Peoples Merchant Annual Report 2010-11

Begining of a new era...
Annual Report 2010 / 11 Annual Report 2010 / 11

Begining of a new era
Sri Lanka emerged fromthree decades of conflict and
the year 2010 can be best described as a year where the
country saw a resurgence of economic activity amidst
peace and tranquility. Peoples Merchant PLC looks
forward to a new beginning in a new era of
opportunities.
Vision
Be the most preferred, socially
responsible and protable merchant
banking insttuton in the country.
Mission
To provide an optmum return to
shareholders by maximising the return
on equity.
To provide business solutons that add
value to clients business ventures and
ensure their contnuous growth in wealth.
To create a pleasant work environment
for employees through training,
empowerment and recogniton of good
performance.
To be a socially responsible organizaton
that maintains high standards of
business ethics and to have good
corporate governance practses.
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Highlights
Contents
Vision / Mission 2 | Highlights 3 | Financial Highlights 4 | Chairmans Statement 5 |
Chief Executve O cers Review 7 | Board of Directors 10 | Management 13 | Branch Management 14 |
Business Review 15 | Financial Review 25 | Corporate Governance 30 | Risk Management and Internal Control 36 |
Our Team 39 |
Financial Calender 42 | Annual Report of the Board 43 | Directors Responsibility For Financial Reportng 46 |
Report of the Audit Commitee 47 | Independent Auditors Report 48 | Income Statement 49 |Balance Sheet 50 |
Statement of changes in equity 51 | Cash Flow Statement 52 |Notes to the nancial statements 54 |
Statement of Value Added 84| Graphical Review 85 | Ten Year Summary 86 | Investor Informaton 87 |
Share Informaton 89 | Our Services 90 |Glossary of Financial Terms 91 | Notce of Meetng 93 |
Form of Proxy 94 |Corporate Informaton Inner Back Cover
Financial Informaton
Income increased by Rs.43Mn, 8% increase over the previous year.
Total assets of the company increased by Rs.629Mn during the year, a 20% increase over last year.
Lease and HP new disbursements reached Rs.1.5Bn during the period, increased by Rs.630Mn
or 72% over last year.
Raised Rs.1.8Bn funds on secured and unsecured basis.
Made a 100% provision of Rs.188Mn for receivables and investment in Credit Card Company during the year.
3
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Financial Highlights
Group Company
For the year ended 31 March 2011 2010 Change % 2011 2010 Change %
Income ( Rs.000s) 666,691 648,225 2.85 586,830 543,749 7.92
Loss before taxaton ( Rs.000s) (63,842) (124,288) 48.63 (215,320) (14,286) 1,407.21
Loss afer taxaton ( Rs.000s) (61,659) (136,004) (54.66) (202,500) (20,409) 892.21
Loss per share (Rs.) (1.66) (4.31) - (5.42) (0.66) -
Equity ( Rs.000s) 484,019 546,278 (11.40) 470,553 673,653 (30.15)
Return on average equity (%) (11.97) (27.34) - (35.40) (3.60) -
Total assets ( Rs.000s ) 3,883,706 3,495,554 11.10 3,707,831 3,079,051 20.42
Return on average total assets (%) (1.67) (7.78) - (5.97) (0.71) -
Equity
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Chairmans Statement
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111
11111
44444444
TheCompany is
strongly positioned to
moveforward, taking
advantageof numerous
opportunities that are
availablewithin a
unified and peaceful
Sri Lanka.
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It gives me great pleasure to welcome you to the 28th
Annual General Meetng of Peoples Merchant PLC, on
behalf of the Board of Directors and present to you the
Annual Report and the Audited Accounts of your company
and its subsidiaries for the year under review.
Global Economic Environment
The global economy rebounded in 2010 with most major
economies showing positve growth in Gross Domestc
Product (GDP) following one of the worst recessions in
decades. The recovery however was sluggish with low
job growth in many advanced economies. Sovereign debt
problems in some European countries created uncertainty
in nancial markets. Although there was a modest recovery
in the last half of 2009 and early 2010 it slowed down in
subsequent quarters as an inital boost from government
spending following the recession, waned.
However it noteworthy to menton that despite the
uncertainty in many advanced economies, global economic
growth contnues and more importantly the Asia-Pacic
region is driving the global recovery led by countries such
as China and India.
Local Perspectve
The Sri Lankan economy recorded a positve growth rate
of 8% in 2010, reectng a fast recovery from the setback
suered in 2009 and moved to a sustainable level. All key
sectors of the economy demonstrated a commendable
performance in 2010, amidst a peaceful environment in
the country, improved investor condence and favourable
macroeconomic conditons.
The stability of the nancial system further strengthened
with the resurgence in economic growth. The soundness of
nancial insttutons was maintained with improvements
in capital and liquidity. Overall asset quality and earnings
also showed improvements during the year under
review.
It is also noted that with declining inaton and easing of
monetary policy there has been a reducton of interest
rates .
Specialised Leasing Companies (SLCs) contnued to grow
in terms of business in 2010 with improvements in credit
quality and favourable provisioning for bad and doubtul
accommodatons. As at the end of 2010, the number
of insttutons registered under the Finance Leasing
Act were 70 of which 15 were licensed banks, 34 were
RFCs and 21 were SLCs. The SLC sectors branch network
further expanded to 224 with the opening of 44 branches,
compared to 180 in 2009. Of the new branches, 15 were
opened in the Northern and Eastern provinces.
Company Performance
Your company has weathered a challenging period last
year and has come through this period and is now poised
for a turnaround. Your Board has made some strategic
decisions which will augur well for the future of the
company and assist in it returning to protability.
The company is strongly positoned to move forward,
taking advantage of numerous opportunites that are
available within a unied and peaceful Sri Lanka .
The leasing industry is positve about future gains and
heading towards a rapid growth due to the post war
resurgence in Sri Lanka and the opening of the North and
Eastern areas for commercial purposes. The Government
on its part has granted capital allowances on equipment
for leasing companies as a budgetary concession for the
industry .The grant will be eectve from 01 April 2011
which will enable leasing of equipment with a depreciaton
of 33% over 3 years as against 12.5% over 8 years.
Undoubtedly Peoples Merchant will stand to gain from
these initatves.
I take this opportunity to thank the Chairman of Peoples
Bank and our major shareholder Peoples Bank for their
guidance and contnued support. I also wish to place on
record my sincere appreciaton to my fellow Directors
for their valuable contributon, advice and guidance.
The Management and the Sta have worked with great
commitment under challenging conditons and I thank
the Chief Executve O cer, the Management and Sta of
Peoples Merchant for their untring eorts
Finally I wish to convey my appreciaton to all our
shareholders for the condence and trust placed in us.
On behalf of the Board of Directors, I assure you that
the Company will contnue to steam ahead, overcoming
whatever challenges faced through the executon of
carefully formulated strategies while upholding the
highest standards of Corporate Governance.
P. A. Ajith Panditharatne
Chairman
23rd August 2011
6
Chief Executve O cers Review
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This year has been a
year of consolidation
for thecompany. It is
with thecombined effort
and support of many
stakeholders of
Peoples Merchant that
theCompany was ableto
Successfully steer through
a challenging year.
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The Financial year 2010/11 was a challenging year for the
company. The company incurred an afer tax loss of Rs.
202.5Mn and a group loss of Rs. 61.7Mn. However the
company consolidated its positon during the year. The loss
this year can be atributed mainly for the full provisioning
of Rs.188Mn made for the investment and receivables
from the credit card company, acquired in 2009.
However the company having made a strategic decision
to make this provisioning can look forward to a much
improved performance in the ensuing nancial year.
The Group recorded a modest increase in Interest income
by Rs.53Mn (9.8%), from Rs. 544Mn to Rs. 598Mn over
the previous year. Interest expenses declined from
Rs.509Mn to Rs. 426Mn during this period due to certain
prudent measures taken by the company. The operatng
prot of the company before provisions was Rs.20.8Mn
compared to last year of Rs.35Mn. Total assets of the
company increased by Rs.629Mn during the year; a 20%
increase over last year. This is mainly due to the transfer of
a property from the credit card company and an increase
in advances.
The company made another strategic decision during the
year to dispose of the Peoples Merchant Finance co Ltd
(PMF) which resulted in a capital gain of Rs.137Mn which
is recorded as a post balance sheet event as the sale was
completed in May 2011.
Shareholders of the company contnued to have faith in
the potental of the company judging by the fact that the
share price remained stable throughout the year .The
market price of a share stood at Rs. 21 on 01 April 2010
and the closing price on 31 March 2011 was Rs 23.50. It
traded within a band of Rs.22 and Rs.24 during the period
under review.
A high concentraton of the leasing portolio of Peoples
Merchant is in vehicle nancing, which accounts for
the bulk of the lease/HP portolio. However, the risks
associated with possible defaults are largely mitgated
by the nature of nance leases, where the vehicle is
considered as security and the company has absolute
ownership of such vehicles. This concentraton is not
considered a major risk to the company as vehicles
nanced are used for public transport, goods transport,
and personal use by a large and loyal customer base who
have been with the company for a long period of tme.
Lease and Hire purchase business accounts for 87% of the
Peoples Merchant portolio. The Lease and HP portolio
grew by 23% during the year and new disbursements
reached Rs.1.5Bn, a 72% increase over last year.
The company has decided to adopt a diversicaton
strategy in order to reduce its dependency on Leasing
and Hire Purchase. The company has introduced Pawning
branded as Peoples Merchant Gold Loans. Already this
product is being oered from four of the branches and
plans have been made to introduce this product in ve
other branches including Colombo. The Corporate Finance
business of the company which was largely dormant is to
be reactvated as a part of the diversicaton strategy.
Trade Finance services were consolidated during the year
as the focus was more on collecton of non performing
loans in this sector. Trade nancing was mainly limited to
bill discountng, short and medium term loans and issue
of leters of guarantees.
The real estate business of the company was aected
by the slow down in the real estate industry. However
the company contnued its real estate projects and this
business sector made a revenue contributon of Rs.
13.6Mn. The company is now focusing more on land
development and sale as opposed to housing projects.
Peoples Merchant expanded its branch network with two
new branches in Anuradhapura and Trincomalee during
the year enabling the company to serve a wider customer
base.
Credit Risk
The level of credit risk of the Specialized Leasing Company
sector depends largely on the quality of assets, which is
measured by the volume of NPLs and the NPL rato.
An issue that the company is faced with is the relatvely
high NPL portolio and a provision for bad and doubtul
debts of Rs. 50 Mn that was made for the year ended 31
March 2011. This is mainly due to non performing term
loans facilites in the past. However credit quality during
the last two years has been maintained for the lease/HP
portolio which forms the bulk of the portolio and recent
loan grantngs. It is also noteworthy to menton that the
overall NPL rato decreased by 4% during the year. The
company maintains provisions on a stricter basis than
what is required under Central Bank regulatons.
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Chief Executve O cers Review Contd...
Therefore a primary area of focus would be a sustained
eort taken to reduce the past Non Performing Loan
(NPL) portolio. The company has recently established a
separate Recoveries division for this purpose and already
positve results are being shown in this area. The objectve
is to signicantly reduce the NPL portolio and to bring the
company on par with industry standards.
Operatonal and other Risks
Sound operatng systems, internal controls, and proper
procedures are critcally important to ensure the nancial
soundness of our company .Peoples Merchant has fullled
all the requirements in this regard.
As a Specialized Leasing Company (SLC) Peoples Merchant
like all other SLCs are mainly dependent on bank
borrowings made against asset-backed securites or funds
obtained through the issue of debt securites.
The liquidity reserve requirement for leasing companies
imposed by Central Bank will therefore pose a challenge
in January 2012 when it comes into eect for specialized
leasing companies .
An issue to all leasing companies is the lack of long term
funding and the issue of the mismatch of funds. However
this is not unusual for Leasing and Finance companies.
In order to beter address this issue the company has
recently established a separate Treasury functon which
will focus on diversifying its funding, securing more long
term funding and retring short term debt in order to
prudently manage the maturity mismatch of its portolio.
Outlook
We maintain a very positve outlook for our core leasing
and HP business in the ensuing year as the sector has
seen a record growth in recent tmes. The reducton of
dutes has seen an inux of vehicles which has resulted
in a demand for lease and HP facilites. This together with
the North and Eastern areas opening up for commercial
actvity and the growth in the constructon and transport
sectors has spurred demand.
The Real Estate sector has good potental to contribute
more meaningfully to the companys earnings in the future
as the proposed development plans of the government in
the real estate sector partcularly in Colombo and suburbs
will create a demand for housing and real estate. Peoples
Merchant is well poised to prot from this sector.
Future Strategies
Diversicaton would be a key focus . Already the company
has ventured into Gold Loans and will be looking to grow
its portolio in this area of business . Reactvaton of fee
based Corporate Finance business is another focus area.
The company is also looking at serving the agricultural
sector more meaningfully through its branch network.
The company has a well trained and experienced sta
to deliver a superior customer service. We would be
looking to leverage on this and improve our product
oering by introducing more e cient processes enabling
Peoples Merchant to further improve its services to its
customers.
Conclusion
This year has been a year of consolidaton for the company.
It is with the combined eort and support of many
stakeholders of Peoples Merchant that the company was
able to successfully steer through a challenging year.
The company is now poised to recover from its losses and
return to protability. The support of shareholders will be
important to achieve this result.
It is heartening to note that the company has been able
to retain and grow its customer base whilst many new
customers have sought the products and services oered
by the company. I thank our customers for their loyalty
and support.
The Chairman and the Board has played a crucial
guiding role for the company and has acted with much
responsibility and taken some strategic decisions which
has impacted the company positvely. I thank the
Chairman and the board for their advice and guidance in
all maters.
The Management and Sta of Peoples Merchant have
played a pivotal role in the aairs of the company and
have responded very well in the face of many challenges
and have given their unstnted support. I thank them.
Rajeeva Bandaranaike
Chief Executve O cer
23rd August 2011
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Board of Directors
Mr. P. A. Ajith Panditharatne
Mr. Panditharatne was appointed as Chairman with eect
from 3rd June, 2010. He also serves as a Director of Peoples
Bank, Peoples Leasing Property Development Ltd. and
Consultant/Director (Special Projects) of the Globe/Monta
Group of Companies.
He was the Natonal Organizer and founder member
in establishing, managing and guiding the Sri Lanka
Commerce Student Foundaton. Mr. Panditharatne has
served in number of state sector insttutons as Working
Director/Chairman of the Natonal Paper Corporaton,
Working Director of the Lanka Cement Limited, Chairman
of the Paranthan Chemical Corporaton and Executve
Director of the Sri Lanka Export Development Board.
Mr. Ahamed Sabry Ibrahim
B.Sc (Hons) FCIB
Mr.Ibrahim was appointed as a Director in June 2009. He
has over 27 years of banking experience, both locally and
internatonally, primarily in the management and risk
management. He holds an Honors Degree (B.Sc) from the
University of Colombo and is a Fellow of the Chartered
Insttute of Bankers UK (FCIB).
He is Senior Deputy General Manager-Risk and
Compliance of Peoples Bank.
Mr. B. S. Yapa
B.A. (Ceylon), B.Com (Ceylon), FCA and FSCMA
Mr.Yapa has been a Director since September 2004 and
has over 31 years experience in Accountng and Finance.
He has specialized training in Port Management, Finance
& Planning at the University of Antwerp.
Mr. Yapa held the positon of Deputy Chief Finance
Manager and Chief Internal Auditor at the Sri Lanka Ports
Authority. He is also a former member of the Accountng
Standards Commitee, Auditng Standards Commitee and
Taxaton Commitee of ICASL.
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Mr. M. P. Haradasa
Atorney-at-Law & Notary Public of Sri Lanka, Solicitor England & Wales
and New South Wales, Solicitor & Barrister - High Court of Australia.
Mr. Haradasa was appointed as Alternate Director to
Mr.Johnston from July 2006. He is a Council member of
the Inter-Pacic Bar Associaton (1997 - 2000 and 2004 -
2006) and is also a member of the Advisory Commission
consttuted under the Companies Act No.17 or 1982
(2002 - 2004). Mr. Haradasa is currently a Senior Partner
of Varners, a rm of Lawyers, Notaries and Agents for
Trademarks and Patents.
Mr. Haradasa resigned from the Board with eect from
5th July 2011.
Board of Directors Contd...
Mr. Anura R. Wickramasinghe
BA, MBA (USA)
Mr. Wickramasinghe was appointed as MD/CEO in June
2009. He has over 27 years experience in the nancial
sector of which 20 years has been at senior management
level. His last positon was Chief Representatve / Executve
Director for J.P.Morgon.
Mr. Wickramasinghe has a Bachelor degree in Computer
Science and Philosophy and a MBA in Informaton Systems
from USA. Mr. Wickramasinghe resigned with eect from
30th June 2011.
Mr. Jehan P. Amaratunga
Associate member of the Insttute of Chartered Accountants of Sri
Lanka and was awarded First in Order of Merit Prize at the nal level
examinaton.
Mr. Amartunga was appointed as a Director on 29th
October 2010. He has over 24 years of extensive experience
in nance and management and has been a consultant
and director to a large number of corporatons and private
enttes. He was also a member of the Governing Council
of the Insttute of Chartered Accountants of Sri Lanka.
He is currently the country head of MTD Walkers PLC, Sri
Lanka. He also serves as a Director of Peoples Bank.
Mr. Kapila Jayawardena
MBA in Finance Management, and an Associate of the Insttute of Cost &
Executve Accountants and Fellow of the Insttute of Bankers
Director since November 2007, Mr. Jayawardena is Group
Managing Director/CEO of Lanka Orix Leasing Co.PLC and
was the Country Head and CEO of Cit Group - Sri Lanka
and Maldives. He has over 28 years experience in Banking
and Finance.
Mr. Jayawardena resigned from the Board with eect from
10th June 2011.
Mr. R. Johnston
(Bachelor of Economics -Sydney University)
Mr. Johnston is a Director since 2001, is the Managing
Director of Rox Capital Pte. Ltd, a Singapore based
Restructuring and Capital Markets Consultancy rm.
He has served 35 years on 9 public company Boards
in Australia and Asia. He was the Chairman of West
Australian Metals Limited from 2005 to 2008.
Mr. Johnston has over 31 years of professional and
commercial experience, having commenced his career as
an insolvency specialist. He holds a Bachelor of economics
from Sydney University.
Mr. Johnston resigned from the Board with eect from
5th July 2011.
Resigned Directors
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Board of Directors Contd...
Mr. K. L. Hewage
B.Sc. (University of Kelaniya), Masters Degree in Agricultural Extension
(University of Reading, England)
Mr. Hewage was appointed as Chairman in July 2009
while being a Director of Peoples Bank. He has been the
Chairman of the Sri Lanka State Plantatons Corporaton
and also the Chairman/CEO of State Printng Corporaton
and the Provincial Road Development Authority (Western
Province). Also served as the GM of Sri Lanka Insttute of
Co-operatve Management; Director of Janatha Estate
Development Board and Janatha Fertlizer Enterprise
Limited.
Mr. Hewage has around 38 years working experience in
the spheres of Engineering, Management, Marketng,
Projects Implementaton, Rural Sector Development etc.
Mr. Hewage resigned with eect from 03rd June 2010.
Mr. P. V. Pathirana
B.Sc (Business Administraton) FIB (SL)
Mr. Pathirana was appointed as a Director in June 2009.
He had over 38 years of experience at Peoples Bank in
various areas from Branch Manager to Senior Deputy
General Manager level. He has specialized in Micro
nance and Development Banking. He was the CEO/ GM
of Peoples Bank.
Mr. Pathirana resigned from the Board on 6th October
2010.
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Management
1. Ms. Ayesha Thennakoon
Senior Assistant Manager - Internal Audit
2. Mr. Rajinda Amarathunga
Senior Assistant Manager - Micro Finance & Pawning
3. Mr. Manoneetha Ariyananda
Senior Manager - Recoveries
4. Mr. Dileepa Assarapperuma
Management Accountant
5. Mr. Suchith Premaratne
Financial Accountant
6. Mr. Jeevana De. S. Karunasiri
Senior Manager - Business Development
7. Mr. Rajeeva Bandaranaike
Chief Executve O cer
8. Mr. Charith Gunaratne
DGM - Credit & Asset Finance
9. Mr. L.V.R.Bandara
Consultant - Micro Finance & Pawning
10. Mr. Anuranga Handaragama
Head of IT
11. Mr. I.D. Weerasena
Senior Consultant - Micro Finance & Pawning
12. Ms. Muditha Jayawickreme
Senior Manager - Legal
7.
1
2
3
4
5
6
7 8
9
10
11 12
Not in picture
Mr. Anura Wickrematunge
Chief Financial O cer
Mr. Anuradha Gamage
DGM - Corporate Finance & Treasury
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Branch Management
1 Mr. Nishad Salinga
Branch Head - Negombo
2 Mr. Pathum Dassanayake
Branch Head - Matugama
3 Mr. P.Mayadunna
Area Manager

4 Mr. Buddhika Pothupitya
Act. Branch Head - Anuradhapura
5 Mr. Nalin Rajakaruna
Area Manager
6 Mr. Amal Geekiyanage
Branch Head - Avissawella
7 Mr. Nalin Jayasekera
Branch Head - Matara
8 Mr. Thushan Abeytunga
Act. Branch Head - Elpitya
1 2
3
4
5
6
7
8
Mr. Prabash Wickramasinghe
Branch Head - Gampaha
Not in picture
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Business Review
Overview
Sri Lanka economy recorded a growth rate of 8% in 2010,
a considerable increase from 3.5% recorded for the year
2009. The conditons were more conducive in the year
with gradual global recovery from the nancial crisis
in the recent past and the full year of peace afer three
decades of war.
The business enttes expanded operatons to North and
East by set ng up branches due to the expected potental
growth in the regions. The Company also opened two
new branches in Anuradhapura and Trincomalee during
the year. Also the Company introduced pawning PMB
Ran Naya into its product line. However, the Company
contnued to consolidate the eects of adverse conditons
that prevailed due to the take over of ABC Credit Card
Company Ltd, business in March 2009. The impact of high
leverage on funding credit card operatons prevented in
rapid business expansions which also led to high interest
costs and operatonal losses.
During the year, the Company in consultaton with
the Central Bank of Sri Lankan decided to discontnue
subsidiary Company credit card operatons. Further,
all deposit liabilites / bank loans and the main asset
of property at Nawam Mawatha Colombo 02 were
transferred to the parent Company. In view of this the
name of the Subsidiary Company was changed from PMB
Credit Card Company Ltd to PMB Financial Services Ltd.
(PMBFS).
The merger of the Company and 99.99% owned subsidiary
Peoples Merchant Finance Company Ltd (PMF) which
was under consideraton in the last nancial year was not
preceded due to technical maters of amalgamaton. PMF
contnued independently and the Company divested the
entre shareholding in May 2011.
The Company changed its name to Peoples Merchant PLC
(PMP) from April 2011.
Leasing & Hire Purchase
Leasing and Hire Purchase business being the companys
main line of business has performed well to be the main
income and prot producer to the company. The step
taken to reduce dutes on motor vehicles during mid
year, had given opportunity to increase the portolio for
unregistered vehicles amongst customers and increase in
leasing facilites where capital allowances are available.
The income generated from Lease and Hire Purchase
business amounts to Rs.510Mn and maintained a good
recovery rato.
For the year under review, the total amount of leasing
& hire purchase disbursements amounted to Rs.1.5Bn,
numbering 1,642 approvals compared to Rs.857Mn,
numbering 1,093 approvals in previous year. Identfying
the needs of the clients we introduced four new leasing
products namely, PMB Jaya Mawatha for cars and vans,
PMB Yodha Saviya for lorries, buses and other heavy
vehicles, PMB Diriyen Divunuwa for heavy equipment
and tractors and PMB Maha Maga Navodhaya for three
wheelers and motor cycles.
The main income source of the Company is leasing and hire
purchase. It accounts for 87% of the total income of the
Company. Our present leasing and hire purchase portolio
increased by 21% to Rs.2,244Mn from Rs. 1,858Mn as at
end of last nancial year.
The Company commenced purchasing three wheelers in
bulk form and granted lease facilites to release them in
the o ce premises. This produced good results as it was
possible for customers to acquire three wheelers without
a waitng period. Under this scheme leases numbering 162
three wheelers were given through our branch network in
the year. The lease and hire purchase portolios account
for major porton of the assets of the company.
To further expand its service to the society we opened
two more new branches i.e. a branch in the largest city
in the North/East, Trincomalee and the other branch in
the historic city of Anuradhapura. The branch network
serving the outstaton had played an important role
to contribute towards the protability. The number of
branches increased to 10 during the year.
Net provisions for leasing & Hire Purchase bad and
doubtul debts increased during the year. A sum of
Rs.33.7Mn was provided during the year under review
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Business Review Contd...
compared to Rs.28.4Mn in previous year. This is in view
of the increased portolio and also a substantal porton
of bad & doubtul debts were in the arrears category of
3 - 6 months.
Leasing and hire purchase operatons contributed a prot
level of Rs.25Mn towards prot before tax, compared to
Rs.24Mn contributon in last year.
Trade Finance
Trade Finance services include Bill discountng facilites,
short and medium term loans and issue of leters of
Undertakings/Guarantees. The services are channeled
through mainly from head o ce, and branch network is
also used to grant term loans and guarantee facilites.
During the Financial year the Company focused on
consolidatng trade nance operatons as a high percentage
of loans fell in to overdue category. The management is
taking various appropriate measures to improve the non
performing loans by recovering arrears and by providing
concessions, rescheduling and in some cases liquidatng
collateral obtained for security in consultaton with the
client. The company also sought assistance of professional
third party debt recovery companies for recovery of long
outstanding facilites. The Company moved out from
conventonal type of practces and focused on more
actual recoveries than bulk lending in order to reduce the
burden of nonperforming loans. This is in line with the
corporate strategy to consolidate and reduce the existng
exposure to this business segment and to make a quality
portolio before initatng growth in the sector.
Due to this, loan approvals during the year were restricted.
The total term loans numbering 29 facilites amountng
to Rs.43.6Mn were only approved in the year. A Credit
Commitee was formed during the year comprising heads
of departments and relevant credit o cers to evaluate
credit proposals. The suggestons brought new dimension
in to credit administraton and was instrumental in
carefully selectng good business proposals for funding
which assisted to avoid probable delinquent advances.
The total loans and advances reduced by Rs.12Mn to Rs.426
at the end of the year from Rs.438Mn at end of previous
year. Trade bills portolio also reduced to Rs.28Mn from
Rs.54Mn at end of previous year. Trade nance income
of Rs.42Mn accounted for 7 % of the total income of the
company compared to previous year income of Rs.67Mn.
This is due to reducton in portolio, reduced interest on
advances and suspension of interest income on overdue
facilites.
As per the Company strategy in identcaton and recovery
of bad debts within a period of 2 years, Trade Finance has
been able to collect over Rs.100Mn during the year from
overdue loans towards recovery of capital and interest.
Provisions for Trade Finance loans and bills for the year
amounted to Rs.15Mn compared to the amount of Rs.7Mn
in the previous year. The increase is mostly due to some
of loan facilites turning in to arrears category requiring
additonal provisions.
Trade Finance operatons incurred a loss before tax of
Rs.38.8Mn in the year, compared to the loss of Rs.17.2Mn
in last year.
Corporate Finance & Capital Markets
The climate for investment banking services improved
during the year under review. Favourable macro economic
conditons helped all sectors to perform well during the
year. A lot of businesses expanded into north and east
to benet from the potental business growth in those
areas. The Company was not able to capitalize the market
opportunites due to high labour turnover in the Corporate
Finance Division. However, the division was involved
in restructuring work within the group of Companies. A
Factory of a Trade Finance client Colour Products (Pvt) Ltd.
16
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considerable tme was spent on intended merger between
PMP and the subsidiary Company Peoples Merchant
Finance Co. Ltd. (PMF) and also discontnuaton of credit
card operatons and transfer of assets and liabilites from
PMB Financial Services Ltd. to PMP. Further, division was
instrumental in developing a strategic plan for the group.
The All Share Price Index (ASPI) and the Milanka Price
Index (MPI), increased by 96% and 83% respectvely in
2010. The Colombo Stock Exchange became one of the
top performing Stock Exchanges in the world. The market
capitalizaton doubled during the year to Rs.2.2Trillion.
The market price earnings rato also reached a high of
25.2 compared to 16.6 in year 2009. During the year eight
new Inital public Oers (IPOs) were announced and all
the IPOs were oversubscribed. Further, 28 Companies
raised Rs.24Bn through rights issues.
The capital market actvites of the division reaped
the benets from the exceptonal performance of the
Colombo Stock Market. The Corporate Finance Division
was entrusted to manage share portolios of PMP and the
subsidiary PMF. The tmely investment and divestment
decisions based on internal research played a vital role in
achieving a gain of Rs.8.1Mn during the year compared to
the loss of Rs.0.3Mn in FY 09/10 from its stock portolio.
However, a provision of Rs.1.1Mn was provided for decline
in dealing portolio (reversal of Rs.4.8Mn in FY 09/10) .The
sector recorded marginal loss of Rs.0.9Mn for the year.
The investment banking operatons are under close review
and the division is under reorganizaton to capitalize on
various market opportunites available to penetrate into
investment banking arena.
Real Estate
Real Estate sector undertakes land development and sale
of land, development of land with constructon of houses
thereon and owner behalf sale propertes.
FY 2010/11 was a complex year with challenges and
uncertaintes, but also a year of opportunites for the
real estate industry. Price declines deterred prospectve
investors in to the real estate sector. Also the decline
could be atributed to the insecure environment which
aected the demand resultng in an oversupply scenario.
The high interest rate scenario in 2007 and 2008 is likely
to have contributed to the decline in property sector in
2010. During the year the division did not commence
new projects in view of the above. However, some of the
previous projects were completed in the year.
On account of these changes in the market, the company
decided to focus mainly on land development and sale
only for the present and not to engage in large and
medium scale housing projects tll the market become
conducive. Despite all these facts our real estate division
ASPI
Peoples Merchant share performance with
Stock Market ASPI and MPI during the year 2010
MPI PMP
20
25
30
35
40
Dec Nov Oct Sep Aug Jul Jun May Apr Mar Feb Jan
3,000
4,000
5,000
6,000
7,000
8,000
Rs
Highway Terrace real estate project at Ranala
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contributed an income of 13.6M for the year in review
compared to Rs.24Mn in the previous year. Although the
real estate market is not very encouraging in 2010, we are
stll of the opinion that it would be viable to investment
in real estate at current prices as it is expected to take
o the market very early. Many Sri Lankans who are living
abroad are investng their money in estate propertes in
the country.
Projects such as Summer Side Garden in Athurugiriya
and Highway Terrace in Ranala contnued throughout
the year. The carefully idented strategic locatons and
marketng concepts of the projects were harmonized
well with our brand positoning of convenience, privacy
class and exclusive living conditons. The real estate stock
decreased to Rs.56Mn at end of FY 10/11 from Rs.108Mn
at end of previous year.
The post war set up has given Sri Lanka a great opportunity
to enhance the per capita income levels and the country
is well poised to enjoy a sustainable economic resurgence
over the next ve years. The Urban Development
Authority is likely to successfully implement the Colombo
Development Plan over the next decade, which could
atract demand for high end residental and commercial
property. This will increase the prices in the areas outside
the Colombo Municipality too. The demand for property
will rise amidst income growth via economic boom, low
interest rate environment, foreigners seeking a retrement
destnaton, return of expatriates and closeness to regional
economic superpowers.
We believe that Sri Lanka real estate and housing market
is resilient like its economy. We look forward to enhance
our positon further, both in terms of brand awareness
and protability. Awareness of the brand, Peoples
Merchant Real Estate will be enhanced amongst existng
and potental customers, through carefully targeted
marketng and sales strategies. The division will contnue
its strategy of selectve expansion with the support of its
branch network and provide more value to customers,
whilst focusing on overhead and working capital.
In the future, the company will look at embarking more
real estate and luxury housing projects in to its portolio
featuring more aordable housing solutons to capitalize
the opportunites for township development arising due
to increasing urbanizaton.
The division ended up with a loss of Rs. 27Mn compared
to Rs.11Mn loss in the previous year. Interest costs and
other overhead costs as well as taking more tme to
complete projects resulted in a loss for the division.
Further, our policy of charging all interest to income
without capitalizing interest on real estate projects has a
direct impact on protability.
Branch Operatons
Branches are equipped to handle Leasing, Hire Purchase,
Term loans, guarantees and investments. In the year
pawning services were added to four branches. All
branches are connected with the Head O ce through an
IPVPN network and all transactons are updated on line.
New branches at Trincomalee and Anuradhapura
As per the 2010/11 branch expansion programme two
branches were opened in Trincomalee and Anuradhapura
Opening of new Anuradhapura Branch.
Opening of new Trincomalee Branch by Hon. Basil Rajapakse,
Minister of Economic Development.
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considering the expected accelerated economic growth
in the north and east. These two branches are equipped
to handle all business transactons carried out in other
branches including recently introduced pawning.
Branch Refurbishment
The Kandy branch was entrely refurbished in the year
and the head o ce of the subsidiary Company, Peoples
Merchant Finance Company Ltd. was relocated at the same
premises to maximize group returns. Further, Avissawella
branch was also refurbished in the year. Pawning divisions
were also set up at both these branches. The refurbished
branches will oer beter facilites to the target market of
small and medium enterprises (SMEs) and other middle
market customers.
Branch protability
All the branches recorded prots in the year except the two
new branches that were opened in the current year as in
the past nancial years. The Prot before tax contributon
from all branches amounted to Rs. 61Mn compared to Rs.
59Mn in the previous year.
Human Resources
Introducton
The the Peoples Merchant has been contnuing
implementng good Human Resource policies and
practces to develop its employees and instll quality to
ensure their nest involvement in achieving desired goals.
The Company employment policy embodies the principle
of equal opportunity to the employees.
At Peoples Merchant PLC, our goal is to create a pleasant
work environment place where our employees can
succeed and perform to the best of their ability. This is
achieved through training, empowerment and recognizing
and rewarding good performance.
Recruitment and retenton
Selectng suitable people for the company is a very vital
area. The Company advertses through print and other
media for vacancies. Selecton of employees is done
through an interview panel consistng CEO and Senior
Managers. Minimum requirements have been specied
for various job functons at dierent levels of the Company.
We have been able to select good talent in a compettve
business environment. It has been the practce of the
bank to recruit employees for junior positons and provide
opportunites for existng sta for advancement wherever
possible.
Retaining people in a compettve economic growth
situaton is a challenge. Despite the adverse results
recorded by the Company, reasonable salary adjustments
were made to majority of the employees to compensate for
increased inaton that prevailed in the last year. Further,
the employees contnued to enjoy other benets such
as medical insurance, leave encashment, Concessionary
lease facilites, etc. The employees who have performed
above the expected levels were promoted to higher grades
and positons. A number of initatves were undertaken to
motvate, reward, and recognize employees.
Performance Management
Afer conductng a series of performance management
and evaluaton programmes, the company introduced
an updated performance management system and
EASTERN
1. Kurunegala
2. Matara
3. Matugama
4. Gampaha
5. Avissawella
6. Elpiya
7. Kandy
8. Negombo
9. Trincomalee
10. Anuradhapura
Branch Locaon
Kurunegala
Matara
Matugama
Gampaha
Avissawella
Elpiya
Kandy
Negombo
Trincomalee
Anuradhapura
Head oce and Branch Income
2010 2011
Rs.341Mn
Branch income
Rs.202Mn
Head oce income
Rs.400Mn
Rs.186Mn
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implemented from this nancial year. Key Performance
Indicators (KPI) were developed for each division. These
indicators were used to measure employee performance
as well as divisional performance so that it can be aligned
to company goals. The last employee rewards were based
on this system.
Training and Development
The Company focused on developing a learning culture
based on a good primary qualicaton, knowledge
and experience. The HR division contnued training
programmes initated in the previous year and completed
those this year. Professional training specialists were
invited to conduct these trainings sessions. This also
provides opportunity for the head o ce and branch
employees to interact and also to unite. The internal
training programmes are conducted at Company Training
Centre at the head o ce. Specialised training in various
technical areas were provided by nominatng employees
to programmes conducted by outside insttutons such as
Central Bank of Sri Lanka, Professional bodies, etc.
Training strategy is intended to cover sof and technical
skills across all functons of the organizaton. Some
programmes focused on developing management,
leadership, communicaton skills and customer
relatonship. These have helped employees to perform
beter to achieve business aspiratons as a team. Further,
all sta members are encouraged to accept/perform
various job functons within their divisions. This facilitates
employees to have a wider area of job knowledge and
also to cover up for various functons if the need arises.
The necessary support is provided by the Managers and
other senior sta.
Training sponsored by the Human Resources Department
during the year 2010/2011
Internal Training
Name of the
Training
Allocated
No of
Sessions
Completed
sessions in
FY 10/11
No of
Partcipants
Presentaton
on Personnel
Leadership
1 1 25
Sales &
Marketng
10 7 28
Management
Development
7 6 25
Strategic
Performance
Management
1 1 22
External Training
Name of the Training No of Partcipants
Risk Management,
Portolio at Risk and Bank
failure
2
Natonal Law conference 2
Workshop on leasing 7
Taxaton Course for
Professionals
1
MTI/IPO Forum 1
Practcal aspects of the
Title Registraton Act
1
Training sessions in progress
0
2,000
4,000
6,000
8,000
10,000
12,000
exp.per employee
'
0
7
'
0
8
'
0
9
'
1
0
'
1
1
Rs
Training and development
expenditure per employee
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Service Analysis of the sta as at March 31
Age Group
(years)
Senior
Managers
& Managers
Asst
Managers
Executves Non
Executve
Support
Sta
2010/11
Total
2009/10
Total
16-20 - 2 1 - 2 05 04
11-15 2 2 2 - - 06 06
6-10 4 2 4 1 1 12 07
5 & below 8 10 31 51 - 100 57
Total 14 16 38 52 3 123 74
Average service of the employees as at March 31,2011 was 3.8 years ( FY 09/10 4.7 Years)
51-60 41-50
31-40 21-30
20 & below
Age Analysis of sta (years)
2011/11
15-20 11-15
6-10 5 & below
Service Analysis of sta (years)
2011/11
Age Analysis of the Sta as at March 31
Age Group
(years)
Senior
Managers
& Managers
Asst
Managers
Executves Non
Executve
Support
Sta
2010/11
Total
2009/10
Total
51-60 2 1 - 4 - 07 03
41-50 5 5 4 1 - 15 12
31-40 7 10 21 13 - 51 21
21-30 - - 13 34 3 50 38
20 & below - - - - - - -
Total 14 16 38 52 3 123 74
Average age of the employees as at March 31,2011 was 34 years ( FY 09/10 33 Years)
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Corporate Social Responsibility (CSR)
The Company is commited to meetng its obligatons
towards the naton and community where the Company
branches are in operaton. In the past the Company has
assisted projects based on the urgency and signicance of
the needs. The projects undertaken by the Company in the
nancial year are given below. The total funds commited
for donatons amounted to Rs. 530,000/-
Donaton of Rs.100,000/- to construct a chaitya.
In keeping with its commitment and also to coincide
with 2600 Buddha Jayanthi, Peoples Merchant
donated Rs.100,000/- to construct the chaitya of the Sri
Bodhirukkaramaya Temple of Batuwana, Niyadurupola
located in the Kegalle district to benet all worshippers and
also to educate the younger generaton of the importance
of safeguarding the countrys heritage.
Thus, we have focused and channeled our eorts through
our branch network as being the best presence on the
ground to address chosen issues. This donaton took place
at the Sri Bodhirukkarama Temple on 19th January, 2011
Poya Day.
Donatons of spectacles
Soon afer the opening of the branch in Trinco, the
company in its duty to help and support the naton and
the people in that area, donated 200 pairs of spectacles to
needy persons in Trincomalee through its CSR programme.
This generous gesture was appreciated by the receiver.
The total cost incurred was Rs.120,000/-
The other donatons made during the year are:
Rs.10,000/- to Karuna Samadhi Foundaton for
grantng educatonal scholarships to innocent
students.
Informaton Technology
Informaton is the major asset in the business world
especially in the nancial industry. The Informaton
Technology department has been formed during this
nancial year with the view of streamlining the IT
operatons of the company and also to facilitate eectve
and e cient informaton environment with the expansion
of the company. The Informaton technology policy was
established in order to direct the company towards
implementng a process and procedures to establish
a secured and qualitatve informaton technology
environment.
Sofware Environment
The company focused on improving its business
applicatons to improve performance of business enttes
of the company. Newly introduced pawn brokering
product performed its rst transacton using the on-line
real tme system. We believe that the company should
have a lawful environment to play in the business world.
Company insists on legalized sofware and in the view
of cost reducton pays more atenton towards the Free
and open source sofware (FOSS). Company has been
contnuly improving the users knowledge on informaton
technology by conductng frequent user trainings and
implementng the help-desk facilites.
Hardware and Network Environment
All executve employees are being allocated with a
dedicated computer to perform their duty. All computer
users are interconnected including the branches through
the secured connecton and informaton is shared
according to access levels. All informaton and business
applicatons have been implemented in the centralized
secured Data Center. During the last nancial year the
Disaster Recovery Site re-implemented with on-line
real-tme data replicaton to improve the informaton
availability. Informaton technology division focused
on research and development to nd cost eectve
solutons to improve the performance of hardware and
network infrastructure. Within the last nancial year we
experienced success stories in the same and contnue
with the improvements.
Branch head distributng spectacles
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Group Business review
The Company has two subsidiary Companies PMB
Financial Services Ltd. and Peoples Merchant Finance
Company Ltd. These two companies became part of PMP
with the acquisiton of ABC Credit Card Company Ltd, a
company that was engaged in local credit card operatons.
For this acquisiton, a new company with the name PMB
Credit Card Company Ltd. was incorporated to take over
business operatons, and selected assets and liabilites of
the business.
PMB Financial Services Ltd.
(Formally PMB Credit Card Company Ltd.)
This is a 100% owned subsidiary of Peoples Merchant PLC.
The Company was set up only in March 2009 to take over
selected assets and liabilites of ABC Credit Card Company
Ltd. During the year the Central Bank of Sri Lanka brought
in new regulatons covering the credit card industry. The
Company was not able to meet the regulatory stpulated
requirements for credit card operatons and was not
registered. The board decided to discontnue credit
card operatons in the year. Thereafer, the name of the
Company was changed to PMB Financial Services Ltd.
It is with humbleness that we wish to state that all the
security deposit liabilites amountng to over Rs.700Mn
were setled along with interest due or transferred to
the parent Company where pro notes were issued for
funds borrowed. This is as our part of assistance to the
government for supportng the stability of the nancial
sector. This was possible only at a high cost to the parent
Company.
At present only collecton of amounts due from credit
card holders are being carried out. The services of third
party persons are obtained for collectons.
This business was reorganized in the year and in
consultaton with the Central Bank of Sri Lanka, the
Companys main asset of property at Nawam Mawatha
was transferred to the parent Company Peoples Merchant
PLC along with deposit liabilites and other loans. This
property is one of the few large blocks of land available in
Nawam Mawatha - Financial Hub. The property consists
of a single storey building converted into a modern o ce
complex.
Rs.100,000/- to Annual Colombo Nawam Mawatha
Perahera
Rs.200,000/- for a bakmaha ulela organized for the
sta and families of a government establishment.
Conductng A Pirith Ceremony for President
To coincide with the Presidents 2nd term swearing in
ceremony, an all night Pirith Ceremony was held on 19th
November, 2010 at Peoples Merchant, Head O ce, amidst
the partcipaton of Mr. W. Karunajeewa - Chairman,
Peoples Bank, Mr. Ajith Panditharatne - Chairman,
Peoples Merchant PLC, Mr. Anura Wickremasinghe -
Managing Director/CEO of PMP, Mr. Anura Siriwardena -
Secretary to the Ministry of Trade and other distnguished
guests and the sta of Peoples Merchant Bank to invoke
blessing on HE the President.
The pirith was conducted by Gangarama Temple under
the auspices of Ven. Galaboda Gnanissara Thero.
23
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The Company incurred a loss of Rs.52Mn for the year
ended 31/03/2011. The total assets of the Company
amounted to Rs.10Mn at end of FY2010/11.
Peoples Merchant Finance Company Ltd (PMF)
The company has been incorporated 29 years ago and is
a nance Company registered with the Central Bank of Sri
Lanka. The operatons were carried out only from its head
o ce in Kandy, covering a wide cross secton of the society
in its nancial needs,. This Company was also acquired
along with the PMB Credit Card Company. Initally a 44%
controlling interest was acquired on 6th March 2009 and
as at 31st March 2009 this was considered as an associate
Company. The remaining shares up to 99.9% were
purchased in FY 2009/10.
The Company head o ce was relocated on 20th January,
2011 at No.145, Kotugodella Veediya, Kandy with the
purpose of serving the community beter. Both PMP
Kandy branch and PMF head o ce are located at the same
premises to take advantage of the available resources. The
rst branch of the Company was set in Colombo in March
2011 at the PMP group head o ce.
The nance companies main line of businesses includes
leasing, hire purchase, trade nance and deposit
mobilizaton. Afer acquisiton, the operatons were
streamlined and long outstanding non performing loans
were provided in full and also cleared a large eet of
repossessed vehicles which were lying in the Company
yard for a long tme. Despite Company having to absorb
losses on these transactons it was possible to record a
reasonable prot for the year.
The Company prot before tax increased to Rs.20.6Mn for
the nancial year ended 31st March 2011. However due
to high income tax charge of Rs.11.3Mn Prot afer tax
amounted to Rs.9.3Mn. The total assets of the Company
increased to Rs.379Mn.
Opening of PMF rst branch o ce in Colombo by Deputy Governor,
Mr. P.D.J. Fernando of Central Bank of Sri Lanka
Certcate of compliance received for company annual report FY 2009/10
24
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Financial Review
Overview
The nancial year 2010/11 was a challenging year to
Peoples Merchant PLC (PMP), as it had to deal with
raising funds for meetng expanding credit, to meet debt
maturites and also arranging obligatons of the security
deposit holders of the subsidiary Company PMB Financial
Services Ltd. (PMBFS) which was set up in March 2009.
This was carried out when the Company was operatng at
a loss. The non performing advances reduced at a slower
pace during the year afer the impact of global economic
crises. The improvement was not up to expectaton, which
resulted in requiring to make more provisions and not
being able to recognize income due to transfer of interest
in to suspense accounts.
During the year the Company decided to make full
impairment provision for the investment/receivable
from the subsidiary Company PMBFS which amounted to
Rs.188Mn. Since full provisions have been made no further
losses are expected from the subsidiary operatons. In
November 2010 in consultaton with Central Bank of Sri
Lanka the property belonging to PMBFS situated at Nawam
Mawatha with a value of Rs.452Mn was transferred
to PMP in consideraton of taking over security deposit
and other liabilites. In view of this, interest expenses on
this investment became a direct charge to the Company.
Further, all subsidiary investments were funded mainly
through borrowings which atract nancial costs.
Mainly due to these reasons the Company incurred a loss
before tax for the year amountng to Rs.214Mn compared
to the loss of Rs.14Mn in the previous year.
The details of the operatons are elaborated below:
Income & Protability
Income
Gross Income of the bank increased to Rs.587Mn from
Rs.544Mn in FY 09/10, a modest growth of 8%. Interest
income increased to Rs.550Mn from Rs.501Mn in FY
09/10, a growth of 10%. The interest income increase was
satsfactory compared to reduced interest rates prevailed
in the year compared to previous years. During the year,
income from Finance leases increased marginally by 6% to
Rs.202Mn from Rs.191Mn in the previous year. However,
Hire Purchase income grew by 23% to Rs.300Mn from
Rs.243Mn in the previous year. The loan interest income
decreased to Rs.43Mn, by 26% from Rs.58Mn in the
previous year. This is due to high non performing loans.
Leasing and Hire Purchase income accounted for more
than 87% of the company revenue.
Other income reduced to Rs.37Mn from Rs.42Mn in the
previous year. The main reason is the reduced real estate
income of Rs.8Mn in the current nancial year compared
to 24Mn in the previous year. The income from stock
portolio amounted to Rs.8Mn compared to a loss of
Rs.0.2Mn in the previous year.
The net interest margin for the year was 30% compared
to previous year margin of 23%. The total net income
increased by 29 % to Rs.203Mn from Rs.157Mn in FY
09/10. This is as a result of higher margins due to higher
lending rates of previously granted facilites and lower
current borrowing costs. Other income consistng non-
interest bearing income reduced to 18% of the total net
income compared to 27% in FY 09/10 as result of reducton
in non interest income.
Expenses
Total operatng expenses increased from Rs.171Mn in FY
09/10 to Rs.418Mn in FY 10/11, an increase of Rs.247Mn,
a phenomenal 146%. This is due to absorbing total losses
arising from the subsidiary Company PMB Financial
Services Ltd. (PMBFS) during the year. Full impairment/
provision was made for investment in PMBFS and the
%
Annual interest margin
0
10
20
30
40
50
60
11 10 09 08 07
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Financial Review Contd...
receivable from PMBFS amountng to Rs.188Mn in the
year, which accounted for 75% of the total increase.
Further, provisions for total bad and doubtul debts
increased from Rs.35Mn to Rs.50Mn, by Rs.15Mn in the
current year. A provision of Rs.1.1Mn was made during
the year for the dealing portolio against a reversal of
Rs.4.8Mn in the previous year.
Other operatng expenses have increased by around 24%
over the previous year. Additonal establishment expenses
amountng to Rs.11.6Mn was incurred in the year for
relocaton of branches, set ng up two new branches,
modicaton and parttoning a secton of the head o ce
to accommodate new divisions. The personnel expenses
increased to Rs.64Mn from Rs.52Mn in FY 09/10, an
increase of 23%. The sta strength increased from 74 at
end FY 09/10 to 123 at end of FY 10/11 as more sta was
recruited due to reorganizaton, creaton of new divisions,
new product lines and set ng up on new branches for
business expansions and reorganizaton.
The balance expenses have increased by less than 10%,
within the acceptable levels considering the normal
inatonary increases in costs and additonal eorts that
were required to manage the acquired Companies.
During the year although overall Non Performing Loans
(NPL) improved, the company had to provide for bad &
doubtul debts amountng to Rs.50Mn. This compares
adversely with the provisions amount made in FY 09/10
of Rs.35Mn, which is an increase of 44%. The quality of
companies lease and hire purchase portolios are similar
with the leasing sector industry. The high non performing
facilites are mainly due to adverse situaton in term loan
facilites. During the year Company set up a separate
division to monitor recovery of all non performing
facilites. Total receivables are separated into dierent
categories depending on the recoverability positon
and appropriate strategies are put in place for recovery
by next nancial year. The Company is presently very
focused for recovery and control of high non performing
advances. The next nancial year will be a further year of
consolidaton especially bringing overall NPL in line with
industry levels.
The cost to income rato, based on total expenses
excluding provisions and nancial VAT on total net income
increased to 83% in the year from 79% in the previous
year. This is due to reduced other income of non interest
bearing income and high interest charges as a result of
funding acquisitons through debts where no income was
recognized.
Protability
Loss before tax for the year under review was Rs.215.3Mn
compared to the loss of Rs.14.3Mn in FY 09/10. The loss is
mainly due to impairing/providing in full for investments in
the subsidiary Company PMBFS, higher interest expenses
due to using borrowed funds for nancing investments
in PMF and property which together totaled more than
Rs.750Mn, high NPL on loan facilites, reduced fee based
Composion of the expenses
2010 Rs Mn 2011 Rs Mn
Personnel expenses
provision for bad & doubul debts
provision for other receivables
other overhead expenses
Premises, equipment & establishment expenses
64
35
50
186
82
52
26
35
15
48
Rs Mn
0
50
100
150
200
250
Provision on NPLs Special Provision
11 10 09 08 07
Annual provisions made
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income, increase in operatng expenses and increased
provisions for bad & doubtul debts. There was a reversal
of Income tax charge for the year amountng to Rs.12.8Mn
due to reversal of provision required for deferred taxaton.
The previous year tax charge was Rs.6.1Mn. Loss afer tax
amounts to Rs. 202.5Mn against Rs.20.4Mn in FY 09/10.
Assets
The total assets of the company grew by Rs.629Mn (20%)
to Rs.3,708Mn from Rs.3,079Mn at end of FY 09/10. The
main reasons for the increase were the transfer of the
property belonging to the subsidiary Company PMBFS
amountng to Rs.470Mn to the Company and increase
in advances. The nance lease portolio increased by
Rs.162Mn (20%) to Rs.991Mn at end of FY 10/11 from
Rs.829Mn at previous year end and hire purchase
portolio increased by Rs.224Mn (22%) to Rs.1,253Mn
from Rs.1,028Mn at previous year end. The leasing and
hire purchase advances amounted to Rs.2,244Mn and
account for 61% of the total assets of the Company. The bill
discountng portolio reduced from Rs.54Mn to Rs.28Mn
at end of FY10/11. This is in line with the Company policy
to reduce exposure to this sector. The term loan portolio
marginally reduced to Rs.426Mn at end of the year from
Rs.438Mn at end of previous year.
When the group balance sheet is considered, the total
assets have increased to Rs.3,884Mn from Rs.3,495Mn,
an increase of Rs.389Mn (11%). The group assets include
the Subsidiary Companies - Peoples Merchant Finance
Company Ltd and PMB Financial Services Ltd. The nance
company was disposed in FY 2011/12 in May 2011.
Borrowings
Borrowings from banks, corporate enttes and individuals
increased to Rs 3,067Mn at end of FY 10/11 from Rs.2,
255Mn as at end of previous year, an increase of Rs.812Mn
(36%). The total borrowings increased to 6.5 tmes the
equity of the company as at 31.03.2011 from 3.3 tmes at
end of the previous nancial year. The reason for increase
in multple is due to high losses incurred by the Company
due to charging all dues in respect of the subsidiary
Company PMBFS. The total equity of the Company reduced
to Rs.471Mn at end of the nancial year from Rs.674Mn
at end of previous year. It should also be noted that with
the disposal of the subsidiary Company PMF in May 2011
in FY 2011/12 a prot of Rs.138Mn was made to oset a
major percentage of the loss in FY 2010/11.
The company raised Rs.1.8Bn during the nancial year to
augment expanding lending actvates and for setlement
of loan maturites/repayments. This is commendable
considering the high leverage, tght liquidity and
performance of the Company due to adverse eects of
the subsidiary Company PMBFS. The Company maturity
analysis shows a period mismatch with regard to assets
and liabilites. This is mainly due to utlizing short term
borrowings for lending and investment purposes. The
company intends to rectfy this mater by raising long term
funds to reduce period mismatches in funding structure.
Afer disposal of the nance Company the positon
improved in May 2011.
Rs. Mn
Lease and HP porolio at the
end of nancial year
0
500
1,000
1,500
2,000
2,500
11 10 09 08 07
Rs Mn
Annual operang prot
before provisions
0
20
40
60
80
100
120
11 10 09 08 07
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Provision for loan losses &
Non - Performing Loans (NPLS)
The Companies Non-Performing advances marginally
decreased to Rs.668Mn at end of FY 10/11 from Rs.697Mn
at end of FY 09/10, a decrease of 4% during the year. The
Company policy on provisions is more stringent than the
minimum stpulated by the Central Bank and provisions
commences when advances reach arrears of 3 months.
Non-Performing advances within the 3-6 months category
amounts to Rs.200Mn. We are condent that this
category can be regularized with closer supervision in the
current year. When this amount is excluded, NPLs over 6
months amount to Rs.468Mn, which is 17.3% (FY 09/10
19.7%) over the total lending portolio. The Company is
aggressively following up the entre non performing loan
portolio to bring NPL positon within acceptable levels. A
special team has studied these and separated into various
categories depending on a case by case basis. More details
have been provided in Trade Finance actvites under the
business review.
The specic provisions made at the year-end
amountsRs.160Mn compared with Rs.110Mn at end of
the previous year, which is an increase of Rs.50Mn (44%).
Specic provisions for NPLs amount to 24% at year-end,
compared to 16% at previous year end. Further, General
Provisions at nancial year-end amount to Rs.5Mn.
Group nancial review
PMB Financial Services Ltd. (PMBFS)
The Company was set up in March 2009 to take over
selected assets and liabilites of ABC Credit Card Company
Ltd. The Company did not carry out credit card operatons
due to not being able to register the business under the
new credit card legislaton. It owned a prime property
situated at Nawam Mawatha, Colombo 02.
Operatons
This Company had security deposits which originated
from the acquired Company. Since the Company did
not have approval from the Central Bank of Sri Lanka
(CBSL) for such business, the Board decided to cease
that part of the business of the Company with eect from
31st December 2010. During the year the Company was
restructured and some of the employees were absorbed
to the parent Company and others were compensated
with a retrement scheme. At present there are no
employees in the Company. Further, the main asset of
property was transferred to the holding Company at a
value of Rs.452Mn in consideraton of taking over of
deposit liabilites of Rs.233.2Mn held by the Company,
bank loans payable of Rs.38.2Mn and to provide a credit
to PMBFS Current account for the amount of Rs. 180.6Mn
as part setlement of money advanced by PMP to PMBFS
in the past.
Losses
The loss for the year amounted to Rs.52.6Mn compared
to the loss of Rs.130.3Mn in the previous year. The main
reason for the loss is the high nancial charges on account
of borrowings utlized to fund assets of the Company,
mainly the property with a value of Rs.452Mn. The total
interest cost for the year amounted to Rs.48.6Mn. With
the transfer of the property to PMP in December 2010
along with all public liabilites, no nancial charges will
arise in future for current operatons. Presently the
main focus of the business is collecton of outstanding
credit card receivables. During FY 2010/11 the Company
Rs Mn
Borrowings at the end of the
nancial year
0
500
1,000
1,500
2,000
2,500
3,000
11 10 09 08 07
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collected Rs.22Mn from customers on account of credit
card outstanding - comprising credit used, interest and
other charges. In FY 2009/10 the Company was able to
collect Rs.66Mn. As these are long outstanding credit, the
Company has made full provision in nancial statements
for all receivables and all future collectons could be
recognized as income in nancial statements. No further
future losses are expected from this Company.
Balance Sheet
Total assets of the Company reduced from Rs.479Mn at
end of FY 2009/10 to Rs.10Mn. at end of FY 2010/11.
This is afer the transfer of major assets and liabilites
to the parent Company. Further, the holding company
capitalized an amount of Rs.152Mn due from PMBFS
to stated capital during the year. The stated capital was
increased to Rs.175Mn afer capitalizaton. The amount
due to the parent Company afer capitalizaton amounts
to Rs.25Mn. The cumulatve loss as at end of the year was
Rs.195Mn and the equity of Rs.175Mn is fully eroded. The
total equity as at 31st March 2011 is a negatve gure of
Rs.20Mn.
Peoples Merchant Finance Company Limited (PMF)
The Company is a registered nance Company with the
Central Bank of Sri Lanka. The principle actvites of the
Company are leasing, hire purchase, trade nance and
acceptance of deposits. The Company was renamed
as Peoples Merchant Finance Company Limited afer
obtaining the controlling interest (Formerly Silvereen
Finance Company Ltd.) PMP held 99.99% of shares in PMF.
This Company was disposed in May 2011 with a capital
gain to improve cash ows to the parent Company despite
losing the access to mobilize public deposits through the
subsidiary.

The summarized nancial informaton of the Company for
the FY 2010/11 is listed below.
Interest income - Rs.43Mn (FY 09/10 Rs.48Mn)
Interest expenses - Rs.10Mn (FY 09/10 Rs.14Mn)
Net interest income - Rs.33Mn (FY 09/10 Rs.34Mn)
Prot before income tax - Rs.20.6Mn (FY 09/10 Rs.8.7Mn)
Prot afer income tax - Rs.9.4Mn (FY 09/10 Rs.3.1Mn)
Total assets - Rs.379Mn (FY 09/10 Rs.289Mn)
Deposits - Rs.137Mn (FY 09/10 Rs.63Mn)
Equity - Rs.217Mn (FY 09/10 Rs.208Mn)
Due to pursuing the intended merger of People Merchant
PLC and PMF, new management persons were not
appointed at the beginning of the nancial year to carry
out business actvites at PMF. As a result limited lending
operatons were done with more focus on recovery and
consolidaton of operatons. However, afer deciding not
to merge the two enttes, in the second half of the year
a senior person was appointed to manage business aairs
at head o ce in Kandy. This resulted in reduced revenues
in the FY 10/11 compared to industry norms. Despite this
PMF Prot before and afer tax increased as indicated
above. This was possible due to making full provisions
for all doubtul debts in the previous year and disposing
a large eet of old repossessed vehicle stock through an
aucton.
The total assets of the Company increased to Rs.379Mn.
The Company advances have reached Rs.220Mn at end
of FY 2010/11 from Rs.151Mn at end of FY 2009/10, an
increase of 45%. This is despite not maximizing the full
business potental as per explanatons made above. The
Company liquidity positon is very favorable, due to raising
funds through a deposit campaign carried out towards the
end of the year. PMF is in a good positon to carry out an
accelerated growth strategy in the future. Deposits of the
Company more than doubled from Rs.63Mn at end of FY
2009/10 to Rs.137Mn at end of FY 2010/11.
The Company was disposed in May 2011 by divestng the
entre shareholding.
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Corporate Governance
The global nancial crisis in the recent years exposed the
weaknesses in the nancial sectors corporate governance
system and in partcular in the risk management policies
and procedures. The Central Bank of Sri Lanka took several
initatves to prevent and mitgate future systematc risk.
At Peoples Merchant PLC we value the importance of
a good corporate governance system for the eectve
management and governance of the company - and
understand that it should not be limited to compliance
with Corporate Governance codes.
Peoples Merchant as a good corporate citzen takes all
initatves in all its operatons in an ethical and socially
acceptable manner taking into account all the interests of
its stake holders - as a priority. The company considers
corporate governance as an essental tool to achieve the
desired objectves of eectve market operatons and the
creaton of wealth for shareholders The Board provides
corporate leadership to the management and provides
the necessary directon for beter performance. Peoples
Merchant closely monitors the corporate governance
guidelines issued by the Central Bank of Sri Lanka and
other regulatory bodies and takes tmely steps to comply
with those requirements.
Corporate governance can be dened as the process
by which corporate enttes are governed. It is mainly
concerned with the manner in which the authority is
exercised over the management and directon of entty
and the supervision of executve actons and accountability
to owners and others. The organizatons management
structure, internal controls, policies and procedures are in
place in order to comply with the objectves of corporate
governance. When ever necessary the company takes
acton to update those systems in order to comply with
the changing requirements.
Recently the Central Bank of Sri Lanka issued a new
directon cited as the Finance Leasing (Corporate
Governance) Directon No.4 of 2009, which applies to
every registered nance leasing establishment with eect
from 01 January 2010. Given below are the corporate
governance measures and the appropriate compliance
initatves taken by our company in order to comply with
those requirements.
Corporate governance rule Companys compliance of rule
01. Board of directors A single board is properly consttuted of executve and non executve
directors
02. Independent directors Two out of six non executve directors are independent
03. Disclosures relatng to directors
- Compositon Executve and non executve directors and their independence
- Functons Segregaton of functons of Chairman and CEO
- Disclosure in the annual report Directors aairs disclosed as required
04. Audit Commitee
- Compositon Consist of 03 non executve directors as at 31st March 2011
- Functons Audit functons are stpulated by board
- Disclosure in the annual report Functons disclosed under Audit Commitee
05. Remuneraton Commitee
- Compositon Consist of 03 non executve directors as at 31st March 2011
- Functons Commitee functons are stpulated by board
- Disclosure in the annual report Functons disclosed under Remuneraton Commitee
06. Rights of shareholders Board eectvely communicates with the share holders
Corporate governance rules practced by the company and its compliances
30
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The Board of Directors
A single board properly consttuted of executve and non-
executve directors provide guidance and leadership for
the company. The board is appointed by its shareholders
and is collectvely responsible for the eectve business
contnuaton and performance of the company. Board
provides entrepreneurial leadership, direct and controls
the operatons of the bank within a prudent and eectve
Table I - Compositon of the Board
Director (name) Positon held on
the board
Nature of
appointment
(ex./non ex./
Nominee)
Date of appointment
Panditharatne Appuhamilage Ajith
Panditharatne
Chairman Non-executve 3rd June 2010
Anura Ravindra Wickremasinghe MD/CEO Executve 1st July 2009, resigned w.e.f
30th June 2011
Roger Johnston Director Non-executve 05th January 2001, resigned
w.e.f 5th July 2011
Mahinda Padmasiri Haradasa (alternate to
Roger Johnston)
Director Non-executve,
Independent
27th July 2006, resigned
w.e.f 5th July 2011
Barana Seneviratne Yapa Director Non-executve,
Independent
24th September 2004
Waduthantri Dharshan Kapila Jayawardena Director Non-executve 28th November 2007,
resigned w.e.f 10th June
2011
Jehan P. Amaratunga Director Non-executve 29th October 2010
Ahamed Sabry Ibrahim Director Non-executve 25th June 2009
Table II - Directorship changes for the period 1st April 2010 to 31st March 2011
Director (name) Positon held on the board
(chairman/MD/director)
Nature of appointment
(ex./non ex./Nominee)
Date of
appointment
Karunadasa Lorensu Hewage Chairman Non-executve 10th August 2009,
resigned w.e.f. 3rd June 2010
Pemasiri Vitana Pathirana Director Non-executve 25th June 2009,
resigned w.e.f. 6th October
2010
Corporate Governance Contd...
The brief resumes of directors are given in the annual
report under Board of Directors on pages 10 to 12.
Appointments to the Board, names and their resumes
are informed to the stock exchange in order to make this
change available to shareholders. The same is provided to
the Central bank of Sri Lanka as well.
internal control framework with contnuous monitoring
and feedback communicaton system.
The board consist of Chairman, MD/CEO and ve directors
those who are all non-executve directors. The compositon
of the board and the directorship changes during the year
are given in the table I and II.
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Directors are appointed at the AGM and resignatons that
occur during the year are lled by the remaining directors
collectvely afer taking in to consideraton all the directors
views at the board meetngs. The board shall appoint
the chairman and the CEO and dene and approve the
functons and responsibilites for them.
Dutes of Chairman and CEO
The roles of Chairman and CEO shall be separated and
Peoples Merchant ensures that these roles are not
performed by the same individual. There is a clear division
of responsibilites, The chairman is a non- executve
director.
The chairman is responsible for leadership of the board,
and conduct of the boards functons. Under this, the
primary responsibility of the chairman is the preparaton
of the agenda for each board meetng, and this functon
may be delegated to company secretary. The Chairman
provides leadership to the board; ensures that the board
works eectvely and discharges its responsibilites and
ensures that all key issues are discussed by the board in
a tmely manner. The Chairman takes the lead to ensure
Table III - Board Meetngs (with special meetng if any held during the period)
Date of
Meetng
M.P.Haradasa
(alternate to
Roger
Johnston)
B.S.Yapa W.D.K.
Jayawardena
P.V.
Pathirana
A.S.
Ibrahim
A.R.Wick
remasinghe
K. L.
Hewage
P. A. A.
Panditharatne
J. P.
Amaratunga
22-4-10 A P P P P P P ND ND
30-4-10 A P P A A P P ND ND
4-5-10 A P P A P P P ND ND
4-6-10 A P P A P P CD P ND
11-6-10 A P P P P P CD P ND
16-6-10 P P P P P A CD P ND
2-7-10 P P P P P P CD P ND
27-7-10 A P P A P P CD P ND
29-10-10 A P P CD P P CD P P
26-11-10 A P P CD P P CD P P
30-12-10 P P A CD P P CD P A
27-1-11 A P P CD P P CD P P
24-2-11 P P P CD P P CD P P
21-3-11 A P P CD P P CD P P
28-3-11 P P P CD P P CD P P
P - Present A - Absent CD - Ceased to be a Director ND - Was not a director then
that the board acts in the best interests of the company
and encourages them to make their full commitment to
the boards aairs.
The chairman takes the initatves to maintain actve and
eectve communicaton with shareholders and that the
views of shareholders are communicated to the board.
Board Meetngs
The Peoples Merchant board contnue to evaluate and
monitor its performance on a monthly basis with more
focus and emphasis on group performance as well. This
ensures eectve discharge of dutes and responsibilites
owed to the company. This complies with the Corporate
Governance Directon No.04 of 2009, issued by the
Central bank of Sri Lanka. Informaton is provided to the
board with su cient tme for them to review and call for
additonal informaton. This enhances the performance
measurement of operatons and internal controls. These
meetngs also focus on risk face by the bank and risk
mitgaton strategies adapted on a regular basis.
The dates of the board meetngs held and the partcipated
directors are given in the table III,
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Audit Commitee
As a good corporate governance practce which required
by the corporate governance rules, Peoples Merchant
appointed an audit commitee to review the performance
and monitor the operatons of the company on
contentous basis. The audit commitee was established
by the board in a formal and transparent manner and the
board ensures the maintenance of independence of the
commitee. It consist of three directors all of whom are
non-executve. Two out of the three commitee members
are independent. The Chairman of the audit commitee is
a non executve, independent director appointed by the
board, who possesses qualicatons and experience over
30 years in accountancy.
During the year under review three audit commitee
meetngs were held to evaluate the operatons of lease,
hire purchase, loans, real estate and branch operatons.
They make their recommendatons based on the audit
ndings with the intenton of improving internal controls,
assessment of risk and review of the feed back and
management response towards their recommendatons.
The names of the members and the dates of meetng held
during the year are given in table IV
Table IV - Audit Commitee
Director (name) 30-9-2010 22-2-2011 30-3-2011
B.S. Yapa (Chairman)- Independent, non executve Present Present Present
M.P. Haradasa - Independent, non executve Present Present Present
A.S. Ibrahim - Non executve Absent Present Present
The main functons of the audit commitee are;
Review internal audits and maintain an appropriate
relatonship with external auditors
Keeping under review the scope and results of the
audit, its eectveness and the independence and
objectvity of the auditors
Dealing clearly with its authority and dutes with
terms of reference
Assist board in
- The Preparaton, presentaton and adequacy of
disclosures in the nancial statements and review
of compliance with related regulatons
- To ensure that the companys internal controls
and risk management procedures are adequate
to meet the standards
- Assessing the companys ability to contnue as a
going concern in the foreseeable future
- Contnue review of independence and perform-
ance of companys external auditors
To make recommendatons to the board pertaining
to appointment, re-appointment and removal of
external auditors and to approve the remuneratons
and terms of engagement of external auditors,
Discussion of the audit plan, key audit issues and
their resolutons and management response and the
company annual audit
Remuneraton Commitee
The Remuneraton Commitee consists of three directors
all of whom are non executve. Two out of the three
commitee members are independent. The Remuneraton
Commitee was established by the board on a formal and
transparent manner and board ensures the maintenance
of independence. The Chairman of the Commitee is a
non-executve director.
The names of the members and the date of meetng held
in the nancial year are given in table V
Table V
Director (name) 15th February
2011
Mr. W.D.K. Jayawardena (Chairman)
Non executve director
Present
Mr. B.S. Yapa - Non executve
Independent director
Present
Mr. M.P. Haradasa - Non executve
Independent director
Present
The main functons of Remuneraton Commitee are;
Developing policy on executve remuneraton and
packages for directors and to ensure that no director
is involved in deciding his own remuneraton
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Recommendaton to the board on the companys
framework for remuneraton packages for executve
directors and senior management
To seek appropriate professional advice as and when
it is required as authorized by the board
Peoples Merchant Board consists of six Non Executve
Directors and none of them were paid a monthly
remuneraton. The commitee met on one occasion during
the nancial year, i.e. on February 15th 2011. Directors
allowances paid during the period are disclosed under
Note 14.
Rule No. Disclosures regarding Board of Directors Compliance
status
Details
i. 7.10.1(a) The correct number of executve /non-executve
directors
Compliant Six out of seven directors are
non executve directors. The
chairman is a non- executve
director. MD/CEO is an
executve director
ii. 7.10.2(a) The correct number of Independent Non-Executve
Directors.
Compliant Two out of six non-executve
directors are Independent
directors
iii. 7.10.2(b) Whether the non-executve directors submited a
declaraton annually of his/her independence or
non-independence to the Board of Directors
Compliant The board obtained
declaraton from the non-
executve directors
iv. 7.10.3(a) Conrmed that the board of directors made an
annual determinaton as to the independence or
non-independence of each non-executve director
based on the declaraton mentoned-above and
other informaton available to the board and states
the names of non-executve directors
Compliant
v. 7.10.3(b) If the Director does not qualify as Independent,
but if the board taking into account all the
circumstances is of their opinion that the non-
executve director is Independent, the board has
specied, in the Annual Report, the qualicaton
not met under Rule 7.10 of the CSE Listng Rules
and the basis for determining the director to be
Independent - Rule 7.10.3 (b)
Compliant
vi. 7.10.3(c) Published a brief resume in the Annual Report,
of each director of the board, which includes
informaton on the nature of his/her expertse
Compliant Brief resume of each director
are provided in pages 10 to
12
Table VI Compliance with Corporate Governance Rules - CSE requirements
In additon to the new directon issued by Central Bank of
Sri Lanka as the Finance Leasing (Corporate Governance)
Directon No.4 of 2009, which applies to registered nance
leasing establishment with eect from 01 January 2010,
Peoples Merchant has already followed and complied
with the corporate governing rules issued by the CSE.
Table VI below provides the summary of PMP compliance
with Central Bank of Sri Lanka / Securites and Exchange
Control (SEC), Corporate Governance requirements.
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Rule No. Disclosures regarding Remuneraton Commitee Compliance
status
Details
vii. 7.10.5(a) The number of Independent non-executve
directors in the Remuneraton Commitee
Compliant Refer page 33
viii. 7.10.5(a) Whether a separate Remuneraton Commitee was
formed or whether listed parents remuneraton
commitee used
Compliant Remuneraton commitee was
formed
ix. 7.10.5(a) Whether the Chairman of the Commitee is a non-
executve director
Compliant Chairman is a non-executve
director
x. 7.10.5(b) Disclosed the functons of the Remuneraton
Commitee
Compliant Provided in page 33 under
Remuneraton commitee
xi. 7.10.5(c) Names of directors comprising the Remuneraton
Commitee (where the parent companys
Remuneraton Commitee qualies to functon as
the listed companys Remuneraton Commitee, a
statement in the Annual Report to this eect and
disclosed the names of the directors
xii. 7.10.5(c) The Annual Report contained a statement on the
Remuneraton Policy
xiii. 7.10.5(c) The aggregate remuneraton paid to executve and
non-executve directors in the Annual Report
Compliant Provided in page 62 Note .14
Rule No. Contents under Audit Commitee Report Compliance
Status
Details
xiv. 7.10.6(a) The number of independent non-executve
directors in the Audit commitee
Compliant Two out of three non executve
directors are independent
xv. 7.10.6(a) Whether the Chairman of the Audit Commitee is a
non-executve director
Compliant Chairman is a non executve
and independent director
xvi. 7.10.6(a) Whether the Chairman or 1 member of the Audit
Commitee is a member of a recognized professional
accountng body
Compliant Chairman is a member of a
professional accountng body
xvii. 7.10.6(a) Whether the CEO and CFO atended Audit
Commitee Meetngs, Unless otherwise determined
by the Audit Commitee
Compliant
xviii. 7.10.6(b) Conrmed that the functons of the Audit Commitee
as being in accordance with Rule 7.10.6(b)
Compliant Audit commitee functons are
stpulated in page 33
xix. 7.10.6(c) Whether a separate Audit Commitee was formed
or whether listed parents Audit Commitee was
used
Compliant Separate Audit Commitee
was formed
xx. 7.10.6(c) Names of directors comprising the Audit Commitee
(where the parent companys Audit Commitee
qualies to functon as the listed companys Audit
commitee, a statement to this eect and disclosed
the names of the director
xxi. 7.10.6(c) The basis for determining external auditors as
being independent
Compliant Disclosed in Independent
Auditors Report on page 48
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Risk Management and Internal Control
Risk means being exposed to the possibility of a bad
outcome . . . Risk management means taking deliberate
acton to shif the odds in your favour - increasing the
odds of good outcomes and decreasing the odds of bad
outcomes.
Risk management is about following a deliberate set
of actons designed to identfy, quantfy, manage, and
monitor events or actons that could lead to a nancial
loss. This implies that risk management is an actve
process requiring commitment and focus. But due to
non availability of perfect informaton, risk management
involves a large degree of judgment and assumptons
about the future.
Today we live in highly uncertain tmes. Compettve
markets, globalizaton, booms, busts, recessions,
technological change, war, climatc change, and so on.
All these present risks to a varying degree and all these
have a direct or indirect impact our business . As a result
Risk Management becomes an important area in todays
business.
Risk is associated with two factors - opportunites on the
positve side and threats on the negatve side. Peoples
Merchants strategy is to convert all these business risks
into opportunites and minimize the threats. Peoples
Merchant believes that in order to increase its business
portolio it has to properly assess and control the risks
associated with the business. Risk may be a driver of
strategic directon of the company but it can be a cause
of uncertainty. But at Peoples Merchant, the overall level
of risk is contnuously assessed and the risk management
process is embedded into the processes and actvites
of the company. This enables compliance, and tmely
decision making.
Risk Management
Risk management is a contnuous process that is followed
by a set of procedures and principles which have been
idented as the most viable to the predictable situatons
of the company. Past experiences are documented and
analysed and these are helpful in assessing risk for future
business opportunites and beter controls.
The Board of directors by giving a corporate leadership
takes the initatve to give eect to these risk management
principles and controls at Peoples Merchant. These are
well supported by the structure of the company. Risk
management is an integral part of the company which is
supported at all levels of the company.
Risk management is a central part of the strategic
management process of the company. In order to
understand the risk, it needs to assess and document the
risk. A step by step process is followed for this purpose by
the company.
Step 01 - Identfy and document the risk associated with
business operatons of the company. The associated risk
of operatons are measure in terms of the likelihood or
probability and impact or consequence of occurrences
using the risk matrix.
Step 02 - List the likelihood of the risk occurring and the
impact it could cause to the company.
Step 03 - List what arrangements the company currently
have in place to prevent or reduce the likelihood of the
risk occurring.
Step 04 - List what arrangements that could be put in
place to prevent or reduce the risk on the company.
Step 05 - Using the informaton gathered a likelihood
score is assigned to each risk with the pre-determined
measures and plot them in the risk matrix.
High Impact
Low Likelihood
High Impact
High Likelihood
Low Impact
Low Likelihood
Low Impact
High Likelihood
Increasing Likelihood

Increasing Likelihood
Step 06 - Rank them accordingly to identfy high impact
and high likelihood to prioritze them in order to take
immediate actons.
The Risk management strategy of the company is as
follows; A top management commitment headed by the
Board and the management, followed by internal audit
commitee and an asset and Liabilites commitee. The
risk culture associated with all actvites and operatons
of the company is being created. All members of the sta
have recognized the importance of the risk culture and
the level of risk the company is ready to accept. All key
decisions are taken afer analyzing the risk factors and
wherever possible collectve decisions are taken.
Internal controls
The company identes the importance of having beter
internal controls to achieve desired objectves of the
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Risk Management and Internal Control Contd...
company at minimal risk. The internal controls are part
of the risk management strategy of the company and
proper initatves been taken where ever possible to place
proper control mechanisms throughout the operatons of
the company. These controls are being reviewed at board
meetngs and at management meetngs on a contnuous
basis by the Board and the senior management.
Appropriate introductons, changes or amendments been
taken to strengthen these internal controls as required
regularly.
In order to comply with Corporate Governance require-
ments of internal controls, the internal audit department
and the audit commitee plays a vital role. Internal audits
are carried out during the year in order to review and ap-
praise the adequacy adaptatons and weaknesses of inter-
nal operatonal controls of the company. The internal con-
trol system of the company ensures that the total nancial
controls of the company are eectve and the operatons
are in compliance with laws and regulatons.
The company considers shareholders assets as a top
priority of the board and the management. The Internal
controls ensures the eectve adherence to internal
policies of the company, safeguarding of assets, preventon
and detecton of fraud and proper and tmely preparaton
of reliable nancial informaton to its stakeholders.
Risk categories
Risk is categorized by identfying the similarites faced in the
dierent level of operatons. The dierent risk categories
idented are; Financial, Market, Credit, Business or
Operatonal, Interest rate, IT, Legal and Systematc.
Each category of risk been addressed separately with
the common framework for organizaton wide risk
management using the risk matrix to assess and quantfy
associate risk. This gives the management more condence
and easy framework to manage risk which is relevant to
their scope of work and address them through separate
directves.
Regulatory bodies have strict standards to measure,
report and disclose risk exposures and the risk
management strategies of the company. The following are
the measures that the company has taken with regard to
these requirements.
Business or operatonal risk
This is the risk that relates to the actvites carried out
within the company arising from structure, systems,
people, services or processes. Business or operatonal
risk includes business interrupton, errors or omissions
by employees, failures of IT systems, frauds and loss of
key employees. Operatonal risks arise as a result of
inadequate or failures in internal control processes, people
and system within the control of the company as well as
from exposures to unfavorable external environment
which is beyond companys control.
Business and operatonal risks of Peoples Merchant is
reduced by introducing well dened internal controls.
Peoples Merchant focuses on the existng customer
base to enhance market share through their contacts
by providing excellent customer oriented services. 2010
was a favorable year for business in general; however the
companys protability was aected by the operatons of
credit card company due to providing 100% provisions
for receivables. But due to companys proactve risk
management strategy, the eect was minimized with sale
of the subsidiary, Peoples Merchant Finance Company
Limited, in the rst quarter of FY 2011/12.
The company has laid down procedures with regard to
safeguarding legal security documentaton with regard
to lease, hire purchase and other trade nance facilites.
These are led in re proof cabinets with restricted access
to security rooms with a record of movements of les.
Peoples Merchants operatonal risk management strategy
includes assessment of market changes on a monthly
basis or more frequently if needed. The ALCO commitee
evaluates the company assets, liabilites and set company
borrowing and lending rates to be in line with market
rates. The Credit commitee monitors and evaluates the
procedures when grantng advances on a contnuous
basis. Senior Management partcipates and reports to the
board for decision making and follow up purposes.
Financial risk
This relates to the nancial operatons of the company.
Credit risk, liquidity risk, currency risk, Interest rate risk,
cash ow risk are some of nancial risks associated with
Peoples Merchant.
As a risk mitgaton strategy, Peoples Merchant follows
the matching of nancial risk through dierent ways
and methods such as xed interest rates against oatng
interest rates, short term borrowings against long term
borrowings, Insurance policies, etc.
Liquidity risk
This risk occurs when the company is unable to meet its
credit obligatons in tme without incurring unacceptable
losses. Liquidity is managed by categorizing assets and
liabilites of the company into various tme bands of
maturites and assessing any short falls, along with fund
requirements as per forecast lending /investments. If there
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Risk Management and Internal Control Contd...
are any gaps arrangements will be made with nancial
insttutons for such requirements well in advance. Also
approved credit lines for short term use are reserved for
utlizaton in case of unforeseen requirements that may
arise.
Credit risk
This arises due to borrowers not being able to setle loan
obligatons either capital or interest as per the terms
agreed with the lender on scheduled dates. The Company
idented this as a high risk area especially in the uncertain
and volatle economic conditons prevailed during the last
nancial year. This was idented and an acton plan was
put into place to mitgate the risk.
Peoples Merchant believes that one of the reasons for
borrower defaults was the adverse situaton that prevailed.
The situaton has since improved during the later part of
the nancial year.
The company has developed procedures which includes
comprehensive credit appraisals for dierent risk levels,
higher approvals and assessment by a credit commitee
with increasing loan amounts, obtaining collateral
where possible, set ng exposure limits for borrowers
and industry sectors, appraisals of clients through CRIB
reportng system, regular review of clients fallen due in
to the overdue category and closely following them up,
updatng sta on new requirements and directons issued
by Central bank of Sri Lanka.
Interest rate risk
This can arise due to changes in the interest rates
prevailing in the market. Adverse movements and volatle
rate uctuatons can aect the companys funding and
such movements always aect the companys lending,
borrowings and investments.
Peoples Merchant always uses natural hedging techniques
to neutralize the worst eects and to maintain a balance
in xed and variable interest rates. Fixed to variable terms
of the borrowing of the company is about 65% to 35%.
The Assets and Liabilites Commitee (ALCO) monitors
and controls market risks of interest rate and liquidity
risk. The commitee meets once a month and decides
on borrowing/ lending rates by taking market conditons
in to account. Also due consideraton is given to the
maturity patern of assets and liabilites to reduce period
mismatches.
IT risk
This encompasses the full spectrum of risks that may aect
or result from IT operatons, external natural disasters,
internal processing and loss of intellectual property,
supervisory of legal controls.
The Company has taken steps to manage possible IT risks
such as informaton security risk, availability of system risk
performance risk and compliance risk. The Informaton
Technology Policy has been implemented . A Disaster
Recovery site have been implemented to enable the
online real tme informaton replicaton.
- Security risk
This arises from the informaton being assessed,
manipulated or used by unauthorized partes. This risk
is controlled by a properly administrated user name and
password administrated with audit check list to review
the data entry. These controls avoid unauthorized
personnel access to the data base, and rewall security
and antvirus security to safeguard our IT system.
- Availability and Performance Risk
This arises when informaton or applicaton are made
inaccessible by processes, people or system failures,
natural disasters, and under performing systems and
applicatons which will diminish business productvity
or value. Peoples Merchant has an agreement with
SLT to provide a 24 hour network connecton of IPVPN
to connect branches with the head o ce. Also an
uninterrupted power supply is in place to avoid sudden
power failures and data losses. The company has a
business contnuity plan to ensure data security and
contnuity of the business operatons. These links are
obtained by another communicaton provider to ensure
contnuity.
- Compliance Risk
Compliance risk is the risk that informaton handling or
processing will fail to meet regulatory, IT or business
policy requirements. This has been avoided by selectng
the most suitable sofware and partnering with reliable
vendors in the market. New controls and procedure
have been implemented in the business applicaton to
ensure management of informaton accuracy.
Legal risk
This arises due to the potental loss from the uncertainty
of legal proceedings, litgatons against the company,
outcomes of potental legal proceedings for recovery of
advances and any trends that may need to be considered
in future agreements and contracts. Peoples Merchant
has procedures in place for ensuring proper legal
documentaton for all disbursements in order to ensure
that the company can take appropriate legal acton when
necessary against defaluters. External consultaton is
sought where and when necessary. The company ensures
compliance with all legal requirements.
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B
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Financial Reports
Financial Calendar
Page No.
Financial Calender 42
Annual Report of the Board 43
Directors Responsibility for Financial Reportng 46
Report of the Audit Commitee 47
Independent Auditors Report 48
Income Statement 49
Balance Sheet 50
Statement of Changes in Equity 51
Cash Flow Statement 52
Notes to the Financial Statements 54
Interim Financial Reports
First Quarter to 30.06.2010 [Unaudited] 13th August 2010
Second Quarter 30.09.2010 [Unaudited] 12th November 2010
Third Quarter 31.12.2010 [Unaudited] 8th February 2011
Annual Report for the year ended 31.03.2011 23rd August 2011
[Audited]
Meetngs
27th Annual General Meetng 30th September 2010
28th Annual General Meetng 29th September 2011
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Annual Report of the Board
5. Taxaton
Provision for taxaton has been computed at the
rates given in Note 17 to the Financial Statements.
6. Dividends
The Directors have not recommended the
declaraton of divided for the nancial year ended
31st March 2011. (Nil per share for2009/10)
Group Company
2011 2010 2011 2010
Rs.000 Rs.000 Rs.000 Rs.000
Loss before taxaton (63,842) (124,288) (215,320) (14,286)
Income tax expenses 2,183 (11,716) 12,820 (6,123)
Loss afer taxaton (61,659) (136,004) (202,500) (20,409)
Revenue reserve b/f (104,523) 42,234 23,005 54,014
Prot/(Loss) available for appropriaton (166,182) (93,770) (179,495) 33,605
Appropriatons
Finance leasing reserve fund 685 153 - -
6% preference dividend 600 600 600 600
Ordinary dividend paid - 10,000 - 10,000
Revenue reserve c/f (167,467) (104,523) (180,095) 23,005
The Board of Directors have pleasure in presentng
to the Shareholders their Report together with the
audited nancial statements of Peoples Merchant PLC
(the Company) and the audited consolidated nancial
statements of the Group for the year ended 31st March
2011.
Peoples Merchant PLC is a public limited liability
company incorporated in Sri Lanka on 26th January 1983,
quoted in the Colombo Stock Exchange in July 1994,
registered under Finance Leasing Act No. 56 of 2000 and
re-registered as per the Companies Act No.07 of 2007 on
16th September 2008.
This Report was approved by the Directors at a meetng
held on 23rd August 2011.
1. Principle Actvites
The principal actvites of the Company are
Leasing, Hire Purchase, Trade Finance, Real Estate,
Investments, Pawning and Corporate Finance
Services. There have been no signicant changes
in business actvites of the Company or any of its
subsidiaries during the year.
2. Review of operatons
The Chairmans Statement and the Chief Executve
O cers Review of Operatons on pages 5 to 9 in this
Report, contain a detailed review of the operatons
which forms an integral part of this Report.
3. Financial Statements
The Financial Statements of the Company comprises
the Balance Sheet, Statement of Income, Statement
of Changes in Equity and Cash Flow statement
together with the Accountng Policies and Notes to
the Financial Statements for the year ended 31st
March 2011 are set out in pages 49 to 83.
4. Summary of Financial Results
For the year ended 31st March
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Annual Report of the Board Contd...
7. Independent Auditors Report
The Independent Auditors Report on the Financial
Statements is given on page 48.
8. Accountng Policies
The accountng policies adopted in the preparaton
of the Financial Statements are given on pages 54
to 61 There have been no changes in the accountng
policies adopted by the company or any of its
subsidiaries during the year under review.
9. Statement of Directors Responsibilites
The statement of Directors responsibility for the
Financial Statements is given in page 46.
10. Directorate
The following were the directors of the Company
during the nancial year ended 31st March 2011:
Mr. P.A. Ajith Panditharatne - Chairman (appointed
from 3rd June 2010)
Mr. Anura R. Wickramasinghe - MD/CEO (resigned
w.e.f. 30th June 2011)
Mr. J. P. Amarathunga (appointed from 29th Oct.
2010)
Mr. A.S.Ibrahim
Mr. W. D. K. Jayawardena (resigned w.e.f. 10th June
2011)
Mr. B. S. Yapa
Mr. R. Johnston (resigned w.e.f. 5th July 2011)
Mr. M. P. Haradasa (Alternate to Mr. R.Johnston
resigned w.e.f. 5th July 2011)
Mr. K.L Hewage (resigned w.e.f. 3rd June 2010)
Mr. P.V. Pathirana (resigned w.e.f. 6th Oct. 2010)
Except for Mr. Anura R. Wickremasinghe, who
was the Chief Executve O cer of the Company,
the other six directors including the Chairman of
the Company are Non-Executve Directors. Out of
the said six Non-Executve Directors, two directors
namely, Mr. B. S. Yapa and Mr. R. Johnston are
Independent Directors.
Notce has been given pursuant to Secton 211 of
the Companies Act No. 07 of 2007 of the intenton to
propose an ordinary resoluton, for re-appointment
of Mr. B.S. Yapa, notwithstanding the age limit of 70
years stpulated by Secton 210 of the Companies
Act. Mr. B.S. Yapa is 70 years old.
11. Interest Register
The Interest Register is maintained by the Company
as per the requirements in the Companies Act No.7
of 2007. All directors have made declaratons as
provided for in secton 192 (2) of the Companies
Act. The related entries were made during the year
ended 31st March 2011.
11.1. Directors Emoluments
The emoluments and other benets made to
the Directors during the year are disclosed in
Note 14 to the Financial Statements.
11.2. Directors Interest in Contracts
No Director has any material interest in any
transactons or proposed contract involving
Peoples Merchant PLC or any of its subsidiaries
other than those disclosed in Note 48 to the
nancial Statements.
11.3. Directors Interest in Shares
Shareholding of Directors and their spouses and
dependent children are as follows:
No. of No. of
Shares Shares
as at as at
1st April 31st March
2010 2011
Mr. P.A. Ajith Panditharatne
- Chairman Nil Nil
Mr. Anura R. Wickramasinghe 24,614 24,614
Mr. J.P. Amarathunga Nil Nil
Mr. W. D. K. Jayawardena Nil 100
Mr. A.S.Ibrahim Nil Nil
Mr. B. S. Yapa 8,324 8,324
Mr. R. Johnston Nil Nil
Mr. M. P. Haradasa Nil Nil
12. Donatons
Donatons amountng Rs.530,000/- were made
during the year under review (Rs.239,000/- in
2009/10) by the company and Rs.740,000/- by the
group (Rs.251,000/- in 2009/10)
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Annual Report of the Board Contd...
13. Employees
Number of employees as at 31st March 2011 was
123 (31st March 2010- 74)
14. Auditors
Messrs. KPMG Ford, Rhodes, Thornton & Company
has expressed their willingness to contnue in
o ce as Auditors of the Company. Accordingly, a
resoluton to re-appoint them as Auditors untl the
next Annual General Meetng at a remuneraton
to be agreed upon with them by the Board and to
audit the Financial Statements of the Company for
the accountng period ending 31 March 2012 will
be proposed at the Annual General Meetng.
The Audit Fee of Messrs. KPMG Ford, Rhodes,
Thornton & Company was Rs.725,000/- for the year
under review and they were paid Rs 477,000/- for
other non-audit related services.
Based on the writen representaton made by the
Auditors to the Board, the Directors are satsed
that the Auditors did not have any relatonship with
or any interest in the Company or its subsidiaries
other than that of an auditor.
15. Investments in Subsidiaries
The details of investments made by the Company
are given in Note 30 to the Financial Statements.
16. Corporate Governance
The Board of Directors of the Company in complying
with the Corporate Governance Directon, No. 4 of
2009 issued to nance leasing companies by the
Central Bank of Sri Lanka have placed great emphasis
in conforming to the best corporate governance
practces and procedures set out therein. The
Board from tme to tme has introduced beter
systems and procedures for the internal controls
and risk management of the Company and thereby
improved accountability and transparency in the
Company. The corporate governance report of the
Company is given in pages 30 to 35.
17. There were no changes in the Companys Stated
Capital during the year under review. In terms
of the Companies Act No. 07 of 2007, the Stated
Capital of the Company was Rs. 644,399,000/- as
at 31st March 2011. (Comprising of 37,500,000
ordinary shares and 1,000,000 preference shares)
18. Events subsequent to the Balance Sheet date
There had not been any circumstances since
the Balance sheet date, which would require
adjustments to or disclosed in the Notes to the
Accounts, except those disclosed in Note 49 to the
accounts.
For and on behalf of the Board of Directors

Mr. P.A. Ajith Panditharatne Mr. B.S.Yapa
Chairman Director

Director
Corporate Services (Private) Limited
Secretaries
Colombo, Sri Lanka.
23rd August 2011
45
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Directors Responsibility For Financial
Reportng
Financial statements for the year ended 31st March 2011
represented in this report are in conformity with Sri
Lanka Accountng Standards and the Companies Act No.
07 of 2007. In preparing the above Financial Statements
appropriate accountng policies have been selected and
applied consistently. Where necessary, reasonable and
prudent judgments and estmates have been made in
line with Accountng Standards.
The Directors are responsible for ensuring that the
Company maintains su cient accountng records to
disclose with reasonable accuracy the nancial positon
of the Company. They are also responsible for taking
reasonable measures to safeguard the assets of the
Company and in that context, to have proper regard to
the establishment of appropriate systems of internal
control with a view to preventon and detecton of fraud
and other irregularites.
The Directors are of the opinion that Company has
adequate resources to contnue in operaton to adopt
the going concern basis in preparing the Accounts.
The Companys external Auditors KPMG Ford. Rhodes.,
Thornton & Company have examined the Financial
statement made available by the Board of Directors
together with all nancial records, related data, minutes
of shareholders and Directors, meetngs and express
their opinion in Auditors Report on page 48 of the
Annual Report.
By order of the Board
Peoples Merchant PLC
CORPORATE SERVICES (PRIVATE) LIMITED
Secretaries
Colombo, Sri Lanka
23rd August 2011
46
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Report of the Audit Commitee
Compositon
The Audit Commitee appointed by and responsible to
the Board of Directors comprise the following members
Mr. B.S. Yapa - Chairman - Independent /Non
Executve Director
Mr. M.P. Haradasa - Independent /Non
Executve Director
Mr. A.S. Ibrahim - Non Executve Director
The Chairman Mr. B.S. Yapa is a fellow member of the
Insttute Of Chartered Accountants of Sri Lanka with over
31 years of experience in Accountng & Finance.
Meetngs
The Commitee met three tmes during the year under
review. The CEO/ Group Managing Director, and the
Chief Financial O cer atended the meetngs by
invitaton. Members of the management team were
invited to partcipate at the meetngs as and when
required. Corporate Services Limited acted as secretaries
to the Audit Commitee. The proceedings of the Audit
Commitee were reported to the Board of Directors on
a regular basis.
Role of the Commitee
The main objectves of the Audit Commitee is to assist the
Board of Directors in fullling its oversight responsibilites
in the nancial reportng process, the system of internal
controls and risk management , the independence and
audit process of the external auditors ,and the process
for monitoring compliance with laws and regulatons .
Internal Audit
An In-house Internal Audit Department to carry out
internal audit functon was established, in additon to
the Internal Audit assignments carried out by Messrs
Ernst & Young. The In-house Internal audit department
mainly focuses on initatng and improving policies
and procedures of the business processes during the
year under review, whilst outsourced internal auditors
mainly focus with compliance with existng policies and
procedures.
The internal auditors are responsible to review and report
on the accuracy and integrity of the nancial statements,
e ciency of the internal control system and compliance
with statutory and other regulatons and the accountng
and operatonal policies. Internal audit reports are
regularly tabled at Audit commitee meetngs. Control
weaknesses highlighted in the internal audit reports are
critcally examined by the commitee and follow up acton
taken by management on the audit recommendatons are
also reviewed. Internal Audit representatves are present
at audit commitee meetngs during the discussion of
their respectve reports.
External Audit
During the year the Commitee met with the Messrs
KPMG Ford, Rhodes, Thomton & Co, External Auditors
to discuss the Auditors management leter pertaining to
the previous years audit and Managements response
thereto. Discussions were also held in regard to the
nature, scope and approach of the audit for 2010/11 prior
to commencement of the audit. The Audit Commitee
has recommended to the Board of Directors that Messrs
KPMG Ford, Rhodes, Thomton & Co is reappointed as
Auditors for the nancial year ending 31st March 2011
subject to the approval of the shareholders at the Annual
General Meetng.
Conclusion
Finally, I would like to thank all the members who served
on the audit commitee during the year for their valuable
contributon to the deliberatons of the commitee.
B.S.Yapa
Chairman
AUDIT COMMITTEE
Colombo, Sri Lanka
23rd August 2011
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Independent Auditors Report
TO THE SHAREHOLDERS OF PEOPLES MERCHANT PLC
(FORMERLY KNOWN AS PEOPLES MERCHANT BANK
PLC)
Report on the Financial Statements
We have audited the accompanying nancial statements
of Peoples Merchant PLC (Company), the consolidated
nancial statements of the Company and its subsidiaries
as at 31st March 2011 which comprise the balance
sheet as at 31st March 2011, and the income statement,
statement of changes in equity and cash ow statement
for the year then ended, and a summary of signicant
accountng policies and other explanatory notes as set
out on pages 49 to 83 of this Annual Report.
Managements Responsibility for the Financial
Statements
Management is responsible for the preparaton and fair
presentaton of these nancial statements in accordance
with Sri Lanka Accountng Standards. This responsibility
includes: designing, implementng and maintaining
internal control relevant to the preparaton and fair
presentaton of nancial statements that are free from
material misstatement, whether due to fraud or error;
selectng and applying appropriate accountng policies;
and making accountng estmates that are reasonable in
the circumstances.
Scope of Audit and Basis of Opinion
Our responsibility is to express an opinion on these
nancial statements based on our audit. We conducted
our audit in accordance with Sri Lanka Auditng
Standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance
whether the nancial statements are free from material
misstatement.
An audit includes examining, on a test basis, evidence
supportng the amounts and disclosures in the nancial
statements. An audit also includes assessing the
accountng policies used and signicant estmates made
by management, as well as evaluatng the overall nancial
statement presentaton.
We have obtained all the informaton and explanatons
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 examinaton,
the Company maintained proper accountng records
for the year ended 31st March 2011 and the nancial
statements give a true and fair view of the Companys
state of aairs as at 31st March 2011 and its loss and
cash ows for the year then ended in accordance with Sri
Lanka Accountng Standards.
In our opinion, the consolidated nancial statements give
a true and fair view of the state of aairs as at 31st March
2011 and the loss and cash ows for the year then ended,
in accordance with Sri Lanka Accountng Standards, of
the Company and its subsidiaries dealt with thereby, so
far as concerns the shareholders of the Company.
Report on Other Legal and Regulatory Requirements
These nancial statements also comply with the
requirements of Sectons 153(2) to 153(7) of the
Companies Act No. 07 of 2007.
Chartered Accountants
Colombo.
23rd August 2011
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Income Statement
For the year ended 31st March Group Company
2011 2010 2011 2010
Note Rs000 Rs000 Rs000 Rs000
Income 10 666,691 648,225 586,830 543,749
Interest income 11 597,767 544,336 550,215 501,796
Interest expense 12 (426,315) (508,622) (383,609) (387,053)
Net Interest Income 171,452 35,714 166,606 114,743
Other income 13 68,924 103,889 36,615 41,953
240,376 139,603 203,221 156,696
Less : Operatng Expenses 14
Personnel expenses 77,069 74,595 63,789 50,874
Provision/(reversal) for sta retrement benets (798) 2,644 238 1,714
Premises, equipment & establishment expenses 46,471 53,634 34,965 25,796
Provision for bad & doubtul debts 15 65,015 33,549 49,727 34,506
Provision/(reversal) in change in value of
dealing securites 16 1,598 (4,730) 1,105 (4,824)
Provision for other receivable 13,719 2,715 186,386 14,715
Other overhead expenses 101,144 101,758 82,331 48,201
304,218 264,165 418,541 170,982
Loss from operatons (63,842) (124,562) (215,320) (14,286)
Share of prot of associates (net of income tax) - 274 - -
Loss before taxaton (63,842) (124,288) (215,320) (14,286)
Income tax expense 17 2,183 (11,716) 12,820 (6,123)
Loss for the year (61,659) (136,004) (202,500) (20,409)
Basic loss per share (Rs.) 18 (1.66) (4.31) (5.42) (0.66)
The notes to the Financial Statements from pages 54 to 83 form an integral part of these Financial Statements
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Balance Sheet
Group Company
As at 31st March 2011 2010 2011 2010
Assets
Cash & short term funds 19 125,537 76,793 47,557 40,129
Government securites 15,230 22,583 - -
Dealing securites 20 21,446 26,935 8,274 4,821
Investment securites 21 776 776 773 773
Non current assets held for sale 22 - 451,577 - -
Bills of exchange 23 28,286 54,375 28,286 54,375
Loans & advances 24 457,809 478,022 425,946 437,917
Finance leases 25 1,127,876 924,775 990,535 828,996
Hire purchases 26 1,327,428 1,072,959 1,253,547 1,028,860
Real estate inventories 27 58,738 110,790 56,168 108,220
Deposits & receivables 28 121,286 138,077 112,128 122,431
Related party receivables 29 - - 383 134,677
Investment in subsidiary companies 30 - - 287,089 298,089
Goodwill 31 82,595 82,595 - -
Property, plant & equipment 32 513,426 50,621 494,182 16,911
Intangible assets 33 3,273 4,676 2,963 2,852
Total Assets 3,883,706 3,495,554 3,707,831 3,079,051
Liabilites
Bank overdraf 39,769 140,410 38,242 126,576
Borrowings 34 3,065,813 2,110,129 2,929,063 2,028,679
Interest accrued 35 129,934 99,081 126,758 85,069
Debentures 36 100,000 100,000 100,000 100,000
Dividends payable 37 1,276 805 1,276 805
Retrement benet obligatons 38 8,026 9,344 7,096 6,932
Deferred tax liabilites 39 13,710 27,653 7,712 26,896
Other liabilites & provisions 40 41,159 461,854 27,131 30,441
Total Liabilites 3,399,687 2,949,276 3,237,278 2,405,398
Equity
Stated capital 41 644,399 644,399 644,399 644,399
Finance leasing reserve fund 7,087 6,402 6,249 6,249
Revenue reserve (167,467) (104,523) (180,095) 23,005
Total Equity 484,019 546,278 470,553 673,653
Total Liabilites & Equity 3,883,706 3,495,554 3,707,831 3,079,051
The Financial Statements are in compliance with the requirements of Companies Act No. 7 of 2007

A. Wickramatunge
Chief Financial O cer
Approved and signed for and on behalf of the Board of Directors

P.A. Ajith Panditharatne B.S.Yapa
Chairman Director

Colombo, Sri Lanka
23rd August 2011
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Statement of Changes in Equity
For the year ended 31st March 2011
Group Stated Finance Leasing Revenue Total
Capital Reserve Fund Reserves
Rs000 Rs000 Rs000 Rs000
Balance as at 01.04.2009 400,028 6,249 42,234 448,511
Right Issue 250,000 - - 250,000
Less : Right Issue expenses (5,629) - - (5,629)
Loss for the year - - (136,004) (136,004)
Preference dividend (6%) - - (600) (600)
Ordinary dividend - - (10,000) (10,000)
Transferred to nance leasing reserve fund - 153 (153) -
Balance as at 01.04.2010 644,399 6,402 (104,523) 546,278
New share issues - - - -
Less: Right issue expenses - - - -
Loss for the year - - (61,659) (61,659)
Ordinary dividends (Note 42) - - - -
Transferred to nance leasing reserve fund - 685 (685) -
Balance as at 31.03.2011 644,399 7,087 (167,467) 484,019
Company Stated Finance Leasing Revenue Total
Capital Reserve Fund Reserves
Rs000 Rs000 Rs000 Rs000
Balance as at 01.04.2009 400,028 6,249 54,014 460,291
Right Issue 250,000 - - 250,000
Less : Right Issue expenses (5,629) - - (5,629)
Loss for the year - - (20,409) (20,409)
Ordinary dividend - - (10,000) (10,000)
Transferred to nance leasing reserve fund - - - -
Balance as at 01.04.2010 644,399 6,249 23,005 673,653
Right issue - - - -
Less: Right issue expenses - - - -
Loss for the year - - (202,500) (202,500)
Ordinary dividends (Note 42) - - - -
Transferred to nance leasing reserve fund - - - -
Balance as at 31.03.2011 644,399 6,249 (180,095) 470,553
The notes to the Financial Statements from pages 54 to 83 form an integral part of these Financial Statements.
In accordance with Secton 58 of Companies Act No 7of 2007, share capital, share Premium and preference share
have been classied as stated capital.
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Cash Flow Statement
Group Company
For the year ended 31st March 2011 2010 2011 2010
Rs000 Rs000 Rs000 Rs000
Cash ows from operatng actvites
Interest income 535,865 540,119 498,969 490,953
Interest payments (400,388) (449,396) (359,609) (410,808)
Receipts from other operatng actvites 42,842 76,917 19,727 16,170
Cash payment to employees (73,080) (78,865) (59,354) (53,704)
Payments on other operatng actvites (109,954) (222,203) (98,800) (62,983)
Operatng prot before changes in operatng assets
/liabilites ( Note A ) (4,715) (133,428) 933 (20,372)
Decrease/(Increase) in operatng assets
Lease rentals & deposits received 567,291 436,417 537,461 404,225
Hire purchase rentals & deposits received 607,223 376,225 585,260 376,225
Real Estate 80,329 30,359 80,329 30,359
Assets Leased (710,222) (306,994) (697,359) (290,973)
Assets Hire purchased (798,999) (649,472) (785,036) (649,472)
Bills discounted 24,929 2,256 24,929 2,256
Pawning advanced (11,879) - (11,879) -
Receivables & prepaid expenses (109,377) 267,318 (312,764) (195,047)
Loans (5,519) 30,222 11,503 (2,401)
(360,939) 52,903 (566,623) (345,200)
Increase/(Decrease) in operatng liabilites
Other payables (46,517) (125,660) (38,941) (70,774)
Net cash used in operatng actvites before tax (407,456) (72,757) (605,564) (415,974)
Income tax paid (9,340) (18,559) (4,132) (15,321)
Net cash used in operatng actvites afer tax (416,796) (91,316) (609,696) (431,295)
Cash ows from investng actvites
Purchase of Dealing securites (63,033) (36,326) (34,560) (6,714)
Sale of Dealing securites 55,648 9,561 38,105 9,561
Purchase of Property, Plant & Equipment (12,549) (14,461) (9,547) (7,177)
Purchase of Intangible Assets (1,808) (949) (1,808) (240)
Net cash eect on investment in subsidiary (Note B) - (159,561) - (160,770)
Sale of Property, Plant & Equipment 6,102 4,806 3,290 400
Dividend receipts 322 1,288 322 1,288
Net cash used in investng actvites (15,318) (195,642) (4,198) (163,652)
Cash ows from nancing actvites
Securitsaton loans / borrowings 9,293 747,523 52,545 666,073
Payment for nance leases (1,637) (3,718) - -
Debentures redeemed - (350,000) - (350,000)
Debentures issued - 100,000 - 100,000
Right issue (net of expenses) - 244,371 - 244,371
Other borrowings 573,843 (337,848) 657,111 (60,472)
Dividend paid - (10,395) - (10,395)
Net cash generated from nancing actvites 581,499 389,933 709,656 589,577
Net cash inow / (outlow) from all actvites 149,385 102,975 95,762 (5,370)
Cash and cash equivalents at beginning of the year (63,617) (166,592) (86,447) (81,077)
Cash and cash equivalents at end of the year 85,768 (63,617) 9,315 (86,447)
Cash and Cash Equivalents at end of the year
Cash & short term funds as at 31st March ( Note 19 ) 125,537 76,793 47,557 40,129
Bank overdraf as at 31st March (39,769) (140,410) (38,242) (126,576)
85,768 (63,617) 9,315 (86,447)
52
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Cash Flow Statement Contd...
Group Company
Rs000 Rs000 Rs000 Rs000
Note A
Reconciliaton of Operatng Prot
Prot before taxaton (63,842) (124,288) (215,320) (14,286)
Add / (Less) :
Prot on sale of shares (13,639) 227 (8,142) 298
Prot on Real Estate actvites (8,424) (24,536) (8,424) (24,536)
Prot on sale of Property, Plant & Equipment 1,126 (548) (103) (256)
Dividend income (322) (1,288) (322) (1,288)
(Provision) / reversal of fall in value of dealing securites 1,598 (4,730) 1,105 (4,824)
Net Provisions 66,672 4,917 225,112 15,614
Depreciaton - Property plant and equipment 9,968 13,687 5,330 6,314
Amortzaton of Intangible Assets 2,148 3,131 1,697 2,592
(4,715) (133,428) 933 (20,372)
Note B
Net Cash eect on investment in subsidiary company - Peoples Merchant Finance Company Ltd
2010
Rs000
Property plant & equipment 7,899
Investments 6,764
Cash & cash equivalents 1,209
Other current assets 146,440
Current liabilites (47,795)
Net identable assets and liabilites 114,517
Good will on acquiston 46,253
Consideraton paid in cash 160,770
Cash acquired (1,209)
Net cash inow 159,561
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Notes to the Financial Statements
1. Reportng entty
Peoples Merchant PLC (Company) is a public
quoted company incorporated on 26th January 1983
and domiciled in Sri Lanka. The registered o ce of
the Company is situated at No.21, Nawam Mawatha,
Colombo 2.
The consolidated nancial statements of the Company
for the year ended 31st March 2011 include the
Company and its Subsidiaries (together referred to as
the Group and individually as Group enttes)
The sta strength of the Company as at 31st March
2011 is 123 (2010 - 74).
1.1. Principle actvites.
1.1.1. Company
The principle actvites of the Company
contnued to be Leasing, Hire Purchase, Trade
Finance, Real Estate, Short-term investments
and Corporate Finance services.
1.1.2. Subsidiaries
The subsidiaries of the Company are;
PMB Financial Services Ltd
Currently PMB Financial Services Limited is not
operatve. Intend to engage in nancial services
in the future.
Peoples Merchant Finance Company Ltd
Silvereen Finance Company Limited, was an
associate of the Company as at 31.03.2009 with
a 44% share holdings. PMP acquired balance
56% of shares and it became a subsidiary from
June 2009. The Company was then re named as
Peoples Merchant Finance Company Ltd. The
principal actvites of the subsidiary are leasing,
hire purchase, trade nance and deposits.
2. Basis of preparaton
2.1. Statement of Compliance
The Financial statements of the Company are
prepared in accordance with the Sri Lanka
Accountng Standards laid down by the Insttute
of Chartered Accountants of Sri Lanka and comply
with the requirements of Companies Act No 7 of
2007.
2.2. Approval of Financial Statements by Directors
The Financial statements were authorized for
issue on 23rd August 2011.
2.3. Basis of measurement
The nancial statements are prepared under the
historical cost conventon. No adjustments have
been made for inatonary factors aectng the
nancial statements. These nancial statements
are prepared in Sri Lanka rupees, rounded to
the nearest thousand, unless otherwise stated.
Where appropriate the accountng policies are
disclosed in the succeeding notes.
2.4. Functonal and Presentaton Currency
The Financial Statements are presented in Sri
Lankan Rupees, which is the Companys functonal
currency. Financial informaton presented in Sri
Lankan Rupees has been rounded to the nearest
thousand unless indicated otherwise.
2.5. Use of Estmate and Judgment
The preparaton of Financial Statements requires
management to make judgments, estmates
and assumptons that aect the applicaton of
accountng policies and the reported amounts of
assets, liabilites, income and expenses. Actual
results may dier from these estmates.
Estmates and underlying assumptons are
reviewed on an ongoing basis. Revisions to
accountng estmates are recognized in the period
in which the estmate is revised and in any future
periods aected.
3. Materiality and aggregaton
Each material class of similar items is presented
separately in the Financial Statements. Items of a
dissimilar nature or functon are presented separately
unless they are immaterial.
4. Singnicant accountng policies
The accountng principles are applied consistently to
all periods with due regard to prudence, materiality
and substance over form criteria as explained in Sri
Lanka Accountng Standard No.3 on Presentaton of
Financial Statements.
The accountng policies of the Company have
been consistently applied by Group enttes where
applicable and deviatons if any have been disclosed
accordingly.
4.1. Basis of Consolidaton
4.1.1. Subsidiaries
Subsidiaries are enttes that are controlled
by the Company. Control exists when the
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Company has the power, directly or indirectly,
to govern the nancial and operatng policies
of an entty so as to obtain benets from its
actvites. In assessing control, potental votng
rights, that presently are exercisable, are taken
into account. The nancial statements of
Subsidiaries are included in the consolidated
nancial statements from the date that control
eectvely commences untl the date that
control eectvely ceases.
The Minority Interests are presented in the
consolidated Balance Sheet within Equity,
separately from the equity atributable to
the Equity Holders of the Company. Minority
Interests in the prot or loss of the Group
are disclosed separately in the consolidated
Income Statement.
The consolidated nancial statements are
prepared to a common nancial year end of 31st
March. The accountng policies of subsidiaries
have been changed where ever necessary to
align them with the policies adopted by the
Group.
4.1.2. Associates
Associates are enttes in which Company has
signicant inuence, but no control over the
nancial and operatng policies. Signicant
inuence is presumed to exist when the
Company holds between 20 and 50 percent
of the votng power of another entty. The
Associates are accounted for using the equity
method and are recognised initally at cost.
The Companys investments include goodwill
idented on acquisiton, net of any accumulated
impairment losses. The consolidated nancial
statements include the Companys share of the
income and expenses and equity movements
of the Associate, afer adjustments being made
to align the accountng policies with those
of the Group from the date that signicant
inuence eectvely commences untl the date
that signicant inuence eectvely ceases.
When Companys share of losses exceeds its
interest in the Associate, the carrying amount
of that interest is reduced to nil and the
recogniton of further losses is discontnued
except to the extent that the Company has an
obligaton or made payments on behalf of the
Associate. If the associate subsequently reports
prots, the Company resumes recognising
its share of those prots only afer its share
of the prots equals the share of losses not
recognised.
The Company discontnues the use of the
equity method from the date that it ceases to
have signicant inuence over an Associate
and re classies the investment as Investment
securites in accordance with Sri Lanka
Accountng Standard 22 Accountng for
Investments.
4.1.3. Transactons Eliminated On Consolidaton
Intra-group balances and transactons and
any unrealised gains arising from intra-group
transactons, are eliminated in preparing
the consolidated nancial statements.
Unrealised gains arising from transactons with
Associates are eliminated to the extent of the
Groups interest in the Associates against the
investment in the Associate. Unrealised losses
are eliminated in the same way as unrealised
gains except that they are only eliminated
to the extent that there is no evidence of
impairment.
4.1.4. Foreign Currency Transactons
All transactons in foreign currencies are
converted at rates of exchange prevailing at
the dates of the transactons are aected.
Monetary assets and liabilites denominated
in foreign currencies are translated at the
rates prevailing on the balance sheet date.
Exchange dierences arising on the setlement
of monetary items, and on the translaton of
monetary items, are included in loss for the
period.
ASSETS AND BASES OF THEIR VALUATION
4.2. Lease Rentals, Trade Bills, Hire Purchase & Other
receivables
Lease rentals receivables, trade bills, hire
purchase and other receivables are stated in the
Balance Sheet net of provision for doubtul debts,
prepaid lease rentals and net of interest which
is not accrued to revenue on non performing
advances.
4.3. Provision for Bad & Doubtul Debts
Specic and general provisions are made for
bad and doubtul debts on advances comprising
Notes to the Financial Statements Contd...
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loans, bills of exchange, nance leases and hire
purchases. Only a general provision is made
in respect of guarantees issued to recognize
liabilites that may arise, as any claim made on
and honoured by us on a guarantee is considered
as a loan with 100% provision.
Specic provisions for doubtul debts are based
on a contnuous review of advances. These
provisions relate to bad and doubtul debts
idented in accordance with Sri Lanka Accountng
Standard No.23 - Revenue Recogniton and
Disclosures in the Financial Statements of Banks
and above the stpulated guidelines issued by the
Central Bank of Sri Lanka.
General provision is made on advances where no
specic provisions have been made.
Provisions are applied to write o advances,
in part or in whole, when loans are considered
partly or wholly irrecoverable

4.4. Investment in Treasury Bills and Treasury Bonds
Held for Dealing
Investments in treasury bills and treasury bonds
in dealing portolio are those investments that
the Group acquires or incurs principally for the
purpose of selling, or holds as part of a portolio
that is managed for short term prot. These
investments are initally recognised at cost and
subsequently measured at market value in the
Balance Sheet. Gains and losses on marked to
market valuaton are dealt with through the
Income Statement.
Provisions on advances are made as follows:
Leases and Loans and Guarantees
Period outstanding Classicaton Hire Bills of
purchases exchange
Specic provision
More than 3 months
Less than 6 months 5% 10% 100%
More than 6 months Sub-standard 20% 20% -
Less than 12 months
More than 12 months Doubtul 50% 50% -
Less than 18 months
More than 18 months Loss 100% 100% -
General provision
Less than 3 months Regular 0.25% 0.5% 0.25%
4.5. Investments
4.5.1. Dealing Securites
These are marketable securites acquired and
held with the intenton of resale over a short
period of tme. Such securites are initally
recognised at cost and subsequently measured
at market value. Gains and losses on marked to
market valuatons are dealt with through the
income statement.
4.5.2. Investment Securites
These are acquired and held for yield or
capital growth in the medium or long term.
Such securites are recorded at cost. Changes
in market values of these securites are not
taken into account unless there is considered
to be a diminuton in value, which is other than
temporary.

Non-quoted investments are valued at cost.
4.5.3. Investments in Subsidiaries
Investments in Subsidiaries
are stated at cost in the Companys
nancial statements.
4.5.4. Investments in Associates
Investments in Associates are
accounted for at cost in the Companys
nancial statements and under the
Equity method in the consolidated
nancial statements. Under the
Equity method, the Investments in
Associates are initally accounted
for at cost and the carrying amount
is adjusted for post acquisiton
changes in the Comapanys share of net assets
of the Associates, less any impairment in the
Companys net Investments in Associates.
4.5.5. Investment in Real Estate
Real estate inventories are stated at cost or
market values which ever is lower. These
costs include cost of purchase of the land and
expenses on development that are capitalized.
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4.6. Assets Held for Sale
Assets that are expected to be recovered
primarily through sale rather than through
contnuing use are classied as Held for Sale
once idented that the carrying amount will be
recovered principally through a sale transacton
rather than through contnuing use. These are
assets which are available for immediate sale in
their present conditon, subject to only the terms
that are usual and customary for sale of such
assets and their sale is highly probable.
Assets Held for Sale are presented separately
on the face of the Balance Sheet at the lower of
its carrying amount and fair value less costs to
sell.
Assets classied as Assets Held for Sale are
neither amortsed nor depreciated.
Impairment losses on inital classicaton as held
for sale and subsequent gains and losses on
remeasurement are recognised in the Income
Statement.
4.7. Property, Plant and Equipment
Property, plant and equipment are tangible items
that are held for servicing, or for administratve
purposes and are expected to be used during more
than one period.
4.7.1. Basis of recogniton
Property, plant and equipment are recognised
if it is probable that future economic benets
associated with the assets will ow to the
Group and cost of the asset can be reliably
measured.
4.7.2. Measurement
An item of property, plant and equipment that
qualies for recogniton as an asset is initally
measured at its cost. Cost includes expenditure
that is directly atributable to the acquisiton
of the asset and cost incurred subsequently to
add to, replace part of, or service it. The cost
of self constructed assets includes the cost of
materials and direct labour, any other costs
directly atributable to bringing the asset to
a working conditon for its intended use and
the costs of dismantling and removing the
items and restoring the site on which they are
located. Purchased sofware that is integral to
the functionality of the related equipment
is capitalised as part of computer equipment.
4.7.3. Subsequent Costs
The cost of replacing part of an item of
property, plant and equipment is recognised in
the carrying amount of the item if it is probable
that the future economic benets embodied
within that part will ow to the Group and
its cost can be reliably measured. The costs of
day to day servicing of property, plant
and equipment are charged to the Income
Statement as incurred.
4.7.4. Derecogniton
The carrying amount of an item of property,
plant and equipment is derecognised on
disposal or when no future economic benets
are expected from its use or disposal. The
gain or loss arising from the derecogniton of
an item of property, plant and equipment is
included in Income Statement when the item
is derecognised.
When replacement costs are recognised in
the carrying amount of an item of property,
plant and equipment, the remaining carrying
amount of the replaced part is derecognised.
Major inspecton costs are capitalised. At
each such capitalisaton, the remaining carrying
amount of the previous cost of inspections
is derecognised.
4.7.5. Depreciaton
Group provides depreciaton on a straight-line
method over the estmated life of the asset
category. Depreciaton is provided on a pro
rata basis on the assets purchased /disposed of
during the year.
The depreciaton is provided at the following
rates for each category:
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Category Rate (per annum)
Buildings 10%
Motor vehicles 20%
Computers 25%
O ce equipment, furniture, t ngs 15%
4.7.6. Impairment of Property, Plant & Equipment
The carrying value of the property, plant &
equipment is reviewed for impairment when
events or changes in circumstances indicate the
carrying value may not be recoverable. If any
such indicaton exists and where the carrying
value exceed the estmated recoverable
amount the assets are writen down to their
recoverable amount. Impairment losses are
recognized in the Income Statement unless
it reverses a previous revaluaton surplus for
the same asset.
4.7.7. Operatng leased assets
Operatng lease assets are stated at cost
less accumulated depreciaton charged on a
straight- line method at the rate of 25% per
annum. The depreciaton commences in the
month the asset is purchased and ceases in the
month of disposal.
4.7.8. Intangible assets
4.7.8.1. Basis of recogniton
An intangible asset is recognized if it is
probable that future economic benets that
are atributable to the asset will ow to the
enterprise and the cost of the asset can be
measured reliably in accordance with the Sri
Lanka Accountng Standard no. 37 - Intangible
assets. Accordingly these assets are stated in
the Balance Sheet at cost less accumulated
amortsaton, less accumulated impairment
losses if any.
4.7.8.2. Goodwill
Goodwill arising on the acquisiton represents
the excess of the cost of acquisiton over the
Groups interest in the net fair value of the
acquirees identable assets, liabilites and
contngent liabilites at the date of acquisiton.
Upon transiton to revised Sri Lanka Accountng
Standard 25 Business Combinatons, goodwill
is no longer amortsed. Instead, goodwill is
tested for impairment annually and assessed
for any indicaton of impairment at each
reportng date to ensure that its carrying
amount does not exceed its recoverable
amount. If an impairment loss is idented, it
will be recognised immediately in the Income
Statement.
The negatve goodwill is recognised immediately
in the Income Statement.
4.7.8.3. Computer sofware
Computer sofware is stated at cost less
accumulated amortsaton, less accumulated
impairment losses. The rate of amortsaton is
25% per annum.
4.7.8.4. Subsequent Expenditure
Expenditure incurred on sofware is capitalised
only when it increases the future economic
benets embodied in the specic asset to which
it relates. All other expenditure is expensed as
incurred.
4.7.8.5. Amortsaton
Intangible assets are amortsed on a straight-
line basis over the estmated life of the asset.
Amortsaton is provided on a pro rata basis on
the assets purchased /disposed of during the
year.
4.7.8.6. Retrement and Disposal
An intangible asset is derecognised on disposal
or when no future economic benets are
expected from its use and subsequent
disposal.
4.7.8.7. Impairment of Assets
As per Sri Lanka Accountng Standard 41 -
Impairment of Asset, impairment is required
to be determined for identable assets.
Identable assets of the Company are reviewed
at each Balance Sheet date to determine
whether there is any indicaton of impairment.
If any such indicaton exists, the recoverable
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amount of the assets is estmated and shown
in the Balance Sheet. The impairment loss is
charged to the Income Statement.
LIABILITIES AND PROVISIONS
4.8. Commitments and Contngencies
All discernible risks are accounted for in
determining the amount of other liabilites.
4.9. Retrement Benets
4.9.1. Retrement Benets Plan-Gratuity
The Group is liable to pay gratuity in terms of
the Payment of Gratuity Act No 12 of 1983.
Gratuity liability was computed from the rst
year of service for all employees in conformity
with Sri Lanka Accountng Standards 16 -
Retrement Benet Costs which was eectve
tll 1 July 2007. However, under the Payment
of Gratuity Act No. 12 of 1983, the liability to
an employee arises only on completon of ve
years of contnual service.
Based on the revised Sri Lanka Accountng
Standards 16 (Revised 2006) - Employee
Benets (SLAS 16) which became eectve
from the nancial year commencing afer 1 July
2007, the Company has adopted the actuarial
valuaton method from 1st April 2008. The
liability recognized in the balance sheet is the
present value of the dened benet obligaton
using the projected unit credit method at
the balance sheet date based on an actuarial
valuaton carried out by a professional actuary.
4.9.2. Employees Provident Fund and Employees
Trust Fund
All employees who are eligible for Employees
Provident Fund contributons and Employees
Trust Fund contributons are covered by
relevant contributon funds in line with the
respectve statutes.
4.10. Provisions for liabilites
A provision is recognized in the balance sheet only
when the Company has a legal or constructve
obligaton as a result of a past event and it is
probable that an outlow of resources embodying
economic benets will be required to setle the
obligaton.
REVENUE AND EXPENSE RECOGNITION
4.11. Interest Income on advances
Interest receivable on advances is recognized on
an accrual basis. Interest ceases to be taken to
revenue when interest or principal is in arrears
for three (3) months or more and thereafer such
income is recognized on a cash basis. Further in
instances where interest is suspended, the interest
accrued up to three months is also removed
from the interest income and transferred to the
interest in suspense account.
4.12. Lease Income
4.12.1. Finance leases
Gross earnings from leases comprising the
excess of rentals receivable over the cost of
leased assets are allocated over the term of
the lease, commencing with the month in
which the lease is granted in proporton to the
declining receivable balances.
Income of nance leases in respect of lease
rentals due ceases to be taken to revenue when
rentals are in arrears for three (3) months or
more and thereafer such income is recognized
on a cash basis. Further in instances where
interest is suspended, the interest accrued
up to three months is also removed from the
interest income and transferred to the interest
in suspense account.
4.12.2. Operatng leases
Rental income is recognized as revenue on a
straight-line basis over the term of lease.
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Income of operatng leases in respect of lease
rentals due ceases to be taken to revenue when
rentals are in arrears for three (3) months or
more and thereafer such income is recognized
on a cash basis. Further in instances where
interest is suspended, the interest accrued
up to three months is also removed from the
interest income and transferred to the interest
in suspense account.
4.13. Hire purchase income
Gross earnings from hire purchases comprising
the excess of rentals receivable over the cost of
hire purchase assets are allocated over the period
of the hire purchase contract, commencing with
the month in which the hire purchase is granted in
proporton to the declining receivable balances.
Income of hire purchases in respect of rentals
due ceases to be taken to revenue when rentals
are in arrears for three (3) months or more and
thereafer such income is recognized on a cash
basis. Further in instances where interest is
suspended, the interest accrued up to three
months is also removed from the interest income
and transferred to the interest in suspense
account.
4.14. Pawning income
Income on pawning is recognized proportonately
on accrual basis over the period of the advance.
4.15. Bills of exchange
Income on discountng of bills of exchange is
recognized proportonately over the period of
the instrument.
Interest income accrued on discountng of bills
of exchange are reversed and transferred to the
interest in suspense account, when bills are not
setled on due dates.
4.16. Overdue charges
Overdue charges for late payment of lease rentals
and other advances, and for delayed redempton
of bills of exchange are recognized as income on
a cash basis.
4.17. Dividend Income
Dividend income from shares is recognized in the
period in which they are declared.
4.18. Interest Income from other sources
Interest on treasury bills and commercial paper
is recognized proportonately over the period of
instrument.
4.19. Gain on Real Estate Sales
Prot on real estate sales are recognized as
follows:
4.19.1. The non-refundable deposits are recognized
into income in the year of receipt, on signing
the sales agreement and collecton of non-
refundable deposit.
4.19.2. The balance prot is recognized as follows:
4.19.2.1. On sale of land, on receiving at least 25% of
the selling price and grantng of an internal
loan facility for the balance amount.
4.19.2.2. On sale of houses constructed, only on
completon of the house and afer receipt
of the full payment or conrmaton from a
recognized insttuton for payment.
4.20. Gains or Losses on Disposal of Property, Plant
and Equipment.
Gains and losses resultng from the disposal
of property, plant and equipment have been
accounted for in the income statement.
4.21. Fee based income
Fee based income is recognized on cash basis.
4.22. Prot or Loss on Sales of Marketable Securites
Prot or loss arising on sale of equity shares,
commercial papers and other marketable
securites is accounted for on cash basis.
4.23. Interest expense
Interest payable is recognized on accrual basis. All
interest expenses are charged to Income without
capitalizing any amount.
60
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4.24. Income Tax expense
Income tax expense comprise of current and
deferred tax. Income tax expense recognized in
prot or loss except to the extent that it relates
to items recognized directly in equity in which
case it is recognized in equity in which case it is
recognized in equity.
4.24.1. Current tax
Provision for Current tax on the prot for
the year is computed in accordance with the
provisions of the Inland Revenue Act No. 10
of 2006 and amendments there to, at the
rates specied in Note No.16 to the nancial
statements.
4.24.2. Deferred Taxaton
Deferred taxaton is provided using the
Balance sheet liability method providing for all
temporary dierences between the carrying
amount of assets and liabilites for nancial
reportng purpose and the amounts used for
taxaton purposes. The amount of deferred
tax provided is based on the expected manner
of realizaton or setlement of the carrying
amount of assets and liabilites using tax
rates enacted or substantvely enacted by the
reportng date.
Deferred tax assets, including those related
to temporary tax eects of income tax losses
and credits available to be carried forward are
recognized only to the extent that it is probable
that future taxable prots will be available
against which the assets can be utlized.
Deferred tax assets are reviewed at each
reportng date and are reduced to the extent
that it is no longer probable that the future
related tax benet will be realized.
5. Cash ow statement
The cash ow statement has been prepared by using
the Direct Method of preparing Cash Flows in
accordance with the Sri Lanka Accountng Standard
No.9 Cash Flow Statements. Cash and cash
equivalents comprise of cash balances and short-
term funds.
6. Segmental reportng
A segment is a distnguishable component of an
enterprise that is engaged either in providing products
and services (business segment), or in providing
products or services within a partcular economic
environment (geographical segment), which is subject
to risks and rewards that are dierent from those of
other segments.
Segmentaton has been determined based on the
actvites of the Company.
7. Comparatve gures
Where ever necessary amounts shown for the
previous year have been reclassied to facilitate
comparison with the current years presentaton.
8. Events afer the balance sheet date
All the material post balance sheet events have been
considered and appropriate adjustments /disclosures
have been made in the Financial Statements where
necessary.
9. New accountng standards issued but not eectve
as at balance sheet date
The Insttute of Chartered Accountants of Sri
Lanka (ICASL) has issued a new volume of Sri Lanka
Accountng Standards - 2011, applicable for nancial
periods beginning on or afer 1st January 2012. These
new Accountng Standards are prexed as both
SLFRS and LKAS which correspond to the relevant
Internatonal Financial Reportng Standards (IFRS)
and Internatonal Accountng Standards (IAS).
Accordingly, these Standards have not been applied
in preparing these nancial statements as they were
not eectve for the year ended 31st March 2011.
The Company/ Group is currently in the process of
evaluatng the potental eects of these Standards
on its nancial statements and the impact on the
adopton of these Standards have not been quanted
as at Balance Sheet date.
61
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Group Company
10. Income
Interest income 11 597,767 544,336 550,215 501,796
Other income 13 68,924 103,889 36,615 41,953
666,691 648,225 586,830 543,749
11. Interest Income
Bills of exchange 3,881 8,426 3,881 8,426
Finance & operatng lease 222,384 207,742 202,054 191,008
Hire purchase 312,529 251,757 300,345 242,836
Short-term nance 53,473 71,311 43,146 58,538
Short-term investments 2,987 3,907 463 988
Pawning interest 326 - 326 -
Other interest income (Interest income from PMBFS) 2,187 1,193 15,642 -
Provision for other interest income - - (15,642) -
597,767 544,336 550,215 501,796
12. Interest Expense
Bank overdraf 9,094 14,987 9,094 14,987
Other interest expenses 417,221 493,635 374,515 372,066
426,315 508,622 383,609 387,053
13. Other Income
Prot/(Loss) on sale of shares 13,639 (227) 8,142 (298)
Prot on real estate sales 8,424 24,536 8,424 24,536
Fee based income 8,029 6,753 8,029 5,782
Dividend income 322 1,288 322 1,288
Prot/(loss) on disposal of xed assets (1,126) 548 103 256
Provision reversals 21,792 36,529 - -
Sundry income 17,844 34,462 11,595 10,389
68,924 103,889 36,615 41,953
14. Operatng Expenses
Expenses among others include the following :
Directors emoluments 6,346 5,781 6,105 4,619
Depreciaton 9,968 13,687 5,330 6,314
Amortsaton of intangible assets 2,148 3,131 1,697 2,592
Auditors remuneraton
- Audit fee and related expenses 1,230 850 725 625
- Fee for non audit services 598 283 477 108
- Fee for other auditors 310 728 310 372
Legal expenses 1,833 3,660 1,396 1,517
Financial & non refundable VAT 10,782 4,468 8,745 2,713
Salaries 50,426 57,664 39,602 37,448
Employers contributon to Employees Provident Fund 5,777 5,852 4,503 3,869
Employers contributon to Employees Trust Fund 1,404 1,553 1,126 967
Branch opening and relocaton expenses 11,805 2,804 11,682 887
Donatons 740 251 530 239
Provision for sta retrement benets (798) 2,644 238 1,714
Impairment loss - investment on subsidiary - - 163,000 12,000
Provision for insurance receivables 8,777 - 8,777 -
Provision for arbitraton deposit 2,100 - 2,100 -
Provision for advance corporaton tax receivables 2,794 - 2,794 -
62
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2011 2010 2011 2010
Rs000 Rs000 Rs000 Rs000
15. Provision for Bad & Doubtul Debts
Specic provision for bills of exchange 2,980 1,781 2,980 1,781
Specic provision for loans 16,866 5,385 12,021 5,627
Specic provision for lease 23,193 16,530 14,432 16,970
Specic provision for hire purchase 20,985 11,203 19,303 11,478

Total 64,024 34,899 48,736 35,856
General provision/(reversal) for bills of exchange (78) 115 (78) 115
General provision for guarantees 45 (21) 45 (21)
General Provision/(reversal) for Loans 306 (1,437) 306 (1,437)
General Provision/(reversal) for Lease (593) (437) (593) (437)
General Provision for Hire purchase 1,311 430 1,311 430
Total 991 (1,350) 991 (1,350)
Total provisions made during the year 65,015 33,549 49,727 34,506

Group Company
Rs000 Rs000 Rs000 Rs000
16. Provision for in changing Value of Dealing Securites
Provision for fall in value of dealing securites
at beginning of the period (191) (4,921) (97) (4,921)
Provision for fall in value of dealing securites at end
of the period - ( Note 20 ) (1,789) (191) (1,202) (97)
Provision/(reversal) during the year 1,598 (4,730) 1,105 (4,824)
17. Income Tax Expense
Current tax on prots of the Bank has been provided at 35% on the taxable income.

2011 2010 2011 2010
Rs000 Rs000 Rs000 Rs000
Tax on current year prot 11,803 4,879 6,407 43
Under/(over) provision (43) 1,603 (43) 1,603
Adjustment to deferred tax liability resultng
from change in tax rate (3,595) - (1,928) -
Deferred tax provision ( Note 39 ) (10,348) 5,234 (17,256) 4,477
(2,183) 11,716 (12,820) 6,123

2011 2010 2011 2010
Rs000 Rs000 Rs000 Rs000
17.1. Reconciliaton of Eectve Tax Rate
Accountng prot/(loss) (63,842) (124,288) (215,320) (14,286)
Tax at the domestc rate of 35% (22,345) (43,500) (75,362) (5,000)
Tax eect on exempted income 496 (3,592) 496 (3,592)
Tax eect on disallowable expenses 105,595 26,302 85,097 13,302
Tax eect on capital allowances (152,858) (136,539) (139,341) (126,115)
Tax eect on leasing actvites 144,221 159,145 135,422 121,447
Social responsibility levy 176 73 95 1
Eect of taxable losses of subsidiaries (63,482) 2,990 - -
11,803 4,879 6,407 43
Eectve Tax Rate (18.49%) 3.93% 2.98% 0.30%
63
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18. Basic Loss Per Share
The calculaton of basic earning per share is based on the net prot/(loss) atributable to ordinary shareholders
and the weighted average number of ordinary shares outstanding during the year, as per the requirement of
the Sri Lanka Accountng Standard No. 34 - Earning Per Share.
Group Company
Loss afer taxaton (Rs.000) (61,659) (136,004) (202,500) (20,409)
Less : Dividends on cumulatve preference shares (Rs.000) 600 600 600 600
Loss atributable to ordinary shareholders (Rs.000) (62,259) (136,604) (203,100) (21,009)
Weighted average number of ordinary shares (a) 37,500,000 31,687,500 37,500,000 31,687,500
Basic loss per share (Rs.) (1.66) (4.31) (5.42) (0.66)
( a ). Qualifying ordinary shares at the beginning of the year 37,500,000 25,000,000 37,500,000 25,000,000
Eect of rights issued (Note 41) - 6,687,500 - 6,687,500
Weighted average number of ordinary
shares at the end of the year 37,500,000 31,687,500 37,500,000 31,687,500
Group Company
As at 31st March 2011 2010 2011 2010
Rs000 Rs000 Rs000 Rs000
19. Cash and Short Term Funds
Cash in hand 2,561 3,010 1,556 138
Cash at Bank 122,976 73,783 46,001 39,991
125,537 76,793 47,557 40,129
20. Dealing Securites
Cost of quoted dealing securites (Note 20.1) 15,905 6,956 9,476 4,918
Provision for fall in value of quoted dealing
securites ( Note 16) (1,789) (191) (1,202) (97)
Aggregate market value of the quoted dealing
securites ( Note 20.1 ) 14,116 6,765 8,274 4,821
Fixed income securites/commercial papers
First Capital Treasuries Ltd 7,330 20 ,170 - -
21,446 26,935 8,274 4,821
64
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As at 31 st March 2011 2010
No of Cost Market No of Cost Market
Shares Value Shares Value
Name of Company Rs000 Rs000 Rs000 Rs000
20.1. Quoted Dealing Securites held by the Bank
BANKS, FINANCE & INSURANCE
Haton Natonal Bank PLC - - - 8,000 1,361 1,506
Vanik Incorporaton PLC 61 3 - 61 3 -
Naton Trust Bank PLC 6,000 428 458 16,100 615 564
DFCC Bank 5,400 1,210 928 - - -
Natonal Development Bank 3,900 1,468 1,328 - - -
Sampath Bank PLC 1,000 268 288 - - -
Union Bank PLC 200 5 7 - - -
3,382 3,009 1,979 2,070
Sectoral percentage 35.69% 40.24%

BEVERAGE & FOOD
Cargills (Ceylon) PLC - - - 600 38 42
- 38 42

DIVERSIFIED HOLDINGS
John Keells Holdings PLC 300 78 86 6,300 1,171 1,159
Richared Pieris and Company PLC - - - 2,000 94 110
78 86 1,265 1,269

POWER & ENERGY
Hemas Power PLC - - - 6,800 136 121
- - 136 121

PLANTATIONS
Balangoda Plantatons PLC 5,000 299 281 - - -
299 281 - -

CONSTRUCTION & ENGINEERING
Colombo Dockyard PLC - - - 12,000 335 339
- - 335 339

LAND & PROPERTY
Overseas Realty (Ceylon) PLC - - - 15,000 226 233
- - 226 233
CHEMICALS
Haycarb PLC 2,800 466 435 1,700 252 272
466 435 252 272
65
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20.1. Quoted Dealing Securites held by the Bank Contd...
As at 31st March 2011 2010
MANUFACTURING
Chevron Lubricant Lanka PLC 6,000 1,024 960 - - -
ACL Cables PLC 10,000 960 940 - - -
1,984 1,900 - -

HOTEL & TRAVELS
John Keels Hotels PLC - - - 16,400 509 303
Keels Hotels 73,785 1,564 1,269 - - -
Hotel services Ceylon PLC 50,000 1,517 1,155 - - -
3,081 2,424 509 303

HEALTH CARE
Nawaloka Hospitals PLC - - - 49,000 178 172
- - 178 172

INVESTMENT TRUST
Environmental Resources Investment PLC 1,800 186 139 - - -
186 139 - -
Total dealing securites 9,476 8,274 4,918 4,821
20.1. Quoted Dealing Securites held by the Subsidiary Companies
As at 31st March 2011 2010
John Keells Holdings PLC - - - 2,500 435 460
John Keels Hotels PLC 32,584 673 557 8,200 217 152
HNB Assurance PLC - - - 6,500 321 361
Malwata Valley Plantatons PLC - - - 5,000 264 210
Nawaloka Hospitals PLC - - - 150,000 553 525
Dialog Telekom PLC - - - 35,000 248 236
ACL Cables PLC 5,800 552 538 - - -
Balangoda Plantatons PLC 22,100 1,478 1,225 - - -
Hotel Corporaton PLC 4,500 177 140 - - -
Hotel Services Ceylon PLC 15,000 437 342 - - -
Richard Pieris & Company PLC 67,500 506 907 - - -
Sunshine Holdings PLC 31,000 2,187 1,653 - - -
Tokyo Cement Company (Lanka) PLC 8,000 419 480 - - -
Total dealing securites held by the
subsidiary company 6,429 5,842 2,038 1,944
Total dealing securites by the Group 15,905 14,116 6,956 6,765
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As at 31st March Group Company
2011 2010 2011 2010
Rs000 Rs000 Rs000 Rs000
21. Investment Securites
Investments in shares ( Note. 21.2) 776 776 773 773
776 776 773 773
21.1. Investments in Debentures
Vanik Incorporaton Ltd 48 48 48 48
Provision for fall in value of investments in debentures (48) (48) (48) (48)
- - - -
21.2. Investments in Shares
Unquoted
Unquoted investments in shares ( Note 21.2.1) 776 776 773 773
776 776 773 773
21.2.1. Unquoted Investments in Shares
As at 31st March 2011 31st March 2010
No of Cost Directors No of Cost Directors
Shares of Valuaton Shares of Valuaton
Name of company Rs.10 each Rs000 Rs000 Rs.10 each Rs000 Rs000
a. Unquoted Investments in shares
I.D.M. Holding Ltd. 75,000 750 750 75,000 750 750
Credit Informaton Bureau of Sri Lanka 100 23 23 100 23 23
Unquoted Investments in shares by company 773 773 773 773

b. Unquoted Investments in shares by
the subsidiary company
Credit Informaton Bureau of Sri Lanka 25 3 3 25 3 3
3 3 3 3
Unquoted Investments in shares by Group 776 776 776 776
22. Non Current Assets held for Sale
Freehold property owned by the subsidiary company; PMB Financial Services Ltd (formerly known as PMB
Credit Card Company Ltd) had been classied as a non current asset held for sale as it was expected that the
recovery of the carrying value will be through a sales transacton in 2010. This asset was transferred to holding
company in exchange of credit card liabilites at cost in December 2010.
Extent Cost of Land
(Perches) Rs.000
Land at No. 21, Nawam Mawatha, Colombo 02. 108.40 451,577
Fair value of the property (land and Building) (108.40 perches) amounted to Rs.525 Mn as at 21st January 2010,
as valued by Mr. N.M. Jayathilake, Dip. in Val, B,Sc Est.Mat & Val., N.C.T. a registered valuer.
67
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Group Company
As at 31st March 2011 2010 2011 2010
Rs000 Rs000 Rs000 Rs000
23. Bills of Exchange
Gross receivable 56,042 79,060 56,042 79,060
Interest to be earned (1,868) (1,863) (1,868) (1,863)
Interest in suspense (1,644) (1,480) (1,644) (1,480)
52,530 75,717 52,530 75,717
Provision for doubtul debts
Specic (24,222) (21,242) (24,222) (21,242)
General (22) (100) (22) (100)
28,286 54,375 28,286 54,375
24. Loans & Advances
Term Loans 648,879 608,360 608,069 561,378
476,350 491,422 439,884 451,558
Provision for doubtul debts
Specic (30,146) (13,280) (25,543) (13,521)
General (426) (120) (426) (120)
445,778 478,022 413,915 437,917
Pawning advances 12,031 - 12,031 -
457,809 478,022 425,946 437,917
25. Finance Leases
Group Company
2011 2010 2011 2010
Rs000 Rs000 Rs000 Rs000
Lease rentals receivable within one year
Lease rentals receivable within one year from
balance sheet date 711,164 666,046 605,933 587,566
Rental received in advance (4,423) (3,053) (2,138) (2,550)
Unearned lease income (141,392) (127,497) (132,262) (124,486)
Provision for lease receivable
Specic (64,814) (42,208) (61,221) (40,578)
General (1,002) (1,595) (1,002) (1,595)
Lease rentals receivable within one year 472,957 466,335 386,450 396,187
Lease rentals receivable from one to ve years
Lease rentals receivable afer one year from
Rental received in advance (2,187) (5,066) (1,587) (4,192)
Unearned lease income (150,660) (131,112) (120,072) (98,353)
Provision for lease receivable
Specic (11,328) (10,741) (6,600) (12,811)
Lease rentals receivable from one to ve years 654,919 458,440 604,085 432,809
Total lease rentals receivable 1,127,876 924,775 990,535 828,996
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26. Hire Purchases
Group Company
2011 2010 2011 2010
Rs000 Rs000 Rs000 Rs000
Hire purchase rentals receivable within one year
Hire purchase rentals receivable within one year from
Rental received in advance (492) (213) (275) (203)
Unearned hire purchase income (201,792) (196,400) (194,697) (194,406)
Provision for hire purchase receivable
Specic (32,156) (13,956) (31,787) (13,496)
General (3,513) (2,202) (3,513) (2,202)
Hire purchase rentals receivable within one year 532,445 426,733 497,147 387,480
Hire purchase rentals receivable from one to ve years
Hire purchase rentals receivable afer one year from
Rental received in advance (795) (619) (50) (254)
Unearned hire purchase income (176,747) (174,981) (147,460) (145,590)
Provision for hire purchase receivable
Specic (11,257) (8,472) (10,219) (9,207)
Hire purchase rentals receivable from one to ve years 794,983 646,226 756,400 641,380
Total hire purchases receivable 1,327,428 1,072,959 1,253,547 1,028,860

Group Company
Rs000 Rs000 Rs000 Rs000
27. Real Estate Inventories
As at beginning of the year 110,790 125,232 108,220 125,232
Additons for the year 14,081 89,303 14,081 86,733
Disposals during the year (64,063) (103,745) (64,063) (103,745)
Provision for real estate inventories (2,070) - (2,070) -
As at end of the year 58,738 110,790 56,168 108,220

Group Company
As at 31st March 2011 2010 2011 2010
Rs000 Rs000 Rs000 Rs000
28. Deposits & Receivables
Deposits 8,882 7,592 7,208 3,367
Real estate debtors 8,282 42,437 8,282 42,437
Sta debtors 380 993 329 864
Statonary stock 655 623 555 408
Vehicle stock 13,113 - 13,113 -
Other receivables 98,751 89,147 91,418 78,070
Less: Provisions for other receivables (8,777) (2,715) (8,777) (2,715)
121,286 138,077 112,128 122,431
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Group Company
As at 31st March 2011 2010 2011 2010
Rs000 Rs000 Rs000 Rs000
29. Related party receivables
Related party receivables
PMB Financial Services Limited - - 25,308 134,677
Peoples Merchant Finance Company Limited - - 383 -
Less: Provisions for related party receivables - - (25,308) -
- - 383 134,677
30. Investments in subsidiary companies
2011 2010
Holding Cost of Directors Holding Cost of Directors
investment Valuaton investment Valuaton
Rs000 Rs000 Rs000 Rs000
PMB Financial Services Ltd
(Formerly known as PMB
credit card company Ltd) 100% 175,000 - 100% 23,000 11,000
Peoples Merchant Finance
company Ltd 99.99% 287,089 287,089 99.99% 287,089 287,089
Provision for impairment
of subsidiary (175,000) - - (12,000) -
287,089 287,089 298,089 298,089

PMB Financial Services Ltd (Formerly known as PMB credit card company Ltd)
PMB Credit Card Company Ltd was setup in March 2009, as a fully owned subsidiary company of Peoples
Merchant PLC (formerly known as Peoples Merchant Bank PLC) for taking over credit card operatons carried
out by ABC Credit Card Company Ltd. PMP initally invested Rs.23Mn towards capital of this company. The
investment was increased to Rs. 175Mn during the year. It was treated as a subsidiary company when group
accounts are prepared under Sri Lanka Accountng Standards No.26. The Investment was fully impaired taking
into account of decline in the value of investment due to losses in this company.

Peoples Merchant Finance Company Ltd
The company acquired 44% of shares of Peoples Merchant Finance Company Ltd in March 2009. It became a
subsidiary company in June 2009 with a acquisiton of 55.99% balance shares. The fair value of the company
of Rs.287Mn was established based on the valuaton carried out by a professional rm.

Acquiston date - June 2009
Acquiston cost Share Holding %
March 2009 44.00% Rs. 126Mn
June 2009 55.99% Rs. 161Mn
Total cost of acquiston Rs. 287Mn
31. Goodwill
The cost of acquiston of 99.99% share holding in Peoples Merchant Finance Company Ltd amounted to Rs.287
Mn. Goodwill arising on consolidaton amounts to Rs.82.6Mn which is stated bellow
Rs000
Purchase consideraton 287,089
Net asset value of the company 204,494
Good will 82,595
70
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32. Property, Plant & Equipment
32.1. Group Free hold Building Motor Operatng Furniture Computers O ce Total Total
Land Vehicles Lease & Fit ngs Equipment 31.03.11 31.03.10
Assets
Rs000 Rs000 Rs000 Rs000 Rs000 Rs000 Rs000 Rs000 Rs000
Cost
As at 1st April 8,313 3,662 20,913 2,741 11,203 21,990 19,885 88,707 518,157
Additons 455,902 13,754 2,819 - 4,407 2,756 5,105 484,743 14,461
Acquistons of subsidiary - - - - - - - - 18,135
Disposals - - (11,380) - - (544) (4,327) (16,251) (9,334)
Write o - - - - - - (2,515) (2,515) -
Transfer to asset held for sale - - - - - - - - (452,711)
As at 31st March 464,215 17,416 12,352 2,741 15,610 24,202 18,148 554,684 88,708
Accumulated Depreciaton
As at 1st April - 1,040 11,623 2,741 3,686 13,771 5,223 38,084 28,866
Charge during the year - 578 1,995 - 1,618 3,065 2,712 9,968 13,687
Acquistons of Subsidiary - - - - - - - - 4,008
Depreciaton on disposals
during the year - - (4,863) - - (211) (1,068) (6,142) (7,340)
Write o - - - - - - (652) (652) -
Transfer to asset held for sale - - - - - - - - (1,134)
As at 31st March - 1,618 8,755 2,741 5,304 16,625 6,215 41,258 38,087
Net book value as at
March 2011 464,215 15,798 3,597 - 10,306 7,577 11,933 513,426 -
March 2010 8,313 2,622 9,291 - 7,516 8,218 14,661 - 50,621
32.2. Company Free hold Building Motor Operatng Furniture Computers O ce Total Total
Land Vehicles Lease & Fit ngs Equipment 31.03.11 31.03.10
Assets
Rs000 Rs000 Rs000 Rs000 Rs000 Rs000 Rs000 Rs000 Rs000
Cost
As at 1st April - - 14,799 2,741 8,209 12,136 6,968 44,853 44,723
Additons 455,902 14,177 6,004 - 3,621 2,175 3,910 485,789 7,177
Disposals - - (6,500) - - - - (6,500) (7,047)
As at 31st March 455,902 14,177 14,303 2,741 11,830 14,311 10,878 524,142 44,853
Accumulated Depreciaton
As at 1st April - - 10,087 2,741 2,873 9,454 2,787 27,942 28,531
Charge during the year - 473 1,057 - 1,239 1,305 1,256 5,330 6,314
Depreciaton on disposals
during the year - - (3,312) - - - - (3,312) (6,903)
As at 31st March - 473 7,832 2,741 4,112 10,759 4,043 29,960 27,942
March 2011 455,902 13,704 6,471 - 7,718 3,552 6,835 494,182 -
March 2010 - - 4,712 - 5,336 2,682 4,181 - 16,911
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33. Intangible Assets - Computer Sofware
Group Company
2011 2010 2011 2010
Rs000 Rs000 Rs000 Rs000
Cost
Additons 1,808 949 1,808 240
Disposals/ write o (1,749) - - -
Accumulated Amortsaton
Amortsaton for the year 2,148 3,131 1,697 2,592
Disposals/ write o (687) - - -
Net book value as at 31st March 3,273 4,676 2,963 2,852
Group Company
As at 31st March 2011 2010 2011 2010
Rs000 Rs000 Rs000 Rs000
34. Borrowings
Unsecured borrowings 2,394,898 1,475,059 2,258,148 1,393,609
Securitsed borrowings ( Note. 34.1 ) 670,915 635,070 670,915 635,070
3,065,813 2,110,129 2,929,063 2,028,679

Payable within one year 2,789,749 1,680,841 2,663,981 1,680,841
Payable afer one year 276,064 429,288 265,082 347,838
3,065,813 2,110,129 2,929,063 2,028,679
34.1. This represent borrowings from Peoples Bank, Natonal Savings Bank, Haton Natonal Bank PLC and Bank of
Ceylon for which part of lease and hire purchase portolio amountng to Rs.595Mn is securitsed and company
property at No.21, Nawam Mw, Colombo 02 are mortgaged for these facilites.
Group Company
As at 31st March 2011 2010 2011 2010
Rs000 Rs000 Rs000 Rs000
35. Interest accrued
Securitsed loans 6,905 9,809 6,905 9,809
Unsecured loans 7,152 461 7,152 461
Commercial papers 80,426 54,051 80,426 54,051
Fixed deposits/promissory notes 35,451 34,760 32,275 20,748
129,934 99,081 126,758 85,069
36. Debentures ( Unsecured, redeemable )
Fixed interest, payable half-yearly 12% p.a ,
redempton 2012 100,000 100,000 100,000 100,000
100,000 100,000 100,000 100,000
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Group Company
As at 31st March 2011 2010 2011 2010
Rs000 Rs000 Rs000 Rs000
37. Dividends Payable
Unclaimed ordinary dividends 76 205 76 205
Preference dividends 1,200 600 1,200 600
1,276 805 1,276 805
38. Retrement Benet Obligatons
Balance brought forward 9,344 5,712 6,932 5,218
Acquiston of subsidiary company - 988 - -
Charge / (Reversal) for the year (798) 2,644 238 1,714
Payments made during the year (520) - (74) -
Balance carried forward 8,026 9,344 7,096 6,932

Retrement Benet Plan - Gratuity
For Peoples Merchant PLC (formerly known as Peoples Merchant Bank PLC) and Peoples Merchant Finance
Company Ltd, an actuarial valuaton of the gratuity liability was carried out as at 31st March 2011 by Mr. M.
Poopalanathan , Messrs Actuarial and Management Consultant (Pvt) Ltd, a rm of professional actuaries. The
valuaton method used by the actuaries to value the liability is the Projected Unit Credit Method, the method
recommended by the Sri Lanka. Accountng Standard No.16(Revised 2006) Employee Benets.
Discount rate used 10%
Future salary increase 10%

Group Company
As at 31st March 2011 2010 2011 2010
Rs000 Rs000 Rs000 Rs000
39. Deferred Tax Liabilites
Impact on rate change reversed to income statement (3,595) - (1,928) -
Charge/ (reversal) for the year (Note 17) (10,348) 5,234 (17,256) 4,477
Balance carried forward 13,710 27,653 7,712 26,896
40. Other Liabilites & Provisions
General provision for Guarantees 82 37 82 37
Lease / hire purchase suppliers 24,729 14,915 20,652 14,330
Provisions for other receivables 4,895 - 4,895 -
Current tax liability 3,201 (1,606) 2,233 (2,386)
Other payables 8,252 448,508 (731) 18,460
41,159 461,854 27,131 30,441
40.1. Impact due to change in Corporate Income Tax Rate
Commencing from year of assessment 2011/12, income tax rate has been changed from 35% to 28% as per
legislaton enacted in March 2011. The reducton in deferred tax liability on rate change amounted to Rs.1.9Mn
for the company and Rs.3.6Mn for the group.
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41. Stated Capital
In accordance with secton 58 of Companies Act No.7 of 2007 , which became eectve from 3rd May 2007
share capital, preference shares and share premium have been combined and reclassied as Stated Capital. The
comparatve informaton has been reclassied accordingly.
2011 2010
Rs.000 Rs.000
Ordinary Shares
Opening balance - 25,000,000 ordinar shares 375,000 250,000
Rights issue of 12,500,000 Ordinary shares* - 125,000
Closing balance - 37,500,000 Ordinary shares 375,000 375,000
Share premium 259,399 259,399

Preference shares
1,000,000 - 6% Cumulatve non redeemable Preference shares 10,000 10,000
Stated capital as at 31st March 644,399 644,399
* Right issue of one share for every two shares held was made in January 2010. A total of 12.5Mn shares were
issued at a price of Rs. 20/- per share. The right issue funds were utlised to setle short term unsecured debt
instruments.
Revenue Reserve
This represents the undistributed earnings held by the Company to be used in the Companys operatons. This
could be used to absorb future probable losses or dividends payable.
Finance Leasing Reserved Fund
This represent a reserve fund created in FY05/06, as per the directons issued by the Department of Non Banking
Financial insttuton of Central Bank of Sri Lanka, under the directon no 06 of 2005 of Finance Leasing Act No
56 of 2000.
This requires a sum equivalent to not less than 5% of prot afer tax being transferred to the reserve fund untl
the amount of the reserve fund is equal to 50% of the issued and paid-up ordinary share capital of the Company,
and thereafer, a further sum equivalent to not less than 2% of prot afer tax untl the amount of the reserve
fund is equal to the issued and paid up ordinary share capital of the Company.
No transfer was made to the reserve account due to losses afer tax for FY 2010/11 by the company. Total
nancial leasing reserve fund as at 31st March 2011 remains at Rs.6.249Mn. An amount of Rs.0.68Mn was
transferred to the statutory reserve on account of subsidiary company.
42. Ordinary dividends
There were no interim dividends paid to the Ordinary Shareholders during the year. Directors have not
recommended a payment of a nal dividend for the year ended 31st March 2011.
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43. Non-performing advances and provisions
In the case of earnings under loans, nance leases and other advances interest income ceases to be taken to
revenue when it is in arrears for three (03) months or more and thereafer such income is recognized on cash
basis. As at 31st March 2010 the balances on which interest is not accrued are as follows
As at 31st March Group Company
2011 2010 2011 2010
Rs000 Rs000 Rs. 000 Rs. 000
Bills of exchange 27,585 26,012 27,585 26,012
Loans 395,891 388,523 361,839 381,128
Lease 171,303 192,355 145,572 179,441
Hire purchase 140,425 118,014 133,487 110,816
735,204 724,904 668,483 697,397
Less: Specic provisions made
as at 31st March ( Note. 43.2 ) 173,923 109,899 159,592 110,856
561,281 615,005 508,891 586,541
Non-performing advances of Rs.735 Mn is secured by immovable assets, movable assets and other registered
securites. The value of securites are discounted, if permited, as per the directons of the Central Bank of Sri
Lanka, when specic provisions are computed.
2011 2010 2011 2010
Rs000 Rs000 Rs. 000 Rs. 000
43.1. Movement in Bad & Doubtul Debts provision
Additonal provision made - specic 64,024 34,899 48,736 35,856
Provision / (reversal) - general 991 (1,350) 991 (1,350)
Balance carried forward ( Note. 43.2 ) 178,968 113,953 164,637 114,910
Group Specic General Total Specic General Total
Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000
43.2. Made up as follows:
Bills of exchange ( Note. 23) 24,222 22 24,244 21,242 100 21,342
Loans ( Note. 24) 30,146 426 30,572 13,280 120 13,400
Lease ( Note. 25) 76,142 1,002 77,144 52,949 1,595 54,544
Hire purchase ( Note. 26) 43,413 3,513 46,926 22,428 2,202 24,630
Guarantees - 82 82 - 37 37
173,923 5,045 178,968 109,899 4,054 113,953
Company Specic General Total Specic General Total
Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000
43.3. Made up as follows:
Bills of exchange ( Note. 23) 24,222 22 24,244 21,242 100 21,342
Loans ( Note. 24) 25,543 426 25,969 13,522 120 13,642
Lease ( Note. 25) 67,821 1,002 68,823 53,389 1,595 54,984
Hire purchase ( Note. 26) 42,006 3,513 45,519 22,703 2,202 24,905
Guarantees - 82 82 - 37 37
159,592 5,045 164,637 110,856 4,054 114,910
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44. Maturity Prole of Assets and Liabilites
Allocaton of Amounts
Amounts were allocated to respectve maturity groupings based on installments falling due as per contract.
The amounts therefore represent total amount receivable or payable in each maturity grouping.
44 (1). Group
As at 31.03.2011 Up to 3 - 12 1 - 3 3 - 5 More than Total
3 Months Months Years Years 5 Years
Rs000 Rs000 Rs000 Rs000 Rs000 Rs000
Interest bearing assets
Cash & short term funds 125,537 - - - - 125,537
Government and dealing securites 37,426 3 - - 23 37,452
Bills of exchange 28,286 - - - - 28,286
Loans 208,968 105,593 121,918 21,330 - 457,809
Leases 150,824 303,502 489,643 164,133 19,774 1,127,876
Hire purchase 176,763 329,081 669,805 125,178 26,601 1,327,428
Real estate inventories 26,937 31,801 - - - 58,738
Total Interest bearing assets 754,741 769,980 1,281,366 310,641 46,398 3,163,126
Total Non - Interest bearing assets 202,997 884 - - 516,699 720,580
Total assets 957,738 770,864 1,281,366 310,641 563,097 3,883,706
Percentage 24.66% 19.85% 32.99% 8.00% 14.50% 100.00%
Interest bearing liabilites
Debentures - 100,000 - - - 100,000
Securitsed borrowings 56,800 553,965 60,150 - - 670,915
Unsecured borrowings 705,664 1,473,319 214,804 1,111 - 2,394,898
Bank overdraf 39,769 - - - - 39,769
Total interest bearing liabilites 802,233 2,127,284 274,954 1,111 - 3,205,582
Total Non- Interest bearing Liabilites 145,589 40,490 - 8,026 - 194,105
Equity - - - - 484,019 484,019
Total liabilites & equity 947,822 2,167,774 274,954 9,137 484,019 3,883,706
Percentage 24.41% 55.83% 7.07% 0.24% 12.45% 100.00%
Group
Rs000 Rs000 Rs000 Rs000 Rs000 Rs000
Government and dealing securites 22,582 27,685 - - 26 50,293
Loans 119,368 86,518 193,616 78,520 - 478,022
Leases 206,194 248,483 363,796 104,920 1,383 924,776
Hire purchase 161,486 264,235 531,935 114,873 430 1,072,959
Total Non - Interest bearing assets 106,304 483,349 19,762 - 118,130 727,545
Total assets 764,153 1,204,010 1,109,109 298,313 119,969 3,495,554
Percentage 21.86% 34.44% 31.73% 8.53% 3.43% 100.00%
Debentures - 100,000 - - - 100,000
Unsecured borrowings 344,883 777,513 346,187 6,476 - 1,475,059
Bank overdraf 140,410 - - - - 140,410
Equity - - - - 546,278 546,278
Percentage 22.76% 49.06% 12.09% 0.45% 15.63% 100.00%
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44. Maturity Prole of Assets and Liabilites Contd...
44(2). Company
Rs000 Rs000 Rs000 Rs000 Rs000 Rs000
Dealing/Investment securites 9,024 - - - 23 9,047
Loans 193,147 94,364 120,314 18,121 - 425,946
Leases 124,236 243,583 454,275 148,667 19,774 990,535
Hire purchase 155,301 315,245 648,175 108,225 26,601 1,253,547
Total Non - Interest bearing assets 373,408 884 25,308 - 497,145 896,745
Total assets 957,896 683,307 1,248,072 275,013 543,543 3,707,831
Percentage 25.83% 18.43% 33.66% 7.42% 14.66% 100.00%
Debentures - 100,000 - - - 100,000
Unsecured borrowings 670,456 1,382,760 204,932 - - 2,258,148
Bank overdraf 38,242 - - - - 38,242
Total interest bearing liabilites 765,498 2,036,725 265,082 - - 3,067,305
Equity - - - - 470,553 470,553
Percentage 24.31% 55.66% 7.14% 0.19% 12.70% 100.00%
Company
Rs000 Rs000 Rs000 Rs000 Rs000 Rs000
Dealing/Investment securites 5,571 - - - 23 5,594
Loans 95,305 75,289 192,012 75,311 - 437,917
Leases 148,727 221,526 359,965 97,396 1,383 828,997
Hire purchase 135,027 251,888 530,171 111,344 431 1,028,861
Total Non - Interest bearing assets 225,334 31,772 19,762 - 298,089 574,957
Total assets 721,519 671,645 1,101,910 284,051 299,926 3,079,051
Percentage 23.43% 21.81% 35.79% 9.23% 9.74% 100.00%
Debentures - 100,000 - - - 100,000
Unsecured borrowings 323,300 898,023 168,286 4,000 - 1,393,609
Bank overdraf 126,576 - - - - 126,576
Equity - - - - 673,653 673,653
Percentage 24.05% 42.55% 11.16% 0.36% 21.88% 100.00%
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45. Concentraton of Assets
45.1. Concentratons in the Distributon of Assets
45.1.1. In order to minimise potental risks inherent in the realisaton of the assets, the bank adheres to
prudent exposure limits on customer and industry groups.
45.1.2. Industrywise distributon of main assets are given below:
Industry sector
Group Company
2011 2010 2011 2010
% % % %
1. Agriculture 11.0 10.0 10.0 11.0
2. Industry 15.0 17.0 16.0 16.0
3. Trading 31.0 33.0 30.0 31.0
4. Transport 9.0 9.0 8.0 9.0
5. Constructon 9.0 9.0 9.0 9.0
6. Service 25.0 21.0 27.0 24.0
7. Credirt Card - 1.0 - -
100.0 100.0 100.0 100.0
46. Segment Informaton-Business Segments
46.1. Group
Trade bills & Leasing & Real Corporate Credit card Total
loans Hire purchase Estate Finance & other
Rs000 Rs000 Rs000 Rs000 Rs000 Rs000
Income
Interest income 52,180 534,913 5,174 - 5,500 597,767
Other income 520 32,969 8,424 14,161 12,850 68,924
Total income 52,700 567,882 13,598 14,161 18,350 666,691
Percentage 8.0% 85.0% 2.0% 2.1% 2.9% 100.0%
Expenses
Interest 55,358 319,209 16,565 2,238 32,945 426,315
Other expenses 38,116 207,656 24,010 7,271 27,165 304,218
Total expenses 93,474 526,865 40,575 9,509 60,110 730,533
Prot before taxaton (40,774) 41,017 (26,977) 4,652 (41,760) (63,842)
Income tax expense 2,183
Prot for the period (61,659)

Segment assets 608,895 3,075,574 73,577 27,836 97,825 3,883,706
Percentage 15.7% 79.2% 1.9% 0.7% 2.5% 100.0%
Segment Liabilites 533,114 2,692,800 64,420 24,372 84,981 3,399,687
Informaton on Cash Flows (Group)
for the year ended 31st March 2011
Cash ow from operatng actvites 77,086 (256,584) 80,329 - (317,627) (416,796)
Cash ow from investng actvites - - - (7,063) (8,255) (15,318)
Cash ow from nancing actvites 116,337 436,535 24,209 6,055 (1,637) 581,499
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46. Segment Informaton-Business Segments Contd...
Group
Trade bills & Leasing & Real Corporate Credit card Total
loans Hire purchase Estate Finance & other
Rs000 Rs000 Rs000 Rs000 Rs000 Rs000
Income
Interest income 78,988 459,499 749 - 5,101 544,336
Other income 1,275 13,323 24,690 1,588 63,012 103,889
Total income 80,263 472,822 25,439 1,588 68,113 648,225
Percentage 12.4% 73.0% 3.9% 0.2% 10.5% 100.0%
Expenses
Interest 74,391 308,416 20,223 1,060 104,532 508,622
Other expenses 19,554 143,759 15,966 530 84,356 264,165
Total expenses 93,945 452,175 36,189 1,590 188,888 772,787
Prot before taxaton (13,682) 20,647 (10,750) (2) (120,775) (124,562)
Share of prot of associate 274
Prot before taxaton (124,288)
Income tax expense (11,716)

Segment assets 532,399 1,997,735 110,790 27,710 826,920 3,495,554
Percentage 15.2% 57.1% 3.2% 0.8% 23.7% 100.0%
Informaton on Cash Flows (Group)
for the year ended 31st March2010
Cash ow from investng actvites - - - (25,477) (170,165) (195,642)
Cash ow from nancing actvites 86,180 298,438 24,416 642 (19,743) 389,933
46.2. Company
Trade bills & Leasing & Real Corporate Other Total
loans Hire purchase Estate Finance
Rs000 Rs000 Rs000 Rs000 Rs000 Rs000
Income
Interest income 41,853 502,399 5,174 - 789 550,215
Other income 520 7,309 8,424 8,664 11,698 36,615
Total income 42,373 509,708 13,598 8,664 12,487 586,830
Percentage 7.2% 86.9% 2.3% 1.5% 2.1% 100.0%
Expenses
Interest 52,104 312,702 16,565 2,238 - 383,609
Other expenses 29,085 171,695 24,010 7,365 186,386 418,541
Total expenses 81,189 484,397 40,575 9,603 186,386 802,150
Income tax expense 12,820

Segment assets 560,513 2,769,152 79,530 11,164 287,472 3,707,831
Percentage 15.1% 74.8% 2.1% 0.3% 7.7% 100.0%
Informaton on Cash Flows
Cash ow from investng actvites - - - 3,867 (8,065) (4,198)
Cash ow from nancing actvites 116,295 574,544 16,501 2,316 - 709,656
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46. Segment Informaton-Business Segments Contd...
46.2. Company
Trade bills & Leasing & Real Corporate Other Total
loans Hire purchase Estate Finance
Rs000 Rs000 Rs000 Rs000 Rs000 Rs000
Income
Interest income 66,215 433,844 749 - 988 501,796
Other income 1,275 11,170 24,690 1,530 3,288 41,953
Total income 67,490 445,014 25,439 1,530 4,276 543,749
Percentage 12.4% 81.8% 4.7% 0.3% 0.8% 100.0%
Expenses
Interest 70,927 295,050 20,016 1,060 - 387,053
Other expenses 13,770 125,798 16,171 530 14,713 170,982
Total expenses 84,697 420,848 36,187 1,590 14,713 558,035
Income tax expense (6,123)

Segment assets 492,294 1,857,857 108,220 5,594 615,086 3,079,051
Percentage 16.0% 60.3% 3.5% 0.2% 20.0% 100.0%
Informaton on Cash Flows
Cash ow from investng actvites - - - 4,136 (167,788) (163,652)
Cash ow from nancing actvites 120,997 456,630 26,599 1,375 (16,024) 589,577
47. Contngent Liabilites and Commitments for Capital Expenditure as at 31st March 2011
47.1. The company had issued Leters of Guarantee to the value of Rs.32.94Mn.
47.2. Litgaton against the company
H C (Civil) 198/2010/MR
This case was led by Siththy Nehimiya Junaideen against us seeking an injuncton to stop us from selling a land
she provided as security. This case was dismissed by Court.
DLM 000133/2009
This case was led by one Sunil Perera against the company since he says that the company has given a loan to a
third party on a security of an immovable property owned by Sunil Perera. The case was led in the District Court
of Colombo and at present the case is proceeding with the trial and now the plaint is giving his evidence.
DLM 00026/2010
This case was led by S P Y D Lakmali against the company since she has given her immovable property to the
company as a security for the loan which was taken by her and her father and the case is pending in the District
Court of Colombo and it is pending in the calling stage.
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47.2. Litgaton against the company Contd...
H C (Civil) 502/2009/MR
Yasunaga Residencies (Pvt) Ltd has led the above mentoned acton in the Commercial High Court against the
company by asking a sum of Rs.26,500,000/- and the company has led the Answer claiming a mortgage Bond
acton against the Yasunaga Residencies (Pvt) Ltd and at present the case is pending in the calling stage.

N. Soysa Vs Peoples Merchant PLC.
The Ex CEO of the company, Mr. Naomal Soysa has led this suit against the company in the Labour Tribunal
seeking reinstatement in service and compensaton for terminaton of his services. The judgment was given in
his favour but only compensaton was awarded to him in a sum of Rs 2.1 Mn. We have appealed against the
judgment and Mr Soysa too has led an appeal asking to vary the judgment by set ng aside the ndings of the
Labour Tribunal that Mr Soysa had failed to maintain cordial relatons with his subordinates, vary the judgment
awarding re instatement with back wages or in the alternatve, by awarding enhanced compensaton.

Dhammika Sumanasekara
A case has been led by an employee whose services were terminated by us in the Labour Tribunal seeking re
instatement in service, back wages and gratuity withheld. Trial was commenced in May 2011.

Anura Fernando
A case has been led by an employee whose services were terminated by us in the Labour Tribunal seeking re
instatement in service and back wages in November 2010.
47.3. There were no commitments approved by the Board of Directors or contracted by the Company.
48. Related Party Transactons
The company carried out transactons in the ordinary course of its business on normal commercial terms basis
with partes who are dened as related partes in Sri Lanka Accountng Standard 30 (Revised 2005) Related
Party Disclosures, the details of which are reported below,
48.1. Transacton with Subsidiaries
Name of Related Party Relatonship Name of Common Transacton Limit / Amount paid Amount
Director Type Value during as at
year 31.03.11
Rs.000 Rs.000 Rs.000
PMB Financial Funds advanced
Services Ltd Subsidiary to subsidiary - 208,076 25,308
81
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48. Related Party Transactons Contd ...
48.2. Transacton with Other Related Partes
Name of Related Party Relatonship Name of Common Transacton Limit / Amount paid Amount
Director Type Value during as at
year 31.03.11
Rs.000 Rs.000 Rs.000
Peoples Bank Major Shareholder Mr.P.A. Ajith Overdraf 120,000 9,094 38,242
Panditharatne / Interest
Chairman Revolving loan 200,000 55,754 -
/ interest
Mr.J.P. Amarathunga Preference shares 10,000 - 10,000
Director / Dividends
Term loans (secured) 750,000 132,833 405,950
/ interest
Mr.Sabry Ibrehim Term loans (unsecured) 40,000 3,333 36,667
Director / interest

Lanka Orix Leasing Shareholder Mr. Kapila Jayawardena Short term Loan 50,000 - 50,000
Company PLC Director

Ceylon Strategic
Holdings LTD Director Mr.Anura Investment in - 12,200 21,374
R. Wickramasinghe Commercial
MD/CEO papers
48.3. Transactons with Key Management Personnel (KMP)
Sri Lanka Accountng Standard 30 (Revised 2005) Related Party Disclosures, Key Management Personnel are those
having authority and responsibility for planning, directng and controlling the actvites of the entty.
Remuneratons paid to key management personnel are disclosed in Note 14.
49. Post Balance Sheet Events
No circumstances have arisen subsequent to the date of the balance sheet which would require adjustment to or
disclosure in the nancial statements, except for those disclosed below.

Disposal of PMF
The Company disposed its entre holding of 99.99% in the subsidiary company, Peoples Merchant Finance Company
Limited on 12th May 2011.
The details of this transacton is given below;
Rs.000
Disposal value (Net of Expenses) 424,517
Less: cost of investment 287,089
Prot on disposal 137,428
82
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50. Reclassicaton of Comparatve Figures
Where appropriate comparatve informatons have been reclassied to conform to the classicaton of 31st
March 2011 nancial statements.
51. Directors Responsibility Statement
The Board of Directors take the responsibility for the preparaton and presentaton of the nancial statement.
Please refer page 46 of the Annual Report for the Statement of Directors Responsibility for Financial
Reportng.
83
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Statement of Value Added
For the year ended 31st March
Group Company
2011 2010 2011 2010
Rs000s % Rs000s % Rs000s % Rs000s %
Value Added
Income 666,691 648,225 586,830 543,749
Less:
Finance cost 426,315 508,622 383,609 387,053
Cost of other services 126,154 134,720 100,924 73,779
Provision for bad &
doubtul debts 78,734 36,263 236,113 37,221
Diminuton in value
of investments 1,598 (4,730) 1,105 (4,824)
33,890 (26,650) (134,921) 50,520
Value Allocated
To employees
Salaries, wages and
other benets 76,271 (225%) 77,240 (290%) 64,027 (48%) 52,589 104%

To providers of capital
Dividends to shareholders 600 (2%) 600 (2%) 600 0% 600 1%
To Government as taxes 7,231 (21%) 16,184 (61%) (4,075) 3% 8,836 17%

To Expansion and growth
Retained income and
depreciaton (50,212) 148% (120,674) 453% (195,473) 145% (11,505) (22%)
33,890 100% (26,650) 100% (134,921) 100% 50,520 100%
Value added per
employee ( Rs.000s) 265 (201) (1,216) 683
84
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Graphical Review
42%
14%
33%
1%
2%
Composion of Assets
as at 31.03.2011
Bills of exchange
Loans
Finance leases
Hire purchases
Real estate stock
Other
8%
Trade bill & Loans
Leasing &Hire Purchase
Real Estate
Corporate Finance
Other
2.1%
7.2%
86.9%
2.3%
1.5%
Composion of Income
for the year 2010/2011
U
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3

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5
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200
400
600
800
1,000
1,200
1,400
1,600
1,800
2,000
2,200
R
s
.
M
n
.
Maturity annalysis of interest bearing
Assets and Liabilies as at 31.03.2011
Liabilies
3
-
1
2

Assets
0%
20%
40%
60%
80%
100%
120%
140%
07 08 09 10 11
Cost to income rao
Distribuon of assets
R
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.
M
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0
500
1,000
1,500
2,000
2,500
3,000
11 10 09 08 07
Securies
Real estate inventory
Hire purchae
Finance lease
Bills & loans
0%
3%
6%
9%
12%
15%
18%
21%
24%
27%
30%
33%
36%
39%
11
Non performing advances
Aected percentage
Non Performing advances
and aected Percentage
07 08 09 10
100
50
150
200
250
300
350
400
450
500
550
600
650
700
R
s
.
M
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.
0%
1%
2%
3%
4%
5%
6%
7%
8%
9%
10%
0%
500
1,000
1,500
2,000
2,500
3,000
Provision % (on Advances)
Total advances and
Bad & Doubul
Debt Provision percentage
[on advances]
Total Porolio
R
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M
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11 07 08 09 10
0
50
100
150
200
250
300
350
400
450
500
550
600
07 08 09 10 11
R
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.
M
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.
Income,interest and
other expenses
Other operang expenses
Interest expenses
Income
85
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Ten Year Summary
Year ended 31st March 2011 2010 2009 2008 2007 2006 2005 2004 2003 2002
Rs. 000s
OPERATING RESULTS
Income 586,830 543,749 540,922 376,090 303,306 220,744 166,064 146,414 134,206 136,909
Interest income 550,215 501,796 497,933 351,071 270,372 181,211 139,181 125,876 112,634 123,947
Interest expense 383,609 387,053 351,822 215,396 129,669 83,903 54,470 57,404 58,287 66,780
Prot before taxaton (215,320) (14,286) 51,653 21,817 68,827 58,753 41,586 20,597 10,766 10,740
Prot afer taxaton (202,500) (20,409) 28,849 14,791 44,789 36,468 32,434 20,597 10,766 10,740
EQUITY 470,553 673,653 460,291 442,042 459,101 192,571 181,703 191,725 179,228 167,582
RATIOS
Return on equity (%) (35.40) (3.60) 6.39 3.28 13.75 19.49 17.37 11.10 6.21 6.51
Interest cover ( tmes ) 0.47 0.95 1.08 1.07 1.35 1.43 1.60 1.36 1.18 1.16
SHARE INFORMATION
Net assets per share ( Rs.) 12.28 17.70 18.01 17.28 17.96 14.61 13.74 14.54 13.54 12.61
Earnings per share ( Rs. ) (5.42) (0.66) 0.95 0.57 2.38 2.33 2.55 1.60 0.81 0.81
Gross ordinary dividend - - 10,000 10,000 31,250 25,000 25,000 18,750 7,500 5,000
Dividend per share (Rs.) - - 0.40 0.40 1.25 2.00 2.00 1.50 0.60 0.40
Market value per share (Rs.) 23.50 23.50 29.75 56.50 23.00 33.00 20.50 11.75 12.25 6.50
Price Earnings rato - - 31.3 99.1 9.7 14.2 8.0 7.3 15.1 8.0
Net assets per share
0
4
8
12
16
18
22
11 10 09 08 07
R
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.
Market value per share
0
10
20
30
40
50
60
11 10 09 08 07
R
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Investor Informaton
Distributon of Shareholdings as at 31st March 2011
Residents Non- Reisdents Total
Range of No. of No (%) of No. of No (%) of No. of No (%) of
Shareholding Share of Share Share of Share Share of Share
Holders Shares holdings Holders Shares holdings Holders Shares holdings
1 - 1,000 10,379 1,774,075 4.73 14 2,560 0.01 10,393 1,776,635 4.74
1,001 - 10,000 959 3,198,152 8.53 8 35,600 0.09 967 3,233,752 8.62
10,001 - 100,000 127 4,010,248 10.69 5 179,600 0.48 132 4,189,848 11.17
100,001 - 1,000,000 10 1,900,300 5.07 0 - - 10 1,900,300 5.07
Over 1,000,000 4 24,524,465 65.40 1 1,875,000 5.00 5 26,399,465 70.40
11,479 35,407,240 94.42 28 2,092,760 5.58 11,507 37,500,000 100.00
Categories of Shareholders - Individuals / Insttutons
31.03.2011 31.03.2010
No.of share No. of No.of share No. of
Holders Shares % Holders Shares %
Individual 11,331 9,932,591 26.49% 10,893 6,552,124 17.47%
Insttutons 176 27,567,409 73.51% 143 30,947,876 82.53%
Total 11,507 37,500,000 100.00% 11,036 37,500,000 100.00%
Categories of Shareholders - Residents / Non-Residents
31.03.2011 31.03.2010
No.of share No. of No.of share No. of
Holders Shares % Holders Shares %
Resident 11,479 35,407,240 94.42% 11,017 34,186,540 91.16%
Non-Resident 28 2,092,760 5.58% 19 3,313,460 8.84%
Total 11,507 37,500,000 100.00% 11,036 37,500,000 100.00%
2011 2010
5.58%
8.84%
94.42% 91.16%
Resident Non-Resident
87
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Investor Informaton Contd...
Twenty Major Shareholdres
Name of the Share Holder Shareholding % Shareholding %
31.03.2011 31.03.2010
Peoples Bank 9,799,990 26.13 9,799,990 26.13
Lanka Orix Leasing Company PLC 7,380,179 19.68 7,568,279 20.18
Peoples Leasing Company Ltd 4,899,996 13.07 4,899,996 13.07
Environmental Resources Investment PLC 2,444,300 6.52 2,444,300 6.52
South Bridge Capital Investments (Sri Lanka) Ltd 1,875,000 5.00 1,875,000 5.00
Mr Morarji Meghdi Udeshi 545,500 1.45 545,500 1.45
Mr.Dhansingani Gangaram Moolchand 243,400 0.65 - -
Mr.Gunasekara Vishramal Sanjiv 181,800 0.48 - -
Mr.Amirudeen Mohammed Khozema 175,700 0.47 - -
Mr.Anandawansa Wanniachchige Lal Thilaksiri 154,200 0.41 - -
Dr.De Silva Ruwanpura Rohitha 142,900 0.38 - -
Mr.Ranga Katpe Arachchige 135,000 0.36 - -
Mr.Weerasinghe Amarakoon Mudiyanselage 110,000 0.29 - -
Mr.Karunanayake Ovitgalage Don Jayaratne 109,700 0.29 - -
Mr.Kundanmal Bhagwan Wassiamal 102,100 0.27 - -
The Bishop of Galle 100,000 0.27 - -
Mr.Kiyabdeen Mohamed Mohideen 100,000 0.27 - -
Mrs.Sri Rayen Nageswary 100,000 0.27 - -
Mr.Biswas Pradeep Kumar 100,000 0.27 - -
Mr. N.A.Rathnayaka 93,500 0.25 - -
Other Share Hodlers who have either sold their
Shares or present holding has fallen below top 20 - - 4,658,548 12.42
28,793,265 76.78 31,791,613 84.77
As per rule No. 8.7 (h) of the Colombo Stock Exchange percentage of public holding as at 31.03.2011 was 15,386,797
(15,231,735 as at 31st March 2010). Public holding as a % of shares issued was 41.03% (40.53% as at 31st March
2010)
Public Holding Non Public Holding
59 %
41 %
2011
59 %
41 %
2010
88
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Share Informaton
Market value of shares 31.03.2011 31.03.2010 31.03.2009 31.03.2008 31.03.2007
Highest price during the Year (Rs.) 35.90 61.75 59.00 93.50 38.25
Lowest Price during the Year (Rs.) 19.90 23.50 23.75 18.50 20.00
Closing Price (Rs.) 23.50 23.50 29.25 56.50 23.00
Investor Ratos
Price Earnigs Ratos - - 31.3 99.1 9.7
Net assest value per share(Rs.) 12.28 17.70 18.01 17.28 17.96
Debt Equity Rato 86 : 14 75 : 25 83 : 17 74 :26 69 : 31
Interest cover (Times) 1.07 1.07 1.08 1.07 1.35
Share Trading
Number of Trnasctons 18,631 6,106 1,387 10,305 1,500
Number of Shares traded 33,394,800 7,648,900 641,800 18,779,753 588,800
Value of shares traded (Rs.000) 934,953 288,451 27,996 770,707 16,146
Market Capitalisaton (Rs.000) 881,250 881,250 743,750 1,412,500 575,000
0
10
20
30
40
50
60
07 08 09 10 11
70
80
R
s
.
Peoples Merchant share price movement
with market performance
PMP share price
1,000
2,000
3,000
4,000
5,000
6,000
7,000
MPI ASPI
89
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Our Services
Corporate Finance
Project/Term Loans
Structuring of Debt/Equity
Syndicaton of Loans
Financial /Corporate Restructuring
Mergers, Acquisitons and Buyouts
Privatzaton & Infrastructure Projects
Consultancy Services
Business valuaton
Independent Opinions
Feasibility Studies/Reports
Fund Management
Investment Advisory Services
Company Formaton
Listng of Equity/Debt
Management of Mandatory/Voluntary Oers
Placement of Equity/Debt
Underwritng
Securitsaton
Employee Share Ownership Plans (ESOPS)
Contact: Anuradha - 011-2300191/4
Trade Finance
Bills Discountng
Short/Medium - Term Loans
Bank Guarantees
Import Financing
Contact: Anuradha - 011-2300191/4
Leasing
Leasing of Vehicles and Equipments
Operatng Leases
Hire Purchase
Contact: Charith - 0777-873515, 011-2300191/4
Real Estate
Housing Projects
Sale of Propertes
Property development
Owner behalf sale
Contact: Jeevana - 0772-61424, 011-2300191/4
Short -Term Investments
Contact: Anura - 011-2300191/4

Branches
Kurunegala
183C, 2nd Floor, Colombo RoadKurunegala
Contact: Nalin Rajakaruna : 0777-811125,
037-7389091-2
Matara
213, Anagarika Dharmapala Maw. Nupe, Matara-
Contact: Nalin Jayasekera : 0777-238078
04122200600/700
Matugama
74B, Naboda Road, Matugama
Contact: PathumDassanayake : 077-3648691
034-2243828
034-2243869
Gampaha
64, Queen Marys Road,Gampaha
Contact: Prabash Wickramasinghe : 077-3587900,
033-2233633
Awissawella
75, Yatyanthota Road,Avissawella
Contact: Amal Geekiyanage : 0714-848177
036-2233520
036-2233790
Elpitya
10A, Pituwala Road, Elpitya
Contact: Thushan Abeytunga : 0773-408043
091-2290498-9
Kandy
145, Kotugodella Street,Kandy
Contact: P. Mayadunne : 0777-274701
0812200798-9
Negombo
51/A, Thammita Road, Negombo
Contact: Nishad Hendalage : 0777-308571
031-2228577
Trincomalee
118 NC Road, Trincomalee
Contact: P. Mayadunne : 026-7389090-3
Anuradhapura
09, Maithripala Senanayake Mw, Anuradhapura
Contact: Buddhika Pothupitya : 077-3914332
025-7389090-2
90
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Guarantees
Primarily represent irrevocable assurance that a Bank
will make payments in the event that its applicant cannot
meet its nancial obligatons to third partes.
Interest Margin
Net interest income divided by average interest earning
assets, expressed as a percentage.
Interest Spread
Represent the dierence between the average interest
rate earned and the average rate paid on funds.
Market Capitalizaton
Number of ordinary shares in issue multplied by the
market value of each share.
Net Asset Value per Share
Equity, less preference share capital divided by the
number ordinary shares in issue.
Net Interest Income
The dierence between income earned from interest
bearing assets and cost incurred on nancial instrument/
facilites used for funding the interest bearing assets.
Non-performing Advances
Leases, loans and other advances that are in arrears for
3 months or more area classied as non-performing
advances. Interest income is recognized on these loans
only on a cash Basis.
Price Earning Rato (P/E Rato)
Market Price of an ordinary share divided by Earning per
Share (EPS).
Provision for Bad and Doubtul Debts
A charge to income, on account of probable losses on
advances granted. Specic provisions are established
to reduce the book value of specic assets to estmated
realizable values. General provisions are made for
possible future losses.
Return on Average Assets (ROA)
Net prot afer tax expressed as a percentage of average
total assets. Used along with ROE, as a measure of
protability and as basis of intra-industry performance
comparison.
Return on Average Equity (ROE)
Net prot afer tax, less preference share dividend
if any, expressed as percentage of average ordinary
shareholders equity.
Shareholders Funds / Equity
Shareholders funds / Equity consist of issued and fully
paid share capital plus revenue and other reserves.
Value Added
Value added is the wealth created by providing services
less the cost of providing such services. The value added
is allocated among the employees, the providers of
capital, to government by way of taxes and retained for
expansion and growth.
Financial Leases
A lease that transfers substantally the entre risks
and rewards incident to ownership of an asset, to the
Lessee.
Operatng Lease
A lease where the substantal ownership lies with the
Lessor and Lessee pays a rental for the use of asset.
Syndicaton of Loans
This is the process by which the corporate nance
department breaks through several dierent lenders in
order to facilitate various portons of a loan.
Promissory Note
It is an agreement between investor & the issuer,
promising that the relevant amount will be paid on the
given date.
Glossary of Financial Terms
91
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Glossary of Financial Terms Contd...
Related Partes
Partes who could control or signicantly inuence the
nancial and operatng policies of the business.
Subsidiary Company
An enterprise that is controlled by another enterprise
(known as the parent)
Associate Company
An enterprise in which an investor has signicant
inuence and which is neither a subsidiary nor a joint
venture of the investor
Bill of exchange
It is a signed, writen, unconditonal order by one person
to pay another a specic sum on a specic date in the
future
Commercial Paper
A debt instrument issued by a corporate body for
borrowing funds which undertake to meet obligatons
on maturity date. It is a lower cost source of nance for
companies to meet short-term nancial needs.
Contngent Liabilites
Conditons or situatons at the balance sheet date, the
nancial eect of which to be determining by future
events which may or may not occur not wholly within
the control of the enterprise
Contngent Asset
A possible asset that arise from past events and whose
existence will be conrmed only by the occurrence of
one or more uncertain future events not wholly within
the control of the enterprise
Segmental Analysis
Analysis of nancial informaton by segments of an
enterprise specically, the dierent industries and the
dierent geographical areas in which it operates.
Non - Current Assets
An asset which is not easily convertble to cash or not
expected to become cash within the next year.
92
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Notce of Meetng
NOTICE IS HEREBY GIVEN that the 28th Annual General Meetng of PEOPLES MERCHANT PLC will be held at the
company Group O ce complex at No. 21, Nawam Mawatha, Colombo 02 on 29th September 2011 at 2.00 p.m. for
the following purposes.
1. To Receive and consider the Annual report of the Board of Directors on the Aairs of the Company and the Financial
Statements for the year ended 31st March 2011 together with report of the Auditors thereon.
2. To reappoint Messrs KPMG Ford Rhodes, Thornton & Company, Chartered Accounts, as the Auditors of the
Company untl the next Annual General Meetng at a remuneraton to be agreed upon with them by the Board
of Directors and to audit the Financial Statements of the Company for the accountng period ending 31st March
2012.
3. To consider, and if thought t, pass the following resoluton as an ordinary resoluton for the re-appointment of
Mr. B.S. Yapa who has reached 70 years of age.
Ordinary Resoluton -
IT IS HEREBY RESOLVED that Mr. B.S. Yapa who has reached the age of 70 years prior to this Annual General
Meetng be appointed as a Director of the Company in terms of secton 211 of the Companies Act No. 7 of 2007,
for a term that ends on the earlier of a date that is one year from the date of appointment or at the conclusion of
the Annual General Meetng following this 28th Annual General Meetng at which the appointment if any, takes
place and it is further resolved that the age limit referred to in secton 210 of the said Companies Act shall not
apply to Mr. B.S. Yapa.
4. To approve the donaton and contributons made by the Directors during the year under review and to authorize
the Board to determine donatons and contributons for the ensuing year.
By order of the Board
CORPORATE SERVICES (PRIVATE) LIMITED
Secretaries
PEOPLES MERCHANT PLC
Colombo, on this 23rd day of August, 2011.
Note: A Shareholder enttled to atend and vote at this meetng is enttled to appoint a proxy to atend and vote/
speak in his/her stead and a form of proxy is sent herewith for this purpose. A proxy need not be a shareholder
of the company.
The completed form of proxy must be deposited at the Head o ce of the Company, No: 21 Nawam Mawatha,
Colombo 2, not later than 48 hours prior to the tme appointed for the holding of the meetng.
93
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Proxy Form
I/We . of
being a shareholder/shareholders of Peoples Merchant PLC, hereby appoint
. of or failing him/her Mr.
P.A.A. Panditharatne or failing him Mr. B. S. Yapa or failing him Mr. A. S. Ibrahim or failing him Mr. J.P. Amaratunga as
my/our proxy to atend and vote/speak at the 28th Annual General Meetng of the Company to be held on the 29th
day of September 2011 and at any adjournment thereof.
For Against
(1) To Receive and consider the Annual Report of the Board of Directors on the Aairs
of the Company and the Financial Statements for the year ended 31st March 2011
together with report of the Auditors thereon.
(2) To reappoint Messrs KPMG Ford Rhodes, Thornton & Company, Chartered Accounts, as
the Auditors of the Company untl the next Annual General Meetng at a remuneraton
to be agreed upon with them by the Board of Directors and to audit the Financial
Statements of the Company for the accountng period ending 31st March 2012.
(3) To consider, and if thought t, pass the following resoluton as an ordinary resoluton
for the re-appointment of Mr. B.S. Yapa who has reached the age of 70 years.
(4) To approve the donatons and contributons made by the Directors during the year
under review and to authorize the Board to determine donatons and contributons
for the ensuing year.
As witness my/our hand this .........................day of ................................. Two Thousand and Eleven.

Signature
Note: Delete what is inapplicable
Please see overleaf for instructons as to completon.
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Proxy Form Contd...
INSTRUCTIONS AS TO COMPLETION
1. In order to appoint a proxy, this form duly completed, together with any power of atorney under which it is
signed, must be deposited at the Registered O ce of the Company, No.21, Nawam Mawatha, Colombo 2, not later
than 48 hours prior to the tme appointed for the holding of the meetng.
2. The proxy appointed need not be a shareholder of the Company.
3. You are kindly requested to bring with you, your Natonal Identty Card or other valid source of identcaton (eg.
Passport, Driving License).
95
Corporate Informaton
Name of Company
People's Merchant PLC
Legal form
Public quoted company registered under the
Companies Act No.17 of 1982 and re-registered
under the Companies Act No.7 of 2007.
Company Incorporaton & Registraton No.
Incorporated in Sri Lanka on 26th January 1983
bearing Registraton No. N (PBS)22.
New Registraton No. PQ200
VAT Registraton No.
134000228 7000
Stock Exchange Listng
The ordinary shares of the company were listed
with Colombo Stock Exchange in July 1994
Ordinary shares listed - 37,500,000
Registered Oce
No.21, Nawam Mawatha
Colombo 02.
Tel.011 2300191
Fax.011 2300190
E-mail. info@pmb.lk
Web. www.peoplesmerchant.lk
Board of Directors
Mr. P.A. Ajith Panditharatne - Chairman
Mr. Jehan P. Amaratunga
Mr. Ahamed Sabry Ibrahim
Mr. B. S. Yapa
(as at 23rd August 2011)
Auditors
KPMG Ford Rhodes, Thornton & Company
Chartered Accountants
32A, Sir Mohamed Macan Makar Mawatha
Colombo 03
Secretaries
Corporate Services (Private) Limited
No.216, de Saram Place
Colombo 10
Lawyers
F.J. & G. de Saram
Atorneys - at - Law
No.216, de Saram Place
Colombo 10
Bankers
People's Bank
Bank of Ceylon
Haton Natonal Bank
Management
Rajeeva Bandaranaike - Chief Executve Ocer
Anura Wickramatunge - Chief Financial Ocer
Charith Gunaratne - DGM (Credit & Asset Finance)
Anuradha Gamage - DGM (Corporate Finance & Treasury)
I.D.Weerasena - Snr. Consultant (Pawning)
J.De.S.Karunasiri - Snr. Manager (Business Development)
Muditha Jayawickrema - Snr. Manager (Legal)
Manoneetha Ariyananda - Snr. Manager (Revoveries)
Dileepa Assarapperuma - Management Accountant
Suchith Premaratne - Financial Accountant
Anuranga Handaragame - Head of IT
P. Mayadunna - Area Manager
Nalin Rajakaruna - Area Manager
Ayesha Thennakoon - Snr. Asst Manager (Internal Audit)
Rajinda Amarathunga - Snr. Asst Manager (Pawning)
Credit Ratng
BB+(lka) stable outlook - credit ratng
from Fitch Ratngs Lanka Ltd
No.21, Nawam Mawatha
Colombo 02.
Tel.011 2300191 Fax.011 2300190
E-mail. info@pmb.lk
Web. www.peoplesmerchant.lk

Peoples Merchant Annual Report 2010-11

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Annual Report 2010 / 11 Annual Report 2010 / 11

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