abans finance services limited- introduction

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Abans Financial Services Limited Introductory Document1

AABBAANNSS FFIINNAANNCCIIAALL SSEERRVVIICCEESS LLIIMMIITTEEDD

Incorporated under the Companies Act No.17of 1982 and registered under the Finance Companies Act No.

78 of 1988. The Company is re-registered under the Companies Act No.07 of 2007

IINNTTRROODDUUCCTTOORRYYDDOOCCUUMMEENNTT

For obtaining the listing of 37,000,000 Ordinary Voting Shares

on the Diri Savi Board of the Colombo Stock Exchange.

MANAGERS TO THE INTRODUCTION

Capital Alliance Limited,

Level 05, “Millennium House”,

46/58, Navam Mawatha,

Colombo 02.

Tel: 2317777

Fax: 2317788



DECLARATION

This Introductory Document has been prepared by Capital Alliance Limited from

information supplied by Abans Financial Services Limited (The Company) or which is

publicly available. The Directors of the Company, collectively and individually,

having made all reasonable inquiries, confirm that to the best of their knowledge and

belief, the information contained herein is true and correct in all material respects and

that there are no other material facts, the omission of which, would make any

statement herein misleading. While Capital Alliance Limited has taken reasonable

care to ensure full and fair disclosure it does not assume any responsibility for any

investment decision made by investors based on information contained herein. In

making an investment decision, prospective investors must rely on their own

examination and assessments of the Company including the risks involved.

No person is authorized to give any information or to make any representations not

contained in this Introductory Document and if given or made, any such information

or representation must not be relied upon as having been authorized by the Company.

The Colombo Stock Exchange (CSE) has taken reasonable care to ensure full and

fair disclosure of information in this Introductory Document. However, the CSE

assumes no responsibility for the accuracy of the statements made, opinions

expressed or reports included in this Introductory Document.

For further inquiries, please contact the Managers to the Introduction.

If you are in any doubt regarding the contents of this document you should

consult your stockbroker, bank manager, lawyer or any other professional advisor.

The delivery of this Introductory Document shall not under any circumstance

constitute a representation or create any implication or suggestion, that there has

been no material change in the affairs of the Company since the date of this

Document.





ABBREVIATIONS USED IN THIS INTRODUCTORY DOCUMENT

CDS - Central Depository Systems (Pvt.) Limited

CSE - Colombo Stock Exchange

AFSL or the “Company” - Abans Financial Services Limited

SEC - Securities & Exchange Commission of Sri Lanka

CBSL - Central Bank of Sri Lanka

Ordinary Share(s) - Ordinary Voting Share(s) of the Company



TABLE OF CONTENTS

1.0 CORPORATE INFORMATION................................................................................... 9 2.0 OVERVIEW OF THE COMPANY............................................................................. 10 2.1 GROUP STRUCTURE ................................................................................................. 10 2.2 ABANS FINANCIAL SERVICES LIMITED............................................................. 11 2.3 PRODUCT PORTFOLIO............................................................................................. 12 2.4 SEGMENTAL ANALYSIS .......................................................................................... 14 2.5 DEPENDENCE ON KEY CUSTOMERS AND SUPPLIERS.................................. 15 2.6 HUMAN RESOURCES ............................................................................................... 15 2.7 EMOLUMENTS ........................................................................................................... 16 2.8 BRANCH NETWORK................................................................................................. 16 2.9 FUTURE PLANS .......................................................................................................... 17 2.10 MAJOR ASSUMPTIONS ON FUTURE PLANS...................................................... 18 2.11 RISKS ASSOCIATED WITH FUTURE PLANS....................................................... 18 2.12 LITIGATION, DISPUTES AND CONTINGENT LIABILITIES............................ 20 3.0 THE BOARD OF DIRECTORS................................................................................... 21 3.1 PROFILES OF THE BOARD OF DIRECTORS ......................................................... 22 3.2 DIRECTORSHIPS ON OTHER BOARDS ................................................................ 26 3.3 STATEMENT – BOARD OF DIRECTORS ............................................................... 27 4.0 CORPORATE GOVERNANCE ................................................................................. 28 4.1 BOARD COMMITTEES .............................................................................................. 28 5.0 CAPITAL STRUCTURE.............................................................................................. 31 5.1 STATED CAPITAL ...................................................................................................... 31 5.2 CONVERTIBLE DEBT SECURITIES......................................................................... 31 5.3 SHARES SOLD PRIVATELY IN CONJUNCTION WITH THE LISTING.......... 31 5.4 FREE TRANSFERABILITY OF SECURITIES........................................................... 32 5.5 TRANSFER OF SHARES ............................................................................................ 32 5.6 TEN LARGEST SHAREHOLDERS OF AFSL.......................................................... 33 6.0 MANAGEMENT ......................................................................................................... 34 6.1 THE TEAM.................................................................................................................... 34 7.0 FINANCIAL INFORMATION .................................................................................. 38 7.1 RATIOS AND SHARE INFORMATION.................................................................. 38 7.2 RECEIVABLES ............................................................................................................. 39 7.3 MATURITY ANALYSIS OF DEPOSITS & BORROWINGS.................................. 40 8.0 DECLARATION BY THE DIRECTORS ...................................................................... 42 AUDITED FINANCIAL STATEMENTS AS AT 31ST MARCH 2011............................. 43 AUDITED FINANCIAL STATEMENTS AS AT 31ST MARCH 2010............................. 66 AUDITED FINANCIAL STATEMENTS AS AT 31ST MARCH 2009............................. 88 DISCLOSURE TO AUDITED FINANCIAL STATEMENTS. ............................................. 110





Information Relevant to the Introduction

Introduction of Ordinary Voting Shares for Listing

This Introductory Document dated 07th June 2011 is published for the purpose of obtaining a

listing on the Colombo Stock Exchange for the Ordinary Voting Shares of Abans Financial

Services Limited.

The Shares are to be listed on the Diri Savi Board of the Colombo Stock Exchange.

Collection Points

Copies of the Introductory Document may be obtained from the Manager or any member firm

and trading member firm of the Colombo Stock Exchange

MANAGERS TO THE INTRODUCTION

Capital Alliance Limited

Level 5, ‘Millennium House’46/58, Navam Mawatha,Colombo 02.

Telephone : 011-2317777Fax : 011-2317788




Members and Trading Members of the CSE

Members of the CSE

Acuity Stockbrokers (Pvt) LimitedLevel 6, Acuity House,53, Dharmapala Mawatha,Colombo 03.Telephone: +9411 2206206Fax: +9411 2206298/9E-mail: [email protected]

Asha Phillip Securities LimitedLevel 4, "Millennium House"46/58, Navam Mawatha,Colombo 02Telephone: +9411 2429100Fax: +9411 2429199E-mail: [email protected]

Asia Securities (Pvt) LimitedLevel 21, West Tower,World Trade Center,Echelon Square, Colombo 1.

Telephone: +9411 2423905/5320000Fax: +9411 2336018E-mail: [email protected]

Assetline Securities (Pvt) Limited282, Kaduwela Road,Battaramulla.Telephone: +9411 4700111/2307366

Fax: +9411 4700112E-mail: [email protected]

Bartleet Mallory Stockbrokers (Pvt) Ltd.Level "G", Bartleet House,65, Braybrooke Place,Colombo 2.Telephone: +9411 5220200Fax: +9411 2434985E-mail: [email protected]

Capital TRUST Securities (Pvt) Limited42, Sir Mohamed Macan Marker Mawatha,Colombo 3.Telephone: +9411 5335225Fax: +9411 5365725E-mail: [email protected]

Ceylinco Stockbrokers (Pvt) LimitedCeylinco House, Level 9,69, Janadhipathi Mawatha,Colombo 1.Telephone: +9411 4714300/ 4714388/ 4714389Fax: +9411 2387228E-mail: [email protected]

CT Smith Stockbrokers (Pvt) Limited4-14, Majestic City,10, Station Road,Colombo 4.Telephone: +9411 2552290-4Fax: +9411 2552289E-mail: [email protected]

D N H Financial (Pvt) LimitedLevel 16, West Tower,World Trade Centre,

Colombo 01.Telephone: +9411 5732222Fax: +9411 5736264E-mail: [email protected]

J B Securities (Pvt) Limited150, St. Joseph Street,Colombo 14.

Telephone: +9411 2490900/772490900Fax: +9411 2430070/2446085/2447875E-mail: [email protected]





John Keells Stockbrokers (Pvt) Limited130, Glennie Street,Colombo 2.Telephone:+9411 2306250/2342066-7/2446694-5Fax: +9411 2342068/2326863E-mail: [email protected]

Lanka Securities (Pvt) Limited228/2, Galle RoadColombo 4.Telephone: +9411 4706757/2554942Fax: +9411 4706767E-mail: [email protected]

NDB Stockbrokers (Pvt) Limited5th Floor, NDB Building,40, Navam Mawatha,Colombo 2.Telephone: +9411 2314170-8Fax: +9411 2314180E-mail: [email protected]

SC Securities (Pvt) Limited2nd Floor,55, D.R. Wijewardena Mawatha,Colombo 10.Telephone: +9411 4711000Fax: +9411 2394405E-mail: [email protected]

Somerville Stockbrokers (Pvt) Limited137, Vauxhall Street,Colombo 2.Telephone: +9411 2329201-5/2332827/2338292-3Fax: +9411 2338921E-mail: [email protected]





Trading Members of the CSE

Arrenga Capital (Pvt) Limited

Level 23, East Tower,

World Trade Centre,Colombo 01

Tel: +9411 7277000 to 98

Fax: +9411 7277099

E-mail: [email protected]

Capital Alliance Securities (Pvt) Limited

Level 5, "Millennium House",

46/58 Navam Mawatha,Colombo 02

Tel: +9411 2317777

Fax: +9411 2317788


Claridge Stockbrokers (Pvt) Limited

10, Gnanartha Pradeepa Mawatha,

Colombo 08

Tel: +9411 2697974


First Guardian Equities (Pvt) Limited

32nd Floor, East Tower,

World Trade Centre, Colombo 01

Tel: +9411 5884400


Heraymila Securities Limited

Level 8, South Wing,

‘Millennium House’46/58, Navam Mawatha,

Colombo 02

Tel: +9411 2359100


IIFL Securities Ceylon (Pvt) Limited

27th Floor, East Tower,

World Trade Centre,Colombo 01

Tel: +9411 2333000

Fax: +9411 2333383


New World Securities (Pvt) Ltd

2nd Floor, 45/2, Braybrooke Street,Colombo 02Tel: +9411 2358700-20

Fax: +9411 2358701


Richard Pieris Securities (Pvt) Limited

69, Hyde Park Corner,Colombo 02

Tel: +9411 7448900Fax: +9411 2675064

E-mail : [email protected]

SKM Lanka Holdings (Pvt) Limited

377/3, Galle Road,Colombo 03

Tel: +9411 2372413-4

Fax: +9411 2372416


SMB Securities (Pvt) Limited

47, Dharmapala Mawatha,Colombo 03

Tel: +9411 5539593

Fax: +9411 2339292


Taprobane Securities (Pvt) Limited

2nd Floor, 10, Gothami Road,Colombo 08

Tel: +9411 5328200

Fax: +9411 5328277


TKS Securities (Pvt) Limited

19-01, East Tower,World Trade Centre,

Colombo 01

Tel: +9411 7857799

Fax: +9411 7857857





1. CORPORATE INFORMATION

Name of Company : Abans Financial Services Limited

Legal Form : Public Company incorporated in Sri Lanka on 8th April2005 under the Companies Act No 17 of 1982 and Re-Registered on 15th June 2009 under the Companies ActNo 7 of 2007.

Registered as a Leasing Company under the FinanceLeasing Establishment Act No 56 of 2000.

Registered as a Finance Company in terms of theFinance Companies Act No 78 of 1988

Company Registration No : N(PBS) 1243(under the Companies Act No 17 of 1982)

New Registration No : PB 1015(under the Companies Act No 7 of 2007)

Place of Incorporation : Colombo, Sri Lanka

Registered Office : 498, Galle Road,Colombo 3.

Board of Directors : Mrs. A. Pestonjee (Chairperson)Mr. R Pestonjee – Alternate for Mrs A PestonjeeMrs. G N M Alles (Managing Director)Mrs S DubashMr. S SothivadivelMr. C D Pathirana

Mr. K WanigasekeraMr. V K ChoksyMr.T Someswaran

Secretaries to the Company : Varners International (Pvt.) Ltd.Level 14, World Trade Centre,Echelon Square, Colombo 1

Auditors to the Company : Ernst & Young201, De Saram Place,Colombo 10

Bankers to the Company : Bank of CeylonSeylan Bank PLCPeople’s BankCommercial Bank of Ceylon PLCPan Asia Banking Corporation PLCUnion Bank PLCMuslim Commercial Bank PLC




2. OVERVIEW OF THE COMPANY

2.1 GROUP STRUCTURE

Abans Financial Services Limited (AFSL), a member of the Abans Group, does not have any

subsidiaries but is a subsidiary of Abans (Pvt) Limited which holds 84.31% of the Shares of the

Company as at 31st March 2011.

2.1.1 ABANS (PVT) LIMITED

Abans (Pvt.) Ltd, the Holding Company of Abans Financial Services Ltd, is owned by the

Pestonjee Family and is one of the Largest retailers of Consumer Electronics and Household

Products in Sri Lanka. It is the Market Leader in several product categories and holds the

exclusive agency franchise for LG Electronics Inc. since 1986.

The Company was incorporated on 17th December 1981, under the Companies Ordinance,

(Cap, 145,) and re-registered on 10th July 2008 under the Companies Act No. 07 of 2007.

Abans (Pvt.) Ltd is rated “A-(lka)’ by Fitch Ratings Lanka Ltd.

The Abans Group consists of Nine (9) Strategic Business Units engaged in Wholesale and Retail

Services, Manufacturing, Logistics, Finance, Air Conditioning Sales, Automobiles, Real Estate andInfrastructure Development. The Group reports an Annual Turnover exceeding Rs. 11.5 billion

(US $100 million) as at 31st March 2010, and employs a workforce of around 6,000. The sizable

distribution network includes over 400 showrooms island-wide and 442 approved dealers

across Sri Lanka.

The Group’s Business activities are highly diversified and include Retail of Mobile Phones and

High-Tech Computer Equipment, Industrial Kitchen, Laundry and Cleaning Equipment, Central

Air Conditioning Systems, Solid Waste Management and Environmental Services,

Pharmaceuticals, Automobiles, Financial Services, Security Services and Travel Reservations.




The Board of Directors of Abans (Pvt) Limited are as follows:

Name Age Address

Mrs. Aban Pestonjee 74 No. 206, Lake Drive, Colombo 08

Mr. Peston Nadirshah Pestonjee 80 No. 18-04, Royal Park Lake Drive, Rajagiriya

Mrs. Saroshi Dubash 53 No. 180, Lake Drive, Colombo 08

Mr. Behman Pestonjee 51 No. 40C, Lake Drive, Off Lake Drive, Rajagiriya

Mr. Rusi Pestonjee 50 No. 206/8, Lake Drive, Colombo 08

Mr. Allan Raffel 58 No. 33, 1st Lane, Shalawa Road, Mirihana, Nugegoda

No. 883/31, Ethul Kotte Road, KotteMr. Clive Augustine Fernando 56

The Shareholding Structure of Abans (Pvt) Limited as at 31stMarch 2011 is as follows:

Name of Shareholder No. of Shares Shareholding Percentage

%02000,234ee jnotsePnabA.srM

%02000,234ee jnotsePnamheB.rM

%02000,234ee jnotsePisuR.rM

%02000,234hsabuDihsoraS.srM

%51000,423tsurTee jnotsePsnabA

%5000,801ee jnotsePhahsridaNnotseP.rM

Total 2,160,000 100%

2.2 ABANS FINANCIAL SERVICES LIMITED

Abans Financial Services Ltd (AFSL), a Subsidiary of Abans (Pvt.) Ltd was incorporated in

April 2005 with a view of providing consumer financing such as hire purchase facilities for

consumable appliances sold by Abans (Pvt.) Ltd. AFSL was registered as a Leasing Company

in April 2006 and subsequently obtained a license from the Central Bank of Sri Lanka toengage in Finance Company Activities.

The Company is primarily engaged in the provision of Finance Leases, Hire Purchase

Facilities, Mortgage Loans, Vehicle Loans, Personal Loans and in Real Estate Development.




It is also involved in the Business of Accepting Deposits, both Fixed Deposits and Savings

Deposits.

Over the years AFSL has steadily built up operations benefiting from captive business

opportunities and operational synergies that stem from the Parent Company. Captive

business opportunities includes consumer financing as well as vehicle financing channelled

by the Abans Group Companies, whilst synergies have been derived by accessing the

significant island wide branch and dealer network of the Parent Company.

Vision Statement

“To be the soundest and most trusted financial solutions provider in the industry”

Mission Statement

“Power the consumer through innovative products, personalized service and a wide range of

financial solutions, by maximizing the synergies of the Abans Group, thereby creating wealth,

fuelling growth and adding to stakeholder value.”

2.3 PRODUCT PORTFOLIO

AFSL which initially commenced operations by offering Hire Purchase Facilities for Consumer

Durables, and Hire Purchase and Leasing Facilities for Vehicles, Machinery, Plant and

Equipment, has since expanded its lending portfolio to include other forms of Financial

Services such as Loans, Real Estate Development, and Microfinance.

2.3.1 HIRE PURCHASE

Initially popularized as a means of Financing Consumer Durables, Hire Purchase has today

evolved as an alternative source for Financing Motor Vehicles, primarily due to the prevalent

taxation framework.

AFSL extends Hire Purchase Finance for Consumer Durables, Registered Vehicles and for

Equipment. AFSL’s main driver of income for the Financial Year 2010/11 was Hire Purchase

Income which accounted for 33.33% of Total Income.




With the reduction in the import duty on vehicles, AFSL is at present experiencing greater

demand for financing of both registered and un-registered vehicles. The brisk trade in the

registered vehicle market, as sellers dispose of used vehicles to cash in on attractive import

options to acquire brand new vehicles, provide a sound opportunity for AFSL.

The anticipated economic recovery and the resultant increase in consumer purchasing power

on the other hand, are expected to auger well for AFSL’s consumer durable activity.

2.3.2 LEASING

Leasing, which was first introduced to Sri Lanka in 1980, has developed as an attractive

means of vehicle financing. AFSL extends Leasing Facilities for brand new and un-registered

vehicles as well as plant and machinery. Income from Leasing for the financial year 2010/11accounted for almost 13.8% of Total Income. Combined Lease and Hire purchase advances

comprised 58% of the Total Advances made by the Company as at 31st March 2011.

With benefits from tax cuts flowing into the vehicle market, new registration of motor vehicles

in the country has surged by as much as 74% during the period January to October 2010.

AFSL expects a further increase in demand for its own leasing facilities in the light of these

developments.

Accelerated economic growth would also offer an opportunity for AFSL to expand its Leasing

Portfolio, particularly given the rise in demand for commercial vehicles in the North-East.

2.3.3 LOANS

AFSL offers mortgage loans secured by property, as well as personal loans mainly for group

sales and vehicle loans to Customers. Group Sales consist of loans given to staff of partner

organizations on easy payment terms, with rentals collected via the respective partner

organization. Loans and Advances comprised 42% of the Total Advances made by the

Company as at 31st March 2011.




01021102tnemg eS

Ag 45.215,607,661erutlucir 130,640,833.00

Manufacturing 350,082,974.35 116,252,018.00

09.027,187,441secivreS 109,629,816.00

Trading 251,095,896.29 223,492,422.00

57.065,646,621tropsnarT 173,271,967.00

59.707,258,311snoitcurtsnoC 132,325,816.00

57.883,165,793lanosreP 174,572,875.00 40.027,785,803srehtO 217,254,225.00

Distribution of Total Advances 1,859,315,481.57 1,277,439,972.00

Lease & Hire Purchase Receivables 1,069,176,652.19 951,629,625.00

83.928,831,097secnavdA&snaoL 325,810,347.00

7 5.184 ,513 ,958 ,1secnavdAlatoT 1,277,439,972.00

2.3.4 REAL ESTATE

AFSL has ventured into Real Estate Development catering to the low and middle income

groups, albeit in a small way. Two property projects in Real Estate have been completed thus

far and others are in progress.

Real Estate Stocks attributed to 6.3% of the Total Assets of the Company as at 31 st March 2011.

2.4 SEGMENTAL ANALYSIS

AFSL’s exposure by way of Loans and Advances, Leases and Hire Purchase Facilities to various

industry sub sectors is illustrated below.

Segmental Analysis of Loans and Advances, Leases, Hire Purchase by Industry as at 31st March 2010 & 2011




2.5 DEPENDENCE ON KEY CUSTOMERS AND SUPPLIERS

2.5.1 CUSTOMERS

AFSL’s Income is derived from a diversified customer base spread throughout the country, as

Hire Purchase, Leasing, Loans and Real Estate Facilities are offered to the society as a whole.Hire Purchase facilities granted to customers of Abans (Pvt.) Ltd for purchase of consumer

durables amounts to Rs. 19 million as 31st March 2011, compared to Total Advances of Rs. 1,859

million, which represents 1% of the Total Advances made by AFSL as at that date. As such the

Company is not dependant on any single customer that would have a material impact on its

revenue.

2.5.2 SUPPLIERS

AFSL’s Chief Source of Financing is the acceptance of Public Deposits in the form of fixed

deposits and savings deposits. Deposits aggregating Rs. 1.48 billion has been mobilized from

customers and represented approximately 83% of AFSL’s Total Liabilities as at 31st March 2011.

AFSL deposit base has been mobilized from the general public and as such, the Company is

not reliant on any single depositor or group of depositors for its financing activity.

AFSL’s portfolio of bank borrowings is spread across various banks and is not dependant on a

single provider of finance. AFSL is not dependant on its parent for financing business growth.

2.6 HUMAN RESOURCES

As at 31st March 2011, there were 109 persons employed by the Company. The Company has

not entered into any collective agreements with the employees as the employees of the

Company are not members of any trade unions.




2.7 EMOLUMENTS

2.7.1 DIRECTORS

Emoluments paid to Directors in the form of Salaries and Bonuses for the Year Ended 31 st

March 2011 amounted to Rs 5.1 million.

2.7.2 SENIOR MANAGEMENT

Emoluments paid to Senior Management in the form of Salaries and Bonuses for the Year

Ended 31st March 2011 amounted to Rs 6.6 million.

2.8 BRANCH NETWORK

Besides the Head Office situated in Colombo, AFSL maintains Nine (9) branches across the

country, approved by the Central Bank of Sri Lanka, to service its customers. The Head Office

and Branches offer lease, hire purchase and loan facilitates and accept public deposits.

The distribution network of AFSL is listed below:

Location Address

Head Office 400, Galle Road, Colombo 3.

Anuradhapura 561/12, Maithripala Senanayake Mawatha, Anuradhapura.

Badulla 45, Kokowatta Road, Badulla.

Galle 71/7/1, Velsen Square, Off Olcott Mawatha, Galle.

Dambulla Sujatha Building, Kurunegala Junction, Dambulla.

Gampaha 2B, Holy Cross Road, Gampaha.

Kandy 1st Floor, Arpico Building, 123, D S Senanayake Mawatha, Kandy.

Kurunegala 19, Baudhaloka Mawatha, Kurunegagla.

Ratnapura 139/1 Main Street, Ratnapura.

Chunnakam 60 1/1, ½ K K S Road, Chunnakam.




2.10 MAJOR ASSUMPTIONS ON FUTURE PLANS

• Overall economic conditions and anticipated economic revival would materialize, giving

rise to greater purchasing power and customer spending.

• Overall demand for financial services would increase in line with anticipated economic

growth and aided by stable financial markets, leading to enhanced demand for AFSL’s

portfolio of products.

• The taxation framework and financial markets including interest rate scenarios will be

favourable to promote the growth of financial products.

2.11 RISKS ASSOCIATED WITH FUTURE PLANS

Together with other finance companies in the industry, AFSL faces the following risks, which

may have an adverse impact on the profitability of the business.

INTEREST RATE RISK

The profitability of financial institutions, such as AFSL are significantly susceptible to the

volatility in interest rates, as it may affect the spread between borrowing and lending rates.

Volatile interest rates could lead to a maturity mismatch between the lending and borrowing

portfolios, particularly in instances where lending is based on fixed rates, whilst borrowing is

mainly funded through floating rates or vice versa. Fixed lending funded through floating

rate finance could lead to a severe exposure to interest rate risks, particularly in a situation

where interest rates are rising.

CREDIT RISK MANAGEMENT

When engaging in lending activities, financial institutions such as AFSL are exposed to

credit/default risk, whereby customers default on their payments. This will have an adverse

effect on the financial position of the Company. To curtail the risks involved, the Company

has implemented a proper credit evaluation process to ascertain the creditworthiness of

customers.




LIQUIDITY RISK MANAGEMENT

This relates to the inability of Financial Institutions to discharge existing Financial Obligations

on time, which was one of the main risk factors which affected some of the finance companies

during the recent Financial Crisis. In order to mitigate liquidity risks, the Company has taken

measures to set in place a proper plan to maintain adequate liquid assets to meet the financial

commitments of the Company, which includes continuous monitoring and review of its

Cashflow Position.

OPERATIONAL RISK MANAGEMENT

This refers to the possible financial losses arising as a result of errors or frauds of the staff,

failure of information systems or unpredictable or uncontrollable natural disasters. To

mitigate risks arising in the operations of the Company, AFSL has implemented proper

Internal Control Procedures, which comes under the purview of the Integrated Risk

Management Committee.

MACRO-ECONOMIC RISKS

Financial Institutions, like AFSL are also exposed to other macro-economic risks such as

exchange rate risk and inflation risk, which affect the disposable income of consumers thereby

affecting their saving and spending patterns. This has both direct and indirect impact on the

borrowing and lending portfolio of finance companies, in terms of the level of deposits and

the tendency for customers to invest in vehicle financing.

Further risk factors which are faced by financial institutions such as AFSL include regulatory

risks, which include amendments in legislation and directions issued by the Central Bank of

Sri Lanka as well as changes in the tax legislation. In addition, there is also the risk of

downgrades in credit ratings, which may affect the borrowing cost, the availability of debt

capital from financial markets and capability of raising deposits from public. There is also

reputation risk involved, arising from negative public opinion, which was witnessed after the

recent financial crisis, which may adversely affect the ability of finance companies to attract

and retain customers. As a result, AFSL needs to be cognizant of the risks it can be exposed to

in an evolving macro environment.




2.12 LITIGATION, DISPUTES AND CONTINGENT LIABILITIES

There are No Legal, Arbitration or Mediation Proceedings, which may have or have had a

material impact on AFSL’s profitability and financial position. It should however be noted

that AFSL has instituted legal proceedings against clients in default, in the usual course of

business.

There are No Contingent Liabilities that would affect current or future profits of the Company.

There are No Penalties imposed by regulatory or state authorities on the Company.




3. THE BOARD OF DIRECTORS

The Board of Directors of AFSL is committed to upholding the highest ethical standards in the

conduct of the Company’s affairs and to act in the best interest of all Stakeholders. The Board

is responsible for providing strategic leadership to ensure that the business is efficiently

managed with a view of creating ultimate Shareholder Value.

In conformity with standards of best practice the role of Chairperson and Chief Executive

Officer (CEO) are separate with the positions being held by two individuals who are

Independent of each other.

The Board comprises Seven Non-Executive Directors and Two Executive Directors. The

Chairperson is a Non-Executive Director while the Managing Director, who is the CEO, is one

of the Two Executive Directors.

Name Age Address

Mrs. Aban Pestonjee 74 No 206, Lake Drive, Colombo 08

Mr. Rusi Pestonjee(Alternate to Mrs. A Pestonjee)

50 No 206/8, Lake Drive, Colombo 08

Mrs. Gloria Noeline Manohari Alles 72 No 11/2, Boyd Place, Colombo 03

Mrs. Saroshi Dubash 53 No 180, Lake Drive, Colombo 08

Mr. Sangarapillai Sothivadivel 71 No 1A, 3/2, Ebenezer Place, Dehiwela

Mr. Channa Dilhan Pathirana 40 No 30/29, Longden Place, Colombo 07

Mr. Kithsiri Bandara Wanigasekara 54 No 30, Aluthgantota Road, Mavilmada, Kandy

Mr. Vishtasp Kairshasp Choksy 42

Mr. Thirunavukarasu Someswaran 68

No 22/4, Sir Marcas Fernando Mawatha, Colombo 07

No 18, R A De Mel Mawatha, Colombo 05




3.1 PROFILES OF THE BOARD OF DIRECTORS

Mrs Aban Pestonjee – Chairperson/Non-Executive Director

A resourceful and self – taught entrepreneur, Mrs. Pestonjee has come to exemplify the

Abans’ creed of “finding a need and fulfilling it”. Her passion, drive and courage,

especially as a South Asian woman in a then male – dominated business world has

inspired successive generations of Sri Lankan Business women and have won her the

praise of many others. She continues in the role of Chairperson of Abans Group of

Companies.

Mrs. Pestonjee has been awarded:

SAARC Women’s Association - Sri Lanka Chapter – “Award of Excellence for Woman

Achievers for outstanding Achievement” – Year 2000.

• “The Bronze Award “ for the large Business Category by women’s chamber of industry &

commerce at the year 2000 women entrepreneurs of the year Award ceremony.

• “KOTRA Plaque of Appreciation -2005” for forging strategic foreign economic ties

between Korea & Sri Lanka.

• Culminating in 2006, she received international recognition for winning the leading

women entrepreneur of the world award. Mrs. Pestonjee was awarded the prize by the

princess of Thailand.

Mr. R. Pestonjee (Alternate to the Chairperson) – Non-Executive Director

Number-crunching and venturing into new avenues of business has been Mr. Rusi

Pestonjee's forte. A leader in Abans in the Accounting and Financial areas, his treasury

management skills have largely come into use in the establishment of the Abans Financial

Services Division, which was set up initially to help finance Abans Limited customers.

His involvement also includes Abans Environmental Services, adding to Abans'

reputation as a socially responsible organization, and AB Securitas.




Mrs. Mano Alles – Managing Director

Mrs. Alles functions as Managing Director. She holds a Bsc. Degree with a First Class from

University of Madras. Former Senior Deputy General Manager of the Bank of Ceylon,

Mrs. Alles served the Bank for over 36 years and held several Senior Managerial Positions

in the Bank. She was also responsible for the Banks Overseas Expansions having set up

branches in Chennai - South India, in Karachi - Pakistan, in Nepal and Representative

Offices in Singapore and Russia. She served as the Bank’s representative in Singapore

from 1981- 1984. She held Directorships in the following Public Sector and the Private

Sector Companies: B.C.C Lanka Limited, Hotels Corporation, Lanka Cement Limited,

Alternate Director Nepal Bank of Ceylon, Merchant Bank of Sri Lanka, Merchant Credit

Limited – Chairperson, Samuels & Company Limited, CEPA (Centre for Poverty

Alleviation), National Agri Business Council, Pan Asia Bank Limited, L B Finance

Limited- Managing Director, Vanik Incorporation Limited. She set up Abans Financial

Services Limited for the Abans Group and presently serves as the Managing Director /

CEO of the Company.

Mrs. Saroshi Dubash – Non-Executive Director

Mrs. Dubash holds a Honours Degree in Chemistry (London), MBA (USA). She is a

member of representative Committee of Women’s Chamber of Commerce and Industry

of the Ceylon Chamber of Commerce. A Director of Abans (Pvt) Ltd. and other Group

Companies. Within the group, Mrs. Dubash is chiefly involved in administering the

supply chain functions of import purchasing, wharf clearance, warehousing, inventory

control, distribution and information systems. Retail Accounts and Hire Purchase

Departments also come under her purview. Flexible, hard-working employees have long

been Mrs. Dubash's main aides and as a result, she oversees the Training Department to

ensure the continuous training and development of quality Abans employees. Her major

projects currently include sourcing a 3PL partner, introducing an ERP system for theAbans Limited channel and spearheading other e-commerce initiatives, most recent of

which is ‘’buyabans.com’’, the online retail arm of Abans. She is supported by an excellent,

hard-working senior administrative network.




Mr. Sangarapillai Sothivadivel – Non-Executive Director

He is the Group Financial Controller with 19 years service in the Abans Group.

Mr.Sothivadivel holds a Degree in Economics from University of Sri Lanka. He is also a

Fellow Member of Institute of Chartered Accountants of Sri Lanka with 30 years

experience in Accounting in the Private Sector. He has held responsible positions

including a Partner of a firm of Chartered Accountants before joining with Abans Group.

Mr.Channa Pathirana - Non-Executive Director

Deputy Director of Abans (Pvt) Ltd. and authorized distributor for LG Electronics in Sri

Lanka since 2002. Counts 20 years of experience in Sales, Marketing, Leasing and Hire

Purchase at multinational / local organizations. Prior to his appointment to Abans

Group, he has extensive experience related to sales and marketing of Consumer

Electronics in a multinational company. He is currently reading for a Master of Business

Administration from the University of Wales having qualified as a Marketer from the

Chartered Institute of Marketing (UK).

Mr.Kithsiri Wanigasekara – Executive Director

Mr. Wanigasekara was appointed to the Abans Financial Services Ltd., Board as an

Executive Director with effect from 1st June 2009. He has functioned as Chairman &

Managing Director / CEO of Sinhaputhra Finance Ltd., from December 1990 to

September 2007. Past Chairman of The Kandy Hotels Co. (1938) Ltd., owners of Hotel

Suisse and Queen’s Hotel, from 1994 to 2001. Chairman of the Finance Houses

Association of Sri Lanka in the years 1998, 1999 and 2000 and a member of the Committee

of the Ceylon Chamber of Commerce during the same period. A Past Council Member of

the Sri Lanka Institute of Credit Management. A Finalist of the Chartered Institute of

Management Accountants, UK. Holds a Masters Degree in Business Administration. A

member of the PSRE 17 Group of Sri Lankan Entrepreneurs to Japan in 2003 sponsored by

The Association of Overseas Technical Scholarships of Japan with “JASTECA”. One of

the three Sri Lankan nominees of the United States – Sri Lanka Fulbright Commission for




the Hubert H. Humphrey North-South Fellowship Program for Mid-Career Professional

Study in the USA for the Academic year 2006-07.

He has been awarded with the following:

• Central Provincial Chamber of Commerce - “Silver Award” winner for the most

Outstanding Entrepreneur of the Central Province in 2000.

“Sri Lankan Entrepreneur of The Year 2005” - Organized by the Federation of Chambers

of Commerce of Sri Lanka (FCCSL).

Extra Large Category

• Central Province – “Silver Award Winner”

• National - “Bronze Award Winner”

Mr. Vishtasp Kairshasp Choksy – Independent Non-Executive Director

Appointed to the Board on 15th March 2011. An Attorney-at-Law and Notary Public.

Possesses 18 years of legal practice and has been specializing in civil law with particular

emphasis in commercial, business and industrial law. A member of the Remuneration

Committee of the Company. Provides specialized legal advice to the company on key

business related issues.

Mr. Thirunavukarasu Someswaran – Independent Non-Executive Director

Appointed to the Board on 10th May 2011. Former Senior Partner of SJMS Associates, a

firm of Chartered Accountants, an Independent Correspondent firm to Deloitte Touche

Tohmatsu. He is the Vice President of International Chamber of Commerce of Sri Lanka

and Treasurer of the European Chamber of Commerce. A Member of the Organizationfor Professional Associations (OPA), International Fiscal Association (IFA) Sri Lanka

Branch and Governing Council of Institute of Management Accountants of Sri Lanka.

Serves on the Boards of Serendib Land PLC, CLEANCO Pvt Ltd, SMB Leasing Pvt Ltd,

Pan Asia Power, Commercial Credit Ltd, Sunrise Senior (Pvt) Ltd, and ECSAT.




3.2 DIRECTORSHIPS ON OTHER BOARDS

Name of Director Directorships on other Boards

Mrs. Aban Pestonjee Abans Electricals PLCAbans Marketing (Private) LimitedAbans Consolidated (Private) Limited

A-Mart (Private) LimitedAbans Lanka (Private) LimitedAbans Office Automation (Private) LimitedABA Telecom (Private) LimitedABS Gardner Dixon Hall International (Private) LimitedAdd Outdoor Advertising (Private) LimitedAbans Development (Private) LimitedAbans Investments (Private) LimitedAbans Tours (Private) LimitedAbans Graphics (Private) LimitedAbans Warehousing (Private) LimitedAbans (Private) Limited

Abans Constructions (Private) LimitedAbans Tourist Hotel (Private) LimitedAbsgro (Private) LimitedCrown City Developers (Private) Limited

Mrs. Mano Alles Vanik Incorporation LimitedSt.Regis Packaging (Private) Limited

Mrs. Saroshi Dubash Abans Electricals PLCAB Technologies (Private) Limited

Abans Marketing (Private) LimitedAbans Office Automation (Private) LimitedAbans Development (Private) LimitedAbans Investments (Private) LimitedAbans Graphics (Private) LimitedAbans (Private) LimitedAbans Retail (Private) LimitedAbans Constructions (Private) LimitedAbsgro (Private) LimitedCrown City Developers (Private) Limited

Mr. Sangarapillai Sothivadivel AB Leisure (Private) Limited(Alternate Director to Mr. B Pestonjee )

Mr. Channa Pathirana None

Mr. Kithsiri Wanigasekera None

Mr. Rusi Pestonjee(Alternate to Mrs. A Pestonjee)

Abans Electricals PLCCleantech (Private) LimitedAB Technologies (Private) LimitedAbans Marketing (Private) LimitedAbans Office Automation (Private) LimitedAbans Development (Private) Limited




Mr. Rusi Pestonjee(contd...)

Abans Investments (Private) LimitedAB Transport (Private) LimitedAbans Tours (Private) LimitedAbans Graphics (Private) LimitedAbans Warehousing (Private) LimitedAbans (Private) LimitedAbans Retail (Private) Limited

Abans Restaurant Systems (Private) LimitedAB Leisure (Private) LimitedAbans Environmental Services (Private) LimitedAbsgro (Private) LimitedCrown City Developers (Private) LimitedSirius Technologies Services (Private) Limited

Mr. Vishtasp Kairshasp ChoksyMr. Thirunavukarasu Someswaran Serendib Land PLC

Cleanco Lanka (Private) LimitedSMB Leasing (Private) LimitedPan Asia Power

Commercial Credit LimitedSunrise Senior (Private) LimitedECSAT Lanka (Equality-based Community Support AndTraining)Centre for Resource Mobilization

3.3 STATEMENT – BOARD OF DIRECTORS

The Chairman nor any Director of the Company has been or is involved in any of the

following events:

• a petition under any bankruptcy laws filed against such person or any partnership in

which he was a partner or any corporation of which he was an executive officer;

• conviction for fraud, misappropriation or breach of trust or any other similar offence

which the CSE considers a disqualification.




4. CORPORATE GOVERNANCE

The Independent Directors, Non-Executive Directors of AFSL comprise of the following

Directors:

•

Mr. T. Someswaran• Mr. V. K. Choksy

4.1 BOARD COMMITTEES

In accordance with best practices, the Board has established three Board Committees that

report to the Board.

Audit Committee

The Audit Committee comprises of the following Directors:

• Mr. T. Someswaran (Chairman) – Independent Non-Executive Director

• Mr. V. K. Choksy – Independent Non-Executive Director

• Mr. S. Sothivadivel - Non-Executive Director

The Audit Committee is chaired by a fellow member of the Institute of Chartered Accountants

of Sri Lanka. The MD/CEO, the Executive Director and External Auditors attend meetings byinvitation.

The primary responsibility of the Audit Committee is to assist the Board in the areas of

financial reporting, risk management and internal control. The Committee meets once a

month to evaluate findings of internal and external audit, assess adequacy of accounting

policies and internal control procedures, as well as the extent of compliance with accounting

standards and statutory requirements. It also reviews the quality and adequacy of disclosure

in financial reporting.




Remuneration Committee

The Remuneration Committee comprises of the following Directors:

• Mr. V. K. Choksy (Chairman) – Independent Non-Executive Director

• Mr. T. Someswaran – Independent Non-Executive Director

• Mr. R. Pestonjee - Non-Executive Director

The Committee is responsible to assist the Board in establishing a competitive remuneration

policy designed to attract, motivate and retain competent personnel. The MD/CEO

participates at meetings by invitation, except where the CEO’s compensation package is

discussed.

The remuneration policy takes into consideration AFSL’s corporate objectives, operationalperformance and industry trends. The Committee meets at least once a year.

The aggregate remuneration paid to the directors for the year ended 31 st March 2011 is given

in Section 2.7.1.

Integrated Risk Management Committee

The Integrated Risk Management Committee comprises of the following Directors:

• Mr. S. Sothivadivel

• Ms. Mano Alles

• Mr. Kithsiri Wanigasekara

• Mr.C.Pathirana

In addition Five Management Personnel representing different risk areas of the Company are

also involved in the Committee.

The Integrated Risk Management Committee ensures that the Company is positioned to

properly identify, monitor and assess potential risks in advance and that corrective risk

mitigating strategies are implemented to protect the Company’s exposure to various risks.




The main responsibilities of the Integrated Risk Management Committee include the

following;

• Review the adequacy and effectiveness of all management level committees.

• Take prompt corrective action to diminish the effects of specific risks.

• Assess the Company’s compliance with laws, regulations, guidelines, internal controls.

• Approve policies on all areas of business operations.




5 CAPITAL STRUCTURE

5.1 STATED CAPITAL

The Stated Capital of the Company comprises of 37,000,000 fully paid Ordinary Shares,

representing a value of Rs. 382,373,630 as at 31st March 2011.

It should be noted that the Ordinary Shareholders of the Company confer their right to receive

dividends as declared from time to time and are entitled to one vote per share at the meetings.

The Stated Capital of the Company over past three years is given below.

2010/11 2009/10 2008/09

No. of Shares Rs. No. of Shares Rs. No. of Shares Rs.37,000,000 382,373,630 37,000,000 382,373,630 37,000,000 382,373,630

No other classes of shares have been issued by the Company, during the last two years

preceding the date of this Introductory Document, and there has not been a reduction in the

Stated Capital of the Company, as indicated in the table above.

Further, it should be noted that no shares have been redeemed or repurchased by the

Company during the last two years preceding the date of this Introductory Document.

5.2 CONVERTIBLE DEBT SECURITIES

AFSL does not have any outstanding convertible debt securities as at the date of this

Introductory Document.

5.3 SHARES SOLD PRIVATELY IN CONJUNCTION WITH THE LISTING

Securities of the same class or another class have not been subscribed or sold privately in

conjunction with the listing of Shares on the Colombo Stock Exchange.




5.4 FREE TRANSFERABILITY OF SECURITIES

There are no statutory restrictions on the free transferability of shares to be listed on the CSE.

It should also be noted that there are no restrictions applicable to non-resident shareholders of

the Company.

5.5 TRANSFER OF SHARES

The following shares of AFSL were transferred during the last year, in order to comply with

the 10% public shareholding. Details of the share transfers are as follows:

24th Feb’ 2010 Mr & Mrs Samarapala Abans (Pvt) Limited 100 Rs. 20

24th Jun’ 2010 Ghandy & Ghandy R Pestonjee 3,500 Rs. 25

52.sR005,3ee jnotsePD

52.sR005,3ee jnotseP JL J

52.sR005,3ee jnotsePT

28th Mar’ 2011 Abans (Pvt) Limited S C Henagama Gamage 370,000 Rs. 10

Abans (Pvt) Limited A H A Jayasinghe 370,000 Rs. 10

Abans (Pvt) Limited M V I F Fernando 370,000 Rs. 10

Abans (Pvt) Limited C V Sumanadasa 370,000 Rs. 10

Abans (Pvt) Limited N N Perera 370,000 Rs. 10

Abans (Pvt) Limited D S Karunakaran 370,000 Rs. 10Abans (Pvt) Limited K Kunenthiran 370,000 Rs. 10

Abans (Pvt) Limited P K Pestonjee 370,000 Rs. 10

Abans (Pvt) Limited I N Jalaldeen 370,000 Rs. 10

Date Transferor Transferee No. of

Shares

Consideration

Per Share




Abans (Pvt.) Ltd 31,195,367 84.31%

Mr. P N Pestonjee 666,669 1.80%

Mr. B Pestonjee 533,334 1.44%

Mr. H Gamage 370,000 1.00%

Mr. A H A Jayasinghe 370,000 1.00%

Ms. C V Sumanadasa 370,000 1.00%

Mr. N N Perera 370,000 1.00%

Mr. M V I F Fernando 370,000 1.00%

Mr. D S Karunakaran 370,000 1.00%

Mr. K Kunenthiran 370,000 1.00%

Others 2,014,630 5.44%

5.6 TEN LARGEST SHAREHOLDERS OF AFSL

The major shareholders of the Company as at 24th May 2011 are as follows:

It should be noted that more than 10% of the shares of AFSL are held by over 100 ‘public’

shareholders holding a minimum of 100 shares each, as defined by the CSE listing rules.

Name of Shareholder No. of Shares Shareholding %

%001000 ,000 ,7 3latoT




6 MANAGEMENT

6.1 THE TEAM

The Senior Management Team of AFSL is as follows:

Mrs. Manohari Alles Managing Director/Chief Executive Officer

Mr. Kithsiri Wanigasekera Executive Director

Mr. Aruna Somasiri Head of Documentation & Disbursement

Mr. Chaminda Sugathadasa Head of Consumer Credit, Recoveries & Branches

Mr. Chandima Bandara Head of Finance

Mr. Rasika Kaluarachchi Head of Credit, Risk Management and Marketing

Ms. Sanjeewi Dharmasena Manager - Deposits

Mr. Manura Rajakaruna Manager – IT

Mrs Mano Alles

No 11/2, Boyd Place,

Colombo 03

Mrs. Alles functions as Managing Director. She holds a Bsc. Degree with a First Class from

University of Madras. Former Senior Deputy General Manager of the Bank of Ceylon,

Mrs. Alles served the Bank for over 36 years and held several Senior Managerial Positions

in the Bank. She was also responsible for the Banks Overseas Expansions having set up

Name Designation

branches in Chennai - South India, in Karachi - Pakistan, in Nepal and Representative

Offices in Singapore and Russia. She served as the Bank’s representative in Singapore

from 1981- 1984. She held Directorships in the following Public Sector and the Private

Sector Companies: B.C.C Lanka Limited, Hotels Corporation, Lanka Cement Limited,

Alternate Director Nepal Bank of Ceylon, Merchant Bank of Sri Lanka, Merchant Credit

Limited – Chairperson, Samuels & Company Limited, CEPA (Centre for Poverty

Alleviation), National Agri Business Council, Pan Asia Bank Limited, L B Finance

Limited- Managing Director, Vanik Incorporation Limited. She set up Abans Financial

Services Limited for the Abans Group and presently serves as the Managing Director /

CEO of the Company.




Mr.Kithsiri Wanigasekara – Executive Director

Mr. Wanigasekara was appointed to the Abans Financial Services Ltd., Board as an

Executive Director with effect from 1st June 2009. He has functioned as Chairman &

Managing Director / CEO of Sinhaputhra Finance Ltd., from December 1990 to

September 2007. Past Chairman of The Kandy Hotels Co. (1938) Ltd., owners of Hotel

Suisse and Queen’s Hotel, from 1994 to 2001. Chairman of the Finance Houses

Association of Sri Lanka in the years 1998, 1999 and 2000 and a member of the Committee

of the Ceylon Chamber of Commerce during the same period. A Past Council Member of

the Sri Lanka Institute of Credit Management. A Finalist of the Chartered Institute of

Management Accountants, UK. Holds a Masters Degree in Business Administration. A

member of the PSRE 17 Group of Sri Lankan Entrepreneurs to Japan in 2003 sponsored by

The Association of Overseas Technical Scholarships of Japan with “JASTECA”. One of

the three Sri Lankan nominees of the United States – Sri Lanka Fulbright Commission for

the Hubert H. Humphrey North-South Fellowship Program for Mid-Career Professional

Study in the USA for the Academic year 2006-07.

He has been awarded with the following:

• Central Provincial Chamber of Commerce - “Silver Award” winner for the most

Outstanding Entrepreneur of the Central Province in 2000.

“Sri Lankan Entrepreneur of The Year 2005” - Organized by the Federation of Chambers

of Commerce of Sri Lanka (FCCSL).

The Chief Executive Officer nor any person nominated to become the Chief Executive

Officer is or was involved in the following events:

• Petition under bankruptcy laws filed against such person or any partnership in

which he was a partner or any corporation of which he was an executive officer.

• Convicted for fraud, misappropriation or breach of trust or any other similar

offence which the CSE considers a disqualification.




Extra Large Category

• Central Province – “Silver Award Winner”

• National - “Bronze Award Winner”

Mr. Aruna Somasiri

Mr. Somasiri holds a MBA from the University of Colombo and a Bachelor’s Degree in

Business Administration from the University of Colombo. He is also a Member of the Institute

of Management, Sri Lanka. He counts over 9 years of industry experience in leasing and

finance companies.

Mr. Chaminda Sugathadasa

Mr. Sugathadasa is a member of the Chartered Institute of Marketing (CIM) (UK). He counts

over 19 years of experience, of which 13 years were in management grades, in credit

Operations, sales, marketing, leasing & hire purchase at multinational as well as local

organisations including five years of banking experience .He joined Abans group in 2003 .He

has held the positions of District Manager, Regional Manager and Senior Regional Manager

prior to joining AFSL in 2006 .

Mr. Chandima Bandara

Mr. Bandara is a Member of Institute of Chartered Accountants and holds a B. Sc.Specialised in Accountancy and Financial Management from the University of Sri J’pura

He is a Member of Institute of Certified Management Accountants and Association of

Accounting Technicians of Sri Lanka and possesses diverse experience in Auditing (Ernst &

Young) Financial Management and consumer durable sectors.

Mr. Rasika Kaluarachchi

Mr. Kaluarchchi holds a MBA in Banking and Finance from the Post Graduate Institute of

Management of the University of Sri Jayawardenapura, a B.Sc from the University of Sri

Jayawardenapura and an Executive Diploma in Business Administration from the University

of Colombo. He possesses 10 years of industry experience.




Ms. Sanjeewi Dharmasena

Ms Dharmasena counts 15 years experience in LB Finance as a senior executive and 2 years in

Industrial Finance as Assistant manager in marketing of fixed deposits prior to joining Abans

Financial Services Limited in 2008. She is in charge of managing fixed deposit/Savings &

Educational loan portfolios at AFSL.

Mr. Manura Rajakaruna

Mr. Rajakaruna holds a National Certificate of Computer (NCC) and trained at the National

Apprentership Board (NAB) 01 year full time. He joined AFSL in 2006 and, counts over 10

years of IT experience, out of which 7 years in Finance industry.




7 FINANCIAL INFORMATION

7.1 RATIOS AND SHARE INFORMATION

Source: Abans Financial Services Ltd.

71.5)%(stessAegarevAlatoT/emocnItseretnIteN 10.32

Non-Interest Income / Total Average Assets (%) 1.18 1.46

Personnel & Other Non-Interest Expenses / Net Interest Income& Non-Interest Income (%)

107.58 57.52

05.02)%(oitaRLPNssorG 11.19

General & Specific Loan Loss Reserves (B/S) / (Total Non- 77.74)%()esnepsuS-nI-tseretnI–snaoLgnimrofreP 58.37

Liquid Assets / Customer Deposits & Short – Term Funds 11.50 15.58

11.02)%(oitaRycauqedAlatipaC 24.90

14.5oitaRytiuqE/tbeD 21.08

33.8).sR(erahSrepeulaVkooB 9.48

)57.1().sR(erahSrePsgninraE 1.15

Profit after Tax / Average Equity )10.91()%( 12.90

)82.4()%(stessAegarevAnonruteR 2.33

-)%(etaRxaTevitceffE 20.16

-)%(xaTretfatiforP/sdnediviD -

Year Ended

31.03.2010 31.03.2011




7.2 RECEIVABLES

7.2.1 POLICY FOR CLASSIFICATION OF NON-PERFORMING

RECEIVABLES

AFSL classifies advances as “Non-Performing” in the following circumstances, in accordance

with SLAS No.33 “Revenue recognition and disclosure in the Financial Statements of Finance

Companies”

(a) Where payment of Principal and / or Interest have been in arrears for a period of 6

months or more,

(b) in the case of rescheduled advances, where the asset financed under a leasing / hire

purchase agreement have been in arrears before rescheduling (if any) and after

rescheduling is 6 months or more. When rescheduling occurs after an account has been

classified as Non Performing, the reschedule account will be continued to be classifying as

Non Performing.

A Non Performing Advance may be classified as Performing Advance upon settlement of all

arrears of principal and interest. A Non Performing Asset which has been rescheduled be

reclassified as performing only when the repayments under the rescheduled terms have beencomplied with for a continuous period of not less than six months. On the other hand, if an

asset was performing at the time of rescheduling but subsequently became Non-Performing, it

will be classified as performing only upon the full settlement of all arrears under the

rescheduled terms.




7.2.2 COMPOSITION OF RECEIVABLES:

7.3 MATURITY ANALYSIS OF DEPOSITS & BORROWINGS

Source: Abans Financial Services Ltd.

YE31.03.2010

(%)

YE31.03.2011

(%)

Performing Loans & Advances

%79%19shtnom3nahtsseL

%30%90shtnom6-3

--shtnom21-7

--shtnom81-31

--shtnom81nahteroM

Total (%) 100% 100%

Total Performing Loans (Rs.) 971,319,337 1,600,140,584

Non Performing Loans & Advances

%60%80shtnom3nahtsseL

%11%11shtnom6-3

%30%60shtom7-6

%71%92shtnom21-7

%31%13shtnom81-31

%05%61shtnoM81nahteroM

Total (%) 100% 100%

Total Non-Performing Loans (Rs.) 250,426,464 201,634,681

Total (Rs.) 1,221,745,801 1,801,775,265

YE31.03.2010

(%)

YE31.03.2011

(%)

Maturity Period

%46shtnom3otlauqeronahtsseL 59%

More than 3 months less than or equal to 1 year 27% 28%

More than 1 year less than or equal to 3 years 07% 08%%20sraey3nahteroM 05%

TOTAL 100% 100%




Inspection of Documents

The Introductory Document and Articles of Association of Abans Financial Services Limited

are also hosted on the CSE website – www.cse.lk and the Company’s website –

www.abansgroup.com for a period of not less than Fourteen (14) days.




8 DECLARATION BY THE DIRECTORS

We, the undersigned, who are named in the Introductory Document as Directors of Abans

Financial Services Limited, hereby declare and confirm that we have read the provisions of

the Companies Act No. 07 of 2007 and the Colombo Stock Exchange Listing Rules and any

amendments to it relating to the issue of this Introductory Document and that those

provisions have been complied with.

This Introductory Document has been seen and approved by us and we collectively and

individually accept full responsibility for the accuracy of the information given and confirm

that provisions of the CSE Listing Rules and of the Companies Act No. 7 of 2007 and any

amendments to it from time to time have been complied with after making all reasonable

enquiries and to the best of our knowledge and belief, there are no other facts, the omission ofwhich would make any statement herein misleading or inaccurate.

dengiSee jnotsePnabA

dengiShsabuDihsoraS

dengiSlevidavihtoSialliparagnaS

dengiSsellAirahonaMenileoNairolG

Rusi Pestonjee (Alternate director to Aban Pestonjee) Signed

dengiSanarihtaPnahliDannahC

dengiSarakesaginaWaradnaBirishtiK

dengiSyskohCpsahsriaKpsathsiV

Thirunavukarasu Someswaran Signed




Partners : A D B Talwatte FCA FCMA M P D Cooray FCA FCMA R N de Saram ACA FCMA Ms. Y A De Silva ACA W R H Fernando FCA FCMA

W K B S P Fernando FCA FCMA A P A Gunasekera FCA FCMA A Herath FCA D K Hulangamuwa FCA FCMA LLB (Lond)H M A Jayesinghe FCA FCMA Ms. G G S Manatunga ACA Ms. L C G Nan ayakkara FCA FCMA B E Wijesuriya ACA ACMA

Chartered Accountants201 De Saram Place

P. O. Box 101

Colombo 10

Sri Lanka

Tel : (0) 11 2463500

Fax Gen : (0) 11 2697369

Tax : (0) 11 [email protected]

INDEPENDENT AUDITORS’ REPORT

TO THE SHAREHOLDERS OF ABANS FINANCIAL SERVICES LIMITED

Report on the Financial Statements

We have audited the accompanying financial statements of Abans Financial Services Limited, which comprise the balance

sheet as at 31 March 2011, the income statement, statement of changes in equity and cash flow statement for the year then

ended, and a summary of significant accounting policies and other explanatory notes.

Management’s Responsibility for the Financial Statements.

Management is responsible for the preparation and fair presentation of these financial statements in accordance with

Sri Lanka Accounting Standards. This responsibility includes: designing, implementing and maintaining internal controlsrelevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether

due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are

reasonable in the circumstances.

Scope of Audit and Basis of Opinion

Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in

accorance with Sri Lanka Auditing Standards. Those standards require that we plan and perform the audit to obtainreasonable 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 principal accounting policies used and significant estimates made by management, as

well as evaluating the overall financial statement presentation.

We have obtained all the information and explanations which to the best of our knowledge and belief were necessary for

the purposes of our audit. We therefore believe that our audit provides a reasonable basis for our opinion.

Opinion

In our opinion, so far as appears from our examination, the Company maintained proper accounting records for the year

ended 31 March 2011 and the financial statements give a true and fair view of the Company’s state of affairs as at 31 March2011 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 for Section 151 (2) of the

Companies Act No. 07 of 2007.

03 May 2011

Colombo.

APAG/NYR/NPD/DM

AUDITED FINANCIAL STATEMENTS AS AT 31ST MARCH 2011



Abans Financial Services Limited

BALANCE SHEET

As at 31 March 2011


These Financial Statements are in compliance with the requirements of the Companies Act No. 07 of 2007.

Note 2011 2010Rs. Rs.

ASSETS

Cash and amounts due from Banks 15 12,497,605 7,771,603

Investments held to Maturity 3 154,636,199 65,878,767

Placements with Banks 4 64,446,969 42,401,609

Dealing Securities 5 11,710,673 -

Investment Securities 6 80,400 80,400

Loans and Advances 7 788,823,034 324,568,604

Lease rentals receivable & Stock out on Hire 8 895,253,101 777,541,018

Real Estate Stock 10 135,883,066 136,058,707

Other Debtors, Deposits and Prepayments 11 35,216,135 79,322,350

Tax Recoverable 6,468,996 13,345,635

Property, Plant & Equipment 12 16,852,026 18,682,524

Deferred Taxation 24 25,118,995 32,969,828

TOTAL ASSETS 2,146,987,199 1,498,621,045

LIABILITIES

Deposits from Customers 13 1,486,357,557 1,009,533,058

Borrowings 14 178,568,205 92,607,209

Other Liabilities 16 131,426,762 88,345,603

Total Liabilities 1,796,352,524 1,190,485,870

SHAREHOLDERS' FUNDS

Stated Capital 17 382,373,630 382,373,630

Reserve Fund 18 9,519,900 1,020,000

Retained Earnings (41,258,855) (75,258,455)

Total Equity 350,634,675 308,135,175

TOTAL EQUITY AND LIABILITIES 2,146,987,199 1,498,621,045

Commitments and Contingencies 27 - -

……………………………………..

Chief Finance Officer

………………………………. ……………………………….

Director

The Accounting Policies and Notes on pages 48 through 65 form an integral part of the Financial Statements.

03 May 2011

Colombo

Director

The Board of Directors is responsibile for the preparation and presentation of the Financial Statements.Signed for and on behalf of the Board by ;





INCOME STATEMENTYear ended 31 March 2011

Note 2011 2010Rs. Rs.

Income 19 396,244,898 287,674,710

178,536,96302emocnItseretnI 269,854,363

)454,474,181(12esnepxEtseretnI (191,575,112)

714,161,881emocnItseretnIteN 78,279,251

720,906,6222emocnIrehtO 17,820,347

214,770,444 96,099,598

Less: Operating Expenses

Staff Costs (53,341,872) (36,157,265)

)434,402,07(sesnepxEnoitartsinimdA&lareneG (67,224,035)

)817,022,91(9stbeDluf tbuoDdnadaBrof noisivorP (95,177,038)

Profit/(Loss) before VAT on Financial Service and Income Tax 72,003,420 (102,458,740)

)835,539,8(secivreSlaicnaniFnoxaTdeddAeulaV -

Profit/(Loss) before Income Tax 63,067,882 (102,458,740)

)283,865,02(42lasreveR / )sesnepxE(xaTemocnI 37,729,196

Profit/(Loss) for the year 42,499,500 (64,729,544)

51.152erahSreP)ssoL( / sgninraE (1.75)





A b a n s F i n a n c i a l S

e r v i c e s L i m i t e d

S T A T E M E N T O F C H A N G E S I N E Q U I T Y

Y e a r e n d e d 3 1 M a r c h 2

0 1 1

R e t a i n e d

S t a t e d

R e s e r v e

E a r n i n g s /

C a p i t a l

F u n d

( L o s s e s )

T o t a l

R s .

R s .

R s .

R s .

B a l a n c e a s a t 3 1 M a r c h

2 0 0 9

3 8 2 , 3 7 3 , 6 3 0

1 , 0 2 0 , 0 0 0

( 1 0 , 5 2 8 , 9 1 1 )

3 7 2 , 8 6 4 , 7 1 9

-

r a e y e h t r o f s s o L t e N

-

( 6 4 , 7 2 9 , 5 4 4 )

( 6 4 , 7 2 9 , 5 4 4 )


2 0 1 0

3 8 2 , 3 7 3 , 6 3 0

1 , 0 2 0 , 0 0 0

( 7 5 , 2 5 8 , 4 5 5 )

3 0 8 , 1 3 5 , 1 7 5

-

r a e y e h t r o f t i f o r p t e N

-

4 2 , 4 9 9 , 5 0 0

4 2 , 4 9 9 , 5 0 0

-

r a e y e h t g

n i r u d m o r f / o t d e r r e f s n a r T

8 , 4 9 9 , 9 0 0

( 8 , 4 9 9 , 9 0 0 )

-


2 0 1 1

3 8 2 , 3 7 3 , 6 3 0

9 , 5 1 9 , 9 0 0

( 4 1 , 2 5 8 , 8 5 5 )

3 5 0 , 6 3 4 , 6 7 5

T h e A c c o u n t i n g P o l i c i e s

a n d N o t e s o n p a g e s 4 8 t h r o u g h

6 5 f o r m a n i n t e g r a l p a r t o f t h e F i n a n c i a l S t a t e m e n t s .




CASH FLOW STATEMENT

Year Ended 31 March 2011


Note 2010Cash Flows From / (Used in) Operating Activities

Rs.

Interest Received 369,635,871 269,854,363

Receipts from Other Income 21,830,190 17,820,347

Interest Paid (182,033,869) (181,160,435)

Cash Payments to Employees & Expenses (121,371,991) (91,529,029) Profit from Operations before Working Capital Changes 88,060,201 14,985,246

(Increase)/ Decrease in Real Estate Stock 175,641 (2,715,575)

(Increase)/ Decrease in Lease Rentals Receivable and Stock out on Hire (133,585,086) 161,782,809

(Increase)/ Decrease in Loans and Advances (464,328,482) (131,177,683)

(Increase) /Decrease in Other Debtors, Deposits, Prepayments 40,832,552 (44,548,739)

(Increase)/ Decrease in Placements with Banks (22,045,360) (27,401,609)

Increase/ (Decrease) in Deposits from Non Bank Customers 476,824,499 418,532,725

Increase/ (Decrease) in Borrowings 82,201,171 (260,039,504)

Increase/ (Decrease) in Accrued Charges 42,333,800 (3,930,828)

Cash Generated from Operations 110,468,936 125,486,841

Retirement Benefit Liabilities paid 16 - - Net Cash From/(Used in) Operating Activities before Tax Payments 110,468,936 125,486,841

Income Tax payments (5,652,966) (2,631,629)

Net Cash used in Operating Activities 104,815,970 122,855,212

Cash Flows from / (Used in) Investing Activities

Acquisition of Property, Plant & Equipment 12 (5,062,202) (2,502,573)

Proceeds from Disposal of Property, Plant & Equipment 84,075 13,797

Investment in Treasury Bills (65,136,904) (24,455,459)

Investment in Securities (38,495,518) - Proceeds from Disposal of Investment Securities 28,381,283 -

Net Cash Flows from/(Used in) Investing Activities (80,229,266) (26,944,235)

Cash Flows from (Used in) Financing Activities

Dividends Paid - - Net Cash Flows from/(Used in) Financing Activities - - Net Increase/(Decrease) in Cash and Cash Equivalents 24,586,704 95,910,977

Cash and Cash Equivalents at the beginning of the year 15 (26,745,498) (122,656,475)

Cash and Cash Equivalents at the end of the year 15 (2,158,794) (26,745,498)

2011

Rs.






1.1 General

Abans Financial Services Limited is a public limited liability company incorporated and domiciled in Sri Lanka.

The registered office of the Company is located at No 498, Galle Road, Colombo 03 and the principal place of

business is situated at No. 400, Galle Road, Colombo 03.

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, Mortgage Loans and other Credit Facilities, Real Estate Development and related Services.

1.3 Parent Enterprise and Ultimate Parent Enterprise

The Company’s parent and ultimate parent company is Abans (Pvt) Ltd.

1.4 Date of Authorization for Issue

The Financial Statements of Abans Financial Services Limited for the year ended 31 March 2011 was

authorized for issue in accordance with a resolution of the Board of Directors on 03 May 2011.


NOTES TO THE FINANCIAL STATEMENTS

Year ended 31 March 2011




2. BASIS OF PREPARATION

2.1 General

These Financial Statements presented in Sri Lanka Rupees have been prepared on a historical cost basis and

prepared in Sri Lanka Rupees.

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 Abans Financial Services Limited have been prepared in accordance with Sri Lanka

Accounting Standards.

2.1.2 Going Concern

The Directors have made an assessment of the Company’s ability to continue as a going concern and they do

not intend either 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.

2.2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

2.2.1 Foreign Currency Translation

Company's functional and presentation currency is Sri Lankan Rupees. Transactions in foreign currencies are

initially recorded at the functional currency rate ruling at the date of the transaction. Monetary assets and

liabilities denominated in foreign currencies are retranslated at the functional currency rate of exchange ruling

at the period end date. All differences are taken to profit or loss. Non monetary items that are measured in

terms of historical cost in a foreign currency are translated using the exchange rates as at the dates of the initial

transactions. Non monetary items measured at fair value in a foreign currency are translated using the

exchange rates at the date when the fair value was determined.

2.2.2 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 FinancialStatements 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 theinitial 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.

2.2.3 Operating Lease

Assets leased to customers under agreements by which all the risk and rewards incident to ownership of an

asset remains with lessor, are classified as operating leases. Lease rentals receivable are recognized on a

straight line basis over the term of the lease.

2.2.4 Provisions for Bad and Doubtful Debts

Amounts are set aside with regard to possible losses on Loans and Advances, Hire Purchases and 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.

2.2.5 Real Estate 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 - Land Cost with Legal Charges.

Cost of Conversion - Actual Development Costs.







2.2.6 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.

2.2.7 Property, Plant and Equipment

Property, 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

Property, Plant and Equipment when that cost is incurred, if the recognition criteria are met.

Depreciation is calculated on a straight line basis over the useful life of the assets.

2.2.8 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 2.2.7.

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.

2.2.9 Investments

a) Investment held to Maturity

The investments in Government Treasury Bills and bonds held to maturity are recorded at the value of the Bills

and Bonds purchased and the discount/premium accrued there on, is carried at these value until maturity.

b) Dealing Securities

Investments in quoted shares are acquired and held with the intention of resale over a short period of time.

Such quoted shares are initially measured at cost and subsequently measured at lower of cost or market value

as at the Balance Sheet date.

The cost of an investment is the cost of acquisition inclusive of brokerages, fees, duties and bank fees.







a) Investment Securities

Investment securities are stated at cost.

The cost of the investment is the cost of acquisition inclusive of brokerage fees, duties and bank fees.

The carrying amounts are reduced to recognize a decline other than temporary, determined for each investment

individually. These reductions for other than temporary declines in carrying amounts are charged to the

Income Statement.

Disposal of Investment

On disposal of an investment, the difference between net disposals and proceed and the carrying amounts isrecognized as income or expense.

2.2.10 Retirement Benefit Liability

a) Defined Benefit Plan – Gratuity

The Company annually measures the present value of the promised retirement benefits for gratuity, which is a

defined benefit plan using the Gratuity Formula in Appendix E of Sri Lanka Accounting Standard No 16,

Employee Benefits (Revised 2006) which is based on the Projected Unit Credit Method as discussed in the

said Standard.

The Gratuity Liability is not funded nor actuarially valued. This item is grouped under Non-Current Liabilities

in the Balance Sheet.

b) Defined Contribution Plans – Employees’ Provident Fund & Employees’ Trust Fund

Employees are eligible for Employees’ Provident Fund Contributions and Employees’ Trust FundContributions in line with respective Statutes and Regulations. The Company contributes 12% and 3% of

gross emoluments of employees to Employees’ Provident Fund and Employees’ Trust Fund respectively.

2.2.11 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.

2.2.12 Revenue Recognition

Revenue is recognized 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 recognized on the basis of the financing method. The excess of aggregaterental 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.

Income from operating leases is recognized on a straight line basis over the term of the lease.

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) issued byCentral Bank of Sri Lanka and thereafter recognized on a cash basis.

b) Interest Income from Loans and Advances

Interest income from loans and advances is recognized 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) issued by the Central Bank of Sri Lanka and thereafter recognized on a cash basis.

c) Interest income from Other Sources

Interest income from Government of Sri Lanka Treasury Bills is recognized on a time proportion basis, and

discounts on purchase are amortized to income on a straight line basis over periods to maturity.

Income from all other interest bearing investments is recognized as revenue on an accrual basis.

d) Dividend Income

Dividend income is recognized on a cash received basis.

e) Insurance agency fees

Agency Fees received in respect of insurance is recognized on accrual basis.

f) Overdue Interest

Overdue interest income from leasing and other loans have been accounted for on a cash received basis.

g) Real Estate Sales

Revenue is recognized 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.

h) Others

Other income is recognized on an accrual basis.

Net Gains and losses of a revenue nature on the disposal of Property, Plant & Equipment and other

noncurrent 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 FUTURE CHANGES IN ACCOUNTING POLICIES

Effect of Sri Lanka Accounting Standards issued but not yet effective:

The following standards have been issued by the Institute of Chartered Accountants of Sri Lanka and are

effective for the accounting period on the dates specified below.

a) Sri Lanka Accounting Standard 44 Financial Instruments; Presentation (SLAS 44) and

Sri Lanka Accounting Standard 45 Financial Instruments; Recognition & Measurement (SLAS 45) SLAS 44 and 45 become effective for financial years beginning on or after 1 January 2011. Accordingly, the

financial Statements for the year ending 31 March 2012 will adopt SLAS 44 and 45, for the first time.

These two standards together provide comprehensive guidance on identification, classification, measurement

and presentation of financial instruments (including Derivatives) into financial assets, financial liabilities and

equity instruments.

In order to comply with the requirements of these standards, the Company is in the process of assessing the

effect of adoption of the aforesaid two standards. Due to the complex nature of the effect of these standards

the impact of adoption is not estimable as at the date of publication of these Financial Statements.

b) Sri Lanka Accounting Standard 39- Share Based Payments (SLAS 39)

SLAS 39- Share based payments, effective for periods beginning on or after 1st January 2010 will be first

adopted in the year ending 31 March 2011. This standard requires an expense to be recognized where the

Group buys goods or services in exchange for shares or rights over shares (equity –settled transactions), or in

exchange for other assets equivalent in value to a given number of shares or rights over shares ( cash- settled

transactions). For equity-settled share-based payment transactions, the Company is required to apply SLAS 39

to grants of shares, share options or other equity instruments that were granted after 1 January 2010.

The Company is in the process of evaluating to impact of this standard, and the impact of the same is not

currently estimable as at the date of the publication of these Financial Statements.








NOTES TO THE FINANCIAL STATEMENTSYear ended 31 March 2011

3. INVESTMENT HELD TO MATURITY 2011 2010

Rs. Rs.

Government of Sri Lanka Treasury Bills - Face Value 88,775,199 65,878,767

Re-Purchase Agreements 65,861,000 -

154,636,199 65,878,767

4. PLACEMENTS WITH BANKS 2011 2010

Rs. Rs.

Fixed Deposits 64,446,969 42,401,609

64,446,969 42,401,609

5. DEALING SECURITIES

No of Shares Carrying value Market value No of Shares Carrying value Market value

Quoted Shares sRsRsRsR

Plantations

000,02CLPsnoitatnalPayitiplE 839,296 670,000 - - -

000,01CLPsnoitatnalPayilek saM 323,271 281,000 - - -

000,6CLPsgnidloHecruoseRnatiloporteM 289,140 195,000 - - -

000,5CLPsnoitatnalPalawataW 160,178 125,000 - - -

41,000 1,611,885 1,271,000 - - -

Hotels & Travels

000,2CLPayirigiSletoH 177,795 152,200 - - -004,9CLPsletoHhcaeRilewahaM 365,104 319,600 - - -

000,7CLPsgnidloHletoHecnepSnek tiA 767,853 686,000 - - -

18,400 1,310,753 1,157,800 - - -

Chemicals and pharmaceuticals

000,4CLPbracyaH 806,502 621,600 - - -

4,000 806,502 621,600 - - -

Diversified Holdings

005CLPhctabrebmuCnosraC 352,909 317,400 - - -

005,2CLPsgnidloHslleeKnhoJ 752,460 714,000 - - -

000,1CLPecnepSnek tiA 190,106 162,300 - - -

4,000 1,295,475 1,193,700 - - -

Power & Energy

000,02CLPCOIak naL 404,484 352,000 - - -

000,2CLPak naLstnacirbuLnorvehC 364,540 320,000 - - -

22,000 769,024 672,000 - - -

Banking & Finance

000,3CLPk naBhtapmaS 896,819 864,900 - - -

000,02CLPk naBnalyeS 1,008,180 786,000 - - -

005CLPynapmoCecnaniFlartneC 472,736 636,850 - - -

000,5CLPserutneVak naL 130,955 110,500 - - -000,1CLPnolyeCf Ok naBlaicremmoC 184,867 165,600 - - -

000,1CLPynapmoCgnisaeLxirOak naL 140,759 119,600 - - -

000,5CLPak naLirSf Ok naBtnahcreM 276,311 231,000 - - -

000,1CLPnoitaroproCgnik naBaisAnaP 59,567 51,300 - - -

000,51dtL)ak naL(ecnaniFregniS 740,705 547,500 - - -

51,500 3,910,898 3,513,250 - - -

Telecommunication

000,02CLPataixAgolaiD 234,598 210,000 - - -

001,5CLPmoceleTak naLirS 291,377 290,700 - - -

25,100 525,975 500,700 - - -

Oil Palm

005CLPharaDtik uBehT 707,840 586,700 - - -

500 707,840 586,700 - - -

Manufacturing

009,1CLPslacirtcelEsnabA 466,841 490,390 - - -

000,4CLPselbaCLCA 374,968 376,000 - - -

009CLPcimareCak naL 109,211 131,760 - - -

000,52CLPnolyeCssalGlamariP 235,105 277,500 - - -

000,1CLPselbaCinaleK 129,307 95,300 - - -

000,1CLPak naLscimareClayoR 152,581 157,000 - - -000,5CLP)ak naL(ynapmoCtnemeCoyk oT 226,003 220,000 - - -

38,800 1,694,016 1,747,950 - - -

Footwear & Textile

000,1CLPstcudorPrehtaeLnolyeC 110,221 90,000 - - -

1,000 110,221 90,000 - - -

Construction & Engineering

000,5CLPstnempoleveDmek naL 280,068 361,500 - - -

5,000 280,068 361,500 - - -

Total 211,300 13,022,657 11,716,200 - - -

)489,113,1(seitirucesf oeulavnillaf rof noisivorP ---

11,710,673 11,716,200 --

01021102






6. INVESTMENT SECURITIES 2011 2010

Rs. Rs.

Non Current Investment

Investments in unquoted shares

004,08ak naLirSf ouaeruBnoitamrof nItiderCniserahS001 80,400

80,400 80,400

7. LOANS AND ADVANCES 2011 2010

Rs. Rs.

Real Estate Loans 16,183,111 18,159,835

Mortgage Loans 239,638,004 93,196,037

Vehicle Loans 3,249,653 9,138,368

Personal Loans 428,756,516 139,981,719

Loans Against Fixed Deposits 22,765,588 20,028,127

Staff Loans 23,642,520 19,375,320

Revolving Loans 67,576,762 28,205,229

Pledge Loans 5,739,907 10,296,808

807,552,061 338,381,443 Less : Finance Charges in Suspense (17,413,225) (12,571,096)

790,138,836 325,810,347

Less : Provision for Bad debts

)208,513,1()2.9etoN(tnuoccAssoL&tif orPtsniagadegrahC- (1,241,743)

788,823,034 324,568,604

01021102:swollof sasihcihwf otnemevomeht,srecif f OynapmoCotdetnargsnaoL1.7

Rs. Rs.

Balance at the beginning of the year 19,375,320 19,026,918

Add : Loans granted during the year 10,213,353 9,279,000

Less : Repayments during the year (5,946,153) (8,930,598)

Balance at the end of the year 23,642,520 19,375,320

ERIHNOTUOKCOTSDNAELBAVIECERSLATNERESAEL.8

latoTsraey5-1raeyenonihtiW

010211020102110201021102

Rs. Rs. Rs. Rs. Rs. Rs.

tnemtsevnIssorG

515,983,022slatneResaeL- 245,014,504 195,359,763 164,311,102 415,749,278 409,325,606

- Amounts receivable from hirers 462,972,608 423,258,609 474,895,260 389,823,201 937,867,868 813,081,810

683,362,123 668,273,113 670,255,023 554,134,303 1,353,617,146 1,222,407,416

Less: Unearned Income (154,148,201) (165,644,506) (130,292,293) (105,133,285) (284,440,494) (270,777,791)

229,312,925tnemtsevnIteN 502,628,607 539,962,730 449,001,018 1,069,176,652 951,629,625

Less: )823,383,611()2.9(stbeDluf tbuoD&daBrof noisivorP (118,394,436)

952,793,324 833,235,189

Rentals received in advance (907,040) (1,934,360)

Finance charges in suspense (56,633,183) (53,759,811)

895,253,101 777,541,018

8.1

(Rs.)

2011 2010 2011 2010 2011 2010

204,486,412tnemtsevnIssorG 254,494,294 60,996,687 62,263,077 275,681,089 316,757,371

Less: Finance Charges Suspended (56,633,183) (53,759,811) (17,413,225) (12,571,096) (74,046,408) (66,330,907)

Non Performing Advance 158,051,219 200,734,483 43,583,462 49,691,981 201,634,681 250,426,464

Less: Provision for Bad and Doubtful Debts (116,383,328) (118,394,436) (1,315,802) (1,241,743) (117,699,130) (119,636,179)

Net Non-Performing Advances 41,667,891 82,340,047 42,267,660 48,450,238 83,935,551 130,790,285

).sR().sR(esahcruP

Non-Performing Advances included in the above Lease Rentals Receivable, Stock Out on Hire and Loans & Advances are as follows;

latoTsnaoLmreTeriH&esaeL






8. LEASE RENTALS RECEIVABLE AND STOCK OUT ON HIRE (Contd..)

8.2 Segmental Analysis of Loans and Advances, Leases, Hire Purchase by Industry

2011 2010

Rs. Rs.

315,607,661erutlucirgA 130,640,833

479,280,053gnirutcaf unaM 116,252,018

Services 144,781,721 109,629,816

Trading 251,095,896 223,492,422

Transport 126,646,561 173,271,967

807,258,311noitcurtsnoC 132,325,816

Personal 397,561,388 174,572,875

Others 308,587,720 217,254,225

1,859,315,481 1,277,439,972

256,671,960,1)8etoN(selbavieceResahcruPeriHdnaesaeL 951,629,625

928,831,097)7etoN(secnavdAdnasnaoL 325,810,347

Total Advances 1,859,315,481 1,277,439,972

01021102STBEDLUFTBUODDNADABROFNOISIVORP.9

Rs. Rs.

9.1 Movement in provision for Bad and Doubtful Debts

979,736,041raeyehtf ogninnigebehttaecnalaB 45,460,941

817,022,91raeyehtgnirud)lasreveR( / egrahC 95,177,038

)401,488,71(raeyehtgnirudf f o-etirW -

395,479,141raeyehtf odneehttaecnalaB 140,637,979

9.2 Provision for Bad and Doubtful Debts consist of provisioning against ;

Leases 42,515,036 44,166,798

677,561,85sesahcruPeriH 64,070,719

615,207,51selbaruDremusnoC 10,156,919

823,383,611)8etoN(erihnotuok cotSdnasesaeLf olatoT 118,394,436

208,513,1)7etoN(secnavdA&snaoL 1,241,743

364,572,42)11etoN(stnemyaperP&stisopeD,srotbeDrehtO 21,001,800

141,974,593 140,637,979

01021102SKCOTSETATSELAER.01

Rs. Rs.

660,388,041sk cotSetatsElaeR 141,108,707

)000,000,5(deviecersecnavdA:sseL (5,050,000)

135,883,066 136,058,707






01021102STNEMYAPERP&STISOPED,SROTBEDREHTO.11

Rs. Rs.Other Debtors 41,626,268 34,924,097

)364,572,42(selbavieceRluf tbuoDrof snoisivorP:sseL (21,001,800)

17,350,805 13,922,297

043,559,31stnemyaperP&stisopeD 10,065,256

099,909,3)1.11(seitraPdetaleRmorf eudstnuomA 55,334,797

35,216,135 79,322,350

11.1 Amounts due from Related Parties

381,761dtL)tvP(srepoleveDytiCnworC 165,133

Abans Retail (Pvt) Ltd 3,742,807 55,169,664

3,909,990 55,334,797

11.2

12. PROPERTY, PLANT & EQUIPMENT

ecnalaBecnalaBstnuomAgniyrraCssorG1.21

tasatasa

1102.30.13slasopsiDsnoitiddA0102.40.10tsoC

.sR.sR.sR.sRstessAdloheerF

563,220,31sgnittiF&erutinruF 1,675,249 - 14,697,614

540,601,5tnempiuqEecif f O 781,110 (23,495) 5,863,660

339,505,3selciheVrotoM - (180,320) 3,325,613

378,111,13tnempiuqEretupmoC 2,605,843 (9,990) 33,707,726

52,746,216 5,062,202 (213,805) 57,594,613

ecnalaBegrahCecnalaB

tasaehtrof tasanoitaicerpeD2.21

1102.30.13slasopsiDraeY0102.40.10stessAdloheerF

Rs. Rs. Rs. Rs.

144,147,3sgnittiF&erutinruF 2,435,216 - 6,176,657

712,392,1tnempiuqEecif f O 695,650 (7,832) 1,981,035

608,603,2selciheVrotoM 872,727 (131,484) 3,048,049

822,227,62tnempiuqEretupmoC 2,817,948 (3,330) 29,536,846

34,063,692 6,821,541 (142,646) 40,742,587

12.3 Net Book Value 2011 2010

At Cost Rs. Rs.

Furniture and Fittings 8,520,957 9,280,924

Office Equipment 3,882,625 3,812,828

Motor Vehicles 277,564 1,199,127

Computer Equipment 4,170,880 4,389,645

16,852,026 18,682,524

01021102swollof sadetamitseerastessaehtf osevilluf esuehT4.21

Furniture and Fittings 3 - 8 Years 3 - 8 Years

Office Equipment 8 Years 8 Years

Motor Vehicles 4 Years 4 Years

sraeY4sraeY4erawtf oS&erawdraHretupmoC

12.5 During the Financial year, the Company acquired Property, Plant & Equipment to the aggregate value of Rs.5,062,202/- (2010 -

Rs.2,502,573/- ). Cash payments amounting to Rs 5,062,202/- (2010- Rs. 2,502,573/-) was paid during the year for purchases of

Property, Plant & Equipment.

Other Related Parties are companies controlled / jointly controlled / significantly influenced by Abans Financial Services Ltd Key

Management Personnel.






01021102SREMOTSUCKNABNONMORFSTISOPED.31

Rs. Rs.Fixed Deposits 1,099,896,614 957,393,309

Savings Deposits 386,460,943 52,139,749

1,486,357,557 1,009,533,058

14. BORROWINGS 2011 2010

Rs. Rs.

Bank Loans (14.1) 73,898,622 16,666,800

432,007,97)51etoN(stf ardrevOk naB 75,940,409

Commercial Papers 24,969,349 -

178,568,205 92,607,209

14.1 Bank Loans

Amount

repayable

within 1 year

Amount

repayable after

1 year Total

Amount

repayable

within 1 year

Amount

repayable

after 1 year Total


Bank of Ceylon 9,620,507 14,278,115 23,898,622 6,250,006 10,416,794 16,666,800

Union Bank Ltd 10,256,425 39,743,575 50,000,000 - - -

19,876,932 54,021,690 73,898,622 6,250,006 10,416,794 16,666,800

14.2 Bank Loans As at Loans Repayments As at Terms of Security

01.04.2010 Obtained 31.03.2011 the Loan Offered

Rs. Rs. Rs. Rs.

Bank of Ceylon 16,666,800 13,481,974 (6,250,152) 23,898,622 48 Months Leases, Hire

PurchasesPortfolio

Union Bank Ltd - 50,000,000 - 50,000,000 12 Months Hire Purchases

Portfolio

16,666,800 63,481,974 (6,250,152) 73,898,622

15. CASH AND CASH EQUIVALENTS IN THE CASH FLOW STATEMENT 2011 2010

Rs. Rs.

506,794,21secnalaBk naB&hsaC 7,771,603

Bank Overdrafts (79,700,234) (75,940,409)

538,340,56stnemeergaesahcrupeR&slliByrusaerT 41,423,308

Total Cash and Cash Equivalents for the Purpose of Cash Flow Statement (2,158,794) (26,745,498)

01021102SEITILIBAILREHTO.61

Rs. Rs.

926,564,07sesnepxEdeurccAdnasrotiderC 35,892,048

Accrued Interest 33,853,313 33,293,898

884,884,12)1.61(seitraPdetaleRoteudstnuomA 16,500,121

233,916,5)2.61(ytilibaiLtif eneBtnemeriteR 2,659,537

131,426,762 88,345,603

pihsnoitaleRseitraPdetaleRoteudstnuomA61

884,884,12ynapmoCtneraPdtL)tvP(snabA 16,500,121

21,488,488 16,500,121

01021102






01021102YTILIBAILTIFENEBTNEMERITER2.61Rs. Rs.

Expense on Defined Benefit Plan

895,175,1tsoCecivreStnerruC (254,003)

616,542noitagilbOtif eneBnotsoCtseretnI 323,727

185,241,1snoitpmussaehtnisegnahcmorf gnisirassoL / )niaG( -

2,959,795 69,724

Defined Benefit Obligation

735,956,2raeyehtf ogninnigebehttasA 2,589,813

895,175,1tsoCecivreStnerruC (254,003)

-raeyehtgnirudedamstnemyaP -

616,542raeyehtrof egrahctseretnI 323,727

185,241,1snoitpmussaehtnisegnahcmorf gnisirassoL / )niaG( - 233,916,5raeyehtf odneehttasA 2,659,537

2011 2010

Discount Rate 10% 12.50%

%05.21%01sesaercnIyralaSerutuF

Staff Turnover 34% 25%

sraey55sraey55egAtnemeriteR

17. STATED CAPITAL

Number Rs. Number Rs.

17.1 000,000,73serahSyranidrOdiaPylluF 382,373,630 37,000,000 382,373,630

17.2 Rights of Shareholders

01021102DNUFEVRESER.81

Rs. Rs.

000,020,1raeyehtf ogninnigebehttA 1,020,000 009,994,8raeyehtgnirudsref snarT -

009,915,9raeyehtf odneehttA 1,020,000

01021102

The employee benefits liability of the Company is based on the Gratuity Formula method in Appendix E of SLAS 16-

Employee Benefits. The principal financial assumptions underlying the valuation are as follows:

Note : Reserve Fund is a capital reserve which contains profits transferred as required by Section 3(b)(ii) of Finance

Companies (Capital Funds) Direction No. 1 of 2003 issued by the Central Bank of Sri Lanka.

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 company's residual assets.






19. INCOME 2011 2010Rs. Rs.

19.1 Summary

898,442,693)2.91(emocnIssorG 287,674,710

396,244,898 287,674,710

19.2 Segmental Analysis of Gross Income

Interest 369,635,871 269,854,363

Real Estate 113,730 383,707

903,099,31emocnIdesaBeeF 11,845,939

Others 12,504,988 5,590,701

396,244,898 287,674,710

01021102SEITIVITCAGNIRAEBTSERETNIMORFEMOCNI.02

Rs. Rs.

947,546,45sesaeLnotseretnI 68,806,044

402,457,931snaoLnotseretnI 37,743,259

749,269,131sesahcruPeriHnotseretnI 126,023,979

563,584,01tseretnIeudrevO 10,708,401

853,162,3stisopeDk naBnotseretnI 1,870,390

976,683,1etatsElaeRnoemocnitseretnI -

339,998,61tseretnItluaf eD 18,739,068

636,932,11slliByrusaerTnotseretnI 5,963,222

369,635,871 269,854,363

01021102SESNEPXETSERETNI.12

Rs. Rs.

706,761,741stisopeDdexiFnotseretnI 130,735,280

704,290,72sgnivaSnotseretnI 757,334

848,812,2snaoLnotseretnI 22,751,735

446,163,4stf ardrevOk naBnotseretnI 25,227,690

849,336srepaPlaicremmoCnotseretnI 12,103,073

181,474,454 191,575,112

01021102EMOCNIREHTO.22

Rs. Rs.

037,311emocnIdnastif orPetatsElaeR 383,707

903,099,31seitivitcAdesabeeFmorf tif orP 11,845,939

760,937,7emocnIyrdnuS 5,590,701

129,567,4seitiruceStnemtsevnIf olasopsidnotif orP -

26,609,027 17,820,347






01021102SESNEPXEGNIWOLLOFEHTGNIGRAHCRETFADETATS)SSOL / TIFORPTEN.32

Rs. Rs.

Included in Administrative Expenses

178,172,35gniwollof ehtgnidulcnistif eneBseeyolpmE 36,157,265

597,959,2)stif eneBeeyolpmEnidedulcni(ytiutarG-stsoCnalPtif eneBdenif eD- 69,724

461,371,5eeyolpmEnidedulcni(FTE&FPE-stsoCnalPnoitubirtnoCdenif eD- 3,513,414

Benefits)

Depreciation 6,821,541 11,620,770

Auditor's Fees and Expenses 399,300 363,000

014,06raeYsuoiverpf otcepserninoisivorp)revO( / rednU -

587,52tnempiuqEdnatnalP,ytreporPf olasopsiDno)ssoL( / tif orP (161,786)

Directors' Emoluments 5,170,000 4,800,000

Advertising Costs 3,624,004 786,224

Litigation Settlements 583,545 882,154

24. PROVISION FOR INCOME TAX

The major components of income tax expense for the years ended 31 March are as follows :

Income Statement 2011 2010

Rs. Rs.

Current Income TaxCurrent Income Tax Charge (24.1) 12,717,549 -

-sraeyroirpf otcepsernisexattnerrucf onoisivorP)revO( / rednU 13,874

Deferred Income Tax

338,058,7)2.42()lasreveR( / egrahCnoitaxaTderref eD (37,743,070)

Income Tax expense reported in the Income Statement 20,568,382 (37,729,196)

24.1

2011 2010

Rs. Rs.

288,760,36xaTemocnIerof eb)ssoL( / tif orPgnitnuoccA (102,458,740)

Aggregate Disallowed items 186,031,281 245,712,607

Aggregate Allowable Expenses (199,711,460) (150,499,587)

Income not subject to Tax (18,912,983) -

30,474,720 (7,245,720)

Adjusted Profit/(Loss) on Lease (12,567,963) 3,473,970

Adjusted Profit/(Loss) on Other Businesses 43,042,683 (10,719,690) 30,474,720 (7,245,720)

Taxable Income 43,042,683 -

Less: Carried Forward Tax Losses (7,243,812) -

Taxable Profit 35,798,871 -

Income Tax Expense at the statutory income tax rate of 35% 12,529,605 -

Social Responsibility Levy 1.5% 187,944 -

12,717,549 -

Taxable Loss (12,567,963) (7,245,720)

Tax Losses Brought Forward - -

Taxable Loss Carried Forward - -

(12,567,963) (7,245,720)

24.2 Deferred Tax Assets, Liabilities and Income Tax relates to the followings

2011 2010 2011 2010

.sR.sR.sR.sRytilibaiLxaTderref eD

001,259,8sesoprupxatrof secnawollalatipaC 310,074 8,642,026 (5,248,817)

8,952,100 310,074 8,642,026 (5,248,817)

Deferred Tax Assets

)667,669,1(snalPtif eneBdenif eD (930,838) (1,035,928) (145,189)

)245,507,72(tbeDluf tbuoDdnadaBrof noisivorP (29,813,062) 2,107,520 (29,813,062)

)787,893,4(sessoLxaTdrawroFthguorB (2,536,002) (1,862,785) (2,536,002)

(34,071,095) (33,279,902) (791,193) (32,494,253)

Deferred Tax Expense 7,850,833 (37,743,070)

)599,811,52()tessA( / ytilibaiLxaTderref eDteN (32,969,828)

A reconciliation between tax expense and the product of accounting profit multiplied by the statutory tax rate is as f ollows :

Balance Sheet Income Statement






25. EARNINGS / (LOSS) PER SHARE

25.1

25.2

2011 2010

Rs. Rs.

Amounts Used as the Numerators:

Net Profit Attributable to Ordinary Shareholders for Basic Earnings / (Loss) Per Share 42,499,500 (64,729,544)

2011 2010

Number of Ordinary Shares Used as Denominators for Basic Earnings/ /(Loss) per share Number Number

Weighted Average number of Ordinary Shares in issue

000,000,73erahSreP)ssoL( / sgninraEcisaBotelbacilppA 37,000,000

26. MATURITY OF ASSETS AND LIABILITIES

Less than 3 3-12 1-3 Over 3 Total

months months years years

.sR.sR.sR.sR.sRstessA

Cash and amount due from banks 12,497,605 - - - 12,497,605

Investments held to Maturity 110,304,453 44,331,746 - - 154,636,199

935,414,44sk nabhtiwstnemecalP 20,032,430 - - 64,446,969

376,017,11seitiruceSgnilaeD - - - 11,710,673

-seitiruceStnemtsevnI - - 80,400 80,400

136,479,504secnavdAdnasnaoL 81,364,882 168,919,353 132,564,168 788,823,034 Lease rentals receivable & Stock out on hire 172,877,194 251,738,489 328,329,911 142,307,507 895,253,101

-k cotSetatsElaeR 38,354,239 83,239,032 14,289,795 135,883,066

Other Debtors, Deposits and Prepayments 3,177,158 18,322,946 3,614,464 10,101,567 35,216,135

-elbarevoceRxaT - 6,468,996 - 6,468,996

-tnempiuqE&tnalP,ytreporP - 16,852,026 - 16,852,026

-noitaxaTderref eD - 25,118,995 - 25,118,995

As at 31.03.2011 760,956,253 454,144,732 632,542,777 299,343,437 2,146,987,199

As at 31.03.2010 544,829,012 305,281,018 494,292,278 154,218,736 1,498,621,044

Liabilities

Deposits from Customers 879,467,264 444,600,841 100,908,921 61,380,531 1,486,357,557

118,825,901sgniworroB 15,017,704 35,705,325 18,316,365 178,568,205

024,501,55seitilibaiLrehtO 35,200,184 29,016,182 12,104,976 131,426,762

As at 31.03.2011 1,044,101,495 494,818,729 165,630,428 91,801,872 1,796,352,524

As at 31.03.2010 741,245,093 320,367,466 85,683,741 43,189,569 1,190,485,870

27. COMMITMENTS AND CONTINGENCIES

27.1 Capital Expenditure Commitments

27.2 There are no significant contingencies as at the balance sheet date

Basic Earnings / (Loss) Per Share is calculated by dividing the net profit/(loss) for the year attributable to ordinary shareholders by the

weighted average number of ordinary shares outstanding during the year.

The following reflects the income and share data used in the Basic Earnings /(Loss) Per Share computations.

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.

The Company has no commitments for acquisition of Property , Plant & Equipment incidental to the ordinary course of business.




Partners : A D B Talwatte FCA FCMA M P D Cooray FCA FCMA R N de Saram ACA FCMA Ms. Y A De Silva ACA W R H Fernando FCA FCMAW K B S P Fernando FCA FCMA A P A Gunasekera FCA FCMA A Herath FCA D K Hulan gamuwa FCA FCMA LLB (Lond)

H M A Jayesinghe FCA FCMA Ms. G G S Manatunga ACA Ms. L C G Nanayakkara FCA FCMA B E Wijesuriya ACA ACMA


P. O. Box 101

Colombo 10

Sri Lanka

Tel : (0) 11 2463500

Fax Gen : (0) 11 2697369

Tax : (0) 11 [email protected]

APAG/AKG/AD




We have audited the accom panying financial statements of Abans Financial Services Limited, which comprise

the balance sheet as at 31 March 2010, the income statement, statement of changes in equity and cash flow

statement for the year then ended, and a summary of significant accounting policies and other explanatory

notes.

Management’s Responsibility for the Financial Statements

Managem ent is responsible for the preparation and fair presentation of these financial statements in accor-

dance with Sri Lanka Accounting Standards. This responsibility includes: designing, implementing and main-

taining internal controls 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.


Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our

audit in accordance with Sri Lanka Auditing Standards. Those standards require that we plan and perform the

audit to obtain reasonable assurance whether the financial statements are free from material misstatement.

An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial

statements. An audit also includes assessing the accounting policies used and significant estimates made by

management, as well as evaluating the overall financial statement presentation.

We have obtained all the information and explanations which to the best of our knowledge and belief were

necessary for the purposes of our audit. We therefore believe that our audit provides a reasonable basis for our

opinion.

Opinion

In our opinion, so far as appears from our examination, the Company maintained proper accounting records

for the year ended 31 March 2010 and the financial statements give a true and fair view of the Company’s state

of affairs as at 31 March 2010 and its loss and cash flows for the year then ended in accordance with Sri Lanka



In our opinion, these financial statements also comply with the requirements of Section 151(2) of the

Companies Act No. 07 of 2007.

7 July 2010

Colombo.





BALANCE SHEET

As at 31 March 2010


Note 2010 2009

Rs. Rs.

ASSETS

Cash and amounts due from banks 7,771,603 4,525,613

Treasury Bills 3 65,878,767 73,315,520

Placements with other banks 4 42,401,609 15,000,000


Lease rentals receivable & Stock out on hire 6 777,541,018 1,012,680,534

Real Estate Stock 8 136,058,707 133,343,132



Tax Recoverable 13,345,635 10,727,880

Property, Plant & Equipment 11 18,682,524 27,976,307

Deferred Taxation 25 32,969,828

TOTAL ASSETS 1,498,621,045 1,527,634,236

LIABILITIES

Deposits from customers 12 1,009,533,058 591,000,333

Borrowings 13 92,607,209 477,203,912

Accrued Charges 15 85,686,066 79,202,217

Retirement Benefit Liability 16 2,659,537 2,589,813

Deferred Taxation 25 - 4,773,242

Total Liabilities 1,190,485,870 1,154,769,517

SHAREHOLDERS' FUNDS

Stated Capital 17 382,373,630 382,373,630

Reserves 18 (74,238,455) (9,508,911)

Total Equity 308,135,175 372,864,719



The Board of Directors is responsible for the preparation and presentation of the Financial Statement signed for and on behalf of the board by ;

These Financial Statements are in compliance with the requirements of the Companies Act No.07 of 2007 .

The Accounting Policies and notes on pages 71 through 87 form an integral part of the financial statements.

.................................................

Director

.................................................


.................................................

Director




Abans Financial Services Limited.

INCOME STATEMENT


Note 2010 2009Rs. Rs.

Income 20 287,674,710 354,520,565

Interest Income 21 269,854,363 338,696,974

Interest Expense 22 (191,575,112) (230,983,120)

Net Interest Income 78,279,251 107,713,854

Other Income 23 17,820,347 15,823,591

96,099,598 123,537,445

Less: Expenses

Staff Costs (36,157,265) (40,850,660)

General & Administration Expenses (67,224,035) (71,503,988)

Provision for Bad and Doubtful Loans 7 (95,177,038) (31,333,036)

Profit/(Loss) before VAT on Financial Service and Income Tax 24 (102,458,740) (20,150,240)

Value Added Tax on Financial Services - (1,192,032)

Profit/(Loss) before Income Tax (102,458,740) (21,342,272)

Income Tax 25 37,729,196 (2,306,621)

Profit/(Loss) for the year (64,729,544) (23,648,893)

Earnings/(Loss) Per Share 26 (1.75) (0.64)






STATEMENT OF CHANGES IN EQUITY


Retained

Note Stated Reserve Earnings/

Capital Fund (Losses) Total

Rs. Rs. Rs. Rs.

Balance as at 31 March 2008 382,373,630 1,020,000 22,715,082 406,108,712

Effect on adoption of - SLAS 16 (Revised) - - (345,100) (345,100)

Net Loss for the year - - (23,648,893) (23,648,893)

Dividend Paid 19 - - (9,250,000) (9,250,000)

Balance as at 31 March 2009 382,373,630 1,020,000 (10,528,911) 372,864,719








CASH FLOW STATEMENT


Note 2010 2009

Cash Flows From / (Used in) Operating Activities Rs. Rs.



Interest Paid (181,160,435) (218,803,742)

Cash Payments to Employees & Expenses (91,529,029) (133,578,327)

Profit from operation before Working Capital Changes 14,985,246 1,054,592

(Increase)/ Decrease in Real Estate Stock (2,715,575) (1,604,366)

(Increase)/ Decrease in Lease Rentals Receivable and Stock out on hire 161,782,809 (265,169,303)

(Increase)/ Decrease in Loans and Advances (131,177,683) (53,414,938)

(Increase) /Decrease in Other Debtors, Deposits, Prepayments (44,548,739) (7,938,777)


Increase/ (Decrease) in Deposits from Non Bank Customers 418,532,725 194,174,506 Increase/ (Decrease) in Borrowings (260,039,504) 133,686,552

Increase/ (Decrease) in Accrued Charges (3,930,828) (9,883,168)

Cash Generated from Operations 125,486,841 (15,594,902)

Retirement Benefit liabilities paid 16 - -

Net Cash From/(Used in) Operating Activities before Tax Payments 125,486,841 (15,594,902)


Net Cash used in Operating Activities 122,855,212 (42,381,648)



Proceeds from Disposal of Property, Plant & Equipment 13,797 115,000



Dividends Paid - (9,250,000)

Net Cash Flows from/(Used in) Financing Activities - (9,250,000)

Net Increase/(Decrease) in Cash and Cash Equivalents 120,366,436 (63,961,162)










3. TREASURY BILLS ELIGIBLE FOR RE-DISCOUNTING WITH CENTRAL BANK 2010 2009

Rs. Rs.

Government of Sri Lanka Treasury Bills - Face Value

Re-Purchase Agreements (Note 14) 65,878,767 73,315,520 65,878,767 73,315,520

4. PLACEMENTS WITH OTHER BANKS 2010 2009

Rs. Rs.

Fixed Deposits 42,401,609 15,000,000

42,401,609 15,000,000


Rs. Rs.


Mortgage Loans 82,069,601 88,633,405

Vehicle Loans 9,064,867 16,120,660

Personal Loans 9,367,521 12,766,493

Loans Against Fixed Deposits 20,028,127 23,244,040

Staff Loans 19,375,320 19,026,918 Revolving Loans 27,741,948 5,086,531

Education Loan 130,489,360 -

Pledge Loans 9,915,984 12,925,362

325,810,347 194,632,665

Less : Provision for Bad debts

- Charged against Profit & Loss Account (Note 7.2) (1,241,743) (423,226)

324,568,604 194,209,439

5.1 Loans granted to Company Officers, the movement of which is as follows : 2010 2009

Rs. Rs.





6. LEASE RENTALS RECEIVABLE AND STOCK OUT ON HIRE

Within one year 1 - 5 years Total

2010 2009 2010 2009 2010 2009


Gross Investment

- Lease Rentals 245,014,504 270,840,719 164,311,102 314,518,988 409,325,606 585,359,707


668,273,113 684,937,727 554,134,303 807,276,269 1,222,407,416 1,492,213,995


Net Investment 502,628,607 462,056,224 449,001,018 617,704,670 951,629,625 1,079,760,893

Less: Provision for Bad & Doubtful Debts (7.2) (118,394,436) (45,037,728)

833,235,189 1,034,723,165

Rentals received in advance (1,934,360) (2,198,804)

Finance charges in suspense (53,759,811) (19,843,827)

777,541,018 1,012,680,534

6.1

(Rs.)

2010 2009 2010 2009 2010 2009

Amount Receivable 254,494,294 121,817,633 62,263,077 22,079,670 316,757,371 143,897,303

Less: Finance Charges Suspended (53,759,811) (19,843,827) (12,571,096) (3,387,554) (66,330,907) (23,231,381)

Provision for Bad Debts (118,394,436) (45,037,728) (1,241,743) (423,226) (119,636,179) (45,460,954)

Net Non-Performing Advances 82,340,047 56,936,078 48,450,238 18,268,890 130,790,285 75,204,968

Non-Performing Advances included in the above Lease Rentals Receivable, Stock Out on Hire and Loans & Advances are as follows.

Purchase (Rs.) (Rs.)

Lease & Hire Term Loans Total








2010 2009

Rs. Rs.

6.2 Segmental Analysis of Loans and Advances, Leases, Hire Purchase by Industry

Agriculture 130,640,833 42,026,452

Manufacturing 116,252,018 255,519,691

Services 109,629,816 84,616,335

Trading 223,492,422 248,515,187

Transport 173,271,967 189,853,620

Construction 132,325,816 119,123,219

Personal 44,083,515 43,856,518

Education 130,489,360 -

Others 217,254,225 290,882,536

Distribution of Total Advances 1,277,439,972 1,274,393,558

Lease and Hire Purchase Receivables (Note 6) 951,629,625 1,079,760,893 Loans and Advances (Note 5) 325,810,347 194,632,665

Total Advances 1,277,439,972 1,274,393,558

7. PROVISION FOR LOSSES 2010 2009

Rs. Rs.

7.1 Movement in provision for Bad and Doubtful Debts


Charge/Appropriation during the year 95,177,038 31,333,036

Write-off during the year - (138,145)

140,637,979 45,460,941


Leases 44,166,798 14,712,486

Hire Purchase 64,070,719 18,995,204

Consumer Durables 10,156,919 11,330,032

Provision for doubtful Leases and Stock out on hire (Note 6) 118,394,436 45,037,723

Loans & Advances (Note 5) 1,241,743 423,226

Deposits & Prepayments (Note 9) 21,001,800 -

140,637,979 45,460,948

8. REAL ESTATE STOCKS 2010 2009

Rs. Rs.

Real Estate Stocks 141,108,707 138,448,132

Less : Advances received against Real Estate stocks (5,050,000) (5,105,000)

136,058,707 133,343,132

8.1 During the year an amount of Rs. Nil (2009 - Rs.3,713,091 /-) was capitalised as borrowing costs to Real Estate Stocks. The

capitalisation rate used to determine the amount of borrowing cost was zero (2009 - 21%).







9. OTHER DEBTORS, DEPOSITS & PREPAYMENTS 2010 2009

Rs. Rs.

Other Debtors 34,924,097 38,159,412

Less: Provisions for Doubtful Receivables (21,001,800) -

13,922,297 38,159,412

Deposits & Prepayments 10,065,256 12,530,823

Amounts due from Related Parties (9.1) 55,334,797 5,085,176

79,322,350 55,775,411

9.1 Amounts due from Related Parties 2010 2009

Rs. Rs.

Relationship

Crown City Developers (Pvt) Ltd Other Related Party 165,133 903,572

AB Technologies (Pvt) Ltd Other Related Party - 740,059

Abans Retail (Pvt) Ltd Other Related Party 55,169,664 3,441,545

Abans (Pvt) Ltd Parent Company - -

55,334,797 5,085,176

9.2

2010 2009

10. INVESTMENT SECURITIES Rs. Rs.

Credit Research Information Bureau of Sri Lanka 80,400 80,400

80,400 80,400


11.1 Gross Carrying Amounts

Balance Balance

as at as at

Cost 01.04.2009 Additions Disposals 31.03.2010

Rs. Rs. Rs. Rs.

Furniture & Fittings 11,286,742 1,735,623 13,022,365

Office Equipment 5,450,366 518,825 863,146 5,106,045

Motor Vehicles 3,505,933 3,505,933

Computer Equipment 30,863,748 248,125 31,111,873

51,106,790 2,502,573 863,146 52,746,216

Balance Charge Balance

as at for the as at

01.04.2009 Year Disposals 31.03.2010

11.2 Depreciation Rs. Rs. Rs. Rs.

Freehold Assets

Furniture & Fittings 1,608,621 2,132,820 3,741,441

Office Equipment 759,237 1,221,540 687,560 1,293,217

Motor Vehicles 1,435,056 871,750 2,306,806

Computer Equipment 19,327,568 7,394,660 26,722,228

23,130,482 11,620,770 687,560 34,063,692

Other Related Parties are companies controlled / jointly controlled / significantly influenced by Key Management Personnel.







11. PROPERTY, PLANT & EQUIPMENT (Contd..)

11.3 Net Book Value 2010 2009At Cost Rs. Rs.

Furniture and Fittings 9,280,924 9,678,121

Office Equipment 3,812,828 4,691,129

Motor Vehicles 1,199,127 2,070,877


18,682,524 27,976,307

11.4 The useful lives of the assets is estimated as follows 2010 2009

Furni ture and Fit tings 3 - 8 Years 3 - 8 Years



Computer Hardware & Software 4 Years 4 Years

11.5

12. DEPOSITS FROM NON BANK CUSTOMERS 2010 2009

Rs. Rs.

Fixed Deposits 957,393,309 586,496,751

Savings Deposits 52,139,749 4,503,582

1,009,533,058 591,000,333

2010 2009

13. BORROWINGS Rs. Rs.

Bank Loans and Other (13.1) 16,666,800 139,991,514

Bank Overdrafts 75,940,409 200,497,608

Borrowings Commercial Papers - 96,714,790 Borrowings on Treasury Bills - 40,000,000

92,607,209 477,203,912

13.1 Bank and Other Loans As at Loans Repayments As at Terms of Security


Rs. Rs. Rs. Rs.

Pan Asia Banking Corporation PLC 2,074,850 - (2,074,850) - 48 Months Motor Vehicle

15,000,000 - (15,000,000) - 9 Months Mortgage Bond 15M

Bank of Ceylon 22,916,664 - (6,249,864) 16,666,800 48 Months Leasing Portfolio

Mercantile Investment Ltd 100,000,000 - (100,000,000) - 12 Months HP Portfolio

139,991,514 - (123,324,714) 16,666,800


Rs. Rs.

Cash & Bank Balances 7,771,603 4,525,613

Re-Purchase Agreements (Note 3) 65,878,767 73,315,520

Bank Overdrafts (Note 13) (75,940,409) (200,497,608)

Total Cash and Cash Equivalents for the Purpose of Cash Flow Statement (2,290,039) (122,656,475)

Wayamba Co-Operative Rural Bank

During the financial year, the Company acquired Property, Plant & Equipment to the aggregate value of Rs.2,502,573/- (2009 - Rs.12,444,514/- ). Cash

payments amounting to Rs 2,502,573/- (2009- Rs. 12,444,514/-) was paid during the year for purchases of Property, Plant & Equipment.







2010 2009

15. OTHER PAYABLES Rs. Rs.

Accrued Expenses 29,582,782 39,796,452


Trade Creditors 6,309,266 435,492

Other Creditors - -

Amounts due to Related Parties (15.1) 16,500,121 16,091,052

85,686,066 79,202,217

15.1 Amounts due to Related Parties 2010 2009

Rs. Rs.

Relationship

Abans (Pvt) Ltd Parent Company 16,500,121 16,091,052

16,500,121 16,091,052

16. RETIREMENT BENEFIT LIABILITY 2010 2009

Rs. Rs.

Retirement Benefit Obligations - Gratuity

Balance at 31.03.2009 2,589,813 1,038,000

Effect on adoption of - SLAS 16 (Revised) - 345,100

Balance at 01.04.2009 2,589,813 1,383,100

Provision made during the year 69,724 1,206,713

Payments made during the year - -


2010 2009

Discount Rate 12.50% 12%

Future Salary Increases 12.50% 12%


Retirement Age 55 years 55 years

17. STATED CAPITAL


17.1 Fully Paid Ordinary Shares 37,000,000 382,373,630 37,000,000 382,373,630


Reserve Retained Total

18. RESERVES Fund Earning/(Losses)

Rs. Rs. Rs.

At the beginning of the year 1,020,000 (10,528,911) (9,508,911) Loss for the year - (64,729,544) (64,729,544)

At the end of the year 1,020,000 (75,258,455) (74,238,455)

2010 2009

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 Company's residual assets.

Note : 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.

The employee benefits liability of the Company is based on the Gratuity Formula method in Appendix E of SLAS 16 - Employee Benefits.

The principle assumptions used in determining the cost of employee benefits were:







19. DIVIDENDS PAID 2010 2009

Rs. Rs.

Declared and paid during the yearEquity dividends on ordinary shares :

Final dividend for 2008 : Rs.0.25 per share - 9,250,000

20. INCOME 2010 2009

Rs. Rs.

20.1 Summary

Gross Income (20.2) 287,674,710 354,520,565

287,674,710 354,520,565

20.2 Segmental Analysis of Gross Income 2010 2009

Rs. Rs.

Interest 269,854,363 338,696,974

Real Estate 383,707 3,858,291

Fee Based Income 11,845,939 6,517,929

Others 5,590,701 5,447,371

287,674,710 354,520,565

21. INCOME FROM INTEREST BEARING ACTIVITIES 2010 2009

Rs. Rs.

Interest on Leases 68,806,044 96,881,351

Interest on Loans 37,743,259 42,279,641

Interest on Hire Purchase 126,023,979 160,601,309 Overdue Interest 10,708,401 8,413,651

Interest on Bank Deposits 1,870,390 2,239,651

Interest income on Real Estate - 919,064

Default Interest 18,739,068 11,965,379

Interest on Treasury Bills 5,963,222 15,396,928

269,854,363 338,696,974

22. INTEREST EXPENSES 2010 2009

Rs. Rs.

Interest on Fixed Deposits 130,735,280 127,051,870

Interest on Savings 757,334 288,020 Interest on Loans 22,751,735 17,546,197

Interest on Bank Overdrafts 25,227,690 29,529,575

Interest on Commercial Papers 12,103,073 52,410,376

Interest on Pro Notes - 4,157,082

191,575,112 230,983,120

23. OTHER INCOME 2010 2009

Rs. Rs.

Real Estate Profits and Income 383,707 3,858,291

Profit from Fee based activities 11,845,939 6,517,929

Sundry Income 5,590,701 5,447,371

17,820,347 15,823,591







24. NET PROFIT /LOSS) STATED AFTER CHARGING THE FOLLOWING EXPENSES

2010 2009

Rs. Rs.


Employees Benefits including the following 36,157,265 40,850,660

- Defined Benefit Plan Costs - Gratuity (included in Employee Benefits) 69,724 1,206,713

- Defined Contribution Plan Costs - EPF&ETF (included in Employee

Benefits) 3,513,414 3,802,394

Depreciation 11,620,770 9,980,682

Auditor's Fees and Expenses 363,000 3,576,000

Under/(Over) provision inrespect of previous Year - 143,500


Advertising Costs 786,224 3,327,098




Rs. Rs.

Current Income Tax

Current Income Tax charge - 1,676,987

Under/(Over) Provision of current taxes in respect of prior years 13,874 (191,504)

Deferred Income Tax

Deferred Taxation Charge/(Reversal) (25.2) (37,743,070) 821,138

Income tax expense reported in the Income Statement (37,729,196) 2,306,621

25.1

2010 2009

Rs. Rs.

Accounting Profit/(Loss) before Income Tax (102,458,740) (21,342,272)



Income not subject to Tax - -

(7,245,720) 4,720,583

Less: Carried forward Tax Losses - -

Taxable Profit (7,245,720) 4,720,583

Income Tax Expense at the statutory income tax rate of 35% - 1,652,204

Social Responsibility Levy 1.5% - 24,783

Gross Tax Liability - 1,676,987

Taxable Loss (7,245,720) -

Tax losses brought forward - -

Taxable Loss Carried Forward - -

(7,245,720) -

25.2 Deferred Tax Assets, Liabilities and Income Tax relates to the followings

2010 2009 2010 2009

Deferred Tax Liability Rs. Rs. Rs. Rs.

Capital allowances for tax purposes 310,074 5,558,891 (5,248,817) 1,243,487

310,074 5,558,891 (5,248,817) 1,243,487

Deferred Tax Assets

Defined Benefit Plans (930,838) (785,649) (145,189) (422,349)

Provision for Bad and Doubtful Debt (29,813,062) - (29,813,062)

Brought Forward Tax Losses (2,536,002) - (2,536,002)

(33,279,902) (785,649) (32,494,253) (422,349)

Deferred tax Expense (37,743,070) 821,138

Net Deferred Tax Liability/(Asset) (32,969,828) 4,773,242

A reconciliation between tax expense and the product of accounting profit multiplied by the statutory tax rate is as follows :









26.1

26.2

2010 2009

Rs. Rs.


Net Profit Attributable to Ordinary Shareholders for Basic Earnings / (Loss) Per Share (64,729,544) (23,648,893)

2010 2009



Applicable to Basic Earnings /(Loss) Per Share 37,000,000 37,000,000


Less than 3 3-12 1-3 over 3 Total


Assets Rs. Rs. Rs. Rs. Rs.

Cash and Bank 7,771,603 - - - 7,771,603

Treasury Bills 46,654,809 19,223,958 - - 65,878,767

Placements with other banks 42,371,609 30,000 - - 42,401,609

Loans and Advances 154,153,694 45,579,768 65,297,680 59,537,462 324,568,604

Lease rentals receivable & Stock out on hire 220,624,062 175,651,928 356,637,155 24,627,873 777,541,018

Real Estate Stock 5,256,115 59,475,821 27,718,794 43,607,977 136,058,707


Investment Securities - - - 80,400 80,400

Tax Recoverable 6,356,125 - 6,989,510 - 13,345,635 Property, Plant & Equipment - - - 18,682,524 18,682,524

Deferred Taxation - 32,969,828 32,969,828

As at 31.03.2010 544,829,012 305,281,018 494,292,278 154,218,736 1,498,621,044

As at 31.03.2009 240,878,565 476,571,571 729,464,732 80,719,368 1,527,624,236

Liabilities

Deposits from Non-Bank Customers 629,802,605 292,391,945 62,895,886 24,442,622 1,009,533,058

Borrowings 77,527,802 4,687,504 10,391,903 - 92,607,209

Accrued Charges 33,914,687 22,785,017 10,919,915 18,066,447 85,686,066

Retirement Benefit Liability - 503,000 1,476,037 680,500 2,659,537

As at 31.03.2010 741,245,093 320,367,466 85,683,741 43,189,569 1,190,485,870

As at 31.03.2009 744,186,862 306,099,516 60,137,113 44,346,027 1,154,769,517




Basic Earnings / (Loss) Per Share is calculated by dividing the net profit/(loss) for the year attributable to ordinary shareholders by the weighted

average number of ordinary shares outstanding during the year.


The Company has no commitments for acquisition of Property , Plant & Equipment incidental to the ordinary course of business.

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 contractualmaturity dates given below.





P. O. Box 101

Colombo 10

Sri Lanka

Tel : (0) 11 2463500

Fax Gen : (0) 11 2697369

Tax : (0) 11 5578180

[email protected]

Partners : A D B Talwatte FCA FCMA M P D Cooray FCA FCMA R N de Saram ACA FCMA Ms. Y A De Silva ACA W R H Fernando FCA FCMA

W K B S P Fernando FCA FCMA A P A Gunasekera FCA FCMA A Herath FCA D K Hulan gamuwa FCA FCMA LLB (Lond)

H M A Jayesinghe F CA FCMA Ms. G G S Manatunga ACA Ms. L C G Nanayakkara FCA FCMA B E Wijesuriya ACA ACMA

APAG/MRH/AKG/JJ




We have audited the accompanying financial statements of Abans Financial Services Limited, which comprise the balance sheet as at 31

March 2009, and the income statement, statement of changes in equity and cash flow statement for the year then ended, and a summaryof significant accounting policies and other explanatory notes.

Management’s Responsibility for the Financial Statements

Management is responsible for the preparation and fair presentation of these financial statements in accordance with Sri Lanka Account-

ing Standards. This responsibility includes: designing, implementing and maintaining internal controls relevant to the preparation and fair

presentation of financial statements that are free from material misstatement, whether due to fraud or error; selecting and applyingappropriate accounting policies; and making accounting estimates that are reasonable in the circumstances.


Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with

Sri Lanka Auditing Standards. Those standards require that we plan and perform the audit to obtain reasonable assurance whether the

financial statements are free from material misstatement.

An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also

includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall

financial statement presentation.

We have obtained all the information and explanations which to the best of our knowledge and belief were necessary for the purposes of

our audit. We therefore believe that our audit provides a reasonable basis for our opinion.

Opinion

In our opinion, so far as appears from our examination, the Company maintained proper accounting records for the year ended 31 March

2009 and the financial statements give a true and fair view of the Company’s state of affairs as at 31 March 2009 and its loss and cash flowsfor the year then ended in accordance with Sri Lanka Accounting Standards.


In our opinion, these financial statements also comply with the requirements of Section 151(2) of the Companies Act No. 07 of 2007.

28 September 2009Colombo.






BALANCE SHEET


The board of Directors is responsible for the preparation and presentation of the

Financial statement signed for and on behalf of the board by ;

Note 2009 2008

Rs. Rs.

ASSETS

Cash and Amounts due from Banks 4,525,613 13,739,953

Treasury Bills Eligible for Re-Discounting 3 73,315,520 55,093,236

Placements with Other Banks 4 15,000,000 8,500,000


Lease Rentals Receivable and Stock Out on Hire 6 1,012,680,534 747,511,231

Real Estate Stocks 8 133,343,132 131,738,766



Income Tax Recoverable 10,727,880 -

Property, Plant and Equipment 11 27,976,307 25,741,470

TOTAL ASSETS 1,527,634,236 1,169,952,288

LIABILITIESDeposits from Non-Bank Customers 12 591,000,334 396,825,828

Borrowings 13 477,203,912 270,548,254

Other Payables 15 79,202,217 76,906,007

Retirement Benefit Liability 16 2,589,813 1,038,000

Income Tax Payable - 14,573,005

Deferred Taxation 25 4,773,242 3,952,104

Total Liabilities 1,154,769,517 763,843,198

SHAREHOLDERS' FUNDS

Stated Capital 17 382,373,630 382,373,630

Reserves 18 (9,508,911) 23,735,460

Total Equity 372,864,719 406,109,090



……………………………………..


………………………………. ……………………………….

Director Director


28 September 2009

Colombo

These Financial Statements are in compliance with the requirements of the Companies Act No.07 of 2007 .





INCOME STATEMENT


Note 2009 2008

Rs. Rs.

Income 20 354,520,565 205,558,532

Interest Income 21 338,696,974 184,543,497

Interest Expense 22 (230,983,120) (73,383,478)

Net Interest Income 107,713,854 111,160,019

Other Income 23 15,823,591 21,015,035

123,537,445 132,175,054

Less: Expenses

Staff Costs (40,850,660) (28,824,745)

General and Administration Expenses (71,503,988) (52,934,768)

Provision for Bad and Doubtful Loans 7 (31,333,036) (13,939,427)

Profit /(Loss) before VAT on Financial Service and Income Tax (20,150,240) 36,476,115

Value Added Tax on Financial Services (1,192,032) (6,825,205)

Profit/(Loss) before Income Tax (21,342,272) 29,650,910

Income Tax 25 (2,306,621) (19,653,086)

Profit/(Loss) for the year (23,648,893) 9,997,824

Earnings/(Loss) Per Share 26 (0.64) 0.27






STATEMENT OF CHANGES IN EQUITY


Retained

Note Stated Reserve Earnings/

Capital Fund (Losses) Total

Rs. Rs. Rs. Rs.

Balance as at 01 April 2007 382,373,630 520,000 13,217,636 396,111,266

Net Profit for the year - - 9,997,824 9,997,824

Transferred to/from during the year 18 - 500,000 (500,000) -

Balance as at 31 March 2008 382,373,630 1,020,000 22,715,460 406,109,090

Transitional Provision 16 - - (345,100) (345,100)


Dividend Paid 19 - - (9,250,000) (9,250,000)


The Accounting Policies and notes on pages 93 through 109 form an integral part of the Financial Statements.





CASH FLOW STATEMENT


Note 2009 2008

Cash Flows From / (Used in) Operating Activities Rs. Rs.



Interest Paid (218,803,742) (64,548,676)

Cash Payments to Employees and Expenses (133,578,327) (79,228,924)

Profit from operation before Working Capital Changes 1,054,592 63,570,992

(Increase)/ Decrease in Real Estate Stock (1,604,366) (132,245,954)

(Increase)/ Decrease in Lease Rentals Receivable and Stock out on Hire (265,169,303) (268,069,561)(Increase)/ Decrease in Loans and Advances (53,414,938) (83,715,356)

(Increase) /Decrease in Other Debtors, Deposits, Prepayments (7,938,777) (19,621,921)


Increase/ (Decrease) in Deposits from Non Bank Customers 194,174,506 396,825,828

Increase/ (Decrease) in Borrowings 133,686,552 59,295,545

Increase/ (Decrease) in Accrued Charges (9,883,168) (11,034,457)

Cash Generated from Operations (15,594,902) (3,494,884)

Retirement Benefit Liabilities Paid 16 - (31,250)

Net Cash From/(Used in) Operating Activities before Tax Payments (15,594,902) (3,526,134)


Net Cash used in Operating Activities (42,381,648) (11,539,979)



Proceeds from Disposal of Property, Plant and Equipment 115,000 2,642,539



Dividends Paid (9,250,000) -

Net Cash Flows from/(Used in) Financing Activities (9,250,000) -

Net Increase/(Decrease) in Cash and Cash Equivalents (63,961,162) (21,298,668)



The Accounting Policies and notes on pages 93 through 109 form an integral part of the Financial Statements.








1.1 General

Abans Financial Services Limited is a public limited liability company incorporated and domiciled in Sri Lanka.

The registered office of the Company is located at No 498, Galle Road, Colombo 03 and the principal place of

business is situated at No. 400, Galle Road, Colombo 03.

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, Mortgage Loans and other credit facilities, Real Estate Development and related services.

1.3 Parent Enterprise and Ultimate Parent Enterprise

The Company’s parent and ultimate parent company is Abans (Pvt) Ltd.

1.4 Date of Authorization for Issue

The Financial Statements of Abans Financial Services Limited for the year ended 31 March 2009 were

authorized for issue in accordance with a resolution of the Board of Directors on 28 September 2009.







2.1 BASIS OF PREPARATION

These financial statements presented in Sri Lanka Rupees have been prepared on a historical cost basis and

prepared in Sri Lanka Rupees.

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 Abans Financial Services Limited have been prepared in accordance with Sri Lanka


2.1.2 Going Concern

The Directors have made an assessment of the Company’s ability to continue as a going concern and they do

not intend either 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 except for item 2.2 below.

2.2 CHANGES IN ACCOUNTING POLICIES

The accounting policies adopted are consistent with those of the previous financial year except where the

Company has made changes to be compliant with Sri Lanka Accounting Standards No 16 Employee Benefits

(Revised 2006), which is discussed below.

Measurement of Defined Benefits Plans

During the year ended 31 March 2009 the Company changes it’s accounting policy for the measurement of

Retirement Gratuities (Defined Benefit Plan). The Company now performs the computation based on Gratuity

Formula in Appendix E of SLAS 16 (Revised 2006). This formula measures the liability, using the Projected

Unit Credit Method.

The Transitional liability as at the first date of adoption 1 April 2008, being Rs.345,100/- was adjusted to the

opening balance of the retained earnings as at that date.

2.4 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

2.4.1 Foreign Currency Translation

Company's functional and presentation currency is Sri Lankan Rupees. Transactions in foreign currencies are

initially recorded at the functional currency rate ruling at the date of the transaction. Monetary assets and

liabilities denominated in foreign currencies are retranslated at the functional currency rate of exchange ruling

at the period end date. All differences are taken to profit or loss. Non monetary items that are measured in

terms of historical cost in a foreign currency are translated using the exchange rates as at the dates of the initial

transactions. Non monetary items measured at fair value in a foreign currency are translated using the

exchange rates at the date when the fair value was determined.







2.4.2 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.

2.4.3 Borrowing Costs

Borrowing costs are recognised as an expense in the period in which they are incurred, except to the extent

where borrowing costs that are directly attributable to the acquisition, construction, or production of an asset

that takes a substantial period of time to get ready for its intended use or sale, are capitalized as part of that

asset.

2.4.5 Loans and Advances

Loans and advances to customers are stated net of provision for bad and doubtful loans and interest not

accrued to revenue.







2.4.6 Lease Rentals Receivable & Stock Out on Hire

Assets leased to customers under agreements, which transfer substantially all the risks and rewards associatedwith 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.

2.4.7 Operating Lease

Assets leased to customers under agreements by which all the risk and rewards incident to ownership of an

asset remains with lessor, are classified as operating leases. Lease rentals receivable are recognized on a

straight line basis over the term of the lease.

2.4.8 Provisions for Bad and Doubtful Debts

Amounts are set a side with regard to possible losses on loans, advances hire purchase and finance 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.

2.4.9 Real Estate 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 - Land cost with legal charges.

Cost of conversion - Actual Development costs.

2.4.10 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.

2.4.11 Property, Plant and Equipment

Property, 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 theProperty, Plant and Equipment when that cost is incurred, if the recognition criteria are met.







2.4.12 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 2.3.11.

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.

2.4.13 Investments

a) Current Investments – Trading Securities

Current investments include Government of Sri Lanka Treasury Bills which is 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) 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.

Disposal of Investment

On disposal of an investment, the difference between net disposals and proceed and the carrying amounts is

recognised as income or expense.

2.4.14 Retirement Benefit Obligations

a) Defined Benefit Plan – Gratuity

The Company annually measures the present value of the promised retirement benefits for gratuity, which is a

defined benefit plan using the Gratuity Formula in Appendix E of Sri Lanka Accounting Standard No 16,

Employee Benefits (Revised 2006) which is based on the Projected Unit Credit Method as discussed in the

said Standard.

The item is stated under retirement benefit liability in the Balance Sheet.







b) Defined Contribution Plans – Employees’ Provident Fund & Employees’ Trust Fund

Employees are eligible for Employees’ Provident Fund Contributions and Employees’ Trust FundContributions in line with respective Statutes and Regulations. The Company contributes 12% and 3% of

gross emoluments of employees to Employees’ Provident Fund and Employees’ Trust Fund respectively.

2.4.15 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.

2.4.16 Revenue Recognition

Revenue is recognised to the extent that it is probable that the economic benefits will flow to the Companyand 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 commencementof 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.Income from operating leases is recognised on a straight line basis over the term of the lease.

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 isoverdue for more than six months in compliance with Direction No. 15 of 1991 (Accrued Interest) issued by

Central Bank of Sri Lanka 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) issued by the Central Bank of Sri Lanka 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) Insurance agency fees

Agency Fees received in respect of insurance is recognized on accrual basis.

f) Overdue Interest

Overdue interest income from leasing and other loans have been accounted for on a cash received basis.

g) 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.

h) 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.







3. TREASURY BILLS ELIGIBLE FOR RE-DISCOUNTING WITH CENTRAL BANK 2009 2008

Rs. Rs.

Government of Sri Lanka Treasury Bills - Face Value


73,315,520 55,093,236

4. PLACEMENTS WITH OTHER BANKS 2009 2008

Rs. Rs.

Fixed Deposits 15,000,000 8,500,000

15,000,000 8,500,000


Rs. Rs.


Mortgage Loans 88,633,405 72,063,419

Vehicle Loans 16,120,660 22,016,271

Personal Loans 12,766,493 12,387,461

Loans Against Fixed Deposit & Pro Notes 23,244,040 13,178,730

Staff Loans (5.1) 19,026,918 12,287,528 Revolving Loans 5,086,531 -

Pledge Loans 12,925,362 -

194,632,665 141,278,475

Less - Provision for Bad debts

- Charged to Income Statement (Note 7.2) (423,226) (483,974)

194,209,439 140,794,501

5.1 Loans granted to Company Officers, the movement of which is as follows : 2009 2008

Rs. Rs.





6. LEASE RENTALS RECEIVABLE AND STOCK OUT ON HIRE

2009 2008 2009 2008 2009 2008


Gross Receivable

- Lease Rentals 270,840,719 189,125,988 314,518,988 291,267,240 585,359,707 480,393,228


684,937,727 468,684,481 807,276,268 601,440,819 1,492,213,995 1,070,125,300


Net Receivable 462,056,224 315,094,469 617,704,669 451,433,499 1,079,760,893 766,527,968

Less - Provision for Bad & Doubtful Debts

- Charged Against Income Statement (Note 7.2) (45,037,728) (13,339,575)

1,034,723,165 753,188,393

Rentals received in advance (2,198,804) (1,426,608) Finance charges in suspense (19,843,827) (4,250,554)

1,012,680,534 747,511,231

6.1

2009 2008 2009 2008 2009 2008


Gross Non-performing Advances 121,817,633 60,533,546 22,079,670 14,096,065 143,897,303 74,629,611

Less - Finance Charges Suspended (19,843,827) (4,250,554) (3,387,554) (598,851) (23,231,381) (4,849,405)

- Provision for Bad Debts (45,037,728) (13,339,575) (423,226) (483,974) (45,460,954) (13,823,549)

Net non-performing advances 56,936,078 42,943,417 18,268,890 13,013,240 75,204,968 55,956,657

Total

Purchase

Lease & Hire Term Loans

Within one year 1 - 5 years Total

Non-Performing Advances included in the above Lease Rentals Receivable, Stock Out on Hire and Loans & Advances are as follows.








2009 2008

6.2 Segmental Analysis of Loans and Advances, Leases, Hire Purchase by Industry Rs. Rs.

Agriculture 42,026,452 15,694,038

Manufacturing 255,519,691 140,502,050

Services 84,616,335 35,540,551

Trading 248,515,187 123,778,201

Transport 189,853,620 81,793,609

Construction 119,123,219 111,484,434

Personal 43,856,518 130,741,361

Others 290,802,153 268,272,199

Distribution of Total Advances 1,274,313,175 907,806,443

Lease Rental Receivables and Stock out on Hire 1,079,680,510 766,527,968

Loans and Advances (Note 5) 194,632,665 141,278,475 Total Advances 1,274,313,175 907,806,443

7. PROVISION FOR BAD AND DOUBTFUL LOANS 2009 2008

Rs. Rs.

7.1 Movement in provision for Bad and Doubtful Loans

Balance at the beginning of the year 14,266,050 326,623

Charge during the year 31,333,036 13,939,427

Write-off to Capital (138,137) -

Written Back / (Written Off) during the year (Note 7.2) - -

45,460,949 14,266,050


Leases 14,712,486 1,227,900

Hire Purchase 18,995,204 12,111,675

Consumer Durables 11,330,033 -

Provision for doubtful Leases and Stock out on hire (Note 6) 45,037,723 13,339,575

Loans and Advances (Note 5) 423,226 483,975

Deposits and Prepayments (Note 9) - 442,500

45,460,949 14,266,050

8. REAL ESTATE STOCKS 2009 2008

Rs. Rs.

Real Estate Stocks 138,448,132 133,380,966

Less : Advances received against Real Estate Stocks (5,105,000) (1,642,200)

133,343,132 131,738,766

8.1

9. OTHER DEBTORS, DEPOSITS & PREPAYMENTS 2009 2008

Rs. Rs.

Other Debtors 38,159,412 29,641,779

Deposits and Prepayments 12,530,823 10,353,723

Provision for Deposits and Pre-payments - (442,500)

Amounts due from Related Parties (9.1) 5,085,176 7,199,729

55,775,411 46,752,731

During the year an amount of Rs.3,713,091/- (2008 - Rs.3,689,601/-) was capitalised as borrowing costs to Real Estate

Stocks. The capitalisation rate used to determine the amount of borrowing cost was 21% (2008 - 21%).







9. OTHER DEBTORS, DEPOSITS & PREPAYMENTS (Contd.) 2009 2008

9.1 Amounts due from Related Parties Relationship Rs. Rs.

Crown City Developers (Pvt) Ltd Other Related Party 903,572 903,572

AB Technologies (Pvt) Ltd Other Related Party 740,059 3,071,833

Abans Retails (Pvt) Ltd Other Related Party 3,441,545 -

Abans (Pvt) Ltd Parent Company - 3,224,324

5,085,176 7,199,729

9.2

2009 2008

Rs. Rs.

10. INVESTMENT SECURITIES

Credit Information Bureau of Sri Lanka 80,400 80,400

80,400 80,400


11.1 Gross Carrying Amounts Balance Balance

as at Disposals/ as at

Cost 01.04.2008 Additions Transfer 31.03.2009

Rs. Rs. Rs. Rs.

Furniture & Fittings 6,345,940 4,940,802 - 11,286,742

Office Equipment 1,597,511 3,852,855 - 5,450,366

Motor Vehicles 3,704,640 180,320 (379,027) 3,505,933

Computer Equipment 27,393,211 3,470,537 - 30,863,748

39,041,302 12,444,514 (379,027) 51,106,790

11.2 Depreciation Balance Charge Balance

as at for the Disposals/ as at

01.04.2008 Year Transfer 31.03.2009

Rs. Rs. Rs. Rs.

Furniture & Fittings 320,774 1,287,847 - 1,608,621

Office Equipment 278,756 480,481 - 759,237

Motor Vehicles 689,055 896,033 (150,031) 1,435,056

Computer Equipment 12,011,247 7,316,321 - 19,327,568

13,299,832 9,980,682 (150,031) 23,130,482

11.3 Net Book Value 2009 2008

At Cost Rs. Rs.

Furniture and Fittings 9,678,121 6,025,166 Office Equipment 4,691,129 1,318,755

Motor Vehicles 2,070,877 3,015,585


27,976,307 25,741,470

11.4 The useful lives of the assets is estimated as follows 2009 2008

Furniture and Fittings 3 - 8 Years 3 - 8 Years



Computer Hardware 4 Years 4 Years

11.5 During the financial year, the Company acquired Property, Plant & Equipments to the aggregate value of Rs. 12,444,514/- (2008 -

Rs.12,401,228/-). Cash payments amounting to Rs12,444,514./- (2008- Rs. 12,401,228/-) was paid during the year for purchases of Property, Plant & Equipments.

Other Related Parties are companies controlled / jointly controlled / significantly influenced by Key Management Personnel.







12. DEPOSITS FROM NON BANK CUSTOMERS 2009 2008

Rs. Rs.

Fixed Deposits 586,496,752 396,825,828

Savings Deposits 4,503,582 -

591,000,334 396,825,828

2009 2008

13. BORROWINGS Rs. Rs.

Promissory Notes - 26,232,913

Bank and Other Loans (13.1) 139,991,514 35,630,565

Bank Overdrafts (Note 14) 200,497,608 127,528,502

Borrowings under Commercial Papers 96,714,790 81,156,274

Borrowings on Treasury Bills 40,000,000 -

477,203,912 270,548,254

13.1 Bank and Other Loans As at Loans Repayments As at Terms of Security


Rs. Rs. Rs. Rs.

Pan Asia Banking Corporation PLC 2,630,565 - (555,715) 2,074,850 48 Months Motor Vehicle

- 15,000,000 - 15,000,000 9 Months Mortgage Bond

33,000,000 - (33,000,000) - 9 Months HP Portfolio

Bank of Ceylon - 25,000,000 (2,083,336) 22,916,664 48 Months Leasing Portfolio

Mercantile Investments Ltd - 100,000,000 - 100,000,000 12 Months HP Portfol io

35,630,565 140,000,000 (35,639,051) 139,991,514


Rs. Rs.

Cash and Bank Balances 4,525,613 13,739,953


Bank Overdrafts (Note 13) (200,497,608) (127,528,502)

Total Cash and Cash Equivalents for the Purpose of Cash Flow Statements (122,656,475) (58,695,313)

2009 2008

15. OTHER PAYABLE Rs. Rs.

Accrued Expenses 39,796,452 30,319,722


Trade Creditors 435,492 31,789,188

Other Creditors - 868,359

Amounts due to Related Parties (15.1) 16,091,052 3,228,895

79,202,217 76,906,007

15.1 Amounts due to Related Parties 2009 2008

Rs. Rs.

Relationship

Abans (Pvt) Ltd Parent Company 16,091,052 3,228,895

16,091,052 3,228,895









16. RETIREMENT BENEFIT LIABILITY 2009 2008

Rs. Rs.

Retirement Benefit Obligations - Gratuity

Balance at 31.03.2008 1,038,000 553,000

Transitional Provision 345,100 -

Balance at 01.04.2008 1,383,100 -

Provision made during the year 1,206,713 516,250

Payments made during the year - (31,250)


2009 2008

Discount Rate 12% 12%

Future Salary Increases 12% 12%


Retirement Age 55 years 55 years

17. STATED CAPITAL


17.1 Fully Paid Ordinary Shares 37,000,000 382,373,630 37,000,000 382,373,630


Reserve Retained Total

18. RESERVES Fund Earning/(Losses)

Rs. Rs. Rs.

At the beginning of the year 1,020,000 22,715,460 23,735,460

Effect on adoption of - SLAS 16 (Revised) - (345,100) -

Dividends Paid (Note 19) - (9,250,000) -

Loss for the year - (23,649,271) -

1,020,000 (10,528,911) (9,508,911)

Transfers to/(from) during the year (18.1) - - -

At the end of the year 1,020,000 (10,528,911) (9,508,911)

Note :

18.1

19. DIVIDENDS PAID 2009 2008

Rs. Rs.

Declared and paid during the year

Equity dividends on ordinary shares :

Final dividend for 2008 : Rs. 0.25 per share) 9,250,000 -

2009 2008

No Transfer has been made due to the Company incurring a loss during the financial year.

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 Company's residual assets.

Reserve Fund is a capital reserve which contains profits transferred as required by Section 3(b)(ii) of Central Bank Direction

No. 1 of2003.

The employee benefi ts liability of the Company is based on the Gratuity Formula method in appendix E of SLAS 16 -

Employee Benefits. The principle assumptions used in determining the cost of employee benefits were:







20. INCOME 2009 2008

Rs. Rs.

20.1 Summary

Gross Income (20.2) 354,520,565 205,558,532

354,520,565 205,558,532

20.2 Segmental Analysis of Gross Income 2009 2008

Rs. Rs.

Interest (Note 21) 338,696,974 184,543,497

Real Estate (Note 23) 3,858,291 8,265,376

Fee Based Income (Note 23) 6,517,929 6,780,475

Others (Note 23) 5,447,371 5,969,184

354,520,565 205,558,532

21. INCOME FROM INTEREST BEARING ACTIVITIES 2009 2008

Rs. Rs.

Interest on Leases 96,881,351 60,731,785 Interest on Loans 69,561,079 19,435,614

Interest on Hire Purchase 133,319,871 94,758,027

Interest on Overdue 8,413,651 3,701,895

Interest on Bank Deposits 2,239,651 380,814

Interest income on Real Estate 919,064 1,499,104

Default Interest 11,965,379 2,245,857

Interest on Treasury Bills 15,396,928 1,790,401

338,696,974 184,543,497

22. INTEREST EXPENSES 2009 2008

Rs. Rs.

Interest on Fixed Deposits 127,051,870 30,175,665 Interest on Savings 288,020 -

Interest on Loans 17,546,197 9,180,925

Interest on Bank Overdrafts 29,529,575 11,681,648

Interest on Commercial Papers 52,410,376 18,238,826

Interest on Promissory Notes 4,157,082 4,106,414

230,983,120 73,383,478

23. OTHER INCOME 2009 2008

Rs. Rs.

Real Estate Profits and Income (Note 20.2) 3,858,291 8,265,376

Profit from Fee based activities (Note 20.2) 6,517,929 6,780,475

Sundry Income (Note 20.2) 5,447,371 5,969,184

15,823,591 21,015,035 24. PROFIT /LOSS) FROM CONTINUING OPERATIONS

2009 2008

Rs. Rs.


Employees Benefits including the following 40,850,660 28,824,746

- Defined Benefit Plan Costs - Gratuity (included in Employee Benefits) 1,206,713 516,250

- Defined Contribution Plan Costs - EPF&ETF (Included in Employee Benefits) 3,802,394 2,298,435

Depreciation 9,980,682 7,877,954

Auditor's Fees and Expenses 473,500 480,275


Advertising Costs 3,327,098 8,354,997



106Abans Financial Services Limited Introductory Document







Rs. Rs.

Current Income Tax

Current Income Tax charge 1,676,987 18,225,232

Over Provision of current taxes in respect of prior years (191,504) -

Deferred Income Tax

Deferred Taxation Charge (25.2) 821,138 1,427,854

Income tax expense reported in the Income Statement 2,306,621 19,653,086

25.1

2009 2008

Rs. Rs.

Accounting Profit/(Loss) before Income Tax (21,342,272) 29,650,910



Income not subject to Tax - -

4,720,583 51,556,525

Less: Carried forward Tax Losses - -

Taxable Profit 4,720,583 51,556,525

Income Tax Expense at the statutory income tax rate of 35% 1,652,204 18,044,784

Social Responsibility Levy 1.5% (2008 - 1%) 24,783 180,448

Gross Tax Liability 1,676,987 18,225,232

25.2 Deferred Tax Assets , Liabilities and Income Tax relates to the followings


2009 2008 2009 2008Rs. Rs. Rs. Rs.

Deferred Tax Liability

Capital allowances for tax purposes 5,558,891 4,315,404 1,243,487 1,597,604

5,558,891 4,315,404 1,243,487 1,597,604

Deferred Tax Assets

Defined Benefit Plans (785,649) (363,300) (422,349) (169,750)

(785,649) (363,300) (422,349) (169,750)

Deferred tax Expense 821,138 1,427,854

Net Deferred Tax Liability 4,773,242 3,952,104

A reconciliation between tax expense and the product of accounting profit multiplied by the statutory tax rate is

as follows :

The Company's operations were taxed at the rate of 35% during the year .



107 Abans Financial Services Limited Introductory Document





26.1

26.2

2009 2008

Rs. Rs.


Net Profit Attributable to Ordinary Shareholders for Basic Earnings / (Loss) Per Share (23,648,893) 9,997,824

2009 2008



Applicable to Basic Earnings /(Loss) Per Share 37,000,000 37,000,000


Less than 3 3-12 1-3 over 3 Total


Assets Rs. Rs. Rs. Rs. Rs.

Cash and Amounts due from Banks 4,525,613 - - - 4,525,613

Treasury Bills Eligible for Re-Discounting 69,222,758 4,092,762 - - 73,315,520

Placements with Other Banks 15,000,000 - - - 15,000,000

Loans and Advances 29,240,717 62,046,745 83,036,620 19,885,357 194,209,439

Lease Rentals Receivable and Stock Out on Hire 112,972,731 271,247,757 627,294,562 1,165,478 1,012,680,529

Real Estate Stocks - 133,343,132 - - 133,343,132


Investment Securities - - - 80,400 80,400

Income Tax Recoverable 6,641,404 - 4,086,476 - 10,727,880

Property, Plant and Equipment - - - 27,976,307 27,976,307

As at 31.03.2009 240,878,560 476,571,571 729,464,732 80,719,368 1,527,634,231

As at 31.03.2008 203,864,621 408,335,357 411,307,330 146,444,980 1,169,952,288

Liabilities

Deposits from Non-Bank Customers 379,615,379 157,244,316 43,795,455 10,345,184 591,000,334

Borrowings 325,018,293 129,687,406 12,490,008 10,008,205 477,203,912

Other Payable 36,963,378 19,167,794 3,851,650 19,219,396 79,202,217

Retirement Benefit Liability 2,589,813 - - - 2,589,813

Income Tax Payable - - - - -

Deferred Taxation - - - 4,773,242 4,773,242

As at 31.03.2009 744,186,862 306,099,516 60,137,113 44,346,027 1,154,769,517

As at 31.03.2008 542,297,216 155,326,697 48,974,041 17,245,244 763,843,198



2009 2008

Rs. Rs.

Authorised by the Board, but not contracted for - -


Basic Earnings / (Loss) Per Share is calculated by dividing the net profit/(loss) for the year attributable to ordinary shareholders by the weighted averagenumber of ordinary shares outstanding during the year.


TheCompany has purchased commitments for acquisitionof Property, Plant & Equipment incidental to the ordinary course of business are,

An analysis of the total assets employed andtotal liabilities at the year end , based on the remaining at the balance sheet date to the respective contractual

maturity dates given below.







2 9 .

A S S E T S P L E D G E D

T h e f o l l o w i n g a s s e t s h a v e b e e n p l e d g e d a s s e c u r

i t y f o r l i a b i l i t i e s .

C a r r y i n g A m o u n t P l e d

g e d

N a t u r e o f a s s e t s

N a t u r e o f L i a b i l i t y

2 0 0 9

2 0 0 8

I n c l u d e d U n d e r

R s .

R s .

L e a s e R e c e i v a b l e s

B a n k O v e r d r a f t s

2 4 6 , 1 7 5 , 1 8 2

2 0 6 , 7 9 2 , 7 9 0

L e a s e & H i r e P u r c h a s e R e c e i v a b l e s

T e r m L o

a n

2 7 9 , 1 2 4 , 4 1 6

-

R e a l E s t a t e

B a n k O v e r d r a f t s

3 9 , 6 1 6 , 2 8 5

-

R e a l E s t a t e

T e r m L o

a n

5 2 , 7 3 4 , 3 0 8

-

6 1 7 , 6 5 0 , 1 9 1

2 0 6 , 7 9 2 , 7 9 0

3 0 .

F I N A N C I A L

R E P O R T I N G B Y S E G M E N T

L e a s e & S t o c k o u t o n H i r e

T

e r m L o a n s

R e a l E s t a t e

O t h e r s

2 0 0 9

2 0 0 8

2 0 0 9

2 0 0 8

2 0 0 9

2 0 0 8

2 0 0 9

2 0 0 8

2 0 0 9

2 0

0 8

R s .

R s .

R s .

R s .

R s .

R s .

R s .

R s .

R s .

R

s .

I n t e r e s t

2 5 7 , 4 8 2 , 6 5 9

1 5 5 , 4 8 9 , 8 1 2

4 1 , 3 1 0 , 1 3 7

1 9 , 4 3 5 , 6 1 4

1 , 8 8 8 , 5 6 8

1 , 4 9 9 , 1 0 4

3 8 , 0 1 5 , 6 1 0

8 , 1 1 8 , 9 6 7

3 3 8 , 6 9 6 , 9 7 4

1 8 4 , 5

4 3 , 4 9 7

R e a l E s t a t e

-

-

-

-

3 , 8 5 8 , 2 9 1

8 , 2 6 5 , 3 7 6

-

3 , 8 5 8 , 2 9 1

8 , 2

6 5 , 3 7 6

F e e B a s e d I n c o m e & O t h e r s

4 , 7 1 0 , 8 0 2

6 , 3 9 6 , 0 7 5

7 4 2 , 8 9 5

3 8 4 , 4 0 0

-

-

2 , 6 5 3 , 3 1 2

5 , 9 6 9 , 1 8 4

1 1 , 9 6 5 , 3 0 0

1 2 , 7

4 9 , 6 5 9

T o t a l R e v e n u e

2 6 2 , 1 9 3 , 4 6 1

1 6 1 , 8 8 5 , 8 8 7

4 2 , 0 5 3 , 0 3 2

1 9 , 8 2 0 , 0 1 4

5 , 7 4 6 , 8 5 9

9 , 7 6 4 , 4 8 0

4 0 , 6 6 8 , 9 2 2

1 4 , 0 8 8 , 1 5 1

3 5 4 , 5 2 0 , 5 6 5

2 0 5 , 5

5 8 , 5 3 2

U n a l l o c a t e d E x p e n s e s

( 3 7 5 , 8 6 2 , 8 3 6 )

( 1 7 5 , 9

0 7 , 6 2 3 )

P r o f i t / ( L o s s ) b e f o r e T a x

( 2 1 , 3 4 2 , 2 7 2 )

2 9 , 6

5 0 , 9 0 9

I n c o m e T a x e x p e n s e s

( 2 , 3 0 6 , 6 2 1 )

( 1 9 , 6

5 3 , 0 8 5 )

N e t P r o f i t / ( L o s s ) f o r t h e y e a r

( 2 3 , 6 4 8 , 8 9 3 )

9 , 9

9 7 , 8 2 4

S e g m e n t A s s e t

1 , 0 1 2 , 6 8 0 , 5 3 4

7 4 7 , 5 1 1 , 2 3 1

1 9 4 , 2 0 9 , 4 3 9

1 4 0 , 7 9 4 , 5 0 1

1 3 3 , 3 4 3 , 1 3 2

1 3 1 , 7 3 8 , 7 6 6

1 , 3 4 0 , 2 3 3 , 1 0 5

1 , 0 2 0 , 0

4 4 , 4 9 8

U n a l l o c a t e d A s s e t s

-

-

-

-

-

-

1 8 7 , 4 0 1 , 1 3 2

1 4 9 , 9

0 7 , 7 9 0

T o t a l A s s e t s

1 , 0 1 2 , 6 8 0 , 5 3 4

7 4 7 , 5 1 1 , 2 3 1

1 9 4 , 2 0 9 , 4 3 9

1 4 0 , 7 9 4 , 5 0 1

1 3 3 , 3 4 3 , 1 3 2

1 3 1 , 7 3 8 , 7 6 6

1 , 5 2 7 , 6 3 4 , 2 3 6

1 , 1 6 9 , 9

5 2 , 2 8 8

U n a l l o c a t e d L i a b i l i t i e s

1 , 1 5 4 , 7 6 9 , 5 1 7

7 6 3 , 8

4 3 , 1 9 8

T o t a l L i a b i l i t i e s

1 , 1 5 4 , 7 6 9 , 5 1 7

7 6 3 , 8

4 3 , 1 9 8

3 1 .

E V E N T S O C C U R R I N G A F T E R T H E B A L A

N C E S H E E T D A T E

T o t a l

L e a s e R e n t a l

R e c e i v a b l e s a n d

S t o c k O u t o n

H i r e

R e a l E s t a t e

T h e r e h a v e b e e n n o m a t e r i a l e v e n t s o c c u r r i n g a f t e r t h e B a l a n c e S h e e t d a t e t h a t r e q u i r e a d j u s t m e n t s t o o r d i s c l o s u r e i n t h e f i n a n c i a l s t a t e m e n t s .







32. RELATED PARTY DISCLOSURES

33.1

a) Compensation to Key Managerial Personnel 2009 2008

Rs. Rs.

Short Term Employee Benefits 3,576,000 3,700,000

2009 2008

b) Other transactions with key Managerial Personnel Rs. Rs.

Fixed Deposits/Promissory Notes accepted during the year 2,809,154 13,652,409

Fixed Deposits/Promissory Notes held at the beginning of the year 2,126,932 3,610,151

34.2

2009 2008 2009 2008 2009 2008


Nature of Transaction

As at 1 April, 2008

Fixed Deposits Accepted during the year - - 20,853,281 23,708,586 20,853,281 23,708,586

Fixed Deposits held at the end of the year - - 20,853,281 16,961,470 20,853,281 16,961,470

Interest payable on Fixed Deposits - - - 234,144 - 234,144

Lease Facilities Granted - - - 3,902,198 - 3,902,198

Purchase of Articles Consumer Credit Granting 31,655,915 86,835,864 32,316,664 - 63,972,579 86,835,864

Purchase of Articles Consumer Hire Purchase Faciliti es - 1,021,420 - - - 1,021,420

Purchase of Vehicles for Finance Lease Facilities 10,129,063 10,784,381 1,495,000 - 11,624,063 10,784,381

Settlement of Liabilities on behalf of the Company - - - - - -

Settlement of Liabilities by the Company on behalf of Oth - 2,210,387 - 1,900,369 - 4,110,756

Transfer of Fixed Assets - 2,409,842 - 903,572 - 3,313,414

Funds Transferred to the Company - 23,421,989 - - - 23,421,989

**Other Related Parties include the following companies

AB Technologies (Pvt) Ltd

Crown City Developers (Pvt) Ltd

34.3 "Other Related Parties are companies controlled / jointly controlled / significantly influenced by Key Management Personnel.

Parent Company Other Related Parties **

Transactions with individuals and their close family members who have significant voting power of the Company.

Transactions with entities that are controlled, jointly controlled or significantly influenced by key Managerial Personnel or their close member of family , or

shareholders who have either control, significant influences or joint control over entity.

Abans (Pvt) Limited Total

The key Managerial personnel of the Company are the members of its Board of Directors. Following transactions are entered into between the Company and its keymanagement personnel and their close family members.




DISCLOSURE TO AUDITED FINANCIAL STATEMENTS.

Effect of Sri Lanka Accounting Standards 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 below.

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.

Due to the complex nature of the effects of these standards the impact of adoption in the period

of initial application cannot be estimated as at the date of publication of these Financial

Statements.