Annual report of the board of directors
General
The Directors of Citizens Development Business Finance PLC have pleasure in presenting to the shareholders this Report together with the Audited Financial Statements and Audited Group Financial Statements for the year ended 31st March 2014 of the Company and the Group together with the Auditors’ Report on those Financial Statements, confirming to the requirements of the Companies Act No. 07 of 2007, Finance Business Act No. 42 of 2011 and amendments thereto and the Directions issued on the same.
The details set out herein provide pertinent information required by the Companies Act No. 7 of 2007, Finance Business Act No. 42 of 2011, Direction No. 03 of 2008 (Finance Companies - Corporate Governance) issued under the Finance Business Act No. 42 of 2011 and subsequent amendments thereto, disclosure requirements under the Listing Rules of the Colombo Stock Exchange and recommended best practices on Corporate Governance. This Report was approved by the Board of Directors on
31st May 2014.
Overview of the Company
The Citizens Development Business Finance PLC (CDB) is a Licensed Finance Company registered under the Finance Business Act No. 42 of 2011 and was incorporated as a public limited liability company on 7th September 1995 under the provisions of the Companies Act No. 17 of 1982 and re-registered under the Companies Act No. 07 of 2007 under the Company Registration Number PB 232 PQ. The Company is also registered under the Finance Leasing Act No. 56 of 2000.
The Ordinary Voting shares and Ordinary Non-Voting shares of the Company are quoted on the Main board of the Colombo Stock Exchange. Lanka Rating Agency Limited has assigned BBB and P2 long-term and short-term financial institution ratings respectively to the Company.
The Registered Office of the Company is at No. 18, Sri Sangaraja Mawatha Colombo 10, at which the Company’s Head Office is also situated.
Reporting information required to be disclosed as per the Section 168 (1) of the Companies Act No. 07 of 2007, Finance Business Act No. 42 of 2011 and Corporate Governance Direction No. 03 of 2008, issued by Central Bank of Sri Lanka.
The required information is disclosed in the tabulation provided below or elsewhere in the Annual Report.
| Section Reference No. | Requirements | Extent of Compliance by the Company |
| 168 (1) (a) - i | Any change in the accounting period in the nature of the business of the Company and its subsidiary | Compliant |
| 168 (1) (a) - ii | Any change in the accounting period in the classes of business in which the Company has an interest, whether as a shareholder of another company or otherwise | Compliant
Company does not have any material shareholding with any other company except for its own subsidiary of CDB MicroFinance Company Limited. |
| 168 (1) (b) | Financial Statements for the accounting period completed and signed in accordance with Section 151 of the Companies Act and for the Group Financial Statements in accordance with Section 152 of the Companies Act | Compliant
Financial Statements have been prepared in compliance with Section 151 and Section 152 of the Companies Act. |
| 168 (1) (c) | Auditor’s Report on the Financial Statements and any Group Financial Statements | Compliant |
| 168 (1) (d) | Describe any changes in accounting policies made during the year | Compliant |
| 168 (1) (e) | Entries in the Interests Register made during the year | Compliant |
| 168 (1) (f) | The remuneration and other benefits of Directors made during the year | Compliant
The required information is disclosed under the transactions with Key Management Personnel of this Annual Report. |
| 168 (1) (g) | The total amount of donations made by the Company | Compliant
The required information is disclosed under the financial information section of this Annual Report. |
| 168 (1) (h) | Names of the persons holding office as Directors of the Company at the end of the accounting period and the names of any persons who ceased to hold office as Directors | Compliant |
| 168 (1) (i) | Details of the remuneration paid to Auditors including non-audit services as a separate item | Compliant
The required information is disclosed |
| 168 (1) (j) | The particulars of any relationship (other than that of Auditor) which Auditor has with or any interest which the Auditor has in, the Company or subsidiary | Compliant
All non-audit related activities carried out by the Auditors have been disclosed under the Operating Expenses. |
| 168 (1) (k) | Board approval for the Directors’ Report to be signed by Two Directors along with the Company Secretary |
Compliant
Report of Directors on Affairs of the Company has been approved by the Board on 2nd June 2014 |
Information disclosed pertaining to the Financial Statements and Audit of the Company as per the Finance Business Act No. 42 of 2011
| Section Reference No. | Requirements | Extent of Compliance by the Company |
| Section 26 | To prepare a complete set of Financial Statements including balance sheet as at end of the financial year and Income Statement in respect of such financial year | Compliant |
| Section 27 (1) | To set out the state of affairs of the Company at the end of the financial year to which the balance sheet relates | Compliant |
| Section 27 (2) (a) | Capitalised expenses not represented by tangible assets | Compliant |
| Section 27 (2) (b) | Market value of investments | Compliant |
| Section 27 (2) (c) | Method adopted to value fixed assets if there had been any valuation of such assets during the financial year | Compliant |
| Section 27 (2) (d) | The aggregate amounts of advances after the provisions for bad and doubtful debts | Compliant |
| Section 27 (2) (e) | Increase or decrease in provision for depreciation, renewals or diminution in value of fixed assets | Compliant |
| Section 27 (2) (f) | Sources and application of funds | Compliant |
| Section 27 (2) (g) | Reserves, provisions and liabilities distinguishable from each other | Compliant |
| Section 27 (2) (h) | Changes in equity | Compliant |
| Section 27 (2) (i) | Corresponding amounts of the previous year for all the items shown in the balance sheet | Compliant |
| Section 28 (a) | Amount charged to revenue by way of provision for depreciation, renewals or diminution in value of fixed assets | Compliant |
| Section 28 (b) | Amount charged to revenue by way of income tax | Compliant |
| Section 28 (c) | The aggregate amounts of dividends paid or proposed to be paid | Compliant |
| Section 28 (d) | The amount of remuneration of Auditors | Compliant |
| Section 28 (e) | The amount charged to revenue representing the aggregate amount of the emoluments paid to Directors | Compliant |
| Section 28 (f) | The movement of reserves | Compliant |
| Section 28 (g) | The profit or loss or the income and expenses arising from transactions that are not usually carried out by the Company and are carried on owing to circumstances of an exceptional or non-recurrent nature or by a change in the basis of accounting | Compliant |
| Section 28(h) | Corresponding figures of the previous year for all the items shown in the Income Statement | Compliant |
| Section 29 (1) | Submission of information to Director Non-Banking Supervision of Central Bank of Sri Lanka as per the Sections 29 (a), (b), (c) and (d) | Compliant |
| Section 29 (2) | Financial Statements published in newspapers | Compliant |
| Section 29 (3) | Exhibition of Financial Statements on business premises | Compliant |
| Section 29 (4) | Specification of the format of the Balance Sheet and the Income Statement | Compliant |
| Section 29 (5) | Publishing key financial data and performance indicators on a biannual basis | Compliant |
| Section 30 (2) | Selection of Auditors as per the guidelines issued by the Director Non-Bank Supervision Department of the Central Bank of Sri Lanka |
Compliant
KPMG, the Company’s External Auditor is listed on the panel of External Auditors to audit the accounts of Licensed Finance Companies, as per the guidelines issued by the Director Non-Bank Supervision Department of the Central Bank of Sri Lanka |
| Section 30 (3) | Rotation of Auditors of the Company | Not applicable as at date. Guidelines or directions have not yet been issued. |
Disclosure Requirements applicable under the Finance Companies (Corporate Governance) Direction No. 3 of 2008
The detailed disclosure has been included under the Corporate Governance Section of the Annual Report.
Disclosure Requirements applicable under the Listing Rules issued by the Securities and Exchange Commission of Sri Lanka
The Detailed Disclosure has been included under the Investor Relations Section of the Annual Report.
Vision, Mission and Corporate Conduct
The Company’s Vision and Mission are included in the Business Model Section. In achieving its vision and mission, all Directors and employees conduct their activities to the highest level of ethical standards and integrity as set out in the Code of Ethics.
Principal Activities of the Company and its Subsidiary
Company - Citizens Development Business Finance PLC
The principal activities of the Company continue to be Finance Business and related activities such as accepting Term Deposits, Savings Deposits, Personal Finance Leasing, Hire Purchase Financing, Pawning, Corporate and Retail Credit, Dealing in Government Securities, Foreign Exchange Dealership, Money Exchange Dealership, Islamic Finance and other financial services. There have been no significant changes in the nature and main business activities of the Company and the Group during the year under review.
Subsidiary - CDB Micro Finance Limited
CDB Micro Finance Limited is established for the purpose of accommodating micro credit facilities. However, since January 2009, there has not been any business operations other than the collections of instalment repayments of the loans granted prior to January 2009.
Review of Operations
A review of Company’s business and its performance during the year with comments on financial results and future developments contained in the Chairman’s Review, the Managing Director’s Review, the Management Discussion & Analysis and Financial Review present an overall appraisal of the Business Operations, Financial Performance and the overall Financial Position of the Company and the Group.
Future Developments
During the year 15 new outlets were opened bringing total outlets to 59. The Company intends to expand its network of distribution channels both in Western province and outside Western province over the next 5 years.
Financial Statements of the Company and the Group
The Financial Statements of the Company and the Group, which are duly certified by the Chief Financial Officer and approved by the Audit Committee and the Board of Directors have been signed by the Chairman and the Managing Director as per the requirements of the Companies Act No. 07 of 2007.
Directors’ Responsibility for Financial Reporting
The Directors are responsible for the preparation of the Financial Statements of the Company and the Group and for ensuring that the Financial Statements have been presented in accordance with the Sri Lanka Accounting Standards and to provide the information required by the Companies Act No. 07 of 2007 and Finance Business Act No. 42 of 2011. The Directors are of the view that the Financial Statements have been prepared in conformity with the requirements of Sri Lanka Financial Reporting Standards (SLFRS) and Sri Lanka Accounting Standards (LKAS) as issued under the Sri Lanka Accounting and Auditing Standards Act No. 15 of 1995, the Companies Act No. 07 of 2007 and the Finance Business Act No. 42 of 2011 and amendments thereto.
The Statement of Directors’ Responsibility for Financial Reporting forms an integral part of this Report.
Auditors’ Report
The Company’s Auditors, Messrs KPMG performed the audit on the Consolidated Financial Statements for the year ended 31st March 2014, and the Auditors’ Report issued thereon as required by Section 168 (1) (c) of the Companies Act No. 07 of 2007.
Accounting Policies and Changes during the Year
The Group and the Company prepared the Financial Statements in accordance with Sri Lanka Accounting Standards (LKAS/SLFRS). The significant accounting policies adopted in the preparation of the Financial Statements of the Group and the Company are given in the Financial Reports.
The Company and Group applied for the first time, Sri Lanka Accounting Standard LKAS - 19 - ‘Employee Benefits’ which requires restatement of previous Financial Statements.
The Interests Register of the Company
The Interests Register is maintained by the Company as required by the Companies Act No. 07 of 2007. All Directors have made declarations as required by Sections 192 (1) and (2) of the Companies Act No. 07 of 2007. All related entries were made in the Interests Register for the year under review. Information pertaining to Directors’ interest in transactions, their remuneration and their share ownership are disclosed in the Interest Register. The Interest Register is available for inspection by shareholders or their authorised representatives as required by Section 119 (1) (d) of the Companies Act No. 07 of 2007.
Directors’ Interests in Contracts or Proposed Contracts
Directors’ interests in contracts or proposed contracts with the Company both direct and indirect are given below. These interests have been declared at Directors’ meetings. As a practice, Directors have refrained from voting on matters in which they have an interest. Directors have no direct or indirect interest in any other contract or proposed contract with the Company.
Remuneration and Other Benefits of Directors
Remuneration and other benefits of Directors in respect of the Company and the Group for the financial year ended 31st March 2014 are given in Note 40 to the Financial Statements as required by the Section 168 (1) (f) of the Companies Act No. 07 of 2007.
The Total Amount of Expenses paid in respect of Corporate Social Responsibility (CSR) Activities and Donations by the Company and the Group Company
During the year, the Company has made donations amounting to Rs. 3,258,422/- for its CSR activities in terms of the resolution passed at the last Annual General Meeting.
Subsidiary
During the year under review, CDB Micro Finance Company Limited has not made any donations.
This information forms an integral part of the Report of the Directors as required by the Section 168 (1) (g) of the Companies Act No. 07 of 2007.
Information on Directors of the Company and the Group
The Board of Directors of the Company as at 31st March 2014 comprised of 11 Directors with extensive financial and commercial knowledge and experience. The qualifications and experience of the Directors are given in the ‘Board of Directors’ - Profile’ of this Annual Report.
Names of the persons holding office as Directors of the Company as at 31st March 2014 and the names of persons who ceased to hold office as Directors of the Company during the year, as required by the Section 168 (1) (h) of the Companies Act No. 07 of 2007 are given below:
| Name | Date of Appointment | Other Information |
| Mr. D H J Gunawardena | 01.01.2012 | Appointed as Chairman w.e.f. 01.01.2012 Non-Executive Director |
| Mr. W P C M Nanayakkara | 01.02.2004 | Executive Director/Chief Executive Officer/Managing Director |
| Mr. R H Abeygoonewardena | 01.04.2011 | Executive Director/Chief Operating Officer |
| Mr. S R Abeynayake | 01.01.2012 | Non-Executive Director |
| Dr. Ajantha Dharmasiri | 01.02.2012 | Non-Executive Independent Director |
| Mr. D A De Silva | 01.01.2012 | Non-Executive Independent Director |
| Mr. P A J Jayawardena | 26.10.2011 | Non-Executive Director |
| Mr. Razik Mohamed | 01.07.2012 | Non-Executive Independent Director/Appointed as Senior Director |
| Mr. S V Munasinghe | 01.04.2011 | Executive Director/Chief Credit Officer |
| Mr. T M D P Tennakoon | 01.04.2011 | Executive Director/Chief Financial Officer |
| Mr. W W K M Weerasooriya | 01.04.2011 | Executive Director/Chief Marketing Officer |
The Names of the Directors of the Subsidiary Company of CDB Micro Finance Company Limited Holding Office as at 31st March 2014.
| Name | Other Information |
| Mr. R Renganathan | Non-Executive Director |
| Mr. P A Jayawardena | Non-Executive Director |
| Mr. E T L Ranasinghe | Non-Executive Director |
| Mr. W P C M Nanayakkara | Non-Executive Director |
Re-election of Directors by Rotation
In terms of Articles 24 (6) and 24 (7) of Articles of Association of the Company, Messrs P A J Jayawardena, S R Abeyanayake, D A De Silva and D H J Gunawardana retire by rotation and being eligible, offer themselves for re-election.
Board Sub-Committees
The Board of Directors while assuming the overall responsibility and accountability for the management of the Company has also appointed Board Sub-committees to ensure oversight and control over certain affairs of
the Company, conforming to Finance Companies (Corporate Governance) Direction No. 03 of 2008 issued by the Central Bank of Sri Lanka under the Finance Business Act No. 42 of 2011 and adopting the best practices accordingly.
| Board Sub-committee | Composition |
| Audit Committee | Mr. D H J Gunawardena Chairman |
| Mr. S R Abeynayake Member | |
| Mr. Razik Mohamed Member | |
| Mr. D A De Silva Member | |
Integrated Risk Management Committee |
Mr. D A De Silva Chairman |
| Mr. Razik Mohamed Member | |
| Mr. W P C M Nanayakkara Member | |
| Mr. R H Abeygoonewardena Member | |
| Mr. S V Munasinghe Member | |
| Mr. T M D P Tennakoon Member | |
| Mr. W W K M Weerasooriya Member | |
Remuneration Committee |
Mr. S R Abeynayake Chairman |
| Mr. Razik Mohamed Member | |
| Dr. Ajantha Dharmasiri Member | |
| Nomination Committee | Mr. P A J Jayawardena Chairman |
| Mr. S R Abeynayake Member | |
| Mr. W P C M Nanayakkara Member | |
| Credit Committee | Mr. W P C M Nanayakkara Chairman |
| Mr. R H Abeygoonewardena Member | |
| Mr. S V Munasinghe Member | |
| Mr. T M D P Tennakoon Member |
Directors Dealings in Shares and Debentures
Directors’ Interest in Ordinary Voting Shares of the Company
| Composition | 31.03.2014 | 31.03.2013 | 31.03.2014 | 31.03.2013 |
| Voting | Voting | Non-Vorting | Non-Vorting | |
| Mr. D H J Gunawardena | Nil | Nil | Nil | Nil |
| Mr. W P C M Nanayakkara | 29,660 | 29,660 | 28,941 | 28,941 |
| Mr. R H Abeygoonewardena | 34,103 | 31,500 | 5,447 | 5,447 |
| Mr. S R Abeynayake | Nil | Nil | Nil | Nil |
| Dr. Ajantha Dharmasiri | Nil | Nil | Nil | Nil |
| Mr. D A De Siva | Nil | Nil | Nil | Nil |
| Mr. P A J Jayawardena | 500 | 500 | 22 | 22 |
| Mr. Razik Mohamed | Nil | Nil | Nil | Nil |
| Mr. S V Munasinghe | 40,500 | 40,000 | 9,411 | 9,411 |
| Mr. T M D P Tennakoon | 42,000 | 42,000 | 7,262 | 7,262 |
| Mr. W W K M Weerasooriya | 7,000 | 7,000 | 1,209 | 1,209 |
Directors’ Interest in Debentures
There were no Debentures registered in the name of any Director as at 31st March 2014. However, Mr. D H J Gunawardena and Mr. S R Abeyanayake are Directors of Ceylinco Insurance PLC, where Rs. 224.77 Mn debentures are registered under Ceylinco Insurance PLC.
Directors’ shareholdings in Ordinary Voting shares, Ordinary Non-Voting shares and Directors’ interest in Debentures have not changed subsequent to the date of the Statement of Financial Position, and up to 19th May 2014 the date being two weeks prior to the date of Notice of the Annual General Meeting.
Review of the Financial Performance during the Year
Financial Results
Income
Interest income represents the Company’s main income. The total income for the year 2013/14 and 2012/13 were as follows:
| Company | Group | |||
| Composition | 2013/14 | 2012/13 | 2013/14 | 2012/13 |
| Rs. | Rs. | Rs. | Rs. | |
| Income | 6,125,161,547 | 4,311,850,070 | 6,125,161,547 | 4,311, 850,070 |
| Interest Income | 5,895,603,537 | 4,087,387,160 | 5,895,603,537 | 4,087,387,160 |
| Non-Interest Income | 229,558,010 | 224,462,910 | 229,558,010 | 224,462,910 |
| Operating Income | 2,740,162,049 | 1,925,279,811 | 2,740,162,049 | 1,925,279,811 |
Details are given in the Income Statements of the Financial Statements.
Profit and Appropriations
The net profit after tax of the Group for 2013/14 was Rs. 561.12 Mn (Rs. 489.06 Mn for 2012/13) while profit before tax for the Company and the Group were up by 17% and 25% respectively. Details regarding the profit and appropriations of the Company are given below:
| 2013/14 | 2012/13 | |
| Rs. | Rs. | |
| Profit before Tax | 729,968,049 | 624,282,545 |
| Provision for Taxation | 168,755,278 | 135,118,484 |
| Net Profit | 561,212,771 | 489,164,061 |
| Comprehensive Income for the Year | (25,713,942) | 6,803,343 |
| Retained Earnings Brought Forward | 746,592,019 | 517,351,677 |
| Profit Available for Appropriation | 1,282,090,848 | 1,013,319,081 |
| Appropriations | ||
| Statutory Reserve Fund (SRF) | 112,242,554 | 106,974,925 |
| Investment Fund Account (IFA) | 36,812,258 | 29,830,847 |
| Final Cash Dividend Paid | (149,339,319) | 59,820,560 |
| Final Scrip Dividend Paid | – | 70,100,730 |
| Balance Carried Forward | 983,696,717 | 746,592,019 |
| Dividend Proposed | – | – |
| Final Cash Dividend Proposed at Rs. 3.00 per Share | 162,915,621 | 149,339,319 |
Reserves
A summary of Company and Group reserves is given below. The information on the composition and movement of reserves is given in the Statement of Changes in Equity.
| Company | Group | |||
| 2013/14 | 2012/13 | 2013/14 | 2012/13 | |
| Rs. | Rs. | Rs. | Rs. | |
| Revaluation Reserve | 132,765,013 | 132,765,013 | 132,765,013 | 132,765,013 |
| Investment Fund Account (IFA) | 87,745,449 | 50,933,191 | 87,745,449 | 50,933,191 |
| Statutory Reserve Fund (SRF) | 497,954,363 | 385,711,809 | 497,954,363 | 385,711,809 |
| AFS Reserve | 689,690,925 | 464,034,525 | 689,690,925 | 464,034,525 |
| Retained Profit | 983,696,717 | 746,592,019 | 983,495,817 | 746,491,219 |
| Total | 2,391,852,467 | 1,780,036,557 | 2,391,651,667 | 1,779,935,757 |
Provision for Taxation
The income tax rate applicable to the Company for the year 2013/14 is 28% (2012/13 - 28%). The Company is also subject to tax on value added on financial services at the rate of 12%. (2012/13 - 12%).
The information on income tax expenses of the Company and Group is given in Note 13 to the Financial Statements.
Minimum Capital Requirement
The Company ensures that it maintains the statutory requirement on minimum capital to safeguard the depositors, thus ensuring the sustainability of the Company and the industry as a whole. The information on Minimum Capital Requirement is given in this Annual Report.
Dividends on Ordinary Shares
The Board of Directors recommends a final cash dividend of Three Rupees (Rs. 3.00) per share on both its 46,299,223 voting ordinary shares and 8,005,984 non-voting ordinary shares aggregating to a sum of Rs. One Hundred Sixty Two Million Nine Hundred Fifteen Thousand Six Hundred and Twenty One only (Rs. 162,915,621) as the first and final dividend for the financial year 2013/14.
The Board was satisfied that the Company would meet the solvency test after the declaration of the aforesaid dividend and required the Company Secretary to obtain a solvency certificate from the Company’s Auditors to that effect. The Board authorised the distribution in terms of Section 56 of the Companies Act No. 07 of 2007. The said dividend will, subject to the approval by the shareholders be payable on the 7 market day of the Annual General Meeting.
In compliance with Finance Companies Guideline No. 1 of 2013, the Company has obtained the approval of the Director, Department of Supervision of Non-Bank Financial Institutions of the Central Bank of Sri Lanka for the proposed dividend.
Stated Capital and Debentures
The stated capital of the Company as at 31st March 2014 was Rs. 1,185 Mn consisting of ordinary voting shares of 46,299,223 and ordinary non-voting shares of 8,005,984 (2012/13 - Rs. 1,185,061,645/- consisting of ordinary voting shares of 46,299,223 and ordinary non-voting shares of 8,005,984).
The Debentures of the Company as at 31st March 2014 was Rs. 1,125,000,000/- consisting of 11,250,000 debentures at Rs. 100/- each (2012/13 - Rs. 250,000,000/-).
Issue of Shares and Debentures
Details of the ordinary shares and debentures issued by the Company are given in the table below:
| Company | Group | |||
| 2013/14 | 2012/13 | 2013/14 | 2012/13 | |
| Ordinary Shares | ||||
| Rights Issue of Ordinary Voting Shares | ||||
| No. of Shares | Nil | Nil | ||
| Consideration Received (Rs.) | Nil | Nil | ||
| Rights Issue of Ordinary Non-Voting Shares | ||||
| No. of Shares | Nil | Nil | ||
| Consideration Received (Rs.) | Nil | Nil | ||
| By Way of Scrip Dividend | ||||
| Ordinary Voting Shares Issued | Nil | Nil | ||
| Consideration Received (Rs.) | Nil | Nil | ||
| Ordinary Non-Voting Shares Issued | Nil | Nil | ||
| Consideration - Transfers from Retained Profit to Stated Capital (Rs.) |
70,100,730 | 70,100,730 | ||
| Debentures | ||||
| No. of Debentures Issued | 10,000,000 | Nil | 10,000,000 | Nil |
| Consideration Received (Rs.) | 1,000,000,000 | Nil | 1,000,000,000 | Nil |
Shareholding
There were 2,162 registered voting shareholders and 2,076 non-voting shareholders as at 31st March 2014. The details of Top Twenty Shareholders, public holding, analysis of distribution of shareholders and market information of the shares are given under the Investor Information of this Annual Report.
Information relating to Earnings, Dividend, Net Assets per Share, Market Value per Share is given under Investor Information of this Annual Report.
Equitable Treatment to all Shareholders
The Company has no restrictions with regard to shareholders carrying out analysis or obtaining independent advice regarding their investment in the Company and has made all endeavours to ensure equitable treatment to all the shareholders.
Property, Plant & Equipment
The Total Capital Expenditure on acquisition of property, plant, computer applications, software and equipment of the Company amounted to Rs. 450 Mn (2012/13 - Rs. 126.2 Mn). The detailed note on acquisition of Property, Plant & Equipment is given under Note 25 of the Financial Statements.
Market Value of Freehold Property
All freehold land and buildings of the Company were revalued by a professionally qualified independent valuer as at 31st March 2013 and brought into the Financial Statements. The Directors are of the opinion that the revalued amounts are not in excess of the current market values of such properties. The details of the freehold properties owned by the Company are given under Note 25 to the Financial Statements.
Corporate Governance
The Board of Directors is dedicated in maintaining an effective corporate governance framework, which ensures that the Company complies with the Codes of Best Practice on Corporate Governance issued jointly by The Institute of Chartered Accountants of Sri Lanka & the Securities and Exchange Commission of Sri Lanka and by the Central Bank of Sri Lanka.
The Directors declare that -
- the Company complied with all applicable laws and regulations in conducting its business;
- The Directors have declared all material interests in contracts involving the Company and refrained from voting on matters in which they were materially interested;
- The Company has made all endeavours to ensure the equitable treatment of shareholders;
- The business is a going concern with supporting assumptions or qualifications as necessary, and that the Board of Directors has reviewed the business plans and is satisfied that the Company has adequate resources to continue its operations in the near future; and
- They have conducted a review of internal controls covering financial, operational and compliance controls and risk management and have obtained a reasonable assurance of their effectiveness and successful adherence herewith.
Employment
Group employment policies are based on recruiting the best people, providing them training to enhance their skills, recognition of innate skills and competencies of each individual while offering equal career opportunities regardless of gender, race or religion and to retain them with the Company as long as possible. The number of persons employed by the Company as at 31st March 2014 was 1,109.
Human Resources
The strategies practiced by the Human Resource team has ensured efficient, effective and productive workforce. The Human Resources team encourages employees to discuss operational and strategic issues with their line management and to make suggestions which would improve the Company’s performance.
Risk Management
The Directors have established a comprehensive risk management framework which identifies the risks faced by the Company, evaluates the impact of the risks and mitigates the risks. The Directors review this process through the Audit Committee and the Risk Management Committee.
Internal Control
The Board of Directors has established an effective internal control system which ensures that the assets of the Company are safeguarded and appropriate systems are in place to minimise and detect fraud, errors and other irregularities. The system ensures that Company adopts procedures which results in financial and operational effectiveness and efficiency.
Environmental Protection
The Company has not engaged in any activities detrimental to the environment. The Company applies very high standards to protect and nurture the environment in which it operates and ensures strict adherence to all environment laws and practices.
The Company has commenced a new project which recycles malfunctioned or unused mobile phones or neutralised CFL Bulbs.
Outstanding Litigation
The Directors to the best of their knowledge and belief confirm that the litigation currently pending against the Company will not have any material impact on the reported financial results or future operations of the Company.
Events Occurring after the Reporting Date
All material events occurring after the reporting date are considered and where necessary, adjusted to or disclosed in the Financial Statements.
Statutory Payments
The Directors to the best of their knowledge and belief are satisfied that all statutory payments in relation to
the Government and the employees have been made up-to-date.
Statutory Reporting and Payments
The Directors to the best of their knowledge and belief are satisfied that all reporting relating to the Government and other regulatory institutions have been reported up-to-date.
The Directors to the best of their knowledge and belief are satisfied that all statutory payments due to the Government and other regulatory institutions and related to the employees have been made in time.
Going Concern
The Board of Directors after considering the financial position, operating conditions, regulatory and other factors has a reasonable expectation that the Company and its subsidiary possess adequate resources to continue its operations without any disruption in the foreseeable future. Accordingly, the Financial Statements of the Company and its subsidiary are prepared based on the Going Concern concept.
Compliance with Laws and Regulations
The Company and the Group have not engaged in any activity contravening the relevant laws and regulations. The Compliance Manager is responsible for ensuring compliance with the provisions in various laws and regulations and confirms such compliance to the Board on a monthly basis.
Appointment of Auditors
The Financial Statements for the year ended 31st March 2014 have been audited by Messrs KPMG, Chartered Accountants who offer themselves for reappointment. The retiring auditors Messrs KPMG, Chartered Accountants have signified their willingness to continue in office and a resolution relating to their reappointment and authorising Directors to fix their remuneration as recommended by the Board will be proposed at the forthcoming Annual General Meeting.
The Board further confirms that the retiring Auditors, Messrs KPMG (Chartered Accountants) are listed in the approved panel of External Auditors in terms of the Guideline issued by the Monetary Board of Central Bank of Sri Lanka under Section 30 (2) of the Finance Business Act No. 42 of 2011.
The Auditors have been paid a fee of Rs. 1,500,000/- as Audit Fee for the year ended 31st March 2014 which has been approved by the Board.
The Directors recommend their reappointment.
Notice of the Meeting
Notice relating to 18th Annual General Meeting of the Company is enclosed herewith.
Acknowledgements of the Contents of the Report
The Board of Directors does hereby acknowledge the contents of this Annual Report as per the requirement of Section 168 (1) (k) of the Companies Act No. 07 of 2007.
Signed in accordance with the resolution adopted by the Directors.
By order of the Board,
D H J Gunawardena
Chairman
W P C M Nanayakkara
Managing Director
SSP Corporate Services (Pvt) Limited
Company Secretary
2nd June 2014
Colombo