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ANNUAL REPORTCOMMERCIAL CREDIT PLC. 2010-2011 Contents Financial Highlights Chairman’s Message CEO’s Review Board of Directors A Brief Profile of Board of Directors Corporate Management Team Management Discussion & Analysis Sri Lankan Economy About the Company Product Portfolio Human Capital Achievements Financial Review Corporate Social Responsibility Report of the Board of Directors Risk Management Corporate Governance Report of the Audit Committee 2 2 1 2 3 5 7 9 12 15 21 21 23 28 30 31 33 34 37 41 42 45 46 47 50 51 52 53 54 80 81 83 85 87 Purpose. Vision, Mission and Shared Values Graphical Presentation of Key Indicators Report of the Remuneration Committee Financial Statements Balance Sheet Income Statement Statement of Changes in Equity Cash Flow Statement Notes to the Financial Statements Five Year Summary Investor Information Commercial Credit Network Notice of Meeting Form of Proxy Corporate Information To build leaders who uplift the lives of people by simple acts of love PURPOSE To be the Most Preferred Company admired for its people, partnership and performance VISION Applying our passion for human values through ethical business opportunities, ensuring development of our staff as individuals and recognizing them, as we contribute to the betterment of our customers through flexible and respectful service, while creating shareholder value MISSION The Company’s values provide guidance throughout its operations, from strategic planning to day-to-day decision making, and governs the manner in which the Company treats all stakeholders. n  Loving and Caring n  Integrity and Trust n  Learning and Development n  Think Win-Win n  Synergy and Team Work SHARED VALUES COMMERCIAL CREDIT PLC. ANNUAL REPORT 2010/2011 1 GRAPHICAL PRESENTATION OF KEY INDICATORS Graphical Presentation of Key Indicators Net Income 2011 2010 2009 2008 2007 0 180 360 540 720 900 Rs. 000,000 Net Interest Income 2011 2010 2009 2008 2007 0 160 320 480 640 800 Rs. 000,000 Profit/(Loss) beforeTaxation 2011 2010 2009 2008 2007 -30 26 82 138 194 250 Rs. 000,000 Profit/(Loss) after Taxation 2011 2010 2009 2008 2007 0 14 28 42 56 70 Rs. 000,000 Asset Base 2011 2010 2009 2008 2007 0 1100 2200 3300 4400 5500 Rs. 000,000 Loans & Advances 2011 2010 2009 2008 2007 0 400 800 1200 1600 2000 Rs. 000,000 Deposits Base 2011 2010 2009 2008 2007 0 800 1600 2400 3200 4000 Rs. 000,000 2 COMMERCIAL CREDIT PLC. ANNUAL REPORT 2010/2011 282 702.919 2009 (Rs.196.366 60.603 854.488 244.308 881. ANNUAL REPORT 2010/2011 3 . ‘000) 218. ‘000) Net Income Net Interest Income Profit/(Loss) Before Taxation Profit/(Loss) After Taxation Asset Base Loans & Advances Deposit Base 115.179 1.944.229 3. ‘000) 140.586 569.190 2.350.137 241.492 COMMERCIAL CREDIT PLC.094 5.270.642 389.732.942 45.813 269.280 7.163 39.043 2008 (Rs.762 247.098 1.765 170.389.FINANCIAL HIGHLIGHTS/REVIEW Financial Highlights 2007 (Rs.048 32.958 2011 (Rs.012 103.862 126.849 712.812 29. ‘000) 162.331 2010 (Rs.463 76.334 1.840.666 -1. ‘000) 848.762 1.305 36.400 -25. ANNUAL REPORT 2010/2011 .4 COMMERCIAL CREDIT PLC. The financial market remained liquid and public confidence in financial institutions strengthened in tandem with the stringent regulatory measures adopted by the Central Bank of Sri Lanka during the year. from 9. the economy is emerging from three decades of modest growth to realize its true potential. Global GDP is projected to increase only by 3. Consequently. with developing economies expanding by over 6% annually. COMMERCIAL CREDIT PLC.3% and 3. quent to the ending of the three-decadelong conflict. which stood at 46% in 2010. global GDP showed an increase of 3.9% in 2010. The government plans to further reduce the budget deficit to 6. Overall. growing a massive 8% in 2010. first full year of operation subseSri Lanka became one of the fastest growing economies in the world. Whilst the results are the best ever in our history. The general deficit reduced to 7. low and middle-income countries contributed towards nearly half of global economic growth. financial conditions are improving. while inflation continued to remain low around the mid-single digit levels. according to the Central Bank of Sri Lanka. Seizing the opportunities presented by newfound peace.8% in 2011 and to below 5% in the medium term. ANNUAL REPORT 2010/2011 5 .6 % during 2011 and 2012.9% in 2009. It is encouraging to note that our business strategies over the past few years have achieved their aim of growing the business while ensuring its strength and stability.CHAIRMAN’S MESSAGE Chairman’s Message I am pleased to welcome you to the 28th Annual General Meeting of Commercial Credit PLC and to present you our Annual Report and Audited Accounts for the financial year 2010/2011. recording a growth of 7% twice as high as that of high-income countries. I believe the Company is yet to realise its full potential in this new and exciting environment. The country’s economic and financial consolidation remains a top priority in the proThis financial year witnessed as the cess of economic rehabilitation. Outlook for the Sri Lankan Economy This financial year was the first full year of operation following the end of the three-decade-long civil conflict. the highest annual growth rate in three decades.single digit and market interest rates continued to decline with the Central Bank of Sri Lanka further easing its monetary policy. Inflation remained unresponsive at a mid. therefore the economy is emerging from three decades of modest growth to realize its true potential. developing economies managed a stronger show. The dawn of peace has brought with it opportunities for the country’s economic and financial consolidation. Overview of the Global Economy Notwithstanding the sharp dip in the global economy in 2008 and contraction in 2009. reinforcing generally positive outcomes which should impact our island nation positively. While high-income countries recorded a growth despite severe economic strain.9% of GDP in 2010. The Asset base of the Company recorded a 130.7 billion in March 2010 to 4. from 1.3 billion in March 2011. I also wish to express my sincere appreciation towards the Chief Executive Officer.2 billion surpassing the Rs. 2011 6 COMMERCIAL CREDIT PLC. ANNUAL REPORT 2010/2011 . which also has grown by 122% from 1. the highly capable and empowered management team and the members of staff who remain steadfast in their dedication and loyalty towards the Company.4 billion in March 2011. Appreciation The guidance. We recorded a total revenue of over Rs. support and contribution of the Board of Directors have been invaluable at this time of the Company’s immense growth and expansion. 25. The Company recorded a net profit before tax of Rs. Vagdevi Fernando Chairman 17th November. I am confident that Commercial Credit will continue to lead a revolution in the industry. The efficiency of operation resulting from the implementation of new strategies and focused direction became evident in the Company’s Cost to Income ratio. and achieved excellent results during the year under review. which dropped significantly to 59% in 2011 from 92% in the preceding year. We have grown both in size and reputation. enabling us to achieve continuous and sustained growth.244.9 million loss in the previous year. I am especially grateful to all our customers. and I wish to express my gratitude for their contribution towards the company’s success.4% growth during the financial year from 2. 1.3 billion in March 2010 to 5.8billion in March 2011. These investments were mainly backed by the Fixed Deposit base of the company.1 billion mark for the first time in the Company’s history. This was due to the 162% growth in the investment base. even during times of volatility. posting strong financial results and consolidating its reach in the market. compared with Rs. depositors and shareholders for the trust and confidence you have placed in us. and play an integral role in redefining the nation’s financial landscape. In an era of promising and exciting opportunities.7 billion in March 2010 to 3.36 million during this period.CHAIRMAN’S MESSAGE Company Performance Commercial Credit has performed exceptionally well in the year under review. The increase of profit after Income tax was however marginal at 32. unprecedented in the sector in the past.3 million for the year ending 2011. 244. In addition. The company’s culture of liberalization and empowerment has enabled the team to deliver results above and beyond industry norms. ANNUAL REPORT 2010/2011 7 . thereby enabling the Company to achieve one of the best NPA ratios and Cost to Income ratios in the industry. the Interest income and Interest Expenditure Gap has grown a staggering 312. During this period the Company has introduced many new innovative and trail-blazing products.. 702. whilst ensuring that control and information flow are maintained at the head office in order to ensure compliance and creditworthiness. 25. The reliable and user friendly MIS system together with the extended branch reach were the key enabling factors for the remarkable growth of the company.a new era of excellence and team work. A well-planned and executed strategy of New Corporate image. 170. 2010/11 was a year of considerable achievements in which I believe we laid a firm foundation for the accomplishment of corporate goals identified at the recently unveiled Three Year Strategic Growth Plan. The loyalty and commitment of the team members have been pivotal factors in the Company’s success story. Commercial Credit once again demonstrated its indomitable spirit and growth potential with the launch of a motivated and aspiring strategic growth plan under the theme “Winning Strategies” . This has enabled the company to reach a wider segment of society and serve a client base of over 310. I t is with great pleasure that I present you a review of the operations of our Company for the year ended 31st March 2011. The company has achieved in terms of pre. Moreover.CEO’S REVIEW CEO’s Review Dear Shareholder. together with an empowered work culture has resulted in the Company recording tremendous growth in its deposit and lending base. The driving force behind the Company’s astronomical success to date is its dedicated workforce drawn from the cream of the industry’s talent pool. The company is in the process of improving the existing branch infraCOMMERCIAL CREDIT PLC.9 million in March 2010 has improved to a profit of Rs. During the period under review the Company increased its staff strength from 312 to 489 with over 80% of the new recruits being competent marketers.98% due to reversal of previous year’s realized deffered tax asset of Rs 121 million.000 customers. leading to increased mobilization of funds and effectiveness of the lending portfolio.26% from Rs.49 million. The scalability the company has achieved was possible due to the culture of empowerment practiced throughout the company together with the highly efficient MIS system.tax profit a growth of 1142%. The MIS system has facilitated Credit Management at the front line. increasing its presence whilst ensuring greater convenience for its island-wide customer base. during this period the company’s brick and mortar presence expanded from 16 to 22 locations throughout the country. Achieving these astronomical figures in an industry dominated by a number of established players is true testament to the company’s strategic direction and pioneering vision.. New Innovative Products and Modern Infrastructure.4 million to Rs. and the pre-tax loss of Rs. the company was awarded the ‘Best Finance Company in Asia’ at the recently concluded international UDC Business Awards in Malaysia. I take this opportunity to express my gratitude to the Chairman and my fellow directors. The branch expansion and infrastructure upgrading. Being awarded the prestigious international UDC Business Award further validates Commercial Credit’s reputation as an eminent financial institution in the Asian region. Further. coupled with a new brand logo and innovative marketing and advertising strategies have strengthened the Company’s foundation. The inculcation of a pioneering corporate culture. having earned a distinct and widely acknowledged reputation as one of the fastest growing and most successful finance companies in the country. Roshan Egodage Chief Executive Officer 17th November. these achievements would not have been possible without the extreme devotion and hard work of my staff to whom I extend my special appreciation and utmost gratefulness for enabling Commercial Credit to outperform its competitors in the finance industry. who are empowered to perform to their optimum. Finally.365 ordinary voting shares on the Diri Savi board of the Colombo Stock Exchange mid this year created waves among investors attracting much attention and thereby enabling the company to achieve the 4th highest market capitalization among the companies in the finance industry of the country. the company’s stellar track record of successes and record-breaking achievements over the past few years secured the company the illustrious Award. On behalf of the Board of Directors I would like to express my deep appreciation to the officials of the Central Bank of Sri Lanka for their guidance and continued assistance and to our stakeholders for their continues loyalty and trust. 2011 8 COMMERCIAL CREDIT PLC. ensuring its future growth as it pursues its goal of becoming the leader in the finance industry within the next three years. will assure the attainment of the Company’s strategic goals.074.CEO’S REVIEW structure in order to create a modernized ambience for both staff and customers. I am proud to announce that. and puts the company on the global map of leading finance establishments. Commercial Credit once again demonstrated its indomitable spirit and growth potential with the launch of a motivated and aspiring strategic growth plan under the theme “Winning Strategies” . with self-managed and dedicated employees.a new era of excellence and team work’ .the three year strategic plan focuses on increasing the company’s stellar performance. Having competed with leading finance companies in the Asian region. for the guidance and support extended in all areas of the Company’s operations. The listing of 218. ANNUAL REPORT 2010/2011 . BOARD OF DIRECTORS Board of Directors T he Company’s business and operations are managed under the supervision of the following members of the Board. ANNUAL REPORT 2010/2011 9 .G. Chairman of Hemachandras (Kandy) Ltd.S and H Holdings (Pvt) Ltd Director – Hotel Supplies (Pvt) Ltd Director – Green Earth Plantations (Pvt) Ltd Name Mrs.Centre for Advancement of Resource Mobilization (CARM) Director. George Hemachandra Non Executive Director Mr. G. The Board of Directors of the Company comprises Eight Directors consisting Three Executive Directors. Director . Cecil Perera Independent Non Executive Director Mr.Kelani Paper Converters Ltd. G. One Non Executive Director and Four Non Executive Independent Directors Age 73 67 54 Other Directorships/Positions Held Past president of Finance Houses Association Director.Samantha Kumara Gunaratne Independent Non Executive Director Mr.Capital (Pvt) Limited Director – Green Earth Constructions (Pvt) Ltd Director – Green Earth Renewables (Pvt) Ltd Director – Green Earth Technologies (Pvt) Ltd Director .G. Capital (Pvt) Limited Director -B. Director -Thilanka Hotels (Pvt) Ltd.Legallnc Trustee Services (Pvt) Ltd Director – Legallnc Investment Services (Pvt) Ltd Director -Best Cars Lanka (Pvt) Ltd Director -SK Consultants (Pvt)Ltd.Panasian Power PLC. Director -Winall(Pvt)Ltd. Susantha Pinto Independent Non Executive Director 46 47 44 COMMERCIAL CREDIT PLC. Geya Rasi Egodage Executive Director Mr. Director -Management Systems (Pvt)Ltd. Roshan Sanjaya Egodage Chief Executive Officer Mr.Serendib Land PLC Director-SMB Leasing PLC Director-Abans Finance PLC Director-Equality-based community support & training (ECSAT) Director -R D S Bakers (Pvt)Ltd Director -B. Director – RDS Bakers (Pvt) Ltd Director. Investments (Pvt) Ltd Director. Director -Eurocentre DDC Lanka (Pvt)Ltd. Investments (Pvt) Ltd Director. Director of Hotel Hiltop Kandy.Legallnc Secretarial & Management Services (Pvt) Ltd Director. Vagdevi Wimalangi Fernando Executive Chairperson Mr.Sunrise Senior (Pvt) Ltd Director . Director.B.CLEANCO Lanka Limited Director.B. Thirunavukarasu Someswaran Independent Non Executive Director 43 67 Mrs.Someswaran Centre (Pvt) Ltd Director. Mr. Roshan Sanjaya Egodage . Geya Rasi Egodage .Independent Non Executive Director.Executive Director. George Hemachandra . Mr. Mr. Vagdevi Wimalangi Fernando . Susantha Pinto . Mr.Executive Chairperson.Chief Executive Officer.Independent Non Executive Director. Mr. Thirunavukarasu Someswaran .Independent Non Executive Director. Mrs.The Board of Directors From left to right: Mr. Cecil Perera .Samantha Kumara Gunaratne .Independent Non Executive Director .Non Executive Director. Mrs. He also held key positions of responsibility in companies 12 COMMERCIAL CREDIT PLC. Donald Fernando who was the Founder Chairman of the Company in 1988. and will continue to do so in the future. she holds a BA General Arts degree from the University of Peradeniya. Egodage is a skilled corporate strategist with a proven track record in guiding corporate entities towards record growth and success. The Alliance Francaise de Kandy. K. FERNANDO Executive Chairperson MR. Vagdevi Fernando joined the Board of Directors of Commercial Credit Ltd following the demise of her late husband Mr. he has been the driving force behind the company’s stellar success. She was the recipient of the Central Province Entrepreneur of the Year Gold Award in 2006. His success is due in part to the multi-disciplinary approach he brings to the table. ensuring the company’s status today as one of the country’s most successful and respected finance companies.W. and was its first female Chairman and the only female to have held the position of President for two consecutive years. Agalawatte Plantations PLC – both positions where he held key responsibilities for the overall direction of the company. Mrs. charting a visionary course of leadership and growth. Mrs. Investments at the same time. R. Elvitigala Mawatha. Egodage has held several top level management positions in the finance industry. She is a Life Member of the Ceylon Chamber of Commerce (Central Province). the Central Province Business for Unity Silver Award in recognition of her contribution to social responsibility and peace. Holding overall responsibility for the company’s operations. gleaned through a diverse career in a range of industries. Mr. V. capability. Mr. Having made her mark in the business arena at a time when the field was dominated by men. where he was instrumental in restructuring the Plantations sector. She also served on the University Council for a period of 3 years. She was also named in the 2003 American International WHO’s WHO of Professional and Business Women.S. EGODAGE Chief Executive Officer No. Egodage took over the reins of Commercial Credit Ltd. Mr. The Sri Lanka Federation of University Women. Colombo. Prior to taking over the stewardship of Commercial Credit. and a Merit Award at the National Entrepreneur of the Year Awards. General Manager – Finance Planning and Administration – Kotagala Plantations PLC and General Manager – Project and Planning.G. The Women’s Chamber of Commerce (Central Province). 847/2 Peradeniya Road. She is a respected businesswoman who has earned the recognition of the corporate fraternity for her contributions to the business arena. Manufacturing. 475/5. Mrs. Having entered the teaching profession for a few years following her graduation from University. growing from a relatively small market share to being within the top five registered finance companies in terms of Net Interest Income. in what is popularly referred to as the Billion Month. No. Egodage has held in reputed listed companies include Deputy Manager – Corporate Finance of the Merchant Bank of Sri Lanka. Fernando has also worked internationally in Germany and England in various capacities. Kandy Mrs. His passion and innate talent for establishing pioneering and liberated corporate strategies has been validated by Commercial Credit’s trailblazing success in just 18 months. A past pupil of VisakhaVidyalaya. while serving on the boards of several group companies at the same time. Plantations and Finance. in October 2009 following the takeover of the company by B. integrity and efficiency she has gleaned for nearly 23 years in this post. ANNUAL REPORT 2010/2011 . As the CEO of the company. Colombo 05. H. including Engineering. he led The Finance Company to declare the highest ever profits in over 70 years of operation.BOARD OF DIRECTORS A Brief Profile of Board of Directors MRS. An industry veteran with a wealth of experience and achievements to his credit. and is an active member of the University Alumni Association. He was appointed as the Deputy Chief Executive Director of The Finance Company PLC in 2006. The Organization of Professionals of Kandy and the Sinhala Velanda Sangamaya. Other positions Mr. Fernando is a senior member of the Finance Houses Association (FHA). Fernando continues to serve as the company’s Chairman with the wisdom. G. MR. Hemachandra is the Chairman of Hemachandras (Kandy) Ltd. Mrs. Mr. ANNUAL REPORT 2010/2011 13 . one of the oldest and well known jewellery businesses in Kandy. Corporate Debt Financing Services. He is undoubtedly one of the most qualified CEO’s in the Finance industry today She brings these same skills and dedication to her role as Executive Director of Commercial Credit and is an integral component of the company’s success story.Sc Special Degree with a Major in Chemistry from the University of Peradeniya and a Post Graduate Diploma in Business Administration from the Open University of Sri Lanka. he has gained a vast amount of expertise in all areas of the Law. as well as at LB Finance PLC and The Finance PLC as a legal officer. Egodage began her career as an Assistant lecturer at the Department of Chemistry. ElvitigalaMawatha.G. Dip. MRS. Kandy. Bakers is now synonymous with . Leasing & Finance Law. Perera is currently a partner of Legal Inc . Mr. From 1996 to 2005 she held the post of Assistant Director for Quality Control and Quality Assurance at the Coconut Development Authority. COMMERCIAL CREDIT PLC. A well respected figure in legal circles. (Hons) degree from the University of Peradeniya and initially embarking on a career in the engineering field. Banking Law. whilst facilitating its continued growth and success.S Bakers (Pvt) Ltd. ACIM and ASCMA. EGODAGE Executive Director No.R. Egodage switched careers. S. he then set his sights on a career in management. A doyen in his industry with over 45 years of experience in the field of commerce. Bakers (Pvt) Ltd. Prior to this he served as the Head of Legal Department at Merchant Bank of Sri Lanka Ltd. A founder director of the company. C. D. 475/5. His continuing focus remains the company’s strategic direction and its expansion into new markets. where she served for a period of 4 years as a Process chemist. as well as a liberated corporate culture.BOARD OF DIRECTORS including Central Finance. for a period of 10 years. PERERA Independent Non Executive Director No:10. and Intellectual Property Advisory Services. Kelaniya During a career spanning over 28 years as an Attorney-at-Law of the Supreme Court. Piachaud Gardens. He currently serves on the Board of Directors of BG Investments (Pvt) Ltd. Colombo 05. Ltd and R. he has been indispensable in advising and guiding the company to reach the heights it has today. G. and was instrumental in developing the popular brand ‘Wonder B’ which R. Eng. MR. He has since then gone on to earn numerous professional qualifications including FCMA. She holds a B.Attorneys-atLaw & Notary Public. Mrs.D. earning a MBA from the University of Colombo. Mr.M(UK). Gonawala. including Corporate Law. Having acquired a BSc. She is presently a Director of B. Capital Market & Fund Management Services.G. Egodage places strong emphasis on employee participation and empowerment. putting her qualification in Business Administration to good use as she took up a position as the Managing Director of R. Investments Pvt.D. Peoples Ventures and Ceylon Pencil Company. Here she quickly gained a reputation for skilled management ability and an adherence to the highest ethical standards. Egodage joined Commercial Credit as an Executive Director following the company’s management takeover in 2009. Following this. He is also a Director of Hotel Hilltop Kandy. Mrs. As her career advanced she collaborated on many research projects before joining Ansell Lanka. An avid sportsman and a firm believer in the wisdom of an organization with a bottom-heavy management strategy.S. University of Peradeniya. HEMACHANDRA Non Executive Director No. 454/23. Someswaran is a Chartered Accountant counting over 35 years in practice and recently retired from the post of Senior Partner of SJMS Associates. He also serves on the Director Board of Panasian Power PLC. and SK Consultants (Pvt) Ltd. he obtained a Diploma in Plantation Management and he is currently reading for a MBA from Western Sydney University in Australia. Nugegoda. GUNARATNE Independent Non Executive Director No. Anthony’s College.3/1. ANNUAL REPORT 2010/2011 . Equity Based Community Support and Training. and serves as an Independent Non Executive Director at Commercial Credit. 14 COMMERCIAL CREDIT PLC. St Michael’s Apartment. SOMESWARAN Independent Non Executive Director No. Mr. He has been a key member of technical teams which visited theU nited Kingdom. Colombo 03. Eurocenter DDC (Pvt) Ltd and Winall (Pvt) Ltd. He served Solar Electric Light Company as the Director – Operations during which he contributed in many ways towards the improvement of operations such as financing. MR. he has participated in many project teams and forums involved in the construction and commissioning of many mass scale manufacturing facilities for the Plywood and Textile Industry. Susantha Pinto Independent Non-Executive Director No 53/7A. K. Panawala. He has passed the Certificate Course on Modern Banking conducted by the Post Graduate Institute of Management. Thilanka Hotels (Pvt) Ltd.executive Director. as well as in the Sugar and Plantation industry. Sri Lanka State Plantation Corporation and later functioned as Assistant Superintendent and Superintendent in leading plantation companies in Sri Lanka. Kandy. 4. Malaysia. With over 22 years of experience in the fields of Engineering and Energy Management. Gunaratne is an Independent Consultant in Energy Conservation and Management. He is a fellow member of CMA and a member of its Governing Council. MR. Old Kottawa Rd. Mihindakulasuriya Susantha Devapriya Pinto started his career as a Trainee Planter in 1996 with Balangoda Estate. Eheliyagoda. a firm of Chartered Accountants associated with Deloitte in Sri Lanka. He is currently a Director of Best Cars Lanka (Pvt) Ltd. Mr. Perera Mw. International Fiscal Association and Sri Lanka Institute of Directors. Alfred House Gardens. Mr. Being an old boy of St. He brings a high degree of commitment and dedication coupled with industry expertise in to the business s a Non-Executive Director of Commercial Credit PLC and he is recognized as a major component in Commercial Credit’s attaining expected improved performance. He is a member of the Tax Faculty. S. Mirihana. T.BOARD OF DIRECTORS He currently serves on the boards of Management Systems (Pvt) Ltd. He holds a National Diploma in Engineering Sciences specializing in Mechanical Engineering. Business Council of Indonesia of the Ceylon Chamber of Commerce and is Vice President of The International Chamber of Commerce.Solar Photo voltaic etc. He serves on the Audit Committee of the Institute of Chartered Accountants of Sri Lanka and Serendib Lands (Pvt) Limited. Sri Jayewardenepura University. Organization of Professional Association.38. China and India in order to evaluate the suitability of adaptation of new Machinery and Technologies for Sri Lankan industries.Gunaratne has worked in senior Engineering positions at some of the leading apparel companies such as MAS Holdings and Brandix. after sales service of Renewable Energy. Susantha Pinto also served as the Chairman at Green Earth Group before joining Commercial Credit as a Non. Mr. the European Chamber of Commerce. He was the Chief Executive Officer of Ceylinco Renewables (Pvt) Limited for a period of two years. Mr. Priyankara’s skill in working with leaders and teams to set goals and his effectiveness in motivating teams to achieving these goals. impetus and inspiration. K.Senevirathne Deputy General Manager – Operations Please refer to Director Profile Mr. Prasanna Wickramasinghe Deputy General Manager – Information Technology Mr. C.A. Roshan Sanjaya Egodage Managing Director/ Chief Executive Officer Mr. He has completed a MSc in Information Technology at the Charles Stuart University.L. ANNUAL REPORT 2010/2011 15 . G R Egodage Working Director Please refer to Director Profile Mr.L. J. Mrs. He has more than 25 years of Finance Industry experience. One of the most skilled and qualified professionals in the industry.L. which boasts one of the best state of the art IT systems in the Finance Industry. Australia. He is a Bachelor of Arts (Hons.A. Priyankara is responsible for a wide range of the company’s day to day activities as well as holding joint responsibility for implementing its strategic focus.Operations. which enables him to discharge his duties with the highest levels of efficiency and skill. One of the Company’s longest serving employees. Priyankara Deputy General Manager – Operations As the Deputy General Manager – Operations at Commercial Credit. which is to cultivate and encourage a new breed of corporate workforce. thereby linking the Company’s vision and strategy with its growth imperatives is vital in Commercial Credit’s market growth plans and aspirations. where he held the position of an Assistant General Manager. Mr. C. and ACS .CORPORATE MANAGEMENT TEAM Corporate Management Team Mr. Mr. He has also worked for both Kelani Cables Limited and The Finance PLC. Prasanna Wickramasinghe is currently employed at Commercial Credit PLC as the Deputy General Manager – Information Technology. Mr. Mr.Wickramasinghe leads Commercial Credit’s IT department. and in addition holds both IDM – Diploma in Programming in IT – SL. His self motivation and vision of empowerment is a key contribution and motivator of the company’s ethos.Senevirathne is currently employed at Commercial Credit PLC as a Deputy General Manager .S. COMMERCIAL CREDIT PLC. which will take the country’s corporate culture into a new era of incentive.A. Mr.) Graduate from the University of Ruhuna and has also completed his MBA at the University of Manipal – India. Mr.Advanced Diploma in IT – Australia.Wickramasinghe is a Chartered IT Professional and a member of the British Computer Society – MBCS CITP. K. Priyankara brings with him over 22 years of experience in the industry in various key positions. Prior to his current position. Andrew Samuel Deputy General Manager – Corporate Planning Mr. he had a long and successful career in the Plantations industry in several key management positions. in the capacity of CEO in 2008. his natural capability. Nanayakkara is a strategic asset in achieving the Organizational goals. Ltd.B. Recoveries and Credit management. He has a Diploma in Credit Management and has completed I. administration etc Mr. where he held the position of Director/CEO.CORPORATE MANAGEMENT TEAM Mr. Having joined the sector as a Trainee Assistant Manager in 1994 at Mackwoods Plantations Pvt. achieving record crops in both Tea and Rubber Estates and facilitating significant estate development projects.. Nanayakkara is resourceful individual with unique set of personal code of ethics which governs his conduct whilst giving utmost trust for customers and the employer. Nanayakkara Deputy General Manager Recoveries Andrew Samuel joined Commercial Credit Limited as the Deputy General Manager – Corporate Planning in February 2010. Mr. An Old Boy of Trinity College. investments and recoveries enabling them to win the Annual Award for the best performance. Nanayakkara not only possesses industry experience but also possesses the professional qualifications in the field of Finance. and was also a director of several group companies.Samuel holds an MBA the University of Peradeniya. recoveries. trainer on recoveries. including intitiating and implementing participatory management structures. He was also a director of Next Finance. and a Fellow of the Chartered Institute of Management Accountants -UK (FCMA). Ltd. He joined Aspic Plantations Pvt. He is an Associate Member of the National Institute of Plantation Management(AIPM).K). In his over 29 years of unblemished service in the field of finance and he has contributed many ways to uplift the standard of the industry. as well as the position of Manager within just seven years. During his career he has managed several noteworthy achievements. During his period at The Finance Company he had been a driving force for its branch managers and center managers in achieving consecutive growth in profitability.A. intelligence and enthusiasm earned him distinction and recognition. As a competent individual in credit evaluation. S. ANNUAL REPORT 2010/2011 . later moving on to Deraniyagala Plantations Pvt. Mr. (U. credit management. he brings the understanding of the business‘ needs to the design and facilitation of transformational programs. Also he was a member of the Credit Committee and a team leader of the Product Development Team at The Finance Company. Mr. 16 COMMERCIAL CREDIT PLC. Ltd. With 17 years of diverse experience and knowledge. Sales Manager at Golden Lion Universal. Ceylinco Shriram Capital Management Services Co.A. Later he had moved to Ceylinco Express Remittance Co.CORPORATE MANAGEMENT TEAM Mr. UAE. He is a fellow member of Society of Certified Management Accountants of Sri Lanka and a member of the Institute of Charted Accountants of Sri Lanka. M. Auditing. he has gained a vast amount of expertise in the industry. Ltd & Asia Growth Fund-Mauritius as an Asst. He has experience as an Asst. COMMERCIAL CREDIT PLC. planning . as a Country Manager he had brought many changes to the operations. Chaminda Janaka( Shammi) Jayathilaka started his career as a Marketing Executive at Ceylinco Insurance Co. Mr. ANNUAL REPORT 2010/2011 17 . He brings the same to Commercial Credit by taking his deities as Deputy General Manager Marketing and he is an integral component of the Company’s success story.PLC. He has experience in Accounting and Financial Management. He had also served Frostaire Industries (Pvt) Limited as a Head of Sales making use of his industry knowledge and the experience.Hong Kong. Tax Planning and business leadership. (Pvt) Limited as a Regional Manager. Deshapriya is responsible for Overlooking Finance Division holds the responsibility of managing and directing activities towards the company’s strategic focus. General Manager overlooking the financial activities. Treasury Management. Prior to joining Commercial Credit PLC he has severed The Finance Company Plc as Chief Acting AGM Finance. he is a dynamic personality who contributed many ways for the achievements of the organizational goals. Shammi Jayathilake Deputy General Manager – Marketing Mr. During his tenure at Ceylinco Consolidated Overseas Limited Dubai. where he awarded as the best performer in two consecutive Years. As the Chief Financial Officer at Commercial Credit.Middle East & Europe from April 2005 to August 2010 where he collaborated on many research projects. Janaka Deshapriya Chief Financial officer Mr. During a career spanning over 15 years in the field of finance. Budget development and management forcasting. General Manager Operations. Sales Manager from November 1998 to Oct 2000.D. Saman Gunawardena. Mr. 2nd Row (Left To Right): Mr. Ayesh Pitigala. Anil Manawadu.G. Mr. Mr. Mr. Anuradha Ranaweera . Mr. Mr. Geya Rasi Egodage. Sebestian Nanayakkara. Mr. Mr. Mrs. Roshan Sanjaya Egodage. Mrs. Prasnna Wickramasinghe. Mr. Andrew Samuel. Mr. K. Senarathne. Dhanushka Udugama. Mr. Janaka Deshapriya. Mr.The Corporate Management Team 1st Row (Left To Right): Mr. D. Sudath Jayasekera. Shammy Jayathilake. Vagdevi Wimalangi Fernando. Jayarathne. Shafraz Jainudeen. Lalith Lunuwila. Saman Perera. Thilak De Alwis. Chaminda Ranasinghe. Chitrabandu De Silva. Sanath Sujeewa. Nalaka Kariyawasam. Vijith Weerakoon. Jagath Gamage. S Thirukumaran. Lalith Attanayake. Abeyakumara. Lalith Dissanayake. Mahiinda Seelagama. Gamage Piyadasa. Faizal Devananda.Regional Managers & Senior Manager 1st Row ( Left To Right): Sunil Wijesinghe. Dharshana Mallawarachchi. Wasala Ariyapala. Pushpa Wijesinghe. Sanjeewa Jayamanne. Anushka Silva. Jeewa N Athukorala. Niroshan Madawala. Indika Prasad. Asitha Ratnayake 2Nd Row (Left To Right ): Shantha Thanthirige. Mrs. Mahesh Lakshan. Nishantha Weerakoon . and improved investor confidence. In GDP per capita terms. Financial system stability requires a stable financial and economic environment within an effective regulatory framework and a safe and robust payment and settlement system.MANAGEMENT DISCUSSION & ANALYSIS Management Discussion & Analysis Sri Lankan Economy T wo years before Sri Lanka gained its second lease of independence and peace has prevailed within its borders thus far.9 percent of GDP in 2010 from 9. land and infrastructure and more so an undivided focus on growth and development.9 percent in 2009. they do so within an environment of unleveled playing fields. while increased earnings from the tourism industry and higher inward remittances offset the widening trade deficit to a great extent. a larger workforce. promotes investment and economic growth. An encouraging improvement in the overall fiscal situation was witnessed in 2010 with the recovery in Government revenue supported by the expansion of economic activity. An encouraging improvement in the overall fiscal situation was witnessed in 2010 with the recovery in government revenue supported by the expansion of economic activity. favorable macroeconomic conditions and gradual recovery of the global economy from one of the deepest recessions in history. The maintenance of financial system stability entails identifying and addressing potential vulnerabilities and risks to the financial system. which made a re- FINANCE SECTOR PERFORMANCE A stable financial system creates a favourable environment for depositors and investors. With favorable macroeconomic conditions and the recovery in economic activity and also with the supportive regulatory and supervisory framework. COMMERCIAL CREDIT PLC.2% for 2010. and hence. Both exports and imports recovered strongly. They are often subject to restrictive or discriminatory practices and to taxes imposed with little consultation and consideration as to the likely consequences. The overall deficit was reduced to 7. further strengthening external reserves of the country. Regulation is more often a euphemism for control of the sector organizations. as opposed to supervision of its professional bodies and. reflecting a fast recovery from the setback suffered in 2009 and moved to a high and sustainable growth path. where we estimated GDP growth to be about 7. ANNUAL REPORT 2010/2011 21 . underpinned by the peaceful domestic environment. Whereas the component parts of the mosaic of activities covered by the report function reasonably well. There would appear to be an evident requirement for more effective supervision encompassing all organizations or individuals engaged in financial operations and more consultation with professional associations. the performance and stability of the financial sector strengthened in 2010 MACRO ECONOMIC REVIEW Sri Lanka’s economy grew by an impressive8.0 per cent in 2010. the addressing of certain persistent structural issues in the tax system. continues to improve in 2010. as well as the containment of recurrent expenditure. May 2009 ushered in a new era for Sri Lanka with more resources for productivity enhancement and development. reducing the external current account deficit. markable turnaround since the second quarter of 2009. The external sector. All key sectors of the economy demonstrated a commendable performance in 2010. The NBFI (Non Banking Financial Institutions) sector has grown and developed on a fragmented basis. the addressing of certain persistent structural issues in the tax system. Increased capital and financial flows resulted in the balance of payments (BOP) recording a surplus in 2010. encourages financial institutions and markets to function effectively and efficiently. 2010 Q2 GDP growth recorded an 8. swathes of activities fall outside the regulatory net altogether. it is ahead of other countries in the South Asian region. Sri Lanka has mostly had strong growth rates in recent years. connectivity of people.5% increase and is well on track to meet year-end target growth levels with 1H 2010 recording a 7.8% growth compared to 1H 2009. as has its regulatory framework. more land to develop and cultivate. despite government efforts to control. Inflation continued to remain low at around mid-single digit levels and the benign outlook for inflation enabled the Central Bank to ease its monetary policy stance further in 2010. as well as the containment of recurrent expenditure. serene coastlines including a natural harbor that were inaccessible by war. 9% in 2012. it rose to 83.3% in 2012.5% for 2011-15 period while the earlier 6. Other developing countries can leverage on the shift in growth poles by restructuring production such that it will be complementary to the demand and output generated by these countries.5% and 6. to encourage a higher level of economic activity. Global Economic Climate Overall the global financial crisis has been stabilized but is still volatile.1% in the first quarter and 8. There is a now a shift in global demand to fast growing. the coverage was 78. 22 COMMERCIAL CREDIT PLC.5% and is marginally lower at 6.1% as the country’s long term potential has increased. led by manufacturing. Now comes the uphill task of bringing down budget deficit to 5 per cent over the next two years.4% in 2011 and 2012. rather than to be in direct competition against them. costs are still lower than those of its South Asian peers.5% in the second. while industry. Areas of Concern The main areas of concern were expenditure and also doubts over the ability of the government to achieve its target of bringing down budget deficit to the promised levels. A substantial proportion of global growth over the next 3-5 years will be derived from large emerging markets. Economic prospects in 2011 and 2012 have improved considerably with GDP growth forecast at 6.0% in 2011 and 6.9 higher than a year earlier. There is much scope to further strengthen the country’s financial infrastructure. in terms of the collection and dissemination of credit information (for both individuals and firms). showing a strong first half performance with a GDP of 7. is projected to expand by 6. There is a need to increase the level of transparency and accountability concerning transactions in the country. The country needs to streamline many of its procedures which would in turn increase the ease of doing business.2 per cent. due to their inherent domestic demand arising from their large populations and high growth rates (averaging 8%-10% over the next five years). It is expected to move the curve down wards in years to come. The services sector is projected to grow by 7.7 per cent (2009) to 7. In the long-run growth is unsustainable without macroeconomic stability. Overall Inflation Overall inflation increased to 8. average annual GDP growth raised to 6. But doubts remain on expenditure side. The Central Bank predicts 8 per cent growth rate in 2011 and 2012.0% forecast for 2016-20 has been raised marginally to 6. ANNUAL REPORT 2010/2011 . The Asian Development Bank (ADB) expects inflation to average 8 per cent in 2011. Nonetheless. Real GDP growth in 2011 is projected at 6.2% from 5. Current expenditure has to be curtailed. due to escalating food prices — food prices were 13.6 per cent (2010). Number of procedures in property registration in Sri Lanka exceeds the regional average. however the European debt crisis may have another round with the problems that still prevail in Ireland for instance and Portugal not able to resolve their debt problems.5 per cent and in 2009. For example.6 per cent in March 2011. On the tax side some measures have been taken. Sri Lanka has more procedures involved in obtaining licences and permits to build a warehouse. There has also been recovery in exports and domestic demand. When considers the rural poverty it had come down sharply from 15. Sri Lanka’s Prospects When considering the Sri Lanka’s prospects. In 2006. manufacturing and services.MANAGEMENT DISCUSSION & ANALYSIS FUTURE OUTLOOK Sri Lanka is one of the “largish economies” that will have managed to provide access to electricity to rural areas. This was possible because the recovery was spread out across all sectors — agriculture. large emerging economies.3% respectively. Tax administration could be streamlined and revised to boost the efficiency of the overall system. compared to other South Asian country. Medium-to-long term growth prospects revised upwards. the economists state that the country’s economy has poised for a strong rebound. with enhanced customer service and innovative products.000 customers across the country Commercial Credit will strive to create future leaders. STRATEGIC PLANNING Commercial Credit as the fastest growing finance company in the country has identified that developing a strategic plan is a prerequisite to achieving a consistent growth within a highly challenging corporate environment. During the initial stages of operation the Company was mainly focused on lending to the Agricultural sector with this sector accounting for over 50% of the lending portfolio. resulting in the development of a highly advanced Management Information System (MIS). A well planned and executed strategy of New Corporate Image. the traditional agricultural regions of the country such as Anuradhapura. Dehiattakandiya etc. A change in the majority shareholding in October of 2009 resulted in a new management team with Mr. who will be empowered to uplift the living standards of society at large.MANAGEMENT DISCUSSION & ANALYSIS About the Company HISTORY 04th October 1982 witnessed the birth of Commercial Credit Limited in the hill capital of Kandy. The Company collaborated with international strategic consultants “MTI Consultants” to wet the Strategic plan for the next 3 years drawn internally by involving all levels of the organisation over a period of 12 months and to bring in the international experience they had. The model used by MTI is given here. in addition to garnering it ISO 9001:2008 in October 2006 for enhanced quality management compliance. The very robust and user friendly MIS system together with the extended branch reach were key enabling factors for the growth the Company. Although the Company had 16 locations spread around the country. accounted for the bulk of its business. Roshan Egodage taking over the reins of the Company. registered as a Finance Company under the Finance Companies Act No. This has enabled the Company to manage day to day operations with a very lean staff structure. Having served over 100. unprecedented in the sector in the past. ANNUAL REPORT 2010/2011 23 .78 of 1988 under the Monetary Board of Central Bank of Sri Lanka. MTI’s 8S Model® SCOPE SCAN SIGHTS STRATEGY STRUCTURE SYSTEMS SOCIAL RESPONSIBILITY STAFF COMMERCIAL CREDIT PLC. New Innovative Products. The Company. A key dynamic the Company ensured during the first phase of its re-emergence was the inculcation of a very strong Process and System driven culture. and Modern Infrastructure together with an empowered work culture has resulted in the Company recording a huge growth in the deposit and lending base. The Strategic Planning Team 1st Row (Left To Right): Mrs. Shashiprabha Pemasinghe, Nirosh Madawala, K L A Seneviratne, Andrew Samuel, Mrs. Vagdevi Fernando, Roshan Egodage, Geya Egodage, Shammy Jayathilake, Sudath Jayasekera, Sebestian Nanayakkara, Ms. Vathsala Sathiyakeerthi, 2nd Row (Left To Right ): Asitha Ratnayake, Saman Gunawardene, Prasanna Wickramasinghe, Ayesh Pitigala, D G Jayaratne, Anil Manawadu, Janaka Deshapriya, Anuradha Ranaweera, Sanjeewa Jayamanne, Dhanushka Udugama, Tharaka Dayabandara MANAGEMENT DISCUSSION & ANALYSIS STRATEGIC STRUCTURING PROCESS The Strategic Plan ensured that all vital functions that an organisation should have are incorporated, categorised broadly as Value Flow and Enablers as illustrated below. The attainment of the subcomponents of value flow will be made possible by the enablers. All functional leaders have come up with Strategic Initiatives and Milestones which are to be implemented over the next three years which on completion will find the company in a different league by March 2014. Strategy, Performance Management & Organizational Leadership Office Environment Office Environment OfficeProcess Environment Supply Chain Product Development & Management Channel Development & Management Value Flow Enablers OfficeCulture Environment Finance Office Environment Corporate Comms People Customer Conversion Service Delivery Collections Office Environment Compliance Risk Office Environment Technology OPERATIONS REVIEW Branch Network Commercial Credit PLC is continuing its record- breaking story of success as it spread its reach across Sri Lanka, stamping its unique brand of service and corporate leadership on cities across the country. The company’s rapid turnaround to become one of the most success stories in recent history has garnered it the trust, recognition and respect of the industry. Living up to our aspiration of being the ‘Preferred Choice’, Commercial Credit has made significant investments in our distribution channels, as we aim to serve increasing customer demands for added convenience. With each and every member of the staff being immersed in the company’s liberated corporate mind-set, the Company has been able to benchmark new levels of performance and service in the industry. During past two years, the Company expanded its reach from 16 locations to 22 locations spread across the country Nugegoda, Moratuwa and Gmapaha adding in to the network as the newest members. This will be expansion of the company’s promise to “Build Leaders Who Uplift Lives through Simple Act of Love”. Having increased the total number of island wide branches and centers to 22 further expansion plans are in the pipeline. Helping to uplift the lives of its customers and facilitating district economic empowerment by offering a variety of flexible services will enable 26 COMMERCIAL CREDIT PLC. ANNUAL REPORT 2010/2011 MANAGEMENT DISCUSSION & ANALYSIS solutions for each geographical territory and its target customer behavior. Also by using various in-house and independent researches we customized our advertising and promotions and also use the same mechanism to track the progress. As per the results we develop or change our marketing strategies. With our past 29 Years of service excellence Commercial Credit provides superior financial services for the domestic customers. Our goal is to exceed the expectations of every client by offering outstanding customer service, increased flexibility and greater value thus improving operational efficiency. Commercial Credit maintains the standard rates for lending and borrowing to the customers and further renders speed and quality services. In addition Commercial Credit provides the financial services through its Island wide branch network and the head office being in Kandy, where customers are provided with increased convenience of access in obtaining the services. Ceremonial Opening of the Moratuwa Branch Commercial Credit to become a nationwide force, while taking pride in the personal success of our customers. Commercial Credit’s corporate strategy, combined with its values and disciplined and conservative approach to managing risk, has ensured continued revenue and profit growth, while maintaining good levels of liquidity and the company remains confident about future business opportunities. Product Development Research and Development that Commercial Credit has undertaken resulted in the innovation of new Financial Products that offer better benefits to its client base. Continuous evaluations are executed to ensure that Commercial Credit operates with the most optimum Product Portfolio and it is assessed on a continuous basis as to whether modifications are required to be made to the product portfolio if the changes are made the financial products would be relaunched to the customers or else discontinue certain financial products in maintaining the competitive edge of the firm in the finance industry. Through our internal IT system customer history can be captured and this gives an insight to the engagement of the customer throughout a longer period of time. Staff keep records about the referral customers through the existing client base. The Company also monitors the progress of the customer by using a “progress report”, where our field staff conduct progress visits to customers. This further gives an indication about the customer history and the desire to continue with Ccommercial Credit. And also provides excellent working environment to all the members of the staff and a friendly environment to customers as appropriate. Commercial Credit conducts the stakeholder Aanalysis which covers customer, staff, shareholder, management, and changes in demand, to arrive at the perception levels of current and future products brand awareness and the potential customer needs, staff perception about the job satisfaction, management and shareholder expectation. MARKETING STRATEGIES Brand Development Company is currently working on a well defined Marketing Strategy that would make the brand of Commercial Credit one of the leading and preferred brands in the financial service industry after the end of the period for which it has implemented its Strategic Plan for three years. Company provides a comprehensive and powerful model for Brand Image development, to help define the brand strategy .Brand building and tracking so that the institution is in greater control over the value of its brand. This constructs a systematic approach to marketing planning that will help the institution design and implement marketing efforts in an effective, efficient manner that is in line with the corporate and business plan. Company uses both the Above the Line (ATL) and Below the Line (BTL) Communication strategy to create awareness, inform the mass market, where the TV, Radio and print media are used for branding campaigns and enhancing product awareness. Street promotions, posters, street boards, Digital media and Exhibitions are undertaken with a view of helping particular segments in gathering information such as businessmen and students The comprehensive marketing plan for Commercial Credit is filled with sub plans for each region of the country. It has tailor made COMMERCIAL CREDIT PLC. ANNUAL REPORT 2010/2011 27 MANAGEMENT DISCUSSION & ANALYSIS PRODUCT PORTFOLIO n MOTOR CREDIT (Hire purchase): a vehicle hire with the option to purchase the vehicle at the end of the agreed rental period. n MOTOR QUICK: This product is similar as Motor credit, where the company grants the facility within one hour to the registered owner up to 50% of the valuation with a maximum repayment of 24 months. n MICRO FINANCE: This product caters specifically to women entrepreneurs who have no access to normal channels of banking, with the objective of uplifting their lives. n LEASING: The Company will retain ownership of the Vehicle, while the lessee will have possession on the asset and enjoy its usage upon payment of a specified amount of rental over a specified period of time. n LEASE PURCHASE: Similar to a normal leasing product but will be extended for machinery and a mortgage will be executed on the asset. n CASH LOAN: The Facility is granted with a view for facilitating personal financial requirements such as wedding expenses, purchase of home appliances, house renovation, etc. n LAND EASY PAYMENT: the Company will purchase real estate, block out, develop and sell the land to customers either outright or on an easy payment scheme. The ownership of the land will be transferred to the customer upon complete repayment of the total rentals. n SHORT TERM LOANS: This product is targeted towards farmers engaging in seasonal cultivation. n CONSUMER CREDIT: This facility is granted to mainly government and selected private sector employees to purchase Consumer durables (TV, Refrigerators, Sawing Machine, Washing Machine etc.), and jewellery. n SHORT TERM LOAN AGAINST FD: This is a specified facility available only for Fixed Deposit holders where up to 75% of the face of the certificate value would be granted as a loan by securitizing the FD certificate. n EDUCATIONAL LOAN: facility granted for both local and international educational purposes, where the borrower may be the student or the parents of the students. n PAWN BROKING: Commercial Credit offers pawning facilities to clients under flexible terms of contract and thereby addressing their immediate financial requirements. DEPOSIT PRODUCTS Deposits can be for a period of 01 month to 5 years and the minimum deposits should be 5000/= Interest is paid monthly or at maturity. n FIXED SAVERS DEPOSITS: “Punchi Panchi” Children Savings - Children below the age of 18 can open accounts to save on daily or monthly basis. A CCL “Till” will be given to the depositor and collections will be made on a regular basis and credited to their account. Birthday gifts, Emergency Insurance Covers, Bonus interests and many more rewards are on offer to encourage the habit of saving among young depositors. n CCL DAILY BUSINESS – A deposit scheme where, Commercial Credit officers visit the customer daily to collect deposits. The minimum deposit amount is Rs. 250 and the minimum period of deposit is six months. n CCL REGULAR – Similar to CCL Daily Business with deposits on a monthly basis instead of Daily. The minimum deposit amount is Rs. 250 and minimum period of deposit is one year. n ONE TO ONE (1 TO 1) BONUS – Similar to CCL Regular, however the customer will be offered one to one Bonus interest at maturity of the deposit when it is converted to a normal Fixed Deposit. 28 COMMERCIAL CREDIT PLC. ANNUAL REPORT 2010/2011 We therefore give priority to customer feedback and address customer concerns via various methods incorporated into our daily business activities. and also engaged in a brand building campaign during the 2011 Cricket world cup. process supports such as document handling and collecting. In the lending products segment. Through the mobile network customers can contact the relevant officers for any requirements. the Company has a team of marketing executives with a different skills set to serve the SME sector. Know Your Customer (KYC) forms. suggestion boxes. The above customer support requirements are comprehensively conveyed through induction programs for every employee and also training programs conducted on a periodic basis. full attention is paid towards developing and managing the relationship. The speed of the service Commercial Credit provides creates an opportunity to retain and acquire more customers and to develop positive word of mouth. A quarterly newsletter provides additional information to existing and potential customers. Commercial Credit uses both ATL and BTL communication strategies to create awareness. COMMERCIAL CREDIT PLC. the Company provides highly trained staff to service them. Commercial Credit publishes newspaper advertisements on particular products on weekend newspapers. as and when they require. The CRM department handles most customer complaints. customer touch points at Customer Relationship Management (CRM). The CRM department mainly serves the FD customer base and makes available the needed data for customer reference. These two segments of marketing executives have been trained to industry standards level to maintain and build relationships and to retain and acquire customers. customers can obtain any details they require. Periodic customer training programs are organized to support the SME customer segment with the CEO’s personal involvement. helping them to grow their business and utilize the funds they obtain in the most efficient manner. focused group discussions. payment procedure and legal support are other key requirements for customers. Our sales force assists the Company’s customer base in various ways. These requirements are determined through past information obtained with regard to customer perception. and previous research studies. ANNUAL REPORT 2010/2011 29 . a web based portal as well as feedback collected from staff who come into contact with customers. financial utilization assistance. Commercial Credit sends periodic newsletters to all existing customers to keep them informed about recent developments within the company and of any special events. benefits over competitor products and accessibility are key to customers when considering their support requirements. Radio and print media being used for branding campaigns and product awareness. Convenience. interviews. Through these training programs Commercial Credit has prepared all staff and processes to support customer requirements. industry standards.MANAGEMENT DISCUSSION & ANALYSIS CUSTOMER FOCUS Feedback from Current Customers Commercial Credit has identified that our customers are the life blood of the Company’s success. Product knowledge such as interest rate. with TV. The recent incorporation of the CRM unit within Commercial Credit has ensured a structured and systematic approach towards managing customer relationships. The dedicated sales force is an integral component of the Company’s customer support endeavours. Throughout the entire branch network and our dedicated work force. From the time customer enters into a transaction with Commercial Credit. management experience. Street promotions and exhibitions target particular segments such as businessmen and students. These methods include customer satisfaction surveys. With regard to our high net worth fixed deposit customers. market situation and other related information within the organization. adhered to and maintained by the IT division for high software reliability. The function of operation of the staff is identified by the nature of capability of each staff member.MANAGEMENT DISCUSSION & ANALYSIS INFORMATION TECHNOLOGY Software Reliability is an important attribute of software quality. performance. enabling effective collection of funds. SMS inquiries have enabled the field staff to carry out their duties effectively assisting them with receipting. life insurance and retirement savings would be major factors in retaining employees. Wedding Gifts. where it consists of discussions with senior management and the Human Resource function at the stages of recruitment. Continuous Improvement Plan A comprehensive Disaster Recovery plan is scheduled to be implemented along with a Business Continuity Plan (BCP) as one of strategies to mitigate associated risks of the entire IT operation. cash banking etc. we always encourage our members to live a balanced life. This insurance cover has also been extended to immediate family members to secure their lives against the unforeseen. contributing to the company and the family uniformly. and documentation. Medical Bill Claims. Etc. We firmly believe that the distinct edge we enjoy in a highly competitive environment is enabled by our workforce. 30 COMMERCIAL CREDIT PLC. Retirement Bonuses. ANNUAL REPORT 2010/2011 . Human Capital Capability and Capacity The workforce of Commercial Credit is always recognized as the driving force behind the company attaining its current high status. capability. Staff Welfare We at Commercial Credit are committed to the highest standards of employee welfare across several areas of the business and in this respect the company has initiated diverse plans for the benefit of the staff. The main focus of investing in welfare activities is to uplift the living standards of all members of the Company. User access levels are controlled by the system itself while adhering to the basic security concerns of IT operation. Real time updating of information helps management with timely decision making and the utilization of SMS as a business process supporting communication and marketing tool enables Commercial Credit to inform Customers on a timely basis about their due and outstanding payments. All employees are entitled to an Accident medical insurance cover. As a principle driven organization. which identifies the capabilities and capacities of staff. Usage of Intra-net Intranet is an effective knowledge sharing tool which enables the sharing of information about products. Further these benefit schemes have been extended for staff loan facilities without interest. install-ability. Therefore Commercial Credit recognizes the importance of maintaining staff motivation and dedication throughout their engagement with the company as the key to long term success of the company. The company would offer a competitive benefits package that fits the needs of the employee. Usage of Mobile Technology Usage of mobile phones as a business tool enables the field staff of CCL to update systems while on the field. Further it assists our deposit customers by reminding them of maturity dates and renewal of deposit accounts. Hence the Company pays great attention to identifying and measuring the capability and capacity of people with respect to their relevant functional areas and their level of competence. Hence we organize family gettogethers in order to demonstrate the value of employees’ families to the Company. usability. Through a company maintained fund. Software development is carried out as per the IT industry standards. together with functionality. We have been able to develop our own software applications based on a user-centric approach which results in high user-friendliness. maintainability. serviceability. Health insurance. which covers all the hospitalization expenses in an emergency. We have been maintaining an in-house developed Core ERP system which is web-enabled. staff members receive numerous benefits in terms of Death Donations. Compensation is also decided based on the same framework of operation. SMS is used as a marketing tool to build customer relationships. The above mentioned attributes are well understood. “SthreeMela” Award. COMMERCIAL CREDIT PLC. VisakhaDharmadasa in Kandy. Senevirathna. Award Presented by Former prime Minister of Malaysia–Dr .2011 Chairman of Commercial Credit PLC. organised by Voice of Sri Lankan Women which is headed by Mrs. “Governor of the Central Province TikiriKobbekaduwa presented the award to Mrs. Award received by Mr Andrew Samuel DGM – Corporate Planning in the presence of the DGM-Operations Mr. Sudath Jayasekara and Mr. A. Mrs.Volleyball Champions 2011 Commercial Credit has gone to prove how much it is equipped with competitve and indisputable strategic thinking coupled with a sense of young and dynamic business acumen where Commercial Credit ruled the “SLIM Industry Masters Strategic Business Challenge-2011” Commercial Credit appeared champions in FHA-Volleyball Championship 2011. Commercial Credit was adjudged the “Best Finance Company in Asia” at recently concluded International UDC Business Awards in Malaysia. K.MANAGEMENT DISCUSSION & ANALYSIS Achievements UDC MASTERCLASS ASIA BEST FINANCING COMPANY 2011 Cementing its reputation as a Premier Financial Institution benchmarking the highest International Standards of service and operation. L. ANNUAL REPORT 2010/2011 31 .2011 FHA.” “SLIM Award.Mahathir Mohamed. Vagdevi Fernando was recently presented with an award by SthreeMela (Voice of Sri Lankan Women) in recognition of her contribution to Sri Lanka’s financial services industry. proving that it not only excells in its core business but also fuels the spirit of team work by a way of encouraging employee participation in sports. Vagdevi Fernando at a well patronised event at the Kandy City Centre. 32 COMMERCIAL CREDIT PLC.MANAGEMENT DISCUSSION & ANALYSIS Mercantile Rugby Championship 2010 The passion and commitment of Commercial Credit towards sports are well embodied with the facilities provided for Rugby and Basketball where Commercial Credit got itself felicitated with the crown of Mercantile Rugby Championship 2010. ANNUAL REPORT 2010/2011 . 2008 2009 2007 2010 2010 2010 The net income of Commercial Credit has increased by 634.2 Credit with a clear understanding of cost where all such cost 0. despite 12 a low ROE figure of 3.17% in the financial year of 2008/2009 6 where the figures were well 0 above the industry standard in both the financial years of 2009/2010 and 2010/2011.27% in the financial year 2006/2007 to 3.9% and 14. The significant increase in the number of shares due to the rights issue was a major contributor for investment plans and more importantly Commercial Credit explains the potential of attaining high figures in respect of ROE given the implementation of the new strategic plan that it has started off with. EPS 20 16 12 8 4 0 Net Interest Income Growth Net Interest Income has increased by 312. 2008 2009 2007 2010 2011 Non Performing Loans Non Performing Loans of Commercial Credit have been constantly decreasing over the period from 7. NPA (%) 10 8 6 4 2 0 2008 2009 2007 COMMERCIAL CREDIT PLC.6 implemented within the firm with the intention of increasing 0.73. This considerable growth in net income is mainly due to the expansion strategy that Commercial Credit has been working on and it needs to be noted that massive levels of growth in net income is yet to be experienced in to the future given the implementation of the well defined and strategically crafted growth strategy.3 shareholder wealth without compromising the degree of 0.68% from the financial year 2007 to 2011 where a massive growth in net income could be observed during the financial years 2010 to 2011 by 287.9 minimization strategies are 0. This mainly reflects the level of professionalism that Commercial Credit employs in facilitating its base of clients to satisfy their financial requirements while being profitable.18% in the fi18 nancial years of 2009/2010 and 2010/2011 respectively. In the financial year 2010/2011 a well under controlled cost to income ratio was produced amounting to 0.17 in the financial year 2010/2011.5 explains the way of execution of the core business at Commercial 1. Although there were right issue and share split which led to increase the share volume by 45 folds. Earnings Per Share The EPS of Commercial Credit for the financial year 2008/2009 was the lowest recorded with in the immediate five years where in the financial year 2009/2010 a recovery was recorded. ANNUAL REPORT 2010/2011 33 2011 2011 2011 Net Income Growth . Commercial Credit PLC was able to maintain a decent EPS of 4.26% during the financial years 2010 to 2011 where this is mainly due to the increase in the demand for financial products such as Loans and Advances plus Leasing. The increased market confidence with which Commercial Credit is attached resulted in the attraction of increased deposits which assist the financing of increased demand for Loans and Advances. which is the lowest for the time span of 5 years under consideration and this is expected to be further reduced going forward.0 efficiency in executing the business operations.76%. 2008 2009 2007 Return on Equity ROE (%) 30 Commercial Credit had been able to generate a ROE figures of 24 19.42 in 2010/2011 financial year.FINANCIAL REVIEW Financial Review Net Income Growth (%) 2011 2010 2009 2008 2007 0 40 80 120 160 200 0 63 126 189 252 315 Net Interest Income Growth Cost to Income Ratio Cost to Income Cost to income ratio well 1. ANNUAL REPORT 2010/2011 . Donations for the Kandy Hospital Neurosurgical Unit by the Chairperson of the Commercial Credit. 34 COMMERCIAL CREDIT PLC. Commercial Credit is in the process of developing products and assistance for the stateemployee community.CORPORATE SOCIAL RESPONSIBILITY Corporate Social Responsibility C ommercial Credit as a responsible corporate citizen is extremely concerned about the well.being of the society we live and work in. Community Activities Blood Donations Activities We support this activity by encouraging employees to donate bloods and more than 100 employees took part in this event. Our main financial support is targeted at the low-income segment of the society. CORPORATE SOCIAL RESPONSIBILITY Oxygen Cylinder Donation to Kandy Hospital by our CSR Team Vesak Dansala Activities at Kandy COMMERCIAL CREDIT PLC. ANNUAL REPORT 2010/2011 35 . ANNUAL REPORT 2010/2011 . We have engaged on these activities with the intention adding economic value to the organization. healthcare and well-being. community and other stakeholders 36 COMMERCIAL CREDIT PLC. Commercial Credit conducts training on marketing New Product Development (NPD)and financials for customers in order to assist the development of their business.The unique concept of encouraging housewives in rural areas to earn extra income for the family has enabled them to contribute to the Gross Domestic Production (GDP). Further. Emergent growth in rural locations helps to give more employment opportunities to the system.CORPORATE SOCIAL RESPONSIBILITY Customer Training The CEO personally conducts training programs for Microfinance customers on self development. child education. Accounting Policies The accounting policies adopted in the preparation of the financial statements are given on pages 55 to 60. Financial Statements The Financial Statements for the Year ended 31st March. 2011 is set out on page 48-49 in the Annual Report. Corporate Governance A description of the Company’s Corporate Governance practices is set out on pages 42 to 44. The Directors are satisfied that the Financial Statements. which are set-out on page 44 The financial statements have been prepared in conformity with the Sri Lanka Accounting Standards as laid down by the Institute of Chartered Accountants of Sri Lanka. suitable accounting policies have been used which are applied consistently and supported by reasonable and prudent judgment and that all applicable accounting standards have been followed. Auditors’ Report The Auditors’ Report which is an integral part of the Financial Statements prepared for the Accounting period ended 31st March. ANNUAL REPORT 2010/2011 37 . 2011. Hire Purchase. presented on pages 50 to 79 inclusive. the principal activities of the Company were Acceptance of Deposits. in preparing these Financial Statements. Principal Activities During the year. Director’s Responsibility for the Financial Statements The Directors are responsible for preparing and presenting the financial statements. COMMERCIAL CREDIT PLC.The Directors consider that.REPORT OF THE BOARD OF DIRECTORS Report of the Board of Directors The Directors have pleasure in presenting to the shareholders the Annual Report of the Board of Directors for the year ended 31st March. Micro Loans and other credit facilities. give a true and fair view of the state of affairs of the Company as well as the profit for the year then ended. 2011 are set out on pages 50 to 79 in the Annual Report. Changes to the Nature of Business There was no significant changes to the principle activities of the Company during the Financial Year Ended 31st March. Companies Act No.7 of 2007 and the Listing Rules of the Colombo Stock Exchange. Real Estate Development and related services. The Financial Statements are prepared on a going concern basis. This Report contains information required by Section 168 of the Companies Act No. Personnel Loans. Granting Lease facilities. 7 of 2007 and other necessary information required by the Listing Rules of Colombo Stock Exchange. 2011. In terms of Article 24 (2) of the Articles of Association of the Company Mr Mihindukulasuriya Susantha Devapriya Pinto. Director. Mr Suresh Manitha Weerasooriya. In terms of Article 24 (2) of the Articles of Association of the Company Mr Thirunavukarasu Someswaran. The changes to the Directorate during the period under review are set out below: Mrs Vagdevi Wimalangi Fernando Mr George Ginendra Hemachandra Mr Roshan Sanjaya Egodage Appointed w. retires and being eligible is recommended by the Board of Directors for election by the Members at the Annual General Meeting for the year 2011. retires by rotation and being eligible is recommended by the Board of Directors for re-election by the Members at the Annual General Meeting for the year 2011.e. retires and being eligible is recommended by the Board of Directors for election by the Members at the Annual General Meeting for the year 2011.f 15th March. and is referred to in the Notice convening the Annul General Meeting for the year 2011. 2010 respectively.f 15th March. Director.f 19th June. 2011 and 5th June. 2011 Mr Kalugamage John Cecil Perera Appointed w.f 1st March. retires and being eligible is recommended by the Board of Directors for election by the Members at the Annual General Meeting for the year 2011. 2011 Mr Janaka Suwandarathna and Mr Duminda Mahali Weerasekare. 07 of 2007 Notice is given by the Company to its Shareholders of the intention to move an Ordinary Resolution for the re-appointment of Mrs V W Fernando as a Director of the Company until 31st December 2011. 2011 Mr Ihala Gamaralalage Samantha Kumara Gunaratne Mrs Geya Rasi Egodage Mr Thirunavukkarasu Someswaran Appointed w. Director. Mr Paul Leslie Suren Peter had resigned w. Director. in terms of the provisions of Section 211 of the Companies Act No.e.e. retires and being eligible is recommended by the Board of Directors for election by the Members at the Annual General Meeting for the year 2011. ANNUAL REPORT 2010/2011 . In terms of Article 24 (6) of the Articles of Association of the Company Mr George Ginendra Hemachandra. In terms of Article 24 (2) of the Articles of Association of the Company Mr Kalugamage John Cecil Perera.f 15th March.e. Board Subcommittees The following Board Sub-Committees have been established by the Company: Audit Committee Mr Thirunavukkarasu Someswaran – Chairman Mr Kalugamage John Cecil Perera Mr Ihala Gamaralalage Samantha Kumara Gunaratne 38 COMMERCIAL CREDIT PLC.e. 2011 Mr Mihindukulasooriya Susantha Devapriya Pinto Appointed w. In terms of Article 24 (2) of the Articles of Association of the Company Mr Roshan Sanjaya Egodage. Director. 07 of 2007. Mrs Vagdevi Wimalangi Fernando who is 73 years of age vacates her office in terms of the provisions of Section 210 of the Companies Act No.REPORT OF THE BOARD OF DIRECTORS Directorate The names of the Directors as at date are set out under Corporate Information. 03. (The Articles of Association of the Company do not stipulate a share qualification for Directors): 31. 116.2010 732.2011 Mrs Vagdevi Wimalangi Fernando Mr George Ginendra Hemachandra Mr Roshan Sanjaya Mr Ihala Gamaralalage Samantha Kumara Gunaratne Mrs Geya Rasi Egodage Mr Thirunavukkarasu Someswaran Mr Kalugamage John Cecil Perera Mr Mihindukulasooriya Susantha Devapriya Pinto 1.168 31. (2010 . Vathsala Sathyakeerthi Remuneration Committees: Mr.168 Directors’ Fees and Emoluments Directors’ fees and emoluments for the Financial Year ended 31st March. are as follows.Rs. S Gunarathne – Chairman Mr. 9.03.672. 940. Andrew Samuel Mr. 2007.032. G Hemachandra – Member The Reports of the Board Audit and Remuneration Subcommittees are set out on page 45-46. ANNUAL REPORT 2010/2011 39 .967. Cecil Perera – Member Mr. which came into effect on 03rd May. Interest Register An interest Register is required to be maintained in terms of Companies Act No. Someswaran Mr. Directors’ Interest in Contracts or proposed contracts with the Company are disclosed in Note 34 to the Financial Statements for the period under review appearing on page 77. T. Roshan Sanjaya Egodage Mr. Janaka Deshapriya Mr. Directors’ Fees and emoluments Rs. and their functions and responsibilities are set out in the Corporate Governance Report appearing on pages 42 to 44 of this Annual Report. Sebestian Nanayakkara Ms.032 as charitable contributions.150) COMMERCIAL CREDIT PLC.951 395.951 495. The Composition of the above Board Sub-Committees.REPORT OF THE BOARD OF DIRECTORS Integrated Risk Management Committee Mr.177 (2010 – Rs 6. 2011. 7 of 2007. Directors’ Shareholding The shares held by the Directors at the beginning and at the end of the financial year were as follows.906) Donations During the year the Company has made Rs. 365 Ordinary Shares.REPORT OF THE BOARD OF DIRECTORS Property. Chartered Accountants. other than note 33. The Directors consider the market value of the property. Rs 2. which would require adjustment to. Plant & Equipment The details of the property. or disclosure in the financial statements. plant & equipment not to be significantly different to the amounts disclosed.640. Stated Capital There has been no change in the Stated Capital of the Company during the year under review. other than that of the Auditor. Auditors The financial statements for the period under review have been audited by Messrs Ernst & Young Chartered Accountants . ANNUAL REPORT 2010/2011 . to the best of their knowledge and belief are satisfied that all statutory payments in relation to the Government had been made upto date. The Stated Capital of the Company as at 31st March. 2011 was Rs. 2011. 170. Statutory Payments The Directors. plant & equipment of the Company. Post Balance Sheet Events No circumstances have arisen since the Balance Sheet date. additions during the year and the depreciation charges for the year are shown in note 12 to the Financial Statements. Auditors’ Relationship with the Company The Company did not have any relationship with the Auditors M/s Ernst & Young. 2011 was 214 (2010 . A Resolution appointing M/s Ernst & Young as the Auditors of the Company and authorising the Directors to determine their remuneration will be proposed at the Annual General Meeting. 2011 _______________________________ Director Samantha Kumara Gunaratne 40 COMMERCIAL CREDIT PLC. Shareholders The total shareholder base of the Company as at 31st March.315 consisting of 218.3 million has been paid as Audit Fee for the year ended 31st March. The Shares of the Company are listed on the Colombo Stock Exchange.The distribution of the shareholding and a listing of the 20 major shareholders are given under Investor Information on page 81-82.074. during the Financial Year Ended 31st March. By Order Of the Board ___________________________ Secretary JACEY & COMPANY Secretaries _______________________________ Director Roshan Sanjaya Egodage 17th November. 2011.212 ). have mismatched reprising dates. Each company should ensure that there are sufficient liquid assets to meet the working capital requirement thus ensuring a smooth run in daily operations. As a mitigation strategy. Interest rate risk is the potential impact on an institution’s earnings and net assets values of changes in interest rates. both on and off balance sheet. RFCs sector experienced this risk with the failure of several entities connected to banks and finance companies in the Ceylinco Group. It involves prudently managing positions in order to control. in order to mitigate the risk participant can improve the accuracy of the predictions made based on the analysis of past trends and prevailing market conditions. counterparties. ensuring credit worthy guarantors etc. procedures. measure. analyze and evaluate risks and to set appropriate policies to the risk appetite in order to manage and hedge such identified risks. One of the main risks RFCs face in this context is the asset liability mismatch and RFCs must ensure that company’s cash inflow is in line with cash out flow. or establish new. 10%. all the employees are given a well defined job profile which clearly communicates the roles and responsibilities of each. Assessing the credit worthiness of the client is done by considering details of the property held by the client. failure of the employees to comply with the set rules and regulations or through human error. within set parameters. RFCs participants place special emphasis on training given to employees thus ensuring that they have comprehensive knowledge and skills required to perform the particular job assigned to them.RISK MANAGEMENT Risk Management R isk management is “the process of analyzing exposure to risk and determining how to best handle such exposure” which ensures that participants assume well calculated business risks which safeguard their capital. being conservative the companies provide provisions out of the profit to meet this risk. volatility and direction of rate changes. This risk is not directly related to one particular company but affects the whole sector. Authority levels are assigned to employees considering the role he/she plays in the corporate hierarchy and it is clearly communicated to the staff thus ensuring that every employee follows the relevant instructions. Further. This could arise as a result of a failure in the systems. to identify. which is mandated by CBSL regulations. funding sources and profitability from various sources of risk. Evaluatingthe credit worthiness of the customer depends on the knowledge and experience of the credit officer concerned. COMMERCIAL CREDIT PLC. Credit risk: the borrowers’ inability to meet the obligations towards the Company on time would expose a Company to this risk. The management of this risk is in the hands of each Company hence there are several actions companies take prior to lending facilities to clients. shareholders. Economic risk associated with debtors’ capability to meet the obligations as well as a potential borrowers’ ability to borrow would get adversely affected due to changes in the state of the economy. All RFCsparticipants should maintain minimum amount of liquid assets. Operational risk is the risk caused by the failure in the routine operational functions of the Company. This too is to a greater extent beyond the control of the Company. Management of this risk is mainly a responsibility of the Treasury Department. significantly hindering the normal business activities of the sector. ANNUAL REPORT 2010/2011 41 . Managing interest rate risk is a fundamental component of safe and sound management of all institutions. direction of interest rate changes and the size and maturity structure of the mismatch Position. obtaining a report from the Credit Information Bureau (CRIB). the size of the interest-sensitive position and the basis of reprising at rollover dates. the slope of the interest rate yield curve. Reputation risk can be defined as the risk arising from negative perception on the part of customers. The mechanism permits the creation of a culture of risk awareness across all sections of the company. investors or regulators that can adversely affect a RFC’s ability to maintain existing. Interest rate risk arises when an institution principal and interest cash flows (including final maturities). Significant factors in managing the risk include the frequency. Liquidity risk is the risk faced by the participants due to the shortage of cash or cash equivalent to meet the obligations of the Company on time. However. business relationships and continued access to sources of funding. the impact of changes in interest rate on the institution. processes. The amount at risk is a function of the magnitude. hence companies make sure that their staff are given comprehensive training in this regard. Further. to take appropriate action in achieving the results and to review the financial performance of the Company.CORPORATE GOVERNANCE Corporate Governance C orporate Governance involves a set of relationships between a Company’s Management. the Board has constituted 2 committees. the Audit and the Remuneration Committees. 42 COMMERCIAL CREDIT PLC. It provides a structure that works for the benefit of everyone concerned by ensuring that the Company adheres to accepted ethical standards and best practices as well as to formal laws. Name of the Director Category Board Eligible to attend Mrs V W Fernando Executive Non-Independent Non-executive Non-Independent Non-executive Independent Executive Non-Independent Executive Independent Non-Executive Independent Non-Executive Independent Non-Executive Independent 10 10 10 10 Mr G G Hemachandra Mr H S K Gunaratne Mrs G R Egodage Mr R S Egodage Mr T Someswaran Mr C Perera Mr M S D Pinto 9 10 10 Attended 10 Compliance with the Code of Best Practice The Company currently complies with the requirements set out in the Code of Best Practice for Corporate Governance issued by the Institute of Chartered Accountant of Sri Lanka and the Rules on Corporate Governance contained in the Listing Rules of the Colombo Stock Exchange. A Statement of Directors’ Responsibilities for the preparation of Financial Statements is set out on page 44 of this Report. fairness and transparency are upheld at all times. which is responsibility. ANNUAL REPORT 2010/2011 . The Board has constituted an Audit sub-Committee and a Remuneration Sub-Committee. We believe that good Corporate Governance plays an integral role in enhancing and retaining Investor trust and therefore the Company always seeks to ensure that it maintains integrity and transparency in attaining its goals. in addition to which Nomination. The Board meets once a month as and when the need arises to discuss any prevailing issues. The Company ensures that the four fundamental pillars of Corporate Governance. accountability. thus improving the public understanding of the structure. n Audit Committee n Remuneration Committee n Integrated Risk Management Committee The Composition of the Board as at the end of the period under review is set out in the table below. In accordance with the Listing Rules of the Colombo Stock Exchange. The Company’s Board of Directors consists of professionals in varied fields and collectively posses a wide area of knowledge and experience. its Board. namely. Risk and Strategic Planning Committees have also been formed. One Third of the Directors retire by rotation at each Annual General Meeting and those eligible are recommended for re-election. together with a record of the attendance of every Director. Board of Directors The Board of Directors of the Company comprises of eight members who jointly oversee the activities of the Company and are responsible for the management of the Company. activities and policies of the Company. its Shareholders and other Stakeholders. Board Sub-Committees The Board sub-committees scrutinize and analyze the areas under their purview and make recommendations to the Board on necessary adjustments and modifications to the internal systems of the Company. 10. The Company Secretaries play a key role in compliance matters by ensuring that the Company complies with the requirements of the Companies Act No. ANNUAL REPORT 2010/2011 43 . The Secretaries also ensure that Board procedures are followed and information is provided to shareholders on a timely basis. Compliance with Legal Requirements All Directors have access to the advice and services of the Company Secretaries as well as to the Financial Information of the Company.10.CORPORATE GOVERNANCE Company Secretaries Jacey & Company provides Corporate Secretarial Services to the Company. The Directors make every endeavor to ensure that the Company Complies with Laws and Regulations.7 of 2007.2 Complied Complied 7.1 Non-Executive Directors Independent Directors At least 1/3 of the total number of Directors should be Non-Executive Directors at the immediately preceding Annual General Meeting At least 1/3 of Non Executive Directors should be independent Of the eight Directors Mr H S K Gunaratne. Each Non-Executive Director should submit a declaration of independence/ non independence in the prescribed format Complied 7. Mr T Someswaran. Mr C Perera and Mr M S D Pinto are Independent Directors.6 Audit Committee A Listed entity shall have an Audit Committee comprising of Non-Executive Directors a majority of whom shall be independent A non Executive Director shall be appointed as the Chairman of the Audit Committee Unless otherwise determined by the Committee the Chief Executive Officer and the Chief Finncial Officer shall attend Audit Committee Meetings The Chairman or one Member of the Committee should be a member of a recognized professional accounting body Complied Complied Please refer page 45 of the Annual Report COMMERCIAL CREDIT PLC. Corporate Governance Report Levels of compliance as per Section 07 of the Listing Rules of the Colombo Stock Exchange Rule No: Subject Applicable requirement Compliance Status 7. the Rules of the Colombo Stock Exchange and other regulatory bodies.10.10.3 Disclosure relating to Directors Names of independent Directors should be disclosed in the Annual Report The Board shall make a determination annually as to the independence or non independence of each non-executive Director based on the Declaration A brief resume of each Director should be included in the Annual Report and should include the Director’s areas of expertise Complied Complied 7.10.5 Remuneration Committee A listed Company shall have a Remuneration Committee and shall comprise of Non-Executive Directors a majority of whom will be independent Complied Please refer page 46 of the Annual Report 7. all taxes and levies payable by the Company and all contributions. The Directors have taken all reasonable steps expected of them to safeguard the assets of the Company and to establish appropriate systems of internal controls in order to prevent. 2011 44 COMMERCIAL CREDIT PLC. The Directors of your Company are required by the Companies Act No.7 of 2007. 2011 presented in the Report have been prepared in accordance with the Sri Lanka Accounting Standards and the Companies Act No. The Directors are required to provide the Auditors with every opportunity to take whatever steps and undertake whatever inspection they consider appropriate for the purpose of enabling them to give their Audit Report. The Directors confirm that the Financial Statements of the Company for the year ended 31st March. levies and taxes payable on behalf of the employees of the Company. deter and detect any fraud. In preparing the Financial Statements. Compliance Report The Directors confirm that. The Directors have also taken all reasonable steps to ensure that the Company maintain adequate and accurate accounting books of record which reflect the transparency of transactions and provide an accurate disclosure of the Company’s financial position. ANNUAL REPORT 2010/2011 .7 of 2007 to prepare Financial Statements which give a true and fair view of the state of affairs of the Company as at the end of the financial year. misappropriation or other irregularities. to the best of their knowledge. __________________ JACEY & COMPANY Secretaries Colombo 17th November. and of the Profit and Loss and of the Cashflows of the Company and of the Group for the financial year.CORPORATE GOVERNANCE Statement of Directors’ Responsibilities Directors’ Responsibilities for the Preparation of Financial Statements This Statement of Directors’ Responsibilities is to be read in conjunctions with the Auditors’ Report and is made to distinguish the respective responsibilities of the Directors and of the Auditors in relation to the Financial Statements contained in this Annual Report. The Directors are of the view that they have discharged their responsibilities in this regard. Reasonable and prudent judgments and estimates have been made and applicable accounting standards have been followed and the Financial Statements have been prepared on a going concern basis. The Directors are of the view that adequate funds and other By Order of the Board resources are available within the Company for the Company to continue in operation for the foreseeable future. the Directors have selected the appropriate accounting policies and have applied them consistently. and all other known statutory obligations as at the balance sheet date have been paid or provided for in the Financial Statements. the Committee was formed thereafter in accordance with the Listing Rules of the CSE. The role of the Audit Committee The main objective of the Audit Committee is to assist the Board of Directors to effectively carry out it’s responsibilities to the financials and other connected affairs of the company. Financial Reporting The Audit Committee had reviewed and discussed Company’s Annual Financial Statements with the Management and the External Auditors prior to publication and have discussed the extent of compliance with Sri Lanka Accounting Standards and other applicable laws.REPORT OF THE AUDIT COMMITTEE Report of the Audit Committee Composition of the Committee and Meetings The Audit Committee comprise of the following three Independent Non-Executive Directors: Mr T Someswaran . External audit The Audit Committee has recommended to the Board of Directors that M/s Ernst & Young. in 28th July 2011 and therefore. Audits and investigations which were presented by the internal auditors. ANNUAL REPORT 2010/2011 45 . Internal Audit The Committee has reviewed and discussed with Management and the Internal Auditors. has not had any Meetings during the period under review. rules and guidelines. The company’s External Auditors and the Chief Financial Officer of the Company are also invited to participate at these meetings.Chairman Mr S Gunaratne Mr C Perera As the Company was listed on the Colombo Stock Exchange (CSE) after the Financial Year under review. Chartered Accountants be re-appointed as Auditors subject to the approval of Shareholders at the Annual General Meeting. _______________________ Mr T Someswaran Chairman – Audit Committee 17th November. 2011 COMMERCIAL CREDIT PLC. The committee discusses reports of internal and external audits at these meetings. As the Company was listed on the Colombo Stock Exchange (CSE) after the Financial Year under review. The Committee is headed by Mr S K Gunaratne. 9. The aggregate remuneration paid to the Directors during the period under review is Rs. 2011 and therefore.177.673. the Committee was formed thereafter in accordance with the Listing Rules of the CSE. 2011 46 COMMERCIAL CREDIT PLC.REPORT OF THE REMUNERATION COMMITTEE Report of the Remuneration Committee The Remuneration Committee appointed by the Board comprises of three Members of whom two are Independent Non-Executive Directors. in 28 July. has not had any Meetings during the period under review. The proceedings of the Committee are reported to the Board of Directors who will in turn make the final determination based on the recommendations of the Committee. The primary purpose of the Remuneration Committee is to review the performance of the Executive Directors and the Chief Executive Officer and to recommend appropriate remuneration benefits and other payments. ANNUAL REPORT 2010/2011 . and the members include Mr C Perera and Mr G G Hemachandra. _______________________ Mr S K Gunaratne Chairman – Remuneration Committee 17th November. ANNUAL REPORT 2010 47 .Financial Statements Contents Report of the Auditors 48 Balance Sheet 50 Income Statement 51 Statement of Changes in Equity 52 Cash Flow Statement 53 Notes to the Financial Statements 54 COMMERCIAL CREDIT PLC. as well as evaluating the overall financial statement presentation. ANNUAL REPORT 2010/2011 . on a test basis. 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. and a summary of significant accounting policies and other explanatory notes. we conducted our audit in accordance with Sri Lanka Auditing Standards. and making accounting estimates that are reasonable in the circumstances. An audit includes examining.SPF/BV/HDS INDEPENDENT AUDITOR’S REPORT TO THE SHAREHOLDERS OF COMMERCIAL CREDIT LIMITED Report on the Financial Statements We have audited the accompanying financial statements of Commercial Credit Limited (“Company”). selecting and applying appropriate accounting policies. Except for the paragraphs a) to c) identified below. 48 COMMERCIAL CREDIT PLC. write off of receivables through retained earnings and revenue recognition on profit on sale of real estate under easy payment schemes. An audit also includes assessing the accounting pilicies used and significant estimates made by management. Those standards require that we plan and perform the audit to obtain reasonable assurance whether the financial statements are free from material misstatement. (a) to (c) 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. evidence supporting the amounts and disclosures in the financial statements. This responsibility includes designing. 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. and the income statements. We therefore believe that our audit provides a reasonable basis for our opinion. statements of changes in equity and cash flow statements for the year then ended. Scope of Audit and Basis of Opinion Our responsibility is to express an opinion on these financial statements based on our audit. The Financial Statements of the Company as at 31 March 2010 and for the year then ended were audited by another Auditor whose report dated 03 February 2011 expressed a qualified opinion due to the Auditors disagreement in connection with the management’s adjustments of provision for fall in value of land stocks. which comprise the balance sheets as at 31 March 2011. Except for the matters referred in the following paragraphs. ANNUAL REPORT 2010/2011 49 . subsequent to the balance sheet date.29 “Revenue Recognition”. In the absence of a break-up of an amount of Rs. as might have been determined to be necessary on the financial statements in respect of the matters referred in the preceding paragraphs. and therefore it has not been feasible to review or observe the performance of internal controls in operation for the year in relation to. 12.Opinion a) Up to the beginning of the current financial year. except for the effects . we were unable to carry out audit procedures to satisfy ourselves in relation to the fairness of the same. b) c) In our opinion. these financial statements also comply with the requirements of Sections 151(2) of the Companies Act No. We were engaged to undertake the audit on 9 April 2011. the Company’s practice was to recognise profit on sale of real estate under easy payment scheme upon entering to the contract of agreement to sell. in the absence of adequate audit evidence we were unable to satisfy ourselves as to the effect of the amounts which should have been included in the current year’s income in relation to such contracts relevant to prior years. so far as appears from our examination. the Company maintained proper accounting records for the year ended 31 March 2011 and the financial statements give a true and fair view of the Company’s state of affairs as at 31 March 2011 and its profit and cash flows for the year then ended in accordance with Sri Lanka Accounting Standards.291/.included in accrued expenses and other payables as given in Note 18. commitments and disclosures of related party transactions are fairly stated. if any . We have not been able to perform alternative audit procedures that provide sufficient and appropriate audit evidence whether contingent liabilities. which is not in compliance with Sri Lanka Accounting Standards . 25 October 2011 Colombo COMMERCIAL CREDIT PLC. 7 of 2007.210. contingent liabilities. commitments and disclosure of related party transactions. Despite the fact that this was changed from the current year onwards. Report on Other Legal and Regulatory Requirements In our opinion. 641.000.283 201. 51.D.1 12 13 14 27.855 5.856 238.125 73.504 1.375 153.921 432.133.043.106 116.289 594.236 5. ANNUAL REPORT 2010/2011 .260 33.843 9.Chairman ___________________________________ Roshan Egodage .207.969.137.353.520 389.350.559.489.2 Note 2011 Rs.924.985.178. _____________________________________________ M.412 9.966 1.459 67.264 3 4 5 6 9 10 11 11.918.145 152.426.445.BALANCE SHEET Balance Sheet As at 31 March 2011 ASSETS Cash and Bank Balances Treasury Bills Placements with other banks Loans and Advances Lease rentals receivable and Stock out on hire Real Estate and Vehicle Stock Other Debtors.392 170.889. 14 October 2011.350.395 9.644 22.732.610 13. Janaka Deshapriya .722 426.364 110.435 36.000 121.003.841.641.640.270.480 76.821.924. ______________________________ Vagdevi Fernando .270.099 4.251.708.443 160.496.047.Chief Financial Officer The Board of Directors is responsible for the preparation and presentation of the Financial Statements signed for and on behalf of the board by .000 5.103.900 55.027 2010 Rs.555.840.073. Colombo 50 COMMERCIAL CREDIT PLC.07 of 2007 .762.000.041.228.365 226.913.650 2.206.740 2.628 3.039 26.944.721 2.A.178.531.214 9. 203.900 24.300.251 9.706.795.939.777.628 11.937.955.236 2.2 These Financial Statements are in compliance with the requirements of the Companies Act No.Chief Executive Officer The Accounting Policies and notes on pages 56 through 81 form an integral part of the Financial Statements.958.488.865 1.193 81.490. Plant and Equipment Leasehold Property Investment Property Deferred Tax Asset Total Assets LIABILITIES Deposits from customers Borrowings Other liabilities Tax Payable Employment Benefit Liability Deferred Tax Liability Total Liabilities SHAREHOLDERS’ FUNDS Stated Capital Reserves Total Equity Total Equity and Liabilities Commitments and Contingencies 20 21 15 16 18 19 27.459.315 261. Deposits and Prepayments Investment Securities Dealing Securities Tax Receivable Property.717.492.887 219.084 7.865 11.245 44.718. 42 (7.441 702. Bad and Doubtful Loans and Write Offs Profit/(Loss) from Operations 26 22 23 24 1.466.109.883.000 87.700.410) 71.762 (18.652 71.440.103 9.994 170.266 2. COMMERCIAL CREDIT PLC.849) Value Added Tax on Financial Services Profit/(Loss) before Taxation Provision for Income Taxation Profit for the year Earnings Per Share 28 27 (37.094.423 22.093 410.513 45.164.132.543.908) 60.271.791 69.162 201.387 4.310.409 425.910.240 1. Income Interest Income Interest Expense Net Interest Income Net Income from Real Estate Other Operating Income Less: Operating Expenses Staff Costs Provision for Staff Retirement Benefits General & Administration Expenses Provision for fall in value of Investments.258.417 206. 2010 Rs.561) (25.295 (184.735 25 291.487.728) 244.439.402.048.190.112.768. ANNUAL REPORT 2010/2011 51 .366.910.023.101.637 281.961.33 The Accounting Policies and notes on pages 56 through 81 form an integral part of the Financial Statements.391.186 4.942.400.094 377.738 73.921 33.777.310.INCOME STATEMENT Income Statement Year ended 31 March 2011 Note 2011 Rs.942 25.573.023 114.597. 387 96.637 8.751.892.696.387 (1.739 60.877) (8.361) 1.000) (9.318.877 58.500.799.094.318.921.125) 45. ANNUAL REPORT 2010/2011 Net Profit for the year Balance as at 31 March 2010 Net Profit for the year Right Issue of Shares for cash 96.200.200.018.890) (36.892.000 12.520) (1.018.751.671.319.890) (36.500.760 (2.640.924.280 (2.375 73.696.190. Plant & Equipment Transferred to/(from) Reserve Fund during the year For 2008/09 For 2009/10 For 2010/11 Tax effect of item transferred from Deferred Tax Liability Transferred to Investment Fund Reserve - Balance as at 31 March 2011 The Accounting Policies and notes on pages 56 through 81 form an integral part of the Financial Statements.011) 122.520 8.375 49.125 73. Rs.718.641) (1.013.103 (30.048.574) Revaluation Reserve Rs.236 73.125 50.294.315 Year ended 31 March 2011 STATEMENT OF CHANGES IN EQUITY Balance as at 1 April 2009 Error Correction-Write off of Bogus Contract Error Correction-Receivable Company Advance Tax Error Correction-GST Receivable Error Correction-Write-down of Real Estate Inventory to NRV Error Correction-Suspense clearance account COMMERCIAL CREDIT PLC. Investment Fund Reserve Rs. 224.190.594 58.103 226. . Accumulated Profit/ (Loss) Rs.318.181 (1.034.000 9. Reserve Fund Rs.940 49.034.137.641 (1.764 74.Statement of Changes in Equity Stated Capital Rs.856.594 58.940 Surplus on Revaluation of Property.125 50. General Reserve Rs.423) (690.094.011) 432.718.603.921.060.181 (1.423) (690.671.856.294.751.000) (12.060.520 45.115) 60.361) 74.329) (1.603.386.443. Total 52 170.760 (33.329) (1. 394 (398.219.1 25 19 23.035 (1.768.902 (66.410) 7.406.000.252.810) 325.735.467.004.274.107 (4.993) (31.392.463. COMMERCIAL CREDIT PLC.384.757) (839.241.777.446) 2. Plant and Equipment Acquisition of Investment Property Acquisition of Investments Proceeds from Sales of Property.534.5 - (35.853.CASH FLOW STATEMENT Cash Flow Statement Year ended 31 March 2011 Cash Flows From / (Used in) Operating Activities Profit/(Loss) before Tax Adjustments for Depreciation Amortization of Lease Hold Property Provision for doubtful debts Increase in Market Value of Investment Property Depreciation in Market Value of Quoted Shares Depreciation in Market Value of Real Estate Stocks Profit from Sale of Property .135 7.942.531) (27.046.643.739) 73.940 406.693.887. Plant and Equipment Net Cash Flows Used in Investing Activities Cash Flows from / (Used in) Financing Activities Proceeds from Loans Obtained Repayments of Bank Loans Payment under Finance Lease Liabilities Proceeds from the Right Issue of Shares Net Cash Flows from/(Used in) Financing Activities Net Increase/(Decrease) in Cash and Cash Equivalents Cash and Cash Equivalents at the beginning of the year Cash and Cash Equivalents at the end of the year 17 19 Note 2011 Rs.671 160.769 193.317) 19.910) 395. Deposits.386 (113.500) 191.117.569.921.120 33.343.898 5.183) (22.483.314.711.000.000) 1.710.710.440.295 12.135 The Accounting Policies and notes on pages 56 through 81 form an integral part of the Financial Statements.126) (30.371) 96.000 (1.891) 73.435.590. Plant and Equipment Provision for Defined Benefit Plans Notional Tax Credit on Interest on Treasury Bills Profit from operation before Working Capital Changes Increase in Real Estate Stock Increase in Lease Rentals Receivable and Stock out on hire Decrease in Government of Sri Lanka Treasury Bills Increase in Loans and Advances Increase in Other Debtors.686.728.1 12.357.484) (5.166 (169.455.792 878.000 (67.795) 1.762 (952.753 (60.386.996.645.000.162 (1.331 (4.699 67.874 (45.400) (399.366.667) (6.500 (40.196.018.607 (1.342.244 (21.694) 118.328.238.722 (37.154.464.331 312. Prepayments Increase in Placement with Banks Increase in Deposits from Customers Increase in Other Liabilities Cash Generated from Operations Retirement Benefit Liabilities Paid Net Cash From/(Used in) Operating Activities before Income Tax Payments Taxes Paid Net Cash used in Operating Activities Cash Flows from / (Used in) Investing Activities Acquisition of Property.409 (3.439.842.946.369) 2.003.865.470.345) (100.000 (78.670) 6.920) (568.250 12.869.536.090.096 205.796.726) (412.686.683) 46.157) (13.000) 2.857) 187.107.276.393.2 13 11.605 66.842.712) 15.434) (1. ANNUAL REPORT 2010/2011 53 . 244.176) 4.163) (5.342) 10.421.882) 2010 Rs.000. (25. The registered office of the Company is located at No 106. apart from those involving estimations. 1. The preparation and presentation of financial statements is in compliance with the Companies Act No. which may have a significant effect on the amounts recognized in the Financial Statements.2 Principal Activities and Nature of Operations During the year.1 CORPORATE INFORMATION General Commercial Credit PLC is a public limited liability company incorporated and domiciled in Sri Lanka. 1. Further.1. These Financial Statements are presented in accordance with Sri Lanka Accounting Standard No. the Company’s ultimate parent undertaking and controlling party is BG Capital (Private) Limited. estimates and assumptions are discussed below: 54 COMMERCIAL CREDIT PLC.3 Parent Enterprise and Ultimate Parent Enterprise The Company’s parent entity is BG Investment (Private) Limited. 33 Revenue Recognition and Disclosures in Financial Statements of Finance Companies.78 of 1988. In the opinion of the directors. key assumptions concerning the future and other key sources of estimation of uncertainty at the Balance Sheet date that may have a significant risk of causing material adjustments to the carrying amounts of assets and liabilities. Personnel Loans.4 Date of Authorization for Issue The Financial Statements of Commercial Credit PLC for the year ended 31 March 2011 was authorized for issue in accordance with a resolution of the board of directors on 14th October 2011 2.1.12 Going Concern The Directors have made an assessment of the Company’s ability to continue as a going concern and they do to liquidate or to cease trading. Hire Purchase. 2. which is incorporated in Sri Lanka.2 SIGNIFICANT ACCOUNTING ESTIMATES AND ASSUMPTIONS In the process of applying the Company’s Accounting Policies. The respective carrying amounts of assets and liabilities are given in the related Notes to the Financial Statements. 1. Micro Loans and other credit facilities. the principal activities of the Company were Acceptance of Deposits.1 BASIS OF PREPARATION These financial statements presented in Sri Lankan Rupees have been prepared on a historical cost basis and prepared in Sri Lanka Rupees except when otherwise stated. Real Estate Development and related services. 2.NOTES TO THE FINANCIAL STATEMENTS Notes to the Financial Statements 1. are consistent with those used in the previous year. management is required to make judgments. The key items which involve these judgments. 2. not intend either 2. the management is required to consider. ANNUAL REPORT 2010/2011 . Yatinuwara Veediya. Granting Lease facilities.1 Statement of compliance The Financial Statements of Commercial Credit PLC has been prepared in accordance with Sri Lanka Accounting Standards. Kandy and the principal place of business is situated at the same place.3 Comparative Information The accounting policies have been consistently applied by the Company and. 1.7 of 2007 and Finance Companies Act No. The actuarial valuation involves making assumptions about discount rates.1 Taxation a) Current Taxes Income tax assets and liabilities for the current and prior periods are measured at the amount expected to be recovered from or paid to the Commissioner General of Inland Revenue. carry-forward of unused tax assets and unused tax losses. future salary increase.NOTES TO THE FINANCIAL STATEMENTS Impairment Losses on Leases Stock out on Hire and Loans and Advances In addition to the provisions made for possible loan losses based on the parameters and directives for specific provisions on Leases Stock out on Hire and Loans and Advances by the Central Bank of Sri Lanka. the Company reviews its Loans and Advances portfolio at each reporting date to assess whether a further allowance for impairment should be provided in the Income Statement.3. Deferred income tax assets are recognised for all deductible temporary differences. Deferred income tax liabilities are recognised for all taxable temporary differences except where the deferred income tax liability arises from the initial recognition of an asset or liability in a transaction that is not a business combination and.6 the Directors have evaluated the recoverability considering the current market prices of respective stocks. affects neither the accounting profit nor taxable profit or loss. Due to the long term nature of such obligation these estimates are subject to significant uncertainty. Deferred income tax assets and liabilities are measured at the tax rates that are expected to apply to the year when the asset is realised or the liability is settled. and The carrying amount of deferred income tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred income tax asset to be utilised. based on tax rates (and tax laws) that have been enacted or substantively enacted at the balance sheet date. affects neither the accounting profit nor taxable profit or loss. mortality rates etc. at the time of the transaction. Further details are given in Note 19 to these financial statements. The judgments by the management is required in the estimation of these amounts and such estimations are based on assumptions about a number of factors and actual results may differ. b) Deferred Taxation Deferred income tax is provided. at the time of the transaction.3 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES 2. ANNUAL REPORT 2010/2011 55 . 2. Deferred income tax relating to items recognised directly in equity is recognised in equity and not in the income statement. using the liability method. Defined Benefit Plans The Defined Benefit Obligation and the related charge for the year is determined using actuarial valuation. Real Estate Stocks Real Estates Stocks have been accounted at cost as disclosed under accounting policy 2. on temporary differences at the balance sheet date between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted by the balance sheet date. to the extent that it is probable that taxable profit will be available against which the deductible temporary differences. resulting in future changes to the allowances. The provision for income tax is based on the elements of income and expenditure as reported in the financial statements and computed in accordance with the provisions of the Inland Revenue Act. and the carry-forward of unused tax assets and unused tax losses can be utilised except where the deferred income tax asset relating to the deductible temporary difference arises from the initial recognition of an asset or liability in a transaction that is not a business combination and. COMMERCIAL CREDIT PLC.3. .3. . .3. . . .a. . . . . Motor Vehicles . . readily convertible to known amounts of cash and subject to insignificant risk of changes in value. . .3. Telephone System. .NOTES TO THE FINANCIAL STATEMENTS 2. . . . . . . . . . . . . Such cost includes the cost of replacing part of the plant and equipment when that cost is incurred. Plant and Equipment Plant and equipment is stated at cost.3 Loans and Advances Loans and advances to customers are stated net of provision for bad and doubtful loans and interest not accrued to revenue. . Assets sold to customers under fixed rate hire agreements. . . . . . finance leases and operating leases in line with Finance Companies (Provision for Bad and Doubtful Debts) Direction No. .20% p. . .20% p. Air Conditioning . which transfer substantially all the risks and rewards associated with ownership other than legal title. . . . . . . .a. . . 2. . . Equipment .25% p. which transfer all the risks and rewards as well as the legal title at the end of such contractual period are classified as stock out on hire. . . Lease rentals receivable represents the total minimum lease payments due net of unearned income and allowance for doubtful recoveries. Fixtures & Fittings. . 2. . . .3. . . . . . . demand deposits and short-term highly liquid investments. . less accumulated depreciation and accumulated impairment in value. . . . .a. . are classified as finance leases. .a. .8 Property. . . Purchase Cost Cost of conversion Land cost with legal charges. . . excluding the costs of day to day servicing.a. . . .a. if the recognition criteria are met. .e. . . . .a. For the purpose of cash flow statement. . . . . . . . . . . . . .2 Borrowing Costs Borrowing costs are recognised as an expense in the period in which they are incurred. . .3. . . . 3 of 2006 issued by the Central Bank of Sri Lanka. . .20% p. . .20% p. . advances hire purchase. 2. .4 Lease Rentals Receivable & Stock Out on Hire Assets leased to customers under agreements. 2. . . . . 15% p. 2. Computer Hardware .5 Provisions for Bad and Doubtful Debts Amounts are set a side with regard to possible losses on loans. . 33. . . .33% p. . . . . Actual Development costs Vehicle Stock is stated at cost. .7 Cash and Cash Equivalents Cash and cash equivalents are defined as cash in hand. . Depreciation is calculated on written – down value basis over the useful life of the assets as follows. three months or less from the date of acquisition are also treated as cash equivalents.3. Such assets are accounted for in a similar manner as finance leases. . . .6 Real Estate and Vehicle Stock Real estate stock comprises all costs of purchase. . . . cash and cash equivalents consist of cash in hand and deposits in banks net of outstanding bank overdrafts. . . . .20% p. . .a.3. 2. 56 COMMERCIAL CREDIT PLC. . . . . . Investments with short maturities i. cost of conversion and other costs incurred in bringing the real estate to its saleable condition. ANNUAL REPORT 2010/2011 . . Furniture & Fittings . . . Fire Protection Equipment . The cost of an investment is the cost of acquisition inclusive of brokerages.8. disclosed as leasehold improvements.11 Leases a) Finance Leases – where the Company is the Lessee Property.3.9 Leaseshold Property Leasehold property is situated at recorded carrying value. 2. which reflects market conditions at the balance sheet date. if lower. which effectively transfer.3. 2. Lease payments are apportioned between the finance charges and reduction of the lease liability so as to achieve a constant rate of interest on the remaining balance of the liability. c) Long Term Investments – Investment Securities Long term investments are stated at cost The cost of the investment is the cost of acquisition inclusive of brokerage fees. at the present value of the minimum lease payments. COMMERCIAL CREDIT PLC. investment properties are stated at fair value.10 Investment Property Investment properties are measured initially at cost. Finance charges are charged reflected in the income statement. The cost of improvements to or on leasehold property is capitalized. The depreciation policy for depreciable leased assets is consistent with that for depreciable asset that are owned as described in 2. and depreciated over the unexpired period of the lease or the estimated useful lives of the improvements.3. Operating lease payments are recognised as an expense in the income statement on a straight line basis over the lease term.3. Subsequent to initial recognition. fees. ANNUAL REPORT 2010/2011 57 . The carrying amounts includes the cost of replacing part of an existing investment property at the time that cost is incurred if the recognition criteria are met.12 Investments a) Current Investments – Government Securities Current investments include Government of Sri Lanka Treasury Bills which are stated at cost plus a portion of discount or premium. to the Company substantially all of the risk and benefits incidental to ownership of the leased item are capitalized at the inception of the lease at the fair value of the leased property or. determined on an individual investment basis. whichever is shorter. Gains or losses arising from changes in the fair values of investment properties are included in the income statement in the year in which they arise.NOTES TO THE FINANCIAL STATEMENTS 2. including transaction costs. Such carrying amounts are amortized over the remaining lease term or useful life of the leasehold property whichever is shorter. b) Current Investments – Trading Securities Current investments are carried at market value Unrealized gains and losses on current investments carried at market value are recognized as income or expense. No further revaluation of these leasehold properties is carried out. and exclude the costs of day to day servicing of an investment property. duties and bank fees. plant and equipment on finance leases. 2. Capitalised leased assets are depreciated over the shorter of the estimated useful life of the asset and the lease term.3. duties and bank fees. if there is no reasonable certainty that the Company will obtain ownership by the end of the lease term. The carrying amount of long-term investments is reduced to recognise a decline other than temporary in the value of investments. where it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and. The excess of aggregate rental receivable over the cost of the leased assets constitute the total unearned income at the commencement of the contract. Recognition of Actuarial Gains and Losses Actuarial gains & losses are recognized as income or expenses when the net cumulative unrecognized actuarial gains & losses at the end of the previous reporting period exceeded 10% of the higher of the defined benefit obligation and the fair value of plan assets at the date. 58 COMMERCIAL CREDIT PLC.14 Provisions Provisions are recognized when the company has a present obligation (legal or constructive) as a result of a past event. a) Income from leasing activities and hire purchase agreements Income from Finance leases is recognised on the basis of the financing method. The following specific criteria are used for the purpose of recognition of revenue.3. the increase in the provision due to the passage of time is recognized as an interest expense. Where discounting is used.16. the risks specific to the liability. which is a defined benefit plan with the advice of an independent professional actuary using the Projected Unit credit Method (PUC) as required by Sri Lanka Accounting Standards No.3. 2. b) Defined Contribution Plans – Employees’ Provident Fund & Employees’ Trust Fund Employees are eligible for Employees’ Provident Fund Contributions and Employees’ Trust Fund Contributions in line with respective Statutes and Regulations. commencing from the month in which the lease is executed. the difference between net disposals and proceeds and the carrying amounts is recognised as income or expense. Funding Arrangement The Gratuity liability is not externally funded. 2. ANNUAL REPORT 2010/2011 .3. where appropriate. 2. Employee Benefit (Revised 2006).NOTES TO THE FINANCIAL STATEMENTS Disposal of Investment On disposal of an investment. If the effect of the time value of money is material. The earned income is taken into revenue over the term of the lease. in proportion to the declining receivable balance of the lease.13 Employment Benefit Obligations a) Defined Benefit Plan – Gratuity The Company measures the present value of the promised retirement benefits for gratuity.15 Revenue Recognition Revenue is recognised to the extent that it is probable that the economic benefits will flow to the Company and the revenue and associated costs incurred or to be incurred can be reliably measured. Revenue is measured at the fair value of the consideration received or receivable net of trade discounts and sales taxes. The gains/losses are recognized over the expected average remaining working lives of the employees participating in the plan. The item stated under Retirement Benefit Liability in the Balance Sheet. The Company contributes 15% and 3% of gross emoluments of employees to Employees’ Provident Fund and Employees’ Trust Fund respectively. e) Overdue Interests Overdue interest income from leasing and other loans have been accounted for on a cash received basis. when there is insufficient assurance as to the receipt of the total consideration. 15 of 1991 (Accrued Interest) and thereafter recognised on a cash basis. d) Dividend Income Dividend income is recognised on a cash received basis. leasing. b) Interest Income from Loans and Advances Interest income from loans and advances is recognised on an accrual basis. 2. All expenditure incurred in the running of the business and in maintaining the property. lending. and discounts on purchase are amortised to income on a straight line basis over periods to maturity. 2. which is subject to risks and returns different from those of other business segments. profit element is recognized over the period of such scheme.17 Segmental Reporting A segment is a distinguishable component of the Company that is engaged either in providing related products or services (business segment). The Company comprises the following major Business segments. or in providing products and services within a particular economic environment (geographical segment). COMMERCIAL CREDIT PLC. ANNUAL REPORT 2010/2011 59 . income from loans and advances ceases when the account is overdue for more than six months in compliance with Direction No. plant & equipment and other non current assets including investments have been accounted for in the income statement. plant & equipment in a state of efficiency has been charged to income in arriving at the profit for the year. 15 of 1991 (Accrued Interest) and thereafter recognised on a cash basis. However. investments and others. However. Income from all other interest bearing investments is recognised as revenue on an accrual basis. For the purpose of segment reporting disclosures. f) Real Estate Sales Revenue is recognised when properties are sold and the buyer has taken possession of such properties. accrual of income both from leases and hire purchase agreements ceases when the account is overdue for more than six months in compliance with Direction No. the carrying amount of the assets and related selling expenses. In the case of realestate sales under easy payment schemes. However. the information is presented in respect of the Company’s business segment which is based on the Company’s management and internal reporting structure. Revenue is recognized when properties are sold and the Risk and Reward of ownership has passed to the buyer.3. having deducted from proceeds on disposal. c) Interest income from other sources Interest income from Government of Sri Lanka Treasury Bills is recognised on a time proportion basis.16 Expenditure Recognition Expenses are recognised in the income statement on the basis of a direct association between the cost incurred and the earning of specific items of income.3. income is accounted for on a cash received basis.NOTES TO THE FINANCIAL STATEMENTS Income arising from the residual interest in hire purchase agreements is credited to the profit and loss account as it accrues in proportion to the declining receivable balance of the agreement. g) Others Other income is recognised on an accrual basis Net Gains and losses of a revenue nature on the disposal of property. real estates. assets and liabilities include items directly attributable to segments as well as those that can be allocated on a reasonable basis. Standards. Presentation (SLAS 44) .4 a) Effect of Sri Lanka Accounting Standard issued but not yet effective: The following standards have been issued by the Institute of Chartered Accountants of Sri Lanka. 60 COMMERCIAL CREDIT PLC. Recognition and Measurement (SLAS 45) . The application of these financial reporting standards is substantially different to the prevailing standards.Sri Lanka Accounting Standard 45 Financial Instruments. 2. These three standards have been amended and forms a part of the new set of financial reporting standards mentioned under note (b) below.Sri Lanka Accounting Standard 39 Share Based Payments (SLAS 39) The effective date of SLAS 44. segment revenue and results is based on the accounting policies set out above. b) Following the convergence of Sri Lanka Accounting Standards with the International Financial Reporting.Sri Lanka Accounting Standard 44 Financial Instruments. 45 and 39 was changed during the year to be effective for financial periods beginning on or after 01 January 2012. the Council of the Institute of Chartered Accountants of Sri Lanka has adopted a new set of financial reporting standards that would apply for financial periods beginning on or after 01 January 2012.NOTES TO THE FINANCIAL STATEMENTS Inter-segment pricing is determined on an arms length basis. liabilities. Segment revenue results. Measurement of segment assets. ANNUAL REPORT 2010/2011 . . 990 Add : Loans granted during the year 13.384.821.803.a) Hire-Purchases (Note 6.490.967 (20.113.616. ANNUAL REPORT 2010/2011 61 .740 (9.251 4.683 62.417) 399.628.1 Term Loans include loans granted to Company Officers.993.520 9.374 5.051.966 9.000 76.827 (15.245 COMMERCIAL CREDIT PLC. PLACEMENTS WITH OTHER BANKS Fixed Deposits 110.283.572 29.976.243.226 4.728.520 51.837) 30.844.110.Face Value Less : Income allocated for future periods Re-Purchase Agreements 68.802 1. LOANS AND ADVANCES Real Estate Loans Short Term Loans Long Term Loans Personal Loans Cash Loans Consumer Credit Loans Micro Finance Loans Staff Loans (Note 5.762.951 (1.814) 3.727.300.526 25. TREASURY BILLS Government of Sri Lanka Treasury Bills .578 (5.b) 870.477 21.944.085.559.954 17.746. RENTALS RECEIVABLE ON LEASE & HIRE-PURCHASE Lease (Note 6.290) As at the end of the year 10.906) 389. 3.019) 1.343 2.241.728.852 116.504 5.072.628 19.548 1.416.706.255.098.1) Fixed Savers Deposits Loans Rescheduled Loans Pawning Stock Less : Provision for Bad debts Interest in suspense 185.251.266.727.628.356.956 3.471 578.000.922 42.374 4.005.553 178.227) 1.903.969.145 733.297.559.638 566.706.227 101.439.943 1. the movement of which is as follows : As at the beginning of the year 3.804 2.016.974.591.818. 2010 Rs.993 4.619.607 1.153.516 29.728.966 110.936 10.587) 10.224.140.NOTES TO THE FINANCIAL STATEMENTS Year ended 31 March 2011 2011 Rs.990 6.926.874.665.605 595.482 415.555.364 88.953.665.494.228.236 (2.226 124.125.568.721 5.410 (10.674 Less : Repayments during the year (6.995. 978 (352.174.431 (558.895.542 (809.216.337.294.233.356.248.020.1 Receivable not later than one year Gross rentals receivable Less: Unearned income Pre-paid rentals Interest in suspense Provision for credit losses 1.908.562.408) (52.267.111.086) (33.408) 1.548.179.178.383.249 (621.431) (8.079) (16.619.888) (1.629) (22.764) (91. 1.280) (4.290) (2.364 1.104) 1.723 62 COMMERCIAL CREDIT PLC.783) (369.628.583) (54. b Hire-Purchases Gross rentals receivable Less: Unearned income Pre-paid rentals Interest in suspense Provision for credit losses 2.578.802 2010 Rs.004) (7.819) (20.728) 870.883.549.818.448.926.497) (1.975) (57.147 (370.646.646.818 (269.946 (337.844.874.927. ANNUAL REPORT 2010/2011 .523) 514.423 909.883 Receivable later than one year and not later than five years Gross rentals receivable Less: Unearned income Pre-paid rentals Interest in suspense Provision for credit losses 2.251.885.452.360.163.638 913.607 6.850 (284.843) (13.365.629.443) 733.576) (1.751) (27.102.099. 1.432.459.713.827.067.849) 861.734.NOTES TO THE FINANCIAL STATEMENTS Year ended 31 March 2011 6.148. a Lease Gross rentals receivable Less: Unearned income Pre-paid rentals Interest in suspense Provision for credit losses 2011 Rs.071) (29.343 6.851) (206.105.194) 785.067.223.383.121.976.274) 566.690.390) (5.573) (28.085) (1. 910.616.134.470.845 271.933.453.577.) 2011 2010 67.NOTES TO THE FINANCIAL STATEMENTS Year ended 31 March 2011 7. Leases.140 2011 Rs.791.921.620 COMMERCIAL CREDIT PLC.990 2010 179.817.689 1.839) (112.670 5.430.796 415.266.417) (132.996.113.671 1.498.269.451 66.404.436.621 2.719.601) (12.470.906) (14.140.109.428 67.791.566.482.844 48.216.583) (2.974.227) (15.019 (5.110.042 3.070 132.026 90.397.146 131.151.136) (60.576.746.962.656 2010 Rs.690.584 2.2 Segmental Analysis of Loans and Advances.425.745) (20.536.814.110. 7.095 668.967 5.1 LEASE RENTALS RECEIVABLE AND STOCK OUT ON HIRE Non-Performing Advances Lease & Hire Purchase (Rs.) 2011 261.016.015.455.598 22.216. ANNUAL REPORT 2010/2011 63 .656 3.180.482.) 2011 2010 Amount Receivable Less: Interest in suspense Provision for Bad Debts Net non-performing advances 194.799 Total (Rs.074.220 Loans and Advances (Rs. 7.278 83.019) (10.717) 77.664 (9.571 1.921.810.134) 37. Hire Purchase by Industry Agriculture Services Trading Transport Others Distribution of Total Advances Gross Receivable Lease & Hire Purchase Receivables Loans & Advances Total Advances 462.430.709.196.476 114.821.824 2. 503.362) (76.380. 811.471 25.004.363 34.363 52.775. 76.074.424.095 76.690.331 (9.459 80.832) 135.435 44.858 (36.265.471.503 831. REAL ESTATE AND VEHICLE STOCKS Real Estate Stocks Less: Fall in Value of Real Estate Stock Vehicle Stock 177.423) 44.675 17.777.426.900 201.NOTES TO THE FINANCIAL STATEMENTS Year ended 31 March 2011 8.2 Provision for Bad and Doubtful Debts consist of provisioning against .838.134 66.209 51.881. INVESMENT SECURITIES Unquoted Shares 11 (a) 5. OTHER DEBTORS.435 10.900 201.507 (41.812 36.548.105.127.068 76.784 152.227 132.353. Leases and Hire Purchase Loans and Advances 112.1 PROVISION FOR LOSSES Movement in provision for Bad and Doubtful Debts Balance at the beginning of the year Charge/Appropriation during the year Written Off during the year 2011 Rs. DEPOSITS & PREPAYMENTS Sundry Debtors Deposits & Prepayments 15.034.134 9.841.102) 132.391.392.785.066 41.325.283 11.136 20.855 10.103.134 8.900 5.735.690.110. ANNUAL REPORT 2010/2011 . 2010 Rs.646 67.900 64 COMMERCIAL CREDIT PLC. 8.110.616.426.110.726 24. 900 5.000 2.686.000 7.000 5.084 - Market Value as at 2010 Rs. 1.000 23.007.600.340 264.790.950.019 Cost as at 2010 Rs.830 625 445.821.000 3.496 3.Non-voting 214 Sampath Bank PLC .786 2.702 2.145 6.578.000 55.000 9.040 524.000 860.856 770 214 341 100 218 648 2.976 7.206 2.400 2. 25.500 1.243.900 200.700 1.000 20.874.880 30.953 29.000 Vanik Incorporation PLC 218 The Finance Company PLC 648 Trading Hayleys PLC Construction & Engineering MTD Walkers PLC DIMO Engineering PLC Colombo Dockyard PLC Cost as at 2010 Rs.084 264.305 Chemicals & Pharmaceuticals Lankem Ceylon PLC Beverages.000 201.225.000 5.000 201.426. 11.000 6.420 625 108 9.036.000 Cost as at 2011 Rs.900 Number of Shares 2010 19 20.987. 144.719.NOTES TO THE FINANCIAL STATEMENTS 11(a) INVESTMENTS IN UNQUOTED SHARES Number of Shares 2011 19 209.007. Rs.000 540.000 970.291.500 442.000 1.679 292.350 11.860 2.470 2.1 DEALING SECURITIES Number of Cost Market Value Number of Shares as at as at Shares 2011 2011 2011 2010 Rs.960 75.900 5.754 (1.900 Credit Information Bureau Valible One Limited (Note: 11(b)) Finance House Consortium (Pvt) Ltd Less: Fall in Value of Investment Net Investment in Unquoted shares 11(b) Vallibel One Limited was listed in Colombo Stock Exchange on 8 July 2011. 1.000 3.246 Hotels and Travels John Keels Hotels PLC 50.939.000 Peoples’ Merchant Bank PLC 100 First Capital Holdings PLC 20.900 Directors Valuation as at 2010 Rs. Food and Tobacco Distilleries Company of Sri Lanka PLC Lion Brewery (Ceylon) PLC 5. 1.145 6.000 3.880 3.939.341 Commercial Bank PLC 15.000 2.560 5.160 1.225.000 200.900 200.690.726 108 9. ANNUAL REPORT 2010/2011 65 . 1.454.996.758 970.220 1.470 10.000 20.821.305 - 25.786 13.000 4.690.640 8.774 3.632.291 - 10.000 860. Bank Finance and Insurance Hatton National Bank PLC -Voting 770 Hatton National Bank PLC .080.000 200.646 3.291.856 COMMERCIAL CREDIT PLC.800.426.291 55.155.000 2.340.460 4.639.600 45.626.758 Net Investment Securities in quoted shares Less: Fall in Value of Investment Net Investment in Quoted shares 26.Voting 10.900 Directors Valuation as at 2011 Rs.898) 24.500 2.000 24.000 2.720 2.612. 71.396 11.734.127.2011 Rs.2 Depreciation Freehold Assets Building Furniture & Fittings Equipment Motor Vehicles & Accessories Computer Systems Air Conditioning Generators Assets on Finance Lease Equipment Motor Vehicle Computer Systems 1.719.250 7.000 40.806 4.595 65.199 1.471.875.997 27.049.120.154.926 249.821.639.654.000 Balance as at 31.283 2.181 4.181 1.380 3.209 2.643.Wimalasena (AIV) and Messrs. The results of such revaluation was incorporated in these financial statement from its effective dates which is 31 March 2011.310 5.437.350.794.892. Rs.000.964 1.802 15.277 5.791.450 44. Rs.671 1.557.097.982. 66 COMMERCIAL CREDIT PLC.685 3.461 282.936 Total Value of Depreciable Assets 199.03.000 4.973.926 170.892.795.2011 Rs.000 7.854 28.000 47.712 12.387 Increase in Revaluation Rs. 12.594 7.973 1. 43.000.000 36.328.727.450 1. Rs.847.765 1.335.695.G.225.176.260 27.380 141.810 9.146 1.913 8.249 28.307 44. Rs.734. 22.392 413.989 16.1 Gross Carrying Amounts Balance as at 01.NOTES TO THE FINANCIAL STATEMENTS 12.839.026. 7.786 441.625 1.250 2.281.565.830 10.697 48. 115.R.584.165.096.310 43.075.336.664 2. Balance as at Charge for the Balance as at 01.048.475 Cost Freehold Assets Land Building Furniture and Fittings Equipment Motor Vehicles and Accessories Computer Systems Air Conditioning Generators Disposals Rs.151 5.649.000 48.875.000.688 36.378 1.795.981 14. PROPERTY.694.137.064.049.000 7.803 4.336.012.012 30.380 3.000 25.746. Such assets were valued on an open market value for existing use basis.758.944.939 6.C.173 361.325.434 15.The surplus arising from the revaluation was transferred to a Revaluation Reserve.959 441.315.Wijesuriya (AIV) for the purpose of ascertaining the fair value of land and building.2010 Rs. R.973 2.880 4.913 13.560.218.375 38.376.560.165.892.535.898 3.681 2.482.765 7.638.746. PLANT AND EQUIPMENT 12.559 33.433.595 38.093 There aren’t any temporarily idling assets as at 31st March 2011. ANNUAL REPORT 2010/2011 .753 1.828.730 3.392 19.04.652 1.625 11.581.181 1.835.619 A revaluation was carried out by independent valuers Messrs.500.04.804.477.323.110.989 16.03.803 6.006.405 454.468 Assets on Finance Lease Equipment Motor Vehicle Computer Systems Additions/ (Transfers) Rs.406 4.2010 Period Transfers Disposals 31. 644 12.120) 9.3 Balance as at 31. The change in fair value was recognised in the Income Statement.03.000 22.637 48. 2011 Rs.207.217.814.689 17. Cash payments amounting to Rs.843 During the financial year.696.913.488.883 206. BORROWINGS Bank Loans (16.Rs.815 1.492.020. 477.31.42.103.750. the Company acquired Property.000. 9.35.764 (312.000.000 4.1) Bank Overdrafts Finance Lease (16.068. LEASEHOLD PROPERTY At 1 April Amortisation for the year (over a period 78 years) At 31 March 9. Jayawardene. by using open market value method.( 2010 .154 238. Plant and Equipment . Plant and Equipment includes fully depreciated assets having a gross carrying amount of Rs. Property.603 594.2010 Rs.NOTES TO THE FINANCIAL STATEMENTS Balance as at 01.000.047. 220.143.531.193 59. D.434. ANNUAL REPORT 2010/2011 67 . Nugegoda as at 31st March 2011 was valued by Mr.000 26.04.21.795.183/-) was paid during the year for purchases of Property .4 13.985.556 160.Rs.157.303.519.658 17.782 3.322/-) .29.035/( 2010.236 12.359.Rs. 2010 Rs. 50/2.129.819 2.421.833.958.464. a qualified professional valuer.272.000 22.688 178. 15.289 16.000 Investment property at No.722 2010 Rs.761.207. Anula Vidyalaya Road .550 8.039 14.219.596/) .741 1.3) 376.2011 Rs. 2011 Rs.698.214 12.514 81.813/.000.001.109.823 13.605) 9. INVESTMENT PROPERTY At the beginning of the year Purchase of Investment Property Net gain from fair value adjustment At the end of the year Valuation Details of Investment Property 22.887 COMMERCIAL CREDIT PLC.35.840. DEPOSITS FROM CUSTOMERS Fixed Deposits-Monthly Fixed Deposits-Maturity Savers Deposits 1.000.732.207644 (160. Plant and Equipment to the aggregate value of Rs.378.517/(2010 . Net Book Value At Cost On Finance Leases 143. 6.25 million. 85.000 7.000 59.3.353.200 1.8.000 79.437. 928.750.550 48 Months 36.000. 4573 for Rs.717 1.000 75.03.421.1.332.603.3666 for Rs.906. Yatinuwara Veediya.540.000.667 376.04.5 million.000.906.000 5.1 Bank Loans Rs. 28.Secondary Mortgage Bond Rs. Kandy & Registered Mortgage Bond2006/01 dated 05/10/2006 over lease/ hire purchase contracts for Rs.2011 Rs.392.250 million together with the underlying assets and a special power of attorney in favour of the Bank Mortgage bond No.814.650. Tertiary Mortgage Bond Rs.5 million.571.000 60 Months 3.500 78.000 1.000.664.000.125 million 13.750 1. 13.2010 Rs.75 million.HG Term Loan Commercial Bank Ceyleases Financial Services Loan SB Securitisation Loan-01 .650.16.500 - Loans Obtained Rs.100.000 60 Months Securitisation of Lease receivable with a retained margin of 40% Mortgage over lease receivables of lease contracts with a total receivable value of Rs.404.459.550 48 Months 4.800 3.000 45. Terms of the Loan Security Offered 68 150.5.800 1.0 million and leeway available on existing territory floating mortgage bond no.500 20.883 24 Months 48 Months Lease Rentals receivables Lease & HP receivables for Rs. ANNUAL REPORT 2010/2011 Capital Loan.HNB Commercial Bank Revolving Loan Term Loan Commercial Bank.950 48.500 - As at 01.550 HNB Revolving Loan HNB Securitization Loan-02 HNB Securitization Loan-03 NOTES TO THE FINANCIAL STATEMENTS COMMERCIAL CREDIT PLC. over the property situated in Main street Hingurakgoda.000.25 million and Quarternary Mortgage Bond over property situated at 106.000.562.336.0 million Primary Mortgage Bond 17.000 395.000 45 Months Primary Registered MortgageBond for Rs.283 73.470. Repayments As at 31.000 150.500 57. Rs.581 230. 13.106 30.158.1 Refer Note 29 for the Gross Liability and Finance Charges Allocated for the future periods on maturity basis.251. 9.400) 13.162 (839. recommended by SLAS No.458.129.460 5. OTHER LIABILITIES Accrued Interest Accrued Expenses and Other Payables Deferred Revenue on Real Estate sales Advances received against Real Estate Stocks 19.274. 6.236) 7.761. 28.4 17.000 (1.210.024 (3.924.216. CASH AND CASH EQUIVALENTS IN THE CASH FLOW STATEMENT Components of Cash and Cash Equivalents Favourable Cash & Cash Equivalents balance Cash & Bank Balances Re-Purchase Agreements ( less than 3 months) 2011 Rs.2010 Rs.650 17.434. 12. 29. 51.1) Payments made during the year Balance at the end of the year 2011 Rs.889.983.000/.296 219.319. a firm of professional actuaries.412 An actuarial valuation of the gratuity was carried out as at 31 March 2011 by Piyal S Goonetilleke and Associates.244 2011 Rs.as at 31st March 2011.480 10.823) 73.210.Gratuity Balance at the beginning of the year Amount Charged/(Reversed) for the year (19. The present value of defined benefit obligation as at 31st March 2011 is Rs.371 As at 31.2011 Rs.510) 13.687. 203. 5.842.440.167.3 Finance Leases Finance Leases 16. 120.852 81.000.958 (8.639.439.073.012 37.04.842.005.708.371 6.761.682 8.460 Repayments Rs.708.129.000 213.454.000.2 Unfavourable Cash & Cash Equivalents balance Bank Overdrafts Total Cash and Cash Equivalents for the Purpose of Cash Flow Statements (206.650 4.363.219.761.247 38.927) 12. 68.929.514 New Leases Obtained Rs.( 2010 .395 2010 Rs.972.603 14. 14.603 12.417 142.135 2010 Rs. 9.129.514 13.530 (2.263.889.603 16. 17.710.659/- COMMERCIAL CREDIT PLC.500) 9.2 The Company has unutilized borrowing facilities of Rs.150 2.884) As at 01.260 18.557.489.420 426.16.03. The valuation method used by the actuary to value the Fund is the “Projected Unit Credit Method”.NOTES TO THE FINANCIAL STATEMENTS 16.480 2010 Rs. ANNUAL REPORT 2010/2011 69 .514 Gross Liability Finance Charges allocated for future periods Net Liability 17.937. RETIREMENT BENEFIT LIABILITY Retirement Benefit Obligations .869. 074.718.877 73.272 Total Rs.538.318.115) 60.153. or age on valuation date. 1 of 2003. 21.2 Actuarial assumptions 2011 Discount Rate Salary scale Staff Turnover 20 years 25 years 30 years 35 years 40 years 45 years 50 years Mortality Retirement age 12 % 11 % 10 % 10 % 10 % 10 % 5% 3% 1% 2010 12 % 11 % 10 % 10 % 10 % 7.5 % 1% GA 1983 Mortality Table Normal retirement Age.094.000) (9.877) (8.1 Expenses on Defined Benefit Plan Current Service Cost for the year Interest cost for the year Actuarial Loss/Gain Recognised during the Year 2011 Rs.387 79.851.094. All shares rank equally with regard to the Company’s residual assets.097 Rs.162 2010 Rs.439.000 19.645 60.375 20.443.539 128.946.386.637 8. with the sanction of the shareholders at an Extraordinary General Meeting held on 24th March 2011 subdivided its 14. 19. ANNUAL REPORT 2010/2011 .498 2.018. (30.018. RESERVES Reserve Fund Rs.294.032 At the beginning of the year Profit for the year 1. 20. if greater .291 Ordinary Shares in issue on the basis of 15 Ordinary Shares for every 01 ordinary Share held and thereby the number of shares in issue increased to 218.200. 73.109 1. Retained Profits Rs.440.520) (1.000 9.000 12. 2.074.2 Rights of Shareholders The holders of ordinary shares confer their right to receive dividends as declared from time to time and are entitled to one vote per share at the meeting.393 663.365 170.5 % 5% 2. STATED CAPITAL 20.839 4. 50.760 Transfers to/(from) during the year For 2008/09 2009/10 For 2009/10 For 2010/11 Transfers to/(from) during the year At the end of the year Investment Fund Reserve Rs. 623.125) 79. 70 COMMERCIAL CREDIT PLC.318.294.760 50.365.500.387 29.792. 2011 Number Rs.651.315 2010 Number 4.000) (12.032 Reserve Fund is a capital reserve which contains profits transferred as required by Section 3(b)(ii) of Central Bank Direction No.640.1 Fully paid ordinary shares 20.3 Share Split The Company.520 (1.784 1.946.517.846.NOTES TO THE FINANCIAL STATEMENTS 19.318.500.200.520 8. 218.013. 112. 2002 ) would be entitled to a notional tax credit ( being one nineth of the net interest income ) provided such interest income forms part of the statutory income of the Company for that year of assessment.101.017 7.466.162 14.649. 131.117.640 1.398 4.Rs.240 22.723.10 of 2007.519.157 410.287. 24.094 425.328.101.978.090 46.109.462 4. Accordingly the net interest income earned from the secondary market transactions in Government Securities for the year.185.1.738 59.013 12.315 20.994 COMMERCIAL CREDIT PLC.093 71.417 Notional Tax Credit for withholding Tax on Government Securities on Secondary market Transactions The Inland Revenue Act No.828.NOTES TO THE FINANCIAL STATEMENTS The Investment Fund Reserve is created in accordance with the Central Bank guidelines issued to create an Investment Fund Reserve 8% of the profits liable for VAT on Financial Services is transferred to this reserve monthly when the payment of VAT on Financial Services for such month becomes due.074 1.597.2) 1.Term Interest on Savers Deposits Interest on Loans Interest on Bank Overdrafts Interest on Finance Leases 2011 Rs.844.2 Segmental Analysis of Gross Income Interest Real Estate Fees & Commision Income Others INCOME Interest on Leases Interest on Loans Interest on Hire Purchase Interest on Land Finance Interest on Treasury Bills Interest on Bank Deposits 1.Maturity Interest on Fixed Deposits.776 2.273 425. provided that a company which derives interest income from the secondary market transactions in Government Securities ( on or after April 1.835.964. 22.150.768.767 1.136.094 227.866.391.417 22. 425.961.667.425.027 4.240 1.899 2.079.094 377.712/-).240 23.891 354.905.441 2010 Rs.854 377. has been grossed up in the Financial Statement & the resulting notional Tax credit amounts to Rs.1 2010 Rs.496 13.932 124. 22. INCOME 2011 Rs.141.985 1. 271.391.093 2.466. ANNUAL REPORT 2010/2011 71 .219.942 20.1.176 53.836.700.391.014 85.477.258.883.753. INTEREST EXPENSES Interest on Fixed Deposits.198.1 Summary Gross Income(22.810/.466. 255.093 23.258.433 13.707 451.597.(2010 .127 582.424 14.888 206.258.996.112.979.923. 667 611.366.697 174.946.556 33. 25.154.451.409 26.488.651.610.349 1. 8.074 (40.585 Deferred Income Tax Deferred Taxation Charge (27.1) 55.276.942.997.513) 27.167 956.655 73.150 (84.784 1.475 (57.167.320.000 25.000 1.788.632.403 (84.055 855.062 1.047) 202. PROFIT FROM OPERATION STATED AFTER CHARGING THE FOLLOWING EXPENSES Depreciation Defined Contribution Plan Costs .132.586 955.166.752.249 11.295 Income Tax Expense at the statutory income tax rate of 35% Non deductable expenses Tax Effect of Other Allowable Credits Profit on Leasing Business Claim of Tax Loss Income Tax @ 35% Social Security Levy at 1.283.402.519.448 37.331 8.917 72 COMMERCIAL CREDIT PLC.877 3.176 6.099 820.220 11.271.319.486 55.585 (25.519.614.175.702 20.5% of Tax ( 2010 .671 20.404) 33.512.2) 128.459) 156. ANNUAL REPORT 2010/2011 .927 27.646.403.735 12.5% ) Income Tax Expense at the effective income tax rate of 36% ( 2010.751 7.123.288.134.041.699.NOTES TO THE FINANCIAL STATEMENTS 2011 Rs.486) 3.910. OTHER OPERATING INCOME Income from Investments .quoted Profit on Sale of Property Plant and Equipment Other Income on Real Estate Service Charges Documentation Charges Commission Income Recoveries of Bad Debts on write offs Sundry Income Profit on Repossessed Items Rent Income 345.908 13.590.323 Income tax expense reported in the Income Statement 184.092 3.200.803.139 54.975 5.363.152.747 2.410) 69.1 A reconciliation between tax expense and the product of accounting profit multiplied by the statutory tax rate is as follows : Accounting Profit before Income Tax 244.695 15.114.178 87.36% ) 330.EPF & ETF included in Staff Costs 2010 Rs.1.400. PROVISION FOR INCOME TAX The major components of income tax expense for the years ended 31 March are as follows : Income Statement Current Income Tax Current Income Tax charge(27.916) (71.200 (372. 84.42 28.614.445.035 14.094. 45. ANNUAL REPORT 2010/2011 73 .030.846.2 2010 Rs.197.492 70.103 2010 Number 4.658 (8. 70. (50.830.039 70.669) 75.917) 28.387 2011 Number 13.250.461.696.027.334 128.675 14.556365 1.870 Income Statement 2011 Rs.2 Deferred Tax Assets .803.323 2010 Rs.203 14.254.623 1.626 4. Liabilities and Income Tax relates to the followings Balance Sheet 2011 Rs.987052 52.989 1.33 COMMERCIAL CREDIT PLC.500 18.752.369.039 199. 28.878 (84.917 49.334.055.197.097 9.777. 2011 Amounts Used as the Numerators: Rs.535 Deferred tax Expense Net Deferred Tax Liability/(Asset) 9.1 EARNING PER SHARE Basic Earnings Per Share is calculated by dividing the net profit for the period attributable to ordinary shareholders by the weighted average number of ordinary shares outstanding during the year.948. The following reflects the Income & Share data used in the Basic Earnings Per Share computation .259.003. Net Profit Attributable to Ordinary Shareholders for Basic Earnings Per Share Number of Ordinary Shares Used as Denominators for Basic Earnings per share Weighted Average number of Ordinary Shares in issue Applicable to Basic Earnings Per Share 60.190.634 Deferred Tax Assets Defined Benefit Plans Tax Loss Effect of rate change 3.378 67.366) (50.451.366) 3.614.099 (121.595.236) 2010 Rs.402. Deferred Tax Liability Capital allowances for tax purposes Revaluation of Buildings Effect of rate change 25.NOTES TO THE FINANCIAL STATEMENTS 27.011 27.453. 188 2.766.841. Deposits and Prepayments Investment Portfolio Dealing Securities Tax Receivable Property. Plant & Equipment Leasehold Property Investment Property Deferred Tax Asset As at 31.060 5.706.435 36.74 203.740.2011 Liabilities Deposits from Customers Borrowings Finance Leases (Note:29.681 364.916 152.03.879.833. ANNUAL REPORT 2010/2011 Assets Cash and Bank Treasury Bills Deposits with Banks Loans and Advances Lease Rental Receivable and Stock out on Hire Real Estate & Vehicle Stock Other Debtors.102.459 67.250.640.166. Rs.103.865 1.845 9.300.392 47.537.868 13.900 238. Rs.364 110.412 9. Rs.228.542.966.966 1.478 34.009 1.373 13.897 31.096.000.269.603 426.426.841.671.777.138 72.000.129.412 9.817 289.514.236 2.146 11.655 1.761.717.195 5.207.353.426.445.782.843.303.436 1.546 24.409 168.133.350.2011 .003.251 9.838.564 2.236 327.382.918.782.700.260 33.928 108.119 12.041.283 201.214 9.969.332.000 121.162.488.047.531.559.939.492.937.125 29.1) Other liabilities Tax Payable Retirement Benefit Liability Differed Tax Liability As at 31.084 7.490.610 2.762.099 4.670 87.073.216 4.000.308.644 22.014.854 5. NOTES TO THE FINANCIAL STATEMENTS COMMERCIAL CREDIT PLC.641.685 1.721 2.968 1.504 1.043.289 582.211 1.003. Rs.338.072 230.594.000 51.708.304 1.193 68.917.047.214 504.939.900 55.797 656.039 26.620.489. MATURITY ANALYSIS An analysis of the total assets employed and total liabilities at the year end .185.03.644.520 389. Less than 3 3-12 1-3 over 3 Total Total months months years years 2011 2010 Rs.531.270.143.413 33.047.858 1.245 44.115.000 203.579 309.767 857.900 24. Rs.418.395 9.899 6.670 110.443 160.178.924.650 2.251.071.428 28.958.569.732.011 485.722.840.921.039 26.821.243 275.856 1.145 152.459 32.890 54.856.097.913.133.610 13.480 29.514 219.480 76.642.856 238.034.106 116.708.555.473.889.281 499.016.853.099 172.845 9.530. based on the remaining at the balance sheet date to the respective contractual maturity dates are given below.489.975.628 3.944. Carrying Amount Pledged Nature of Liability Lease Receivables & Stock out on hire Loans Carrying Amount Pledged 2011 2010 Rs.022 Included Under Lease Rentals Receiv ables & Stock out on hire Property.NOTES TO THE FINANCIAL STATEMENTS 29.054.1 Finance Leases Less than 3 months Rs.264 11.866 614.782.603 30. Plant and Equipment & Vehicle Stocks incidental to the ordinary course of business are .027 11. Rs.573) 4.459.258. ANNUAL REPORT 2010/2011 75 . 30.459.198. 5.022 258.787 (1.309) 6. Contracted but not provided for 11.044) 1. ASSETS PLEDGED The following assets have been pledged as security for liabilities.113 COMMERCIAL CREDIT PLC. Rs.151.557.687.463 (1.955.091 370.890 1-3 years Rs. 2011 2010 Rs. 14.478 Total Rs.940.829.940.264 31.955. Plant and Equipment Freehold Land & Building Loans & Overdrafts 111.769.250.280 (456.129.027 11. 30. 7.530 (2. Finance Leases-Gross Liability Less: Finace Charges allocated for Future Periods 1.1 COMMITMENTS AND CONTINGENCIES Contingent Liabilities There are no contingent liabilities as at the balance sheet date.047.096.927) 12. 502.888 111.706.236 3-12 months Rs.2 Commitments The Company has purchase commitments for acquisition of Property.829. Plant and Equipment .543.117. Rs.154.707 Fee Based Income & others 13.214.891) 151.854 516.918. Rs.334.646.857 1.712.012. Rs.513 45.976.041.627 1.542 3.044 482.590.770 (212.697 7.723.723 217.681.331.447.375 14.690.538 4. Rs.311.208.094.090 92.104. Rs.139.828.314 1. Rs.824.048.489.877 VAT on Financial Institutions Profits from Operations Income Tax Expenses NOTES TO THE FINANCIAL STATEMENTS Net profit for the period Segment Asset 870.000 101.844.049.178.929 2.240 281.133 63.183 12.171 516.296.029 86.039 311.752 25.012.371.389.154.367 295.980 5.514 514. Rs.225.132.959. Finance Lease 2011 Rs.135.998.448.358 281.464.466.701.976.054.528 2.905.359 20.519.978 1.697 21.929 561.391.480.710.538 362.413 4.182 1.641 Unallocated Revenue Total Revenue 285.996.628 561.839.516.32.628 683.978 5.539.387 9. ANNUAL REPORT 2010/2011 Unallocated Assets Segment Liabilities 800.208. Rs.891 85.454 200.847 1. 2010 2011 2010 2011 2010 2011 2010 2011 2010 2011 2010 2011 2010 Hire Purchase Term Loan Real Estate Short Term Investment Unallocated Total FINANCIAL REPORTING BY SEGMENT 76 227.495.939 362.781.110 12.755 10.375 (14.015 12.737.231 176.671 7.008.464.495.258.860.042.910 8.183 Interest 271.510.337.777.470.910.271.209 505.590. Rs.113 10.103 757.468 Unallocated Liabilities Total Liabilities Others Depreciation and Amortization Addition to Property.714 1.093 (18.755 425.639.190.619.497.896.144.467.847.431 354.482.171 2.027 2.281.410) 71.561) (25.000 409.167 13.366.348 Segmental Result 14.401.899 451.561 997.433 88.063.350.772.012.802 COMMERCIAL CREDIT PLC.680.155 6.755 4.208.144. Rs.000 5.392 1.164.671 43.295 (184.698 409.713 240.629 48.225.849) (7.832 400.758.217.788.980 1.191.978 5.609.728) 244.831.940.453 15.331.023 (37.869.908) 60.074 14.627. Rs.485 113.343.270.184.482.458.331 43.343 569.357 95.552.728 (5.779 28.755 10.896.757.899) 22. Rs.331 21.553.942.324 321. Rs.087 126.740.315 46.363) 83.145 31.616.497.078 714.620 364.907 467.308. 371 125.677 3.000 Short Term Employment Benefits Paid Post Employment Benefits 34.106 86.1. Rs.438. 6.924.865 1.1 COMPARATIVE INFORMATION The presentation and classification of the following items in the financial statements are amended to ensure the comparability with the current year.747 COMMERCIAL CREDIT PLC. 8.106 (b) Treasury Bills Placements with other banks 116.251.317.1 Compensation to Key Managerial Personnel 2011 Rs.000 4. 23.409 (13.977.866 21.688 592.747 Rs.555.2 Other transactions with Key Managerial Personnel Fixed Deposits Accepted during the year Fixed Deposits held at the end of the year Interest paid on Fixed Deposits 35. 34.520 125.469 2.720.728. EVENTS OCCURRING AFTER THE BALANCE SHEET DATE There have been no material events occurring after the Balance Sheet date that require adjustments to or disclosure in the Financial Statements other than the company was registered in the Colombo Stock Exchange on 01 June 2011.317. Following transactions are entered between the company and its Key Management Personnel and their close family members.245 1.968.771 915. 8. 34.637 51. ANNUAL REPORT 2010/2011 77 .1.346.000 11.140.342.000 2010 Rs.642.090.NOTES TO THE FINANCIAL STATEMENTS 33.485.690.771 (c) Loans and Advances Supplier Payable Rental Receivables Lease rentals receivable and Stock out on hire Repossessed inventory 389.690.400 39.706.432.000 2.106 51.712. As Reported Previously 49.081) 173.945.300.078.251 9.848 1.632.762.957.850 2011 Rs.502 1.245.924.957. 34. Current Presentation (a) Cash and Bank Balances Bank Transfer 51.000 9.670.1 RELATED PARTY DISCLOSURES Transactions with Key Managerial persons The Key Managerial personnel of the Company are the members of its Board of Directors and Corporate Management. 35.453 2010 Rs.156.924. 695.688) (15.258.774.921 2.402.761.179 (7.660.353.353.192.270 169.044) (15.283 160.418 55.395 377.044) (173.887 (g) Other liabilities Supplier payable Land sales Income Receivables VAT receivables Income tax Receivable (h) Interest income Default Interest LE & LP Other income Default Interest LE & LP (i) Premises.774.826 3.346.644 169. As Reported Previously 229.858 59.417 377.258.192. Current Presentation (d) Other Debtors.078.762 758.120 78 COMMERCIAL CREDIT PLC.646.517.215) 219.023.417 25.454.207.283 36.795.120 Rs. Deposits and Prepayments Bank Transfer Land sales Income Receivables Rental Receivables VAT receivables (e) Property.402.921 87.656) 36.495.101.864.488.023.441.395 219. Plant and Equipment Intangible assets Leasehold Property (f) Borrowings Lease creditors Bank overdraft 36.353.735 25.887 81.227) 25.550 13.101.735 63.219.081) (1.485.303 30. ANNUAL REPORT 2010/2011 .395 346.864.921 2.795.308 (2.561) 87. equipment & establishment expenses Other overhead expenses General & Administration Expenses Value Added Tax on Financial Services 219.858 81.214 9.735 87.887 249.962 (30.514 8.164.814.283 165.637) (1.101.227 377.073.795.NOTES TO THE FINANCIAL STATEMENTS Rs.646.402.695.843.823 81.656) (399.191 30.152.023.073.391 (13.734.073. is separately disclosed in the income statement. Input VAT is recorded under the Other Receivables in previous year accounts. Supplier Payable Balances which is deducted from lease receivables in previous year accounts. Lease and loans rental receivable were recorded under the Other Receivables in previous year accounts. (d) (e) (f) (g) (h) (i) COMMERCIAL CREDIT PLC. was reclassified under the other payable by netting off with the VAT payable in current year for a better presentation of these Financial Statements. was reclassified under the Other payables in current year for a better presentation of these Financial Statements.which was recognised as an other income in previous year accounts. Computer software which is recorded under Intangible assets in previous year accounts. was aggregated under the Borrowings in current year for a better presentation of these Financial Statements. was reclassified under Cash and bank during the current year for a better presentation of these Financial Statements Rs. was aggregated under the General & Administration Expenses in current year for a better presentation of these Financial Statements.Also the VAT on financial services. was reclassified under Treasury bills during the current year for a better presentation of these Financial Statements. Finance leases and Bank overdrafts which were recorded separately in previous year accounts. Default interest for LE & LP.2 Reason for changes in the presentation and classification: (a) (b) (c) Cash in transits were recorded under the other receivables in previous year accounts. Premises. 30 million Repos were recorded under the placements with other banks in previous year accounts.which was presented separately in the income statement in previous year accounts. equipment & establishment expenses. was reclassified under the Property Plant and Equipment in current year for a better presentation of these Financial Statements. was reclassified under the Lease Receivables & loans & Advances respectively in current year for a better presentation of these Financial Statements. was reclassified under the Interest Income in current year for a better presentation of these Financial Statements.NOTES TO THE FINANCIAL STATEMENTS 35. Borrowings. ANNUAL REPORT 2010/2011 79 . 642 203.391 1.592 9.466 377.270.603 143.148 7.844.718 74.342 451.229 238.101 206.022 17.386 432.996 1.190 1.868 8.492 594.295 58.508 67.972 73.094 2008 (Rs.489 4.163 3.812 3.924 1.070 712.014 58.179 182.331 81.925 4.840.901 881.627 854.266 187. ‘000) 2009 (Rs.972 170.126 212. ‘000) 2010 (Rs.319 1.FIVE YEAR SUMMARY Five Year Summary 2007 (Rs.701 237.137 12.844.958 81.531 5.043 26.300.350.751 12.600 164.272 60.944.461 314.074.488 2.295 58.666 143.985 282.048 4.986 13.796 9.718 74.751 6.372 244.972 58.132 45. ANNUAL REPORT 2010/2011 .203 79.942 71.300 36.918 1.578 548. ‘000) 80 COMMERCIAL CREDIT PLC.162 109.751 -33.543 -25.555 389.603 50.200 32.145 39.114 107.813 51.196.800 73.849 144.972 73.112.308 249.109 566.280 8.597 410.762 5. ‘000) 2011 (Rs.762 160.751 30.821 1.320 224.341 45.603 50.098 425.361 269.295 40.689 151.251 4.388.365 569.142 -1.490.844.603 50.708 2.883 255.919 66.532 247.890 3.218 241.443 226. ‘000) For the year ended 31st March OPERATING RESULTS Revenue Interest Income Interest Expense Operating Expenses & Provision Profit/(Loss) before Taxation Taxation Profit/(Loss) after Taxation As at 31st March ASSETS Cash & Bank Balances Lease Rentals Receivables and Stock Out on Hire Loans & Advances Property Plant and Equipment Total Assets EQUITY & LIABILITIES LIABILITIES Deposits from Customers Long Term Borrowings Retiring Gratuity Obligations SHAREHOLDERS’ FUND Stated Capital Revaluation Reserve Statutory Reserve General Reserves Retained Earnings Total Shareholder’s Fund No of Shares 41.844.295 58.366 184.718 74.137 218.098 4.751 -1.640 122.478 29.586 72.732.378 7.258.334 350. 980 15.980 1.000 292.15% 1. COMMERCIAL CREDIT PLC. ANNUAL REPORT 2010/2011 81 . Premakumar Shanthilal Maryson Fernando Mrs. Thusitha Kumara Hemachandra Mr.148.800 19.19% 0.22% 0.530 4. George Ginendra Hemachandra Ms.46% 0.490 879.12% 8.427.230 159.000 300.550 1.885 814.494.13% 95. Deegala Nilanthi Keerthisinghe Pedrisons Limited Mr. Isuru Finance Company Limited Mr.01% 15.116.419.41% 1.INVESTOR INFORMATION Investor Information 1.124.57% 1.40% 0.577 76.320 471. STOCK EXCHANGE LISTING The Stock exchange ticker symbol for Commercial Credit PLC is “ COCR”. G.15% 0.297 47.97% 0.738 11. Mr. Panduka Bimal Fernando Mr.37% 0.455 724.966 58.09% 1.495 21.52% 0.74% % 50.074.380 19.534 732.19% 2.54% 0.99% 0.810 337.15% 0.55% 3.51% 1.075 417.18% 0.000 1.40% 91.425 327.40% 0.485 1. Susila Semage Mr.423. Amal Indrajith Fernando TOTAL ISSUED SHARE CAPITAL 31st March 2011 Number of Shares 168. Vagdevi Wimalangi Fernando Mr.099 95.168 75.29% 2. Investments (Pvt) Ltd Mrs. Gampolage Shiran De Fonseka/JAYASURIYA Mr.424.222 % 77.65% 0.53% 0.388.45% 0. Nirmala Samudra Hemachandra Mr.000 24.254 22. Eresha Fernando Ms.11% 3. Karandeniya Hewage Ukkantha Garvin Fernando Mr.846.250 101.50% 0. TOP TWENTY SHAREHOLDERS Ordinary Voting Shares Name 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 M/S B.365 compared to 4.097 as at March 31.750 2.53% 0.14% 0.24% 0.55% 1.659 24.103.96% 0. Deegala Jayantha Keerthisinghe Dr.10% 0. (Listed on 1st June 2011) 3.425. SHAREHOLDER BASE The Total number of (Ordinary Voting) shares as at March 31.162.060 393.09% 7. Sri Deva Kumara Semage Mr.268 26.33% 0.19% 0. Batapola Arachchige Lal Athula Indrasena M/S. Munugoda Hewage Gunawardena Mr.58% 1.774.260 31st March 2010 Number of Shares 2. Mahendra Nalaka Kariyawasam.570 74. 2011 were 218.456 9. 2010.520 3.260 2.950 208.951 395.265 7.21% 0. 520 % of Holding 7.097 4.000 1.000 5.535 7.540 218.77% 8.103.50.06% 0.55% 1. DISTRIBUTION OF SHAREHOLDERS Ordinary Voting .418.000.097 2.265 7. 2010 No. of % of Share Shares holdings 0 123.074. of Shares 732.001 . of Shares 0 123.975 204.09% 9 35.059 2.64% 78.280 2.846.282.000 1.365 % of Share holdings 100% 100% 21.751.660 % of Share holdings 0.245 2. Vagdevi Wimalangi Fernando Mr. George Ginendra Hemachandra No.000 50.001 .477.074.494.000.418. ANNUAL REPORT 2010/2011 . of % of Share Holders Shares holdings No.187.103.001 .11% 3.751.280 2.660 0. of Shares 15. of Shareholders 212 212 209 3 212 No.38% 77.09% 0. of Holders 0 48 28 57 34 34 3 No.59% 1.168 2010 % of Holding 15.100.06% 0.10.00% No.000.390 1.84% 100% 2011 DIRECTORS’ SHAREHOLDING Mrs.609.535 7.712.300 1 168.886.000 100.00% 0.000 10.097 % of Share holdings 100% 100% 46.5. of No.1.500.50.365 100.975 204.55% 1.365 218.Shareholding as at 31st March 2011 Resident Range of Shareholders 1 .75.365 47.000 75.11% 16.001 & above Total 1 168.38% Non-Resident No.09% 100.825 170.00% 0.951 395.000.000.846.59% 1.300 9 35.980 214 218.001 . of No.846.001 .001 .00% 214 218.074.237.038 4.390 1.50% 82 COMMERCIAL CREDIT PLC.41% No.712. of Shares 4.001 . of Shareholders Shares 214 214 211 3 214 218.074.14% 3.11% 16.000 50.245 2.000. of Holders 0 48 28 57 34 34 3 Total No.09% 0.1.36% 100% March 31.INVESTOR INFORMATION 4.477.16% 53.980 5.365 77.14% 3.282. COMPOSITION OF SHAREHOLDERS March 31.074.000 500.001 . 2011 Ordinary Voting Shares Resident Non-Resident Total Individual Institution Total No.427. Kurunegala Negombo No. High Level Road. 150.Colombo No. Opposite Bank of Ceylon. Kandy Road.113A. Maithripala Senanayake Mawatha. 223. Anuradhapura Rathnapura No. Galle Moratuwa No. Hingurakgoda. 50. High Level . Colombo 07 Hingurakgoda No. Lower Street. Yatinuwara Veediya. Anuradhapura Road. Embilipitiya COMMERCIAL CREDIT PLC. Main Street. 64/141 C. Galnewa Galenbindunuwewa No. 1st Floor. 24. Dharmapala Mawatha. Mahiyanganaya Thambuththegama No. 14. 10. Moratuwa Badulla NO. Nugegoda Gampaha No.COMMERCIAL CREDIT NETWORK Commercial Credit Network Head Office 1 2 3 4 5 6 7 3 18 20 17 15 16 2 Kandy No. ANNUAL REPORT 2010/2011 83 . Mangala Road. Maharagama Nuwara Eliya No. Anuradhapura No. Hayesha Building. New Galle Road. 01. 53. Galenbindunuwewa Mahiyanganaya No. Dehiattakandiya Galnewa No. Bandaranayaka Mawatha. 231. Greens Road. 115. Thambuththegama Embilipitiya No. Hospital Road. Sippikulama Road. Badulla Nugegoda No. Nuwara Eliya Avissawella No. 6. 272. Opposite Public Fare. Kandy 8 9 10 11 12 10 11 1 9 4 14 13 19 13 14 7 8 6 12 15 16 21 17 5 18 19 20 21 City Office . Avissawella Dambulla No. Rajapihilla Road. Jaya Mawatha.262. 45. 03. Negombo Maharagama No. 738. Ground Floor. Dambulla Dehiattakandiya Commercial No. 106. Ratnapura Galle No. New Town. Medirigiriya Road. Gampaha Kurunegala No. Dickson Road. 131. 53. 126 B. G S S Doole Badulla 84 COMMERCIAL CREDIT PLC.COMMERCIAL CREDIT NETWORK H T K Narampanawa Hingurakgoda A N Gunasinghe Galenbindunuwewa H M S Kumara Mahiyanganaya M U S Perera Galnewa Lakmal Weerabahu Anuradhapura P K S S Wilmot Nuwara Eliya H P S Panditharathna Gampaha B H I Niroshan Moratuwa D M P G Dayaratne Dehiattakandiya M P T Dhanapala Ratnapura A K M A Artigala Avissawella J P A S Jayaweera Negombo W A N Weerasinghe Dambulla P K W Rathnayake Embilipitiya D K K Denewaka Nugegoda H L K Karunaratne Kurunegala K H P K Dissanayake Thambuttegama G R Abhayakumara Maharagama Mrs. R B Rambukwella Galle Mrs. ANNUAL REPORT 2010/2011 . Director. 2011 NOTE: 1. 17th November. who retires by rotation in terms of Article 24 (6) of the Articles of Association of the Company. A proxy need not be a member of the company 3. To approve donations To appoint the Auditors Messrs Ernst & Young. By order of the board. 07 of 2007 (the Act). Director. Mrs V W Fernando who is 73 years of age on 5th April. JACEY & COMPANY SECRETARIES Colombo. 4. Chartered Accountants. (iii) To elect Mr Roshan Sanjaya Egodage. 2011. 2011. who retires in terms of Article 24 (2) of the Articles of Association of the Company (vi) To elect Mihindukulasuriya Susantha Devapriya Pinto. Director. (i) To re-appoint as a Director. Kandy on 15th December 2011 at 10am for the following purposes : 1. Kandy not less than 48 hours before the time fixed for the meeting. Yatinuwara Veediya. in accordance with the Finance Comapnies Corporate Governance Direction No. Yatinuwara Veediya. who retires in terms of Article 24 (2) of the Articles of Association of the Company (v) To elect Mr Kalugamage John Cecil Perera. 7 of 2007 shall not apply to Mrs Vagdevi Wimalagi Fernando who is and hereby re-appointed as a Director of the company until 31st December 2011. A member entitled to attend and vote at the meeting is entitled to appoint a proxy to attend and vote in his/her stead. 2.” (ii) To re-elect George Ginendra Hemachandra. Notice is hereby given to propose the undernoted Ordinary Resolution in compliance with Section 211 of the Act. The completed form of proxy must be deposited at the registered office of the company at no. in accordance with the Finance Comapnies Corporate Governance Direction No.NOTICE OF MEETING Notice of Meeting NOTICE is hereby given that the Twenty Eighth Annual General Meeting of Commercial Credit PLC will be held at No. who retires in terms of Article 24 (2) of the Articles of Association of the Company (iv) To elect Mr Thirunavukarasu Someswaran.106. Director. COMMERCIAL CREDIT PLC. 3 of 2008. and who vacates her office in terms of Section 210 of the Companies Act No. 2.106. Director. 2011 together with the Reports of the Directors’ and Auditors’ thereon. in relation to her re-appointment. who retires in terms of Article 24 (2) of the Articles of Association of the Company 3. until 31st December. to hold office until the conclusion of the next Annual General Meeting and to authorize the Directors to determine their remuneration. “RESOLVED THAT the age limit of 70 years referred to in Section 210 of the Companies Act No. ANNUAL REPORT 2010/2011 85 . 3 of 2008. To receive and consider the Audited Financial Statements for the Year Ended 31st March. ANNUAL REPORT 2010 .86 COMMERCIAL CREDIT PLC. ________________________________ Signature of Shareholder Notes: 1. 3. 2011 and the Reports of the Auditors’ and of the Directors’ thereon Directors (i) To pass the Ordinary Resolution numbered 2 (i) set out in the Notice of Meeting (ii) To re-elect Mr G G Hemachandra who retires by rotation in Terms of Articles 24(6) of the Articles of Association of the Company Against (iii) To elect Mr R S Egodage who retires in terms of Articles 24(2) of the Articles of Association of the Company (iv) To elect Mr T Someswaran who retires in terms of Articles 24(2) of the Articles of Association of the Company (v) To elect Mr K J C Perera who retires in terms of Articles 24(2) of the Articles of Association of the Company. 2.Form of Proxy I/We the undersigned ___________________________________________________________________________________________ ______________________________________________________________________________________________________________ of ___________________________________________________________________________________________________________ being a member/members of Commercial Credit PLC do hereby appoint ________________________________________________ ______________________________________________________ of _____________________________________________________ whom failing MRS V W FERNANDO whom failing MR G G HEMACHANDRA whom failing MR R S EGODAGE whom failing MR H S K GUNARATNE whom failing MRS G R EGODAGE whom failing MR T SOMESWARAN whom failing MR C PERERA whom failing MR M S D PINTO as my/our Proxy to represent me/us and *____________________ to vote on my/our behalf at the TWENTY EIGHTH ANNUAL GENERAL MEETING of the Company to be held on _____________________. and at every poll which may be taken in consequence thereof. Chartered Accountants. (vi) To elect Mr M S D Pinto who retires in terms of Articles 24(2) of the Articles of Association of the Company. As witness my/our hand this ____________ day of ____________ Two Thousand and Eleven. 2. to hold office until the conclusion of the next Annual General Meeting and to authorize the Directors to determine their remuneration. 2011 (Please Complete) and at any adjournment thereof. To authorise the Directors to determine and make donations (PLEASE CONFIRM) 4. I /We the undersigned hereby authorise my/our proxy to vote on my/our behalf in accordance with the preference indicated below: For 1. . A Proxy holder need not be a member of the Company Instructions as to completion appear on the reverse hereof 3. To receive and consider the Audited Financial Statements for the year ended 31st March. Please indicate with an “x” in the space provided how your Proxy is to vote. the Proxy holder shall vote as he thinks fit. To appoint the Auditors Messrs Ernst & Young. If there is in the view of the Proxyholder doubt (by reason of the way in which the instructions contained in the Proxy have been completed) as to the way in which the Proxyholder should vote. 4. If you wish your Proxy to speak at the Meeting you should insert the words “to speak and” in the place indicated with an asterisk and initial such insertion. the relevant Power of Attorney or a notarially certified copy thereof. The full name and address of the Proxyholder and of the Shareholder appointing the Proxyholder should be entered legibly in the Form of Proxy. . The instrument appointing a Proxy shall in the case of an individual be signed by the appointor or by his Attorney and in the case of a Company/Corporation. the Proxy Form must be executed under its Common Seal. should also accompany the completed Form of Proxy if it has not already been registered with the Company. To be valid this Form of Proxy must be deposited at the Registered Office of the Company at No. which should be affixed and attested in the manner prescribed by its Articles of Association or other constitutional documents.106. 4.INSTRUCTIONS AS TO COMPLETION 1. If the Proxy Form is signed by an Attorney. Yatinuwara Veediya. 2. 3. Kandy not less than 48 hours before the time appointed for the holding of the Meeting. Janaka Deshapriya Mr. Janadhipathi Mawatha. Someswaran Mr. Chartered Accountants Julies & Creasy No. C Perera Mr.cclk. Sebestian Nanayakkara Ms. R S Egodage Mr. G Hemachandra Mr. 9/5.106.CORPORATE INFORMATION COMPANY NAME LEGAL STATUS COMPANY REGISTRATION NO.Chairman Mr. C Perera Mr. R S Egodage . I G S K Gunaratne Mr.Chief Executive Officer Mr. I G S K Gunaratne Mr. Colombo 07 Tel: 4335159 . Cecil Perera Mr. Thambiah Avenue. G G Hemachandra Mr. Vathsala Sathyakeerthi Jacey & Company No. Yatinuwara Vidiya. M S D Pinto Mr. Kandy Tel: 081 2234963-4 Fax: 081 2234390 e mail: ccl@cclk. Andrew Samuel Mr. 41. T Someswaran Mrs. G R Egodage Mr.lk Mrs.lk www. V W Fernando . Place of Incorporation REGISTERED OFFICE Contact Information Commercial Credit PLC A quoted Public Company with limited liability incorporated in Sri Lanka PB 269 PQ Kandy. S Gunarathne – Chairman Mr.Chairperson Mr. Sri Lanka No. T. T Someswaran . Colombo 01 Commercial Bank of Ceylon PLC Hatton National Bank PLC Sampath Bank PLC National Development Bank PLC Seylan Bank PLC People’s Bank Bank of Ceylon Nations Trust Bank PLC Website BOARD OF DIRECTORS AUDIT COMMITTEE REMUNERATION COMMITTEE INTEGRATED RISK MANAGEMENT COMMITTEE SECRETARIES & REGISTRARS AUDITORS LAWYERS BANKERS .62 M/s Ernst & Young. CONCEPT AND DESIGN BY ARUNA WICKRAMARACHCHI TEL: 071 4943864 PRINTED AT DESIGN SYSTEMS .