Sri Lanka Wonder of Asia

An Indian Ocean island republic famous for its tea, coffee and cinnamon, Sri Lanka bore the brunt of the 2004 Asian tsunami. BRAC quickly responded to the disaster by setting up relief and emergency operations in 2005. Since then, BRAC has expanded its outreach, touching the lives of an estimated 527,000 Sri Lankans, helping to improve livelihoods through rigorous capacity development training and providing over USD 74.2 million in microloans, with 74,000 active borrowers across the country’s 15 most vulnerable districts.

What started out in 1972 in a remote village of Bangladesh as a limited relief operation BRAC - has turned into the largest development organisation in the world. Of major nongovernmental organisation, it is one of the few based in the global south.

Today, BRAC is a development success story, spreading solutions born in Bangladesh to 10 other countries around the world – a global leader in creating opportunity for the world’s poor. Organising the poor using communities’ own human and material resources, it catalyses lasting change, creating an ecosystem in which the poor have the chance to seize control of their own lives. We do this with a holistic development approach geared toward inclusion, using TOOLSÖLIKEÖMICROÙNANCE ÖEDUCATION ÖHEALTHCARE ÖLEGALÖ services, community empowerment and more.

Our work now touches the lives of an estimated 126 million people, with staff and BRAC-trained entrepreneurs numbering in the hundreds of thousands – a global movement bringing change to 10 countries in Asia, Africa and the Caribbean, with operations in our 11th country, Philippines, being launched in 2012. BRAC LANKA (GUARANTEE LIMITED) 40th Year Special Edition Harnessing the past Enriching the future

Contents

Our Mission, Vision and Values 01 Chairperson’s Statement 02 0LFURÛQDQFH Governance 08 Management 09 Development partners 09 BRAC across the world 10 Harnessing the past 12 Financials 15 1 BRAC Annual Report 2011

Vision, Mission and Values

Vision Mission Values A world free from all forms Our mission is to empower Innovation of exploitation and people and communities in For forty years, BRAC has been an innovator in the creation of opportunities for the poor to discrimination where situations of poverty, illiteracy, lift themselves out of poverty. We value everyone has the opportunity disease and social injustice. creativity in programme design and strive to display global leadership in groundbreaking to realise their potential. Our interventions aim to development initiatives. achieve large scale, positive changes through economic Integrity and social programmes that We value transparency and accountability in all our professional work, with clear policies enable men and women to and procedures, while displaying the utmost realise their potential. level of honesty in our financial dealings. We hold these to be the most essential elements of our work ethic.

Inclusiveness We are committed to engaging, supporting and recognising the value of all members of society, regardless of race, religion, gender, nationality, ethnicity, age, physical or mental ability, socioeconomic status and geography.

Effectiveness We value efficiency and excellence in all our work, constantly challenging ourselves to perform better, to meet and exceed programme targets, and to improve and deepen the impact of our interventions. 2 BRAC Annual Report 2011 Chairperson’s Statement

It gives me great pleasure to present the ANNUALÖREPORTÖANDÖTHEÖAUDITEDÖÙNANCIALÖ statements for the year ended 31 December 2011.

The year concluded saw Sri Lanka engaging in large-scale reconstruction and development projects following the end OFÖTHEÖ YEARÖCONÚICTÖWITHÖTHEÖ,IBERATIONÖ Tigers of Tamil Eela, including increasing electricity access and rebuilding its road and rail network. Sri Lanka now seeks to reduce poverty by using a combination of state directed policies and private investment promotion to spur growth in disadvantaged areas, develop small and medium enterprises, and promote increased agriculture. In a country with a population of over 21 million, the unemployment rate is relatively low, standing at 4.3 per cent as of 2011, the lowest yet for the country. Continued employment generation was due to reconstruction, infrastructure development and expansion of economic activities.

In 2011, BRAC Sri Lanka began its agricultural development programme to provide farmers living below the poverty LINEÖWITHÖAGRICULTURE SPECIÙCÖCREDITÖSUPPORTÖ With the support of our development partner Etimos, 471 farmers in this programme have received orientation and input support for the cultivation of cocoa plants which they can sell to Etimos’ cocoa factory, based in Sri Lanka, at a fair wage. BRAC Annual Report 2011 3

BRAC continues to provide relief in areas Through our extensive global experience I take this opportunity to commend our suffering from environmental disasters. INÖMICROÙNANCE ÖWEÖKNOWÖTHATÖLIVELIHOODÖ team in Sri Lanka who have worked with With the support from Stromme development works best when it goes enduring commitment and loyalty to Foundation and food donations from its beyond providing loans. In Sri Lanka, engage every opportunity that has come BENEÙCIARYÖFARMERS Ö"2!#ÖHASÖPROVIDEDÖ "2!#lSÖHOLISTICÖMICROÙNANCEÖPROGRAMMEÖ our way. The quality of our performance ÖPEOPLEÖAFFECTEDÖBYÖTHEÖÚOODSÖINÖ acts as a capacity-building platform. is attributed to this remarkably competent eastern Sri Lanka in February 2011 A combination of local knowledge and team, their knowledge, skills and with dried and cooked foods while they rigorous training means that our staff professionalism. I extend my sincere focused on rebuilding their livelihoods. are best placed to support the poorest, thanks to the members of the governing At the request of the government of Sri MOSTÖMARGINALISEDÖBENEÙCIARIESÖINÖTHEIRÖ body, whose leadership and foresight has Lanka, BRAC has also provided public entrepreneurial endeavours. BRAC’s steered the company to success. I thank LATRINESÖFORÖÙSHERMENÖINÖTHEÖPORTÖOFÖ4RICNO Ö local staff are women, employed the government and our development ÚOORÖMATSÖFORÖÚOODÖVICTIMSÖINÖ"ATTICOLA Ö from within the branch areas in which partners in Sri Lanka for their continued and sports and wet weather materials for they work, ensuring a truly contextual support as we strive to create greater school children in southern Sri Lanka. understanding of the challenges faced value in our services to contribute towards locally. The combination of all our efforts the progress and prosperity of Sri Lanka. In 2011, BRAC directed its efforts results in enhanced livelihoods of women to scaling up its services, opening across the country, in turn ensuring ÖNEWÖBRANCHESÖINÖÙVEÖDISTRICTSÖINÖ PROGRESSÖTOWARDSÖACHIEVINGÖTHEÖÙRSTÖANDÖ western, central, north central and third Millennium Development Goals, eastern provinces of Sri Lanka. We have eradicating extreme poverty and hunger organised 112,329 members, all women, and the empowerment of women. In the into 6,131 village organisations. Over coming year, BRAC hopes to continue 74,000 members (including 36,022 new its expansion to reach more of the most members) are actively borrowing and vulnerable women in rural Sri Lanka. more than USD 74.2 million has been disbursed to date. We provided holistic capacity development training to 177 members of staff.

While our work in Sri Lanka started with disaster relief and rehabilitation following the Indian Ocean tsunami of 2004, by 2007 our focus had turned to longer term efforts in revitalising affected enterprises ANDÖECONOMIESÖTHROUGHÖMICROÙNANCEÖ With the end to three decades of armed CONÚICTÖINÖ Ö"2!#lSÖWORKÖINÖ3RIÖ,ANKAÖ aims to build livelihoods to help turn the peace dividends into a practical reality. 4 BRAC Annual Report 2011 BRAC Programmes Microfinance

)NNOVATIVE ÖCLIENT FOCUSEDÖANDÖSUSTAINABLE ÖTHEÖ"2!#ÖMICROÙNANCEÖPROGRAMMEÖISÖAÖCRITICALÖCOMPONENTÖOFÖOURÖHOLISTICÖ approach to support livelihoods. Over the course of the last four decades, we have grown to become one of the WORLDlSÖLARGESTÖPROVIDERSÖOFÖÙNANCIALÖSERVICESÖTOÖTHEÖPOOR ÖPROVIDINGÖTOOLSÖWHICHÖMILLIONSÖCANÖUSEÖFORÖTHEÖBETTERMENTÖOFÖ their lives.

Filling service gaps for the poor

$ESPITEÖTHEÖSIGNIÙCANTÖSTEPSÖFORWARDÖSINCEÖTHEÖCIVILÖWARÖOFÙCIALLYÖENDEDÖINÖÖANDÖTHEÖ devastating impact of the 2004 Tsunami eased, it is estimated that 1.8 million people in Sri Lanka remain below the poverty line . Economic activity is concentrated in the prosperous western provinces, with huge income differentials in the eastern and inland RURALÖDISTRICTSÖ"2!#ÖAIMSÖTOÖÙLLÖTHEÖGAPSÖINÖÙNANCIALÖSERVICESÖACROSSÖTHEÖCOUNTRYÖANDÖTOÖ support its clients as they grow.

Women attend a BRAC Village Organizations weekly collection meeting in Madapathana neighbourhood of Galle district. Sri Lanka. Microfinance BRAC Annual Report 2011 5

Our approach: 4UFQTUPXBSEÙOBODJBMJODMVTJPO

#3"$mTNJDSPÙOBODF

:4,SVHUZ programme reliably serves MYVT THPUZ[YLHT millions each year - a IHURZ rarity anywhere. Recent improvements in products 4PJYVLU[LYWYPZL and delivery mechanisms SVHUZ further allow BRAC to EFMJWFSCFUUFSÙOBODJBM services to the poor in the 4PJYVSVHUZ years to come.

Gregory C. Chen ;HYNL[LKHZZL[ Regional Representative for South Asia NYHU[ZHUK Consultative Group to Assist the Poor ZVM[SVHUZ (CGAP)

As depicted in the diagram, we address Serving women borrowers /URÖWOMENÖBORROWERSÖMUSTÖÙRSTÖORGANISEÖ THEÖSCARCITYÖOFÖÙNANCIALÖACCESSÖTOÖPOORÖ THEMSELVESÖINTOÖGROUPSÖOFÖÙVE ÖEACHÖWITHÖ women by providing them with targeted At the core of our intervention is the their own elected leader. These groups ÙNANCIALÖSERVICESÖ"2!#ÖSTRONGLYÖBELIEVESÖ collateral-free micro-loan, exclusively meet weekly in their VOs to receive that the poor are able to help themselves provided to women participating in support and discuss their business when organised effectively. With this in the VOs. Understanding the limits challenges and successes. In these mind, BRAC conducts comprehensive OFÖMICROÙNANCE ÖWEÖTARGETÖPOORÖBUTÖ meetings, women make loan repayments door-to-door surveys, consulting traditional economically active women, typically and receive further disbursements under and government leaders to select poor, INVOLVEDÖINÖTAILORING ÖÙSHING ÖFOODÖ THEÖGUIDANCEÖOFÖTHEIRÖTRAINEDÖCREDITÖOFÙCERÖ uneducated but economically active processing, agriculture and small women. To date, BRAC has mobilised BUSINESSESÖ/URÖCREDITÖOFÙCERSÖAREÖ $ISBURSEMENTCRITERIA over 112,000 such women into village responsible for identifying clients and organisations (VOs), each consisting of forming VOs from among the women in 20 to 40 members, across 15 districts out their target areas. p Household monthly income of 25 of Sri Lanka. These groups, led by less then or up to LKR 15000. AÖRIGOROUSLYÖTRAINEDÖ"2!#ÖCREDITÖOFÙCER Ö 4ARGETBENEÚCIARIES p Participation in six weekly network and support the women to be p Poor, economically active women group meetings prior to start of effective conduits for their own social disbursements change. aged 18 to 60 pÖ ,IVINGÖWITHINÖÙVEÖKILOMETRESÖOFÖONEÖÖ p Loan range of LKR10,000-100,000 Ö OFÖOURÖÖBRANCHÖOFÙCESÖFORÖAÖPERIODÖÖ LKR (USD 80-800) Ö OFÖATÖLEASTÖÙVEÖYEARS p Repayment in equal weekly pÖ .OTÖSERVEDÖBYÖOTHERÖMICROÙNANCEÖÖ instalments organisations pÖ ÖÚATÖRATEÖOFÖINTEREST p Priority to female-headed pÖ ,+2Ö Ö53$Ö ÖBENEÙTÖÖ Ö households and widows with provided to family on borrower’s children death 6 BRAC Annual Report 2011 Microfinance

Achievements of 2011 Capacity development programme for BRAC staff: Through our extensive global experience INÖMICROÙNANCE ÖWEÖKNOWÖTHATÖLIVELIHOODÖ !GRICULTURALDEVELOPMENT BRAC’s local staff are women, employed from within the branch areas in which development works best when it goes In 2011, BRAC Sri PROGRAMME they work, ensuring a truly contextual beyond providing loans. In Sri Lanka, Lanka began its agricultural development understanding of the challenges faced "2!#lSÖHOLISTICÖMICROÙNANCEÖPROGRAMMEÖ programme. Partnering with Etimos Lanka, locally. Staff across all 15 districts acts as a capacity-building platform. BRAC provides farmers living below the participate in an intensive capacity Clients are encouraged to save and learn POVERTYÖLINEÖWITHÖAGRICULTURE SPECIÙCÖCREDITÖ development programme, comprising from each other, before being given careful support. The programme has disbursed support to select, develop and manage ÙNANCIALÖANDÖOPERATIONSÖMANAGEMENTÖANDÖ LKR 55 million to 2643 farmers in selected enterprise development, followed up with their own small businesses effectively. rural areas of Trincomalee and Kurunagala periodic refresher sessions. "2!#lSÖBENEÙCIARIESÖANDÖSTAFFÖGOÖONÖ districts. The farmers continue to be to act as highly effective vehicles for supported through VOs and monthly development within their communities. farmers meetings with an emphasis on The year in numbers improving the production of the agricultural Future plans sector. A combination of local knowledge and rigorous training means that our staff are best placed to support the poorest, 4OÖCONTINUEÖSUPPORTINGÖOURÖBENEÙCIARIESlÖ With Etimos’ support, we gave orientation growth, our team is currently developing a MOSTÖMARGINALISEDÖBENEÙCIARIESÖINÖTHEIRÖ on cocoa cultivation to 471 farmers and micro-leasing service to begin in 2012. In distributed cocoa plants to 311 farmers. entrepreneurial endeavours. In 2011, BRAC directed its efforts to scaling up its partnership with leasing specialists, BRAC Farmers will have the opportunity to sell hopes to provide its borrowers with the SERVICES ÖOPENINGÖÖNEWÖBRANCHESÖINÖÙVEÖ the cocoa they produce to Etimos’ cocoa opportunity to lease otherwise prohibitively factory, based in Sri Lanka, at a fair wage. districts in western, central, north central and eastern provinces of Sri Lanka. We expensive agricultural machinery and have organised 112,329 members (100% vehicles, increasing the pace and scale of Relief: BRAC continues to provide women) into 6,131 village organisations. production and allowing them to truly alter relief in areas suffering from environmental Over 74,000 members (including 36,022 their future. disasters. Supported by Stromme new members) are actively borrowing and Foundation and food donations from its more than USD 74.6 million (USD 23.2 In the coming year, BRAC hopes to BENEÙCIARYÖFARMERS Ö"2!#ÖPROVIDEDÖÖ million in 2011) has been disbursed to continue its expansion to reach more of PEOPLEÖAFFECTEDÖBYÖTHEÖÚOODSÖINÖEASTERNÖ3RIÖ date. We provided with holistic capacity the most vulnerable women in rural Sri Lanka (Batticaloa, Trincomalee, Ampara, development training to 177 members of Lanka. Anuradapura) in February 2011 with dried staff. and cooked foods to support them while they focused on rebuilding their livelihoods. 3CALINGUPANDADAPTATION At the request of the government of Sri Lanka, BRAC has also provided public Initiated in Bangladesh, BRAC is LATRINESÖFORÖÙSHERMENÖINÖTHEÖPORTÖOFÖ4RICNO Ö CURRENTLYÖIMPLEMENTINGÖCONTEXTÖSPECIÙCÖ ÚOORÖMATSÖFORÖÚOODÖVICTIMSÖINÖ"ATTICOLA ÖANDÖ MICROÙNANCEÖPROGRAMMESÖINÖNINEÖOTHERÖ sports and wet weather materials for 550 countries including Afghanistan, Liberia, school children in southern Sri Lanka. Pakistan, Sierra Leone, South Sudan, Sri Lanka, Tanzania, Uganda and Haiti. While The combination of all our efforts results in our work in Sri Lanka started with disaster enhanced livelihoods of women across the relief and rehabilitation following the Indian country, in turn ensuring progress towards Ocean tsunami of 2004, by 2007 our ACHIEVINGÖTHEÖÙRSTÖANDÖTHIRDÖ-ILLENNIUMÖ focus had turned to longer term efforts Development Goals, eradicating in revitalising affected enterprises and extreme poverty and hunger and the ECONOMIESÖTHROUGHÖMICROÙNANCEÖ7ITHÖTHEÖ empowerment of women. ENDÖTOÖTHREEÖDECADESÖOFÖARMEDÖCONÚICTÖ in 2009, BRAC’s work in Sri Lanka aims to build livelihoods to help turn the peace dividends into a practical reality. Microfinance BRAC Annual Report 2011 7

CASE STUDY

Pathmawathi in her restaurant, which she opened with loans from BRAC. Today, her business is booming as she makes plans for expansion.

4ESTIMONIAL

Pathmawathi is a borrower from BRAC’s Pathmawathi’s income has skyrocketed Sooriyawewa branch. She was deserted from LKR 250 rupees to 3,000 per day. by her husband within weeks of her Pathmawathi re-invests all the excess after daughter being born. To make ends meet, living costs back into her business, and is she used to walk with her baby from determined to add a bakery in 2012 and door to door through her local streets, start a small hotel in 2013. persuading people to buy her home-made string hopper noodles. “BRAC gave me an Knowing of Pathmawathi’s predicament opportunity to invest in my and of her dream and potential to become business and my family. Now a restaurateur, a friend encouraged her to talk to BRAC. In July 2011, Pathmawathi I am independent and happy TOOKÖOUTÖHERÖÙRSTÖLOANÖFORÖ,+2Ö Ö and I have faith that I can go rupees. ONÖTOÖFULÙLÖALLÖOFÖMYÖDREAMSn Within six months of receiving the loan and participating in her village organisation, Pathmawathi has made a complete life turnaround. She has been able to save enough to set up her own one-room restaurant, in which she now operates a buffet style restaurant serving breakfast, lunch and dinner as well as snacks on the side. Today, her small restaurant business is expanding to meet increasing demand. 8 BRAC Annual Report 2011 Governance

Sir Fazle Hasan Abed Dr. Mahabub Muhammad A. Faruque Ahmed Founder and Chairperson, Hossain (Rumee) Ali Senior Director BRAC Executive Director, BRAC Managing Director, BRAC BRAC International (Ex-officio) Sir Fazle is recognised and BRAC International (Ex-officio) Prior to joining BRAC, Mr. by Ashoka as one of the Mr. Rumee is the vice Ahmed worked for the mGLOBALÖGREATSnÖANDÖISÖAÖ chairman A renowned agricultural World Bank. He is a founding member of its of Bangladesh economist, Dr. Hossain member of the working prestigious Global Association of Banks is former head of Social group of Bangladesh Academy for Social and a member of Sciences Division of Health Watch, a civil Entrepreneurship. He the Global Steering the International Rice society initiative, vice was also appointed Committee of Research Institute chair of Bangladesh Knight Commander of the ‘Performance (IRRI), Philippines and Country Coordination the Most Distinguished Based Grants Initiative’ former director General Mechanism for Global Order of St. Michael and of the International of the Bangladesh Funds for AID St. George (KCMG) by Finance Corporation Institute of Development Tuberculosis and Malaria the British crown in 2010 and the Technical Studies (BIDS). He (GFATM) and a member in recognition of his Advisory Committee of was awarded the of World Bank Civil services to reducing Bangladesh Investment first Gold Medal Society Consultative poverty in Bangladesh Climate Fund. He from the Bangladesh Group on Health, and internationally. He served as the deputy Agricultural Economist Nutrition and Population. has received numerous governor of Bangladesh Association in 1985, He also represented civil national and international Bank, and country in recognition of society on the GAVI awards for his head and general outstanding contribution Alliance Board. achievements in leading manager of Grindlays to understanding BRAC, including WISE Bangladesh. He was the operation of Prize – the world’s first appointed the CEO of rural economy in major international prize the Standard Chartered Bangladesh. for education by Qatar Group in Bangladesh, Foundation (2011), the heading both Standard David Rockefeller Chartered Bank and Bridging Leadership Standard Chartered Award (2008), the Grindlays Bank. He also Conrad N. Hilton served as a member of Humanitarian Prize the Governing Body of (2008) – the world’s PKSF. largest humanitarian S.N. Kairy prize, the Inaugural CFO, BRAC Group Clinton Global Citizen Award (2007), the Henry Tanwir Rahman Mr. Kairy joined the R. Kravis Prize in Director, Finance, Accounts Section of Leadership (2007) BRAC and BRAC BRAC in April 1982. He International is responsible for ensuring the effective Previously, Mr. Rahman Procurement and Asset was the Divisional Management of BRAC Controller for HBG Group. Currently, Mr. (Hollandsche Beton Kairy is serving on the Groep) Royal BAM, board of BRAC Bank Assistant Controller for Limited as a Director Mitchell engineering, nominated by BRAC. He Senior Project is also the Chair of the Accounting Manager for Board Audit Committee Bovis Lend Lease. of BRAC Bank Limited. Before joining BRAC he worked as Controller for Allied Container System. BRAC Annual Report 2011 9 Management

Sagarika Indu Lalitha Senarathne Gretion E Perera Sadara Wedage Juli Diana Ragel Country Honorary director of BRAC Director, BRAC Lanka Padma Subashini Regional Manager - Representative, Lanka (Guarantee) Ltd (Guarantee) Limited Regional Manager - Eastern Region, BRAC Sri Lanka Southern, Microfinance Microfinance Ms. Indu has been Ms. Senarathne is a Mr. Perera is an working with BRAC lawyer, who actively attorney-at-law, and since December 1996. practiced law in Sri notary public, with a In her 15 years of Lanka . from 1986 to career spanning 26 working with BRAC, she 2000as a junior to Mr. years, primarily in civil law has worked as a Nimal Senanayake, PC, practice, civil courts, programme organiser then president of the Bar notarial work and before being appointed Association of Sri Lanka, corporate work. In 1981, the country and to the late he obtained his (LL.B) representative for Sri Honourable Lakshman from University of Lanka. Aside from her Kadirgamar, PC, minister Colombo, Sri Lanka, and Abeysingha Chief Accountant work in the microfinance of Foreign Affairs. From three years later, he - Microfinance and ultra-poor 2000 onwards, she has passed the attorneys-at- Gunawardana programmes, she also been practicing as a law final examination Nadeeka has experience as a specialist in Conflict of from Sri Lanka Law Regional Manager - Central & North management consultant the Laws and College with first class Central Region, of sustainable livelihood International Trade. She honours. From the Microfinance programme for the is also working as a beginning, he has extreme poor in India consultant to the Sri worked in the unofficial and Yemen. She was Lanka Medical Council, bar as a practicing born in Chittagong, and legal consultant lawyer and gained wide Bangladesh in 1963 and (through the WHO) to the experience in the field of holds a BA (Hons) and government of East law. As of 26July 2011, Master degrees in Timor in the matter of he has been serving as Bangla Literature from draft legislation for the the Sri Lankan director of Chittagong University, establishment of a BRAC Lanka (Guarantee) Bangladesh, and a Medical Council. She is Limited, the company Bachelor degree in the member of the Bar which controls micro Education from Open Association of Sri Lanka, finance activities of University, Bangladesh. and SAARC Law. She is BRAC in Sri Lanka. She also has a post the former vice president graduate diploma on of the Sri Lanka International Rural Federation of University Planning and Women and the former Development (Major in chairperson of the Microfinance and National YWCA Women Empowerment) Constitution Committee. from University of She was the Hon. Guelph, Canada. Executive Director of m&OCUSn ÖASÖWELLÖASÖTHEÖ Hon. Executive Director of the Coastal Fisheries & Industries Trust.

Development Partners 10 BRAC Annual Report 2011 BRAC across the world BRAC Annual Report 2011 11 12 BRAC Annual Report 2011 Harnessing the Past: Our innovations in the last four decades

Functional Village organisations Para-professionals

education (VOs) Pioneering models for vaccinators, community health Life skills development The most effective workers and ‘barefoot lawyers’ education for adults that helps to medium for catalysing that provide incentive based build solidarity, create a savings change in disadvantaged jobs for those ready to serve mentality and prepare people for communities their own communities new income generation

Homemade oral Incentive salary Education for rehydration system dropouts and non

solution campaign A result oriented incentive entrants package that measures A groundbreaking campaign in Our own primary schools that effectiveness of and which 13 million households in help disadvantaged children compensates our community Bangladesh learned how to make successful transitions to workers and volunteers make oral saline at home – a formal schools accordingly lesson that continues to save millions of lives from diarrhoea

Enterprises for Directly observed Credit ++ approach

value chain treatment (DOT) An integrated set of services support for TB control for the landless poor, marginal farmers and small An integrated network of our An effective treatment entrepreneurs working development programmes, method for tuberculosis, a together to strengthen the enterprises and investments result of our incentive based supply chain of the that result in a unique synergy salary system for community enterprises in which our that supports our holistic health workers, ensuring microfinance borrowers approach for alleviating poverty patients’ daily intake of invest medicine for six months or more BRAC Annual Report 2011 13

Empowerment and Adolescent clubs Pre primary schools livelihood for adolescents Safe spaces where peer driven Our own pre primary schools intervention for adolescents where we prepare A range of initiatives to empower enhance their personal growth underprivileged children to adolescents including skills and social skills enter mainstream primary training, social development and schools micro-loans for their future businesses.

Hybrid maize Popular theatre $UWLÛFLDOLQVHPLQDWRUV A pioneer venture to We transformed over 2,000 A traditional platform became commercialise corn harvesting, rural poor into entrepreneurs an effective communication which plays a key role in with an innovative livelihood medium to advocate for social making farmers shift from opportunity: providing fee changes in rural communities, traditional single cropping to based ‘door to door’ artificial particularly to the illiterate multiple cropping to maximise insemination and education land usage during idle seasons services for livestock farmers

Challenging the Sharecroppers frontiers of poverty Birthing huts scheme reduction Safe and culturally accepted A phenomenal initiative to offer A unique model focusing on childbirth places with soft loans for tenant farmers extremely deprived women to appropriate services for (sharecroppers) with a specially improve their economic and mothers in urban slums tailored recovery plan social situations, allowing ultra poor households to graduate from extreme poverty and enter mainstream development programmes

M-health services Unique management model

A mobile based platform that A unique management model community health workers use to that focuses on internal control collect data and provide a range without suffocating creativity, of real time automated services runs our large scale such as storing patient records, interventions cost effectively, categorising and assessing and enables us to constantly medical risks, prioritising learn from the communities we medical responses and serve across the world monitoring referrals 47 BRAC Annual Report 2011 Notes BRAC Annual Report 2011 48 Notes

BRAC SRI LANKA Statement Of Comprehensive Income %NQØ3GDØ/DQHNCØ$MCDCØØ#DBDLADQØ

2011 2010 2011 2010 Notes LKR LKR USD USD

Service charge on loans 4 3,618,790 4,024,328 32,022 36,542 Interest expenses 5 (132,939) (113,329) (1,176) (1,029) Net income from service charge 3,485,851 3,910,999 30,846 35,513

Membership fees and other charges 6 54,100 - 479 - Grant income 15.1 13,262 - 117 - Total operating income 67,362 - 596 - 3,553,213 3,910,999 31,442 35,513

Impairment losses on loans and advances to customers 7 56,582 42,426 501 385 Operating income after impairment charges 3,496,631 3,868,573 30,941 35,127

Other operating expenses 8 418,532 28,500 3,703 259 418,532 28,500 3,703 259 /QNÚSØADENQDØS@WØ Ø Ø ØØ Ø ØØ Ø ØØ Ø Income tax expense 9(a) 369,372 768,015 3,268 6,974 -DSØOQNÚSØENQØSGDØXD@QØ Ø Ø ØØ Ø ØØ Ø ØØ Ø

BRAC SRI LANKA 2S@SDLDMSØ.EØ%HM@MBH@KØ/NRHSHNMØ SØØ#DBDLADQØ

2011 2010 2011 2010 Notes LKR LKR USD USD

ASSETS

Cash in hand and at Bank 10 - 494,703 - 4,492 Loans and advances to customers 11 11,972,809 12,179,772 105,945 110,594 Other assets 13 - 16,992,680 - 154,296 Total assets 11,972,809 29,667,155 105,945 269,382

LIABILITIES AND CAPITAL FUND +H@AHKHSHDR

Loan security fund 12 2,318,020 2,217,247 20,512 20,133 Other liabilities 14 1,739,453 5,393,006 15,392 48,969 Tax payable A 369,372 768,015 3,268 6,974 4,426,845 8,378,268 39,172 76,076

Capital fund Donor funds 15 - 16,451,650 - 149,383 BRAC contribution 16 1,765,179 1,765,179 15,620 16,028 Retained earnings 5,780,785 3,072,058 51,153 27,895 Total capital fund 7,545,964 21,288,887 66,773 193,306

3NS@KØKH@AHKHSHDRØ@MCØB@OHS@KØETMCØ Ø Ø ØØ Ø ØØ Ø ØØ Ø Ø

Country Head of Accountant BRAC Sri Lanka

4HEÖÙNANCIALÖSTATEMENTSÖWEREÖAPPROVEDÖBYÖTHEÖGOVERNINGÖBODYÖONÖTHÖ!PRILÖÖANDÖWEREÖSIGNEDÖONÖITSÖBEHALFÖBYÖ Ö Ö

Director Director

4HEÖACCOMPANYINGÖNOTESÖAREÖANÖINTEGRALÖPARTÖOFÖTHESEÖÙNANCIALÖSTATEMENTS BRAC SRI LANKA 2S@SDLDMSØ.EØ"G@MFDRØ(MØ$PTHSXØ %NQØ3GDØ8D@QØ$MCDCØØ#DBDLADQØ

Retained BRAC Total Capital Total Capital Earnings "NMSQHATSHNM Fund Fund

LKR LKR LKR USD

At 1 January 2010 - 1,765,179 1,765,179 16,028

0ROÙTÖFORÖTHEÖYEARÖ Ö ÖÖ Ö ÖÖÖÖ Ö Ö Ö Ö

SØØ#DBDLADQØØ Ø ØØ Ø ØØ Ø ØØ Ø Ø

At 1 January 2011 3,072,058 1,765,179 4,837,237 42,804

0ROÙTÖFORÖTHEÖYEARÖ Ö ÖÖ Ö Ö ÖÖ Ö

SØØ#DBDLADQØØ Ø ØØ Ø ØØ Ø ØØ Ø Ø

BRAC SRI LANKA "@RGÛNVØ2S@SDLDMSØ %NQØ3GDØ8D@QØ$MCDCØØ#DBDLADQØ

2011 2010 2011 2010 Notes LKR LKR USD USD

"@RGØÛNVØEQNLØ.ODQ@SHMFØ BSHUHSHDRØ 10,846 4,002,061 96 36,339 Loan disbursements (20,100,000) (18,545,000) (177,860) (168,392) Loan collection 20,261,693 16,423,433 179,177 149,128

-DSØB@RGØÛNVØEQNLØ.ODQ@SHMFØ BSHUHSHDR 161,693 (2,121,567) 1,317 (19,264)

"@RGØÛNVØEQNLØ(MUDRSHMFØ BSHUHSHDR - - - -

"@RGØÛNVØEQNLØ%HM@MBHMFØØ BSHU@SDR Loan security fund 100,773 706,073 892 6,411 Tax paid (768,015) (4,714,846) (6,796) (42,812) -DSØB@RGØÛNVØEQNLØØÚM@MBHMFØ@BSHUHSHDR (667,242) (4,008,773) (5,904) (36,400)

Net (decrease)/increase in cash in hand and at Bank (494,703) (2,128,279) (4,492) (19,325) "@RGØHMØG@MCØ@MCØ@SØ!@MJØ@SØØADFHMMHMFØNEØSGDØXD@Q 494,703 2,622,982 4,492 23,817 "@RGØHMØG@MCØ@MCØ@SØ!@MJØ@SØØDMCØNEØSGDØXD@QØ Ø Ø ØØØØ ØØ ØØ ØØ Ø Ø

BRAC SRI LANKA NOTES TO THE FINANCIAL STATEMENTS

1.00 THE REPORTING ENTITY Ö "2!#Ö3RIÖ,ANKAÖSTARTEDÖITSÖOPERATIONSÖFROMÖ!PRILÖÖASÖANÖ).'/ÖREGISTEREDÖWITHÖTHEÖ.ATIONALÖ3ECRETARIATÖFORÖ.'/SÖUNDERÖTHEÖ-INISTRYÖOFÖ3OCIALÖ Services and Welfare (Reg. No. 94806).BRAC Sri Lanka is engaged in implementing and operating rehabilitation and livelihood development activities.

2.00 BASIS OF PREPARATION 2.01 Statement of Compliance Ö 4HEÖÙNANCIALÖSTATEMENTSÖHAVEÖBEENÖPREPAREDÖINÖACCORDANCEÖWITHÖANDÖCOMPLYÖWITHÖ)NTERNATIONALÖ&INANCIALÖ2EPORTINGÖ3TANDARDSÖ)&23 ÖANDÖTHEÖ requirements of the Sri Lankan’s Voluntary Service Act No 1980.

Ö 4HESEÖÙNANCIALÖSTATEMENTSÖWEREÖAUTHORIZEDÖFORÖISSUEÖBYÖTHEÖ"OARDÖOFÖ$IRECTORSÖONÖÖ!PRILÖÖ ÖÖÖÖ

2.02 Basis of Measurement Ö 4HEÖÙNANCIALÖSTATEMENTSÖAREÖPREPAREDÖUNDERÖTHEÖHISTORICALÖCOSTÖCONVENTIONÖ ÖÖÖÖÖÖ

ØØ %TMBSHNM@KØ@MCØ/QDRDMS@SHNMØ"TQQDMBX Ö 4HESEÖÙNANCIALÖSTATEMENTSÖAREÖPRESENTEDÖINÖ3RIÖ,ANKANÖ2UPEEÖ,+2 ÖWHICHÖISÖTHEÖENTITYlSÖFUNCTIONALÖCURRENCYÖ Ö Ö Ö

Ö 4HEÖÙNANCIALÖSTATEMENTSÖINCLUDEÖÙGURES ÖWHICHÖHAVEÖBEENÖTRANSLATEDÖFROMÖ3RIÖ,ANKANÖ2UPEEÖ,+2 ÖTOÖ5NITEDÖ3TATESÖ$OLLARSÖ53Ö ÖATÖTHEÖYEARÖ ENDÖRATEÖOFÖ53ÖÖÖ,OCALÖCURRENCYÖ4HESEÖÙGURESÖAREÖFORÖMEMORANDUMÖPURPOSESÖONLYÖANDÖDOÖNOTÖFORMÖPARTÖOFÖTHEÖAUDITEDÖÙNANCIALÖ statements.

2.04 Use of Estimation and Judgments Ö 4HEÖPREPARATIONÖOFÖÙNANCIALÖSTATEMENTSÖINÖCONFORMITYÖWITHÖ)NTERNATIONALÖ&INANCIALÖ2EPORTINGÖ3TANDARDSÖREQUIRESÖMANAGEMENTÖTOÖMAKEÖJUDGMENTS Ö estimates and assumptions that affect the application of policies and reported amounts of assets and liabilities, and disclosure of contingent ASSETSÖANDÖLIABILITIESÖATÖTHEÖDATEÖOFÖÙNANCIALÖSTATEMENTSÖANDÖREPORTEDÖAMOUNTSÖOFÖREVENUESÖANDÖEXPENSESÖDURINGÖTHEÖREPORTEDÖPERIODÖ4HEÖ ESTIMATESÖANDÖASSOCIATEDÖASSUMPTIONSÖAREÖBASEDÖONÖHISTORICALÖEXPERIENCES ÖTHEÖRESULTSÖOFÖWHICHÖFORMÖTHEÖBASISÖOFÖMAKINGÖTHEÖJUDGMENTSÖ about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results ultimately may differ from these estimates.

3.00 SIGNIFICANT ACCOUNTING POLICIES Ö 4HEÖACCOUNTINGÖPOLICIESÖSETÖOUTÖBELOWÖHAVEÖBEENÖAPPLIEDÖCONSISTENTLYÖTOÖALLÖPERIODÖPRESENTEDÖINÖTHISÖÙNANCIALÖSTATEMENTSÖ Ö Ö

ØØ /QNODQSXØ@MCØ$PTHOLDMS Property and equipment are stated at cost less accumulated depreciation and impairment losses. Cost includes expenditures that are directly attributable to the acquisition of the asset.

The cost of self-constructed assets includes the cost of materials and direct labour, any other costs directly attributable to bringing the asset to AÖWORKINGÖCONDITIONÖFORÖITSÖINTENDEDÖUSE ÖANDÖTHEÖCOSTSÖOFÖDISMANTLINGÖANDÖREMOVINGÖTHEÖITEMSÖANDÖRESTORINGÖTHEÖSITEÖONÖWHICHÖTHEYÖAREÖLOCATEDÖ 0URCHASEDÖSOFTWAREÖTHATÖISÖINTEGRALÖTOÖTHEÖFUNCTIONALITYÖOFÖTHEÖRELATEDÖEQUIPMENTÖISÖCAPITALIZEDÖASÖPARTÖOFÖTHATÖEQUIPMENTÖ Ö Ö

Ö 'AINSÖANDÖLOSSESÖONÖDISPOSALÖOFÖANÖITEMÖOFÖPROPERTYÖANDÖEQUIPMENTÖAREÖDETERMINEDÖBYÖCOMPARINGÖTHEÖPROCEEDSÖFROMÖDISPOSALÖWITHÖTHEÖCARRYINGÖ VALUEÖOFÖPROPERTYÖANDÖEQUIPMENTÖANDÖRECOGNIZEDÖNETÖWITHÖOTHERÖINCOMEÖINÖPROÙTÖORÖLOSS

3.02 Depreciation Ö $EPRECIATIONÖISÖRECOGNIZEDÖINÖPROÙTÖORÖLOSSÖANDÖCALCULATEDÖTOÖWRITEÖOFFÖTHEÖCOSTÖOFÖTHEÖPROPERTYÖANDÖEQUIPMENTÖONÖAÖREDUCINGÖBALANCEÖBASISÖOVERÖ the expected useful lives of the assets concerned, and intangible assets on a straight line basis. Land is not depreciated.

Ö 4HEÖESTIMATEDÖUSEFULÖLIVESÖFORÖTHEÖCURRENTÖANDÖCOMPARATIVEÖPERIODSÖAREÖASÖFOLLOWSÖ Ö ÖÖÖÖÖ

Ö ÖÖ &URNITUREÖÖ&IXTURESÖ ÖÖÖÖÖ Ö Ö ÖÖ -OTORÖ6EHICLESÖ ÖÖÖÖÖ Ö Ö ÖÖ "ICYCLESÖ ÖÖÖÖÖÖ Ö Ö ÖÖ -OTORÖ#YCLESÖ ÖÖÖÖÖ Ö Ö ÖÖ %QUIPMENTSÖ ÖÖÖÖÖ Ö

Ö -ANAGEMENTÖ ANDÖ DIRECTORSÖ REVIEWÖ THEÖ DEPRECIATIONÖ METHODS Ö RESIDUALÖ VALUEÖ ANDÖ USEFULÖ LIFEÖ OFÖ ANÖ ASSETÖ ATÖ THEÖ YEARÖ ENDÖ ANDÖ ANYÖ CHANGEÖ considered to be appropriate in accounting estimate is recorded through the statement of comprehensive income.

Ö 'AINSÖANDÖLOSSESÖONÖDISPOSALSÖAREÖDETERMINEDÖBYÖCOMPARINGÖPROCEEDSÖWITHÖCARRYINGÖAMOUNTSÖANDÖAREÖINCLUDEDÖINÖTHEÖOPERATINGÖRESULTÖFORÖTHEÖ reporting period.

ØØ %NQDHFMØ"TQQDMBXØ3Q@MR@BSHNMRØ Ø Ø Ø ØØØØ Transactions in foreign currencies are translated to Sri Lankan Rupee at the foreign exchange rate ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies at the balance sheet date are translated to Sri Lankan Rupee at the foreign exchange RATEÖAPPLICABLEÖFORÖSETTLEMENTÖ4HEÖFOREIGNÖCURRENCYÖGAINÖORÖLOSSÖONÖTHEÖMONETARYÖITEMSÖISÖTHEÖDIFFERENCEÖBETWEENÖAMORTIZEDÖCOSTÖINÖTHEÖFUNCTIONALÖ CURRENCYÖATÖTHEÖBEGINNINGÖOFÖTHEÖPERIOD ÖADJUSTEDÖFORÖTHEÖEFFECTIVEÖINTERESTÖANDÖPAYMENTSÖDURINGÖTHEÖPERIOD ÖANDÖTHEÖAMORTIZEDÖCOSTÖINÖTHEÖ foreign currency translated at the exchange rate at the end of the period.

Ö .ON MONETARYÖASSETSÖANDÖLIABILITIESÖDENOMINATEDÖINÖFOREIGNÖCURRENCIES ÖWHICHÖAREÖSTATEDÖATÖHISTORICALÖCOST ÖAREÖTRANSLATEDÖTOÖ,+2ÖATÖTHEÖFOREIGNÖ exchange rate ruling at the date of transaction. Non-monetary assets and liabilities denominated in foreign currencies that are stated at fair VALUEÖAREÖTRANSLATEDÖTOÖ,+2ÖATÖFOREIGNÖEXCHANGEÖRATESÖRULINGÖATÖTHEÖDATESÖTHEÖFAIRÖVALUESÖWEREÖDETERMINEDÖ&OREIGNÖEXCHANGEÖDIFFERENCESÖARISINGÖ ONÖTRANSLATIONÖAREÖRECOGNIZEDÖINÖTHEÖSTATEMENTÖOFÖCOMPREHENSIVEÖINCOMEÖÖ ÖÖÖÖÖÖ

3.04 Loans and Advances to the Customers Ö A Ö,OANSÖORIGINATEDÖBYÖTHEÖCOMPANYÖBYÖPROVIDINGÖÙNANCEÖDIRECTLYÖTOÖBORROWERSÖISÖCATEGORIZEDÖASÖLOANSÖTOÖGROUPÖMEMBERSÖANDÖISÖCARRIEDÖATÖ AMORTIZEDÖCOST ÖWHICHÖISÖDEÙNEDÖASÖFAIRÖVALUEÖOFÖTHEÖCASHÖCONSIDERATIONÖGIVENÖTOÖORIGINATEÖTHOSEÖLOANSÖASÖISÖDETERMINABLEÖBYÖREFERENCEÖTOÖ market prices at origination date and subsequently measured at the original effective interest rate at reporting date. All loans and advances are RECOGNIZEDÖWHENÖCASHÖISÖADVANCEDÖTOÖBORROWERSÖ Ö Ö ÖÖÖÖÖ

Ö B Ö "2!#Ö 3RIÖ ,ANKAÖ GENERALLYÖ PROVIDESÖ FORÖ ANÖ ALLOWANCEÖ FORÖ LOANÖ IMPAIRMENTÖ ATÖ Ö Ö OFÖ LOANÖ DISBURSEMENTSÖ MADEÖ -ANAGEMENTÖ REGULARLYÖ ASSESSÖTHEÖADEQUACYÖOFÖALLOWANCEÖFORÖIMPAIRMENTÖBASEDÖONÖTHEÖAGEÖOFÖTHEÖLOANÖPORTFOLIOÖ!TÖTHEÖYEARÖENDÖ"2!#Ö3RIÖ,ANKAÖÖCALCULATESÖTHEÖ REQUIREDÖPROVISIONÖFORÖLOANÖLOSSESÖBASEDÖONÖLOANÖCLASSIÙCATIONÖANDÖPROVISIONINGÖMETHODOLOGYÖWHICHÖISÖSHOWNÖBELOWÖANDÖANYÖADJUSTMENTSÖ IFÖ REQUIREDÖAREÖMADEÖANDÖACCOUNTEDÖFORÖINÖTHEÖÙNANCIALÖSTATEMENTSÖFORÖTHEÖYEARÖ Ö Ö ÖÖÖÖ

Ö ,OANÖCLASSIÙCATIONÖ $AYSÖINÖ!RREARÖ 0ROVISIONÖREQUIREDÖ

Ö 3TANDAÖ .OÖARREARÖ ÖÖ Ö 7ATCHÖLISTÖ Ö ÖÖ Ö 3UBSTANDARDÖ Ö ÖÖ Ö $OUBTFULÖ Ö ÖÖ Ö ,OSSÖ Ö ÖÖ Ö C Ö,OANSÖWITHINÖTHEÖMATURITYÖPERIODÖISÖCONSIDEREDÖm#URRENTÖ,OANSnÖ,OANSÖWHICHÖREMAINSÖOUTSTANDINGÖAFTERÖTHEÖEXPIRYÖOFÖTHEIRÖMATURITYÖPERIODÖAREÖ CONSIDEREDÖASÖk,ATEÖLOANSnÖ,ATEÖLOANSÖWHICHÖREMAINÖUNPAIDÖAFTERÖONEÖYEARÖAFTERÖBEINGÖCLASSIÙEDÖAREÖCONSIDEREDÖASÖm.ON )NTERESTÖ"EARINGÖ,OANSlÖ .)", ÖANDÖISÖREFERREDÖTOÖTHEÖ"OARDÖFORÖWRITEÖOFFÖ!PARTÖFROMÖTHAT ÖANYÖLOANSÖCANÖBEÖWRITTENÖOFFÖSUBJECTÖTOÖTHEÖAPPROVALÖOFÖTHEÖBOARDÖWHEREÖTHEÖBOARDÖ THINKSÖTHATÖITÖISÖNOTÖREALIZABLEÖDUEÖTOÖDEATH ÖDISLOCATIONÖOFÖTHEÖBORROWERÖORÖANYÖOTHERÖNATURALÖORÖHUMANITARIANÖDISASTERÖTHATÖAFFECTSÖTHEÖLIVELIHOODÖOFÖ THEÖBORROWERSÖ3UBSEQUENTÖRECOVERIESÖAREÖCREDITEDÖASÖINCOMEÖTHEÖÖINÖTHEÖSTATEMENTÖOFÖCOMPREHENSIVEÖINCOMEÖ Ö Ö Ö

3.05 Impairment i) Financial Assets Ö !TÖEACHÖBALANCEÖSHEETÖDATEÖ"2!#Ö3RIÖ,ANKAÖASSESSESÖWHETHERÖTHEREÖISÖOBJECTIVEÖEVIDENCEÖTHATÖÙNANCIALÖASSETSÖNOTÖCARRIEDÖATÖFAIRÖVALUEÖTHROUGHÖ PROÙTÖORÖLOSSÖAREÖIMPAIREDÖ&INANCIALÖASSETSÖAREÖCONSIDEREDÖTOÖBEÖIMPAIREDÖWHENÖOBJECTIVEÖEVIDENCEÖINDICATESÖTHATÖONEÖORÖMOREÖEVENTSÖTHATÖHAVEÖAÖ NEGATIVEÖEFFECTÖONÖTHEÖESTIMATEDÖFUTUREÖCASHÖÚOWÖOFÖANÖASSETÖÖ ÖÖÖÖÖÖ

Ö )NDIVIDUALLYÖSIGNIÙCANTÖÙNANCIALÖASSETSÖAREÖTESTEDÖFORÖIMPAIRMENTÖONÖANÖINDIVIDUALÖBASISÖ4HEÖREMAININGÖÙNANCIALÖASSETSÖAREÖASSESSEDÖCOLLECTIVELYÖ in groups that share similar credit characteristics.

Ö !LLÖ IMPAIRMENTÖ LOSSESÖ AREÖ RECOGNIZEDÖ INÖ PROÙTÖ ORÖ LOSSÖ ANDÖ IMPAIRMENTÖ LOSSESÖ ONÖ AVAILABLE FOR SALEÖ INVESTMENTÖ SECURITIESÖ AREÖ RECOGNIZEDÖ BYÖ TRANSFERRINGÖTHEÖDIFFERENCEÖBETWEENÖTHEÖAMORTIZEDÖACQUISITIONÖCOSTÖANDÖCURRENTÖFAIRÖVALUEÖOUTÖOFÖEQUITYÖTOÖPROÙTÖORÖLOSSÖ Ö Ö

Ö !NÖIMPAIRMENTÖLOSSÖISÖREVERSEDÖIFÖTHEÖREVERSALÖCANÖBEÖRELATEDÖOBJECTIVELYÖTOÖANÖEVENTÖOCCURRINGÖAFTERÖTHEÖIMPAIRMENTÖLOSSÖWASÖRECOGNIZEDÖ&ORÖ ÙNANCIALÖASSETSÖMEASUREDÖATÖAMORTIZEDÖCOSTÖANDÖAVAILABLEÖFORÖSALEÖSECURITIESÖISÖRECOGNIZEDÖINÖPROÙTÖORÖLOSSÖ&ORÖAVAILABLEÖFORÖSALEÖSECURITIESÖTHATÖAREÖ EQUITYÖSECURITIESÖTHEÖREVERSALÖISÖRECOGNIZEDÖDIRECTLYÖINÖEQUITYÖÖÖÖÖÖÖÖ

ii) Non Financial Assets Ö 4HEÖCARRYINGÖAMOUNTSÖOFÖ"2!#Ö3RIÖ,ANKAlSÖNONÖÙNANCIALÖASSETSÖOTHERÖTHANÖINVENTORIESÖAREÖREVIEWEDÖATÖEACHÖBALANCEÖSHEETÖDATEÖTOÖDETERMINEÖ WHETHERÖTHEREÖISÖANYÖINDICATIONÖOFÖIMPAIRMENTÖ)FÖSUCHÖCONDITIONÖEXISTS ÖTHEÖASSETSÖRECOVERABLEÖAMOUNTÖISÖESTIMATEDÖANDÖANÖIMPAIRMENTÖLOSSÖ RECOGNIZEDÖINÖTHEÖSTATEMENTÖOFÖCOMPREHENSIVEÖINCOMEÖWHENEVERÖTHEÖCARRYINGÖAMOUNTÖOFÖANÖASSETÖEXCEEDSÖITSÖRECOVERABLEÖAMOUNTÖ Ö

3.06 Other Assets Ö /THERÖASSETSÖCOMPRISEÖPREPAYMENTS ÖDEPOSITSÖANDÖOTHERÖRECOVERABLEÖWHICHÖARISEÖDURINGÖTHEÖNORMALÖCOURSEÖOFÖBUSINESSÖTHEYÖAREÖCARRIEDÖATÖ ORIGINALÖINVOICEÖAMOUNTÖLESSÖPROVISIONÖMADEÖFORÖIMPAIRMENTÖLOSSESÖ!ÖPROVISIONÖFORÖIMPAIRMENTÖOFÖTRADEÖRECEIVABLEÖISÖESTABLISHEDÖWHENÖTHEREÖISÖ OBJECTIVEÖEVIDENCEÖTHATÖTHEÖFUNDÖWILLÖNOTÖBEÖABLEÖTOÖCOLLECTÖALLÖAMOUNTSÖDUEÖACCORDINGÖTOÖTHEÖORIGINALÖTERMSÖOFÖRECEIVABLESÖ4HEÖAMOUNTÖOFÖTHEÖ PROVISIONSÖISÖTHEÖDIFFERENCEÖBETWEENÖTHEÖCARRYINGÖAMOUNTÖANDÖTHEÖRECOVERABLEÖAMOUNTÖ ÖÖÖÖÖ

3.07 Cash and Cash Equivalents Ö &ORÖTHEÖPURPOSESÖOFÖTHEÖCASHÖÚOWÖSTATEMENT ÖCASHÖANDÖCASHÖEQUIVALENTSÖCOMPRISEÖBALANCESÖWITHÖLESSÖTHANÖÖDAYSÖMATURITYÖFROMÖTHEÖBALANCEÖ SHEETÖDATEÖANDÖINCLUDEÖCASHÖINÖHAND ÖDEPOSITSÖHELDÖATÖCALLÖWITHÖBANKS ÖNETÖOFÖBANKÖOVERDRAFTÖFACILITIESÖSUBJECTÖTOÖSWEEPINGÖARRANGEMENTSÖ

ØØ /QNUHRHNMRØ@MCØ.SGDQØ+H@AHKHSHDRØ Ö !ÖPROVISIONÖISÖRECOGNIZEDÖIF ÖASÖAÖRESULTÖOFÖAÖPASTÖEVENT Ö"2!#Ö3RIÖ,ANKAÖHASÖAÖPRESENTÖLEGALÖORÖCONSTRUCTIVEÖOBLIGATIONÖTHATÖCANÖBEÖESTIMATEDÖ RELIABLY ÖANDÖITÖISÖPROBABLEÖTHATÖANÖOUTÚOWÖOFÖECONOMICÖBENEÙTSÖWILLÖBEÖREQUIREDÖTOÖSETTLEÖTHEÖOBLIGATIONÖ ÖÖÖÖ

Ö /THERÖ ACCOUNTSÖ PAYABLEÖ AREÖ CARRIEDÖ ATÖ COST Ö WHICHÖ ISÖ THEÖ FAIRÖ VALUEÖ OFÖ THEÖ CONSIDERATIONÖ TOÖ BEÖ PAIDÖ INÖ THEÖ FUTUREÖ FORÖ GOODSÖ ANDÖ SERVICESÖ received.

Ø ØØ (MBNLDØ3@W Current income tax is the expected tax payable on taxable income for the year, using tax rates enacted at the balance sheet date. Management PERIODICALLYÖEVALUATESÖPOSITIONSÖTAKENÖINÖTAXÖRETURNSÖWITHÖRESPECTÖTOÖSITUATIONSÖINÖWHICHÖAPPLICABLEÖTAXÖREGULATIONSÖAREÖSUBJECTÖTOÖINTERPRETATIONÖANDÖ ESTABLISHESÖPROVISIONSÖWHEREÖAPPROPRIATEÖONÖTHEÖBASISÖOFÖAMOUNTSÖEXPECTEDÖTOÖBEÖPAIDÖTOÖTHEÖTAXÖAUTHORITIESÖ Ö Ö Ö

3.10 Revenue Recognition Ö 2EVENUEÖISÖRECOGNIZEDÖONÖANÖACCRUALSÖBASISÖ Ö Ö ÖÖÖÖÖ

i) Service Charge on Loans Ö 3ERVICEÖCHARGEÖONÖLOANÖISÖRECOGNIZEDÖONÖANÖACCRUALÖBASISÖ4HEÖRECOGNITIONÖCEASESÖWHENÖAÖLOANÖISÖTRANSFERREDÖTOÖ.ONÖ)NTERESTÖ"EARINGÖ,OANÖ.)", Ö ASÖDESCRIBEDÖINÖNOTEÖÖ3ERVICEÖCHARGEÖISÖRECOGNIZEDÖTHEREAFTERÖONLYÖWHENÖITÖISÖRECEIVEDÖ ÖÖÖÖÖ

HHØ,DLADQRGHOØ%DDRØ@MCØ.SGDQØ"G@QFDRØ Ö -EMBERSHIPÖFEESÖANDÖOTHERÖCHARGESÖAREÖRECOGNIZEDÖONÖANÖACCRUALÖBASISÖWHENÖTHEÖSERVICEÖHASÖBEENÖPROVIDEDÖÖ Ö Ö Ö

iv) Other Income Other income comprises interest from short term deposits, gains less losses related to trading assets and liabilities, and includes gains from DISPOSALÖOFÖ"2!#Ö3RIÖ,ANKAÖASSETSÖANDÖALLÖREALIZEDÖANDÖUNREALIZEDÖFOREIGNÖEXCHANGEÖDIFFERENCESÖ ÖÖÖÖ

Ö )NTERESTÖ INCOMEÖ ONÖ "2!#Ö 3RIÖ ,ANKAÖ BANKÖ DEPOSITÖ ISÖ EARNEDÖ ONÖ ANÖ ACCRUALSÖ BASISÖ ATÖ THEÖ AGREEDÖ INTERESTÖ RATEÖ WITHÖ THEÖ RESPECTIVEÖ ÙNANCIALÖ institution.

3.11 Donor Grants Ö !LLÖDONORÖGRANTSÖRECEIVEDÖAREÖINITIALLYÖRECOGNIZEDÖASÖDEFERREDÖINCOMEÖATÖFAIRÖVALUEÖANDÖRECORDEDÖASÖLIABILITIESÖINÖTHEÖ'RANTSÖ2ECEIVEDÖINÖ!DVANCEÖ Account for the period.

Ö 4HEÖPORTIONÖOFÖTHEÖGRANTSÖUTILIZEDÖTOÖPURCHASEÖPROPERTYÖANDÖÙXEDÖASSETSÖAREÖTRANSFERREDÖASÖDEFERREDÖINCOMEÖINÖLIABILITIESÖANDÖSUBSEQUENTLYÖTHEÖ PORTIONÖ OFÖ THEÖ DEPRECIATIONÖ EXPENSEÖ OFÖ THEÖ SAMEÖ ASSETSÖ FORÖ THEÖ PERIODÖ ISÖ RECOGNIZEDÖ INÖ THEÖ STATEMENTÖ OFÖ COMPREHENSIVEÖ INCOMEÖ ASÖ GRANTÖ income.

Ö 'RANTSÖUTILIZEDÖTOÖREIMBURSEÖPROGRAMÖRELATEDÖEXPENDITURE ÖTHEÖAMOUNTSÖAREÖRECOGNIZEDÖASÖ'RANTÖ)NCOMEÖFORÖTHEÖPERIODÖÖ Ö Ö

Ö $ONORÖGRANTSÖRECEIVEDÖINÖKIND ÖTHROUGHÖTHEÖPROVISIONÖOFÖGIFTSÖANDORÖSERVICES ÖAREÖRECORDEDÖATÖFAIRÖVALUEÖEXCLUDINGÖSITUATIONSÖWHENÖ"2!#Ö3RIÖ,ANKAÖÖ MAYÖRECEIVEÖEMERGENCYÖSUPPLIESÖFORÖONWARDÖDISTRIBUTIONÖINÖTHEÖEVENTÖOFÖAÖDISASTERÖWHICHÖAREÖNOTÖRECORDEDÖASÖGRANTS Ö Ö Ö

Ö 'RANTÖINCOMEÖISÖCLASSIÙEDÖASÖTEMPORARILYÖRESTRICTEDÖORÖUNRESTRICTEDÖDEPENDINGÖUPONÖTHEÖEXISTENCEÖOFÖDONOR IMPOSEDÖRESTRICTIONSÖ&ORÖCOMPLETEDÖ ORÖ PHASEDÖ OUTÖ PROJECTSÖ ANDÖ PROGRAMS Ö ANYÖ UNUTILIZEDÖ AMOUNTSÖ AREÖ DEALTÖ WITHÖ INÖ ACCORDANCEÖ WITHÖ CONSEQUENTÖ DONORÖ ANDÖ MANAGEMENTÖ agreements.

Ö &ORÖONGOINGÖPROJECTSÖANDÖPROGRAMS ÖANYÖEXPENDITURESÖYETÖTOÖBEÖFUNDEDÖBUTÖFORÖWHICHÖFUNDINGÖHASÖBEENÖAGREEDÖATÖTHEÖENDÖOFÖTHEÖREPORTINGÖPERIODÖ ISÖRECOGNIZEDÖASÖ'RANTSÖRECEIVABLEÖ Ö Ö Ö ÖÖÖÖ

3.12 Grant Income Ö 'RANTÖINCOMEÖISÖRECOGNIZEDÖONÖAÖCASHÖBASISÖTOÖTHEÖEXTENTÖTHATÖ"2!#Ö3RIÖ,ANKAÖFULÙLLSÖTHEÖCONDITIONSÖOFÖTHEÖGRANTÖ4HISÖINCOMEÖISÖTRANSFERREDÖFROMÖ THEÖDEFERREDÖGRANTÖRECEIVEDÖFROMÖ$ONORSÖANDÖRECOGNIZEDÖASÖINCOMEÖINÖTHEÖSTATEMENTÖOFÖCOMPREHENSIVEÖINCOMEÖ Ö Ö Ö

Ö !ÖSUBSTANTIALLYÖPORTIONÖOFÖ"2!#Ö3RIÖ,ANKAlSÖDONORÖGRANTSÖAREÖFORÖTHEÖFUNDINGÖOFÖ.OT FOR PROÙTÖPROJECTSÖANDÖPROGRAMS ÖANDÖFORÖTHESEÖGRANTS ÖINCOMEÖ RECOGNIZEDÖISÖMATCHEDÖTOÖTHEÖEXTENTÖOFÖACTUALÖEXPENDITURESÖINCURREDÖONÖPROJECTSÖANDÖPROGRAMSÖFORÖTHEÖPERIODÖ

Ö &ORÖDONORÖGRANTSÖRESTRICTEDÖTOÖFUNDINGÖPROCUREMENTÖÙXEDÖASSETS ÖGRANTÖINCOMEÖISÖRECOGNIZEDÖASÖTHEÖAMOUNTÖEQUIVALENTÖTOÖDEPRECIATIONÖEXPENSESÖ CHARGEDÖONÖTHEÖÙXEDÖASSETÖ

Ø ØØ +N@MRØ@MCØ!NQQNVHMFRØ ØØØØØØØ Ö ,OANSÖANDÖ"ORROWINGSÖAREÖRECOGNIZEDÖASÖTHEÖPROCEEDSÖAREÖRECEIVED ÖNETÖOFÖTRANSACTIONÖCOSTSÖINCURREDÖ4HEÖCARRYINGÖVALUESÖOFÖÖTHESEÖINSTRUMENTSÖ approximate their fair values due to their short term maturity.

Ö !LLÖBORROWINGÖCOSTSÖAREÖRECOGNIZEDÖASÖANÖEXPENSEÖINÖTHEÖSTATEMENTÖOFÖINCOMEÖANDÖEXPENDITUREÖINÖTHEÖPERIODÖINÖWHICHÖTHEYÖAREÖINCURREDÖ

Ø ØØ $LOKNXDDØ!DMDÚSRØØØØØØØØ Ö %MPLOYEEÖENTITLEMENTSÖTOÖANNUALÖLEAVEÖAREÖRECOGNIZEDÖWHENÖTHEYÖACCRUEÖTOÖEMPLOYEESÖ!ÖPROVISIONÖISÖMADEÖFORÖTHEÖESTIMATEDÖLIABILITYÖFORÖANNUALÖ LEAVEÖASÖAÖRESULTÖOFÖSERVICESÖRENDEREDÖBYÖEMPLOYEESÖUPÖTOÖTHEÖBALANCEÖSHEETÖDATEÖ4HEÖCOMPANYÖDOESÖNOTÖOPERATEÖANYÖRETIREMENTÖBENEÙTÖFUNDÖ (OWEVERÖSEVERANCEÖPAYÖISÖPROVIDEDÖFORÖINÖACCORDANCEÖWITHÖTHEÖ3RIÖ,ANKANÖSTATUTEÖ4HEÖCOMPANYÖALSOÖOPERATESÖANÖEMPLOYEEÖBONUSÖINCENTIVEÖ SCHEMEÖ4HEÖPROVISIONÖFORÖEMPLOYEEÖBONUSÖINCENTIVEÖISÖBASEDÖONÖAÖPREDETERMINEDÖCOMPANYÖPOLICYÖANDÖISÖRECOGNIZEDÖINÖOTHERÖACCRUALSÖ4HEÖ ACCRUALÖFORÖEMPLOYEEÖBONUSÖINCENTIVEÖISÖEXPECTEDÖTOÖBEÖSETTLEDÖWITHINÖÖMONTHSÖ ÖÖÖÖÖÖ

Ø ØØ 1DK@SDCØ/@QSXØ3Q@MR@BSHNMRØ ØØØØØØØ Ö 2ELATEDÖPARTIESÖCOMPRISEÖDIRECTORS ÖSUBSIDIARIESÖOFÖ"2!#Ö)NTERNATIONALÖANDÖKEYÖMANAGEMENTÖPERSONNELÖOFÖTHEÖCOMPANYÖANDÖCOMPANIESÖWITHÖ COMMONÖOWNERSHIPÖANDORÖDIRECTORSÖÖÖ Ö Ö Ö ÖÖÖÖ

3.16 Comparatives Ö 7HEREÖNECESSARYÖCOMPARATIVEÖÙGURESÖHAVEÖBEENÖADJUSTEDÖTOÖCONFORMÖTOÖCHANGESÖINÖPRESENTATIONÖINÖTHEÖCURRENTÖYEARÖ Ö Ö

2011 2010 2011 2010 LKR LKR USD USD

4.00 SERVICE CHARGE ON LOANS 'ROUPÖ,OANSÖÖ-ICROÙNANCE Ö Ö ÖÖ Ö ÖÖ Ö ÖÖ Ö 3,618,790 4,024,328 32,022 36,542

5.00 INTEREST EXPENSES Interest on VO Members Savings 132,939 113,329 1,176 1,029 Total 132,939 113,329 1,176 1,029

6.00 MEMBERSHIP FEES AND OTHER CHARGES Membership fee 54,100 - 479 - Total 54,100 - 479 -

7.00 IMPAIRMENT LOSSES ON LOANS AND ADVANCES Provision on Impairment losses 56,582 42,426 501 385 Total 56,582 42,426 501 385

8.00 OTHER OPERATING EXPENSES Maintenance and general expenses 388,292 - 3,436 - Audit fee 30,240 28,500 268 259 Total 418,532 28,500 3,703 259

9.00 TAXATION @ØØ(MBNLDØS@WØDWODMRD

Corporation tax –charge for the year 369,372 768,015 3,268 6,974 3@WØ"QDCHSØDWODMRDØ Ø ØØ Ø ØØ Ø ØØ Ø Ø

AØ3@WØO@X@AKDØ Ø Ø Ø Balance b/f 768,015 4,714,846 6,796 42,812 Charge for the period 369,372 768,015 3,268 6,974 Paid during the year (768,015) (4,714,846) (6,796) (42,812) Tax payable 369,372 768,015 3,268 6,974

9.01ÖÖ4HEÖTAXÖCHARGEÖONÖTHEÖCOMPANYlSÖPROÙTÖBEFOREÖTAXÖDIFFERSÖFROMÖTHEÖTHEORETICALÖAMOUNTÖUSINGÖTHEÖBASICÖTAXÖRATEÖASÖFOLLOWSÖ Ö Ö

Ö /PERATINGÖPROÙTSURPLUSÖBEFOREÖTAXATIONÖ ÖÖ Ö ÖÖ Ö ÖÖ Ö Ö Ö 4AXÖCALCULATEDÖATÖÖ Ö ÖÖ Ö ÖÖ Ö ÖÖ Ö Ö Tax charge for the year 369,372 768,015 3,268 6,974 2011 2010 2011 2010 LKR LKR USD USD

10.00 CASH AND BANK Cash in hand - - - - Cash at bank - 494,703 - 4,492 - 494,703 - 4,492

11.00 LOANS AND ADVANCES TO CUSTOMERS Group loans 12,266,343 12,428,036 108,542 112,849 Interest receivable 11,609 297 103 3 Impairment loss on loan advance (305,143) (248,561) (2,700) (2,257) 11,972,809 12,179,772 105,945 110,594

Ö!DVANCESÖTOÖCUSTOMERSÖAREÖCARRIEDÖATÖAMORTIZEDÖCOSTÖÖ)TÖISÖESTIMATEDÖTHATÖTHEÖFAIRÖVALUESÖOFÖADVANCESÖTOÖCUSTOMERSÖAREÖAPPROXIMATELYÖTHEÖSAMEÖ as the carrying values. All advances to customers are unsecured.

11.01ÖÖ 4HEÖMOVEMENTÖONÖTHEÖLOANÖACCOUNTSÖISÖANALYZEDÖASÖSHOWNÖBELOWÖÖ Ö Ö Ö

At 1 January 12,428,036 10,269,861 109,973 93,252 Loans disbursed 20,100,000 18,545,000 177,860 168,392 Ö ,ESSÖ,OANSÖREPAYMENTSÖ Ö Ö Ö Ö Ö Ö Ö Gross advances to customers 12,266,343 12,428,036 108,542 112,849 Interest receivable 11,609 297 103 3 Impairment loss on loans advance (Note -11.02) (305,143) (248,561) (2,700) (2,257) Net advances to customers 11,972,809 12,179,772 105,945 110,594

11.02 Ö 4HEÖMOVEMENTÖONÖTHEÖIMPAIRMENTÖONÖLOANSÖACCOUNTÖISÖÖSHOWNÖBELOWÖ Ö Ö Ö Ö

At 1 January 248,561 206,135 2,199 1,851 Charge for the year 56,582 42,426 501 406 305,143 248,561 2,700 2,257

11.03 Annalysis of impairment of loans Principal Provision Provision Outstanding rate required Local Local For general Provision .OÖPASTÖDUEÖ Ö ÖÖ Ö Ö

%NQØRODBHÚBØOQNUHRHNMØ ÖDAYSÖ Ö Ö ÖÖÖÖ Ö Ö ÖÖÖ Ö ÖDAYSÖ Ö Ö ÖÖ Ö Ö Ö Ö ÖDAYSÖ Ö Ö ÖÖÖÖ Ö Ö ÖÖÖ Ö ÖDAYSÖANDÖABOVEÖPASTÖDUEÖ Ö Ö ÖÖ Ö Ö Ö

143,465 62,685 12,266,343 305,143 2011 2010 2011 2010 LKR LKR USD USD

12.00 LOAN SECURITY FUND Opening balance 2,217,247 1,511,174 19,620 13,722 Received during the year 2,010,000 927,250 17,786 8,420 Ö 0AIDÖOFFÖ!DJUSTEDÖDURINGÖTHEÖYEARÖ Ö Ö Ö Ö Ö Ö Ö Closing balance 2,318,020 2,217,247 20,512 20,133

Ö 4HEÖ,OANÖ3ECURITYÖ&UNDÖACTSÖASÖCOLLATERALÖFORÖTHEÖCUSTOMERSlÖLOANÖOBLIGATIONSÖTOÖ"2!#Ö3RIÖ,ANKAÖ4HISÖISÖCOMPUTEDÖASÖÖOFÖTHEÖCUSTOMERSlÖ APPROVEDÖLOANÖ)NÖTHEÖEVENTÖOFÖANYÖDEFAULT ÖTHEÖCLIENTSÖFORFEITÖALLÖORÖPARTÖOFÖTHEÖ,OANÖ3ECURITYÖ&UNDÖTOÖTHEÖEXTENTÖOFÖTHEÖAMOUNTÖATÖRISKÖÖ ÖÖ

13.00 Other Assets Related party receivables - 16,992,680 - 154,296 - 16,992,680 - 154,296

14.00 OTHER LIABILITIES Accrual for expenses 1,738,563 4,822,171 15,384 43,786 VO members saving deposits 890 570,835 8 5,183 Total 1,739,453 5,393,006 15,392 48,969

15.00 DONOR FUNDS Donor funds investment in loans to group members - 16,438,388 - 149263 Donor funds received in advance (15.10) - 13,262 - 119 Total - 16,451,650 - 149,383

15.10 Donor funds received in advance Opening balance 13,262 13,262 117 119 Transferred to statement of income and expenses (13,262) - (117) - "KNRHMFØA@K@MBDØ Ø ØØØØ Ø ØØ Ø ØØØØ ØØ

16.00 BRAC CONTRIBUTION 4HEÖFUNDÖAMOUNTINGÖTOÖ,+2Ö ÖRELATESÖTOÖVARIOUSÖCONTRIBUTIONSÖMADEÖTOWARDSÖTHEÖESTABLISHMENTÖOFÖ"2!#Ö3RIÖ,ANKAÖÖ ÖÖ

17.00 SUBSEQUENT EVENTS !LLÖMATERIALÖEVENTSÖOCCURRINGÖAFTERÖTHEÖBALANCEÖSHEETÖDATEÖAREÖCONSIDEREDÖANDÖAPPROPRIATEÖADJUSTMENTSÖORÖDISCLOSURESÖHAVEÖBEENÖMADEÖINÖTHEÖ ÙNANCIALÖSTATEMENTS 18.00 CASHFLOW FROM OPERATING ACTIVITIES 2011 2010 2011 2010 LKR LKR USD USD

Ø "@RGØÛNVØEQNLØNODQ@SHMFØ@BSHUHSHDR

Ø $WBDRRØNEØHMBNLDØNUDQØDWODMCHSTQD 3,078,099 3,840,073 27,237 34,869 Loan loss provision 56,582 42,426 501 385 "@RGØÛNVØADENQDØBG@MFDRØHMØVNQJHMFØB@OHS@KØ Ø ØØ Ø ØØ Ø ØØ Ø Ø

Ø "G@MFDRØHMØVNQJHMFØB@OHS@K Decrease/(increase) of Other Assets 16,992,680 - 150,364 - Decrease/(increase) of Interest Receivable (11,312) - (100) - Increase/(decrease) of Current Liabilities (3,653,553) 119,562 (32,329) (3,798) Ö )NCREASEDECREASE ÖOFÖ$ONORÖ&UNDSÖ Ö Ö Ö ÖÖÖÖ Ö Ö Net cash from operations 10,846 4,002,061 96 36,339

19.00 CONTINGENT LIABILITIES #ONTINGENTÖLIABILITIESÖAREÖNOTÖRECOGNIZEDÖBUTÖDISCLOSEDÖINÖTHEÖÙNANCIALÖSTATEMENTSÖUNLESSÖTHEÖPOSSIBILITYÖOFÖANÖOUTÚOWÖOFÖRESOURCESÖEMBODYINGÖ ECONOMICÖBENEÙTSÖISÖRELIABLYÖESTIMATEDÖ Ö Ö Ö Ö

Ö #ONTINGENTÖASSETSÖAREÖNOTÖRECOGNIZEDÖINÖTHEÖÙNANCIALÖSTATEMENTSÖASÖTHISÖMAYÖRESULTSÖINÖTHEÖRECOGNITIONÖOFÖINCOMEÖWHICHÖMAYÖNEVERÖBEÖ REALIZEDÖ Ö Ö Ö Ö

BRAC LANKA (GUARANTEE) LIMITED Statement Of Comprehensive Income %NQØ3GDØ/DQHNCØ$MCDCØØ#DBDLADQØ

2011 2010 2011 2010 Notes LKR LKR USD USD

Service charge on loans 4 373,121,918 377,367,954 3,301,672 3,388,334 Interest expense 5 (45,988,258) (36,890,570) (406,940) (329,733) Net income from service charge 327,133,660 340,477,384 2,894,732 3,058,601

Membership fees and other charges 6 8,415,743 8,815,985 74,469 78,798 Other income 7 9,733,518 28,275,964 86,130 252,734 Grant income 21.1 131,028 131,028 1,159 1,190 18,280,289 37,222,977 161,758 332,722

Total operating income 345,413,949 377,700,361 3,056,490 3,391,322 Impairment losses on loans and advances to customers 8 10,881,417 10,669,012 96,287 95,361 Operating income after impairment charges 334,532,532 367,031,349 2,960,203 3,295,961

Staff costs 9 154,028,904 133,370,680 1,362,967 1,192,119 Other operating expenses 10 100,754,040 125,592,339 891,550 1,122,563 Depreciation 16 8,674,888 5,954,701 76,762 54,070 263,457,832 264,917,720 2,331,279 2,368,752 /QNÚSØADENQDØ%HM@MBH@KØ5 3Ø Ø Ø ØØ Ø ØØ Ø ØØ Ø Ø &INANCIALÖ6!4Ö Ö Ö Ö Ö ÖÖÖÖÖÖ Ö Ö /QNÚSØADENQDØS@WØ Ø Ø ØØØ Ø ØØ Ø ØØØØ Ø Ø Income tax expense 11(a) (22,921,633) (21,501,399) (202,828) (195,237) -DSØOQNÚSØENQØSGDØXD@QØ Ø Ø ØØØ Ø ØØ Ø ØØØØ Ø Ø Other comprehensive income - - - - Total comprehensive income 44,283,522 80,612,230 391,855 731,973 BRAC LANKA (GUARANTEE) LIMITED 2S@SDLDMSØ.EØ%HM@MBH@KØ/NRHSHNMØ SØØ#DBDLADQØ

2011 2010 2011 2010 Notes LKR LKR USD USD

ASSETS Cash in hand and at Bank 12 25,579,312 175,942,975 226,346 1,597,594 Short term deposits 13 - 50,000,000 - 454,009 Loans and advances to customers 14 1,261,358,262 986,872,622 11,161,475 8,960,979 Other assets 15 3,964,069 10,543,667 35,077 95,738 Property, plant and equipment 16 47,130,532 46,657,379 417,048 423,657 Total assets 1,338,032,175 1,270,016,643 11,839,946 11,531,977

LIABILITIES AND CAPITAL FUND +H@AHKHSHDR Loan security fund 17 254,085,289 68,328,588 2,248,343 620,436 Related party payables 18 198,907,388 167,478,290 1,760,087 1,520,733 "ORROWINGSÖ 19 294,448,787 292,248,213 2,605,511 2,653,666 Other liabilities 20 24,741,626 221,558,768 218,933 2,011,793 Tax payable A 22,795,207 21,501,399 201,710 195,237 3NS@KØKH@AHKHSHDRØ Ø Ø ØØ Ø ØØ Ø ØØ Ø Ø

Capital fund Donor funds 21 4,864,349 4,995,377 43,044 45,359 BRAC contribution 22 460,599,963 460,599,963 4,075,745 4,182,330 Retained earnings 77,589,566 33,306,045 686,574 302,425 Total capital fund 543,053,878 498,901,385 4,805,362 4,530,113

3NS@KØKH@AHKHSHDRØ@MCØB@OHS@KØETMCØ Ø Ø ØØ Ø ØØ Ø ØØ Ø Ø

4HEÖ&INANCIALÖ3TATEMENTSÖAREÖINÖ#OMPLIANCEÖ7ITHÖTHEÖ2EQUIREMENTÖOFÖTHEÖ#OMPANIESÖ!CTÖ.OÖÖOFÖÖ Ö Ö Ö

Country Head of Accounts BRAC Lanka (Guarantee) Limited

4HEÖÙNANCIALÖSTATEMENTSÖWEREÖAPPROVEDÖBYÖTHEÖBOARDÖOFÖDIRECTORSÖONÖTHÖ!PRILÖÖANDÖWEREÖSIGNEDÖONÖITSÖBEHALFÖBYÖ Ö Ö

Director Director

4HEÖACCOMPANYINGÖNOTESÖAREÖANÖINTEGRALÖPARTÖOFÖTHESEÖÙNANCIALÖSTATEMENTSÖ Ö Ö Ö BRAC LANKA (GUARANTEE) LIMITED 2S@SDLDMSØ.EØ"G@MFDRØ(MØ$PTHSXØ %NQØ3GDØ8D@QØ$MCDCØØ#DBDLADQØ

Retained BRAC Total Total Ø Ø Ø $@QMHMFRØ "NMSQHATSHNMØ "@OHS@KØ%TMCØ "@OHS@KØ%TMCØ

LKR LKR LKR USD

At 1 January 2010 (47,306,187) 460,599,963 413,293,776 3,752,781

0ROÙTÖFORÖTHEÖYEARÖ ÖÖ ÖÖ Ö ÖÖÖÖ Ö ÖÖ Ö Ö

SØØ#DBDLADQØØ ØØ ØØ Ø ØØØ Ø ØØ Ø Ø

At 1 January 2011 33,306,045 460,599,963 493,906,008 4,370,463

0ROÙTÖFORÖTHEÖYEARÖ ÖÖ ÖÖ Ö ÖÖÖÖ Ö ÖÖ Ö Ö

SØØ#DBDLADQØØ ØØ ØØØ Ø ØØØØ Ø ØØ Ø BRAC LANKA (GUARANTEE) LIMITED "@RGÛNVØ2S@SDLDMSØ%NQØ3GDØ8D@QØ$MCDCØØ#DBDLADQØ

2011 2010 2011 2010 Notes LKR LKR USD USD

"@RGØÛNVØEQNLØ.ODQ@SHMFØ BSHUHSHDRØ (74,309,919) 78,718,534 (698,266) 706,947 Loan disbursements (2,537,819,000) (1,855,782,000) (22,456,588) (16,666,206) Loan collection 2,254,714,876 1,638,551,521 19,951,463 14,715,326

-DSØB@RGØÛNVØEQNLØ.ODQ@SHMFØ BSHUHSHDRØ Ø Ø Ø Ø ØØ Ø Ø Ø

"@RGØÛNVØEQNLØ(MUDRSHMFØ BSHUHSHDR !CQUISITIONÖOFÖÙXEDÖASSETSÖ Ö Ö Ö Ö Ö Ö Ö Ö )NVESTMENTÖINÖÙXEDÖDEPOSITSÖ Ö Ö ÖÖ Ö Ö Ö ÖÖ Ö

-DSØB@RGØÛNVØEQNLØ(MUDRSHMFØ BSHUHSHDRØ Ø Ø ØØ Ø Ø Ø ØØ Ø

"@RGØÛNVØEQNLØ%HM@MBHMFØØ BSHU@SDR Term loans 2,200,574 34,390,018 19,472 308,846 Loan security fund 185,756,701 68,328,589 1,643,719 613,638 Deferred income (131,028) (131,028) (1,159) (1,177) Tax paid (21,627,825) (7,103,122) (191,380) (63,791)

-DSØB@RGØÛNVØEQNLØØÚM@MBHMFØ@BSHUHSHDRØ Ø Ø ØØ Ø ØØ Ø ØØ Ø Ø

-DSØCDBQD@RDHMBQD@RDØHMØB@RGØHMØG@MCØ@MCØ@SØA@MJØ Ø Ø Ø Ø Ø Ø Ø Ø Cash in hand and at bank at beginning of the year 175,942,975 280,417,569 1,597,594 2,535,848

"@RGØHMØG@MCØ@MCØ@SØA@MJØ@SØØDMCØNEØSGDØXD@QØ Ø Ø ØØ Ø ØØ Ø ØØ Ø Ø

BRAC LANKA (GUARANTEE) LIMITED Notes To The Financial Statements

1.00 THE REPORTING ENTITY Ö "2!#Ö,ANKAÖ'UARANTEE Ö,IMITEDÖISÖAÖLIMITEDÖLIABILITYÖBYÖGUARANTEEÖCOMPANYÖINCORPORATEDÖANDÖDOMICILEDÖINÖ3RIÖ,ANKAÖ4HEÖREGISTEREDÖOFÙCEÖISÖLOCATEDÖINÖ THEÖDISTRICTÖOFÖ#OLOMBOÖ4HEÖ#OMPANYÖHASÖRE REGISTEREDÖUNDERÖTHEÖNEWÖ#OMPANIESÖ!CTÖ.OÖÖOFÖÖ4HEÖ#OMPANYÖISÖENGAGEDÖINÖ-ICROÖ&INANCEÖ Activities to assist in poverty alleviation.

2.00 BASIS OF PREPARATION 2.01 Statement of Compliance Ö 4HEÖ ÙNANCIALÖ STATEMENTSÖ HAVEÖ BEENÖ PREPAREDÖ INÖ ACCORDANCEÖ WITHÖ ANDÖ COMPLYÖ WITHÖ )NTERNATIONALÖ &INANCIALÖ 2EPORTINGÖ 3TANDARDSÖ )&23 Ö ANDÖ THEÖ requirements of the Sri Lankan’s Companies Act No. 07 of 2007.

Ö 4HESEÖÙNANCIALÖSTATEMENTSÖWEREÖISSUEDÖBYÖTHEÖ"OARDÖOFÖ$IRECTORSÖONÖÖ!PRILÖÖ ÖÖÖÖÖÖ

2.02 Basis of Measurement Ö 4HEÖÙNANCIALÖSTATEMENTSÖAREÖPREPAREDÖUNDERÖTHEÖHISTORICALÖCOSTÖCONVENTIONÖ ÖÖÖÖÖÖ

ØØ %TMBSHNM@KØ@MCØ/QDRDMS@SHNMØ"TQQDMBXØ Ø Ø Ø ØØØØ Ö 4HESEÖÙNANCIALÖSTATEMENTSÖAREÖPRESENTEDÖINÖ3RIÖ,ANKANÖ2UPEEÖ,+2 ÖWHICHÖISÖTHEÖENTITYlSÖFUNCTIONALÖCURRENCYÖ ÖÖÖÖ

Ö 4HEÖÙNANCIALÖSTATEMENTSÖINCLUDEÖÙGURES ÖWHICHÖHAVEÖBEENÖTRANSLATEDÖFROMÖ3RIÖ,ANKANÖ2UPEEÖ,+2 ÖTOÖ5NITEDÖ3TATESÖ$OLLARSÖ53Ö ÖATÖTHEÖYEARÖENDÖRATEÖ OFÖ53ÖÖÖ,OCALÖCURRENCYÖ4HESEÖÙGURESÖAREÖFORÖMEMORANDUMÖPURPOSESÖONLYÖANDÖDOÖNOTÖFORMÖPARTÖOFÖTHEÖAUDITEDÖÙNANCIALÖSTATEMENTSÖ Ö

2.04 Use of Estimation and Judgments Ö 4HEÖPREPARATIONÖOFÖÙNANCIALÖSTATEMENTSÖINÖCONFORMITYÖWITHÖ)NTERNATIONALÖ&INANCIALÖ2EPORTINGÖ3TANDARDSÖREQUIRESÖMANAGEMENTÖTOÖMAKEÖJUDGMENTS Ö estimates and assumptions that affect the application of policies and reported amounts of assets and liabilities, and disclosure of contingent assets ANDÖLIABILITIESÖATÖTHEÖDATEÖOFÖÙNANCIALÖSTATEMENTSÖANDÖREPORTEDÖAMOUNTSÖOFÖREVENUESÖANDÖEXPENSESÖDURINGÖTHEÖREPORTEDÖPERIODÖ4HEÖESTIMATESÖANDÖ ASSOCIATEDÖASSUMPTIONSÖAREÖBASEDÖONÖHISTORICALÖEXPERIENCES ÖTHEÖRESULTSÖOFÖWHICHÖFORMÖTHEÖBASISÖOFÖMAKINGÖTHEÖJUDGMENTSÖABOUTÖTHEÖCARRYINGÖVALUESÖ of assets and liabilities that are not readily apparent from other sources. Actual results ultimately may differ from these estimates.

3.00 SIGNIFICANT ACCOUNTING POLICIES Ö 4HEÖACCOUNTINGÖPOLICIESÖSETÖOUTÖBELOWÖHAVEÖBEENÖAPPLIEDÖCONSISTENTLYÖTOÖALLÖPERIODÖPRESENTEDÖINÖTHISÖÙNANCIALÖSTATEMENTSÖ Ö Ö Ö

Ø ØØ /QNODQSX Ø/K@MSØ@MCØ$PTHOLDMSØ ØØØØØØØ Property, plant and equipment are stated at cost less accumulated depreciation and impairment losses. Cost includes expenditures that are directly attributable to the acquisition of the asset.

Ö 'AINSÖANDÖLOSSESÖONÖDISPOSALÖOFÖANÖITEMÖOFÖPROPERTY ÖPLANTÖANDÖEQUIPMENTÖAREÖDETERMINEDÖBYÖCOMPARINGÖTHEÖPROCEEDSÖFROMÖDISPOSALÖWITHÖTHEÖCARRYINGÖ VALUEÖOFÖPROPERTY ÖPLANTÖANDÖEQUIPMENTÖANDÖRECOGNIZEDÖNETÖWITHÖOTHERÖINCOMEÖINÖPROÙTÖORÖLOSSÖ ÖÖÖÖÖ

3.02 Depreciation Ö $EPRECIATIONÖISÖRECOGNIZEDÖINÖPROÙTÖORÖLOSSÖANDÖCALCULATEDÖTOÖWRITEÖOFFÖTHEÖCOSTÖOFÖTHEÖPROPERTY ÖPLANTÖANDÖEQUIPMENTÖONÖTHEÖSTRAIGHTÖLINEÖBASISÖONÖTHEÖ cost over the expected useful lives of the assets concerned, and intangible assets on a straight line basis. Depreciation is not provided for Land.

Ö 4HEÖESTIMATEDÖUSEFULÖLIVESÖFORÖTHEÖCURRENTÖANDÖCOMPARATIVEÖPERIODSÖAREÖASÖFOLLOWSÖ Ö ÖÖÖÖÖÖ

Ö ÖÖ &URNITUREÖÖ&IXTURESÖ ÖÖÖÖÖ Ö Ö ÖÖ -OTORÖ6EHICLESÖ ÖÖÖÖÖ Ö Ö ÖÖ "ICYCLESÖ ÖÖÖÖÖÖ Ö Ö ÖÖ -OTORÖ#YCLESÖ ÖÖÖÖÖ Ö Ö ÖÖ %QUIPMENTSÖ ÖÖÖÖÖ Ö

Ö $EPRECIATIONÖOFÖASSETSÖBEGINÖWHENÖITÖISÖAVAILABLEÖFORÖUSEÖ Ö Ö Ö ÖÖÖÖ

Ö -ANAGEMENTÖANDÖDIRECTORSÖREVIEWÖTHEÖDEPRECIATIONÖMETHODS ÖRESIDUALÖVALUEÖANDÖUSEFULÖLIFEÖOFÖANÖASSETÖATÖTHEÖYEARÖENDÖANDÖANYÖCHANGEÖCONSIDEREDÖTOÖ be appropriate in accounting estimate is recorded through the statement of comprehensive income.

Ö 'AINSÖANDÖLOSSESÖONÖDISPOSALSÖAREÖDETERMINEDÖBYÖCOMPARINGÖPROCEEDSÖWITHÖCARRYINGÖAMOUNTSÖANDÖAREÖINCLUDEDÖINÖTHEÖOPERATINGÖRESULTÖFORÖTHEÖREPORTINGÖ period.

ØØ %NQDHFMØ"TQQDMBXØ3Q@MR@BSHNMRØ Ø Ø Ø ØØØØ Transactions in foreign currencies are translated to Sri Lankan Rupee at the foreign exchange rate ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies at the balance sheet date are translated to Sri Lankan Rupee at the foreign exchange rate applicable FORÖSETTLEMENTÖ4HEÖFOREIGNÖCURRENCYÖGAINÖORÖLOSSÖONÖTHEÖMONETARYÖITEMSÖISÖTHEÖDIFFERENCEÖBETWEENÖAMORTIZEDÖCOSTÖINÖTHEÖFUNCTIONALÖCURRENCYÖATÖTHEÖ BEGINNINGÖOFÖTHEÖPERIOD ÖADJUSTEDÖFORÖTHEÖEFFECTIVEÖINTERESTÖANDÖPAYMENTSÖDURINGÖTHEÖPERIOD ÖANDÖTHEÖAMORTIZEDÖCOSTÖINÖTHEÖFOREIGNÖCURRENCYÖTRANSLATEDÖ at the exchange rate at the end of the period.

Ö .ON MONETARYÖASSETSÖANDÖLIABILITIESÖDENOMINATEDÖINÖFOREIGNÖCURRENCIES ÖWHICHÖAREÖSTATEDÖATÖHISTORICALÖCOST ÖAREÖTRANSLATEDÖTOÖÖÖ3RIÖ,ANKANÖ2UPEEÖ,+2 Ö at the foreign exchange rate ruling at the date of transaction. Non-monetary assets and liabilities denominated in foreign currencies that are stated at FAIRÖVALUEÖAREÖTRANSLATEDÖTOÖÖ3RIÖ,ANKANÖ2UPEEÖ,+2 ÖATÖFOREIGNÖEXCHANGEÖRATESÖRULINGÖATÖTHEÖDATESÖTHEÖFAIRÖVALUESÖWEREÖDETERMINEDÖ&OREIGNÖEXCHANGEÖ DIFFERENCESÖARISINGÖONÖTRANSLATIONÖAREÖRECOGNIZEDÖINÖTHEÖSTATEMENTÖOFÖCOMPREHENSIVEÖINCOMEÖÖÖÖÖÖÖÖ

3.04 Loans and Advances to the Customers a)Ö,OANSÖORIGINATEDÖBYÖTHEÖCOMPANYÖBYÖPROVIDINGÖÙNANCEÖDIRECTLYÖTOÖBORROWERSÖISÖCATEGORIZEDÖASÖLOANSÖTOÖGROUPÖMEMBERSÖANDÖISÖCARRIEDÖATÖAMORTIZEDÖ COST ÖWHICHÖISÖDEÙNEDÖASÖFAIRÖVALUEÖOFÖTHEÖCASHÖCONSIDERATIONÖGIVENÖTOÖORIGINATEÖTHOSEÖLOANSÖASÖISÖDETERMINABLEÖBYÖREFERENCEÖTOÖMARKETÖPRICESÖATÖ ORIGINATIONÖDATEÖANDÖSUBSEQUENTLYÖMEASUREDÖATÖTHEÖORIGINALÖEFFECTIVEÖINTERESTÖRATEÖATÖREPORTINGÖDATEÖ!LLÖLOANSÖANDÖADVANCESÖAREÖRECOGNIZEDÖWHENÖCASHÖ ISÖADVANCEDÖTOÖBORROWERSÖ ÖÖÖÖÖÖÖ

AÖ"2!#Ö,ANKAÖ'UARANTEE Ö,IMITEDÖGENERALLYÖPROVIDESÖFORÖANÖALLOWANCEÖFORÖLOANÖIMPAIRMENTÖATÖÖÖOFÖLOANÖDISBURSEMENTSÖMADEÖ-ANAGEMENTÖ REGULARLYÖ ASSESSÖ THEÖ ADEQUACYÖ OFÖ ALLOWANCEÖ FORÖ IMPAIRMENTÖ BASEDÖ ONÖ THEÖ AGEÖ OFÖ THEÖ LOANÖ PORTFOLIOÖ !TÖ THEÖ YEARÖ ENDÖ "2!#Ö ,ANKAÖ 'UARANTEE Ö ,IMITEDÖCALCULATESÖTHEÖREQUIREDÖPROVISIONÖFORÖLOANÖLOSSESÖBASEDÖONÖLOANÖCLASSIÙCATIONÖANDÖPROVISIONINGÖMETHODOLOGYÖWHICHÖISÖSHOWNÖBELOWÖANDÖANYÖ ADJUSTMENTSÖ IFÖREQUIREDÖAREÖMADEÖANDÖACCOUNTEDÖFORÖINÖTHEÖÙNANCIALÖSTATEMENTSÖFORÖTHEÖYEARÖ ÖÖÖÖÖÖ

Ö ,OANÖCLASSIÙCATIONÖ $AYSÖINÖ!RREARÖ 0ROVISIONÖREQUIREDÖ Ö 3TANDARDÖ .OÖARREARÖ ÖÖ Ö 7ATCHÖLISTÖ Ö ÖÖ Ö 3UBSTANDARDÖ Ö ÖÖ Ö $OUBTFULÖ Ö ÖÖ Ö ,OSSÖ Ö ÖÖ

Ö C Ö,OANSÖWITHINÖTHEÖMATURITYÖPERIODÖISÖCONSIDEREDÖm#URRENTÖ,OANSnÖ,OANSÖWHICHÖREMAINSÖOUTSTANDINGÖAFTERÖTHEÖEXPIRYÖOFÖTHEIRÖMATURITYÖPERIODÖAREÖ CONSIDEREDÖASÖk,ATEÖLOANSnÖ,ATEÖLOANSÖWHICHÖREMAINÖUNPAIDÖAFTERÖONEÖYEARÖAFTERÖBEINGÖCLASSIÙEDÖAREÖCONSIDEREDÖASÖm.ON )NTERESTÖ"EARINGÖ,OANSlÖ .)", ÖANDÖISÖREFERREDÖTOÖTHEÖ"OARDÖFORÖWRITEÖOFFÖ!PARTÖFROMÖTHAT ÖANYÖLOANSÖCANÖBEÖWRITTENÖOFFÖSUBJECTÖTOÖTHEÖAPPROVALÖOFÖTHEÖBOARDÖWHEREÖTHEÖBOARDÖ THINKSÖTHATÖITÖISÖNOTÖREALIZABLEÖDUEÖTOÖDEATH ÖDISLOCATIONÖOFÖTHEÖBORROWERÖORÖANYÖOTHERÖNATURALÖORÖHUMANITARIANÖDISASTERÖTHATÖAFFECTSÖTHEÖLIVELIHOODÖOFÖ THEÖBORROWERSÖ3UBSEQUENTÖRECOVERIESÖAREÖCREDITEDÖASÖINCOMEÖINÖTHEÖSTATEMENTÖOFÖCOMPREHENSIVEÖINCOMEÖ Ö Ö Ö

3.05 Impairment i) Financial Assets Ö !TÖEACHÖBALANCEÖSHEETÖDATEÖ"2!#Ö,ANKAÖ'UARANTEE Ö,IMITEDÖASSESSESÖWHETHERÖTHEREÖISÖOBJECTIVEÖEVIDENCEÖTHATÖÙNANCIALÖASSETSÖNOTÖCARRIEDÖATÖ FAIRÖVALUEÖTHROUGHÖPROÙTÖORÖLOSSÖAREÖIMPAIREDÖ&INANCIALÖASSETSÖAREÖCONSIDEREDÖTOÖBEÖIMPAIREDÖWHENÖOBJECTIVEÖEVIDENCEÖINDICATESÖTHATÖONEÖORÖMOREÖ EVENTSÖTHATÖHAVEÖAÖNEGATIVEÖEFFECTÖONÖTHEÖESTIMATEDÖFUTUREÖCASHÖÚOWÖOFÖANÖASSETÖ ÖÖÖÖÖÖ

ii) Non Financial Assets Ö 4HEÖCARRYINGÖAMOUNTSÖOFÖ"2!#Ö,ANKAÖ'UARANTEE Ö,IMITEDlSÖNONÖÙNANCIALÖASSETSÖOTHERÖTHANÖINVENTORIESÖAREÖREVIEWEDÖATÖEACHÖBALANCEÖSHEETÖ DATEÖTOÖDETERMINEÖWHETHERÖTHEREÖISÖANYÖINDICATIONÖOFÖIMPAIRMENTÖ)FÖSUCHÖCONDITIONÖEXISTS ÖTHEÖASSETSÖRECOVERABLEÖAMOUNTÖISÖESTIMATEDÖANDÖANÖ IMPAIRMENTÖLOSSÖRECOGNIZEDÖINÖTHEÖSTATEMENTÖOFÖCOMPREHENSIVEÖINCOMEÖWHENEVERÖTHEÖCARRYINGÖAMOUNTÖOFÖANÖASSETÖEXCEEDSÖITSÖRECOVERABLEÖ amount.

3.07 Cash in Hand and at Bank Ö &ORÖTHEÖPURPOSESÖOFÖTHEÖCASHÖÚOWÖSTATEMENT ÖCASHÖANDÖCASHÖEQUIVALENTSÖCOMPRISEÖBALANCESÖWITHÖLESSÖTHANÖÖDAYSÖMATURITYÖFROMÖTHEÖBALANCEÖ SHEETÖDATEÖANDÖINCLUDEÖCASHÖINÖHAND ÖDEPOSITSÖHELDÖATÖCALLÖWITHÖBANKS ÖNETÖOFÖBANKÖOVERDRAFTÖFACILITIESÖSUBJECTÖTOÖSWEEPINGÖARRANGEMENTSÖ

Ø ØØ /QNUHRHNMRØ@MCØ.SGDQØ+H@AHKHSHDRØ Ö !ÖPROVISIONÖISÖRECOGNIZEDÖIF ÖASÖAÖRESULTÖOFÖAÖPASTÖEVENT ÖÖ"2!#Ö,ANKAÖ'UARANTEE Ö,IMITEDÖHASÖAÖPRESENTÖLEGALÖORÖCONSTRUCTIVEÖOBLIGATIONÖTHATÖCANÖ BEÖESTIMATEDÖRELIABLY ÖANDÖITÖISÖPROBABLEÖTHATÖANÖOUTÚOWÖOFÖECONOMICÖBENEÙTSÖWILLÖBEÖREQUIREDÖTOÖSETTLEÖTHEÖOBLIGATIONÖ Ö Ö

Ö /THERÖ ACCOUNTSÖ PAYABLEÖ AREÖ CARRIEDÖ ATÖ COST Ö WHICHÖ ISÖ THEÖ FAIRÖ VALUEÖ OFÖ THEÖ CONSIDERATIONÖ TOÖ BEÖ PAIDÖ INÖ THEÖ FUTUREÖ FORÖ GOODSÖ ANDÖ SERVICESÖ received. Ø ØØ (MBNLDØ3@W Current income tax is the expected tax payable on taxable income for the year, using tax rates enacted at the balance sheet date. Management PERIODICALLYÖEVALUATESÖPOSITIONSÖTAKENÖINÖTAXÖRETURNSÖWITHÖRESPECTÖTOÖSITUATIONSÖINÖWHICHÖAPPLICABLEÖTAXÖREGULATIONSÖAREÖSUBJECTÖTOÖINTERPRETATIONÖANDÖ ESTABLISHESÖPROVISIONSÖWHEREÖAPPROPRIATEÖONÖTHEÖBASISÖOFÖAMOUNTSÖEXPECTEDÖTOÖBEÖPAIDÖTOÖTHEÖTAXÖAUTHORITIESÖ Ö Ö Ö

3.10 Revenue Recognition Ö 2EVENUEÖISÖRECOGNIZEDÖONÖANÖACCRUALSÖBASISÖ Ö Ö ÖÖÖÖÖ

Ø HHØ,DLADQRGHOØ%DDRØ@MCØ.SGDQØ"G@QFDRØ Ö -EMBERSHIPÖFEESÖANDÖOTHERÖCHARGESÖAREÖRECOGNIZEDÖONÖANÖACCRUALÖBASISÖWHENÖTHEÖSERVICEÖHASÖBEENÖPROVIDEDÖÖ Ö Ö Ö

iv) Other Income Other income comprises interest from short term deposits, gains less losses related to trading assets and liabilities, and includes gains from DISPOSALÖOFÖÖ"2!#Ö,ANKAÖ'UARANTEE Ö,IMITEDÖASSETSÖANDÖALLÖREALIZEDÖANDÖUNREALIZEDÖFOREIGNÖEXCHANGEÖDIFFERENCESÖ Ö Ö

Ö )NTERESTÖINCOMEÖONÖÖ"2!#Ö,ANKAÖ'UARANTEE Ö,IMITEDÖBANKÖDEPOSITÖISÖEARNEDÖONÖANÖACCRUALSÖBASISÖATÖTHEÖAGREEDÖINTERESTÖRATEÖWITHÖTHEÖRESPECTIVEÖ ÙNANCIALÖINSTITUTIONÖ ÖÖÖÖÖÖÖ

Ö 4HEÖPORTIONÖOFÖTHEÖGRANTSÖUTILIZEDÖTOÖPURCHASEÖPROPERTYÖANDÖÙXEDÖASSETSÖAREÖTRANSFERREDÖASÖDEFERREDÖINCOMEÖINÖLIABILITIESÖANDÖSUBSEQUENTLYÖTHEÖ PORTIONÖOFÖTHEÖDEPRECIATIONÖEXPENSEÖOFÖTHEÖSAMEÖASSETSÖFORÖTHEÖPERIODÖISÖRECOGNIZEDÖINÖTHEÖSTATEMENTÖOFÖCOMPREHENSIVEÖINCOMEÖASÖGRANTÖ income.

Ö 'RANTSÖUTILIZEDÖTOÖREIMBURSEÖPROGRAMÖRELATEDÖEXPENDITURE ÖTHEÖAMOUNTSÖAREÖRECOGNIZEDÖASÖ'RANTÖ)NCOMEÖFORÖTHEÖPERIODÖÖ Ö Ö

Ö $ONORÖGRANTSÖRECEIVEDÖINÖKIND ÖTHROUGHÖTHEÖPROVISIONÖOFÖGIFTSÖANDORÖSERVICES ÖAREÖRECORDEDÖATÖFAIRÖVALUEÖEXCLUDINGÖSITUATIONSÖWHENÖ"2!#Ö,ANKAÖ 'UARANTEE Ö,IMITEDÖMAYÖRECEIVEÖEMERGENCYÖSUPPLIESÖFORÖONWARDÖDISTRIBUTIONÖINÖTHEÖEVENTÖOFÖAÖDISASTERÖWHICHÖAREÖNOTÖRECORDEDÖASÖGRANTS Ö

3.12 Grant Income Ö 'RANTÖINCOMEÖISÖRECOGNIZEDÖONÖAÖCASHÖBASISÖTOÖTHEÖEXTENTÖTHATÖÖ"2!#Ö,ANKAÖ'UARANTEE Ö,IMITEDÖFULÙLLSÖTHEÖCONDITIONSÖOFÖTHEÖGRANTÖ4HISÖINCOMEÖ ISÖTRANSFERREDÖFROMÖTHEÖDEFERREDÖGRANTÖRECEIVEDÖFROMÖ$ONORSÖANDÖRECOGNIZEDÖASÖINCOMEÖINÖTHEÖSTATEMENTÖOFÖCOMPREHENSIVEÖINCOMEÖÖ

Ö !ÖSUBSTANTIALLYÖPORTIONÖOFÖÖ"2!#Ö,ANKAÖ'UARANTEE Ö,IMITEDlSÖDONORÖGRANTSÖAREÖFORÖTHEÖFUNDINGÖOFÖ.OT FOR PROÙTÖPROJECTSÖANDÖPROGRAMS ÖANDÖFORÖ THESEÖGRANTS ÖINCOMEÖRECOGNIZEDÖISÖMATCHEDÖTOÖTHEÖEXTENTÖOFÖACTUALÖEXPENDITURESÖINCURREDÖONÖPROJECTSÖANDÖPROGRAMSÖFORÖTHEÖPERIODÖ

Ö &ORÖDONORÖGRANTSÖRESTRICTEDÖTOÖFUNDINGÖPROCUREMENTÖÙXEDÖASSETS ÖGRANTÖINCOMEÖISÖRECOGNIZEDÖASÖTHEÖAMOUNTÖEQUIVALENTÖTOÖDEPRECIATIONÖEXPENSESÖ CHARGEDÖONÖTHEÖÙXEDÖASSETÖ ÖÖÖÖÖÖÖ Ø ØØ +N@MRØ@MCØ!NQQNVHMFRØ ØØØØØØØ Ö ,OANSÖANDÖ"ORROWINGSÖAREÖRECOGNIZEDÖASÖTHEÖPROCEEDSÖAREÖRECEIVED ÖNETÖOFÖTRANSACTIONÖCOSTSÖINCURREDÖ4HEÖCARRYINGÖVALUESÖOFÖÖTHESEÖINSTRUMENTSÖ approximate their fair values due to their short term maturity.

Ö !LLÖBORROWINGÖCOSTSÖAREÖRECOGNIZEDÖASÖANÖEXPENSEÖINÖTHEÖSTATEMENTÖOFÖINCOMEÖANDÖEXPENDITUREÖINÖTHEÖPERIODÖINÖWHICHÖTHEYÖAREÖINCURREDÖ Ö

Ø ØØ $LOKNXDDØ!DMDÚSRØØØØØØØØ Ö %MPLOYEEÖENTITLEMENTSÖTOÖANNUALÖLEAVEÖAREÖRECOGNIZEDÖWHENÖTHEYÖACCRUEÖTOÖEMPLOYEESÖ!ÖPROVISIONÖISÖMADEÖFORÖTHEÖESTIMATEDÖLIABILITYÖFORÖANNUALÖLEAVEÖ ASÖAÖRESULTÖOFÖSERVICESÖRENDEREDÖBYÖEMPLOYEESÖUPÖTOÖTHEÖBALANCEÖSHEETÖDATEÖ4HEÖCOMPANYÖDOESÖNOTÖOPERATEÖANYÖRETIREMENTÖBENEÙTÖFUNDÖ(OWEVERÖ SEVERANCEÖPAYÖISÖPROVIDEDÖFORÖINÖACCORDANCEÖWITHÖTHEÖ3RIÖ,ANKANÖSTATUTEÖ4HEÖCOMPANYÖALSOÖOPERATESÖANÖEMPLOYEEÖBONUSÖINCENTIVEÖSCHEMEÖ4HEÖ PROVISIONÖFORÖEMPLOYEEÖBONUSÖINCENTIVEÖISÖBASEDÖONÖAÖPREDETERMINEDÖCOMPANYÖPOLICYÖANDÖISÖRECOGNIZEDÖINÖOTHERÖACCRUALSÖ4HEÖACCRUALÖFORÖEMPLOYEEÖ BONUSÖINCENTIVEÖISÖEXPECTEDÖTOÖBEÖSETTLEDÖWITHINÖÖMONTHSÖ Ö Ö Ö ÖÖÖÖ

ØØ 1DK@SDCØ/@QSXØ3Q@MR@BSHNMRØ ØØØØØØØ Ö 2ELATEDÖPARTIESÖCOMPRISEÖDIRECTORS ÖSUBSIDIARIESÖOFÖ"2!#Ö)NTERNATIONALÖANDÖKEYÖMANAGEMENTÖPERSONNELÖOFÖTHEÖCOMPANYÖANDÖCOMPANIESÖWITHÖCOMMONÖ OWNERSHIPÖANDORÖDIRECTORSÖÖÖ ÖÖÖÖÖÖÖ

3.16 Comparatives Ö 7HEREÖNECESSARYÖCOMPARATIVEÖÙGURESÖHAVEÖBEENÖADJUSTEDÖTOÖCONFORMÖTOÖCHANGESÖINÖPRESENTATIONÖINÖTHEÖCURRENTÖYEARÖ Ö Ö Ö

2011 2010 2011 2010

LKR LKR USD USD

4.00 SERVICE CHARGE ON LOANS 'ROUPÖ,OANSÖÖ-ICROÙNANCE Ö ÖÖ ÖÖ Ö ÖÖ Ö ÖÖ Ö Ö 373,121,918 377,367,954 3,301,672 3,388,334

5.00 INTEREST EXPENSE Lender 1. SMAGL 13,993,916 10,719,660 123,829 95,814 2. People’s Bank 126,717 704,359 1,121 6,296 3. Etimos 19,269,806 13,174,604 170,514 117,757 4. Deutsche Bank - 164,397 - 1,469 5. Interest on VO Members Savings 12,597,819 12,127,550 111,475 108,398 Total 45,988,258 36,890,570 406,940 329,733

6.00 MEMBERSHIP FEES AND OTHER CHARGES Membership fee 8,415,743 8,815,985 74,469 78,798 Total 8,415,743 8,815,985 74,469 78,798

7.00 Other Income )NTERESTÖONÖÙXEDÖDEPOSITSÖ Ö Ö ÖÖ Ö ÖÖ Ö ÖÖ Ö Ö Other income 7,017,706 22,835,425 62,098 204,106 Total 9,733,518 28,275,964 86,130 252,734

The exchange gains arise from translation of foreign currency transactions and revaluations of foreign currency denominated assets and liabilities TOÖ,+2Ö&INANCIALÖASSETSÖANDÖLIABILITIESÖDENOMINATEDÖINÖFOREIGNÖCURRENCIESÖAREÖTRANSLATEDÖTOÖ,+2ÖATÖRATEÖRULINGÖATÖBALANCEÖSHEETÖDATEÖ Ö

8.00 IMPAIRMENT LOSSES ON LOANS AND ADVANCES Provision on Impairment losses 10,881,417 10,669,012 96,287 95,361 Total 10,881,417 10,669,012 96,287 95,361

9.00 STAFF COSTS 3ALARIESÖÖ"ONUSÖ ÖÖ ÖÖ ÖÖ Ö ÖÖ Ö Ö Total 154,028,904 133,370,680 1,362,967 1,192,119

2011 2010 2011 2010

LKR LKR USD USD

10.00 OTHER OPERATING EXPENSES Staff training and development 1,931,676 3,064,981 17,093 27,395 Travel and transportation 14,592,791 20,137,962 129,128 179,996 Maintenance and general expenses 29,722,209 16,725,128 263,005 149,492 Ö 0RINTINGÖANDÖOFÙCEÖSTATIONERYÖ Ö Ö ÖÖ Ö ÖÖ Ö ÖÖ Ö Ö Occupancy expenses (10.10) 20,086,968 15,592,783 177,745 139,371 Ö 'ROUPÖMEMBERÖDEATHÖBENEÙTSÖ Ö Ö ÖÖ Ö ÖÖ Ö ÖÖ Ö Ö Audit fees 403,200 369,600 3,568 3,304 Program supplies 184,160 425,050 1,630 3,799 Ö "ADÖDEBTÖWRITTENÖOFFÖ Ö Ö ÖÖÖÖ Ö ÖÖ Ö ÖÖÖÖ Ö HO logistics and management expenses 23,162,086 49,605,026 204,956 443,377 Total 100,754,040 125,592,339 891,550 1,122,563

Ø Ø.BBTO@MBXØDWODMRDR Rent 14,663,560 10,997,198 129,755 98,295 Ö 5TILITIESÖ Ö Ö ÖÖ Ö ÖÖ Ö ÖÖ Ö Ö Total 20,086,968 15,592,783 177,745 139,371

11.00 TAXATION @ØØ(MBNLDØS@WØDWODMRD Corporation tax –charge for the year 22,921,633 21,501,399 202,828 195,237 3@WØ"QDCHSØDWODMRDØ Ø Ø ØØ Ø ØØ Ø ØØ Ø Ø

Ø AØ3@WØO@X@AKD Balance b/f 21,501,399 7,103,122 190,261 64,498 Charge for the period 22,921,633 21,501,399 202,828 195,237 Paid during the year (21,627,825) (7,103,122) (191,380) (64,498) 3@WØO@X@AKDØ Ø Ø ØØ Ø ØØ Ø ØØ Ø Ø

11.01ÖÖ4HEÖTAXÖCHARGEÖONÖTHEÖCOMPANYlSÖPROÙTÖBEFOREÖTAXÖDIFFERSÖFROMÖTHEÖTHEORETICALÖAMOUNTÖUSINGÖTHEÖBASICÖTAXÖRATEÖASÖFOLLOWSÖÖ

Ö /PERATINGÖPROÙTSURPLUSÖANDÖOTHERÖINCOMEÖBEFOREÖTAXATIONÖ Ö Ö ÖÖ Ö ÖÖ Ö ÖÖ Ö Ö Ö 4AXÖCALCULATEDÖATÖÖ Ö Ö ÖÖ Ö ÖÖ Ö ÖÖ Ö Ö Tax effect of non deductible expense and non taxable income 3,020,717 772,332 26,730 7,013 3@WØBG@QFDØENQØSGDØXD@QØ Ø Ø ØØ Ø ØØ Ø ØØ Ø Ø 2011 2010 2011 2010

LKR LKR USD USD

12.00 CASH IN HAND AND AT BANK Cash in hand 205,996 2,221,782 1,823 20,174 Cash at Bank Standard Chartered Bank 15,644,728 133,774,655 138,437 1,214,698 Hatton National Bank PLC 886,058 6,995,737 7,841 63,523 Commercial Bank of Ceylon PLC 276,955 6,219,451 2,451 56,474 Peoples Bank 7,971,287 18,389,325 70,536 166,978 Bank of Ceylon 505,631 3,612,027 4,474 32,798 Seylan Bank PLC 55,888 3,837,541 495 34,846 Sampath Bank PLC 32,769 892,457 290 8,104 25,373,316 173,721,193 224,523 1,577,419 "@RGØHMØG@MCØ@MCØ@SØA@MJØ Ø Ø ØØ Ø ØØ Ø ØØ Ø Ø

13.00 FIXED DEPOSITS AT AMORTISED COST 0EOPLESÖ"ANKÖ Ö Ö ÖÖÖÖ Ö ÖÖ Ö ÖÖÖÖ Ö Ö Total - 50,000,000 - 454,009

Ø 3GDØL@STQHSXØNEØSGDØÚWDCØCDONRHSRØHRØ@M@KXYDCØ@RØENKKNVRØ Within 3 months - 50,000,000 - 454,009 Total - 50,000,000 - 454,009

14.00 LOANS AND ADVANCES TO CUSTOMERS Group loans 1,296,508,615 1,024,317,480 11,472,512 9,300,985 Ö ,OANÖWRITEÖOFFÖ Ö Ö ÖÖÖÖ Ö Ö Ö ÖÖÖÖ Ö Interest receivable 2,705,131 442,198 23,937 4,015 Impairment loss on loan advance (37,855,484) (26,974,067) (334,975) (244,929) 1,261,358,262 986,872,622 11,161,475 8,960,979

Ö !DVANCESÖTOÖCUSTOMERSÖAREÖCARRIEDÖATÖAMORTIZEDÖCOSTÖÖ)TÖISÖESTIMATEDÖTHATÖTHEÖFAIRÖVALUESÖOFÖADVANCESÖTOÖCUSTOMERSÖAREÖAPPROXIMATELYÖTHEÖSAMEÖ as the carrying values. All advances to customers are unsecured.

14.01ÖÖ4HEÖMOVEMENTÖONÖTHEÖLOANÖACCOUNTSÖISÖANALYZEDÖASÖSHOWNÖBELOWÖ Ö ÖÖ Ö At 1 January 1,013,404,491 807,087,001 8,967,388 7,328,494 Loans disbursed 2,537,819,000 1,855,782,000 22,456,588 16,850,831 Ö ,ESSÖ,OANSÖREPAYMENTSÖ Ö Ö Ö Ö Ö Ö Ö Ö Gross advances to customers 1,296,508,615 1,024,317,480 11,472,512 9,300,985 Ö ,ESSÖ7RITEÖOFFÖ Ö Ö ÖÖÖÖ Ö Ö Ö ÖÖÖÖ Ö Interest receivable 2,705,131 442,198 23,937 4,015 Impairment loss on loans advance (Note -14.02) (37,855,484) (26,974,067) (334,975) (244,929) Net advances to customers 1,261,358,262 986,872,622 11,161,475 8,960,979 2011 2010 2011 2010

LKR LKR USD USD

14.02ÖÖ4HEÖMOVEMENTÖONÖTHEÖIMPAIRMENTÖONÖLOANSÖACCOUNTÖISÖÖSHOWNÖBELOWÖ Ö Ö Ö Ö

At 1 January 26,974,067 16,647,303 238,687 151,160 Charge for the year 10,881,417 21,582,001 96,287 195,968 Ö ,OANÖWRITE OFFÖ Ö Ö ÖÖÖÖ Ö Ö Ö ÖÖÖÖ Ö Ö )NTERESTÖRECEIVABLEÖWRITEÖOFFÖ Ö Ö ÖÖÖÖ Ö Ö Ö ÖÖÖÖ Ö At 31 December 37,855,484 26,974,067 334,975 244,929

14.03 Analysis of Impairment of loans Principal Provision Provision Outstanding rate required Local Local For general provision (4.40) .OÖPASTÖDUEÖ Ö Ö Ö ÖÖ Ö Ö Ö

%NQØRODBHÚBØOQNUHRHNMØ ÖDAYSÖ Ö Ö Ö ÖÖ Ö Ö Ö Ö ÖDAYSÖ Ö Ö Ö ÖÖ Ö Ö Ö Ö ÖDAYSÖ Ö Ö Ö ÖÖ Ö Ö Ö Ö ÖDAYSÖANDÖABOVEÖPASTÖDUEÖ Ö Ö Ö ÖÖ Ö Ö Ö 20,202,708 12,329,366 1,296,508,615 37,855,484

15.00 OTHER ASSETS Advance to third party 3,941,619 3,144,718 34,878 28,555 Related party receivables - 5,946,455 - 53,995 Advances to staff 22,450 - 199 - Ö &IELDÖRECEIVABLEÖ Ö Ö ÖÖÖÖ Ö ÖÖ Ö ÖÖÖÖ Ö Ö Total 3,964,069 10,543,667 35,077 95,738 16.00 PROPERTY AND EQUIPMENT

Ö Ö ,ANDÖ &URNITUREÖÖ %QUIPMENTSÖ 6EHICLEÖ "ICYCLEÖ -OTORÖ#YCLESÖ 4OTALÖ 4OTAL Ö Ö Ö Ö&IXTURESÖ Ö Ö Ö Ö Ö Ö Ö

LKR LKR LKR LKR LKR LKR LKR USD Cost

At 1 January 2010 15,000,000 9,437,263 8,297,437 3,437,700 2,237,003 10,775,215 49,184,618 446,605 Additions - 1,827,639 2,067,558 11,363,000 48,790 1,140,118 16,447,105 149,343 Ø SØØ#DBDLADQØØ Ø ØØ ØØ ØØ Ø ØØ Ø ØØØØ Ø ØØØ Ø ØØ Ø ØØ Ø Ø Additions - 2,536,437 3,559,092 - 315,603 3,815,350 10,226,482 79,894 Ö !DJUSTÖÖ$ISPOSALÖÖ4RANSFERREDÖ Ö ÖÖÖÖ Ö ÖÖ Ö Ö Ö ÖÖÖÖ Ö ÖÖ Ö ÖÖ Ö ÖÖ Ö Ö Ø SØØ#DBDLADQØØ Ø ØØ Ø ØØ Ø ØØ Ø ØØ Ø ØØØ Ø ØØØØØ Ø ØØ Ø Ø

Depreciation

At 1 January 2010 - 2,163,654 2,392,779 3,437,699 1,137,054 3,888,457 13,019,643 118,221 Charge for the year - 1,035,110 1,399,682 943,217 400,800 2,175,892 5,954,701 54,070 Ø SØØ#DBDLADQØØ Ø ØØØØ Ø ØØ Ø ØØ Ø ØØ Ø ØØ Ø ØØ Ø ØØ Ø Ø Charge for the year - 1,324,704 1,913,825 2,272,600 447,021 2,716,738 8,674,888 76,762 SØØ#DBDLADQØØ Ø ØØØØ Ø ØØ Ø ØØ Ø ØØ Ø ØØ Ø ØØ Ø ØØ Ø Ø

Ø SØØ#DBDLADQØØ Ø ØØ Ø ØØ Ø ØØ Ø ØØ Ø ØØ Ø ØØ Ø ØØ Ø Ø

Ø SØØ#DBDLADQØØ Ø ØØ Ø ØØ Ø ØØ Ø ØØ Ø ØØ Ø ØØ Ø ØØ Ø 2011 2010 2011 2010

LKR LKR USD USD

17.00 LOAN SECURITY FUND Opening balance 68,328,588 - 604,624 - Received during the year 253,781,900 92,789,100 2,245,659 842,542 Ö 0AIDÖOFFÖ!DJUSTEDÖDURINGÖTHEÖYEARÖ Ö Ö Ö Ö Ö Ö Ö Ö Closing balance 254,085,289 68,328,588 2,248,343 620,436

4HEÖ,OANÖ3ECURITYÖ&UNDÖACTSÖASÖCOLLATERALÖFORÖTHEÖCUSTOMERSlÖLOANÖOBLIGATIONSÖTOÖ"2!#Ö,ANKAÖ'UARANTEE Ö,IMITEDÖ4HISÖISÖCOMPUTEDÖASÖÖOFÖ THEÖCUSTOMERSlÖAPPROVEDÖLOANÖ)NÖTHEÖEVENTÖOFÖANYÖDEFAULT ÖTHEÖCLIENTSÖFORFEITÖALLÖORÖPARTÖOFÖTHEÖ,OANÖ3ECURITYÖ&UNDÖTOÖTHEÖEXTENTÖOFÖTHEÖAMOUNTÖATÖ risk.

18.00 RELATED PARTY PAYABLE Payable to Stitching BRAC International 23,162,086 - 204,956 - Payable to BRAC Bangladesh 175,745,302 167,478,290 1,555,131 1,520,733 198,907,388 167,478,290 1,760,087 1,520,733

2ELATEDÖPARTYÖPAYABLESÖRELATEÖTOÖAMOUNTSÖOWINGÖTOÖ"2!#Ö!SSOCIATESÖFORÖTHEÖSETTLEMENTÖOFÖSTAFFÖCOSTSÖANDÖOPERATINGÖEXPENDITURESÖONÖBEHALFÖOFÖ BRAC Lanka (Guarantee) Limited, HO logistics and other fees payable.

19.00 BORROWINGS SMAGL 185,312,483 105,029,168 1,639,788 953,684 Ö +)6!Ö Ö Ö ÖÖÖÖ Ö Ö Ö ÖÖÖÖ Ö Ö Etimos 108,865,143 182,554,292 963,323 1,657,625 Peoples Bank 271,161 4,039,905 2,399 36,683 Total 294,448,787 292,248,213 2,605,511 2,653,666

Ø !NQQNVHMFR Opening balance 292,248,213 257,858,196 2,653,666 2,341,398 Obtained during the year 19 . B 150,000,000 171,837,539 1,327,316 1,560,315 Less - Loan Repayment during the year 19 . C (147,799,426) (137,447,522) (1,375,471) (1,248,048) 294,448,787 292,248,213 2,605,511 2,653,666

!Ø !NQQNVHMFRØ.AS@HMDCØCTQHMFØSGDØXD@Q #ONSORZIOÖ%TIMOSÖSCÖ 19.1 - 99,712,691 - 905,409 Ö 3TROMMEÖ-ICROÖ&INANCEÖ!SIAÖ'UARANTEE Ö,TDÖ 19.2 - 8,000,000 - 72,641 Ö 3TROMMEÖ-ICROÖ&INANCEÖ!SIAÖ'UARANTEE Ö,TDÖ 19.3 - 8,500,000 - 77,182 Ö 3TROMMEÖ-ICROÖ&INANCEÖ!SIAÖ'UARANTEE Ö,TDÖ 19.4 - 25,000,000 - 227,004 Ö 3TROMMEÖ-ICROÖ&INANCEÖ!SIAÖ'UARANTEE Ö,TDÖ 19.5 - 30,000,000 - 272,405 Ö +)6!Ö,TDÖ 19.6 - 624,848 - 5,674 Ö 3TROMMEÖ-ICROÖ&INANCEÖ!SIAÖ'UARANTEE Ö,TDÖ 19.7 20,000,000 - 176,975 - Ö 3TROMMEÖ-ICROÖ&INANCEÖ!SIAÖ'UARANTEE Ö,TDÖ 19.8 20,000,000 - 176,975 - Ö 3TROMMEÖ-ICROÖ&INANCEÖ!SIAÖ'UARANTEE Ö,TDÖ 19.9 30,000,000 - 265,463 - Ö 3TROMMEÖ-ICROÖ&INANCEÖ!SIAÖ'UARANTEE Ö,TDÖ 19.10 30,000,000 - 265,463 - Ö 3TROMMEÖ-ICROÖ&INANCEÖ!SIAÖ'UARANTEE Ö,TDÖ 19.11 20,000,000 - 176,975 - Ö 3TROMMEÖ-ICROÖ&INANCEÖ!SIAÖ'UARANTEE Ö,TDÖ 19.12 30,000,000 - 265,463 - 150,000,000 171,837,539 1,327,316 1,560,315

"Ø +N@MØ1DO@XLDMSØCTQHMFØØSGDØXD@QØ $EUTSCHEÖ"ANKÖ!MERICASÖ&OUNDATIONÖ Ö Ö ÖÖÖÖ Ö ÖÖ Ö ÖÖÖÖ Ö Ö Ö 3TROMMEÖ-ICROÖ&INANCEÖ!SIAÖ'UARANTEE Ö,TDÖ Ö Ö ÖÖ Ö ÖÖ Ö ÖÖ Ö Ö People’s Bank Sri Lanka 73,689,149 8,333,316 684,111 75,668 Ö #ONSORZIOÖ%TIMOSÖSCÖ Ö Ö ÖÖ Ö ÖÖ Ö ÖÖ Ö Ö +)6!Ö,TDÖ Ö Ö ÖÖ Ö ÖÖÖÖ Ö ÖÖ Ö ÖÖÖ 147,799,426 137,447,522 1,375,471 1,248,048 Ø ØØ "NMRNQYHNØ$SHLNRØR B Ø Ø Ø Ø Ø Ø ,OANÖFROMÖ%4)-/3Ö)4!,9 Ö,+2Ö ÖANDÖ,+2Ö ÖWEREÖOBTAINEDÖTOÖDISBURSEÖAMONGÖTHEÖ6/ÖMEMBERSÖASÖLOANS ÖANDÖBEARSÖ INTERESTÖATÖÖANDÖÖPERÖANNUMÖRESPECTIVELYÖ4HEÖLOANÖWILLÖBEÖPAIDÖASÖEVERYÖSIXÖMONTHÖÖ9EAR ÖINSTALLMENTÖWITHÖINTERESTÖONÖREDUCINGÖ method.

Ø ØØ 2SQNLLDØ,HBQNØ%HM@MBDØ RH@Ø&T@Q@MSDDØ+SC Ø Ø Ø Ø Ø Ø ,OANSÖFROMÖ3TROMMEÖ-ICROÖ&INANCEÖ!SIAÖ'UARANTEE Ö,TDÖOFÖÖ,+2Ö ÖWASÖOBTAINEDÖTOÖDISBURSEÖAMONGÖ6/ÖMEMBERSÖASÖLOANS ÖANDÖ BEARSÖINTERESTÖATÖÖÖPERÖANNUMÖONÖREDUCINGÖBALANCEÖ4HEÖLOANÖISÖTOÖBEÖPAIDÖASÖMONTHLYÖINSTALLMENTSÖ Ö Ö Ö Ö

Ø ØØ 2SQNLLDØ,HBQNØ%HM@MBDØ RH@Ø&T@Q@MSDDØ+SC Ø Ø Ø Ø Ø Ø ,OANSÖFROMÖ3TROMMEÖ-ICROÖ&INANCEÖ!SIAÖ'UARANTEE Ö,TDÖOFÖ,+2Ö ÖWASÖOBTAINEDÖTOÖDISBURSEÖAMONGÖ6/ÖMEMBERSÖASÖLOANS ÖANDÖ BEARSÖINTERESTÖATÖÖÖPERÖANNUMÖONÖREDUCINGÖBALANCEÖ4HEÖLOANÖISÖTOÖBEÖPAIDÖASÖMONTHLYÖINSTALLMENTSÖ Ö Ö Ö Ö

Ø ØØ *(5 Ø+SC Ø Ø Ø Ø Ø Ø ,OANSÖFROMÖ+)6!Ö,TDÖOFÖ,+2Ö ÖWASÖOBTAINEDÖTOÖDISBURSEÖAMONGÖ6/ÖMEMBERSÖASÖLOANS ÖREPAYMENTÖWILLÖMADEÖENDÖOFÖTHEÖPROJECTÖ Ö Ö

Ø ØØ 2SQNLLDØ,HBQNØ%HM@MBDØ RH@Ø&T@Q@MSDDØ+SC Ø Ø Ø Ø Ø Ø ,OANSÖFROMÖ3TROMMEÖ-ICROÖ&INANCEÖ!SIAÖ'UARANTEE Ö,TDÖOFÖ,+2Ö ÖWASÖOBTAINEDÖTOÖDISBURSEÖAMONGÖ6/ÖMEMBERSÖASÖLOANS ÖANDÖ BEARSÖINTERESTÖATÖÖPERÖANNUMÖONÖREDUCINGÖBALANCEÖ4HEÖLOANÖISÖTOÖBEÖPAIDÖASÖMONTHLYÖINSTALLMENTSÖ Ö Ö Ö Ö

Ø ØØ 2SQNLLDØ,HBQNØ%HM@MBDØ RH@Ø&T@Q@MSDDØ+SC Ø Ø Ø Ø Ø Ø ,OANSÖFROMÖ3TROMMEÖ-ICROÖ&INANCEÖ!SIAÖ'UARANTEE Ö,TDÖOFÖÖ,+2Ö ÖWASÖOBTAINEDÖTOÖDISBURSEÖAMONGÖ6/ÖMEMBERSÖASÖLOANS ÖANDÖ BEARSÖINTERESTÖATÖÖPERÖANNUMÖONÖREDUCINGÖBALANCEÖ4HEÖLOANÖISÖTOÖBEÖPAIDÖASÖMONTHLYÖINSTALLMENTSÖ Ö Ö Ö Ö

2011 2010 2011 2010

LKR LKR USD USD 20.00 OTHER LIABILITIES

Accrual for expenses 13,376,410 13,494,182 118,365 122,530 VO Members Saving Deposits (20.10) 10,992,443 208,064,586 97,270 1,889,263 Interest Payable 372,773 - 3,299 - Total 24,741,626 221,558,768 218,933 2,011,793

Ø ØØ 5.Ø,DLADQRØ2@UHMFØ#DONRHSRØØ Ø Ø Ø Ø Ø Opening balance 208,064,586 179,591,326 1,889,263 1,630,721 Ö !DDÖ$EPOSITSÖDURINGÖTHEÖYEARÖ Ö Ö ÖÖÖÖ Ö ÖÖ Ö ÖÖÖÖ Ö Ö 208,064,586 242,664,832 1,889,263 2,203,440 Ö ,ESSÖ2EPAYMENTÖDURINGÖTHEÖYEARÖ Ö Ö Ö Ö Ö Ö Ö Ö 10,992,443 208,064,586 97,270 1,889,263

21.00 DONOR FUNDS $ONORÖFUNDSÖINVESTMENTÖINÖÙXEDÖASSETSÖ.OTE Ö Ö Ö ÖÖ Ö ÖÖ Ö ÖÖ Ö Ö Total 4,864,349 4,995,377 43,044 45,359

Ø ØØ #NMNQØETMCRØHMUDRSLDMSØHMØÚWDCØ@RRDSR Ø#DEDQQDCØHMBNLDØØØ ØØØØ Opening balance 4,995,377 5,126,405 44,203 46,549 Transferred from donor funds received in advance - - - - Depreciation charged during the year (131,028) (131,028) (1,159) (1,190) Ø "KNRHMFØA@K@MBDØ Ø Ø ØØ Ø ØØ Ø ØØ Ø Ø

22.00 BRAC CONTRIBUTION Ö 4HEÖFUNDÖAMOUNTINGÖTOÖ,+2Ö ÖRELATESÖTOÖVARIOUSÖCONTRIBUTIONSÖMADEÖTOWARDSÖTHEÖESTABLISHMENTÖOFÖ"2!#Ö,ANKAÖ'UARANTEE Ö,IMITEDÖ

23.00 EVENTS AFTER THE BALANCE SHEET DATE Ö !LLÖMATERIALÖEVENTSÖOCCURRINGÖAFTERÖTHEÖBALANCEÖSHEETÖDATEÖAREÖCONSIDEREDÖANDÖAPPROPRIATEÖADJUSTMENTSÖORÖÖDISCLOSURESÖHAVEÖBEENÖMADEÖINÖTHEÖ ÙNANCIALÖSTATEMENTSÖ Ö Ö Ö Ö Ö Ö

24.00 CASHFLOW FROM OPERATING ACTIVITIES 2011 2010 2011 2010

LKR LKR USD USD

Ö #ASHÖÚOWÖFROMÖOPERATINGÖACTIVITIESÖ Ö Ö Ö Ö Ö Ö

$WBDRRØNEØHMBNLDØNUDQØDWODMCHSTQD 71,074,700 102,113,629 628,924 917,051 Depreciation 8,674,888 5,954,701 76,762 53,477 Ö &INANCIALÖ6!4Ö Ö Ö Ö Ö ÖÖÖÖ Ö Ö Ö ÖÖÖ Loan loss provision 10,881,417 21,582,001 96,287 193,821 "@RGØÛNVØADENQDØBG@MFDRØHMØVNQJHMFØ Ø Ø ØØ Ø ØØ Ø ØØ Ø Ø capital

"G@MFDRØHMØVNQJHMFØB@OHS@K Decrease/(increase) of other assets 6,579,598 (105,317) 58,221 (946) Increase/(decrease) of related parties payable 31,429,098 68,793,759 278,109 617,816 Increase/(decrease) of other liabilities (196,817,142) (144,456,213) (1,782,304) (1,297,317) (Increase)/decrease interest receivable (2,262,933) 24,835,974 (20,024) 223,044 (161,071,379) (50,931,797) (1,465,998) (457,403) Net cash from operations (74,309,919) 78,718,534 (698,266) 706,947

25.00 CONTINGENT LIABILITIES #ONTINGENTÖ,IABILITIESÖAREÖNOTÖRECOGNIZEDÖBUTÖDISCLOSEDÖINÖTHEÖÙNANCIALÖSTATEMENTSÖUNLESSÖTHEÖPOSSIBILITYÖOFÖANÖOUTÚOWÖOFÖRESOURCESÖEMBODYINGÖ ECONOMICÖBENEÙTSÖISÖRELIABLYÖESTIMATEDÖ Ö Ö Ö Ö Ö Ö

#ONTINGENTÖASSETSÖAREÖNOTÖRECOGNIZEDÖINÖTHEÖÙNANCIALÖSTATEMENTSÖASÖTHISÖMAYÖRESULTSÖINÖTHEÖRECOGNITIONÖOFÖINCOMEÖWHICHÖMAYÖNEVERÖBEÖREALIZEDÖÖ

Photo Credit: Rest of the Photos : BRAC/Shehzad Noorani

BRAC BRAC International BRAC in Sri Lanka BRAC Centre T : +88 02 9881265 Teleportboulevard 140 197/1, Templers Road, Mount 75 Mohakhali F : +88 02 8823542 1043 EJ Amsterdam Lavinia, Sri Lanka. Dhaka 1212 E : [email protected] Netherlands Tel: +94-11-4853063 Bangladesh W : www.brac.net Fax: +94-11-2727503 www.brac.net