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ABANS FINANCIAL SERVICES LIMITED

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

INTRODUCTORY DOCUMENT
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

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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.

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ABBREVIATIONS USED IN THIS INTRODUCTORY DOCUMENT
CDS CSE AFSL or the “Company” SEC CBSL Ordinary Share(s) Central Depository Systems (Pvt.) Limited Colombo Stock Exchange Abans Financial Services Limited Securities & Exchange Commission of Sri Lanka Central Bank of Sri Lanka Ordinary Voting Share(s) of the Company

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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

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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 Fax : 011-2317777 : 011-2317788

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Members and Trading Members of the CSE

Members of the CSE Acuity Stockbrokers (Pvt) Limited Level 6, Acuity House, 53, Dharmapala Mawatha, Colombo 03. Telephone: +9411 2206206 Fax: +9411 2206298/9 E-mail: sales@acuitystockbrokers.com Asia Securities (Pvt) Limited Level 21, West Tower, World Trade Center, Echelon Square, Colombo 1. Telephone: +9411 2423905/5320000 Fax: +9411 2336018 E-mail: enquiry@asiacapital.lk Bartleet Mallory Stockbrokers (Pvt) Ltd. Level "G", Bartleet House, 65, Braybrooke Place, Colombo 2. Telephone: +9411 5220200 Fax: +9411 2434985 E-mail: info@bartleetstock.com Ceylinco Stockbrokers (Pvt) Limited Ceylinco House, Level 9, 69, Janadhipathi Mawatha, Colombo 1. Telephone: +9411 4714300/ 4714388/ 4714389 Fax: +9411 2387228 E-mail: info@ecsbl.com D N H Financial (Pvt) Limited Level 16, West Tower, World Trade Centre, Colombo 01. Telephone: +9411 5732222 Fax: +9411 5736264 E-mail: info@dnhfinancial.com Asha Phillip Securities Limited Level 4, "Millennium House" 46/58, Navam Mawatha, Colombo 02 Telephone: +9411 2429100 Fax: +9411 2429199 E-mail: apsl@ashaphillip.net Assetline Securities (Pvt) Limited 282, Kaduwela Road, Battaramulla. Telephone: +9411 4700111/2307366 Fax: +9411 4700112 E-mail: dpgsl@sltnet.lk

Capital TRUST Securities (Pvt) Limited 42, Sir Mohamed Macan Marker Mawatha, Colombo 3. Telephone: +9411 5335225 Fax: +9411 5365725 E-mail: inquiries@capitaltrust.lk CT Smith Stockbrokers (Pvt) Limited 4-14, Majestic City, 10, Station Road, Colombo 4. Telephone: +9411 2552290-4 Fax: +9411 2552289 E-mail: ctssales@sltnet.lk J B Securities (Pvt) Limited 150, St. Joseph Street, Colombo 14. Telephone: +9411 2490900/772490900 Fax: +9411 2430070/2446085/2447875 E-mail: jbs@jb.lk

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Members and Trading Members of the CSE John Keells Stockbrokers (Pvt) Limited 130, Glennie Street, Colombo 2. Telephone:+9411 2306250/2342066-7/ 2446694-5 Fax: +9411 2342068/2326863 E-mail: jkstock@keells.com NDB Stockbrokers (Pvt) Limited 5th Floor, NDB Building, 40, Navam Mawatha, Colombo 2. Telephone: +9411 2314170-8 Fax: +9411 2314180 E-mail: mail@ndbs.lk Somerville Stockbrokers (Pvt) Limited 137, Vauxhall Street, Colombo 2. Telephone: +9411 2329201-5/2332827/ 2338292-3 Fax: +9411 2338921 E-mail: ssb@web-lk.com Lanka Securities (Pvt) Limited 228/2, Galle Road Colombo 4. Telephone: +9411 4706757/2554942 Fax: +9411 4706767 E-mail: lankasec@sltnet.lk SC Securities (Pvt) Limited 2nd Floor, 55, D.R. Wijewardena Mawatha, Colombo 10. Telephone: +9411 4711000 Fax: +9411 2394405 E-mail: cscres@sltnet.lk

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Members and Trading Members of the CSE 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: dihand@arrengacapital.com Claridge Stockbrokers (Pvt) Limited 10, Gnanartha Pradeepa Mawatha, Colombo 08 Tel: +9411 2697974 Fax: +9411 2677576 E-mail: fonseka@mackwoods.com Heraymila Securities Limited Level 8, South Wing, ‘Millennium House’ 46/58, Navam Mawatha, Colombo 02 Tel: +9411 2359100 Fax: +9411 2305522 E-mail: info-hsl@heraymila.com New World Securities (Pvt) Ltd 2nd Floor, 45/2, Braybrooke Street, Colombo 02 Tel: +9411 2358700-20 Fax: +9411 2358701 E-mail: info@nws.lk SKM Lanka Holdings (Pvt) Limited 377/3, Galle Road, Colombo 03 Tel: +9411 2372413-4 Fax: +9411 2372416 E-mail: info@skmlankaholdings.com Taprobane Securities (Pvt) Limited 2nd Floor, 10, Gothami Road, Colombo 08 Tel: +9411 5328200 Fax: +9411 5328277 E-mail: info@taprobane.lk Capital Alliance Securities (Pvt) Limited Level 5, "Millennium House", 46/58 Navam Mawatha, Colombo 02 Tel: +9411 2317777 Fax: +9411 2317788 E-mail: info@capitalalliance.lk First Guardian Equities (Pvt) Limited 32nd Floor, East Tower, World Trade Centre, Colombo 01 Tel: +9411 5884400 Fax: +9411 5884401 E-mail: info@firstguardianequities.com IIFL Securities Ceylon (Pvt) Limited 27th Floor, East Tower, World Trade Centre, Colombo 01 Tel: +9411 2333000 Fax: +9411 2333383 E-mail: info.ceylon@iiflcap.com

Richard Pieris Securities (Pvt) Limited 69, Hyde Park Corner, Colombo 02 Tel: +9411 7448900 Fax: +9411 2675064 E-mail : communication@rpsecurities.com SMB Securities (Pvt) Limited 47, Dharmapala Mawatha, Colombo 03 Tel: +9411 5539593 Fax: +9411 2339292 E-mail: smbsecurities@gmail.com TKS Securities (Pvt) Limited 19-01, East Tower, World Trade Centre, Colombo 01 Tel: +9411 7857799 Fax: +9411 7857857 E-mail: ralph@tks.lk

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1. CORPORATE INFORMATION
Name of Company Legal Form : : Abans Financial Services Limited Public Company incorporated in Sri Lanka on 8th April 2005 under the Companies Act No 17 of 1982 and ReRegistered on 15th June 2009 under the Companies Act No 7 of 2007. Registered as a Leasing Company under the Finance Leasing Establishment Act No 56 of 2000. Registered as a Finance Company in terms of the Finance Companies Act No 78 of 1988 Company Registration No New Registration No Place of Incorporation Registered Office Board of Directors : : : : : N(PBS) 1243 (under the Companies Act No 17 of 1982) PB 1015 (under the Companies Act No 7 of 2007) Colombo, Sri Lanka 498, Galle Road, Colombo 3. Mrs. A. Pestonjee (Chairperson) Mr. R Pestonjee – Alternate for Mrs A Pestonjee Mrs. G N M Alles (Managing Director) Mrs S Dubash Mr. S Sothivadivel Mr. C D Pathirana Mr. K Wanigasekera Mr. V K Choksy Mr.T Someswaran Varners International (Pvt.) Ltd. Level 14, World Trade Centre, Echelon Square, Colombo 1 Ernst & Young 201, De Saram Place, Colombo 10 Bank of Ceylon Seylan Bank PLC People’s Bank Commercial Bank of Ceylon PLC Pan Asia Banking Corporation PLC Union Bank PLC Muslim Commercial Bank PLC

Secretaries to the Company

:

Auditors to the Company

:

Bankers to the Company

:

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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 Aban Financial Services Ltd, is owned by the s 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 and Infrastructure 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.

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

Name
Mrs. Aban Pestonjee Mr. Peston Nadirshah Pestonjee Mrs. Saroshi Dubash Mr. Behman Pestonjee Mr. Rusi Pestonjee Mr. Allan Raffel Mr. Clive Augustine Fernando

Age
74 80 53 51 50 58 56

Address
No. 206, Lake Drive, Colombo 08 No. 18-04, Royal Park Lake Drive, Rajagiriya No. 180, Lake Drive, Colombo 08 No. 40C, Lake Drive, Off Lake Drive, Rajagiriya No. 206/8, Lake Drive, Colombo 08 No. 33, 1st Lane, Shalawa Road, Mirihana, Nugegoda No. 883/31, Ethul Kotte Road, Kotte

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

Name of Shareholder
Mrs. Aba n Pest onjee Mr. Behman Pestonjee Mr. Rus i Pest onjee Mrs. Saroshi Dubash Abans Pestonjee Trust Mr. Peston Nadirshah Pestonjee Total

No. of Shares
432,000 432,000 432,000 432,000 324,000 108,000 2,160,000

Shareholding Percentage
20% 20% 20% 20% 15% 5% 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 to engage in Finance Company Activities.

The Company is primarily engaged in the provision of Finance Leases, Hire Purchase Facilities, Mortgage Loans, Vehicle Loans, Person Loans and in Real Estate Development. al

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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.

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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 2010/11 accounted 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.

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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 31st 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

Segment Agriculture Manufacturing Services Trading Transport Constructions Personal Others Distribution of Total Advances Lease & Hire Purchase Receivables Loans & Advances Total Advances

2011 166,706,512.54 350,082,974.35 144,781,720.90 251,095,896.29 126,646,560.75 113,852,707.95 397,561,388.75 308,587,720.04 1,859,315,481.57 1,069,176,652.19 790,138,829.38 1,859,315,481.57

2010 130,640,833.00 116,252,018.00 109,629,816.00 223,492,422.00 173,271,967.00 132,325,816.00 174,572,875.00 217,254,225.00 1,277,439,972.00 951,629,625.00 325,810,347.00 1,277,439,972.00

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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 acceptan ce 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.

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2.7

EMOLUMENTS

2.7.1 DIRECTORS
Emoluments paid to Directors in the form of Salaries and Bonuses for the Year Ended 31st 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 Head Office Anuradhapura Badulla Galle Dambulla Gampaha Kandy Kurunegala Ratnapura Chunnakam

Address 400, Galle Road, Colombo 3. 561/12, Maithripala Senanayake Mawatha, Anuradhapura. 45, Kokowatta Road, Badulla. 71/7/1, Velsen Square, Off Olcott Mawatha, Galle. Sujatha Building, Kurunegala Junction, Dambulla. 2B, Holy Cross Road, Gampaha. 1st Floor, Arpico Building, 123, D S Senanayake Mawatha, Kandy. 19, Baudhaloka Mawatha, Kurunegagla. 139/1 Main Street, Ratnapura. 60 1/1, ½ K K S Road, Chunnakam.

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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.

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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.

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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.

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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
Mrs. Aban Pestonjee Mr. Rusi Pestonjee (Alternate to Mrs. A Pestonjee) Mrs. Gloria Noeline Manohari Alles Mrs. Saroshi Dubash Mr. Sangarapillai Sothivadivel Mr. Channa Dilhan Pathirana Mr. Kithsiri Bandara Wanigasekara Mr. Vishtasp Kairshasp Choksy Mr. Thirunavukarasu Someswaran

Age
74 50 72 53 71 40 54 42 68

Address
No 206, Lake Drive, Colombo 08 No 206/8, Lake Drive, Colombo 08 No 11/2, Boyd Place, Colombo 03 No 180, Lake Drive, Colombo 08 No 1A, 3/2, Ebenezer Place, Dehiwela No 30/29, Longden Place, Colombo 07 No 30, Aluthgantota Road, Mavilmada, Kandy No 22/4, Sir Marcas Fernando Mawatha, Colombo 07 No 18, R A De Mel Mawatha, Colombo 05

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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.

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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 the Abans 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.

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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 Chairman of the Finance Houses

Suisse and Queen’s Hotel, from 1994 to 2001.

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

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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 Organization for 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.

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3.2

DIRECTORSHIPS ON OTHER BOARDS
Directorships on other Boards
Abans Electricals PLC Abans Marketing (Private) Limited Abans Consolidated (Private) Limited A-Mart (Private) Limited Abans Lanka (Private) Limited Abans Office Automation (Private) Limited ABA Telecom (Private) Limited ABS Gardner Dixon Hall International (Private) Limited Add Outdoor Advertising (Private) Limited Abans Development (Private) Limited Abans Investments (Private) Limited Abans Tours (Private) Limited Abans Graphics (Private) Limited Abans Warehousing (Private) Limited Abans (Private) Limited Abans Constructions (Private) Limited Abans Tourist Hotel (Private) Limited Absgro (Private) Limited Crown City Developers (Private) Limited

Name of Director
Mrs. Aban Pestonjee

Mrs. Mano Alles Mrs. Saroshi Dubash

Vanik Incorporation Limited St.Regis Packaging (Private) Limited Abans Electricals PLC AB Technologies (Private) Limited Abans Marketing (Private) Limited Abans Office Automation (Private) Limited Abans Development (Private) Limited Abans Investments (Private) Limited Abans Graphics (Private) Limited Abans (Private) Limited Abans Retail (Private) Limited Abans Constructions (Private) Limited Absgro (Private) Limited Crown City Developers (Private) Limited AB Leisure (Private) Limited (Alternate Director to Mr. B Pestonjee) None None Abans Electricals PLC Cleantech (Private) Limited AB Technologies (Private) Limited Abans Marketing (Private) Limited Abans Office Automation (Private) Limited Abans Development (Private) Limited

Mr. Sangarapillai Sothivadivel Mr. Channa Pathirana Mr. Kithsiri Wanigasekera Mr. Rusi Pestonjee (Alternate to Mrs. A Pestonjee)

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Mr. Rusi Pestonjee (contd...)

Abans Investments (Private) Limited AB Transport (Private) Limited Abans Tours (Private) Limited Abans Graphics (Private) Limited Abans Warehousing (Private) Limited Abans (Private) Limited Abans Retail (Private) Limited Abans Restaurant Systems (Private) Limited AB Leisure (Private) Limited Abans Environmental Services (Private) Limited Absgro (Private) Limited Crown City Developers (Private) Limited Sirius Technologies Services (Private) Limited Serendib Land PLC Cleanco Lanka (Private) Limited SMB Leasing (Private) Limited Pan Asia Power Commercial Credit Limited Sunrise Senior (Private) Limited ECSAT Lanka (Equality-based Community Support And Training) Centre for Resource Mobilization

Mr. Vishtasp Kairshasp Choksy Mr. Thirunavukarasu Someswaran

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.

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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 by invitation.

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.

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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, operational performance and industry trends. The Committee meets at least once a year.

The aggregate remuneration paid to the directors for the year ended 31st 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.

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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.

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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 No. of Shares 37,000,000 2009/10 No. of Shares 37,000,000 2008/09 No. of Shares 37,000,000

Rs.

Rs.

Rs.

382,373,630

382,373,630

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.

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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: Date 24th Feb’ 2010 24th Jun’ 2010 Transferor Mr & Mrs Samarapala Ghandy & Ghandy Transferee Abans (Pvt) Limited R Pestonjee D Pestonjee J L J Pestonjee T Pestonjee S C Henagama Gamage A H A Jayasinghe M V I F Fernando C V Sumanadasa N N Perera D S Karunakaran K Kunenthiran P K Pestonjee I N Jalaldeen No. of Shares 100 3,500 3,500 3,500 3,500 370,000 370,000 370,000 370,000 370,000 370,000 370,000 370,000 370,000 Consideration Per Share Rs. 20 Rs. 25 Rs. 25 Rs. 25 Rs. 25 Rs. 10 Rs. 10 Rs. 10 Rs. 10 Rs. 10 Rs. 10 Rs. 10 Rs. 10 Rs. 10

28th Mar’ 2011

Abans (Pvt) Limited Abans (Pvt) Limited Abans (Pvt) Limited Abans (Pvt) Limited Abans (Pvt) Limited Abans (Pvt) Limited Abans (Pvt) Limited Abans (Pvt) Limited Abans (Pvt) Limited

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5.6

TEN LARGEST SHAREHOLDERS OF AFSL
The major shareholders of the Company as at 24th May 2011 are as follows:

Name of Shareholder Abans (Pvt.) Ltd Mr. P N Pestonjee Mr. B Pestonjee Mr. H Gamage Mr. A H A Jayasinghe Ms. C V Sumanadasa Mr. N N Perera Mr. M V I F Fernando Mr. D S Karunakaran Mr. K Kunenthiran Others Total

No. of Shares 31,195,367 666,669 533,334 370,000 370,000 370,000 370,000 370,000 370,000 370,000 2,014,630 37,000,000

Shareholding % 84.31% 1.80% 1.44% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% 5.44% 100%

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.

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6 MANAGEMENT
6.1 THE TEAM
The Senior Management Team of AFSL is as follows: Name
Mrs. Manohari Alles Mr. Kithsiri Wanigasekera Mr. Aruna Somasiri Mr. Chaminda Sugathadasa Mr. Chandima Bandara Mr. Rasika Kaluarachchi Ms. Sanjeewi Dharmasena Mr. Manura Rajakaruna

Designation
Managing Director/Chief Executive Officer Executive Director Head of Documentation & Disbursement Head of Consumer Credit, Recoveries & Branches Head of Finance Head of Credit, Risk Management and Marketing Manager - Deposits 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 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.

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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.

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 Chairman of the Finance Houses

Suisse and Queen’s Hotel, from 1994 to 2001.

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).

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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.

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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.

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7 FINANCIAL INFORMATION
7.1 RATIOS AND SHARE INFORMATION
Year Ended 31.03.2010 31.03.2011 5.17 10.32 1.18 1.46 107.58 20.50 47.77 11.50 20.11 5.41 8.33 (1.75) (19.01) (4.28) 57.52 11.19 58.37 15.58 24.90 21.08 9.48 1.15 12.90 2.33 20.16 -

Net Interest Income / Total Average Assets (%) Non-Interest Income / Total Average Assets (%) Personnel & Other Non-Interest Expenses / Net Interest Income & Non-Interest Income (%) Gross NPL Ratio (%) General & Specific Loan Loss Reserves (B/S) / (Total NonPerforming Loans – Interest-In-Suspense) (%) Liquid Assets / Customer Deposits & Short – Term Funds Capital Adequacy Ratio (%) Debt/Equity Ratio Book Value per Share (Rs.) Earnings Per Share (Rs.) Profit after Tax / Average Equity (%) Return on Average Assets (%) Effective Tax Rate (%) Dividends / Profit after Tax (%)

Source: Abans Financial Services Ltd.

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7.2

RECEIVABLES

7.2.1 POLICY FOR RECEIVABLES

CLASSIFICATION

OF

NON-PERFORMING

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 been complied 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.

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7.2.2 COMPOSITION OF RECEIVABLES:
YE 31.03.2010 (%) Performing Loans & Advances Less than 3 months 3-6 months 7-12 months 13-18 months More than 18 months Total (%) Total Performing Loans (Rs.) Non Performing Loans & Advances Less than 3 months 3-6 months 6-7 moths 7-12 months 13-18 months More than 18 Months Total (%) Total Non-Performing Loans (Rs.) Total (Rs.) 08% 11% 06% 29% 31% 16% 100% 250,426,464 1,221,745,801 06% 11% 03% 17% 13% 50% 100% 201,634,681 1,801,775,265 91% 09% 100% 971,319,337 97% 03% 100% 1,600,140,584 YE 31.03.2011 (%)

7.3

MATURITY ANALYSIS OF DEPOSITS & BORROWINGS
YE 31.03.2010 (%) Maturity Period Less than or equal to 3 months More than 3 months less than or equal to 1 year More than 1 year less than or equal to 3 years More than 3 years TOTAL 64% 27% 07% 02% 100% 59% 28% 08% 05% 100% YE 31.03.2011 (%)

Source: Abans Financial Services Ltd.

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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.

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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 of which would make any statement herein misleading or inaccurate.

Aban Pestonjee Saroshi Dubash Sangarapillai Sothivadivel Gloria Noeline Manohari Alles Rusi Pestonjee (Alternate director to Aban Pestonjee) Channa Dilhan Pathirana Kithsiri Bandara Wanigasekara Vishtasp Kairshasp Choksy Thirunavukarasu Someswaran

Signed Signed Signed Signed Signed Signed Signed Signed Signed

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AUDITED FINANCIAL STATEMENTS AS AT 31ST MARCH 2011
Chartered Accountants
201 De Saram Place P. O. Box 101 Colombo 10 Sri Lanka Tel : (0) 11 2463500 Fax Gen : (0) 11 2697369 Tax : (0) 11 5578180 eysl@lk.ey.com

APAG/NYR/NPD/DM

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 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. 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 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 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 March 2011 and its profit and cash flows for the year then ended in accordance with Sri Lanka Accounting Standards. Report on Other Legal and Regulatory Requirements In our opinion, these financial statements also comply with the requirements for Section 151 (2) of the Companies Act No. 07 of 2007.

03 May 2011 Colombo.

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 Nanayakkara FCA FCMA B E Wijesuriya ACA ACMA

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Abans Financial Services Limited BALANCE SHEET As at 31 March 2011

Note ASSETS Cash and amounts due from Banks Investments held to Maturity Placements with Banks Dealing Securities Investment Securities Loans and Advances Lease rentals receivable & Stock out on Hire Real Estate Stock Other Debtors, Deposits and Prepayments Tax Recoverable Property, Plant & Equipment Deferred Taxation TOTAL ASSETS LIABILITIES Deposits from Customers Borrowings Other Liabilities Total Liabilities SHAREHOLDERS' FUNDS Stated Capital Reserve Fund Retained Earnings Total Equity TOTAL EQUITY AND LIABILITIES Commitments and Contingencies

2011 Rs. 12,497,605 154,636,199 64,446,969 11,710,673 80,400 788,823,034 895,253,101 135,883,066 35,216,135 6,468,996 16,852,026 25,118,995 2,146,987,199

2010 Rs. 7,771,603 65,878,767 42,401,609 80,400 324,568,604 777,541,018 136,058,707 79,322,350 13,345,635 18,682,524 32,969,828 1,498,621,045

15 3 4 5 6 7 8 10 11 12 24

13 14 16

1,486,357,557 178,568,205 131,426,762 1,796,352,524

1,009,533,058 92,607,209 88,345,603 1,190,485,870

17 18

382,373,630 9,519,900 (41,258,855) 350,634,675 2,146,987,199 -

382,373,630 1,020,000 (75,258,455) 308,135,175 1,498,621,045 -

27

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

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

………………………………. ………………………………. Director Director The Accounting Policies and Notes on pages 48 through 65 form an integral part of the Financial Statements. 03 May 2011 Colombo

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Abans Financial Services Limited INCOME STATEMENT
Year ended 31 March 2011

Note

2011 Rs. 396,244,898 369,635,871 (181,474,454) 188,161,417

2010 Rs. 287,674,710 269,854,363 (191,575,112) 78,279,251 17,820,347 96,099,598

Income Interest Income Interest Expense Net Interest Income Other Income Less: Operating Expenses Staff Costs General & Administration Expenses Provision for Bad and Doubtful Debts Profit/(Loss) before VAT on Financial Service and Income Tax Value Added Tax on Financial Services Profit/(Loss) before Income Tax Income Tax (Expenses)/Reversal Profit/(Loss) for the year

19 20 21

22

26,609,027 214,770,444

(53,341,872) (70,204,434) 9 (19,220,718) 72,003,420 (8,935,538) 63,067,882 24 (20,568,382) 42,499,500

(36,157,265) (67,224,035) (95,177,038) (102,458,740) (102,458,740) 37,729,196 (64,729,544)

Earnings/(Loss) Per Share

25

1.15

(1.75)

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

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Introductory Document

Abans Financial Services Limited STATEMENT OF CHANGES IN EQUITY

Abans Financial Services Limited

Year ended 31 March 2011

Stated Capital Rs. 382,373,630 382,373,630 382,373,630 1,020,000 8,499,900 9,519,900 1,020,000

Reserve Fund Rs.

Retained Earnings/ (Losses) Rs. (10,528,911) (64,729,544) (75,258,455) 42,499,500 (8,499,900) (41,258,855)

Total Rs. 372,864,719 (64,729,544) 308,135,175 42,499,500 350,634,675

Balance as at 31 March 2009

Net Loss for the year

46

Balance as at 31 March 2010

Net profit for the year

Transferred to/from during the year

Balance as at 31 March 2011

Introductory Document

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

Abans Financial Services Limited CASH FLOW STATEMENT Year Ended 31 March 2011

Cash Flows From / (Used in) Operating Activities Interest Received Receipts from Other Income Interest Paid Cash Payments to Employees & Expenses Profit from Operations before Working Capital Changes

Note

2011 Rs. 369,635,871 21,830,190 (182,033,869) (121,371,991) 88,060,201 175,641 (133,585,086) (464,328,482) 40,832,552 (22,045,360) 476,824,499 82,201,171 42,333,800 110,468,936 110,468,936 (5,652,966) 104,815,970

2010 Rs. 269,854,363 17,820,347 (181,160,435) (91,529,029) 14,985,246 (2,715,575) 161,782,809 (131,177,683) (44,548,739) (27,401,609) 418,532,725 (260,039,504) (3,930,828) 125,486,841 125,486,841 (2,631,629) 122,855,212

(Increase)/ Decrease in Real Estate Stock (Increase)/ Decrease in Lease Rentals Receivable and Stock out on Hire (Increase)/ Decrease in Loans and Advances (Increase) /Decrease in Other Debtors, Deposits, Prepayments (Increase)/ Decrease in Placements with Banks Increase/ (Decrease) in Deposits from Non Bank Customers Increase/ (Decrease) in Borrowings Increase/ (Decrease) in Accrued Charges Cash Generated from Operations Retirement Benefit Liabilities paid 16 Net Cash From/(Used in) Operating Activities before Tax Payments Income Tax payments Net Cash used in Operating Activities Cash Flows from / (Used in) Investing Activities Acquisition of Property, Plant & Equipment Proceeds from Disposal of Property, Plant & Equipment Investment in Treasury Bills Investment in Securities Proceeds from Disposal of Investment Securities Net Cash Flows from/(Used in) Investing Activities 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 Cash and Cash Equivalents at the beginning of the year Cash and Cash Equivalents at the end of the year 15 15

12

(5,062,202) 84,075 (65,136,904) (38,495,518) 28,381,283 (80,229,266) 24,586,704 (26,745,498) (2,158,794)

(2,502,573) 13,797 (24,455,459) (26,944,235) 95,910,977 (122,656,475) (26,745,498)

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

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Introductory Document

Abans Financial Services Limited NOTES TO THE FINANCIAL STATEMENTS Year ended 31 March 2011
1. CORPORATE INFORMATION

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.

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Abans Financial Services Limited NOTES TO THE FINANCIAL STATEMENTS Year ended 31 March 2011
2. 2.1 BASIS OF PREPARATION 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 Financial Statements and computed in accordance with the provisions of the Inland Revenue Act.

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Abans Financial Services Limited NOTES TO THE FINANCIAL STATEMENTS Year ended 31 March 2011
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.

2.2.3 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 Cost of Conversion Land Cost with Legal Charges. Actual Development Costs.

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Abans Financial Services Limited NOTES TO THE FINANCIAL STATEMENTS Year ended 31 March 2011
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.

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Abans Financial Services Limited NOTES TO THE FINANCIAL STATEMENTS Year ended 31 March 2011
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 is recognized 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 Fund Contributions 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.

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Abans Financial Services Limited NOTES TO THE FINANCIAL STATEMENTS Year ended 31 March 2011
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 aggregate rental receivable over the cost of the leased assets constitute the total unearned income at the commencement of the contract. The earned income is taken into revenue over the term of the lease, commencing from the month in which the lease is executed, in proportion to the declining receivable balance of the lease. 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 by Central 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.

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Introductory Document

Abans Financial Services Limited NOTES TO THE FINANCIAL STATEMENTS Year ended 31 March 2011
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.

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Abans Financial Services Limited NOTES TO THE FINANCIAL STATEMENTS
Year ended 31 March 2011

3.

INVESTMENT HELD TO MATURITY Government of Sri Lanka Treasury Bills - Face Value Re-Purchase Agreements

2011 Rs. 88,775,199 65,861,000 154,636,199

2010 Rs. 65,878,767 65,878,767

4.

PLACEMENTS WITH BANKS Fixed Deposits

2011 Rs. 64,446,969 64,446,969

2010 Rs. 42,401,609 42,401,609

5.

DEALING SECURITIES Quoted Shares Plantations Elpitiya Plantations PLC Maskeliya Plantations PLC Metropolitan Resource Holdings PLC Watawala Plantations PLC Hotels & Travels Hotel Sigiriya PLC Mahaweli Reach Hotels PLC Aitken Spence Hotel Holdings PLC Chemicals and pharmaceuticals Haycarb PLC Diversified Holdings Carson Cumberbatch PLC John Keells Holdings PLC Aitken Spence PLC Power & Energy Lanka IOC PLC Chevron Lubricants Lanka PLC Banking & Finance Sampath Bank PLC Seylan Bank PLC Central Finance Company PLC Lanka Ventures PLC Commercial Bank Of Ceylon PLC Lanka Orix Leasing Company PLC Merchant Bank Of Sri Lanka PLC Pan Asia Banking Corporation PLC Singer Finance ( Lanka) Ltd Telecommunication Dialog Axiata PLC Sri Lanka Telecom PLC Oil Palm The Bukit Darah PLC Manufacturing Abans Electricals PLC ACL Cables PLC Lanka Ceramic PLC Piramal Glass Ceylon PLC Kelani Cables PLC Royal Ceramics Lanka PLC Tokyo Cement Company (Lanka) PLC Footwear & Textile Ceylon Leather Products PLC Construction & Engineering Lankem Developments PLC

2011 2010 No of Shares Carrying value Market value No of Shares Carrying value Market value Rs Rs Rs Rs 20,000 10,000 6,000 5,000 41,000 2,000 9,400 7,000 18,400 4,000 4,000 500 2,500 1,000 4,000 20,000 2,000 22,000 3,000 20,000 500 5,000 1,000 1,000 5,000 1,000 15,000 51,500 20,000 5,100 25,100 500 500 1,900 4,000 900 25,000 1,000 1,000 5,000 38,800 1,000 1,000 5,000 5,000 211,300 839,296 323,271 289,140 160,178 1,611,885 177,795 365,104 767,853 1,310,753 806,502 806,502 352,909 752,460 190,106 1,295,475 404,484 364,540 769,024 896,819 1,008,180 472,736 130,955 184,867 140,759 276,311 59,567 740,705 3,910,898 234,598 291,377 525,975 707,840 707,840 466,841 374,968 109,211 235,105 129,307 152,581 226,003 1,694,016 110,221 110,221 280,068 280,068 13,022,657 (1,311,984) 11,710,673 670,000 281,000 195,000 125,000 1,271,000 152,200 319,600 686,000 1,157,800 621,600 621,600 317,400 714,000 162,300 1,193,700 352,000 320,000 672,000 864,900 786,000 636,850 110,500 165,600 119,600 231,000 51,300 547,500 3,513,250 210,000 290,700 500,700 586,700 586,700 490,390 376,000 131,760 277,500 95,300 157,000 220,000 1,747,950 90,000 90,000 361,500 361,500 11,716,200 11,716,200 -

Total Provision for fall in value of securities

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Abans Financial Services Limited NOTES TO THE FINANCIAL STATEMENTS
Year ended 31 March 2011

6.

INVESTMENT SECURITIES Non Current Investment Investments in unquoted shares 100 Shares in Credit Information Bureau of Sri Lanka

2011 Rs.

2010 Rs.

80,400 80,400

80,400 80,400

7.

LOANS AND ADVANCES Real Estate Loans Mortgage Loans Vehicle Loans Personal Loans Loans Against Fixed Deposits Staff Loans Revolving Loans Pledge Loans Less : Finance Charges in Suspense Less : Provision for Bad debts - Charged against Profit & Loss Account (Note 9.2)

2011 Rs. 16,183,111 239,638,004 3,249,653 428,756,516 22,765,588 23,642,520 67,576,762 5,739,907 807,552,061 (17,413,225) 790,138,836 (1,315,802) 788,823,034

2010 Rs. 18,159,835 93,196,037 9,138,368 139,981,719 20,028,127 19,375,320 28,205,229 10,296,808 338,381,443 (12,571,096) 325,810,347 (1,241,743) 324,568,604

7.1 Loans granted to Company Officers, the movement of which is as follows : Balance at the beginning of the year Add : Loans granted during the year Less : Repayments during the year Balance at the end of the year

2011 Rs. 19,375,320 10,213,353 (5,946,153) 23,642,520

2010 Rs. 19,026,918 9,279,000 (8,930,598) 19,375,320

8. LEASE RENTALS RECEIVABLE AND STOCK OUT ON HIRE Within one year 2011 2010 Rs. Rs. Gross Investment - Lease Rentals - Amounts receivable from hirers Less: Unearned Income Net Investment 220,389,515 462,972,608 683,362,123 (154,148,201) 529,213,922 245,014,504 423,258,609 668,273,113 (165,644,506) 502,628,607 1 - 5 years 2011 Rs. 195,359,763 474,895,260 670,255,023 (130,292,293) 539,962,730 2010 Rs. 164,311,102 389,823,201 554,134,303 (105,133,285) 449,001,018 2011 Rs. 415,749,278 937,867,868 1,353,617,146 (284,440,494) 1,069,176,652 Total 2010 Rs. 409,325,606 813,081,810 1,222,407,416 (270,777,791) 951,629,625

Less: Provision for Bad & Doubtful Debts (9.2) Rentals received in advance Finance charges in suspense

(116,383,328) 952,793,324 (907,040) (56,633,183) 895,253,101

(118,394,436) 833,235,189 (1,934,360) (53,759,811) 777,541,018

8.1 Non-Performing Advances included in the above Lease Rentals Receivable, Stock Out on Hire and Loans & Advances are as follows; Lease & Hire Purchase (Rs.) 2011 2010 Gross Investment Less: Finance Charges Suspended Non Performing Advance Less: Provision for Bad and Doubtful Debts Net Non-Performing Advances 214,684,402 (56,633,183) 158,051,219 (116,383,328) 41,667,891 254,494,294 (53,759,811) 200,734,483 (118,394,436) 82,340,047 Term Loans (Rs.) 2011 2010 60,996,687 (17,413,225) 43,583,462 (1,315,802) 42,267,660 62,263,077 (12,571,096) 49,691,981 (1,241,743) 48,450,238 Total (Rs.) 2011 275,681,089 (74,046,408) 201,634,681 (117,699,130) 83,935,551 2010 316,757,371 (66,330,907) 250,426,464 (119,636,179) 130,790,285

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Year ended 31 March 2011

8. 8.2

LEASE RENTALS RECEIVABLE AND STOCK OUT ON HIRE (Contd..) Segmental Analysis of Loans and Advances, Leases, Hire Purchase by Industry 2011 Rs. Agriculture Manufacturing Services Trading Transport Construction Personal Others 166,706,513 350,082,974 144,781,721 251,095,896 126,646,561 113,852,708 397,561,388 308,587,720 1,859,315,481 1,069,176,652 790,138,829 1,859,315,481 2010 Rs. 130,640,833 116,252,018 109,629,816 223,492,422 173,271,967 132,325,816 174,572,875 217,254,225 1,277,439,972 951,629,625 325,810,347 1,277,439,972

Lease and Hire Purchase Receivables (Note 8) Loans and Advances (Note 7) Total Advances

9. 9.1

PROVISION FOR BAD AND DOUBTFUL DEBTS Movement in provision for Bad and Doubtful Debts Balance at the beginning of the year Charge/(Reversal) during the year Write-off during the year Balance at the end of the year

2011 Rs. 140,637,979 19,220,718 (17,884,104) 141,974,593

2010 Rs. 45,460,941 95,177,038 140,637,979

9.2

Provision for Bad and Doubtful Debts consist of provisioning against ; Leases Hire Purchases Consumer Durables Total of Leases and Stock out on hire (Note 8) Loans & Advances (Note 7) Other Debtors, Deposits & Prepayments (Note 11) 42,515,036 58,165,776 15,702,516 116,383,328 1,315,802 24,275,463 141,974,593 44,166,798 64,070,719 10,156,919 118,394,436 1,241,743 21,001,800 140,637,979

10.

REAL ESTATE STOCKS Real Estate Stocks Less : Advances received

2011 Rs. 140,883,066 (5,000,000) 135,883,066

2010 Rs. 141,108,707 (5,050,000) 136,058,707

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Abans Financial Services Limited NOTES TO THE FINANCIAL STATEMENTS
Year ended 31 March 2011

11.

OTHER DEBTORS, DEPOSITS & PREPAYMENTS Other Debtors Less: Provisions for Doubtful Receivables Deposits & Prepayments Amounts due from Related Parties (11.1)

2011 Rs. 41,626,268 (24,275,463) 17,350,805 13,955,340 3,909,990 35,216,135

2010 Rs. 34,924,097 (21,001,800) 13,922,297 10,065,256 55,334,797 79,322,350

11.1 Amounts due from Related Parties Crown City Developers (Pvt) Ltd Abans Retail (Pvt) Ltd 167,183 3,742,807 3,909,990 165,133 55,169,664 55,334,797

11.2 Other Related Parties are companies controlled / jointly controlled / significantly influenced by Abans Financial Services Ltd Key Management Personnel. 12. PROPERTY, PLANT & EQUIPMENT Balance as at 01.04.2010 Rs. 13,022,365 5,106,045 3,505,933 31,111,873 52,746,216 Balance as at 01.04.2010 Rs. 3,741,441 1,293,217 2,306,806 26,722,228 34,063,692 Balance as at 31.03.2011 Rs. 14,697,614 5,863,660 3,325,613 33,707,726 57,594,613 Balance as at 31.03.2011 Rs. 6,176,657 1,981,035 3,048,049 29,536,846 40,742,587

12.1 Gross Carrying Amounts Cost Freehold Assets Furniture & Fittings Office Equipment Motor Vehicles Computer Equipment

Additions Rs. 1,675,249 781,110 2,605,843 5,062,202 Charge for the Year Rs. 2,435,216 695,650 872,727 2,817,948 6,821,541

Disposals Rs. (23,495) (180,320) (9,990) (213,805)

12.2 Depreciation Freehold Assets Furniture & Fittings Office Equipment Motor Vehicles Computer Equipment

Disposals Rs. (7,832) (131,484) (3,330) (142,646)

12.3 Net Book Value At Cost Furniture and Fittings Office Equipment Motor Vehicles Computer Equipment

2011 Rs. 8,520,957 3,882,625 277,564 4,170,880 16,852,026 2011 3 - 8 Years 8 Years 4 Years 4 Years

2010 Rs. 9,280,924 3,812,828 1,199,127 4,389,645 18,682,524 2010 3 - 8 Years 8 Years 4 Years 4 Years

12.4 The useful lives of the assets are estimated as follows Furniture and Fittings Office Equipment Motor Vehicles Computer Hardware & Software

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.

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Year ended 31 March 2011

13. DEPOSITS FROM NON BANK CUSTOMERS Fixed Deposits Savings Deposits

2011 Rs. 1,099,896,614 386,460,943 1,486,357,557

2010 Rs. 957,393,309 52,139,749 1,009,533,058

14. BORROWINGS

2011 Rs. 73,898,622 79,700,234 24,969,349 178,568,205

2010 Rs. 16,666,800 75,940,409 92,607,209

Bank Loans (14.1) Bank Overdrafts (Note 15) Commercial Papers

14.1 Bank Loans

2011 Amount Amount repayable repayable after within 1 year 1 year Rs. Rs. Amount repayable within 1 year Rs. 6,250,006 6,250,006

2010 Amount repayable after 1 year Rs. 10,416,794 10,416,794

Total Rs. 23,898,622 50,000,000 73,898,622

Total Rs. 16,666,800 16,666,800

Bank of Ceylon Union Bank Ltd

9,620,507 10,256,425 19,876,932

14,278,115 39,743,575 54,021,690

14.2 Bank Loans

As at 01.04.2010 Rs. 16,666,800

Loans Obtained Rs. 13,481,974

Repayments Rs. (6,250,152)

As at 31.03.2011 Rs. 23,898,622

Terms of the Loan

Security Offered

Bank of Ceylon

48 Months

Union Bank Ltd

-

50,000,000

-

50,000,000

12 Months

Leases, Hire Purchases Portfolio 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 Cash & Bank Balances Bank Overdrafts Treasury Bills & Repurchase agreements Total Cash and Cash Equivalents for the Purpose of Cash Flow Statement

2011 Rs. 12,497,605 (79,700,234) 65,043,835 (2,158,794)

2010 Rs. 7,771,603 (75,940,409) 41,423,308 (26,745,498)

16. OTHER LIABILITIES Creditors and Accrued Expenses Accrued Interest Amounts due to Related Parties (16.1) Retirement Benefit Liability (16.2)

2011 Rs. 70,465,629 33,853,313 21,488,488 5,619,332 131,426,762 Relationship Parent Company 21,488,488 21,488,488

2010 Rs. 35,892,048 33,293,898 16,500,121 2,659,537 88,345,603

16

Amounts due to Related Parties Abans (Pvt) Ltd

16,500,121 16,500,121

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Abans Financial Services Limited NOTES TO THE FINANCIAL STATEMENTS
Year ended 31 March 2011

16.2

RETIREMENT BENEFIT LIABILITY Expense on Defined Benefit Plan Current Service Cost Interest Cost on Benefit Obligation (Gain)/Loss arising from changes in the assumptions Defined Benefit Obligation As at the beginning of the year Current Service Cost Payments made during the year Interest charge for the year (Gain)/Loss arising from changes in the assumptions As at the end of the year

2011 Rs.

2010 Rs.

1,571,598 245,616 1,142,581 2,959,795

(254,003) 323,727 69,724

2,659,537 1,571,598 245,616 1,142,581 5,619,332

2,589,813 (254,003) 323,727 2,659,537

The employee benefits liability of the Company is based on the Gratuity Formula method in Appendix E of SLAS 16Employee Benefits. The principal financial assumptions underlying the valuation are as follows: 2011 10% 10% 34% 55 years 2010 12.50% 12.50% 25% 55 years

Discount Rate Future Salary Increases Staff Turnover Retirement Age

17.

STATED CAPITAL Number

2011 Rs. 382,373,630 Number

2010 Rs. 382,373,630

17.1

Fully Paid Ordinary Shares

37,000,000

37,000,000

17.2

Rights of Shareholders The holders of ordinary shares confer their right to receive dividends as declared from time to time and are entitled to one vote per share at the meeting. All shares rank equally with regard to the company's residual assets.

18.

RESERVE FUND

2011 Rs. 1,020,000 8,499,900 9,519,900

2010 Rs. 1,020,000 1,020,000

At the beginning of the year Transfers during the year At the end of the year

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.

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Abans Financial Services Limited NOTES TO THE FINANCIAL STATEMENTS
Year ended 31 March 2011

19. 19.1

INCOME Summary Gross Income (19.2)

2011 Rs. 396,244,898 396,244,898

2010 Rs. 287,674,710 287,674,710

19.2

Segmental Analysis of Gross Income Interest Real Estate Fee Based Income Others 369,635,871 113,730 13,990,309 12,504,988 396,244,898 269,854,363 383,707 11,845,939 5,590,701 287,674,710

20.

INCOME FROM INTEREST BEARING ACTIVITIES Interest on Leases Interest on Loans Interest on Hire Purchases Overdue Interest Interest on Bank Deposits Interest income on Real Estate Default Interest Interest on Treasury Bills

2011 Rs. 54,645,749 139,754,204 131,962,947 10,485,365 3,261,358 1,386,679 16,899,933 11,239,636 369,635,871

2010 Rs. 68,806,044 37,743,259 126,023,979 10,708,401 1,870,390 18,739,068 5,963,222 269,854,363

21.

INTEREST EXPENSES Interest on Fixed Deposits Interest on Savings Interest on Loans Interest on Bank Overdrafts Interest on Commercial Papers

2011 Rs. 147,167,607 27,092,407 2,218,848 4,361,644 633,948 181,474,454

2010 Rs. 130,735,280 757,334 22,751,735 25,227,690 12,103,073 191,575,112

22.

OTHER INCOME

2011 Rs. 113,730 13,990,309 7,739,067 4,765,921 26,609,027

2010 Rs. 383,707 11,845,939 5,590,701 17,820,347

Real Estate Profits and Income Profit from Fee based Activities Sundry Income Profit on disposal of Investment Securities

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Abans Financial Services Limited NOTES TO THE FINANCIAL STATEMENTS
Year ended 31 March 2011

23.

NET PROFIT /LOSS) STATED AFTER CHARGING THE FOLLOWING EXPENSES Included in Administrative Expenses Employees Benefits including the following - Defined Benefit Plan Costs - Gratuity (included in Employee Benefits) - Defined Contribution Plan Costs - EPF&ETF (included in Employee Benefits) Depreciation Auditor's Fees and Expenses Under/(Over) provision in respect of previous Year Profit/(Loss) on Disposal of Property, Plant and Equipment Directors' Emoluments Advertising Costs Litigation Settlements

2011 Rs. 53,271,871 2,959,795 5,173,164 6,821,541 399,300 60,410 25,785 5,170,000 3,624,004 583,545

2010 Rs. 36,157,265 69,724 3,513,414 11,620,770 363,000 (161,786) 4,800,000 786,224 882,154

24.

PROVISION FOR INCOME TAX The major components of income tax expense for the years ended 31 March are as follows : Income Statement Current Income Tax Current Income Tax Charge (24.1) Under/(Over) Provision of current taxes in respect of prior years Deferred Income Tax Deferred Taxation Charge/(Reversal) (24.2) Income Tax expense reported in the Income Statement 2011 Rs. 12,717,549 2010 Rs. 13,874

7,850,833 20,568,382

(37,743,070) (37,729,196)

24.1

A reconciliation between tax expense and the product of accounting profit multiplied by the statutory tax rate is as follows : 2011 Rs. 63,067,882 186,031,281 (199,711,460) (18,912,983) 30,474,720 (12,567,963) 43,042,683 30,474,720 43,042,683 (7,243,812) 35,798,871 12,529,605 187,944 12,717,549 (12,567,963) (12,567,963) 2010 Rs. (102,458,740) 245,712,607 (150,499,587) (7,245,720) 3,473,970 (10,719,690) (7,245,720) (7,245,720) (7,245,720)

Accounting Profit/(Loss) before Income Tax Aggregate Disallowed items Aggregate Allowable Expenses Income not subject to Tax

Adjusted Profit/(Loss) on Lease Adjusted Profit/(Loss) on Other Businesses

Taxable Income Less: Carried Forward Tax Losses Taxable Profit Income Tax Expense at the statutory income tax rate of 35% Social Responsibility Levy 1.5%

Taxable Loss Tax Losses Brought Forward Taxable Loss Carried Forward

24.2

Deferred Tax Assets, Liabilities and Income Tax relates to the followings Balance Sheet 2011 2010 Rs. Rs. 8,952,100 310,074 8,952,100 310,074 (1,966,766) (27,705,542) (4,398,787) (34,071,095) (930,838) (29,813,062) (2,536,002) (33,279,902) Income Statement 2011 2010 Rs. Rs. 8,642,026 (5,248,817) 8,642,026 (5,248,817) (1,035,928) 2,107,520 (1,862,785) (791,193) 7,850,833 (25,118,995) (32,969,828) (145,189) (29,813,062) (2,536,002) (32,494,253) (37,743,070)

Deferred Tax Liability Capital allowances for tax purposes Deferred Tax Assets Defined Benefit Plans Provision for Bad and Doubtful Debt Brought Forward Tax Losses

Deferred Tax Expense Net Deferred Tax Liability/(Asset)

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Abans Financial Services Limited NOTES TO THE FINANCIAL STATEMENTS
Year ended 31 March 2011

25. 25.1

EARNINGS / (LOSS) PER SHARE 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. 2011 Rs. Amounts Used as the Numerators: Net Profit Attributable to Ordinary Shareholders for Basic Earnings / (Loss) Per Share 42,499,500 2011 Number 37,000,000

25.2

2010 Rs. (64,729,544) 2010 Number 37,000,000

Number of Ordinary Shares Used as Denominators for Basic Earnings/ /(Loss) per share Weighted Average number of Ordinary Shares in issue Applicable to Basic Earnings /(Loss) Per Share

26.

MATURITY OF ASSETS AND LIABILITIES An analysis of the Total Assets employed and Total Liabilities at the year end , based on the remaining at the balance sheet date to the respective contractual maturity dates are given below. Less than 3 months Rs. 12,497,605 110,304,453 44,414,539 11,710,673 405,974,631 172,877,194 3,177,158 760,956,253 544,829,012 3-12 months Rs. 44,331,746 20,032,430 81,364,882 251,738,489 38,354,239 18,322,946 454,144,732 305,281,018 1-3 years Rs. 168,919,353 328,329,911 83,239,032 3,614,464 6,468,996 16,852,026 25,118,995 632,542,777 494,292,278 Over 3 years Rs. 80,400 132,564,168 142,307,507 14,289,795 10,101,567 299,343,437 154,218,736 Total Rs. 12,497,605 154,636,199 64,446,969 11,710,673 80,400 788,823,034 895,253,101 135,883,066 35,216,135 6,468,996 16,852,026 25,118,995 2,146,987,199 1,498,621,044

Assets Cash and amount due from banks Investments held to Maturity Placements with banks Dealing Securities Investment Securities Loans and Advances Lease rentals receivable & Stock out on hire Real Estate Stock Other Debtors, Deposits and Prepayments Tax Recoverable Property, Plant & Equipment Deferred Taxation As at 31.03.2011 As at 31.03.2010 Liabilities Deposits from Customers Borrowings Other Liabilities As at 31.03.2011 As at 31.03.2010

879,467,264 109,528,811 55,105,420 1,044,101,495 741,245,093

444,600,841 15,017,704 35,200,184 494,818,729 320,367,466

100,908,921 35,705,325 29,016,182 165,630,428 85,683,741

61,380,531 18,316,365 12,104,976 91,801,872 43,189,569

1,486,357,557 178,568,205 131,426,762 1,796,352,524 1,190,485,870

27. 27.1

COMMITMENTS AND CONTINGENCIES Capital Expenditure Commitments The Company has no commitments for acquisition of Property , Plant & Equipment incidental to the ordinary course of business.

27.2

There are no significant contingencies as at the balance sheet date

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Abans Financial Services Limited NOTES TO THE FINANCIAL STATEMENTS

Year ended 31 March 2011

28. Carrying Amount Pledged Nature of Liability Bank Overdraft Term Loan Bank Overdraft Included Under

ASSETS PLEDGED

Abans Financial Services Limited
2011 Rs. 187,591,429 138,299,225 37,307,266 363,197,920 2010 Rs. 269,902,071 35,189,301 39,616,285 344,707,658 Lease Rental Receivables and Stock Lease Rental Receivables and Stock Real Estate Term Loans Real Estate 2010 Rs. 2011 Rs. 2010 Rs. 2011 Rs. 2011 Rs. Others 2010 Rs. 2011 Rs. Total 2010 Rs. 224,277,492 4,807,607 229,085,099 139,754,204 1,904,350 141,658,554 37,743,259 10,051,823 47,795,082 1,386,679 113,730 1,500,409 383,707 383,707 14,500,994 12,504,988 27,005,982 7,833,612 2,193,503 10,027,115 369,635,871 113,730 26,495,297 396,244,898 269,854,363 383,707 17,436,640 287,674,710 333,177,016 63,067,882 (20,568,382) 42,499,500 777,541,018 777,541,018 788,823,034 788,823,034 324,568,604 324,568,604 135,883,066 135,883,066 136,058,707 136,058,707 1,819,959,201 327,027,998 2,146,987,199 1,796,352,524 1,796,352,524 (390,133,450) (102,458,740) (102,458,740) 1,238,168,329 260,452,716 1,498,621,045 1,190,485,870 1,190,485,870

The following assets have been pledged as security for liabilities.

Nature of assets

Lease & Hire Purchase Receivables Lease & Hire Purchase Receivables Real Estate -Panadura Land

29.

FINANCIAL REPORTING BY SEGMENT

Lease & Stock out on Hire 2011 2010 Rs. Rs.

64

Interest Real Estate Fee Based Income & Others Total Revenue

213,993,994 12,085,959 226,079,953

Unallocated Expenses Profits/ (Loss) before Tax Income Tax expenses Net Profit /(Loss) for the period

Segment Assets Unallocated Assets Total Assets

895,253,101 895,253,101

Unallocated Liabilities Total Liabilities

30.

EVENTS OCCURRING AFTER THE BALANCE SHEET DATE

Introductory Document

The Company will be listed on the Dirisavi Board by way of an Introduction on or before 30 June 2011.

Abans Financial Services Limited NOTES TO THE FINANCIAL STATEMENTS

Year ended 31 March 2011

31.

RELATED PARTY DISCLOSURES

Abans Financial Services Limited
2011 Rs. 5,170,000 2010 Rs. 4,800,000 2011 Rs. 77,000,000 8,278,405 2010 Rs. 6,000,000 9,267,723 Total Abans Limited Parent Company 2011 2010 Rs. Rs. 4,556,628 141,773 Other Related Parties ** 2011 2010 Rs. Rs. 8,191,836 14,196,030 14,157,428 (10,000,000) 7,290,195 14,213,658 702,948 2,410,151 1,500,000 50,000,000 2011 Value Rs. 8,191,836 14,196,030 18,714,056 (10,000,000) 2010 Value Rs. 7,290,195 14,213,658 702,948 141,773 2,410,151 1,500,000 50,000,000

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 Key Management Personnel and their close family members.

31.1

Transactions with individuals and their close family members who have significant voting power of the Company.

a) Compensation to Key Managerial Personnel

Short Term Employee Benefits

b) Other transactions with Key Managerial Personnel

Fixed Deposits/Promissory Notes accepted during the year Fixed Deposits/Promissory Notes held at the beginning of the year

31.2

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.

65

Nature of Transaction

Fixed Deposits Accepted during the year Fixed Deposits held at the end of the year Interest payable on Fixed Deposits Lease Facilities Granted Purchase of Articles Consumer Credit Granting Purchase of Articles Consumer Hire Purchase Facilities Purchase of Vehicles for Finance Lease Facilities Settlement of Liabilities on behalf of the Company Settlement of Liabilities by the Company on behalf of Other Transfer of Fixed Assets Funds Transferred (to)/ from the Company

**Other Related Parties include the following companies AB Technologies (Pvt) Ltd Crown City Developers (Pvt) Ltd Abans Retail (Pvt) Ltd

Introductory Document

"Other Related Parties are companies controlled / jointly controlled / significantly influenced by Key Management Personnel.

AUDITED FINANCIAL STATEMENTS AS AT 31ST MARCH 2010
Chartered Accountants
201 De Saram Place P. O. Box 101 Colombo 10 Sri Lanka Tel : (0) 11 2463500 Fax Gen : (0) 11 2697369 Tax : (0) 11 5578180 eysl@lk.ey.com

APAG/AKG/AD INDEPENDENT AUDITORS’ REPORT TO THE SHAREHOLDERS OF ABANS FINANCIAL SERVICES LIMITED Report on the Financial Statements 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 accordance with Sri Lanka Accounting 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 applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances. Scope of Audit and Basis of Opinion Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with Sri Lanka Auditing Standards. Those standards require that we plan and perform the audit to obtain reasonable assurance whether the financial statements are free from material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting 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 Accounting Standards. Report on Other Legal and Regulatory Requirements 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.
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 Nanayakkara FCA FCMA B E Wijesuriya ACA ACMA

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Introductory Document

Abans Financial Services Limited BALANCE SHEET As at 31 March 2010
Note ASSETS Cash and amounts due from banks Treasury Bills Placements with other banks Loans and Advances Lease rentals receivable & Stock out on hire Real Estate Stock Other Debtors, Deposits and Prepayments Investment Securities Tax Recoverable Property, Plant & Equipment Deferred Taxation TOTAL ASSETS LIABILITIES Deposits from customers Borrowings Accrued Charges Retirement Benefit Liability Deferred Taxation Total Liabilities SHAREHOLDERS' FUNDS Stated Capital Reserves Total Equity TOTAL EQUITY AND LIABILITIES Commitments and Contingencies 2010 Rs. 7,771,603 65,878,767 42,401,609 324,568,604 777,541,018 136,058,707 79,322,350 80,400 13,345,635 18,682,524 32,969,828 1,498,621,045 2009 Rs. 4,525,613 73,315,520 15,000,000 194,209,439 1,012,680,534 133,343,132 55,775,411 80,400 10,727,880 27,976,307 1,527,634,236

3 4 5 6 8 9 10 11 25

12 13 15 16 25

1,009,533,058 92,607,209 85,686,066 2,659,537 1,190,485,870

591,000,333 477,203,912 79,202,217 2,589,813 4,773,242 1,154,769,517

17 18

382,373,630 (74,238,455) 308,135,175 1,498,621,045 -

382,373,630 (9,508,911) 372,864,719 1,527,634,236 -

28

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

................................................. Chief Finance Officer

The Board of Directors is responsible for the preparation and presentation of the Financial Statement signed for and on behalf of the board by ;

................................................. Director

................................................. Director

The Accounting Policies and notes on pages 71 through 87 form an integral part of the financial statements.

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Abans Financial Services Limited. INCOME STATEMENT Year ended 31 March 2010

Note

2010 Rs. 287,674,710 269,854,363 (191,575,112) 78,279,251

2009 Rs. 354,520,565 338,696,974 (230,983,120) 107,713,854 15,823,591 123,537,445

Income Interest Income Interest Expense Net Interest Income Other Income Less: Expenses Staff Costs General & Administration Expenses Provision for Bad and Doubtful Loans Profit/(Loss) before VAT on Financial Service and Income Tax Value Added Tax on Financial Services Profit/(Loss) before Income Tax Income Tax Profit/(Loss) for the year

20 21 22

23

17,820,347 96,099,598

(36,157,265) (67,224,035) 7 24 (95,177,038) (102,458,740) (102,458,740) 25 37,729,196 (64,729,544)

(40,850,660) (71,503,988) (31,333,036) (20,150,240) (1,192,032) (21,342,272) (2,306,621) (23,648,893)

Earnings/(Loss) Per Share

26

(1.75)

(0.64)

The Accounting Policies and notes on pages 71 through 87 form an integral part of the financial statements.

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Abans Financial Services Limited. STATEMENT OF CHANGES IN EQUITY Year ended 31 March 2010

Note

Stated Capital Rs. 382,373,630 -

Reserve Fund Rs. 1,020,000 1,020,000 1,020,000

Retained Earnings/ (Losses) Rs. 22,715,082 (345,100) (23,648,893) (9,250,000) (10,528,911) (64,729,544) (75,258,455)

Total Rs. 406,108,712 (345,100) (23,648,893) (9,250,000) 372,864,719 (64,729,544) 308,135,175

Balance as at 31 March 2008 Effect on adoption of - SLAS 16 (Revised) Net Loss for the year Dividend Paid Balance as at 31 March 2009 Net Loss for the year Balance as at 31 March 2010 19

382,373,630 382,373,630

The Accounting Policies and notes on pages 71 through 87 form an integral part of the financial statements.

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Abans Financial Services Limited. CASH FLOW STATEMENT Year ended 31 March 2010

Note Cash Flows From / (Used in) Operating Activities

2010 Rs.

2009 Rs.

Interest Received Receipts from Other Income Interest Paid Cash Payments to Employees & Expenses Profit from operation before Working Capital Changes (Increase)/ Decrease in Real Estate Stock (Increase)/ Decrease in Lease Rentals Receivable and Stock out on hire (Increase)/ Decrease in Loans and Advances (Increase) /Decrease in Other Debtors, Deposits, Prepayments (Increase)/ Decrease in Placements with Banks Increase/ (Decrease) in Deposits from Non Bank Customers Increase/ (Decrease) in Borrowings Increase/ (Decrease) in Accrued Charges Cash Generated from Operations Retirement Benefit liabilities paid Net Cash From/(Used in) Operating Activities before Tax Payments Income Tax payments Net Cash used in Operating Activities Cash Flows from / (Used in) Investing Activities Acquisition of Property, Plant & Equipment Proceeds from Disposal of Property, Plant & Equipment Net Cash Flows from/(Used in) Investing Activities 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 Cash and Cash Equivalents at the beginning of the year Cash and Cash Equivalents at the end of the year 14 14 16

269,854,363 17,820,347 (181,160,435) (91,529,029) 14,985,246 (2,715,575) 161,782,809 (131,177,683) (44,548,739) (27,401,609) 418,532,725 (260,039,504) (3,930,828) 125,486,841 125,486,841 (2,631,629) 122,855,212

337,613,071 15,823,591 (218,803,742) (133,578,327) 1,054,592 (1,604,366) (265,169,303) (53,414,938) (7,938,777) (6,500,000) 194,174,506 133,686,552 (9,883,168) (15,594,902) (15,594,902) (26,786,746) (42,381,648)

11

(2,502,573) 13,797 (2,488,776)

(12,444,514) 115,000 (12,329,514)

120,366,436 (122,656,475) (2,290,039)

(9,250,000) (9,250,000) (63,961,162) (58,695,313) (122,656,475)

The Accounting Policies and notes on pages 71 through 87 form an integral part of the financial statements.

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Abans Financial Services Limited. NOTES TO THE FINANCIAL STATEMENTS Year ended 31 March 2010

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Abans Financial Services Limited. NOTES TO THE FINANCIAL STATEMENTS Year ended 31 March 2010
3. TREASURY BILLS ELIGIBLE FOR RE-DISCOUNTING WITH CENTRAL BANK Government of Sri Lanka Treasury Bills - Face Value Re-Purchase Agreements (Note 14) 2010 Rs. 65,878,767 65,878,767 2010 Rs. 42,401,609 42,401,609 2010 Rs. 17,757,619 82,069,601 9,064,867 9,367,521 20,028,127 19,375,320 27,741,948 130,489,360 9,915,984 325,810,347 (1,241,743) 324,568,604 2010 Rs. 19,026,918 9,279,000 (8,930,598) 19,375,320 2009 Rs. 73,315,520 73,315,520 2009 Rs. 15,000,000 15,000,000 2009 Rs. 16,829,255 88,633,405 16,120,660 12,766,493 23,244,040 19,026,918 5,086,531 12,925,362 194,632,665 (423,226) 194,209,439 2009 Rs. 12,287,528 10,920,254 (4,180,865) 19,026,918

4.

PLACEMENTS WITH OTHER BANKS

Fixed Deposits

5.

LOANS AND ADVANCES

Real Estate Loans Mortgage Loans Vehicle Loans Personal Loans Loans Against Fixed Deposits Staff Loans Revolving Loans Education Loan Pledge Loans Less : Provision for Bad debts - Charged against Profit & Loss Account (Note 7.2)

5.1

Loans granted to Company Officers, the movement of which is as follows :

Balance at the beginning of the year Add : Loans granted during the year Less : Repayments during the year Balance at the end of the year 6. LEASE RENTALS RECEIVABLE AND STOCK OUT ON HIRE Within one year 2010 2009 Rs. Rs. Gross Investment - Lease Rentals - Amounts receivable from hirers Less: Unearned Income Net Investment 245,014,504 423,258,609 668,273,113 (165,644,506) 502,628,607 270,840,719 414,097,008 684,937,727 (222,881,503) 462,056,224 1 - 5 years 2010 Rs. 164,311,102 389,823,201 554,134,303 (105,133,285) 449,001,018 2009 Rs. 314,518,988 492,757,281 807,276,269 (189,571,599) 617,704,670

Total 2010 Rs. 409,325,606 813,081,810 1,222,407,416 (270,777,791) 951,629,625 2009 Rs. 585,359,707 906,854,288 1,492,213,995 (412,453,102) 1,079,760,893

Less: Provision for Bad & Doubtful Debts (7.2) Rentals received in advance Finance charges in suspense

(118,394,436) 833,235,189 (1,934,360) (53,759,811) 777,541,018

(45,037,728) 1,034,723,165 (2,198,804) (19,843,827) 1,012,680,534

6.1

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

Lease & Hire Purchase (Rs.) 2010 2009 Amount Receivable Less: Finance Charges Suspended Provision for Bad Debts Net Non-Performing Advances 254,494,294 (53,759,811) (118,394,436) 82,340,047 121,817,633 (19,843,827) (45,037,728) 56,936,078

Term Loans (Rs.) 2010 62,263,077 (12,571,096) (1,241,743) 48,450,238 2009 22,079,670 (3,387,554) (423,226) 18,268,890 2010

Total (Rs.) 2009 143,897,303 (23,231,381) (45,460,954) 75,204,968

316,757,371 (66,330,907) (119,636,179) 130,790,285

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Introductory Document

Abans Financial Services Limited. NOTES TO THE FINANCIAL STATEMENTS Year ended 31 March 2010
6. LEASE RENTALS RECEIVABLE AND STOCK OUT ON HIRE (Contd..) 2010 Rs. 6.2 Segmental Analysis of Loans and Advances, Leases, Hire Purchase by Industry Agriculture Manufacturing Services Trading Transport Construction Personal Education Others Distribution of Total Advances Lease and Hire Purchase Receivables (Note 6) Loans and Advances (Note 5) Total Advances 7. 7.1 PROVISION FOR LOSSES Movement in provision for Bad and Doubtful Debts Balance at the beginning of the year Charge/Appropriation during the year Write-off during the year 130,640,833 116,252,018 109,629,816 223,492,422 173,271,967 132,325,816 44,083,515 130,489,360 217,254,225 1,277,439,972 951,629,625 325,810,347 1,277,439,972 2010 Rs. 45,460,941 95,177,038 140,637,979 42,026,452 255,519,691 84,616,335 248,515,187 189,853,620 119,123,219 43,856,518 290,882,536 1,274,393,558 1,079,760,893 194,632,665 1,274,393,558 2009 Rs. 14,266,050 31,333,036 (138,145) 45,460,941 2009 Rs.

7.2

Provision for Bad and Doubtful Debts consist of provisioning against ; Leases Hire Purchase Consumer Durables Provision for doubtful Leases and Stock out on hire (Note 6) Loans & Advances (Note 5) Deposits & Prepayments (Note 9)

44,166,798 64,070,719 10,156,919 118,394,436 1,241,743 21,001,800 140,637,979 2010 Rs. 141,108,707 (5,050,000) 136,058,707

14,712,486 18,995,204 11,330,032 45,037,723 423,226 45,460,948 2009 Rs. 138,448,132 (5,105,000) 133,343,132

8.

REAL ESTATE STOCKS

Real Estate Stocks Less : Advances received against Real Estate stocks 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%).

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Abans Financial Services Limited. NOTES TO THE FINANCIAL STATEMENTS Year ended 31 March 2010

9.

OTHER DEBTORS, DEPOSITS & PREPAYMENTS Other Debtors Less: Provisions for Doubtful Receivables Deposits & Prepayments Amounts due from Related Parties (9.1)

2010 Rs. 34,924,097 (21,001,800) 13,922,297 10,065,256 55,334,797 79,322,350 2010 Rs.

2009 Rs. 38,159,412 38,159,412 12,530,823 5,085,176 55,775,411 2009 Rs. 903,572 740,059 3,441,545 5,085,176

9.1

Amounts due from Related Parties Relationship Other Related Party Other Related Party Other Related Party Parent Company

Crown City Developers (Pvt) Ltd AB Technologies (Pvt) Ltd Abans Retail (Pvt) Ltd Abans (Pvt) Ltd

165,133 55,169,664 55,334,797

9.2 Other Related Parties are companies controlled / jointly controlled / significantly influenced by Key Management Personnel. 2010 2009 INVESTMENT SECURITIES Rs. Rs. Credit Research Information Bureau of Sri Lanka 11. 11.1 PROPERTY, PLANT & EQUIPMENT Gross Carrying Amounts Balance as at 01.04.2009 Rs. 11,286,742 5,450,366 3,505,933 30,863,748 51,106,790 Balance as at 01.04.2009 Rs. 1,608,621 759,237 1,435,056 19,327,568 23,130,482 Balance as at 31.03.2010 Rs. 13,022,365 5,106,045 3,505,933 31,111,873 52,746,216 Balance as at 31.03.2010 Rs. 3,741,441 1,293,217 2,306,806 26,722,228 34,063,692 80,400 80,400 80,400 80,400

10.

Cost

Additions Rs. 1,735,623 518,825 248,125 2,502,573 Charge for the Year Rs. 2,132,820 1,221,540 871,750 7,394,660 11,620,770

Disposals Rs.

Furniture & Fittings Office Equipment Motor Vehicles Computer Equipment

863,146

863,146

11.2

Depreciation Freehold Assets Furniture & Fittings Office Equipment Motor Vehicles Computer Equipment

Disposals Rs.

687,560

687,560

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Abans Financial Services Limited. NOTES TO THE FINANCIAL STATEMENTS Year ended 31 March 2010
11. 11.3 PROPERTY, PLANT & EQUIPMENT (Contd..) Net Book Value At Cost Furniture and Fittings Office Equipment Motor Vehicles Computer Equipment 2010 Rs. 9,280,924 3,812,828 1,199,127 4,389,645 18,682,524 2010 3 - 8 Years 8 Years 4 Years 4 Years 2009 Rs. 9,678,121 4,691,129 2,070,877 11,536,180 27,976,307 2009 3 - 8 Years 8 Years 4 Years 4 Years

11.4

The useful lives of the assets is estimated as follows Furniture and Fittings Office Equipment Motor Vehicles Computer Hardware & Software

11.5

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.

12.

DEPOSITS FROM NON BANK CUSTOMERS

2010 Rs. 957,393,309 52,139,749 1,009,533,058 2010 Rs. 16,666,800 75,940,409 92,607,209

2009 Rs. 586,496,751 4,503,582 591,000,333 2009 Rs. 139,991,514 200,497,608 96,714,790 40,000,000 477,203,912 Security Offered

Fixed Deposits Savings Deposits

13.

BORROWINGS Bank Loans and Other (13.1) Bank Overdrafts Borrowings Commercial Papers Borrowings on Treasury Bills

13.1

Bank and Other Loans

As at 01.04.2009 Rs. 2,074,850 15,000,000 22,916,664 100,000,000 139,991,514

Loans Obtained Rs. -

Repayments Rs. (2,074,850) (15,000,000) (6,249,864) (100,000,000) (123,324,714)

As at 31.03.2010 Rs. 16,666,800 16,666,800

Terms of the Loan

Pan Asia Banking Corporation PLC Wayamba Co-Operative Rural Bank Bank of Ceylon Mercantile Investment Ltd

48 Months 9 Months 48 Months 12 Months

Motor Vehicle
Mortgage Bond 15M

Leasing Portfolio HP Portfolio

14.

CASH AND CASH EQUIVALENTS IN THE CASH FLOW STATEMENT

2010 Rs. 7,771,603 65,878,767 (75,940,409) (2,290,039)

2009 Rs. 4,525,613 73,315,520 (200,497,608) (122,656,475)

Cash & Bank Balances Re-Purchase Agreements (Note 3) Bank Overdrafts (Note 13) Total Cash and Cash Equivalents for the Purpose of Cash Flow Statement

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Abans Financial Services Limited. NOTES TO THE FINANCIAL STATEMENTS Year ended 31 March 2010
15. OTHER PAYABLES Accrued Expenses Accrued Interest Trade Creditors Other Creditors Amounts due to Related Parties (15.1) 2010 Rs. 29,582,782 33,293,898 6,309,266 16,500,121 85,686,066 2010 Rs. Relationship Parent Company 16,500,121 16,500,121 2010 Rs. 2,589,813 2,589,813 69,724 2,659,537 2009 Rs. 39,796,452 22,879,221 435,492 16,091,052 79,202,217 2009 Rs. 16,091,052 16,091,052 2009 Rs. 1,038,000 345,100 1,383,100 1,206,713 2,589,813

15.1

Amounts due to Related Parties

Abans (Pvt) Ltd

16.

RETIREMENT BENEFIT LIABILITY Retirement Benefit Obligations - Gratuity Balance at 31.03.2009 Effect on adoption of - SLAS 16 (Revised) Balance at 01.04.2009 Provision made during the year Payments made during the year Balance at the end of the year

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: 2010 12.50% 12.50% 25% 55 years 2010 Number 17.1 17.2 Fully Paid Ordinary Shares 37,000,000 Rs. 382,373,630 Number 37,000,000 2009 Rs. 382,373,630 2009 12% 12% 27% 55 years

Discount Rate Future Salary Increases Staff Turnover Retirement Age 17. STATED CAPITAL

Rights of Shareholders The holders of ordinary shares confer their right to receive dividends as declared from time to time and are entitled to one vote per share at the meeting. All shares rank equally with regard to the Company's residual assets.

18.

RESERVES At the beginning of the year Loss for the year At the end of the year

Reserve Fund Rs. 1,020,000 1,020,000

Retained Earning/(Losses) Rs. (10,528,911) (64,729,544) (75,258,455)

Total Rs. (9,508,911) (64,729,544) (74,238,455)

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.

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Abans Financial Services Limited. NOTES TO THE FINANCIAL STATEMENTS Year ended 31 March 2010
19. DIVIDENDS PAID Declared and paid during the year Equity dividends on ordinary shares : Final dividend for 2008 : Rs.0.25 per share 20. 20.1 INCOME Summary Gross Income (20.2) 2010 Rs. 287,674,710 287,674,710 2010 Rs. 269,854,363 383,707 11,845,939 5,590,701 287,674,710 2010 Rs. 68,806,044 37,743,259 126,023,979 10,708,401 1,870,390 18,739,068 5,963,222 269,854,363 2010 Rs. 130,735,280 757,334 22,751,735 25,227,690 12,103,073 191,575,112 2010 Rs. 383,707 11,845,939 5,590,701 17,820,347 2010 Rs. 2009 Rs.

-

9,250,000 2009 Rs. 354,520,565 354,520,565 2009 Rs. 338,696,974 3,858,291 6,517,929 5,447,371 354,520,565 2009 Rs. 96,881,351 42,279,641 160,601,309 8,413,651 2,239,651 919,064 11,965,379 15,396,928 338,696,974 2009 Rs. 127,051,870 288,020 17,546,197 29,529,575 52,410,376 4,157,082 230,983,120 2009 Rs. 3,858,291 6,517,929 5,447,371 15,823,591

20.2

Segmental Analysis of Gross Income Interest Real Estate Fee Based Income Others

21.

INCOME FROM INTEREST BEARING ACTIVITIES Interest on Leases Interest on Loans Interest on Hire Purchase Overdue Interest Interest on Bank Deposits Interest income on Real Estate Default Interest Interest on Treasury Bills

22.

INTEREST EXPENSES Interest on Fixed Deposits Interest on Savings Interest on Loans Interest on Bank Overdrafts Interest on Commercial Papers Interest on Pro Notes

23.

OTHER INCOME Real Estate Profits and Income Profit from Fee based activities Sundry Income

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Abans Financial Services Limited. NOTES TO THE FINANCIAL STATEMENTS Year ended 31 March 2010
24. NET PROFIT /LOSS) STATED AFTER CHARGING THE FOLLOWING EXPENSES 2010 Rs. Included in Administrative Expenses Employees Benefits including the following - Defined Benefit Plan Costs - Gratuity (included in Employee Benefits) - Defined Contribution Plan Costs - EPF&ETF (included in Employee Benefits) Depreciation Auditor's Fees and Expenses Under/(Over) provision inrespect of previous Year Directors' Emoluments Advertising Costs 25. PROVISION FOR INCOME TAX The major components of income tax expense for the years ended 31 March are as follows : Income Statement Current Income Tax Current Income Tax charge Under/(Over) Provision of current taxes in respect of prior years Deferred Income Tax Deferred Taxation Charge/(Reversal) (25.2) Income tax expense reported in the Income Statement 25.1 A reconciliation between tax expense and the product of accounting profit multiplied by the statutory tax rate is as follows : 2010 2009 Rs. Rs. Accounting Profit/(Loss) before Income Tax (102,458,740) (21,342,272) Aggregate Disallowed items 245,712,607 184,155,787 Aggregate Allowable Expenses (150,499,587) (158,092,932) 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% Social Responsibility Levy 1.5% Gross Tax Liability Taxable Loss Tax losses brought forward Taxable Loss Carried Forward 25.2 Deferred Tax Assets, Liabilities and Income Tax relates to the followings Balance Sheet 2010 2009 Rs. Rs. 310,074 5,558,891 310,074 5,558,891 (930,838) (29,813,062) (2,536,002) (33,279,902) (785,649) (785,649) Income Statement 2010 2009 Rs. Rs. (5,248,817) 1,243,487 (5,248,817) 1,243,487 (145,189) (29,813,062) (2,536,002) (32,494,253) (37,743,070) (32,969,828) 4,773,242 (422,349) (7,245,720) (7,245,720) 1,652,204 24,783 1,676,987 2010 Rs. 13,874 (37,743,070) (37,729,196) 2009 Rs. 1,676,987 (191,504) 821,138 2,306,621 36,157,265 69,724 3,513,414 11,620,770 363,000 4,800,000 786,224 2009 Rs. 40,850,660 1,206,713 3,802,394 9,980,682 3,576,000 143,500 3,576,000 3,327,098

Deferred Tax Liability Capital allowances for tax purposes Deferred Tax Assets Defined Benefit Plans Provision for Bad and Doubtful Debt Brought Forward Tax Losses

(422,349) 821,138

Deferred tax Expense Net Deferred Tax Liability/(Asset)

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Abans Financial Services Limited. NOTES TO THE FINANCIAL STATEMENTS Year ended 31 March 2010

26. 26.1

EARNINGS / (LOSS) PER SHARE 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. 2010 Rs. Amounts Used as the Numerators: Net Profit Attributable to Ordinary Shareholders for Basic Earnings / (Loss) Per Share (64,729,544) 2010 Number 37,000,000 2009 Rs. (23,648,893) 2009 Number 37,000,000

26.2

Number of Ordinary Shares Used as Denominators for Basic Earnings/ /(Loss) per share Weighted Average number of Ordinary Shares in issue Applicable to Basic Earnings /(Loss) Per Share 27. MATURITY OF ASSETS AND LIABILITIES

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 given below. Less than 3 months Rs. 7,771,603 46,654,809 42,371,609 154,153,694 220,624,062 5,256,115 61,640,996 6,356,125 544,829,012 240,878,565 3-12 months Rs. 19,223,958 30,000 45,579,768 175,651,928 59,475,821 5,319,543 305,281,018 476,571,571 1-3 years Rs. 65,297,680 356,637,155 27,718,794 4,679,311 6,989,510 32,969,828 494,292,278 729,464,732 over 3 years Rs. 59,537,462 24,627,873 43,607,977 7,682,500 80,400 18,682,524 154,218,736 80,719,368 Total Rs. 7,771,603 65,878,767 42,401,609 324,568,604 777,541,018 136,058,707 79,322,350 80,400 13,345,635 18,682,524 32,969,828 1,498,621,044 1,527,624,236

Assets Cash and Bank Treasury Bills Placements with other banks Loans and Advances Lease rentals receivable & Stock out on hire Real Estate Stock Other Debtors, Deposits and Prepayments Investment Securities Tax Recoverable Property, Plant & Equipment Deferred Taxation As at 31.03.2010 As at 31.03.2009 Liabilities Deposits from Non-Bank Customers Borrowings Accrued Charges Retirement Benefit Liability As at 31.03.2010 As at 31.03.2009 28. 28.1 COMMITMENTS AND CONTINGENCIES Capital Expenditure Commitments

629,802,605 77,527,802 33,914,687 741,245,093 744,186,862

292,391,945 4,687,504 22,785,017 503,000 320,367,466 306,099,516

62,895,886 10,391,903 10,919,915 1,476,037 85,683,741 60,137,113

24,442,622 18,066,447 680,500 43,189,569 44,346,027

1,009,533,058 92,607,209 85,686,066 2,659,537 1,190,485,870 1,154,769,517

The Company has no commitments for acquisition of Property , Plant & Equipment incidental to the ordinary course of business. 28.2 There are no significant contingencies as at the balance sheet date

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29.

ASSETS PLEDGED

The following assets have been pledged as security for liabilities. Nature of Liability Bank Overdraft Term Loan Bank Overdraft Term Loan 344,707,658 617,650,191 Lease Rental Receivables and Stock Lease Rental Receivables and Stock Real Estate Real Estate Included Under

Abans Financial Services Limited
Carrying Amount Pledged 2010 2009 Rs. Rs. 269,902,071 246,175,182 35,189,301 279,124,416 39,616,285 39,616,285 52,734,308 Real Estate 2010 Rs. 2009 Rs. 2010 Rs. 2009 Rs. Others 2010 Rs. Total 2009 Rs. 2010 Rs. Term Loans 2009 Rs. 7,833,612 2,193,503 10,027,115 38,015,610 2,653,312 40,668,922 257,482,659 4,710,802 262,193,461 37,743,259 10,051,823 47,795,082 41,310,137 742,895 42,053,032 383,707 383,707 1,888,568 3,858,291 5,746,859 269,854,363 383,707 17,436,640 287,674,710 338,696,974 3,858,291 11,965,300 354,520,565 (390,133,450) (102,458,740) (102,458,740) 1,012,680,534 1,012,680,534 324,568,604 324,568,604 194,209,439 194,209,439 136,058,707 136,058,707 133,343,132 133,343,132 1,238,168,329 260,452,716 1,498,621,045 1,190,485,870 1,190,485,870 (375,862,836) (21,342,272) (2,306,621) (23,648,893) 1,340,233,105 187,401,132 1,527,634,237 1,154,769,517 1,154,769,517

Nature of assets

Lease & Hire Purchase Receivables Lease & Hire Purchase Receivables Real Estate -Panadura Land Real Estate

30.

FINANCIAL REPORTING BY SEGMENT

Abans Financial Services Limited. NOTES TO THE FINANCIAL STATEMENTS Year ended 31 March 2010

Lease & Stock out on Hire 2010 2009 Rs. Rs.

86

Interest Real Estate Fee Based Income & Others Total Revenue

224,277,492 4,807,607 229,085,099

Unallocated Expenses Profits/ (Loss) before Tax Income Tax expenses Net Profit /(Loss) for the period

Segment Asset Unallocated Assets Total Assets

777,541,018 777,541,018

Unallocated Liabilities Total Liabilities

31.

EVENTS OCCURRING AFTER THE BALANCE SHEET DATE

Introductory Document

There have been no material events occurring after the Balance Sheet date that require adjustments to or disclosure in the financial statements.

32.

RELATED PARTY DISCLOSURES

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 key management personnel and their close family members.

33.1 2010 Rs. 4,800,000 3,576,000 2009 Rs.

Transactions with individuals and their close family members who have significant voting power of the Company.

Abans Financial Services Limited
2010 Rs. 6,000,000 9,267,723 2009 Rs. 2,809,154 2,126,932 Total Other Related Parties ** 2010 2009 Rs. Rs. 2010 Value Rs. 2009 Value Rs. Abans Limited Parent Company 2010 2009 Rs. Rs. 141,773 31,655,915 10,129,063 7,290,195 14,213,658 702,948 2,410,151 1,500,000 50,000,000 20,853,281 20,853,281 32,316,664 1,495,000 7,290,195 14,213,658 702,948 141,773 2,410,151 1,500,000 50,000,000 20,853,281 20,853,281 63,972,579 11,624,063 -

a)

Compensation to key managerial personnel

Short Term Employee Benefits

b) Other transactions with key Managerial Personnel

Fixed Deposits/Promissory Notes accepted during the year Fixed Deposits/Promissory Notes held at the beginning of the year

Abans Financial Services Limited. NOTES TO THE FINANCIAL STATEMENTS Year ended 31 March 2010

34.2

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.

87

Nature of Transaction

Fixed Deposits Accepted during the year Fixed Deposits held at the end of the year Interest payable on Fixed Deposits Lease Facilities Granted Purchase of Articles Consumer Credit Granting Purchase of Articles Consumer Hire Purchase Facilities Purchase of Vehicles for Finance Lease Facilities Settlement of Liabilities on behalf of the Company Settlement of Liabilities by the Company on behalf o Transfer of Fixed Assets Funds Transferred (to)/ from the Company

**Other Related Parties include the following companies AB Technologies (Pvt) Ltd Crown City Developers (Pvt) Ltd

Introductory Document

"Other Related Parties are companies controlled / jointly controlled / significantly influenced by Key Management Personnel..

AUDITED FINANCIAL STATEMENTS AS AT 31ST MARCH 2009
Chartered Accountants
201 De Saram Place P. O. Box 101 Colombo 10 Sri Lanka Tel : (0) 11 2463500 Fax Gen : (0) 11 2697369 Tax : (0) 11 5578180 eysl@lk.ey.com

APAG/MRH/AKG/JJ 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 2009, and the income statement, statement of changes in equity and cash flow statement for the year then ended, and a summary of significant accounting policies and other explanatory notes. Management’s Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with Sri Lanka Accounting Standards. This responsibility includes: designing, implementing and maintaining internal 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. Scope of Audit and Basis of Opinion Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with Sri Lanka Auditing Standards. Those standards require that we plan and perform the audit to obtain reasonable assurance whether the financial statements are free from material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We have obtained all the information and explanations which to the best of our knowledge and belief were necessary for the purposes of our audit. We therefore believe that our audit provides a reasonable basis for our opinion. Opinion In our opinion, so far as appears from our examination, the Company maintained proper accounting records for the year ended 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 flows for the year then ended in accordance with Sri Lanka Accounting Standards.

Report on Other Legal and Regulatory Requirements In our opinion, these financial statements also comply with the requirements of Section 151(2) of the Companies Act No. 07 of 2007.

28 September 2009 Colombo.
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 Nanayakkara FCA FCMA B E Wijesuriya ACA ACMA

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Introductory Document

Abans Financial Services Limited. BALANCE SHEET Year ended 31 March 2009
Note ASSETS Cash and Amounts due from Banks Treasury Bills Eligible for Re-Discounting Placements with Other Banks Loans and Advances Lease Rentals Receivable and Stock Out on Hire Real Estate Stocks Other Debtors, Deposits and Prepayments Investment Securities Income Tax Recoverable Property, Plant and Equipment TOTAL ASSETS LIABILITIES Deposits from Non-Bank Customers Borrowings Other Payables Retirement Benefit Liability Income Tax Payable Deferred Taxation Total Liabilities SHAREHOLDERS' FUNDS Stated Capital Reserves Total Equity TOTAL EQUITY AND LIABILITIES Commitments and Contingencies 2009 Rs. 4,525,613 73,315,520 15,000,000 194,209,439 1,012,680,534 133,343,132 55,775,411 80,400 10,727,880 27,976,307 1,527,634,236 2008 Rs. 13,739,953 55,093,236 8,500,000 140,794,501 747,511,231 131,738,766 46,752,731 80,400 25,741,470 1,169,952,288

3 4 5 6 8 9 10 11

12 13 15 16 25

591,000,334 477,203,912 79,202,217 2,589,813 4,773,242 1,154,769,517

396,825,828 270,548,254 76,906,007 1,038,000 14,573,005 3,952,104 763,843,198

17 18

382,373,630 (9,508,911) 372,864,719 1,527,634,236 -

382,373,630 23,735,460 406,109,090 1,169,952,288 -

28

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

…………………………………….. Chief Finance Officer

The board of Directors is responsible for the preparation and presentation of the Financial statement signed for and on behalf of the board by ;

………………………………. Director

………………………………. Director

The Accounting Policies and notes on pages 93 through 109 form an integral part of the financial statements.

28 September 2009 Colombo

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Introductory Document

Abans Financial Services Limited. INCOME STATEMENT Year ended 31 March 2009
Note 2009 Rs. 354,520,565 338,696,974 (230,983,120) 107,713,854 23 15,823,591 123,537,445 2008 Rs. 205,558,532 184,543,497 (73,383,478) 111,160,019 21,015,035 132,175,054

Income Interest Income Interest Expense Net Interest Income Other Income Less: Expenses Staff Costs General and Administration Expenses Provision for Bad and Doubtful Loans Profit /(Loss) before VAT on Financial Service and Income Tax Value Added Tax on Financial Services Profit/(Loss) before Income Tax Income Tax Profit/(Loss) for the year

20 21 22

(40,850,660) (71,503,988) 7 (31,333,036) (20,150,240) (1,192,032) (21,342,272) 25 (2,306,621) (23,648,893)

(28,824,745) (52,934,768) (13,939,427) 36,476,115 (6,825,205) 29,650,910 (19,653,086) 9,997,824

Earnings/(Loss) Per Share

26

(0.64)

0.27

The Accounting Policies and notes on pages 93 through 109 form an integral part of the financial statements.

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Abans Financial Services Limited. STATEMENT OF CHANGES IN EQUITY Year ended 31 March 2009

Note

Stated Capital Rs. 382,373,630 -

Reserve Fund Rs. 520,000 500,000 1,020,000 1,020,000

Retained Earnings/ (Losses) Rs. 13,217,636 9,997,824 (500,000) 22,715,460 (345,100) (23,648,893) (9,250,000) (10,528,533)

Total Rs. 396,111,266 9,997,824 406,109,090 (345,100) (23,648,893) (9,250,000) 372,865,097

Balance as at 01 April 2007 Net Profit for the year Transferred to/from during the year Balance as at 31 March 2008 Transitional Provision Net Loss for the year Dividend Paid Balance as at 31 March 2009 19 16 18

382,373,630 382,373,630

The Accounting Policies and notes on pages 93 through 109 form an integral part of the Financial Statements.

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Abans Financial Services Limited. CASH FLOW STATEMENT Year ended 31 March 2009

Note Cash Flows From / (Used in) Operating Activities

2009 Rs.

2008 Rs.

Interest Received Receipts from Other Income Interest Paid Cash Payments to Employees and Expenses Profit from operation before Working Capital Changes

337,613,071 15,823,591 (218,803,742) (133,578,327) 1,054,592

177,623,933 29,724,659 (64,548,676) (79,228,924) 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 Placements with Banks (6,500,000) (8,500,000) 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 Net Cash From/(Used in) Operating Activities before Tax Payments Income Tax payments Net Cash used in Operating Activities Cash Flows from / (Used in) Investing Activities Acquisition of Property, Plant & Equipment Proceeds from Disposal of Property, Plant and Equipment Net Cash Flows from/(Used in) Investing Activities 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 Cash and Cash Equivalents at the beginning of the year Cash and Cash Equivalents at the end of the year 14 14 (15,594,902) (26,786,746) (42,381,648) (31,250) (3,526,134) (8,013,845) (11,539,979)

11

(12,444,514) 115,000 (12,329,514)

(12,401,228) 2,642,539 (9,758,689)

(9,250,000) (9,250,000) (63,961,162) (58,695,313) (122,656,475)

(21,298,668) (37,396,645) (58,695,313)

The Accounting Policies and notes on pages 93 through 109 form an integral part of the Financial Statements.

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Abans Financial Services Limited. NOTES TO THE FINANCIAL STATEMENTS Year ended 31 March 2009
1. CORPORATE INFORMATION

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.

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Abans Financial Services Limited. NOTES TO THE FINANCIAL STATEMENTS Year ended 31 March 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 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 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.

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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.

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Abans Financial Services Limited. NOTES TO THE FINANCIAL STATEMENTS Year ended 31 March 2009
2.4.6 Lease Rentals Receivable & Stock Out on Hire Assets leased to customers under agreements, which transfer substantially all the risks and rewards associated with ownership other than legal title, are classified as finance leases. Lease rentals receivable represents the total minimum lease payments due net of unearned income and allowance for doubtful recoveries. Assets sold to customers under fixed rate hire agreements, which transfer all the risks and rewards as well as the legal title at the end of such contractual period are classified as stock out on hire. Such assets are accounted for in a similar manner as finance leases.

2.4.7 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 Cost of conversion Land cost with legal charges. 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 the Property, Plant and Equipment when that cost is incurred, if the recognition criteria are met.

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Abans Financial Services Limited. NOTES TO THE FINANCIAL STATEMENTS Year ended 31 March 2009
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.

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Abans Financial Services Limited. NOTES TO THE FINANCIAL STATEMENTS Year ended 31 March 2009
b) Defined Contribution Plans – Employees’ Provident Fund & Employees’ Trust Fund Employees are eligible for Employees’ Provident Fund Contributions and Employees’ Trust Fund Contributions in line with respective Statutes and Regulations. The Company contributes 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 Company and the revenue and associated costs incurred or to be incurred can be reliably measured. Revenue is measured at the fair value of the consideration received or receivable net of trade discounts and sales taxes. The following specific criteria are used for the purpose of recognition of revenue.

a)

Income from Leasing Activities and Hire Purchase Agreements Income from Finance leases is recognised on the basis of the financing method. The excess of aggregate rental receivable over the cost of the leased assets constitute the total unearned income at the commencement of the contract. The earned income is taken into revenue over the term of the lease, commencing from the month in which the lease is executed, in proportion to the declining receivable balance of the lease. 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 is overdue 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.

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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.

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Abans Financial Services Limited. NOTES TO THE FINANCIAL STATEMENTS Year ended 31 March 2009
3. TREASURY BILLS ELIGIBLE FOR RE-DISCOUNTING WITH CENTRAL BANK Government of Sri Lanka Treasury Bills - Face Value Re-Purchase Agreements (Note 14) 2009 Rs. 73,315,520 73,315,520 2009 Rs. 15,000,000 15,000,000 2009 Rs. 16,829,255 88,633,405 16,120,660 12,766,493 23,244,040 19,026,918 5,086,531 12,925,362 194,632,665 (423,226) 194,209,439 2009 Rs. 12,287,528 10,920,254 (4,180,865) 19,026,918 2008 Rs. 55,093,236 55,093,236 2008 Rs. 8,500,000 8,500,000 2008 Rs. 9,345,066 72,063,419 22,016,271 12,387,461 13,178,730 12,287,528 141,278,475 (483,974) 140,794,501 2008 Rs. 2,892,223 10,583,693 (1,188,388) 12,287,528

4.

PLACEMENTS WITH OTHER BANKS Fixed Deposits

5.

LOANS AND ADVANCES

Real Estate Loans Mortgage Loans Vehicle Loans Personal Loans Loans Against Fixed Deposit & Pro Notes Staff Loans (5.1) Revolving Loans Pledge Loans Less - Provision for Bad debts - Charged to Income Statement (Note 7.2)

5.1

Loans granted to Company Officers, the movement of which is as follows :

Balance at the beginning of the year Add : Loans granted during the year Less : Repayments during the year Balance at the end of the year

6. LEASE RENTALS RECEIVABLE AND STOCK OUT ON HIRE Within one year 2009 2008 Rs. Rs. Gross Receivable - Lease Rentals - Amounts receivable from hirers Less: Unearned Income Net Receivable 270,840,719 414,097,008 684,937,727 (222,881,503) 462,056,224 189,125,988 279,558,493 468,684,481 (153,590,012) 315,094,469 1 - 5 years 2009 Rs. 314,518,988 492,757,280 807,276,268 (189,571,599) 617,704,669 2008 Rs. 291,267,240 310,173,579 601,440,819 (150,007,320) 451,433,499 2009 Rs. 585,359,707 906,854,288 1,492,213,995 (412,453,102) 1,079,760,893 Total 2008 Rs. 480,393,228 589,732,072 1,070,125,300 (303,597,332) 766,527,968

Less - Provision for Bad & Doubtful Debts - Charged Against Income Statement (Note 7.2) Rentals received in advance Finance charges in suspense

(45,037,728) 1,034,723,165 (2,198,804) (19,843,827) 1,012,680,534

(13,339,575) 753,188,393 (1,426,608) (4,250,554) 747,511,231

6.1

Non-Performing Advances included in the above Lease Rentals Receivable, Stock Out on Hire and Loans & Advances are as follows. Lease & Hire Purchase 2009 2008 Rs. Rs. 121,817,633 60,533,546 (19,843,827) (45,037,728) 56,936,078 (4,250,554) (13,339,575) 42,943,417 Term Loans 2009 Rs. 22,079,670 (3,387,554) (423,226) 18,268,890 2008 Rs. 14,096,065 (598,851) (483,974) 13,013,240 Total 2009 Rs. 143,897,303 (23,231,381) (45,460,954) 75,204,968 2008 Rs. 74,629,611 (4,849,405) (13,823,549) 55,956,657

Gross Non-performing Advances Less - Finance Charges Suspended - Provision for Bad Debts Net non-performing advances

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6. 6.2 LEASE RENTALS RECEIVABLE AND STOCK OUT ON HIRE (Contd..) Segmental Analysis of Loans and Advances, Leases, Hire Purchase by Industry Agriculture Manufacturing Services Trading Transport Construction Personal Others Distribution of Total Advances Lease Rental Receivables and Stock out on Hire Loans and Advances (Note 5) Total Advances 7. 7.1 PROVISION FOR BAD AND DOUBTFUL LOANS Movement in provision for Bad and Doubtful Loans Balance at the beginning of the year Charge during the year Write-off to Capital Written Back / (Written Off) during the year (Note 7.2) 2009 Rs. 42,026,452 255,519,691 84,616,335 248,515,187 189,853,620 119,123,219 43,856,518 290,802,153 1,274,313,175 1,079,680,510 194,632,665 1,274,313,175 2009 Rs. 14,266,050 31,333,036 (138,137) 45,460,949 2008 Rs. 15,694,038 140,502,050 35,540,551 123,778,201 81,793,609 111,484,434 130,741,361 268,272,199 907,806,443 766,527,968 141,278,475 907,806,443 2008 Rs. 326,623 13,939,427 14,266,050

7.2

Provision for Bad and Doubtful Debts consist of provisioning against ; Leases Hire Purchase Consumer Durables Provision for doubtful Leases and Stock out on hire (Note 6) Loans and Advances (Note 5) Deposits and Prepayments (Note 9)

14,712,486 18,995,204 11,330,033 45,037,723 423,226 45,460,949 2009 Rs. 138,448,132 (5,105,000) 133,343,132

1,227,900 12,111,675 13,339,575 483,975 442,500 14,266,050 2008 Rs. 133,380,966 (1,642,200) 131,738,766

8.

REAL ESTATE STOCKS

Real Estate Stocks Less : Advances received against Real Estate Stocks

8.1

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%). OTHER DEBTORS, DEPOSITS & PREPAYMENTS 2009 Rs. 38,159,412 12,530,823 5,085,176 55,775,411 2008 Rs. 29,641,779 10,353,723 (442,500) 7,199,729 46,752,731

9.

Other Debtors Deposits and Prepayments Provision for Deposits and Pre-payments Amounts due from Related Parties (9.1)

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9. 9.1 OTHER DEBTORS, DEPOSITS & PREPAYMENTS (Contd.) Amounts due from Related Parties Relationship Crown City Developers (Pvt) Ltd AB Technologies (Pvt) Ltd Abans Retails (Pvt) Ltd Abans (Pvt) Ltd Other Related Party Other Related Party Other Related Party Parent Company 2009 Rs. 903,572 740,059 3,441,545 5,085,176 2008 Rs. 903,572 3,071,833 3,224,324 7,199,729

9.2

Other Related Parties are companies controlled / jointly controlled / significantly influenced by Key Management Personnel. 2009 Rs. 2008 Rs.

10.

INVESTMENT SECURITIES Credit Information Bureau of Sri Lanka 80,400 80,400 80,400 80,400

11. 11.1

PROPERTY, PLANT & EQUIPMENT Gross Carrying Amounts Cost Balance as at 01.04.2008 Rs. 6,345,940 1,597,511 3,704,640 27,393,211 39,041,302 Balance as at 01.04.2008 Rs. 320,774 278,756 689,055 12,011,247 13,299,832 Balance as at 31.03.2009 Rs. 11,286,742 5,450,366 3,505,933 30,863,748 51,106,790 Balance as at 31.03.2009 Rs. 1,608,621 759,237 1,435,056 19,327,568 23,130,482 2008 Rs. 6,025,166 1,318,755 3,015,585 15,381,964 25,741,470 2008 3 - 8 Years 8 Years 4 Years 4 Years

Additions Rs. 4,940,802 3,852,855 180,320 3,470,537 12,444,514 Charge for the Year Rs. 1,287,847 480,481 896,033 7,316,321 9,980,682

Disposals/ Transfer Rs. (379,027) (379,027)

Furniture & Fittings Office Equipment Motor Vehicles Computer Equipment

11.2

Depreciation

Disposals/ Transfer Rs. (150,031) (150,031) 2009 Rs. 9,678,121 4,691,129 2,070,877 11,536,180 27,976,307 2009 3 - 8 Years 8 Years 4 Years 4 Years

Furniture & Fittings Office Equipment Motor Vehicles Computer Equipment

11.3

Net Book Value At Cost Furniture and Fittings Office Equipment Motor Vehicles Computer Equipment

11.4

The useful lives of the assets is estimated as follows Furniture and Fittings Office Equipment Motor Vehicles Computer Hardware

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.

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12.

DEPOSITS FROM NON BANK CUSTOMERS

2009 Rs. 586,496,752 4,503,582 591,000,334 2009 Rs. 139,991,514 200,497,608 96,714,790 40,000,000 477,203,912

2008 Rs. 396,825,828 396,825,828 2008 Rs. 26,232,913 35,630,565 127,528,502 81,156,274 270,548,254

Fixed Deposits Savings Deposits

13.

BORROWINGS Promissory Notes Bank and Other Loans (13.1) Bank Overdrafts (Note 14) Borrowings under Commercial Papers Borrowings on Treasury Bills

13.1

Bank and Other Loans

As at 01.04.2008 Rs. 2,630,565 33,000,000 35,630,565

Loans Obtained Rs. 15,000,000 25,000,000 100,000,000 140,000,000

Repayments Rs. (555,715) (33,000,000) (2,083,336) (35,639,051)

As at 31.03.2009 Rs. 2,074,850 15,000,000 22,916,664 100,000,000 139,991,514

Terms of the Loan

Security Offered

Pan Asia Banking Corporation PLC Wayamba Co-Operative Rural Bank Wayamba Co-Operative Rural Bank Bank of Ceylon Mercantile Investments Ltd

48 Months 9 Months 9 Months 48 Months 12 Months

Motor Vehicle Mortgage Bond HP Portfolio Leasing Portfolio HP Portfolio

14.

CASH AND CASH EQUIVALENTS IN THE CASH FLOW STATEMENT

2009 Rs. 4,525,613 73,315,520 (200,497,608) (122,656,475) 2009 Rs. 39,796,452 22,879,221 435,492 16,091,052 79,202,217 2009 Rs.

2008 Rs. 13,739,953 55,093,236 (127,528,502) (58,695,313) 2008 Rs. 30,319,722 10,699,843 31,789,188 868,359 3,228,895 76,906,007 2008 Rs. 3,228,895 3,228,895

Cash and Bank Balances Re-Purchase Agreements (Note 3) Bank Overdrafts (Note 13) Total Cash and Cash Equivalents for the Purpose of Cash Flow Statements

15.

OTHER PAYABLE Accrued Expenses Accrued Interest Trade Creditors Other Creditors Amounts due to Related Parties (15.1)

15.1

Amounts due to Related Parties Relationship Parent Company

Abans (Pvt) Ltd

16,091,052 16,091,052

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16. RETIREMENT BENEFIT LIABILITY Retirement Benefit Obligations - Gratuity Balance at 31.03.2008 Transitional Provision Balance at 01.04.2008 Provision made during the year Payments made during the year Balance at the end of the year 2009 Rs. 1,038,000 345,100 1,383,100 1,206,713 2,589,813 2008 Rs. 553,000 516,250 (31,250) 1,038,000

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: 2009 12% 12% 27% 55 years 2008 12% 12% 27% 55 years

Discount Rate Future Salary Increases Staff Turnover Retirement Age

17.

STATED CAPITAL Number

2009 Rs. 382,373,630 Number

2008 Rs. 382,373,630

17.1

Fully Paid Ordinary Shares

37,000,000

37,000,000

17.2

Rights of Shareholders The holders of ordinary shares confer their right to receive dividends as declared from time to time and are entitled to one vote per share at the meeting. All shares rank equally with regard to the Company's residual assets. Reserve Fund Rs. 1,020,000 1,020,000 1,020,000 Retained Earning/(Losses) Rs. 22,715,460 (345,100) (9,250,000) (23,649,271) (10,528,911) (10,528,911) Total Rs. 23,735,460 (9,508,911) (9,508,911)

18.

RESERVES

At the beginning of the year Effect on adoption of - SLAS 16 (Revised) Dividends Paid (Note 19) Loss for the year Transfers to/(from) during the year (18.1) At the end of the year

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. 18.1 19. No Transfer has been made due to the Company incurring a loss during the financial year. DIVIDENDS PAID Declared and paid during the year Equity dividends on ordinary shares : Final dividend for 2008 : Rs. 0.25 per share) 2009 Rs. 2008 Rs.

9,250,000

-

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Abans Financial Services Limited. NOTES TO THE FINANCIAL STATEMENTS Year ended 31 March 2009
20. 20.1 INCOME Summary Gross Income (20.2) Segmental Analysis of Gross Income Interest (Note 21) Real Estate (Note 23) Fee Based Income (Note 23) Others (Note 23) 21. INCOME FROM INTEREST BEARING ACTIVITIES Interest on Leases Interest on Loans Interest on Hire Purchase Interest on Overdue Interest on Bank Deposits Interest income on Real Estate Default Interest Interest on Treasury Bills 2009 Rs. 354,520,565 354,520,565 2009 Rs. 338,696,974 3,858,291 6,517,929 5,447,371 354,520,565 2009 Rs. 96,881,351 69,561,079 133,319,871 8,413,651 2,239,651 919,064 11,965,379 15,396,928 338,696,974 2009 Rs. 127,051,870 288,020 17,546,197 29,529,575 52,410,376 4,157,082 230,983,120 2009 Rs. 3,858,291 6,517,929 5,447,371 15,823,591 2009 Rs. Included in Administrative Expenses Employees Benefits including the following 40,850,660 - Defined Benefit Plan Costs - Gratuity (included in Employee Benefits) 1,206,713 - Defined Contribution Plan Costs - EPF&ETF (Included in Employee Benefits) 3,802,394 Depreciation Auditor's Fees and Expenses Directors' Emoluments Advertising Costs 9,980,682 473,500 3,576,000 3,327,098 2008 Rs. 205,558,532 205,558,532 2008 Rs. 184,543,497 8,265,376 6,780,475 5,969,184 205,558,532 2008 Rs. 60,731,785 19,435,614 94,758,027 3,701,895 380,814 1,499,104 2,245,857 1,790,401 184,543,497 2008 Rs. 30,175,665 9,180,925 11,681,648 18,238,826 4,106,414 73,383,478 2008 Rs. 8,265,376 6,780,475 5,969,184 21,015,035 2008 Rs. 28,824,746 516,250 2,298,435 7,877,954 480,275 3,000,000 8,354,997

20.2

22.

INTEREST EXPENSES Interest on Fixed Deposits Interest on Savings Interest on Loans Interest on Bank Overdrafts Interest on Commercial Papers Interest on Promissory Notes

23.

OTHER INCOME Real Estate Profits and Income (Note 20.2) Profit from Fee based activities (Note 20.2) Sundry Income (Note 20.2)

24.

PROFIT /LOSS) FROM CONTINUING OPERATIONS

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Abans Financial Services Limited. NOTES TO THE FINANCIAL STATEMENTS Year ended 31 March 2009
25. PROVISION FOR INCOME TAX The major components of income tax expense for the years ended 31 March are as follows : Income Statement 2009 Rs. Current Income Tax Current Income Tax charge 1,676,987 Over Provision of current taxes in respect of prior years (191,504) Deferred Income Tax Deferred Taxation Charge (25.2) Income tax expense reported in the Income Statement 25.1 821,138 2,306,621

2008 Rs. 18,225,232 1,427,854 19,653,086

A reconciliation between tax expense and the product of accounting profit multiplied by the statutory tax rate is as follows : 2009 2008 Rs. Rs. Accounting Profit/(Loss) before Income Tax Aggregate Disallowed items Aggregate Allowable Expenses Income not subject to Tax Less: Carried forward Tax Losses Taxable Profit Income Tax Expense at the statutory income tax rate of 35% Social Responsibility Levy 1.5% (2008 - 1%) Gross Tax Liability The Company's operations were taxed at the rate of 35% during the year . (21,342,272) 184,155,787 (158,092,932) 4,720,583 4,720,583 1,652,204 24,783 1,676,987 29,650,910 131,334,593 (109,428,978) 51,556,525 51,556,525 18,044,784 180,448 18,225,232

25.2

Deferred Tax Assets , Liabilities and Income Tax relates to the followings Balance Sheet 2009 2008 Rs. Rs. Deferred Tax Liability Capital allowances for tax purposes Deferred Tax Assets Defined Benefit Plans Deferred tax Expense Net Deferred Tax Liability 4,773,242 3,952,104 5,558,891 5,558,891 (785,649) (785,649) 4,315,404 4,315,404 (363,300) (363,300) Income Statement 2009 2008 Rs. Rs. 1,243,487 1,243,487 (422,349) (422,349) 821,138 1,597,604 1,597,604 (169,750) (169,750) 1,427,854

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Abans Financial Services Limited. NOTES TO THE FINANCIAL STATEMENTS Year ended 31 March 2009
26. 26.1 EARNINGS / (LOSS) PER SHARE 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. 2009 Rs. Amounts Used as the Numerators: Net Profit Attributable to Ordinary Shareholders for Basic Earnings / (Loss) Per Share (23,648,893) 2009 Number 37,000,000 2008 Rs. 9,997,824 2008 Number 37,000,000

26.2

Number of Ordinary Shares Used as Denominators for Basic Earnings/ /(Loss) per share Weighted Average number of Ordinary Shares in issue Applicable to Basic Earnings /(Loss) Per Share

27.

MATURITY OF ASSETS AND LIABILITIES 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 given below. Less than 3 months Rs. 4,525,613 69,222,758 15,000,000 29,240,717 112,972,731 3,275,336 6,641,404 240,878,560 203,864,621 3-12 months Rs. 4,092,762 62,046,745 271,247,757 133,343,132 5,841,175 476,571,571 408,335,357 1-3 years Rs. 83,036,620 627,294,562 15,047,074 4,086,476 729,464,732 411,307,330 over 3 years Rs. 19,885,357 1,165,478 31,611,826 80,400 27,976,307 80,719,368 146,444,980 Total Rs. 4,525,613 73,315,520 15,000,000 194,209,439 1,012,680,529 133,343,132 55,775,411 80,400 10,727,880 27,976,307 1,527,634,231 1,169,952,288

Assets Cash and Amounts due from Banks Treasury Bills Eligible for Re-Discounting Placements with Other Banks Loans and Advances Lease Rentals Receivable and Stock Out on Hire Real Estate Stocks Other Debtors, Deposits and Prepayments Investment Securities Income Tax Recoverable Property, Plant and Equipment As at 31.03.2009 As at 31.03.2008 Liabilities Deposits from Non-Bank Customers Borrowings Other Payable Retirement Benefit Liability Income Tax Payable Deferred Taxation As at 31.03.2009 As at 31.03.2008

379,615,379 325,018,293 36,963,378 2,589,813 744,186,862 542,297,216

157,244,316 129,687,406 19,167,794 306,099,516 155,326,697

43,795,455 12,490,008 3,851,650 60,137,113 48,974,041

10,345,184 10,008,205 19,219,396 4,773,242 44,346,027 17,245,244

591,000,334 477,203,912 79,202,217 2,589,813 4,773,242 1,154,769,517 763,843,198

28. 28.1

COMMITMENTS AND CONTINGENCIES Capital Expenditure Commitments The Company has purchased commitments for acquisition of Property, Plant & Equipment incidental to the ordinary course of business are, 2009 Rs. Authorised by the Board, but not contracted for 2008 Rs. -

28.2

There are no significant contingencies as at the balance sheet date

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29.

ASSETS PLEDGED

The following assets have been pledged as security for liabilities. Nature of Liability Bank Overdrafts Lease Rental Receivables and Stock Out on Hire Included Under

Nature of assets

Abans Financial Services Limited
Carrying Amount Pledged 2009 2008 Rs. Rs. 246,175,182 206,792,790 Term Loan Bank Overdrafts Term Loan 279,124,416 39,616,285 52,734,308 617,650,191 206,792,790 Real Estate Lease & Stock out on Hire 2009 2008 Rs. Rs. 2009 Rs. 2009 Rs. Term Loans 2009 2008 Rs. Rs. Real Estate 2008 Rs. Others 2008 Rs. 2009 Rs. Total 2008 Rs. 257,482,659 4,710,802 262,193,461 155,489,812 6,396,075 161,885,887 41,310,137 742,895 42,053,032 19,435,614 384,400 19,820,014 1,888,568 3,858,291 5,746,859 1,499,104 8,265,376 9,764,480 38,015,610 2,653,312 40,668,922 8,118,967 5,969,184 14,088,151 338,696,974 3,858,291 11,965,300 354,520,565 184,543,497 8,265,376 12,749,659 205,558,532 (375,862,836) (21,342,272) (2,306,621) (23,648,893) 1,012,680,534 1,012,680,534 747,511,231 747,511,231 194,209,439 194,209,439 140,794,501 140,794,501 133,343,132 133,343,132 131,738,766 131,738,766 1,340,233,105 187,401,132 1,527,634,236 1,154,769,517 1,154,769,517 (175,907,623) 29,650,909 (19,653,085) 9,997,824 1,020,044,498 149,907,790 1,169,952,288 763,843,198 763,843,198

Lease Receivables

Lease & Hire Purchase Receivables Real Estate Real Estate

Abans Financial Services Limited. NOTES TO THE FINANCIAL STATEMENTS Year ended 31 March 2009

30.

FINANCIAL REPORTING BY SEGMENT

108

Interest Real Estate Fee Based Income & Others Total Revenue

Unallocated Expenses Profit/ (Loss) before Tax Income Tax expenses Net Profit /(Loss) for the year

Segment Asset Unallocated Assets Total Assets

Unallocated Liabilities Total Liabilities

31.

EVENTS OCCURRING AFTER THE BALANCE SHEET DATE

Introductory Document

There have been no material events occurring after the Balance Sheet date that require adjustments to or disclosure in the financial statements.

Abans Financial Services Limited. NOTES TO THE FINANCIAL STATEMENTS Year ended 31 March 2009

32.

RELATED PARTY DISCLOSURES 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 key management personnel and their close family members.

33.1

Transactions with individuals and their close family members who have significant voting power of the Company. a) Compensation to Key Managerial Personnel 2009 Rs. 3,576,000 2009 Rs. 2,809,154 2,126,932 2008 Rs. 3,700,000 2008 Rs. 13,652,409 3,610,151

Short Term Employee Benefits

b)

Other transactions with key Managerial Personnel Fixed Deposits/Promissory Notes accepted during the year Fixed Deposits/Promissory Notes held at the beginning of the year

34.2

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 Parent Company 2009 2008 Rs. Rs. Nature of Transaction As at 1 April, 2008 Fixed Deposits Accepted during the year Fixed Deposits held at the end of the year Interest payable on Fixed Deposits Lease Facilities Granted Purchase of Articles Consumer Credit Granting Purchase of Articles Consumer Hire Purchase Facilities Purchase of Vehicles for Finance Lease Facilities Settlement of Liabilities on behalf of the Company Settlement of Liabilities by the Company on behalf of Oth Transfer of Fixed Assets Funds Transferred to the Company 31,655,915 10,129,063 86,835,864 1,021,420 10,784,381 2,210,387 2,409,842 23,421,989 20,853,281 20,853,281 32,316,664 1,495,000 23,708,586 16,961,470 234,144 3,902,198 1,900,369 903,572 20,853,281 20,853,281 63,972,579 11,624,063 23,708,586 16,961,470 234,144 3,902,198 86,835,864 1,021,420 10,784,381 4,110,756 3,313,414 23,421,989 Total Other Related Parties ** 2009 2008 Rs. Rs. 2009 Rs. 2008 Rs.

**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.

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Abans Financial Services Limited.

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.

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