing him,
5. Arjuna Kapila Gunaratne or failing him,
6. Tissa Kumara Bandaranayake or failing him,
7. Sunil Chandra Sillapana Wickramasinghe or failing him,
8. Chandima Lalith Kumar Perera Jayasuriya or failing him,
9. Dhammika Prasanna de Silva or failing him,
10. Faiz Mohideen or failing him,
……………………………………………………………………………………………………………………………………………………… of
…………………………………………………………………………………………………………………………………………………………
as *my/our Proxy to vote/speak for me/us on *my/our behalf at the 54th Annual General Meeting of the Company to be held at the
registered office of the Company, No.84, Raja Veediya,Kandy on the 20th day of July 2012 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.1.10 per share as authorised by the Directors
3. To re-elect as a Director S.C.S. Wickramasinghe in terms of Article 105 of the Articles of Association
4. To re-elect as a Director J.D. Bandaranayake in terms of Article 111 of the Articles of Association
5. To re-elect as a Director F. Mohideen in terms of Article 111 of the Articles of Association
6. To appoint SJMS Associates as Auditor of the Company to audit the financial statements and authorise the
Directors to fix their remuneration
7. To consider and if thought fit pass the Special Resolution
8. To authorise the Directors to determine contributions to charities
Signed this ……………………… day of ………………………… Two Thousand and Twelve.
……………………………….
*Signature/s
Note: Please delete the inappropriate words
Instructions as to completion are noted on the reverse hereof.
Central Finance Company PLC - Annual Report 2011-12128
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 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 Articles of Association.
5. The completed Form of Proxy should be deposited at the Registered Office of the Company, Nio.84, Raja Veediya, Kandy not less
than forty eight (48) hours before the appointed time for the Meeting.
Form of Proxy (contd.)
Central Finance Company PLC - Annual Report 2011-12 129
Investor Feedback FormTo request information or submit a comment/query to the Company, please complete the following and return this page to -
General Manager - Finance
Central Finance Company PLC,
84, Raja Veediya, Kandy
Sri Lanka
Email: [email protected]
Name : ................................................................................................................................................................................................
Permanent Mailing Address : ................................................................................................................................................................................................
................................................................................................................................................................................................
Contact Numbers (Tel) : .................................. .................................. ..................................
Country Code Area Code Number
(Fax) : .................................. .................................. ..................................
Country Code Area Code Number
Email : ................................................................................................................................................................................................
Name of Company : ................................................................................................................................................................................................
(If applicable)
Designation : ................................................................................................................................................................................................
(If applicable)
Company Address : ................................................................................................................................................................................................(If applicable) ................................................................................................................................................................................................
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Queries / Comments
NAME OF COMPANYCentral Finance Company PLC
LEGAL FORMA Quoted Public Company with limited liability incorporated in Sri Lanka on 5th December 1957 and registered under the Companies Act No.07 of 2007.
Registered under Finance Business Act No.42 of 2011 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
DIRECTORSJ.D. Bandaranayake - ChairmanE.H. Wijenaike - Managing DirectorG.S.N. Peiris - Director (Finance)R.E. Rambukwelle - Director (Marketing and Operations)A.K. Gunaratne - Director (Group Co-ordination)T.K. BandaranayakeD.P. de Silva - Director (Credit)C.L.K.P. JayasuriyaS.C.S. WickramasingheF. Mohideen
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 LimitedNDB Bank PLCNations Trust Bank PLCPeople’s BankSampath Bank PLCSeylan Bank PLCStandard Chartered BankHabib Bank Ltd.
AUDITORSJMS Associates,Chartered Accountants,2, Castle Lane,Colombo 04.
LEGAL ADVISERF.J. & G. De Saram,Attorneys-at-Law,P.O.Box 212,Colombo.
COMPANY SECRETARYCorporate 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 and produced by emagewiseDigital plates by Imageline (Pvt) LtdPrinted by Aitken Spence Printing & Packaging (Pvt) Ltd.
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