Annual: Commercial Credit PLC

ANNUAL REPORT
COMMERCIAL CREDIT PLC.
2010-2011
Contents
Financial Highlights Chairmans Message CEOs 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
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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 Companys 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
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
FINANCIAL HIGHLIGHTS/REVIEW
Financial Highlights
2007 (Rs. 000) Net Income Net Interest Income Profit/(Loss) Before Taxation Profit/(Loss) After Taxation Asset Base Loans & Advances Deposit Base 115,463 76,305 36,163 39,308 881,762 247,586 569,043 2008 (Rs. 000) 140,012 103,048 32,812 29,334 1,196,137 241,849 712,919 2009 (Rs. 000) 162,862 126,666 -1,280 7,098 1,389,813 269,603 854,331 2010 (Rs. 000) 218,765 170,400 -25,942 45,190 2,270,642 389,762 1,732,958 2011 (Rs. 000) 848,282 702,488 244,366 60,094 5,350,179 1,944,229 3,840,492
CHAIRMANS MESSAGE
Chairmans Message
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. Whilst the results are the best ever in our history, I believe the Company is yet to realise its full potential in this new and exciting environment. 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.
Overview of the Global Economy

Notwithstanding the sharp dip in the global economy in 2008 and contraction in 2009, global GDP showed an increase of 3.9% in 2010. While high-income countries recorded a growth despite severe economic strain, developing economies managed a stronger show, recording a growth of 7% twice as high as that of high-income countries. Consequently, low and middle-income countries contributed towards nearly half of global economic growth, which stood at 46% in 2010. Global GDP is projected to increase only by 3.3% and 3.6 % during 2011 and 2012, with developing economies expanding by over 6% annually. Overall, financial conditions are improving, reinforcing generally positive outcomes which should impact our island nation positively.
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. Seizing the opportunities presented by newfound peace, the economy is emerging from three decades of modest growth to realize its true potential. The countrys economic and financial consolidation remains a top priority in the proThis financial year witnessed as the cess of economic rehabilitation. first full year of operation subseSri Lanka became one of the fastest growing economies in the world, growing a massive 8% in 2010, the highest annual growth rate in three decades, while inflation continued to remain low around the mid-single digit levels, according to the Central Bank of Sri Lanka. The general deficit reduced to 7.9% of GDP in 2010, from 9.9% in 2009. The government plans to further reduce the budget deficit to 6.8% in 2011 and to below 5% in the medium term.
quent to the ending of the three-decadelong conflict, therefore the economy is emerging from three decades of modest growth to realize its true potential. The dawn of peace has brought with it opportunities for the countrys economic and financial consolidation.
Inflation remained unresponsive at a mid- single digit and market interest rates continued to decline with the Central Bank of Sri Lanka further easing its monetary policy. 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.
CHAIRMANS MESSAGE
Company Performance
Commercial Credit has performed exceptionally well in the year under review, posting strong financial results and consolidating its reach in the market. We recorded a total revenue of over Rs. 1.2 billion surpassing the Rs.1 billion mark for the first time in the Companys history. The Company recorded a net profit before tax of Rs.244.36 million during this period, compared with Rs. 25.9 million loss in the previous year. This was due to the 162% growth in the investment base; from 1.7 billion in March 2010 to 4.4 billion in March 2011. These investments were mainly backed by the Fixed Deposit base of the company, which also has grown by 122% from 1.7 billion in March 2010 to 3.8billion in March 2011. The Asset base of the Company recorded a 130.4% growth during the financial year from 2.3 billion in March 2010 to 5.3 billion in March 2011. The efficiency of operation resulting from the implementation of new strategies and focused direction became evident in the Companys Cost to Income ratio, which dropped significantly to 59% in 2011 from 92% in the preceding year.
Appreciation
The guidance, support and contribution of the Board of Directors have been invaluable at this time of the Companys immense growth and expansion, and I wish to express my gratitude for their contribution towards the companys success. We have grown both in size and reputation, and achieved excellent results during the year under review. I also wish to express my sincere appreciation towards the Chief Executive Officer, the highly capable and empowered management team and the members of staff who remain steadfast in their dedication and loyalty towards the Company. I am especially grateful to all our customers, depositors and shareholders for the trust and confidence you have placed in us, enabling us to achieve continuous and sustained growth, even during times of volatility. In an era of promising and exciting opportunities, I am confident that Commercial Credit will continue to lead a revolution in the industry, and play an integral role in redefining the nations financial landscape.
Vagdevi Fernando Chairman 17th November, 2011
CEOS REVIEW
CEOs Review
Dear Shareholder,
t is with great pleasure that I present you a review of the operations of our Company for the year ended 31st March 2011. 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. A well-planned and executed strategy of New Corporate image, New Innovative Products and Modern Infrastructure, together with an empowered work culture has resulted in the Company recording tremendous growth in its deposit and lending base, unprecedented in the sector in the past. 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. The company has achieved in terms of pre- tax profit a growth of 1142%, and the pre-tax loss of Rs. 25.9 million in March 2010 has improved to a profit of Rs. 244.3 million for the year ending 2011. The increase of profit after Income tax was however marginal at 32.98% due to reversal of previous years realized deffered tax asset of Rs 121 million. In addition, the Interest income and Interest Expenditure Gap has grown a staggering 312.26% from Rs. 170.4 million to Rs. 702.49 million. Achieving these astronomical figures in an industry dominated by a number of established players is true testament to the companys strategic direction and pioneering vision. The driving force behind the Companys astronomical success to date is its dedicated workforce drawn from the cream of the industrys talent pool. The companys culture of liberalization and empowerment has enabled the team to deliver results above and beyond industry norms. The loyalty and commitment of the team members have been pivotal factors in the Companys success story. 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.
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 - a new era of excellence and team work...
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. The MIS system has facilitated Credit Management at the front line, whilst ensuring that control and information flow are maintained at the head office in order to ensure compliance and creditworthiness, thereby enabling the Company to achieve one of the best NPA ratios and Cost to Income ratios in the industry. During this period the Company has introduced many new innovative and trail-blazing products, leading to increased mobilization of funds and effectiveness of the lending portfolio. This has enabled the company to reach a wider segment of society and serve a client base of over 310,000 customers. Moreover, during this period the companys brick and mortar presence expanded from 16 to 22 locations throughout the country, increasing its presence whilst ensuring greater convenience for its island-wide customer base. The company is in the process of improving the existing branch infraCOMMERCIAL CREDIT PLC. ANNUAL REPORT 2010/2011
CEOS REVIEW
structure in order to create a modernized ambience for both staff and customers. The branch expansion and infrastructure upgrading, coupled with a new brand logo and innovative marketing and advertising strategies have strengthened the Companys foundation, ensuring its future growth as it pursues its goal of becoming the leader in the finance industry within the next three years. The listing of 218,074,365 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. Further, having earned a distinct and widely acknowledged reputation as one of the fastest growing and most successful finance companies in the country, 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 - a new era of excellence and team work - the three year strategic plan focuses on increasing the companys stellar performance. I am proud to announce that, the company was awarded the Best Finance Company in Asia at the recently concluded international UDC Business Awards in Malaysia. Being awarded the prestigious international UDC Business Award further validates Commercial Credits reputation as an eminent financial institution in the Asian region, and puts the company on the global map of leading finance establishments. Having competed with leading finance companies in the Asian region, the companys stellar track record of successes and record-breaking achievements over the past few years secured the company the illustrious Award. The inculcation of a pioneering corporate culture, with self-managed and dedicated employees, who are empowered to perform to their optimum, will assure the attainment of the Companys strategic goals. I take this opportunity to express my gratitude to the Chairman and my fellow directors, for the guidance and support extended in all areas of the Companys operations. 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. Finally, 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.
Roshan Egodage Chief Executive Officer 17th November, 2011
BOARD OF DIRECTORS
Board of Directors
he Companys business and operations are managed under the supervision of the following members of the Board. The Board of Directors of the Company comprises Eight Directors consisting Three Executive Directors, 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- Kelani Paper Converters Ltd. Chairman of Hemachandras (Kandy) Ltd. Director of Hotel Hiltop Kandy. Director -Management Systems (Pvt)Ltd, Director -Eurocentre DDC Lanka (Pvt)Ltd, Director -Winall(Pvt)Ltd, Director -Thilanka Hotels (Pvt) Ltd. Director- Legallnc Secretarial & Management Services (Pvt) Ltd Director- Legallnc Trustee Services (Pvt) Ltd Director Legallnc Investment Services (Pvt) Ltd Director -Best Cars Lanka (Pvt) Ltd Director -SK Consultants (Pvt)Ltd. Director RDS Bakers (Pvt) Ltd Director- Panasian Power PLC, Director - Someswaran Centre (Pvt) Ltd Director- Sunrise Senior (Pvt) Ltd Director - Centre for Advancement of Resource Mobilization (CARM) Director- CLEANCO Lanka Limited Director- 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. G. Investments (Pvt) Ltd Director- B.G. Capital (Pvt) Limited Director -B. G. Investments (Pvt) Ltd Director- B.G.Capital (Pvt) Limited Director Green Earth Constructions (Pvt) Ltd Director Green Earth Renewables (Pvt) Ltd Director Green Earth Technologies (Pvt) Ltd Director - S and H Holdings (Pvt) Ltd Director Hotel Supplies (Pvt) Ltd Director Green Earth Plantations (Pvt) Ltd
Name Mrs. Vagdevi Wimalangi Fernando Executive Chairperson Mr. George Hemachandra Non Executive Director Mr. Cecil Perera Independent Non Executive Director
Mr.Samantha Kumara Gunaratne Independent Non Executive Director Mr. Thirunavukarasu Someswaran Independent Non Executive Director
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Mrs. Geya Rasi Egodage Executive Director Mr. Roshan Sanjaya Egodage Chief Executive Officer Mr. Susantha Pinto Independent Non Executive Director
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The Board of Directors

From left to right: Mr.Samantha Kumara Gunaratne - Independent Non Executive Director, Mr. Thirunavukarasu Someswaran - Independent Non Executive Director, Mrs. Geya Rasi Egodage - Executive Director, Mr. Roshan Sanjaya Egodage - Chief Executive Officer, Mrs. Vagdevi Wimalangi Fernando - Executive Chairperson, Mr. Cecil Perera - Independent Non Executive Director, Mr. George Hemachandra - Non Executive Director, Mr. Susantha Pinto - Independent Non Executive Director
BOARD OF DIRECTORS
A Brief Profile of Board of Directors

MRS. V.W. FERNANDO
Executive Chairperson
MR. R.S. EGODAGE
Chief Executive Officer
No. 847/2 Peradeniya Road, Kandy Mrs. Vagdevi Fernando joined the Board of Directors of Commercial Credit Ltd following the demise of her late husband Mr. K. H. Donald Fernando who was the Founder Chairman of the Company in 1988. Having entered the teaching profession for a few years following her graduation from University, Mrs. Fernando has also worked internationally in Germany and England in various capacities. She is a respected businesswoman who has earned the recognition of the corporate fraternity for her contributions to the business arena. Mrs. Fernando is a senior member of the Finance Houses Association (FHA), and was its first female Chairman and the only female to have held the position of President for two consecutive years. She was the recipient of the Central Province Entrepreneur of the Year Gold Award in 2006, the Central Province Business for Unity Silver Award in recognition of her contribution to social responsibility and peace, and a Merit Award at the National Entrepreneur of the Year Awards. She was also named in the 2003 American International WHOs WHO of Professional and Business Women. She is a Life Member of the Ceylon Chamber of Commerce (Central Province), The Womens Chamber of Commerce (Central Province), The Sri Lanka Federation of University Women, The Alliance Francaise de Kandy, The Organization of Professionals of Kandy and the Sinhala Velanda Sangamaya. A past pupil of VisakhaVidyalaya, Colombo, she holds a BA General Arts degree from the University of Peradeniya, and is an active member of the University Alumni Association. She also served on the University Council for a period of 3 years. Having made her mark in the business arena at a time when the field was dominated by men, Mrs. Fernando continues to serve as the companys Chairman with the wisdom, capability, integrity and efficiency she has gleaned for nearly 23 years in this post, and will continue to do so in the future.
No. 475/5, Elvitigala Mawatha, Colombo 05. Mr. Egodage took over the reins of Commercial Credit Ltd. in October 2009 following the takeover of the company by B.G. Investments at the same time. As the CEO of the company, he has been the driving force behind the companys stellar success, charting a visionary course of leadership and growth, ensuring the companys status today as one of the countrys most successful and respected finance companies. An industry veteran with a wealth of experience and achievements to his credit, Mr. Egodage is a skilled corporate strategist with a proven track record in guiding corporate entities towards record growth and success. His passion and innate talent for establishing pioneering and liberated corporate strategies has been validated by Commercial Credits trailblazing success in just 18 months, growing from a relatively small market share to being within the top five registered finance companies in terms of Net Interest Income. His success is due in part to the multi-disciplinary approach he brings to the table, gleaned through a diverse career in a range of industries, including Engineering, Manufacturing, Plantations and Finance. Prior to taking over the stewardship of Commercial Credit, Mr. Egodage has held several top level management positions in the finance industry. He was appointed as the Deputy Chief Executive Director of The Finance Company PLC in 2006. Holding overall responsibility for the companys operations, while serving on the boards of several group companies at the same time, he led The Finance Company to declare the highest ever profits in over 70 years of operation, in what is popularly referred to as the Billion Month. Other positions Mr. Egodage has held in reputed listed companies include Deputy Manager Corporate Finance of the Merchant Bank of Sri Lanka, where he was instrumental in restructuring the Plantations sector, General Manager Finance Planning and Administration Kotagala Plantations PLC and General Manager Project and Planning, Agalawatte Plantations PLC both positions where he held key responsibilities for the overall direction of the company. He also held key positions of responsibility in companies
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BOARD OF DIRECTORS
including Central Finance, Peoples Ventures and Ceylon Pencil Company. He currently serves on the Board of Directors of BG Investments (Pvt) Ltd. An avid sportsman and a firm believer in the wisdom of an organization with a bottom-heavy management strategy, Mr. Egodage places strong emphasis on employee participation and empowerment, as well as a liberated corporate culture. His continuing focus remains the companys strategic direction and its expansion into new markets, whilst facilitating its continued growth and success. Having acquired a BSc. Eng. (Hons) degree from the University of Peradeniya and initially embarking on a career in the engineering field, he then set his sights on a career in management, earning a MBA from the University of Colombo. He has since then gone on to earn numerous professional qualifications including FCMA, Dip.M(UK), ACIM and ASCMA. He is undoubtedly one of the most qualified CEOs 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 companys success story. She holds a B.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.
MR. G.G. HEMACHANDRA
Non Executive Director
No. 454/23, Piachaud Gardens, Kandy. A founder director of the company, Mr. Hemachandra is the Chairman of Hemachandras (Kandy) Ltd, one of the oldest and well known jewellery businesses in Kandy. He is also a Director of Hotel Hilltop Kandy. A doyen in his industry with over 45 years of experience in the field of commerce, he has been indispensable in advising and guiding the company to reach the heights it has today.
MRS. G.R. EGODAGE
Executive Director
No. 475/5, ElvitigalaMawatha, Colombo 05. Mrs. Egodage joined Commercial Credit as an Executive Director following the companys management takeover in 2009. She is presently a Director of B.G. Investments Pvt. Ltd and R.D.S Bakers (Pvt) Ltd. Mrs. Egodage began her career as an Assistant lecturer at the Department of Chemistry, University of Peradeniya. As her career advanced she collaborated on many research projects before joining Ansell Lanka, where she served for a period of 4 years as a Process chemist. From 1996 to 2005 she held the post of Assistant Director for Quality Control and Quality Assurance at the Coconut Development Authority. Following this, Mrs. Egodage switched careers, putting her qualification in Business Administration to good use as she took up a position as the Managing Director of R.D.S. Bakers (Pvt) Ltd. Here she quickly gained a reputation for skilled management ability and an adherence to the highest ethical standards, and was instrumental in developing the popular brand Wonder B which R. D. S. Bakers is now synonymous with .
MR. C. PERERA Independent Non Executive Director No:10, Gonawala, Kelaniya

During a career spanning over 28 years as an Attorney-at-Law of the Supreme Court, he has gained a vast amount of expertise in all areas of the Law, including Corporate Law, Banking Law, Leasing & Finance Law, Capital Market & Fund Management Services, Corporate Debt Financing Services, and Intellectual Property Advisory Services. A well respected figure in legal circles, Mr. Perera is currently a partner of Legal Inc - Attorneys-atLaw & Notary Public. Prior to this he served as the Head of Legal Department at Merchant Bank of Sri Lanka Ltd. for a period of 10 years, as well as at LB Finance PLC and The Finance PLC as a legal officer.
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BOARD OF DIRECTORS
He currently serves on the boards of Management Systems (Pvt) Ltd, Thilanka Hotels (Pvt) Ltd, Eurocenter DDC (Pvt) Ltd and Winall (Pvt) Ltd. He has passed the Certificate Course on Modern Banking conducted by the Post Graduate Institute of Management, Sri Jayewardenepura University.
He also serves on the Director Board of Panasian Power PLC, the European Chamber of Commerce, Equity Based Community Support and Training, Business Council of Indonesia of the Ceylon Chamber of Commerce and is Vice President of The International Chamber of Commerce. He is a member of the Tax Faculty, Organization of Professional Association, International Fiscal Association and Sri Lanka Institute of Directors. He is a fellow member of CMA and a member of its Governing Council.
MR. S. K. GUNARATNE
Independent Non Executive Director
No.38, Panawala, Eheliyagoda. Mr. Gunaratne is an Independent Consultant in Energy Conservation and Management, and serves as an Independent Non Executive Director at Commercial Credit. Mr.Gunaratne has worked in senior Engineering positions at some of the leading apparel companies such as MAS Holdings and Brandix, as well as in the Sugar and Plantation industry. With over 22 years of experience in the fields of Engineering and Energy Management, 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. He has been a key member of technical teams which visited theU nited Kingdom, Malaysia, China and India in order to evaluate the suitability of adaptation of new Machinery and Technologies for Sri Lankan industries. He holds a National Diploma in Engineering Sciences specializing in Mechanical Engineering. He is currently a Director of Best Cars Lanka (Pvt) Ltd. and SK Consultants (Pvt) Ltd.
Mr. Susantha Pinto
Independent Non-Executive Director
No 53/7A, Perera Mw, Old Kottawa Rd, Mirihana, Nugegoda. Mihindakulasuriya Susantha Devapriya Pinto started his career as a Trainee Planter in 1996 with Balangoda Estate, Sri Lanka State Plantation Corporation and later functioned as Assistant Superintendent and Superintendent in leading plantation companies in Sri Lanka. 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, after sales service of Renewable Energy- Solar Photo voltaic etc. He was the Chief Executive Officer of Ceylinco Renewables (Pvt) Limited for a period of two years. Mr. Susantha Pinto also served as the Chairman at Green Earth Group before joining Commercial Credit as a Non- executive Director. Being an old boy of St. Anthonys College, Kandy, he obtained a Diploma in Plantation Management and he is currently reading for a MBA from Western Sydney University in Australia. 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 Credits attaining expected improved performance.
MR. T. SOMESWARAN
Independent Non Executive Director
No.3/1, St Michaels Apartment, 4, Alfred House Gardens, Colombo 03. Mr. Someswaran is a Chartered Accountant counting over 35 years in practice and recently retired from the post of Senior Partner of SJMS Associates, a firm of Chartered Accountants associated with Deloitte in Sri Lanka. He serves on the Audit Committee of the Institute of Chartered Accountants of Sri Lanka and Serendib Lands (Pvt) Limited.
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CORPORATE MANAGEMENT TEAM
Corporate Management Team

Mr. Roshan Sanjaya Egodage
Managing Director/ Chief Executive Officer
Mr. K.L.A.Senevirathne
Deputy General Manager Operations
Please refer to Director Profile Mr. K.L.A.Senevirathne is currently employed at Commercial Credit PLC as a Deputy General Manager - Operations. He has also worked for both Kelani Cables Limited and The Finance PLC, where he held the position of an Assistant General Manager. He has more than 25 years of Finance Industry experience. His self motivation and vision of empowerment is a key contribution and motivator of the companys ethos, which is to cultivate and encourage a new breed of corporate workforce, which will take the countrys corporate culture into a new era of incentive, impetus and inspiration.
Mrs. G R Egodage
Working Director
Please refer to Director Profile
Mr. C. Prasanna Wickramasinghe

Deputy General Manager Information Technology
Mr. C. Prasanna Wickramasinghe is currently employed at Commercial Credit PLC as the Deputy General Manager Information Technology. One of the most skilled and qualified professionals in the industry, Mr.Wickramasinghe leads Commercial Credits IT department, which boasts one of the best state of the art IT systems in the Finance Industry. One of the Companys longest serving employees, Mr.Wickramasinghe is a Chartered IT Professional and a member of the British Computer Society MBCS CITP. He has completed a MSc in Information Technology at the Charles Stuart University, Australia, and in addition holds both IDM Diploma in Programming in IT SL, and ACS - Advanced Diploma in IT Australia.
Mr. J.L.A.S. Priyankara

Deputy General Manager Operations
As the Deputy General Manager Operations at Commercial Credit, Mr. Priyankara is responsible for a wide range of the companys day to day activities as well as holding joint responsibility for implementing its strategic focus. Mr. Priyankara brings with him over 22 years of experience in the industry in various key positions, which enables him to discharge his duties with the highest levels of efficiency and skill. Mr. Priyankaras skill in working with leaders and teams to set goals and his effectiveness in motivating teams to achieving these goals, thereby linking the Companys vision and strategy with its growth imperatives is vital in Commercial Credits market growth plans and aspirations. He is a Bachelor of Arts (Hons.) Graduate from the University of Ruhuna and has also completed his MBA at the University of Manipal India.
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Mr. Andrew Samuel

Deputy General Manager Corporate Planning
Mr. S. Nanayakkara
Deputy General Manager Recoveries
Andrew Samuel joined Commercial Credit Limited as the Deputy General Manager Corporate Planning in February 2010. With 17 years of diverse experience and knowledge, he brings the understanding of the business needs to the design and facilitation of transformational programs. Prior to his current position, he had a long and successful career in the Plantations industry in several key management positions. Having joined the sector as a Trainee Assistant Manager in 1994 at Mackwoods Plantations Pvt. Ltd., his natural capability, intelligence and enthusiasm earned him distinction and recognition, as well as the position of Manager within just seven years. He joined Aspic Plantations Pvt. Ltd. in the capacity of CEO in 2008, and was also a director of several group companies, later moving on to Deraniyagala Plantations Pvt. Ltd. where he held the position of Director/CEO. He was also a director of Next Finance. During his career he has managed several noteworthy achievements, including intitiating and implementing participatory management structures, achieving record crops in both Tea and Rubber Estates and facilitating significant estate development projects. An Old Boy of Trinity College, Mr.Samuel holds an MBA the University of Peradeniya. He is an Associate Member of the National Institute of Plantation Management(AIPM), and a Fellow of the Chartered Institute of Management Accountants -UK (FCMA).
Mr. 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. 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. 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, investments and recoveries enabling them to win the Annual Award for the best performance. Also he was a member of the Credit Committee and a team leader of the Product Development Team at The Finance Company. Mr. Nanayakkara not only possesses industry experience but also possesses the professional qualifications in the field of Finance, Recoveries and Credit management. He has a Diploma in Credit Management and has completed I.A.B. (U.K). As a competent individual in credit evaluation, recoveries, trainer on recoveries, credit management, administration etc Mr. Nanayakkara is a strategic asset in achieving the Organizational goals.
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Mr. Shammi Jayathilake

Deputy General Manager Marketing
Mr. M.A.D. Janaka Deshapriya

Chief Financial officer
Mr. Chaminda Janaka( Shammi) Jayathilaka started his career as a Marketing Executive at Ceylinco Insurance Co.PLC, he is a dynamic personality who contributed many ways for the achievements of the organizational goals. He has experience as an Asst. Sales Manager at Golden Lion Universal- Hong Kong, Ceylinco Shriram Capital Management Services Co. Ltd & Asia Growth Fund-Mauritius as an Asst. Sales Manager from November 1998 to Oct 2000, where he awarded as the best performer in two consecutive Years. During his tenure at Ceylinco Consolidated Overseas Limited Dubai, UAE, as a Country Manager he had brought many changes to the operations. Later he had moved to Ceylinco Express Remittance Co. (Pvt) Limited as a Regional Manager- Middle East & Europe from April 2005 to August 2010 where he collaborated on many research projects. He had also served Frostaire Industries (Pvt) Limited as a Head of Sales making use of his industry knowledge and the experience. He brings the same to Commercial Credit by taking his deities as Deputy General Manager Marketing and he is an integral component of the Companys success story.
During a career spanning over 15 years in the field of finance, he has gained a vast amount of expertise in the industry. 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. Prior to joining Commercial Credit PLC he has severed The Finance Company Plc as Chief Acting AGM Finance, General Manager Operations, General Manager overlooking the financial activities. He has experience in Accounting and Financial Management, Budget development and management forcasting, planning , Treasury Management, Auditing, Tax Planning and business leadership. As the Chief Financial Officer at Commercial Credit, Mr. Deshapriya is responsible for Overlooking Finance Division holds the responsibility of managing and directing activities towards the companys strategic focus.
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The Corporate Management Team

1st Row (Left To Right): Mr. Shammy Jayathilake, Mr. Sebestian Nanayakkara, Mr. Sudath Jayasekera, Mr. Andrew Samuel, Mrs. Vagdevi Wimalangi Fernando, Mr. Roshan Sanjaya Egodage, Mrs. Geya Rasi Egodage, Mr. K. Senarathne, Mr. Janaka Deshapriya, Mr. Prasnna Wickramasinghe. 2nd Row (Left To Right): Mr. D.G. Jayarathne, Mr. Dhanushka Udugama, Mr. Saman Gunawardena, Mr. Ayesh Pitigala, Mr. Anil Manawadu, Mr. Anuradha Ranaweera
Regional Managers & Senior Manager

1st Row ( Left To Right): Sunil Wijesinghe, Lalith Attanayake, Mahiinda Seelagama, Niroshan Madawala, Indika Prasad, Chitrabandu De Silva, Thilak De Alwis, Mrs. Pushpa Wijesinghe, Lalith Lunuwila, Mahesh Lakshan, Vijith Weerakoon, Shafraz Jainudeen, Sanjeewa Jayamanne, Asitha Ratnayake 2Nd Row (Left To Right ): Shantha Thanthirige, Gamage Piyadasa, Abeyakumara, Nalaka Kariyawasam, Saman Perera, Anushka Silva, Jagath Gamage, Wasala Ariyapala, Lalith Dissanayake, Chaminda Ranasinghe, Faizal Devananda, S Thirukumaran, Sanath Sujeewa, Jeewa N Athukorala, Dharshana Mallawarachchi, Nishantha Weerakoon
MANAGEMENT DISCUSSION & ANALYSIS
Management Discussion & Analysis

Sri Lankan Economy
wo years before Sri Lanka gained its second lease of independence and peace has prevailed within its borders thus far, May 2009 ushered in a new era for Sri Lanka with more resources for productivity enhancement and development; a larger workforce, serene coastlines including a natural harbor that were inaccessible by war, more land to develop and cultivate, connectivity of people, land and infrastructure and more so an undivided focus on growth and development.
markable turnaround since the second quarter of 2009, continues to improve in 2010. Both exports and imports recovered strongly, while increased earnings from the tourism industry and higher inward remittances offset the widening trade deficit to a great extent, reducing the external current account deficit. Increased capital and financial flows resulted in the balance of payments (BOP) recording a surplus in 2010, further strengthening external reserves of the country. With favorable macroeconomic conditions and the recovery in economic activity and also with the supportive regulatory and supervisory framework, the performance and stability of the financial sector strengthened in 2010
MACRO ECONOMIC REVIEW

Sri Lankas economy grew by an impressive8.0 per cent in 2010, reflecting a fast recovery from the setback suffered in 2009 and moved to a high and sustainable growth path. All key sectors of the economy demonstrated a commendable performance in 2010, underpinned by the peaceful domestic environment, and improved investor confidence, favorable macroeconomic conditions and gradual recovery of the global economy from one of the deepest recessions in history. Sri Lanka has mostly had strong growth rates in recent years. In GDP per capita terms, it is ahead of other countries in the South Asian region. 2010 Q2 GDP growth recorded an 8.5% 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, where we estimated GDP growth to be about 7.2% for 2010. 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. 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, the addressing of certain persistent structural issues in the tax system, as well as the containment of recurrent expenditure. 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, the addressing of certain persistent structural issues in the tax system, as well as the containment of recurrent expenditure. The overall deficit was reduced to 7.9 percent of GDP in 2010 from 9.9 percent in 2009. The external sector, which made a re-
FINANCE SECTOR PERFORMANCE

A stable financial system creates a favourable environment for depositors and investors, encourages financial institutions and markets to function effectively and efficiently, and hence, promotes investment and economic growth. Financial system stability requires a stable financial and economic environment within an effective regulatory framework and a safe and robust payment and settlement system. The maintenance of financial system stability entails identifying and addressing potential vulnerabilities and risks to the financial system. The NBFI (Non Banking Financial Institutions) sector has grown and developed on a fragmented basis, as has its regulatory framework. Whereas the component parts of the mosaic of activities covered by the report function reasonably well, they do so within an environment of unleveled playing fields. They are often subject to restrictive or discriminatory practices and to taxes imposed with little consultation and consideration as to the likely consequences. Regulation is more often a euphemism for control of the sector organizations, as opposed to supervision of its professional bodies and, despite government efforts to control, swathes of activities fall outside the regulatory net altogether. 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.
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FUTURE OUTLOOK
Sri Lanka is one of the largish economies that will have managed to provide access to electricity to rural areas. In 2006, the coverage was 78.5 per cent and in 2009, it rose to 83.2 per cent. When considers the rural poverty it had come down sharply from 15.7 per cent (2009) to 7.6 per cent (2010). The Central Bank predicts 8 per cent growth rate in 2011 and 2012. This was possible because the recovery was spread out across all sectors agriculture, manufacturing and services.
The Asian Development Bank (ADB) expects inflation to average 8 per cent in 2011. It is expected to move the curve down wards in years to come.
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. In the long-run growth is unsustainable without macroeconomic stability. Now comes the uphill task of bringing down budget deficit to 5 per cent over the next two years. On the tax side some measures have been taken. But doubts remain on expenditure side. Current expenditure has to be curtailed. The country needs to streamline many of its procedures which would in turn increase the ease of doing business. For example, Sri Lanka has more procedures involved in obtaining licences and permits to build a warehouse, compared to other South Asian country. Tax administration could be streamlined and revised to boost the efficiency of the overall system. Number of procedures in property registration in Sri Lanka exceeds the regional average. Nonetheless, costs are still lower than those of its South Asian peers. There is much scope to further strengthen the countrys financial infrastructure, in terms of the collection and dissemination of credit information (for both individuals and firms). There is a need to increase the level of transparency and accountability concerning transactions in the country, to encourage a higher level of economic activity. Economic prospects in 2011 and 2012 have improved considerably with GDP growth forecast at 6.5% and 6.3% respectively. Medium-to-long term growth prospects revised upwards; average annual GDP growth raised to 6.2% from 5.5% for 2011-15 period while the earlier 6.0% forecast for 2016-20 has been raised marginally to 6.1% as the countrys long term potential has increased.
Global Economic Climate

Overall the global financial crisis has been stabilized but is still volatile; 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. There is a now a shift in global demand to fast growing, large emerging economies. A substantial proportion of global growth over the next 3-5 years will be derived from large emerging markets, due to their inherent domestic demand arising from their large populations and high growth rates (averaging 8%-10% over the next five years). 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, rather than to be in direct competition against them.
Sri Lankas Prospects

When considering the Sri Lankas prospects, the economists state that the countrys economy has poised for a strong rebound, showing a strong first half performance with a GDP of 7.1% in the first quarter and 8.5% in the second. There has also been recovery in exports and domestic demand. Real GDP growth in 2011 is projected at 6.5% and is marginally lower at 6.3% in 2012. The services sector is projected to grow by 7.0% in 2011 and 6.9% in 2012, while industry, led by manufacturing, is projected to expand by 6.4% in 2011 and 2012.
Overall Inflation
Overall inflation increased to 8.6 per cent in March 2011, due to escalating food prices food prices were 13.9 higher than a year earlier.
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About the Company

HISTORY
04th October 1982 witnessed the birth of Commercial Credit Limited in the hill capital of Kandy. The Company, registered as a Finance Company under the Finance Companies Act No.78 of 1988 under the Monetary Board of Central Bank of Sri Lanka. 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. Although the Company had 16 locations spread around the country, the traditional agricultural regions of the country such as Anuradhapura, Dehiattakandiya etc. accounted for the bulk of its business. 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, resulting in the development of a highly advanced Management Information System (MIS). This has enabled the Company to manage day to day operations with a very lean staff structure, in addition to garnering it ISO 9001:2008 in October 2006 for enhanced quality management compliance. A change in the majority shareholding in October of 2009 resulted in a new management team with Mr. Roshan Egodage taking over the reins of the Company. A well planned and executed strategy of New Corporate Image, New Innovative Products, and Modern Infrastructure together with an empowered work culture has resulted in the Company recording a huge growth in the deposit and lending base, unprecedented in the sector in the past. The very robust and user friendly MIS system together with the extended branch reach were key enabling factors for the growth the Company. Having served over 100,000 customers across the country Commercial Credit will strive to create future leaders, who will be empowered to uplift the living standards of society at large, with enhanced customer service and innovative products.
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. 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.
MTIs 8S Model
SCOPE SCAN
SIGHTS
STRATEGY
STRUCTURE
SYSTEMS
SOCIAL RESPONSIBILITY
STAFF
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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
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 companys 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 companys 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 companys 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
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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 Credits 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
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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.
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CUSTOMER FOCUS Feedback from Current Customers

Commercial Credit has identified that our customers are the life blood of the Companys success. We therefore give priority to customer feedback and address customer concerns via various methods incorporated into our daily business activities. These methods include customer satisfaction surveys, interviews, focused group discussions, Know Your Customer (KYC) forms, suggestion boxes, customer touch points at Customer Relationship Management (CRM), a web based portal as well as feedback collected from staff who come into contact with customers. Throughout the entire branch network and our dedicated work force, customers can obtain any details they require, as and when they require. Commercial Credit publishes newspaper advertisements on particular products on weekend newspapers, and also engaged in a brand building campaign during the 2011 Cricket world cup. A quarterly newsletter provides additional information to existing and potential customers. Our sales force assists the Companys customer base in various ways, helping them to grow their business and utilize the funds they obtain in the most efficient manner. Through the mobile network customers can contact the relevant officers for any requirements. The dedicated sales force is an integral component of the Companys customer support endeavours. With regard to our high net worth fixed deposit customers, the Company provides highly trained staff to service them. In the lending products segment, the Company has a team of marketing executives with a different skills set to serve the SME sector. These two segments of marketing executives have been trained to industry standards level to maintain and build relationships and to retain and acquire customers. Commercial Credit uses both ATL and BTL communication strategies to create awareness, with TV, Radio and print media being used for branding campaigns and product awareness. Street promotions and exhibitions target particular segments such as businessmen and students. The CRM department mainly serves the FD customer base and makes available the needed data for customer reference. Periodic customer training programs are organized to support the SME customer segment with the CEOs personal involvement. Product knowledge such as interest rate, benefits over competitor products and accessibility are key to customers when considering their
support requirements. Convenience, process supports such as document handling and collecting, financial utilization assistance, payment procedure and legal support are other key requirements for customers. These requirements are determined through past information obtained with regard to customer perception, management experience, industry standards, and previous research studies. The above customer support requirements are comprehensively conveyed through induction programs for every employee and also training programs conducted on a periodic basis. The CRM department handles most customer complaints. Through these training programs Commercial Credit has prepared all staff and processes to support customer requirements. The recent incorporation of the CRM unit within Commercial Credit has ensured a structured and systematic approach towards managing customer relationships. From the time customer enters into a transaction with Commercial Credit, 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. Commercial Credit sends periodic newsletters to all existing customers to keep them informed about recent developments within the company and of any special events.
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INFORMATION TECHNOLOGY
Software Reliability is an important attribute of software quality, together with functionality, usability, performance, serviceability, capability, install-ability, maintainability, and documentation. We have been maintaining an in-house developed Core ERP system which is web-enabled. Software development is carried out as per the IT industry standards. The above mentioned attributes are well understood, adhered to and maintained by the IT division for high software reliability. We have been able to develop our own software applications based on a user-centric approach which results in high user-friendliness. User access levels are controlled by the system itself while adhering to the basic security concerns of IT operation.
Usage of Intra-net
Intranet is an effective knowledge sharing tool which enables the sharing of information about products, market situation and other related information within the organization.
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. 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, enabling effective collection of funds. Further it assists our deposit customers by reminding them of maturity dates and renewal of deposit accounts. SMS is used as a marketing tool to build customer relationships. SMS inquiries have enabled the field staff to carry out their duties effectively assisting them with receipting, cash banking etc.
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.
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. We firmly believe that the distinct edge we enjoy in a highly competitive environment is enabled by our workforce. 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. 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. The function of operation of the staff is identified by the nature of capability of each staff member, where it consists of discussions with senior management and the Human Resource function at the stages of recruitment. Compensation is also decided based on the same framework of operation, which identifies the capabilities and capacities of staff. The company would offer a competitive benefits package that fits the needs of the employee. Health insurance, life insurance and retirement savings would be major factors in retaining employees.
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. All employees are entitled to an Accident medical insurance cover, which covers all the hospitalization expenses in an emergency. This insurance cover has also been extended to immediate family members to secure their lives against the unforeseen. Through a company maintained fund, staff members receive numerous benefits in terms of Death Donations, Wedding Gifts, Retirement Bonuses, Medical Bill Claims, Etc. Further these benefit schemes have been extended for staff loan facilities without interest. As a principle driven organization, we always encourage our members to live a balanced life, contributing to the company and the family uniformly. Hence we organize family gettogethers in order to demonstrate the value of employees families to the Company.
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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, Commercial Credit was adjudged the Best Finance Company in Asia at recently concluded International UDC Business Awards in Malaysia.
SthreeMela Award- 2011

Chairman of Commercial Credit PLC, Mrs. Vagdevi Fernando was recently presented with an award by SthreeMela (Voice of Sri Lankan Women) in recognition of her contribution to Sri Lankas financial services industry.
Award Presented by Former prime Minister of MalaysiaDr .Mahathir Mohamed. Award received by Mr Andrew Samuel DGM Corporate Planning in the presence of the DGM-Operations Mr. Sudath Jayasekara and Mr. K. L. A. Senevirathna.
Governor of the Central Province TikiriKobbekaduwa presented the award to Mrs. Vagdevi Fernando at a well patronised event at the Kandy City Centre, organised by Voice of Sri Lankan Women which is headed by Mrs. VisakhaDharmadasa in Kandy.
SLIM Award- 2011
FHA- 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, 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.
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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.
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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 1.5 explains the way of execution of the core business at Commercial 1.2 Credit with a clear understanding of cost where all such cost 0.9 minimization strategies are 0.6 implemented within the firm with the intention of increasing 0.3 shareholder wealth without compromising the degree of 0.0 efficiency in executing the business operations. In the financial year 2010/2011 a well under controlled cost to income ratio was produced amounting to 0.73, which is the lowest for the time span of 5 years under consideration and this is expected to be further reduced going forward.
2008 2009 2007 2010 2010 2010
The net income of Commercial Credit has increased by 634.68% 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 287.76%. 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.
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. Although there were right issue and share split which led to increase the share volume by 45 folds, Commercial Credit PLC was able to maintain a decent EPS of 4.42 in 2010/2011 financial year.
EPS
20 16 12 8 4 0
Net Interest Income Growth

Net Interest Income has increased by 312.26% 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.
2008
2009
2007
Return on Equity
ROE (%)
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Commercial Credit had been able to generate a ROE figures of 24 19.9% and 14.18% in the fi18 nancial years of 2009/2010 and 2010/2011 respectively, 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. 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.
2008 2009 2007 2010 2011
Non Performing Loans

Non Performing Loans of Commercial Credit have been constantly decreasing over the period from 7.27% in the financial year 2006/2007 to 3.17 in the financial year 2010/2011. 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.
NPA (%)
10 8 6 4 2 0
2008
2009
2007
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2011
2011
2011
Net Income Growth
CORPORATE SOCIAL RESPONSIBILITY
Corporate Social Responsibility
ommercial Credit as a responsible corporate citizen is extremely concerned about the well- being of the society we live and work in. Our main financial support is targeted at the low-income segment of the society. Commercial Credit is in the process of developing products and assistance for the stateemployee community.
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.
Donations for the Kandy Hospital Neurosurgical Unit by the Chairperson of the Commercial Credit.
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Oxygen Cylinder Donation to Kandy Hospital by our CSR Team
Vesak Dansala Activities at Kandy
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Customer Training
The CEO personally conducts training programs for Microfinance customers on self development, child education, healthcare and well-being. Further, 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). Emergent growth in rural locations helps to give more employment opportunities to the system. We have engaged on these activities with the intention adding economic value to the organization, community and other stakeholders
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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, 2011. This Report contains information required by Section 168 of the Companies Act No. 7 of 2007 and other necessary information required by the Listing Rules of Colombo Stock Exchange.
Principal Activities
During the year, the principal activities of the Company were Acceptance of Deposits, Granting Lease facilities, Hire Purchase, Personnel Loans, Micro Loans and other credit facilities, Real Estate Development and related services.
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, 2011.
Financial Statements
The Financial Statements for the Year ended 31st March, 2011 are set out on pages 50 to 79 in the Annual Report.
Auditors Report
The Auditors Report which is an integral part of the Financial Statements prepared for the Accounting period ended 31st March, 2011 is set out on page 48-49 in the Annual Report.
Directors Responsibility for the Financial Statements

The Directors are responsible for preparing and presenting 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, Companies Act No.7 of 2007 and the Listing Rules of the Colombo Stock Exchange. The Directors are satisfied that the Financial Statements, presented on pages 50 to 79 inclusive, give a true and fair view of the state of affairs of the Company as well as the profit for the year then ended.
Accounting Policies
The accounting policies adopted in the preparation of the financial statements are given on pages 55 to 60.The Directors consider that, in preparing these Financial Statements, 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. The Financial Statements are prepared on a going concern basis.
Corporate Governance
A description of the Companys Corporate Governance practices is set out on pages 42 to 44.
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Directorate
The names of the Directors as at date are set out under Corporate Information. 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.e.f 15th March, 2011 Mr Ihala Gamaralalage Samantha Kumara Gunaratne Mrs Geya Rasi Egodage Mr Thirunavukkarasu Someswaran Appointed w.e.f 15th March, 2011 Mr Kalugamage John Cecil Perera Appointed w.e.f 15th March, 2011 Mr Mihindukulasooriya Susantha Devapriya Pinto Appointed w.e.f 19th June, 2011 Mr Janaka Suwandarathna and Mr Duminda Mahali Weerasekare, Mr Suresh Manitha Weerasooriya, Mr Paul Leslie Suren Peter had resigned w.e.f 1st March, 2011 and 5th June, 2010 respectively. 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. 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, in terms of the provisions of Section 211 of the Companies Act No. 07 of 2007, and is referred to in the Notice convening the Annul General Meeting for the year 2011. In terms of Article 24 (6) of the Articles of Association of the Company Mr George Ginendra Hemachandra, Director, 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. In terms of Article 24 (2) of the Articles of Association of the Company Mr Roshan Sanjaya Egodage, Director, 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. In terms of Article 24 (2) of the Articles of Association of the Company Mr Thirunavukarasu Someswaran, Director, 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. In terms of Article 24 (2) of the Articles of Association of the Company Mr Kalugamage John Cecil Perera, Director, 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. In terms of Article 24 (2) of the Articles of Association of the Company Mr Mihindukulasuriya Susantha Devapriya Pinto, Director, 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.
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
Integrated Risk Management Committee

Mr. T. Someswaran Mr. Roshan Sanjaya Egodage Mr. Andrew Samuel Mr. Janaka Deshapriya Mr. Sebestian Nanayakkara Ms. Vathsala Sathyakeerthi
Remuneration Committees:
Mr. S Gunarathne Chairman Mr. Cecil Perera Member Mr. G Hemachandra Member The Reports of the Board Audit and Remuneration Subcommittees are set out on page 45-46. The Composition of the above Board Sub-Committees, and their functions and responsibilities are set out in the Corporate Governance Report appearing on pages 42 to 44 of this Annual Report.
Interest Register
An interest Register is required to be maintained in terms of Companies Act No. 7 of 2007, which came into effect on 03rd May, 2007. 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.
Directors Shareholding
The shares held by the Directors at the beginning and at the end of the financial year were as follows. (The Articles of Association of the Company do not stipulate a share qualification for Directors): 31.03.2011 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 1,032,951 495,168 31.03.2010 732,951 395,168
Directors Fees and Emoluments

Directors fees and emoluments for the Financial Year ended 31st March, 2011, are as follows. Directors Fees and emoluments Rs. 9,672,177 (2010 Rs 6,967,906)
Donations
During the year the Company has made Rs. 940,032 as charitable contributions. (2010 - Rs. 116,150)
39
Property, Plant & Equipment

The details of the property, plant & equipment of the Company, additions during the year and the depreciation charges for the year are shown in note 12 to the Financial Statements. The Directors consider the market value of the property, plant & equipment not to be significantly different to the amounts disclosed.
Stated Capital
There has been no change in the Stated Capital of the Company during the year under review. The Stated Capital of the Company as at 31st March, 2011 was Rs. 170,640,315 consisting of 218,074,365 Ordinary Shares. The Shares of the Company are listed on the Colombo Stock Exchange.
Shareholders
The total shareholder base of the Company as at 31st March, 2011 was 214 (2010 - 212 ).The distribution of the shareholding and a listing of the 20 major shareholders are given under Investor Information on page 81-82.
Statutory Payments
The Directors, to the best of their knowledge and belief are satisfied that all statutory payments in relation to the Government had been made upto date.
Post Balance Sheet Events

No circumstances have arisen since the Balance Sheet date, which would require adjustment to, or disclosure in the financial statements, other than note 33.
Auditors
The financial statements for the period under review have been audited by Messrs Ernst & Young Chartered Accountants . Rs 2.3 million has been paid as Audit Fee for the year ended 31st March, 2011. 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.
Auditors Relationship with the Company

The Company did not have any relationship with the Auditors M/s Ernst & Young, Chartered Accountants, other than that of the Auditor, during the Financial Year Ended 31st March, 2011. By Order Of the Board
___________________________ Secretary JACEY & COMPANY Secretaries
_______________________________ Director Roshan Sanjaya Egodage 17th November, 2011
_______________________________ Director Samantha Kumara Gunaratne
40
RISK MANAGEMENT
Risk Management
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, funding sources and profitability from various sources of risk. The mechanism permits the creation of a culture of risk awareness across all sections of the company, to identify, measure, analyze and evaluate risks and to set appropriate policies to the risk appetite in order to manage and hedge such identified risks. 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. Assessing the credit worthiness of the client is done by considering details of the property held by the client, obtaining a report from the Credit Information Bureau (CRIB), ensuring credit worthy guarantors etc. Evaluatingthe credit worthiness of the customer depends on the knowledge and experience of the credit officer concerned, hence companies make sure that their staff are given comprehensive training in this regard. Further, being conservative the companies provide provisions out of the profit to meet this risk. 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. This too is to a greater extent beyond the control of the Company. However, 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. Interest rate risk is the potential impact on an institutions earnings and net assets values of changes in interest rates. Interest rate risk arises when an institution principal and interest cash flows (including final maturities), both on and off balance sheet, have mismatched reprising dates. The amount at risk is a function of the magnitude, direction of interest rate changes and the size and maturity structure of the mismatch Position. Managing interest rate risk is a fundamental component of safe and sound management of all institutions. It involves prudently managing positions in order to control, within set parameters, the impact of changes in interest rate on the institution. Significant factors in managing the risk include the frequency, volatility and direction of rate changes, the slope of the interest rate yield curve, the size of the interest-sensitive position and the basis of reprising at rollover dates.
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. Management of this risk is mainly a responsibility of the Treasury Department. Each company should ensure that there are sufficient liquid assets to meet the working capital requirement thus ensuring a smooth run in daily operations. One of the main risks RFCs face in this context is the asset liability mismatch and RFCs must ensure that companys cash inflow is in line with cash out flow. All RFCsparticipants should maintain minimum amount of liquid assets, 10%, which is mandated by CBSL regulations. Operational risk is the risk caused by the failure in the routine operational functions of the Company. This could arise as a result of a failure in the systems, procedures, processes, failure of the employees to comply with the set rules and regulations or through human error. As a mitigation strategy, 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. Further, all the employees are given a well defined job profile which clearly communicates the roles and responsibilities of each. 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. Reputation risk can be defined as the risk arising from negative perception on the part of customers, counterparties, shareholders, investors or regulators that can adversely affect a RFCs ability to maintain existing, or establish new, business relationships and continued access to sources of funding. This risk is not directly related to one particular company but affects the whole sector. RFCs sector experienced this risk with the failure of several entities connected to banks and finance companies in the Ceylinco Group, significantly hindering the normal business activities of the sector.
41
CORPORATE GOVERNANCE
Corporate Governance
orporate Governance involves a set of relationships between a Companys Management, its Board, its Shareholders and other Stakeholders. 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. The Company ensures that the four fundamental pillars of Corporate Governance, which is responsibility, accountability, fairness and transparency are upheld at all times, thus improving the public understanding of the structure, activities and policies of the Company. 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.
A Statement of Directors Responsibilities for the preparation of Financial Statements is set out on page 44 of this Report.
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. The Board has constituted an Audit sub-Committee and a Remuneration Sub-Committee. 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, together with a record of the attendance of every Director. 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.
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. The Companys Board of Directors consists of professionals in varied fields and collectively posses a wide area of knowledge and experience. One Third of the Directors retire by rotation at each Annual General Meeting and those eligible are recommended for re-election. The Board meets once a month as and when the need arises to discuss any prevailing issues, to take appropriate action in achieving the results and to review the financial performance of the Company. In accordance with the Listing Rules of the Colombo Stock Exchange, the Board has constituted 2 committees, namely, the Audit and the Remuneration Committees, in addition to which Nomination, Risk and Strategic Planning Committees have also been formed.
42
Company Secretaries
Jacey & Company provides Corporate Secretarial Services to the Company. The Company Secretaries play a key role in compliance matters by ensuring that the Company complies with the requirements of the Companies Act No.7 of 2007, the Rules of the Colombo Stock Exchange and other regulatory bodies. 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. The Directors make every endeavor to ensure that the Company Complies with Laws and Regulations.
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
7.10.1
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, Mr T Someswaran, Mr C Perera and Mr M S D Pinto are Independent Directors. Each Non-Executive Director should submit a declaration of independence/ non independence in the prescribed format
Complied
7.10.2
Complied Complied
7.10.3
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 Directors 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
7.10.6
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
43
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 of your Company are required by the Companies Act No.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, and of the Profit and Loss and of the Cashflows of the Company and of the Group for the financial year. The Directors confirm that the Financial Statements of the Company for the year ended 31st March, 2011 presented in the Report have been prepared in accordance with the Sri Lanka Accounting Standards and the Companies Act No.7 of 2007. In preparing the Financial Statements, the Directors have selected the appropriate accounting policies and have applied them consistently. 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 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, deter and detect any fraud, misappropriation or other irregularities. 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 Companys financial position. 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 are of the view that they have discharged their responsibilities in this regard.
Compliance Report
The Directors confirm that, to the best of their knowledge, all taxes and levies payable by the Company and all contributions, levies and taxes payable on behalf of the employees of the Company, and all other known statutory obligations as at the balance sheet date have been paid or provided for in the Financial Statements.
__________________ JACEY & COMPANY Secretaries Colombo 17th November, 2011
44
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 - Chairman Mr S Gunaratne Mr C Perera As the Company was listed on the Colombo Stock Exchange (CSE) after the Financial Year under review, the Committee was formed thereafter in accordance with the Listing Rules of the CSE, in 28th July 2011 and therefore, has not had any Meetings during the period under review.
The role of the Audit Committee

The main objective of the Audit Committee is to assist the Board of Directors to effectively carry out its responsibilities to the financials and other connected affairs of the company. The committee discusses reports of internal and external audits at these meetings. The companys External Auditors and the Chief Financial Officer of the Company are also invited to participate at these meetings.
Financial Reporting
The Audit Committee had reviewed and discussed Companys 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, rules and guidelines.
Internal Audit
The Committee has reviewed and discussed with Management and the Internal Auditors, Audits and investigations which were presented by the internal auditors.
External audit
The Audit Committee has recommended to the Board of Directors that M/s Ernst & Young, 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
45
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. The Committee is headed by Mr S K Gunaratne, and the members include Mr C Perera and Mr G G Hemachandra. 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. 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. As the Company was listed on the Colombo Stock Exchange (CSE) after the Financial Year under review, the Committee was formed thereafter in accordance with the Listing Rules of the CSE, in 28 July, 2011 and therefore, has not had any Meetings during the period under review. The aggregate remuneration paid to the Directors during the period under review is Rs. 9,673,177.
_______________________ Mr S K Gunaratne Chairman Remuneration Committee 17th November, 2011
46
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. ANNUAL REPORT 2010
47
SPF/BV/HDS
INDEPENDENT AUDITORS 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), which comprise the balance sheets as at 31 March 2011, and the income statements, statements of changes in equity and cash flow statements for the year then ended, and a summary of significant accounting policies and other explanatory notes. 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 managements adjustments of provision for fall in value of land stocks, write off of receivables through retained earnings and revenue recognition on profit on sale of real estate under easy payment schemes. Managements Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with Sri Lanka Accounting Standards. This responsibility includes designing, implementing and maintaining internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error, selecting and applying appropriate accounting policies, and making accounting estimates that are reasonable in the circumstances. Scope of Audit and Basis of Opinion Our responsibility is to express an opinion on these financial statements based on our audit. Except for the paragraphs a) to c) identified below, we conducted our audit in accordance with Sri Lanka Auditing Standards. Those standards require that we plan and perform the audit to obtain reasonable assurance whether the financial statements are free from material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting pilicies used and significant estimates made by management, as well as evaluating the overall financial statement presentation. Except for the matters referred in the following paragraphs, (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. We therefore believe that our audit provides a reasonable basis for our opinion.
48
Opinion a) Up to the beginning of the current financial year, the Companys practice was to recognise profit on sale of real estate under easy payment scheme upon entering to the contract of agreement to sell, which is not in compliance with Sri Lanka Accounting Standards - 29 Revenue Recognition. Despite the fact that this was changed from the current year onwards, 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 years income in relation to such contracts relevant to prior years. We were engaged to undertake the audit on 9 April 2011, subsequent to the balance sheet date, and therefore it has not been feasible to review or observe the performance of internal controls in operation for the year in relation to, contingent liabilities, commitments and disclosure of related party transactions. We have not been able to perform alternative audit procedures that provide sufficient and appropriate audit evidence whether contingent liabilities, commitments and disclosures of related party transactions are fairly stated. In the absence of a break-up of an amount of Rs. 12,210,291/- included in accrued expenses and other payables as given in Note 18, we were unable to carry out audit procedures to satisfy ourselves in relation to the fairness of the same.
b)
c)
In our opinion, except for the effects , if any , as might have been determined to be necessary on the financial statements in respect of the matters referred in the preceding paragraphs, 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 Companys 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.
Report on Other Legal and Regulatory Requirements In our opinion, these financial statements also comply with the requirements of Sections 151(2) of the Companies Act No. 7 of 2007.
25 October 2011 Colombo
49
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, Deposits and Prepayments Investment Securities Dealing Securities Tax Receivable Property, 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 27.2 Note 2011 Rs. 203,708,480 76,969,364 110,559,966 1,944,228,721 2,490,821,145 152,841,459 67,103,855 5,426,900 24,939,856 238,531,843 9,047,039 26,000,000 5,350,178,628 3,840,492,289 594,985,722 426,937,260 33,133,610 13,489,412 9,003,099 4,918,041,392 170,640,315 261,496,921 432,137,236 5,350,178,628 11,955,027 2010 Rs. 51,924,106 116,251,251 9,706,520 389,762,504 1,300,555,245 44,777,435 36,353,283 201,900 55,084 7,913,443 160,488,214 9,207,644 22,000,000 121,445,236 2,270,641,865 1,732,958,193 81,795,887 219,073,395 9,889,650 2,043,717,125 73,718,375 153,206,365 226,924,740 2,270,641,865 11,459,264 3 4 5 6 9 10 11 11.1 12 13 14 27.2
These Financial Statements are in compliance with the requirements of the Companies Act No.07 of 2007 . _____________________________________________ M.A.D. Janaka Deshapriya - 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 ; ______________________________ Vagdevi Fernando - Chairman ___________________________________ Roshan Egodage - Chief Executive Officer
The Accounting Policies and notes on pages 56 through 81 form an integral part of the Financial Statements. 14 October 2011, Colombo
50
INCOME STATEMENT
Income Statement
Year ended 31 March 2011 Note 2011 Rs. 2010 Rs. 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, Bad and Doubtful Loans and Write Offs Profit/(Loss) from Operations 26 22 23 24 1,258,391,240 1,112,597,093 410,109,441 702,487,652 71,883,738 73,910,409 425,466,094 377,101,417 206,700,994 170,400,423 22,961,942 25,402,735
25
291,573,186 4,439,162 201,310,791 69,048,637 281,910,023
114,310,266 2,440,000 87,023,921 33,768,762 (18,777,849)
Value Added Tax on Financial Services Profit/(Loss) before Taxation Provision for Income Taxation Profit for the year Earnings Per Share 28 27
(37,543,728) 244,366,295 (184,271,908) 60,094,387 4.42
(7,164,561) (25,942,410) 71,132,513 45,190,103 9.33
The Accounting Policies and notes on pages 56 through 81 form an integral part of the Financial Statements.
51
Statement of Changes in Equity

Stated Capital Rs. Rs. 224,048,280 (2,856,641) (1,671,329) (1,060,890) (36,034,423) (690,361) 1,500,000 9,200,000 12,018,877 58,751,125 73,013,637 8,318,520 8,318,520 45,190,103 (30,443,115) 60,094,387 (1,500,000) (9,200,000) (12,018,877) (8,318,520) (1,386,125) 45,190,103 226,924,739 60,094,387 96,921,940 49,892,181 (1,696,011) 432,137,236 73,718,375 73,718,375 49,892,181 (1,696,011) 122,799,764 74,603,594 58,751,125 50,294,760 (2,856,641 (1,671,329) (1,060,890) (36,034,423) (690,361) 74,603,594 58,751,125 50,294,760 (33,319,574) Revaluation Reserve Rs. General Reserve Rs. Reserve Fund Rs. Investment Fund Reserve Rs. Accumulated Profit/ (Loss) Rs. Total
52
170,640,315
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
Net Profit for the year
Balance as at 31 March 2010 Net Profit for the year
Right Issue of Shares for cash 96,921,940 Surplus on Revaluation of Property, 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
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 , 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, Deposits, 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, Plant and Equipment Acquisition of Investment Property Acquisition of Investments Proceeds from Sales of Property, 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. 244,366,295 12.2 13 11.1 25 19 23.1 12,154,671 160,605 66,004,331 (4,000,000) 1,686,898 5,357,409 (3,946,176) 4,439,162 (1,219,810) 325,003,386 (113,421,434) (1,241,343,317) 19,276,035 (1,569,393,126) (30,536,345) (100,853,446) 2,107,534,096 205,090,394 (398,643,757) (839,400) (399,483,157) (13,252,726) (412,735,882) 2010 Rs. (25,942,410) 7,590,331 312,120 33,768,762 (952,369) 2,440,000 (1,328,712) 15,887,722 (37,117,920) (568,342,342) 10,314,166 (169,046,484) (5,238,795) 1,463,792 878,384,699 67,406,769 193,711,607 (1,869,500) 191,842,107 (4,645,857) 187,196,250
12.5 -
(35,455,993) (31,796,670) 6,865,753 (60,386,910) 395,000,000 (78,392,667) (6,842,371) 96,921,940 406,686,902 (66,435,891) 73,710,135 7,274,244
(21,464,183) (22,000,000) 2,467,500 (40,996,683) 46,000,000 (67,777,163) (5,693,531) (27,470,694) 118,728,874 (45,018,739) 73,710,135
53
NOTES TO THE FINANCIAL STATEMENTS
Notes to the Financial Statements

1.
1.1
CORPORATE INFORMATION
General Commercial Credit PLC is a public limited liability company incorporated and domiciled in Sri Lanka. The registered office of the Company is located at No 106, Yatinuwara Veediya, Kandy and the principal place of business is situated at the same place.
1.2
Principal Activities and Nature of Operations During the year, the principal activities of the Company were Acceptance of Deposits, Granting Lease facilities, Hire Purchase, Personnel Loans, Micro Loans and other credit facilities, Real Estate Development and related services.
1.3
Parent Enterprise and Ultimate Parent Enterprise The Companys parent entity is BG Investment (Private) Limited. In the opinion of the directors, the Companys ultimate parent undertaking and controlling party is BG Capital (Private) Limited, which is incorporated in Sri Lanka.
1.4
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
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. The preparation and presentation of financial statements is in compliance with the Companies Act No.7 of 2007 and Finance Companies Act No.78 of 1988.
2.1.1 Statement of compliance The Financial Statements of Commercial Credit PLC has been prepared in accordance with Sri Lanka Accounting Standards. These Financial Statements are presented in accordance with Sri Lanka Accounting Standard No. 33 Revenue Recognition and Disclosures in Financial Statements of Finance Companies. 2.12 Going Concern The Directors have made an assessment of the Companys ability to continue as a going concern and they do to liquidate or to cease trading. 2.1.3 Comparative Information The accounting policies have been consistently applied by the Company and, are consistent with those used in the previous year. not intend either
2.2
SIGNIFICANT ACCOUNTING ESTIMATES AND ASSUMPTIONS

In the process of applying the Companys Accounting Policies, management is required to make judgments, apart from those involving estimations, which may have a significant effect on the amounts recognized in the Financial Statements. Further, the management is required to consider, 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. The respective carrying amounts of assets and liabilities are given in the related Notes to the Financial Statements. The key items which involve these judgments, estimates and assumptions are discussed below:
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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. 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, resulting in future changes to the allowances. Defined Benefit Plans The Defined Benefit Obligation and the related charge for the year is determined using actuarial valuation. The actuarial valuation involves making assumptions about discount rates, future salary increase, mortality rates etc. Due to the long term nature of such obligation these estimates are subject to significant uncertainty. Further details are given in Note 19 to these financial statements. Real Estate Stocks Real Estates Stocks have been accounted at cost as disclosed under accounting policy 2.3.6 the Directors have evaluated the recoverability considering the current market prices of respective stocks.
2.3
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
2.3.1 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. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted by the balance sheet date. 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. b) Deferred Taxation Deferred income tax is provided, using the liability method, on temporary differences at the balance sheet date between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes. 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, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss. Deferred income tax assets are recognised for all deductible temporary differences, carry-forward of unused tax assets and unused tax losses, to the extent that it is probable that taxable profit will be available against which the deductible temporary differences, 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, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss; 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. 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, based on tax rates (and tax laws) that have been enacted or substantively enacted at the balance sheet date. Deferred income tax relating to items recognised directly in equity is recognised in equity and not in the income statement.
55
2.3.2 Borrowing Costs Borrowing costs are recognised as an expense in the period in which they are incurred. 2.3.3 Loans and Advances Loans and advances to customers are stated net of provision for bad and doubtful loans and interest not accrued to revenue. 2.3.4 Lease Rentals Receivable & Stock Out on Hire Assets leased to customers under agreements, which transfer substantially all the risks and rewards associated with ownership other than legal title, are classified as finance leases. Lease rentals receivable represents the total minimum lease payments due net of unearned income and allowance for doubtful recoveries. Assets sold to customers under fixed rate hire agreements, 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. Such assets are accounted for in a similar manner as finance leases. 2.3.5 Provisions for Bad and Doubtful Debts Amounts are set a side with regard to possible losses on loans, advances hire purchase, finance leases and operating leases in line with Finance Companies (Provision for Bad and Doubtful Debts) Direction No. 3 of 2006 issued by the Central Bank of Sri Lanka. 2.3.6 Real Estate and Vehicle Stock Real estate stock comprises all costs of purchase, cost of conversion and other costs incurred in bringing the real estate to its saleable condition. Purchase Cost Cost of conversion Land cost with legal charges. Actual Development costs
Vehicle Stock is stated at cost. 2.3.7 Cash and Cash Equivalents Cash and cash equivalents are defined as cash in hand, demand deposits and short-term highly liquid investments, readily convertible to known amounts of cash and subject to insignificant risk of changes in value. For the purpose of cash flow statement, cash and cash equivalents consist of cash in hand and deposits in banks net of outstanding bank overdrafts. Investments with short maturities i.e. three months or less from the date of acquisition are also treated as cash equivalents. 2.3.8 Property, Plant and Equipment Plant and equipment is stated at cost, excluding the costs of day to day servicing, less accumulated depreciation and accumulated impairment in value. Such cost includes the cost of replacing part of the plant and equipment when that cost is incurred, if the recognition criteria are met. Depreciation is calculated on written down value basis over the useful life of the assets as follows. Furniture & Fittings . . . . . . . . . . . . . . . . . . 15% p.a. Equipment . . . . . . . . . . . . . . . . . . . . . . . .20% p.a. Motor Vehicles . . . . . . . . . . . . . . . . . . . . .25% p.a. Computer Hardware . . . . . . . . . . . . . . . .20% p.a. Air Conditioning . . . . . . . . . . . . . . . . . . . .20% p.a. Telephone System. . . . . . . . . . . . . . . . . .20% p.a. Fire Protection Equipment . . . . . . . . . . .20% p.a. Fixtures & Fittings. . . . . . . . . . . . . . . . 33.33% p.a.
56
2.3.9 Leaseshold Property Leasehold property is situated at recorded carrying value. Such carrying amounts are amortized over the remaining lease term or useful life of the leasehold property whichever is shorter. No further revaluation of these leasehold properties is carried out. 2.3.10 Investment Property Investment properties are measured initially at cost, including transaction costs. 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; and exclude the costs of day to day servicing of an investment property. Subsequent to initial recognition, investment properties are stated at fair value, which reflects market conditions at the balance sheet date. 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. 2.3.11 Leases a) Finance Leases where the Company is the Lessee Property, plant and equipment on finance leases, which effectively transfer, 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, if lower, at the present value of the minimum lease payments. 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. Finance charges are charged reflected in the income statement. Capitalised leased assets are depreciated over the shorter of the estimated useful life of the asset and the lease term, if there is no reasonable certainty that the Company will obtain ownership by the end of the lease term. The depreciation policy for depreciable leased assets is consistent with that for depreciable asset that are owned as described in 2.3.8. The cost of improvements to or on leasehold property is capitalized, disclosed as leasehold improvements, and depreciated over the unexpired period of the lease or the estimated useful lives of the improvements, whichever is shorter. Operating lease payments are recognised as an expense in the income statement on a straight line basis over the lease term. 2.3.12 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. The cost of an investment is the cost of acquisition inclusive of brokerages, fees, duties and bank fees. 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. 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, duties and bank fees. The carrying amount of long-term investments is reduced to recognise a decline other than temporary in the value of investments, determined on an individual investment basis.
57
Disposal of Investment On disposal of an investment, the difference between net disposals and proceeds and the carrying amounts is recognised as income or expense. 2.3.13 Employment Benefit Obligations a) Defined Benefit Plan Gratuity The Company measures the present value of the promised retirement benefits for gratuity, 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.16, Employee Benefit (Revised 2006). The item stated under Retirement Benefit Liability in the Balance Sheet. 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. The gains/losses are recognized over the expected average remaining working lives of the employees participating in the plan. Funding Arrangement The Gratuity liability is not externally funded. 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. The Company contributes 15% and 3% of gross emoluments of employees to Employees Provident Fund and Employees Trust Fund respectively. 2.3.14 Provisions Provisions are recognized when the company has a present obligation (legal or constructive) as a result of a past event, 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. If the effect of the time value of money is material, 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, where appropriate, the risks specific to the liability. Where discounting is used, the increase in the provision due to the passage of time is recognized as an interest expense. 2.3.15 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 following specific criteria are used for the purpose of recognition of revenue. a) Income from leasing activities and hire purchase agreements Income from Finance leases is recognised on the basis of the financing method. The excess of aggregate rental receivable over the cost of the leased assets constitute the total unearned income at the commencement of the contract. The earned income is taken into revenue over the term of the lease, commencing from the month in which the lease is executed, in proportion to the declining receivable balance of the lease.
58
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. However, 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. 15 of 1991 (Accrued Interest) and thereafter recognised on a cash basis. b) Interest Income from Loans and Advances Interest income from loans and advances is recognised on an accrual basis. However, income from loans and advances ceases when the account is overdue for more than six months in compliance with Direction No. 15 of 1991 (Accrued Interest) and thereafter recognised on a cash basis. c) Interest income from other sources Interest income from Government of Sri Lanka Treasury Bills is recognised on a time proportion basis, and discounts on purchase are amortised to income on a straight line basis over periods to maturity. Income from all other interest bearing investments is recognised as revenue on an accrual basis. d) Dividend Income Dividend income is recognised on a cash received basis. e) Overdue Interests Overdue interest income from leasing and other loans have been accounted for on a cash received basis. f) Real Estate Sales Revenue is recognised when properties are sold and the buyer has taken possession of such properties. However, when there is insufficient assurance as to the receipt of the total consideration, income is accounted for on a cash received basis. Revenue is recognized when properties are sold and the Risk and Reward of ownership has passed to the buyer. In the case of realestate sales under easy payment schemes, profit element is recognized over the period of such scheme. g) Others Other income is recognised on an accrual basis Net Gains and losses of a revenue nature on the disposal of property, plant & equipment and other non current assets including investments have been accounted for in the income statement, having deducted from proceeds on disposal, the carrying amount of the assets and related selling expenses. 2.3.16 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. All expenditure incurred in the running of the business and in maintaining the property, plant & equipment in a state of efficiency has been charged to income in arriving at the profit for the year. 2.3.17 Segmental Reporting A segment is a distinguishable component of the Company that is engaged either in providing related products or services (business segment), or in providing products and services within a particular economic environment (geographical segment), which is subject to risks and returns different from those of other business segments. For the purpose of segment reporting disclosures, the information is presented in respect of the Companys business segment which is based on the Companys management and internal reporting structure. The Company comprises the following major Business segments; lending, leasing, real estates, investments and others.
59
Inter-segment pricing is determined on an arms length basis. Measurement of segment assets, liabilities, segment revenue and results is based on the accounting policies set out above. Segment revenue results, assets and liabilities include items directly attributable to segments as well as those that can be allocated on a reasonable basis. 2.4 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. - Sri Lanka Accounting Standard 44 Financial Instruments; Presentation (SLAS 44) - Sri Lanka Accounting Standard 45 Financial Instruments; Recognition and Measurement (SLAS 45) - Sri Lanka Accounting Standard 39 Share Based Payments (SLAS 39) The effective date of SLAS 44, 45 and 39 was changed during the year to be effective for financial periods beginning on or after 01 January 2012. These three standards have been amended and forms a part of the new set of financial reporting standards mentioned under note (b) below. b) Following the convergence of Sri Lanka Accounting Standards with the International Financial Reporting. Standards, 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. The application of these financial reporting standards is substantially different to the prevailing standards.
60
Year ended 31 March 2011
2011 Rs.
2010 Rs.
3.
TREASURY BILLS Government of Sri Lanka Treasury Bills - Face Value Less : Income allocated for future periods Re-Purchase Agreements
68,224,951 (1,255,587) 10,000,000 76,969,364
88,297,236 (2,051,837) 30,005,852 116,251,251
4.
PLACEMENTS WITH OTHER BANKS Fixed Deposits
110,559,966 110,559,966
9,706,520 9,706,520 51,591,526 25,125,516 29,153,227 101,665,226 124,243,572 29,818,922 42,439,956 3,728,993 4,085,804 2,568,605 595,482 415,016,827 (15,113,417) 399,903,410 (10,140,906) 389,762,504
5.
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 5.1) Fixed Savers Deposits Loans Rescheduled Loans Pawning Stock Less : Provision for Bad debts Interest in suspense
185,746,683 62,803,628 19,098,477 21,874,471 578,665,954 17,416,943 1,072,356,936 10,727,374 5,241,553 178,548 1,974,110,967 (20,616,227) 1,953,494,740 (9,266,019) 1,944,228,721
5.1
Term Loans include loans granted to Company Officers, the movement of which is as follows : As at the beginning of the year 3,728,990 Add : Loans granted during the year 13,993,674 Less : Repayments during the year (6,995,290) As at the end of the year 10,727,374
4,384,226 4,628,578 (5,283,814) 3,728,990
6.
RENTALS RECEIVABLE ON LEASE & HIRE-PURCHASE Lease (Note 6.a) Hire-Purchases (Note 6.b)
870,976,802 1,619,844,343 2,490,821,145
733,628,638 566,926,607 1,300,555,245
61
Year ended 31 March 2011 6. a Lease Gross rentals receivable Less: Unearned income Pre-paid rentals Interest in suspense Provision for credit losses
2011 Rs. 1,365,248,147 (370,383,573) (28,459,280) (4,067,764) (91,360,728) 870,976,802
2010 Rs. 1,102,020,850 (284,895,071) (29,251,290) (2,067,408) (52,178,443) 733,628,638 913,432,946 (337,111,851) (206,783) (369,431) (8,818,274) 566,926,607
6. b
Hire-Purchases Gross rentals receivable Less: Unearned income Pre-paid rentals Interest in suspense Provision for credit losses
2,452,562,542 (809,734,888) (1,121,085) (1,148,819) (20,713,408) 1,619,844,343
6.1
Receivable not later than one year Gross rentals receivable Less: Unearned income Pre-paid rentals Interest in suspense Provision for credit losses
1,549,883,249 (621,885,004) (7,223,390) (5,216,583) (54,383,849) 861,174,423
909,578,978 (352,827,843) (13,294,497) (1,099,751) (27,448,523) 514,908,364 1,105,874,818 (269,179,079) (16,163,576) (1,337,086) (33,548,194) 785,646,883
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
2,267,927,431 (558,233,629) (22,356,975) (57,690,104) 1,629,646,723
62
Year ended 31 March 2011 7. 7.1 LEASE RENTALS RECEIVABLE AND STOCK OUT ON HIRE Non-Performing Advances Lease & Hire Purchase (Rs.) 2011 2010 Amount Receivable Less: Interest in suspense Provision for Bad Debts Net non-performing advances 194,425,146 131,180,220
Loans and Advances (Rs.) 2011 2010 67,151,844 48,216,799
Total (Rs.) 2011 261,576,990 2010 179,397,019
(5,216,583) (2,436,839) (112,074,136) (60,996,717) 77,134,428 67,746,664
(9,266,019) (10,140,906) (14,482,601) (12,577,745) (20,616,227) (15,113,417) (132,690,362) (76,110,134) 37,269,598 22,962,476 114,404,026 90,709,140
2011 Rs. 7.2 Segmental Analysis of Loans and Advances, Leases, Hire Purchase by Industry Agriculture Services Trading Transport Others Distribution of Total Advances Gross Receivable Lease & Hire Purchase Receivables Loans & Advances Total Advances 462,498,095 668,814,278 83,566,042 3,196,109,571 1,380,933,670 5,791,921,656 3,817,810,689 1,974,110,967 5,791,921,656
2010 Rs. 503,719,845 271,536,451 66,821,671 1,455,482,070 132,910,584 2,430,470,621 2,015,453,796 415,016,824 2,430,470,620
63
Year ended 31 March 2011 8. 8.1 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.
2010 Rs.
76,110,134 66,004,331 (9,424,102) 132,690,363
52,392,726 24,548,503 831,095 76,110,134
8.2
Provision for Bad and Doubtful Debts consist of provisioning against ; Leases and Hire Purchase Loans and Advances
112,074,136 20,616,227 132,690,363
34,785,066 41,325,068 76,110,134
9.
REAL ESTATE AND VEHICLE STOCKS Real Estate Stocks Less: Fall in Value of Real Estate Stock Vehicle Stock
177,127,507 (41,391,832) 135,735,675 17,105,784 152,841,459
80,811,858 (36,034,423) 44,775,435 44,777,435
10.
OTHER DEBTORS, DEPOSITS & PREPAYMENTS Sundry Debtors Deposits & Prepayments
15,265,209 51,838,646 67,103,855
10,881,471 25,471,812 36,353,283
11.
INVESMENT SECURITIES Unquoted Shares 11 (a)
5,426,900 5,426,900
201,900 201,900
64
11(a) INVESTMENTS IN UNQUOTED SHARES
Number of Shares 2011 19 209,000 20,000
Cost as at 2011 Rs. 1,900 5,225,000 200,000 5,426,900
Directors Valuation as at 2011 Rs. 1,900 5,225,000 200,000 5,426,900
Number of Shares 2010 19 20,000 20,019
Cost as at 2010 Rs. 1,900 200,000 201,900
Directors Valuation as at 2010 Rs. 1,900 200,000 201,900
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. 11.1 DEALING SECURITIES Number of Cost Market Value Number of Shares as at as at Shares 2011 2011 2011 2010 Rs. Rs. Bank Finance and Insurance Hatton National Bank PLC -Voting 770 Hatton National Bank PLC - Non-voting 214 Sampath Bank PLC - Voting 10,341 Commercial Bank PLC 15,000 Peoples Merchant Bank PLC 100 First Capital Holdings PLC 20,000 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. 25,145 6,786 13,420 625 108 9,000 55,084
-
Market Value as at 2010 Rs. 144,953 29,960 75,702 2,350 11,340 264,305
-
25,145 6,786 2,996,460 4,155,830 625 445,726 108 9,000 7,639,679
292,600 45,646 3,080,774 3,987,000 2,500 442,000 23,976 7,874,496

3,821,000 3,821,000 1,950,000 4,454,220 1,632,640 8,036,860 2,007,500 2,007,500 1,800,000 540,000 2,340,000 860,000 860,000 24,939,856
770 214 341 100 218 648 2,291

-
10,000
3,690,880 3,690,880
30,000 3,000 6,400
2,578,560 5,612,160 1,600,000 9,790,720
2,291
55,084
264,305
Chemicals & Pharmaceuticals Lankem Ceylon PLC Beverages, Food and Tobacco Distilleries Company of Sri Lanka PLC Lion Brewery (Ceylon) PLC
5,000
2,291,470 2,291,470
10,000 2,700
1,719,040 524,206 2,243,246
Hotels and Travels John Keels Hotels PLC
50,000
970,758 970,758
Net Investment Securities in quoted shares Less: Fall in Value of Investment Net Investment in Quoted shares
26,626,754 (1,686,898) 24,939,856
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12. PROPERTY, PLANT AND EQUIPMENT 12.1 Gross Carrying Amounts Balance as at 01.04.2010 Rs. 71,165,000 36,335,000 25,638,730 3,471,765 7,719,392 19,565,277 5,064,378 1,734,926 170,694,468 Assets on Finance Lease Equipment Motor Vehicle Computer Systems Additions/ (Transfers) Rs. 22,120,209 2,746,830 10,581,973 2,727,375 38,176,387 Increase in Revaluation Rs. 43,835,000 4,165,000 48,000,000 Balance as at 31.03.2011 Rs. 115,000,000 40,500,000 47,758,939 6,218,595 65,012 30,006,250 7,791,753 1,734,926 249,075,475
Cost Freehold Assets Land Building Furniture and Fittings Equipment Motor Vehicles and Accessories Computer Systems Air Conditioning Generators
Disposals Rs. 7,654,380 141,000 7,795,380
3,560,989 16,336,913 8,535,249 28,433,151
5,049,310 5,049,310 43,225,697
48,000,000
7,795,380
3,560,989 16,336,913 13,584,559 33,482,461 282,557,936
Total Value of Depreciable Assets 199,127,619
A revaluation was carried out by independent valuers Messrs.R.G.Wimalasena (AIV) and Messrs. R.C.Wijesuriya (AIV) for the purpose of ascertaining the fair value of land and building. Such assets were valued on an open market value for existing use basis. The results of such revaluation was incorporated in these financial statement from its effective dates which is 31 March 2011.The surplus arising from the revaluation was transferred to a Revaluation Reserve. Balance as at Charge for the Balance as at 01.04.2010 Period Transfers Disposals 31.03.2011 Rs. Rs. Rs. Rs. Rs. 12.2 Depreciation Freehold Assets Building Furniture & Fittings Equipment Motor Vehicles & Accessories Computer Systems Air Conditioning Generators Assets on Finance Lease Equipment Motor Vehicle Computer Systems
1,437,283 2,982,973 1,477,685 3,794,981 14,328,664 2,281,964 1,012,260 27,315,810 9,350,199 1,973,396 11,323,595 38,639,405
454,898 3,821,173 361,765 1,097,450 1,643,392 413,688 36,594 7,828,959 441,625 1,746,681 2,137,406 4,325,712 12,154,671
1,892,181 1,892,181 1,892,181
4,847,997 27,806 4,875,803 4,875,803
6,804,146 1,839,450 44,434 15,944,250 2,695,652 1,048,854 28,376,786 441,625 11,096,880 4,110,802 15,649,307 44,026,093
There arent any temporarily idling assets as at 31st March 2011.
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Balance as at 01.04.2010 Rs. Net Book Value At Cost On Finance Leases 143,378,658 17,109,556 160,488,214 12.3
Balance as at 31.03.2011 Rs. 220,698,689 17,833,154 238,531,843
During the financial year, the Company acquired Property, Plant and Equipment to the aggregate value of Rs.42,913,517/(2010 - Rs.29,068,322/-) . Cash payments amounting to Rs.35,143,813/- ( 2010 - Rs.21,464,183/-) was paid during the year for purchases of Property , Plant and Equipment . Property, Plant and Equipment includes fully depreciated assets having a gross carrying amount of Rs.31,750,035/( 2010- Rs.35,020,596/) . 2011 Rs. 2010 Rs. 9,519,764 (312,120) 9,207,644
12.4
13.
LEASEHOLD PROPERTY At 1 April Amortisation for the year (over a period 78 years) At 31 March
9,207644 (160,605) 9,047,039
14.
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
22,000,000 4,000,000 26,000,000
22,000,000 22,000,000
Investment property at No. 50/2, Anula Vidyalaya Road , Nugegoda as at 31st March 2011 was valued by Mr. D. Jayawardene, a qualified professional valuer, by using open market value method. The change in fair value was recognised in the Income Statement. 2011 Rs. 15. DEPOSITS FROM CUSTOMERS Fixed Deposits-Monthly Fixed Deposits-Maturity Savers Deposits 1,303,272,819 2,359,001,688 178,217,782 3,840,492,289 16. BORROWINGS Bank Loans (16.1) Bank Overdrafts Finance Lease (16.3) 376,421,883 206,434,236 12,129,603 594,985,722 2010 Rs. 477,696,741 1,207,103,637 48,157,815 1,732,958,193 59,814,550 8,219,823 13,761,514 81,795,887
67
16.1 Bank Loans Rs. 85,000,000 5,664,000 79,336,000 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.250 million together with the underlying assets and a special power of attorney in favour of the Bank Mortgage bond No.3666 for Rs.1.0 million and leeway available on existing territory floating mortgage bond no. 4573 for Rs.5.0 million Primary Mortgage Bond 17.5 million,Secondary Mortgage Bond Rs.3.75 million, Tertiary Mortgage Bond Rs.8.25 million and Quarternary Mortgage Bond over property situated at 106, Yatinuwara Veediya, Kandy & Registered Mortgage Bond2006/01 dated 05/10/2006 over lease/ hire purchase contracts for Rs.25 million. 928,800 3,404,000 45 Months Primary Registered MortgageBond for Rs.6.5 million. over the property situated in Main street Hingurakgoda. 28,000,000 75,000,000 395,000,000 1,650,000 7,459,717 1,562,500 20,540,283 73,437,500 78,392,667 376,421,883 24 Months 48 Months Lease Rentals receivables Lease & HP receivables for Rs.125 million 13,906,500 -
As at 01.04.2010 Rs. 13,906,500 -
Loans Obtained Rs.
Repayments
As at 31.03.2011 Rs.
Terms of the Loan
Security Offered
68
150,000,000 150,000,000 60 Months 3,353,750 1,750,200 1,603,550 48 Months 36,571,500 57,000,000 45,470,950 48,100,550 48 Months 4,332,800 1,650,000 59,814,550
HNB Revolving Loan
HNB Securitization Loan-02
HNB Securitization Loan-03
Capital Loan- HNB
Commercial Bank Revolving Loan
Term Loan Commercial Bank- HG
Term Loan Commercial Bank
Ceyleases Financial Services Loan
SB Securitisation Loan-01
16.2
The Company has unutilized borrowing facilities of Rs. 28,000,000/- as at 31st March 2011.( 2010 - Rs. 29,263,884) As at 01.04.2010 Rs. 13,761,514 13,761,514 Gross Liability Finance Charges allocated for future periods Net Liability 17,216,024 (3,454,510) 13,761,514 New Leases Obtained Rs. 5,210,460 5,210,460 Repayments Rs. 6,842,371 6,842,371 As at 31.03.2011 Rs. 12,129,603 12,129,603 14,687,530 (2,557,927) 12,129,603
16.3 Finance Leases
Finance Leases
16.4 17. 17.1
Refer Note 29 for the Gross Liability and Finance Charges Allocated for the future periods on maturity basis. 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. 203,708,480 10,000,000 213,708,480
2010 Rs. 51,924,106 30,005,852 81,929,958 (8,219,823) 73,710,135 2010 Rs. 68,363,417 142,458,682 8,251,296 219,073,395 2010 Rs. 9,319,150 2,440,000 (1,869,500) 9,889,650
17.2
Unfavourable Cash & Cash Equivalents balance Bank Overdrafts Total Cash and Cash Equivalents for the Purpose of Cash Flow Statements
(206,434,236) 7,274,244 2011 Rs. 120,167,581 230,972,247 38,158,012 37,639,420 426,937,260
18.
OTHER LIABILITIES Accrued Interest Accrued Expenses and Other Payables Deferred Revenue on Real Estate sales Advances received against Real Estate Stocks
19.
RETIREMENT BENEFIT LIABILITY Retirement Benefit Obligations - Gratuity Balance at the beginning of the year Amount Charged/(Reversed) for the year (19.1) Payments made during the year Balance at the end of the year
2011 Rs. 9,889,650 4,439,162 (839,400) 13,489,412
An actuarial valuation of the gratuity was carried out as at 31 March 2011 by Piyal S Goonetilleke and Associates, a firm of professional actuaries. The valuation method used by the actuary to value the Fund is the Projected Unit Credit Method, recommended by SLAS No.16. The present value of defined benefit obligation as at 31st March 2011 is Rs. 14,983,659/-
69
19.1
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. 2,517,784 1,792,539 128,839 4,439,162
2010 Rs. 623,109 1,153,393 663,498 2,440,000
19.2
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 % 5% 2.5 % 1%
GA 1983 Mortality Table Normal retirement Age, or age on valuation date, if greater . 2011 Number Rs. 218,074,365 170,640,315 2010 Number 4,846,097 Rs. 73,718,375
20. STATED CAPITAL 20.1 Fully paid ordinary shares
20.2 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. All shares rank equally with regard to the Companys residual assets. 20.3 Share Split The Company, with the sanction of the shareholders at an Extraordinary General Meeting held on 24th March 2011 subdivided its 14,538,291 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 218,074,365. 21. RESERVES Reserve Fund Rs. 50,294,760 50,294,760 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. Retained Profits Rs. (30,443,115) 60,094,387 29,651,272 Total Rs. 19,851,645 60,094,387 79,946,032
At the beginning of the year Profit for the year
1,500,000 9,200,000 12,018,877 73,013,637
8,318,520 8,318,520
(1,500,000) (9,200,000) (12,018,877) (8,318,520) (1,386,125)
79,946,032
Reserve Fund is a capital reserve which contains profits transferred as required by Section 3(b)(ii) of Central Bank Direction No. 1 of 2003.
70
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. 22. INCOME 2011 Rs. 22.1 Summary Gross Income(22.2) 1,258,391,240 1,258,391,240 22.2 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 1,112,597,093 71,883,738 59,141,424 14,768,985 1,258,391,240 23. 271,723,707 451,117,891 354,996,315 20,425,013 12,198,093 2,136,074 1,112,597,093 23.1 2010 Rs. 425,466,094 425,466,094 377,101,417 22,961,942 20,649,462 4,753,273 425,466,094 227,828,014 85,519,090 46,905,899 2,978,433 13,287,127 582,854 377,101,417
Notional Tax Credit for withholding Tax on Government Securities on Secondary market Transactions The Inland Revenue Act No.10 of 2007, provided that a company which derives interest income from the secondary market transactions in Government Securities ( on or after April 1, 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. Accordingly the net interest income earned from the secondary market transactions in Government Securities for the year, has been grossed up in the Financial Statement & the resulting notional Tax credit amounts to Rs.1,219,810/- (2010 - Rs.1,328,712/-).
24.
INTEREST EXPENSES Interest on Fixed Deposits- Maturity Interest on Fixed Deposits- Term Interest on Savers Deposits Interest on Loans Interest on Bank Overdrafts Interest on Finance Leases
2011 Rs. 255,477,932 124,667,398 4,185,162 14,835,017 7,979,776 2,964,157 410,109,441
2010 Rs. 131,079,176 53,836,640 1,844,496 13,150,027 4,866,767 1,923,888 206,700,994
71
2011 Rs. 25. 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 345,877 3,946,176 6,363,556 33,288,702 20,200,975 5,651,747 2,646,667 611,055 855,655 73,910,409 26. PROFIT FROM OPERATION STATED AFTER CHARGING THE FOLLOWING EXPENSES Depreciation Defined Contribution Plan Costs - EPF & ETF included in Staff Costs
2010 Rs. 8,167 956,349 1,512,695 15,997,092 3,041,784 1,610,586 955,062 1,000 1,320,000 25,402,735
12,154,671 20,488,751
7,590,331 8,403,927
27.
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(27.1) 55,519,585 Deferred Income Tax Deferred Taxation Charge (27.2) 128,752,323 Income tax expense reported in the Income Statement 184,271,908
13,319,403 (84,451,916) (71,132,513)
27.1
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 244,366,295 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 1.5% of Tax ( 2010 - 1.5% ) Income Tax Expense at the effective income tax rate of 36% ( 2010- 36% ) 330,400,200 (372,134,047) 202,632,448 37,803,150 (84,152,459) 156,283,139 54,699,099 820,486 55,519,585
(25,942,410) 69,276,074 (40,167,486) 3,166,178 87,123,475 (57,114,404) 33,175,249 11,614,697 174,220 11,788,917
72
27.2
Deferred Tax Assets , Liabilities and Income Tax relates to the followings Balance Sheet 2011 Rs. Deferred Tax Liability Capital allowances for tax purposes Revaluation of Buildings Effect of rate change 25,334,623 1,696,011 27,030,634 Deferred Tax Assets Defined Benefit Plans Tax Loss Effect of rate change 3,777,035 14,250,500 18,027,535 Deferred tax Expense Net Deferred Tax Liability/(Asset) 9,003,099 (121,445,236) 2010 Rs. (50,614,366) (50,614,366) 3,461,378 67,369,492 70,830,870 Income Statement 2011 Rs. 84,402,658 (8,453,669) 75,948,989 1,259,917 49,556365 1,987052 52,803,334 128,752,323 2010 Rs. 70,197,039
70,197,039 199,675 14,055,203 14,254,878 (84,451,917)
28. 28.1
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. The following reflects the Income & Share data used in the Basic Earnings Per Share computation . 2011 Amounts Used as the Numerators: Rs. 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 60,094,387 2011 Number 13,595,626 4.42
28.2
2010 Rs. 45,190,103 2010 Number 4,846,097 9.33
73
74
203,708,480 29,115,436 1,642,281 499,338,681 364,014,916 152,841,459 32,542,546 24,939,856 1,308,143,655 1,569,879,072 230,640,858 1,250,236 327,514,413 33,133,610 2,162,418,188 2,097,594,211 1,966,921,138 72,473,216 4,096,890 54,102,968 1,740,530,304 1,644,671,243 275,620,409 168,766,899 6,782,478 34,016,011 485,185,797 656,833,428 28,071,670 110,975,146 11,303,868 13,489,412 9,003,099 172,843,195 5,350,178,628 3,840,492,289 582,856,119 12,129,603 426,937,260 33,133,610 13,489,412 9,003,099 4,918,041,392 47,853,928 108,917,685 1,047,838,214 504,382,897 31,537,579 309,782,009 1,332,722,564 2,166,670 87,269,817 289,700,767 857,060 5,426,900 238,531,845 9,047,039 26,000,000 203,708,480 76,969,364 110,559,966 1,944,228,721 2,490,821,145 152,841,459 67,103,854 5,426,900 24,939,856 238,531,845 9,047,039 26,000,000 51,924,106 116,251,251 9,706,520 389,762,504 1,300,555,245 44,777,435 36,353,283 201,900 55,084 7,913,443 160,488,214 9,207,644 22,000,000 121,445,236 2,270,641,865 1,732,958,193 68,034,373 13,761,514 219,073,395 9,889,650 2,043,717,125
29. MATURITY ANALYSIS An analysis of the total assets employed and total liabilities at the year end , based on the remaining at the balance sheet date to the respective contractual maturity dates are given below. Less than 3 3-12 1-3 over 3 Total Total months months years years 2011 2010 Rs. Rs. Rs. Rs. Rs. Rs.
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, Deposits and Prepayments Investment Portfolio Dealing Securities Tax Receivable Property, Plant & Equipment Leasehold Property Investment Property Deferred Tax Asset
As at 31.03.2011
Liabilities Deposits from Customers Borrowings Finance Leases (Note:29.1) Other liabilities Tax Payable Retirement Benefit Liability Differed Tax Liability
As at 31.03.2011
29.1
Finance Leases Less than 3 months Rs. Finance Leases-Gross Liability Less: Finace Charges allocated for Future Periods 1,706,280 (456,044) 1,250,236 3-12 months Rs. 5,151,463 (1,054,573) 4,096,890 1-3 years Rs. 7,829,787 (1,047,309) 6,782,478 Total Rs. 14,687,530 (2,557,927) 12,129,603
30. 30.1
COMMITMENTS AND CONTINGENCIES Contingent Liabilities There are no contingent liabilities as at the balance sheet date.
30.2
Commitments The Company has purchase commitments for acquisition of Property, Plant and Equipment & Vehicle Stocks incidental to the ordinary course of business are , 2011 2010 Rs. Rs. Contracted but not provided for 11,955,027 11,459,264 11,955,027 11,459,264
31.
ASSETS PLEDGED The following assets have been pledged as security for liabilities. Carrying Amount Pledged Nature of Liability Lease Receivables & Stock out on hire Loans
Carrying Amount Pledged 2011 2010 Rs. Rs. 502,940,022 258,940,022
Included Under Lease Rentals Receiv ables & Stock out on hire Property, Plant and Equipment
Freehold Land & Building
Loans & Overdrafts
111,258,866 614,198,888
111,829,091 370,769,113
75
32.
Finance Lease 2011 Rs. Rs. Rs. Rs. Rs. Rs. Rs. Rs. Rs. Rs. Rs. Rs. Rs. Rs. 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
227,828,015 12,781,713 240,609,728 (5,553,363) 83,281,770 (212,891) 151,447,375 (14,690,899) 22,824,561 997,528 2,510,209 505,155 6,847,231 176,620 364,135,629 48,458,044 482,757,433 88,737,000 101,048,779 28,311,453 15,049,074 14,337,113 10,208,978 5,012,755 10,208,978 5,012,755 10,208,978 1,258,391,240 281,910,023 (37,543,728) 244,366,295 (184,271,908) 60,094,387 9,139,314 1,552,145 31,639,542 3,217,910 8,740,027 2,371,078 714,907 467,133 63,701,431 354,996,315 46,905,899 451,117,891 85,519,090 92,308,752 25,940,375 14,334,167 13,869,980 1,184,480,832 400,063,359 20,389,980 5,012,755 425,466,093 (18,777,849) (7,164,561) (25,942,410) 71,132,513 45,190,103 757,054,182 1,619,844,343 569,712,714 1,758,482,039 311,959,324 321,482,357 95,831,723 217,896,087 126,214,755 4,788,681,628 561,497,000 409,331,929 561,497,000 5,350,178,628 683,646,857 1,489,008,514 514,470,847 1,616,448,358 281,710,367 295,516,029 86,539,454 200,296,485 113,976,413 4,401,896,854 516,144,538 362,495,171 516,144,538 4,918,041,392 1,860,772,698 409,331,929 2,270,104,627 1,680,343,939 362,495,171 2,042,839,110 12,154,671 7,590,331 43,225,697 21,464,183 12,154,671 43,225,697 7,590,331 21,464,183
Interest
271,723,707
Fee Based Income & others
13,467,641
Unallocated Revenue
Total Revenue
285,191,348
Segmental Result
14,998,877
VAT on Financial Institutions
Profits from Operations
Income Tax Expenses
Net profit for the period
Segment Asset
870,976,802
Unallocated Assets
Segment Liabilities
800,627,468
Unallocated Liabilities
Total Liabilities
Others
Depreciation and Amortization
Addition to Property,Plant and Equipment
33.
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.
34. 34.1
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. Following transactions are entered between the company and its Key Management Personnel and their close family members.
34.1.1 Compensation to Key Managerial Personnel
2011 Rs. 23,945,677 3,720,850 2011 Rs. 8,632,000 9,156,848 1,432,453
2010 Rs. 6,968,000 2,670,000 2010 Rs. 8,090,000 11,140,000 4,642,000
Short Term Employment Benefits Paid Post Employment Benefits
34.1.2 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. 35.1
COMPARATIVE INFORMATION The presentation and classification of the following items in the financial statements are amended to ensure the comparability with the current year. Rs. Current Presentation (a) Cash and Bank Balances Bank Transfer 51,924,106 51,924,106 (b) Treasury Bills Placements with other banks 116,251,251 9,706,520 125,957,771 (c) Loans and Advances Supplier Payable Rental Receivables Lease rentals receivable and Stock out on hire Repossessed inventory 389,762,502 1,300,555,245 1,690,317,747 Rs. As Reported Previously 49,438,469 2,485,637 51,924,106 86,245,400 39,712,371 125,957,771 915,342,409 (13,078,081) 173,346,688 592,977,866 21,728,865 1,690,317,747
77
Rs. Current Presentation (d) Other Debtors, Deposits and Prepayments Bank Transfer Land sales Income Receivables Rental Receivables VAT receivables (e) Property, Plant and Equipment Intangible assets Leasehold Property (f) Borrowings Lease creditors Bank overdraft 36,353,283 36,353,283 160,488,214 9,207,644 169,695,858 81,795,887 81,795,887 (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, equipment & establishment expenses Other overhead expenses General & Administration Expenses Value Added Tax on Financial Services 219,073,395 219,073,395 377,101,417 377,101,417 25,402,735 25,402,735 87,023,921 87,023,921 2,864,646,120
Rs. As Reported Previously 229,152,308 (2,485,637) (1,192,044) (173,346,688) (15,774,656) 36,353,283 165,495,762 758,826 3,441,270 169,695,858 59,814,550 13,761,514 8,219,823 81,795,887 249,517,391 (13,078,081) (1,192,044) (15,774,656) (399,215) 219,073,395 346,843,191 30,258,227 377,101,418 55,660,962 (30,258,227) 25,402,735 63,734,303 30,454,179 (7,164,561) 87,023,921 2,864,646,120
78
35.2 Reason for changes in the presentation and classification: (a) (b) (c) Cash in transits were recorded under the other receivables in previous year accounts, was reclassified under Cash and bank during the current year for a better presentation of these Financial Statements Rs. 30 million Repos were recorded under the placements with other banks in previous year accounts, was reclassified under Treasury bills during the current year for a better presentation of these Financial Statements. Lease and loans rental receivable were recorded under the Other Receivables in previous year accounts, was reclassified under the Lease Receivables & loans & Advances respectively in current year for a better presentation of these Financial Statements. Input VAT is recorded under the Other Receivables in previous year accounts, was reclassified under the other payable by netting off with the VAT payable in current year for a better presentation of these Financial Statements. Computer software which is recorded under Intangible assets in previous year accounts, was reclassified under the Property Plant and Equipment in current year for a better presentation of these Financial Statements. Borrowings, Finance leases and Bank overdrafts which were recorded separately in previous year accounts, was aggregated under the Borrowings in current year for a better presentation of these Financial Statements. Supplier Payable Balances which is deducted from lease receivables in previous year accounts, was reclassified under the Other payables in current year for a better presentation of these Financial Statements. Default interest for LE & LP,which was recognised as an other income in previous year accounts, was reclassified under the Interest Income in current year for a better presentation of these Financial Statements. Premises, equipment & establishment expenses,which was presented separately in the income statement in previous year accounts, was aggregated under the General & Administration Expenses in current year for a better presentation of these Financial Statements.Also the VAT on financial services,is separately disclosed in the income statement.
(d) (e) (f) (g) (h) (i)
79
FIVE YEAR SUMMARY
Five Year Summary

2007 (Rs. 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 Shareholders Fund No of Shares 41,022 17,341 45,295 40,751 6,689 151,098 4,844,972 58,718 74,603 50,295 58,751 12,883 255,251 4,844,972 73,718 74,603 50,295 58,751 -33,320 224,048 4,844,972 73,718 74,603 50,295 58,751 30,443 226,925 4,844,972 170,640 122,800 73,014 58,751 -1,386 432,137 218,074,365 569,043 26,148 7,070 712,919 66,868 8,627 854,331 81,592 9,319 1,732,958 81,796 9,890 3,840,492 594,986 13,489 4,985 282,532 247,586 72,901 881,762 5,342 451,218 241,849 144,918 1,196,137 12,578 548,361 269,603 143,996 1,388,813 51,924 1,300,555 389,762 160,488 2,270,642 203,708 2,490,821 1,944,229 238,531 5,350,179 182,666 143,508 67,203 79,300 36,163 3,145 39,308 249,126 212,162 109,114 107,200 32,812 3,478 29,334 350,461 314,266 187,600 164,142 -1,280 8,378 7,098 425,466 377,101 206,701 237,543 -25,942 71,132 45,190 1,258,391 1,112,597 410,109 566,372 244,366 184,272 60,094 2008 (Rs. 000) 2009 (Rs. 000) 2010 (Rs. 000) 2011 (Rs. 000)
80
INVESTOR INFORMATION
Investor Information
1. 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. G. Investments (Pvt) Ltd Mrs. Vagdevi Wimalangi Fernando Mr. George Ginendra Hemachandra Ms. Deegala Nilanthi Keerthisinghe Pedrisons Limited Mr. Sri Deva Kumara Semage Mr. Thusitha Kumara Hemachandra Mr. Deegala Jayantha Keerthisinghe Dr. Eresha Fernando Ms. Nirmala Samudra Hemachandra Mr. Premakumar Shanthilal Maryson Fernando Mrs. Susila Semage Mr. Karandeniya Hewage Ukkantha Garvin Fernando Mr. Mahendra Nalaka Kariyawasam. Mr. Batapola Arachchige Lal Athula Indrasena M/S. Isuru Finance Company Limited Mr. Panduka Bimal Fernando Mr. Munugoda Hewage Gunawardena Mr. Gampolage Shiran De Fonseka/JAYASURIYA Mr. Amal Indrajith Fernando TOTAL ISSUED SHARE CAPITAL
31st March 2011 Number of Shares

168,103,980 15,494,265 7,427,520 3,424,260 2,388,750 2,116,485 1,425,000 1,162,980 1,148,550 1,124,490 879,885 814,455 724,320 471,075 417,060 393,810 337,425 327,000 300,000 292,950 208,774,260
31st March 2010 Number of Shares

2,423,534 732,951 395,168 75,230 159,250 101,099 95,000 24,577 76,570 74,966 58,659 24,297 47,738 11,456 9,268 26,254 22,495 21,800 19,380 19,530 4,419,222
%
77.09% 7.11% 3.41% 1.57% 1.10% 0.97% 0.65% 0.53% 0.53% 0.52% 0.40% 0.37% 0.33% 0.22% 0.19% 0.18% 0.15% 0.15% 0.14% 0.13% 95.74%
%
50.01% 15.12% 8.15% 1.55% 3.29% 2.09% 1.96% 0.51% 1.58% 1.55% 1.21% 0.50% 0.99% 0.24% 0.19% 0.54% 0.46% 0.45% 0.40% 0.40% 91.19%
2. STOCK EXCHANGE LISTING

The Stock exchange ticker symbol for Commercial Credit PLC is COCR. (Listed on 1st June 2011)
3. SHAREHOLDER BASE
The Total number of (Ordinary Voting) shares as at March 31, 2011 were 218,074,365 compared to 4,846,097 as at March 31, 2010.
81
INVESTOR INFORMATION
4.
DISTRIBUTION OF SHAREHOLDERS
Ordinary Voting - Shareholding as at 31st March 2011 Resident Range of Shareholders 1 - 1,000 1,001 - 5,000 5,001 - 10,000 10,001 - 50,000 50,001 - 100,000 100,001 - 500,000 500,001 - 1,000,000 1,000,001 - 50,000,000 50,000,001 - 75,000,000 75,000,001 & above Total 1 168,103,980 214 218,074,365 77.09% 100.00% 214 218,074,365 100.00% No. of Holders 0 48 28 57 34 34 3 No. of Shares 0 123,975 204,390 1,282,245 2,477,535 7,751,280 2,418,660 % of Share holdings 0.00% 0.06% 0.09% 0.59% 1.14% 3.55% 1.11% 16.38% Non-Resident No. of No. of % of Share Holders Shares holdings No. of Holders 0 48 28 57 34 34 3 Total No. of % of Share Shares holdings 0 123,975 204,390 1,282,245 2,477,535 7,751,280 2,418,660 0.00% 0.06% 0.09% 0.59% 1.14% 3.55% 1.11% 16.38% 77.09%
9 35,712,300
9 35,712,300 1 168,103,980
5.
COMPOSITION OF SHAREHOLDERS
March 31, 2011 Ordinary Voting Shares Resident Non-Resident Total Individual Institution Total No. of No. of Shareholders Shares 214 214 211 3 214 218,074,365 218,074,365 47,187,825 170,886,540 218,074,365 % of Share holdings 100% 100% 21.64% 78.36% 100% March 31, 2010 No. of Shareholders 212 212 209 3 212 No. of Shares 4,846,097 4,846,097 2,237,059 2,609,038 4,846,097 % of Share holdings 100% 100% 46.16% 53.84% 100%
2011 DIRECTORS SHAREHOLDING Mrs. Vagdevi Wimalangi Fernando Mr. George Ginendra Hemachandra No. of Shares 15,494,265 7,427,520 % of Holding 7.11% 3.41% No. of Shares 732,951 395,168
2010 % of Holding 15.77% 8.50%
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COMMERCIAL CREDIT NETWORK
Commercial Credit Network

Head Office
1 2 3 4 5 6 7
3 18 20 17 15 16 2
Kandy No. 106, Yatinuwara Veediya, Kandy
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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 - Colombo No. 45, Dharmapala Mawatha, Colombo 07 Hingurakgoda No. 01, Medirigiriya Road, Hingurakgoda. Anuradhapura No. 272, Maithripala Senanayake Mawatha, Anuradhapura Rathnapura No. 126 B, Bandaranayaka Mawatha, Ratnapura Galle No. 14, Dickson Road, Galle Moratuwa No. 115, New Galle Road, Moratuwa Badulla NO.262, Lower Street, Badulla Nugegoda No. 231, High Level , Nugegoda Gampaha No. 6, Mangala Road, Gampaha Kurunegala No. 53, Ground Floor, Rajapihilla Road, Kurunegala Negombo No.113A, Greens Road, Negombo Maharagama No. 223, High Level Road, Maharagama Nuwara Eliya No. 50, Kandy Road, Nuwara Eliya Avissawella No. 64/141 C, Hospital Road, Avissawella Dambulla No. 738, Anuradhapura Road, Dambulla Dehiattakandiya Commercial No. 10, Opposite Bank of Ceylon, Dehiattakandiya Galnewa No. 03, Jaya Mawatha, Galnewa Galenbindunuwewa No. 131, Sippikulama Road, Galenbindunuwewa Mahiyanganaya No. 24, 1st Floor, New Town, Mahiyanganaya Thambuththegama No. 150, Opposite Public Fare, Thambuththegama Embilipitiya No. 53, Hayesha Building, Main Street, Embilipitiya
83
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. G S S Doole Badulla
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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.106, Yatinuwara Veediya, Kandy on 15th December 2011 at 10am for the following purposes : 1. To receive and consider the Audited Financial Statements for the Year Ended 31st March, 2011 together with the Reports of the Directors and Auditors thereon. (i) To re-appoint as a Director, Mrs V W Fernando who is 73 years of age on 5th April, 2011, and who vacates her office in terms of Section 210 of the Companies Act No. 07 of 2007 (the Act), until 31st December, 2011, in accordance with the Finance Comapnies Corporate Governance Direction No. 3 of 2008. Notice is hereby given to propose the undernoted Ordinary Resolution in compliance with Section 211 of the Act, in relation to her re-appointment. RESOLVED THAT the age limit of 70 years referred to in Section 210 of the Companies Act No. 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, in accordance with the Finance Comapnies Corporate Governance Direction No. 3 of 2008. (ii) To re-elect George Ginendra Hemachandra, Director, who retires by rotation in terms of Article 24 (6) of the Articles of Association of the Company. (iii) To elect Mr Roshan Sanjaya Egodage, Director, who retires in terms of Article 24 (2) of the Articles of Association of the Company (iv) To elect Mr Thirunavukarasu Someswaran, Director, who retires in terms of Article 24 (2) of the Articles of Association of the Company (v) To elect Mr Kalugamage John Cecil Perera, Director, who retires in terms of Article 24 (2) of the Articles of Association of the Company (vi) To elect Mihindukulasuriya Susantha Devapriya Pinto, Director, who retires in terms of Article 24 (2) of the Articles of Association of the Company 3. 4. To approve donations To appoint the Auditors Messrs Ernst & Young. Chartered Accountants, to hold office until the conclusion of the next Annual General Meeting and to authorize the Directors to determine their remuneration.
2.
By order of the board,
JACEY & COMPANY SECRETARIES Colombo, 17th November, 2011 NOTE: 1. 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. A proxy need not be a member of the company 3. The completed form of proxy must be deposited at the registered office of the company at no.106, Yatinuwara Veediya, Kandy not less than 48 hours before the time fixed for the meeting.
85
86
COMMERCIAL CREDIT PLC. ANNUAL REPORT 2010
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 _____________________, 2011 (Please Complete) and at any adjournment thereof, and at every poll which may be taken in consequence thereof. I /We the undersigned hereby authorise my/our proxy to vote on my/our behalf in accordance with the preference indicated below: For 1. 2. To receive and consider the Audited Financial Statements for the year ended 31st March, 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.
(vi) To elect Mr M S D Pinto who retires in terms of Articles 24(2) of the Articles of Association of the Company. 3. To authorise the Directors to determine and make donations (PLEASE CONFIRM) 4. To appoint the Auditors Messrs Ernst & Young, Chartered Accountants, to hold office until the conclusion of the next Annual General Meeting and to authorize the Directors to determine their remuneration. As witness my/our hand this ____________ day of ____________ Two Thousand and Eleven.
________________________________ Signature of Shareholder
Notes:
1. 2. 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. Please indicate with an x in the space provided how your Proxy is to vote. 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, the Proxy holder shall vote as he thinks fit. A Proxy holder need not be a member of the Company Instructions as to completion appear on the reverse hereof
3. 4.
INSTRUCTIONS AS TO COMPLETION
1. To be valid this Form of Proxy must be deposited at the Registered Office of the Company at No.106, Yatinuwara Veediya, Kandy not less than 48 hours before the time appointed for the holding of the Meeting. 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, which should be affixed and attested in the manner prescribed by its Articles of Association or other constitutional documents. If the Proxy Form is signed by an Attorney, the relevant Power of Attorney or a notarially certified copy thereof, should also accompany the completed Form of Proxy if it has not already been registered with the Company. The full name and address of the Proxyholder and of the Shareholder appointing the Proxyholder should be entered legibly in the Form of Proxy.
2.
3.
4.
CORPORATE INFORMATION
COMPANY NAME LEGAL STATUS COMPANY REGISTRATION NO. 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, Sri Lanka No.106, Yatinuwara Vidiya, Kandy Tel: 081 2234963-4 Fax: 081 2234390 e mail: ccl@cclk.lk www.cclk.lk Mrs. V W Fernando - Chairperson Mr. R S Egodage - Chief Executive Officer Mr. G G Hemachandra Mr. C Perera Mr. I G S K Gunaratne Mr. M S D Pinto Mr. T Someswaran Mrs. G R Egodage Mr. T Someswaran - Chairman Mr. I G S K Gunaratne Mr. C Perera Mr. S Gunarathne Chairman Mr. Cecil Perera Mr. G Hemachandra Mr. T. Someswaran Mr. R S Egodage Mr. Andrew Samuel Mr. Janaka Deshapriya Mr. Sebestian Nanayakkara Ms. Vathsala Sathyakeerthi Jacey & Company No. 9/5, Thambiah Avenue, Colombo 07 Tel: 4335159 - 62 M/s Ernst & Young, Chartered Accountants Julies & Creasy No. 41, Janadhipathi Mawatha, Colombo 01 Commercial Bank of Ceylon PLC Hatton National Bank PLC Sampath Bank PLC National Development Bank PLC Seylan Bank PLC Peoples 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
CONCEPT AND DESIGN BY ARUNA WICKRAMARACHCHI TEL: 071 4943864 PRINTED AT DESIGN SYSTEMS

Annual: Commercial Credit PLC

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Annual: Commercial Credit PLC

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ANNUAL REPORT

COMMERCIAL CREDIT PLC.

COMMERCIAL CREDIT PLC. ANNUAL REPORT 2010/2011

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Graphical Presentation of Key Indicators

Net Interest Income

Profit/(Loss) after Taxation

Loans & Advances

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COMMERCIAL CREDIT PLC. ANNUAL REPORT 2010/2011

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Overview of the Global Economy

Outlook for the Sri Lankan Economy

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Vagdevi Fernando Chairman 17th November, 2011

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Roshan Egodage Chief Executive Officer 17th November, 2011

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A Brief Profile of Board of Directors

MR. R.S. EGODAGE

Chief Executive Officer

COMMERCIAL CREDIT PLC. ANNUAL REPORT 2010/2011

MR. G.G. HEMACHANDRA

Non Executive Director

MRS. G.R. EGODAGE

MR. C. PERERA Independent Non Executive Director No:10, Gonawala, Kelaniya

COMMERCIAL CREDIT PLC. ANNUAL REPORT 2010/2011

Independent Non Executive Director

Mr. Susantha Pinto

Independent Non-Executive Director

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COMMERCIAL CREDIT PLC. ANNUAL REPORT 2010/2011

CORPORATE MANAGEMENT TEAM

Corporate Management Team

Please refer to Director Profile

Mr. C. Prasanna Wickramasinghe

Mr. J.L.A.S. Priyankara

COMMERCIAL CREDIT PLC. ANNUAL REPORT 2010/2011

CORPORATE MANAGEMENT TEAM

Mr. Andrew Samuel

COMMERCIAL CREDIT PLC. ANNUAL REPORT 2010/2011

CORPORATE MANAGEMENT TEAM

Mr. Shammi Jayathilake

Mr. M.A.D. Janaka Deshapriya

COMMERCIAL CREDIT PLC. ANNUAL REPORT 2010/2011

The Corporate Management Team

Regional Managers & Senior Manager

MANAGEMENT DISCUSSION & ANALYSIS

Management Discussion & Analysis

MACRO ECONOMIC REVIEW

FINANCE SECTOR PERFORMANCE

COMMERCIAL CREDIT PLC. ANNUAL REPORT 2010/2011

MANAGEMENT DISCUSSION & ANALYSIS

Global Economic Climate

Sri Lankas Prospects

COMMERCIAL CREDIT PLC. ANNUAL REPORT 2010/2011

MANAGEMENT DISCUSSION & ANALYSIS

About the Company

COMMERCIAL CREDIT PLC. ANNUAL REPORT 2010/2011

The Strategic Planning Team