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AUDITORS’ REPORT
1. We refer to your letter dated March 1, 2010 requesting us to audit the accounts of A V Transworks Limited
(“the Company”), a wholly owned subsidiary of Transworks Information Services Limited (“the Parent”),
incorporated in the Canada, based on records, received from the said Company in Mumbai and in
accordance with the accounting policies described in Note 1 of Schedule 9 to the attached financial
statements (“the accounting policies”). We have not performed a statutory audit, the objective of which
would be the expression of an opinion on the financial statements in conformity with generally accepted
accounting practices and accordingly, we do not express such an opinion.
2. We have audited, in accordance with the accounting policies, the attached Balance Sheet of the Company as
at March 31, 2010 and also the Profit and Loss account and cash flow statement for the year ended on that
date annexed thereto, which are in agreement with the books of account verified by us. These financial
statements are the responsibility of the Company’s management and have been prepared in accordance with
the accounting policies, for the purpose of consolidation with the financial statements of the Parent. Our
responsibility is to express an opinion on these financial statements based on our audit.
3. We conducted our audit in accordance with generally accepted auditing standards in India. These Standards
require that we plan and perform the audit to obtain reasonable assurance whether the financial statements
are free of material misstatements. An audit includes, examining on a test basis, evidence supporting the
amounts and disclosures in the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as evaluating the overall financial
statements. We believe that our audit provides a reasonable basis for our opinion.
5. In our opinion, based on our audit, and to the best of our information and according to the explanations
given to us, the accompanying financial statements give a true and fair view in conformity with the
accounting policies:
a. in the case of the Balance Sheet, of the state of affairs of Company as at 31st March, 2010;
b. in the case of the Profit and Loss Account, of the loss for the year ended on that date; and
c. in the case of the Cash Flow Statement, of the cash flows for the year ended on that date.
6. This report is furnished solely for the purpose of meeting the requirement if consolidation of the
attached financial statements with the financial statement of the Parent and hence should not to be used
for any other purpose.
1
A V Transworks Limited
I. SOURCES OF FUNDS
1 Shareholders' Funds
2
A V Transworks Limited
1 - (0) (0.00)
Notes to Accounts 8
The Schedules referred to above and the notes to accounts form an integral part of the Balance
Sheet.
As per our report of the event For and on behalf of the Board of
date Directors of
A V Transworks Limited
For S.R. BATLIBOI & CO.
Firm Registration No. 301003E
Chartered Accountants DEEPAK J. PATEL
3
A V Transworks Limited
PROFIT & LOSS ACCOUNT FOR THE YEAR ENDED 31ST MARCH 2010
For the Year Ended 31st
Mar 2010 For the Year Ended
31st Mar 2009
Schedule CAD Rs. Lacs CAD Rs. Lacs
INCOME :
EXPENDITURE :
Profit / (Loss) before tax for the year (1,307,833) (570.14) (572,751) (237.21)
Notes to Accounts 8
The Schedules referred to above and the notes to accounts form an integral part of the Profit & Loss Account.
As per our report of the event date For and on behalf of the Board of Directors of
A V Transworks Limited
For S.R. BATLIBOI & CO.
Firm Registration No. 301003E
Chartered Accountants DEEPAK J. PATEL
4
A V Transworks Limited
CASH FLOW STATEMENT FOR THE YEAR ENDED 31ST MARCH 2010
For the Year ended For the Year ended
March 31 2010 March 31 2009
Net Cash flow from Operating Activities 287,085 6,256.39 70,667,761 29,927.64
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A V Transworks Limited
Cash and cash equivalants at the end of the year 67,073 29.62 3,506 1.41
Notes:
Components of Cash and Cash Equivalents As At 31st As At 31st As At 31st As At 31st
Mar, Mar, Mar, Mar,
2010 2010 2009 2009
(0) 0.00 0 0
As per our report of the event date For and on behalf of the Board of
Directors of
A V Transworks Limited
For S.R. BATLIBOI & CO.
Firm Registration No. 301003E
Chartered Accountants DEEPAK J. PATEL
per Vijay Maniar
Partner
Membership No. 36738
Place: Mumbai RAMESH KAMATH
Date: April 23, 2010 Chief Financial Officer
6
A V Transworks Limited
Authorised Capital
SCHEDULE - 2
INVESTMENTS
In Subsidiary Companies
Unquoted, fully paid-up
7
A V Transworks Limited
SCHEDULE - 4
CURRENT LIABILITIES & PROVISIONS
ii) Acrrued Interest on Secured Loan from Bank 83,926 37.06 318,856 128.38
iii) Acrrued Interest on Loan from Holding Company 171,041 75.53 10,155 4.09
i) Provision for Taxation / Minimum Alternative Tax 2,607 1.15 2,607 1.05
SCHEDULE - 5
OTHER INCOME
Interest received
8
A V Transworks Limited
For the Year Ended 31st For the Year Ended 31st
SCHEDULE - 6 Mar 2010 Mar 2009
ADMINISTRATIVE EXPENSES
CAD Rs. Lacs CAD Rs. Lacs
SCHEDULE - 7
FINANCIAL CHARGES
1. ACCOUNTING POLICIES
a. Basis of preparation
The accounts have been prepared under the historical cost convention on accrual basis in accordance
with the generally accepted accounting principles applicable in India.
b. Interest
Interest on Loan given/ taken is booked on a time proportion basis taking into account the amounts of
loan given and taken and the rate of interest
i) Initial Recognition
Foreign currency transactions are recorded in the reporting currency, by applying to the foreign
currency amount the exchange rate between the reporting currency and the foreign currency at the
date of the transaction.
ii) Conversion
Foreign currency monetary items are reported using the closing rate. Non-monetary items, which
are carried in terms of historical cost denominated in a foreign currency, are reported using the
exchange rate at the date of the transaction.
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A V Transworks Limited
d. Provision
A provision is recognized when an enterprise has a present obligation as a result of past event; it is
probable that an outflow of resources will be required to settle the obligation, in respect of which a
reliable estimate can be made. Provisions are not discounted to its present value and are determined
based on best estimate required to settle the obligation at the balance sheet date. These are reviewed at
each balance sheet date and adjusted to reflect the current best estimates.
e. Investments
i) Investments that are readily realizable and intended to be held for not more than a year are
classified as current investments. All other investments are classified as long-term investments.
ii) Long-term investments are valued at cost. Any decline in the value of investments other than
temporary, is provided for and charged to the profit & loss account.
For the purpose of consolidation of the financials statements with that of the Parent, the amounts in
Canadian Dollar (CAD) are converted into INR as follows:
Equity capital and all other balance sheet items at closing rate of exchange, profit and loss items at
average rate and resultant translation gain/loss is shown separately in Balance sheet
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A V Transworks Limited
(a) Name and nature of relationship of the Related Party where control exists:
11
A V Transworks Limited
(In CAD)
Particulars As at March 31, As at March 31,
2010 2009
Holding Company
Loan Repayment 7,500,000 20,038,641
Loan Taken 8,450,000 Nil
Interest on loan from ABMWL 456,787 613,584
Subsidiary (ABMWI)
Investment 30,000,000 50,638,021
Loan repayment from subsidiary 7,500,000 65,470,971
Loan given to subsidiary 7,500,000 Nil
Interest on loan given 157,375 660,301
Related Party Balances
Holding
Equity Contribution from holding Co 127,000,001 127,000,001
Preference Contribution from holding Co 30,000,000 Nil
Loan from Holding Co. 21,424,531 20,526,184
Interest Payable to Holding Co 171,041 10,155
Corporate guarantee given by Holding Co 30,901,850 30,901,850
Subsidiary (ABMWI)
Investment in Subsidiary 207,892,852 177,892,852
Loan to subsidiary Nil Nil
Interest received from Subsidiary 157,375 1,631,908
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A V Transworks Limited
Subsidiary (ABMWI)
Investment in Subsidiary 91,805.48 71,623.04
Loan to subsidiary Nil Nil
Interest received from Subsidiary 68.61 675.87
3. Derivative Instruments
The Company uses derivative financial instruments such as forward exchange contracts, currency swaps
and interest rate swaps to hedge its risks associated with foreign currency fluctuations and interest rate.
All the above contracts are for hedging and not for speculation.
As at March 31, 2010 all the foreign currency exposure stands hedged by derivative instrument or
otherwise.
The Company, time to time, holds financial derivatives instruments primarily for hedging purpose. In
pursuance of the announcement dated 29th March 2008 of ICAI, The Company has decided to account
for losses, if any, on derivatives transactions, on net basis, after considering effect of underlying
exposure / commitments / obligations. As there was no such loss at the end of the year, the above
changes does not have any effect on the profit for the year.
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A V Transworks Limited
4. Previous year figures have been regrouped wherever necessary to correspond with current period
figures.
For S. R. BATLIBOI & CO. For and on behalf of the Board of Directors of
Firm Registration No. 301003E A V Transworks Limited
Chartered Accountants
DEEPAK J. PATEL
Per VIJAY MANIAR
Partner
Membership No. 36738
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Compass BPO Limited
The directors have pleasure in submitting their annual report with the audited accounts of the group for the year.
PRINCIPAL ACTIVITY
The principal activity of the group during the year under review was the provision of personnel and related
consultancy services from Asia.
REVIEW OF BUSINESS
Despite the global economic slowdown, the group, through alignment, focus and relentless execution, has been able
to generate revenue of £4.37m for the current year (2009 :£5.06m).
Earnings before interest, tax, depreciation and gain/losses on foreign exchange was £93,837 (2009 : £ 426,028).
Cash on the balance sheet at the year end was £197,484 (2009 : £461,155).
On 9 March 2010 the entire issued share capital of the group was acquired by Aditya Birla Minacs Worldwide Inc.
(a Canadian company), a part of the US$29.2 billion Aditya Birla Group that today employs 130,000 people of 30
different nationalities.
Minacs has a history that goes back three decades. Today, they serve clients across 3 continents, 8 countries, in 41
languages - several of them Fortune 500 corporations. Minacs has 12,500 people across 29 centres to serve clients in
the verticals of BFSI (banking, financial services and insurance), TIME (telecom, technology infrastructure, media,
and entertainment), manufacturing and the public sector.
On 9 March 2010, the 10% convertible loan notes of £350,000 were converted into ordinary shares at 1 ordinary
share per £53.75 of nominal loan value.
DIVIDEND
DIRECTORS
The directors are responsible for preparing the Directors’ Report and the financial statements in accordance with
applicable law and regulations.
Company law requires the directors to prepare financial statements for each financial year. Under that law the
directors have elected to prepare the financial statements in accordance with United Kingdom Generally Accepted
Accounting Practice (United Kingdom Accounting Standards and applicable law). Under company law the directors
must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of
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Compass BPO Limited
affairs of the company and of the profit or loss of the company for that period. In preparing these financial
statements, the directors are required to:
The directors are responsible for keeping adequate accounting records that are sufficient to show and explain the
company’s transactions and disclose with reasonable accuracy at any time the financial position of the company and
enable them to ensure that the financial statements comply with the Companies Act 2006. They are also responsible
for safeguarding the assets of the company and hence for taking reasonable steps for the prevention and detection of
fraud and other irregularities.
So far as each of the directors is aware at the time the report is approved:
there is no relevant audit information of which the company's auditors are unaware; and
the directors have taken all steps that they ought to have taken to make themselves aware of any relevant audit
information and to establish that the auditors are aware of that information.
AUDITORS
The auditors, haysmacintyre, will be proposed for re-appointment in accordance with S485 of the Companies Act
2006.
The Directors report has been prepared in accordance with the special provisions of Part 15 sections 416 and 417 of
the Companies Act 2006 relating to small entities.
D Patel
Director
Registered Office
Fairfax House
15 Fulwood Place
London
WC1V 6AY
16
Compass BPO Limited
We have audited the financial statements of Compass BPO Limited for the year ended 31 March 2010 which
comprise the Profit and Loss Account, the Consolidated and Company Balance Sheets, the Consolidated Statement
of Total Recognised Gains and Losses and the related notes. The financial reporting framework that has been
applied in their preparation is applicable law and United Kingdom Accounting Standards (United Kingdom
Generally Accepted Accounting Practice).
This report is made solely to the company’s members, as a body, in accordance with Chapter 3 of Part 16 of the
Companies Act 2006. Our audit work has been undertaken so that we might state to the company’s members those
matters we are required to state to them in an Auditor’s report and for no other purpose. To the fullest extent
permitted by law, we do not accept or assume responsibility to anyone other the company’s members as a body, for
our audit work, for this report, or for the opinions we have formed.
As explained more fully in the Directors’ Responsibilities Statement set out on page 3, the directors are responsible
for the preparation of the financial statements and for being satisfied that they give a true and fair view. Our
responsibility is to audit the financial statements in accordance with applicable law and International Standards on
Auditing (UK and Ireland). Those standards require us to comply with the Auditing Practices Board’s Ethical
Standards for Auditors.
An audit involves obtaining evidence about the amounts and disclosures in the financial statements sufficient to give
reasonable assurance that the financial statements are free from material misstatement, whether caused by fraud or
error. This includes an assessment of: whether the accounting policies are appropriate to the company’s
circumstances and have been consistently applied and adequately disclosed; the reasonableness of significant
accounting estimates made by the directors; and the overall presentation of the financial statements.
give a true and fair view of the state of the company’s affairs as at 31 March 2010 and of its loss for the year
then ended;
have been properly prepared in accordance with United Kingdom Generally Accepted Accounting Practice;
and
have been prepared in accordance with the requirements of the Companies Act 2006.
In our opinion the information given in the Directors’ Report for the financial year for which the financial statements
are prepared is consistent with the financial statements.
We have nothing to report in respect of the following matters where the Companies Act 2006 requires us to
report to you if, in our opinion:
adequate accounting records have not been kept, or returns adequate for our audit have not been received
from branches not visited by us; or
the financial statements are not in agreement with the accounting records and returns; or
17
Compass BPO Limited
18
Compass BPO Limited
2010 2009
Notes £ £
2010 2009
£ £
19
Compass BPO Limited
153,513 356,360
LESS: OVERHEADS
20
Compass BPO Limited
21
Compass BPO Limited
FIXED ASSETS
CURRENT ASSETS
1,143,580 1,499,145
22
Compass BPO Limited
These accounts are prepared in accordance with the special provisions of Part 15 of the Companies Act 2006 relating
to small entities.
The financial statements were approved and authorised for issue by the Board on
and were signed below on its behalf by:-
D Patel M Kedia
Director Director
23
Compass BPO Limited
AS AT 31 MARCH 2010
2010 2009
Notes £ £ £ £
FIXED ASSETS
Tangible assets 6 1,507 1,573
Investments 7 268,548 268,548
------------------ ------------------
270,055 270,121
CURRENT ASSETS
Debtors 8 698,620 717,945
Cash at bank and in hand 144,669 313,396
-------------------- --------------------
843,289 1,031,341
CREDITORS: amounts falling due within
one year 9a (185,960) (119,960)
-------------------- --------------------
NET CURRENT ASSETS 657,329 911,381
------------------ ------------------
TOTAL ASSETS LESS CURRENT
LIABILITIES 927,384 1,181,502
These accounts are prepared in accordance with the special provisions of Part 15 of the Companies Act 2006 relating
to small entities.
The financial statements were approved and authorised for issue by the Board on
and were signed below on its behalf by:-
D Patel M Kedia
Director Director
24
Compass BPO Limited
The financial statements have been prepared in accordance with applicable accounting standards. The particular
accounting policies adopted are described below:
The accounts have been prepared under the historical cost convention and in accordance with the Financial
Reporting Standard for Smaller Entities (effective April 2008).
The group financial statements consolidate the accounts of Compass BPO Limited and its subsidiary
undertaking made up to 31 March each year; the group profit and loss account includes the results of the
subsidiary undertaking for the period from the date of their incorporation or acquisition and up to the date of
disposal.
No profit and loss account is presented for Compass BPO Limited as provided by S408 of the Companies
Act 2006. The holding company’s loss for the year was £197,584 (2009: profit £21,981).
(c) Turnover
Company
Assets and liabilities on foreign currencies are translated at the rates of exchange ruling at the balance sheet
date. Transactions on foreign currencies are recorded at the rate of exchange ruling at the date of the
transaction. All differences are taken to the profit and loss account.
Group
The balance sheets of overseas subsidiary undertakings are translated at the rate of exchange ruling at the
balance sheet date and the profit and loss accounts are translated at the average rates for the year. The
exchange differences arising on the re-translation of opening net assets is taken directly to reserves.
Deferred taxation is provided on the full provision method to take account of timing differences between the
treatment of certain items for accounts purposes and their treatment for tax purposes. Tax deferred or
accelerated is accounted for in respect of all timing differences, where material.
Assets acquired under hire purchase contracts are capitalised in the balance sheet and are depreciated over
their expected useful lives. The interest element of the instalments is charged to the profit and loss account
over the period of the contract.
25
Compass BPO Limited
Contributions to defined contribution pension schemes are charged to the profit and loss account in the
period in which they become payable. Compass Business Process Outsourcing Pvt Limited operates a
defined benefit pension scheme, known as Compass Development (India) Pvt Ltd. Employees Group
Gratuity Assurance Scheme, covering all eligible employees. The deficit on the pension scheme has
been provided for in the financial statements.
Depreciation is calculated to write off the cost of the assets, net of disposal proceeds, over their
anticipated useful lives at the following rates:-
(j) Investments
Fixed asset investments are shown at the lower of cost or directors’ valuation.
(k) Taxation
The directors have taken advantage of the exemptions available in Financial Reporting Standard No.1
and have chosen not to prepare a cash flow statement on the grounds that the group is small.
Compound financial instruments comprise of both liability and equity components. At issue date, the
fair value of the liability component is estimated by discounting its future cash flows at an interest rate
that would have been payable on a similar debt instrument without any equity conversion option. The
liability component is accounted for as a financial liability.
The difference between the net issue proceeds and the liability component, at the time of issue, is the
residual of equity component, which is accounted for as an equity instrument.
The interest expense on the liability component is calculated by applying the effective interest rate for
the liability component of the instrument. The difference between any repayments and the interest
expense is deducted from the carrying amount of the liability.
26
Compass BPO Limited
Turnover is attributable to the principal activity of the group, net of Value Added Tax.
2. OPERATING LOSS
2010 2009
Group Group
£ £
Operating loss is stated after charging:
Depreciation 136,447 113,137
Auditors remuneration - audit 8,500 7,900
- other services 12,476 -
======== ========
3. INTEREST PAYABLE
2010 2009
Group Group
£ £
Interest on the 10% convertible loan stock has been charged at a rate of 12.5%, the estimated rate of interest
that would have applied on a pure loan in the absence of the convertibility feature.
4. EMPLOYEES
2010 2009
Group Group
£ £
Staff costs (including directors) during the year amounted to:
Wages and salaries 2,214,508 2,343,897
Social security costs 2,227 2,822
---------------------- ----------------------
£2,216,735 £2,346,719
========== ==========
27
Compass BPO Limited
No. No.
The average weekly number of Employees during the year was: 363 402
==== ====
Pension contributions are made to a defined contribution scheme. All assets therein are independent of the
group.
The corporation tax assessed for the year is different from the small companies’ rate of corporation tax in
the UK of 28% (2009: 21%). The differences are explained below:
2010 2009
£ £
28
Compass BPO Limited
The company is carrying forward tax losses of £61,193 to offset against future profits.
29
Compass BPO Limited
The 10% Preference Shares are redeemable at par any time between 5 and 10 years from 27 March 2000, the
date of allotment. However there is a put and call option anytime after 36 months from the date of allotment.
The principal activities of Compass Business Process Outsourcing Pvt. Ltd and Compass BPO Inc. are the
provision of personnel and related consultancy services from Asia.
The company holds 100% of the issued share capital of Compass BPO FZE, consisting of 1 share acquired
for AED100,000.
8. DEBTORS
2010 2009
Group Company Group Company
£ £ £ £
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Compass BPO Limited
On 27 February 2007 the Group issued convertible loan notes, redeemable by 1 April 2010, carrying a
coupon rate of 10% interest payable on redemption or conversion of the relevant note. At any time after 1
April 2009, the holders have the option to convert the face value of their holdings to shares at a price of
£53.75 for one ordinary £0.25 share.
On 9 March 2010, the convertible loan notes were converted into 6,511 ordinary shares at a price of £53.75
for each £0.25 share.
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Compass BPO Limited
Also on the same date share options were exercised resulting in the issue of 3,117 ordinary shares of £65.91
per £0.25 share.
During the year the company had the following share options in issue:
The share options were granted to 7 employees and one consultant of the group. There are no performance
conditions attached to any of the options.
On 9 March 2010, share options were exercised resulting in the issue of 3,117 ordinary £0.25 shares at
£65.91 per share.
32
Compass BPO Limited
2010 2009
Group Company Group Company
£ £ £ £
New share capital (including share premium) 350,779 350,779 5,044 5,044
(Loss)/Profit for the financial year (171,448) (197,584) 365,262 21,981
Exchange gain on currency translation 11,505 - 66 -
Opening shareholders’ funds 695,248 774,189 324,876 747,164
------------------- ------------------- ------------------- -------------------
Closing shareholders' funds £886,084 £927,384 £695,248 £774,189
========= ========= ========= =========
Compass Business Process Outsourcing Pvt Ltd, operates a defined benefit pension scheme, for eligible staff.
It is funded by the payment of contributions to a separately administered trust fund. The assets of the scheme
are held separately from those of the group.
The Group adopts the valuation and disclosure requirements of FRS 17 “Retirement Benefits”, as amended by
the FRSSE 2007. The Group includes the assets and liabilities of the pension fund in the Group’s balance sheet,
with a subsequent effect on reserves.
The pension contributions are determined with the advice of a qualified actuary on the basis of annual
valuations using the method. The most recent valuation was conducted as at 31March 2010. The principal
assumptions used by the actuaries were that the return on assets would be 9% per annum and salaries would
increase by 4% per annum. The market value of the assets at 31 March 2010 was £33,639.
The pension charge for the year was £17,017 (2009: £16,219). Contributions to the scheme are expected to
remain at this level in the future.
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Compass BPO Limited
The movement in the deficit during the year arose as follows: 2010
£’000s
At 31 March 2010 the company had the following annual commitments under non-cancellable operating
leases.
2010 2009
Group Group
Land and Land and
Buildings Buildings
£ £
Operating leases which expire:
- within one year 64,652 -
- within one to two years - 267,771
- within two to five years 12,600 -
========= =========
The company has taken advantage of the exemption available not to disclose transactions with its 100%
owned subsidiary undertakings.
The company is a joint guarantor in respect of loan and overdraft facilities granted to Compass Business
Process Outsourcing Pvt. Limited, the company’s wholly owned subsidiary. The loan and overdraft facilities
provided by The IDBI Bank (formerly known as The United Western Bank Limited) amounted to £36,836.
At the year end, £9,388 was drawn.
34
Aditya Birla Minacs Philippines Inc.
BALANCE SHEET
Mar-31
2010(PHP) 2010(INR) 2009(PHP) 2009(INR)
ASSETS
Current Assets
Cash 4,294,486 4,299,248 13,055,293 13,703,601
Receivables (Note 4) 33,738,747 33,776,160 22,513,318 26,612,422
Prepaid expenses and other current assets 5,575,511 5,581,694 3,850,684 1,060,780
(Notes 5)
Total Current Assets 43,608,744 43,657,101 39,419,295 41,376,802
Noncurrent Assets
Property and equipment (Notes 6 and 7) 40,140,748 40,185,260 61,624,662 64,684,856
Other noncurrent assets (Note 14) 3,280,358 3,283,996 3,394,393 3,562,954
Total Noncurrent Assets 43,421,106 43,469,255 65,019,055 68,247,810
TOTAL ASSETS 87,029,850 87,126,357 104,438,350 109,624,612
35
Aditya Birla Minacs Philippines Inc.
STATEMENTS OF INCOME
Years Ended March 31
2010(PHP) 2010(INR) 2009(PHP) 2009(INR)
SERVICE INCOME (Note 11) 145,577,147 147,781,703 140,439,885 141,796,611
Interest and bank charges (Note 11) 1,848,541 1,876,534 3,424,397 3,457,479
36
Aditya Birla Minacs Philippines Inc.
37
Aditya Birla Minacs Philippines Inc.
1. Corporate Information
Aditya Birla Minacs Philippines, Inc. (the Company) was registered with the Philippine Securities and
Exchange Commission (SEC) on November 3, 2006 with the primary purpose of carrying on and
undertaking the business of setting up and operating a center for sales and customer interaction
services and business process outsourcing services; providing system integration and software
development services which are ancillary thereto; and carrying on the business in computer hardware
and software related matters and fields, including the design, development, manufacture, production,
marketing, selling, leasing and integration of computer hardware and software systems, the provision
of customized software development consultancy and services, and the import and export of computer
hardware technology. The Company started its commercial operations on March 5, 2007.
The Company is a wholly owned subsidiary of Aditya Birla Minacs Worldwide Ltd. (ABMW). The
ultimate parent company is Aditya Birla Nuvo Limited (ABNL). ABMW and ABNL are incorporated
in India.
The Company’s principal place of business is at 1800 Eastwood Ave. Bldg., 10/F Eastwood City
Cyberpark, 188 E. Rodriguez, Jr. Ave., Bagumbayan, Quezon City. The Company has 378 and 185
employees as of March 31, 2010 and 2009, respectively.
The financial statements were approved for issue by the Board of Directors (BOD) on
April 21, 2010.
The Company is registered with PEZA as an Ecozone Information Technology (IT) Enterprise,
engaged in providing customer contact center services at Eastwood City Cyberpark.
The Company is entitled to all incentives granted to pioneer projects under Republic Act (RA)
No. 7916, as amended, and the PEZA IT Guidelines, subject to certain terms and conditions, including,
among others, the following:
a. The Company’s project shall be entitled to six (6) years income tax holiday (ITH) incentive, as
amended in accordance with the 2006 Investment Priorities Plan. The project’s entitlement to the
said incentive shall be subject to validation by PEZA based on the Company’s audited financial
statements covering the first year of its operations showing the investment cost per seat for its
project is equivalent to at least United States (US) $2,500, inclusive of the cost of equipment, office
furniture and fixtures, building improvements and renovations, fixed assets, except land, building
and working capital, and complies with the minimum US$2.5 million investment required for
pioneer status.
In case the Company does not attain the said investment cost per seat, the Company’s project shall
be granted 5% gross income incentive and other incentives under RA 7916, as amended, instead of
the ITH incentive. On the other hand, if the Company complies with the minimum
US$2,500 investment cost per seat but fails to comply with the minimum US$2.5 million
investment required for pioneer status, the Company shall instead be entitled to only four (4) years
ITH incentive.
Entitlement of the project to the 5th and 6th years of ITH from the date of start of commercial
operations shall be subject to the issuance by the PEZA Director General of a written validation of
the project cost.
38
Aditya Birla Minacs Philippines Inc.
b. The Company’s operations shall be limited to its PEZA-approved projects. Any expansion of this
project or other additional activities to be undertaken by the Company shall require prior PEZA
clearance.
The Company is in a tax loss position for the years ended March 31, 2010 and 2009 and as such, it did
not benefit from the ITH.
The principal accounting policies adopted in preparing the financial statements of the Company are as
follows:
The accompanying financial statements have been prepared under the historical cost convention and
are presented in Philippine Peso (Peso). Amounts are rounded to the nearest Peso unless otherwise
indicated.
The PFRS for SME is a self-contained standard that is tailored for the needs and capabilities of smaller
businesses. Many of the principles in full PFRSs for recognizing and measuring assets, liabilities,
income and expenses have been simplified, topics not relevant to SMEs have been omitted, and the
number of required disclosures has been significantly reduced.
The Company, which currently follows the accounting principles generally accepted in the Philippines
applicable to NPAE, will adopt the PFRS for SMEs in its fiscal year 2011 financial statements. The
Company is currently assessing the impact on its financial statements when the PFRS for SME is
adopted in fiscal year 2011.
Cash
Cash includes cash on hand and in banks.
Receivables
Trade receivables are recognized and carried at original invoice amount, less any allowance for
uncollectible accounts. An estimate for doubtful accounts is made when there is objective evidence that
the Company will not be able to collect the debts.
Other receivables are recognized at face amount, less any allowance for doubtful accounts.
39
Aditya Birla Minacs Philippines Inc.
Prepayments
Prepaid expenses are amounts paid in advance for goods and services that are yet to be delivered and
from which future economic benefits are expected to flow to the Company with its normal operating
cycle or within 12 months from the balance sheet date.
The initial cost of property and equipment consists of its purchase price, including import duties, taxes
and any directly attributable cost of bringing the asset to its working condition and location for its
intended use. Expenditures incurred after the property and equipment have been put into operation,
such as repairs and maintenance, are normally charged to income in the period in which the costs are
incurred. In situations where it can be clearly demonstrated that the expenditures have resulted in an
increase in the future economic benefits expected to be obtained from the use of an item of property and
equipment beyond its originally assessed standard of performance, the expenditures are capitalized as
additional cost of property and equipment.
Depreciation is computed using the straight-line method over the estimated useful lives of the assets as
follows:
Category Years
Computer equipment 3
Furniture and fixtures 3-5
Office and communication equipment 5
Leasehold improvements are amortized over the life of the assets (average of two years) or the term of
the lease, whichever is shorter. Recognition of depreciation commences when the asset is ready for its
intended use.
The estimated useful lives of the assets and depreciation method used are reviewed periodically to
ensure that these are consistent with the expected pattern of economic benefits from items of property
and equipment.
When assets are sold or retired, their cost, accumulated depreciation and any impairment in value are
eliminated from the accounts. Any gain or loss resulting from their disposal is recognized in the
statement of income.
Impairment of Assets
The carrying values of property and equipment are reviewed for impairment when events or changes in
circumstances indicate that the carrying values may not be recoverable. If any such indication exists
and where the carrying values exceed the estimated recoverable amounts, the assets or cash-generating
units are written down to their recoverable amount. The recoverable amount of the asset is the greater
of net selling price and value-in-use. In assessing value-in-use, the estimated future cash flows are
discounted to their present value using a pre-tax discount rate that reflects current market assessments
of the time value of money and the risks specific to the asset. For an asset that does not generate
largely independent cash inflows, the recoverable amount is determined for the cash-generating unit to
which the asset belongs. Any impairment loss is recognized in the statement of income.
If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related
objectively to an event occurring after the impairment was recognized, the previously recognized
impairment loss is reversed. Any subsequent reversal of an impairment loss is recognized in the
statement of income, to the extent that the carrying value of the asset does not exceed its amortized cost
at the reversal date.
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Aditya Birla Minacs Philippines Inc.
Construction in progress represents assets under construction and is stated at cost, including cost of
construction and other direct costs. Construction in progress is not depreciated until the relevant assets
are completed and ready for their intended operational use.
Liabilities
Liabilities are recognized when the Company has a present obligation from past events, the settlement
of which is expected to result in an outflow of economic benefits from the Company and the amount
can be reliably measured. Liabilities expected to be settled in the Company’s normal operating cycle or
within 12 months from the balance sheet date are classified as current liabilities. Otherwise, these are
classified as noncurrent liabilities.
Capital Stock
Capital stock is carried at par value of the shares issued. When the shares are sold at a premium, the
difference between the proceeds and the par value is credited to additional paid-in capital. When the
shares are issued for a consideration other than cash, the proceeds are measured by the fair value of the
consideration received. In case the shares are issued to extinguish or settle the liability of the
Company, the shares shall be measured either at the fair value of the shares issued or fair value of the
liability settled, whichever is more readily determinable.
Revenue
Revenue is recognized to the extent that it is probable that the economic benefits will flow to the
Company and the amount of revenue can be reliably measured. Revenue is measured at the fair value
of the consideration received or receivable. The following specific recognition criteria must also be
met before revenue is recognized:
Service income
Service income is recognized as related services are performed based on agreements with the
customers.
Interest income
Interest income is recognized as the interest accrues.
Leases
Leases where the lessor retains substantially all the risks and benefits of ownership of the asset are
classified as operating leases. Operating lease expense is recognized in the statement of income on a
straight-line basis over the lease term.
Actuarial gains and losses are recognized as income or expense if the cumulative unrecognized
actuarial gains and losses at the end of the previous reporting period exceeded the greater of 10% of the
present value of defined benefit obligation and 10% of the fair value of the plan assets at that date. The
gains and losses are recognized over the expected average remaining working life of the employees
participating in the plan.
The past service cost is recognized as an expense on a straight-line basis over the average period until
the benefits become vested. If the benefits are already vested immediately following the introduction of,
or changes to, a pension plan, past service cost is recognized immediately.
The defined benefit liability is the aggregate of the present value of the defined benefit obligation and
actuarial gains and losses not recognized, reduced by past service cost not yet recognized and the fair
value of plan assets out of which the obligations are to be settled directly.
Income Taxes
Current income tax
Current income tax assets and liabilities for the current and prior periods are measured at the amount
expected to be recovered from or paid to the taxation authorities. The tax rates and tax laws used to
compute the amount are those that have been enacted or substantively enacted at the balance sheet date.
Deferred income tax liabilities are recognized for all taxable temporary differences. Deferred income
tax assets are recognized for all deductible temporary differences and unused net operating loss
carryover (NOLCO), to the extent that it is probable that sufficient future taxable profits will be
available against which the deductible temporary differences and carryforward benefits of unused
NOLCO can be utilized.
The carrying amount of deferred income tax assets (DTA) is reviewed at each balance sheet date and
reduced to the extent of the sufficient future taxable profits that will be available to allow all or part of
the deferred income tax asset to be utilized. Unrecognized income deferred tax assets are reassessed at
each balance sheet date and are recognized to the extent that it has become probable that future taxable
profits will allow the deferred income tax assets to be recognized.
Deferred income tax assets and deferred income tax liabilities are measured at the tax rates that are
expected to apply to the period when the asset is realized or the liability is settled, based on tax rates
and tax laws that have been enacted or substantively enacted at the balance sheet date.
Deferred income tax assets and deferred income tax liabilities are offset if a legally enforceable right
exists to offset current tax assets against current tax liabilities and the deferred taxes relate to the same
taxable entity and the same taxation authority.
Borrowing Costs
Borrowing costs are generally expensed as incurred.
Provisions are recognized when: (1) the Company has a present obligation (legal or constructive) as a
result of a past event; (2) it is probable that an outflow of resources embodying economic benefits will
be required to settle the obligation; and (3) a reliable estimate of the amount of the obligation can be
made.
Contingent liabilities are not recognized in the financial statements. They are disclosed in the notes to
financial statements unless the possibility of an outflow of resources embodying economic benefits is
remote. A contingent asset is not recognized in the financial statements but is disclosed in the notes to
the financial statements when an inflow of economic benefits is probable.
4. Receivables
Rental and other prepayments (Note 14) 1,358,588 1,360,095 2,997,716 3,146,578
5,575,511 5,581,694 3,850,684 4,041,904
2010
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Aditya Birla Minacs Philippines Inc.
Accumulated
Depreciation
Beginning of year 20593516 8794710 4113891 12200956 – 45703073
Depreciation 13107172 5145169 3114283 8214450 – 29581074
End of year 33700688 13939879 7228174 20415406 - 75284147
Net Book Values =
P
=9365311
P =12967667
P = 8240030
P =5592951
P =3974789
P 40140748
2009
Computer Furniture Office and Leasehold Construct Total
Equipment and Communica Improveme ion in
Fixtures tion nts Progress
Equipment
Cost
Beginning of year =35433750
P =26371725
P =10095349
P =14726680
P =-
P P86627504
=
Additions 3179357 234721 5372855 1077183 10836115 20700231
End of year 38613107 26606446 15468204 15803863 10836115 107327735
Accumulated
Depreciation
Beginning of year 7818339 3700235 1120327 4760142 – 17399043
Depreciation 12775177 5094475 2993564 7440814 – 28304030
End of year 20593516 8794710 4113891 12200956 - 45703073
Net Book Values =
P
=18019591
P =17811736
P =11354313
P =3602907
P 10836115 =61624662
P
Accounts payable as of March 31, 2010 and 2009 includes unpaid invoices for the acquisition of certain
items of property and equipment totaling P
=3,497,700 and P
=2,197,434, respectively.
8. Cost of Services
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Aditya Birla Minacs Philippines Inc.
a. The Company availed of various loans from ABMW to finance its working capital requirements.
The loans bear interest at LIBOR + 1% and are payable in 60 months (including the interest and
other related charges). As of March 31, 2010 and 2009, the outstanding principal amounted to P
=
90.57 million (US$2.01 million) and P =84.33 million (US$1.76 million), respectively. Interest
45
Aditya Birla Minacs Philippines Inc.
b. The Company has various service agreements which are carried out together with its affiliates
based in Bangalore, India and Toronto, Canada. These agreements are effective for three years,
subject to renewal terms, and primarily cover after-sale support/call center services. Rates are
determined based on the statement of work agreed with client and are normally expressed per
minute or per hour. Revenue recognized for these agreements amounted to
=145.58 million and P
P =140.44 million for the years ended March 31, 2010 and 2009, respectively.
The Company provides retirement benefits to all its regular, full time employees in accordance with
RA No. 7641.
Retirement benefits cost (income) charged to operations in 2010 and 2009 consisted of the following:
2010(Php) 2010(Inr) 2009(Php) 2009(Inr)
Current service cost 1,800 1,827 164,100 172,248.98
Interest cost 15,400 15,417 11,400 11,966.11
Amortization of actuarial gain -43,200 -43,248 – -
Curtailment gain -34,500 -34,538 -33,300
(34,953.63)
-60,500 -60,542 142,200 149,261
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Aditya Birla Minacs Philippines Inc.
The latest actuarial valuation of the plan is as of March 31, 2010. The principal actuarial assumptions used
to determine retirement benefit cost were as follows:
2010 2009
Discount rate 9.6% 37.5%
Average annual salary increase 8.0% 8.0%
a. The provision for current income tax represents final tax on interest income.
b. The Company did not recognize deferred income tax assets on the following temporary differences
and NOLCO since these were incurred and will expire/reverse within the period when the
Company is under ITH (see Note 2).
d. The reconciliation between the provision for income tax at statutory rates and the provision for
income tax as shown in the statement of income is as follows:
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Aditya Birla Minacs Philippines Inc.
e. RA No. 9337 or the Expanded Value-Added Tax Act of 2005, which took effect on
November 1, 2005, provides for, among others, the corporate income tax rate to be 35% for three
years effective on November 1, 2005, and 30% starting on January 1, 2009 and thereafter; and the
unallowable deduction for interest expense to be 42% of the interest income subject to final tax
effective November 1, 2005, and 33% effective January 1, 2009.
The Company has various lease agreements for its office space and condominium units with terms
ranging from three months to five years. These leases are renewable on terms mutually agreed by the
parties. Certain lease agreements require the Company to pay security deposits. These are included
under “Prepaid expenses and other current assets” and “Other noncurrent assets” in the balance sheets.
The Company has three-year lease agreements covering two of its office/facilities spaces that are
subject to annual escalation of 8% and 10%, with one month and three months rent-free period,
respectively.
Future minimum rentals payable under these noncancelable operating lease arrangements are as
follows:
2010(Php) 2010(Inr) 2009(Php) 2009(Inr)
Within one year 12,514,170 12,528,047 8,499,988 8,922,085
After one year but not more than five years 18,131,585 18,151,691 3,859,776 4,051,447
30,645,755 30,679,738 12,359,764 12,973,533
15. Equity
On January 19, 2009, the Company’s BOD authorized the issuance of 479,232 additional shares from
the remaining unissued shares at P
=100 per share in favor of ABMW, to be applied against the deposits
for future stock subscription.
As of March 31, 2010, the Company has yet to submit the application with the SEC.
The Company is a defendant in a number of labor cases filed with the National Labor Regulatory
Commission pertaining to nonpayment of salaries and other benefits to its employees. Management
believes that the outcome of these cases will not have a material effect on the Company’s financial
statements.
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Aditya Birla Minacs Worldwide Inc.
AUDITORS’ REPORT
We have audited the consolidated balance sheet of Aditya Birla Minacs Worldwide Inc. as at March 31, 2010 and
the consolidated statements of operations and deficit, comprehensive income (loss), changes in shareholders’ equity
(deficiency) and cash flows for the year then ended. These financial statements are the responsibility of the
Company’s management. Our responsibility is to express an opinion on these financial statements based on our
audit
We conducted our audit in accordance with Canadian generally accepted auditing standards. Those standards
require that we plan and perform an audit to obtain reasonable assurance whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall financial statement presentation.
In our opinion, these consolidated financial statements present fairly, in all material respects, the financial position
of the Company as at March 31, 2010 and the results of its operations and its cash flows for the year then ended in
accordance with Canadian generally accepted accounting principles.
Toronto, Canada, Chartered Accountants
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Aditya Birla Minacs Worldwide Inc.
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Aditya Birla Minacs Worldwide Inc.
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Aditya Birla Minacs Worldwide Inc.
52
Aditya Birla Minacs Worldwide Inc.
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Aditya Birla Minacs Worldwide Inc.
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Aditya Birla Minacs Worldwide Inc.
1 NATURE OF BUSINESS
Aditya Birla Minacs Worldwide Inc. (the “Company” or “Minacs”) is incorporated under the Ontario
Business Corporations Act. The Company is wholly-owned by AV Transworks Limited Canada, a wholly-
owned subsidiary of Aditya Birla Minacs Worldwide Limited, India, which in turn is a subsidiary of Aditya
Birla Nuvo Limited. The Company operates in one segment as a provider of business process outsourcing
(“BPO”) solutions. These incorporate contact centre solutions, integrated marketing services and back
office administration. Operating in multiple languages, the Company serves customers throughout Nor th
America, Europe, Latin America and the Pacific Rim from its operating locations in North America and
Europe.
Basis of Presentation
These consolidated financial statements have been prepared in accordance with Canadian generally accepted
accounting principles ("GAAP") and include the accounts of the Company and its subsidiaries. All significant inter-
company balances and transactions among these entities have been eliminated on consolidation.
Changes in Accounting Policies
Effective April 1, 2009, the Company adopted the following new Canadian Institute of Chartered
Accountants ("CICA") accounting standards and Emerging Issues Committee ("EIC") abstract.
Section 3064, Goodwill and Intangible Assets, which replaced Section 3062, Goodwill and Other Intangible
Assets. The standard establishes guidelines for the recognition, measurement, presentation and disclosure of
goodwill and intangible assets subsequent to initial recognition. As a result of the adoption of th is standard,
the Company has reclassified computer software from property, plant and equipment to intangible assets and
has separately disclosed deferred development costs on the consolidated balance sheet.
The following table summarizes the adjustment that was recorded in the consolidated financial statements.
Section 1000, Financial Statement Concepts. The objectives of this Section are to reinforce a principle-based
approach to the recognition of costs as assets and to clarify the application of the concept of matching revenue and
expenses in Section 1000. Collectively, this change brings the Canadian practice closer to International Financial
Reporting Standards ("IFRS") and U.S. generally accepted accounting principles by eliminating the practice of
recognizing as assets a variety of start-up, pre-production and similar costs that do not meet the definition and
recognition criteria of an asset. Adoption of this guidance had no impact on the Company's consolidated
financial statements.
EIC 173, Credit Risk and the Fair Value of Financial Assets and Financial Liabilities. This guidance
clarifies that an entity's own credit risk and the credit risk of the counterparty should be taken into account
in determining the fair value of financial assets and financial liabilities including derivative instruments.
Adoption of this guidance had no impact on the Company's consolidated financial statements.
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Aditya Birla Minacs Worldwide Inc.
In 2006, the CICA announced that accounting standards in Canada will converge with IFRS. The Company
will have the option of reporting under IFRS beginning January 1, 2011, with comparative data for the prior
year. IFRS uses a conceptual framework similar to Canadian GAAP, but there could be significant
differences on recognition, measurement and disclosures that will need to be addressed.
In September 2009, the CICA approved the final accounting standards for private enterprises in Canad a.
The new standards (GAAP for private enterprises) are available for early adoption. Under the new
standards, private enterprises will have a choice of reporting in accordance with Canadian GAAP by
adopting either the same set of accounting standards as publicly accountable enterprises (i.e. IFRS) or the
new GAAP for private enterprises. The existing accounting standards in the CICA Handbook will be
available until 2011, at which time they will be withdrawn. As such, enterprises will be able to adopt GAAP
for private enterprises in 2009, 2010 or 2011. The Company is considering the impact of these new
standards and assessing whether it will adopt IFRS or GAAP for private enterprises.
Use of Estimates
The preparation of these consolidated financial statements in conformity with Canadian GAAP requires
management to make estimates and assumptions. These estimates and assumptions affect the reported
amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the
consolidated financial statements and the reported amounts of revenues and expenses during the year.
Actual results could differ from those estimates.
Revenue Recognition
The Company derives revenues by providing BPO solutions and consulting arrangements. Payment terms
may vary by contract. The Company recognizes revenues at the time services are performed and when the
price is fixed or determinable and collection is reasonably assured.
The majority of revenues are recognized based on the billable hours or minutes rendered as defined in the
client contract. The rate per billable hour or minute charged is based on a predetermined contractual rate as
agreed in the underlying contract. This contractual rate fluctuates based on the Company’s performance
against certain predetermined criteria related to quality and performance. Some clients are entitled to
service credits when the Company is not in compliance with certain obligations as defined in the client
contract. Such service credits are recorded as a reduction of revenues as incurred based on a measurement
of the Company’s obligation under the terms of the client contract.
For some contracts, the Company is paid by its customer based on achievement of client-determined criteria
specified in the client contract such as full-time equivalents, units processed or completed contacts. The
Company recognizes this performance-based revenue by measuring its actual results against the
performance criteria specified in the contracts.
Amounts collected from customers prior to the performance of services are recorded as deferred revenue.
These advances are amortized to revenues in accordance with the Company’s policy on revenue recognition.
The Company classifies reimbursements received from customers for out-of-pocket expenditures as
revenues. The Company incurs out-of-pocket expenditures such as expenses related to travel, postage and
telecommunications costs for which customers have agreed to reimburse Minacs. The corresponding cost
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Aditya Birla Minacs Worldwide Inc.
associated with this revenue is recorded within direct expenses. Some customers agree to reimburse the
Company for initial training and recruiting costs over a specified period of time. The revenue for these
costs is recorded over the period of time stipulated within the contract with a corresponding cost r ecorded
within direct expenses.
Property, plant and equipment are stated at cost less accumulated amortization. Amortization is provided on
a straight-line basis over the estimated useful lives of the assets. Computer equipment is amortized over a
four-year life. Communications equipment is amortized over five to seven-year lives. Furniture and
fixtures are amortized over seven to ten-year lives. Leasehold improvements are amortized over the term of
the lease.
Leases
Leases are classified as either capital or operating leases. Leases that substantially transfer all of the
benefits and risks of ownership of property to the Company are accounted for as capital leases. At the time
a capital lease is entered into, an asset is recorded together with its related long-term obligation to reflect the
acquisition and financing. Equipment recorded under capital leases is amortized on the same basis as
property, plant and equipment. Rental payments under operating leases are expensed as incurred.
The Company follows the guidance in the CICA Handbook Section 1581, Business Combinations, which
requires all business combinations to be accounted for using the purchase method. In addition, any goodwill
and intangible assets acquired in a business combination are accounted for under CICA Handbook Section
3064, Goodwill and Intangible Assets. This section requires that goodwill not be amortized, while identified
intangible assets with finite useful lives be amortized over their useful lives.
Goodwill represents the excess of the purchase price over the fair value of the net identifiable assets
acquired. Goodwill and indefinite life intangible assets are tested for impairment annually or more
frequently if events or changes in circumstances indicate that those assets might be impaired. The
impairment test is carried out in two steps. In the first step, the identification of a potential impairment is
determined by comparing the fair value of the reporting unit to its carrying value. Fair value is based on
estimates of discounted future cash flows. When the fair value of the reporting unit is less than its carrying
value, the fair value is allocated to all its assets and liabilities based on their fair values. The amount that
the fair value of the reporting unit exceeds the amounts assigned to its assets and liabilities is the fair value
of the goodwill. In the second step, impairment is determined by comparing the fair value of goodwill to its
carrying value. Any shortfall is charged to income.
Intangible assets with finite useful lives acquired through business combinations are recorded at their fair
value at the date of acquisition. An impairment loss on an intangible asset with a finite useful life is
recognized when its carrying value exceeds the total undiscounted cash flows expected from its use and
disposition. The amount of loss is determined b y deducting its fair value based on undiscounted cash flows
expected from its use and disposition from its carrying value. The Company reviews definite life intangible
assets for impairment whenever events or changes in circumstances indicate that the carrying value may not
be recoverable. Amortization of intangible assets, other than computer software, is provided on a straight-
line basis over ten years. Computer software is amortized over four to five-year lives.
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Aditya Birla Minacs Worldwide Inc.
Asset Impairment
The Company follows the guidance in CICA Handbook Section 3063, Impairment of Long-Lived Assets, and
CICA Handbook Section 3855, Financial Instruments - Recognition and Measurement. The Compan y
evaluates the carrying value of long-lived assets for potential impairment annually or more frequently if
events or circumstances warrant a review. The carrying value of such assets is considered impaired when
the anticipated net recoverable amount of the asset is less than its carrying value or when the change in
value is other than temporary. In that event, the carrying value of the asset is adjusted to fair value and an
impairment loss is charged to income. The Company reviews long-lived assets for impairment whenever
events or changes in circumstances indicate that the carrying value may not be recoverable.
Income Taxes
The Company follows the liability method of accounting for income taxes. Under this method, future tax
assets and liabilities are determined based on differences between the financial reporting and tax bases of
assets and liabilities, and are measured using substantively enacted tax rates and laws that are expected to be
in effect when the differences are expected to reverse. Valuation allowances are established when necessary
to reduce future tax assets to the estimated amount that is more likely than not to be realized.
Government Assistance
Government assistance towards current expenses is included in the determination of income for the year as a
reduction of the expenses to which it relates. The Company has made a number of estimates and
assumptions in determining the amount eligible for government assistance. It is possible that the allowed
amount of assistance could be materially different from the recorded amount upon assessment by the
respective government agency.
Comprehensive income is the change in equity from transactions and other events from non-owner sources.
Other comprehensive income refers to items recognized in comprehensive income that are excluded from net
income calculated in accordance with Canadian GAAP.
Financial Instruments
All financial instruments, including derivatives, are measured on the consolidated balance sheet at fair value
except for loans and receivables, held-to-maturity investments and other financial liabilities, which are
measured at amortized cost. Subsequent measurement and changes in fair value will depend on their initial
classification, as follows: held-for-trading financial assets are measured at fair value and changes in fair
value are recognized in net income; available-for-sale financial instruments are measured at fair value with
changes in fair value recorded in other comprehensive income until the investment is derecognized or
impaired, at which time the amounts would be recorded in net income. The Company's financial assets and
liabilities are generally classified and measured as follows:
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Aditya Birla Minacs Worldwide Inc.
Deferred grant and government assistance Other financial liabilities Amortized cost
The Company had no financial instruments classified as available-for-sale during the year ended March 31,
2010.
Financing costs and credit facility arrangement fees associated with the issuance of long-term debt are
netted against the carrying value of the related debt and are amortized using the effective interest rate
method to interest expense over the period to maturity of the related debt.
Hedges
The Company applies hedge accounting to forward rate contracts, options and cross-currency swap
agreements. These contracts have been designated as cash flow hedges, and are measured at fair value at the
end of each period. The resulting gain/loss on recognition of the forward rate contracts, options and cross-
currency swap agreements is recognized in other comprehensive income.
Foreign operations are considered to be self-sustaining and are translated into Canadian dollars using the
current rate method. Assets and liabilities are translated using the exchange rate in effect at the
consolidated balance sheet date and revenues and expenses are translated at the average rate for the month in
which the transaction is recorded. Exchange gains or losses on translation of the Company’s investments in
these subsidiaries are recorded in accumulated other comprehensive income.
Research costs are expensed as incurred. Development costs that meet specific criteria related to technical,
market and financial feasibility are capitalized and amortized over the useful life of the technology when put
into use.
3 ACQUISITION
On March 9, 2010, the Company acquired Compass BPO Limited ("Compass") for cash consideration of $7,853,000
(INR 34.68 Cr) including acquisition costs of $39,000 (INR 0.17 Cr). The purchase has been accounted for under
the purchase method and, accordingly, the results of operations are included in the consolidated financial statements
from the date of acquisition. The consideration and allocation of the purchase price are as follows:
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Aditya Birla Minacs Worldwide Inc.
The customer relationships will be amortized on a straight-line basis over ten years. Included in the net working
capital is $257,000 (INR 1.13 Cr) of cash.
4 OTHER RECEIVABLES
As at March 31, 2009, a derivative liability of $11,300,000 (INR 49.90 Cr) was included in accounts
payable and accrued liabilities.
The assets under capital leases are held as collateral for the capital lease obligations. For the year ended
March 31, 2010, included within amortization expense is $1,732,000 (INR 7.65 Cr) (2009: $3,112,000)
(INR 13.74 Cr) relating to assets under capital leases.
Included in restructuring charges for 2010 is an impairment loss of $933,000 (INR 4.33 Cr) relating to the
write-down in value of leasehold improvements and lease exit costs relating to the Saskatoon and Port
Hawkesbury site closures (Note 14). Included in restructuring charges for 2009 is an impairment loss of
$4,606,000 (INR 20.08 Cr) relating to the write-down in value of leasehold improvements and lease exit
costs relating to the Saskatoon, Pickering and Chatham site closures (Note 14).
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Aditya Birla Minacs Worldwide Inc.
7 INTANGIBLE ASSETS
Included in these figures are intangible assets under capital leases as follows:
The intangible assets under capital leases are held as collateral for the capital lease obligations. For the year
ended March 31, 2010, included within amortization expense is $165,000 (INR 0.72 Cr) (2009: $268,000)
(INR 1.17 Cr) relating to intangible assets under capital leases.
8 GOODWILL
(a) In fiscal 2009, the Company became eligible to receive funding from the Ontario Apprenticeship
Program. For the year ended March 31, 2010, the Company recorded $10,775,000 (INR 47.58 Cr) (2009:
$1,014,000) (INR 4.42 Cr) as a reduction of direct expenses and selling, general and administrative
expenses for these grants. As at March 31, 2010, the Company has recorded $10,818,000 (INR 47.77 Cr)
(2009: $1,014,000) (INR 4.48 Cr) as part of other receivables.
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Aditya Birla Minacs Worldwide Inc.
(b) The Company also receives payroll rebates from Nova Scotia Business Inc. if certain incremental wage
growth is achieved within the Province of Nova Scotia. As at March 31, 2010, the Company has recorded
$230,000 (INR 1.02 Cr) (2009: $642,000) (INR 2.83 Cr) as a payroll rebate receivable which is included in
other receivables. During the year ended March 31, 2010, the Company recorded $231,000 (INR 1.01 Cr)
(2009: $257,000) (INR 1.12 Cr) as a reduction of direct expenses and selling, general and administrative
expenses for this grant.
(c) In fiscal 2008, Minacs finalized an agreement with the Province of New Brunswick to receive a
forgivable loan in the amount of $2,260,000 (INR 9.98 Cr). The loan provides for forgiveness subject to
terms being met in respect of employment to be created at a contact centre in that province. To date, Minacs
has received $900,000 (INR 3.97 Cr); no amounts were received in fiscal 2010. As at March 31, 2010, the
Company has recorded $858,000 (INR 3.79 Cr) (2009: $771,000) (INR 3.4 Cr) as deferred grant and
government assistance. If the terms of the loan are not met by August 31, 2014, then the amount remaining
as deferred grant and government assistance will need to be repaid.
10 LONG-TERM DEBT
This facility bears interest at 0.65% margin over bank prime, banker’s acceptance or LIBOR rates. The total
commitment available under the senior revolving facility is $40,000,000 (INR 176.64 Cr), subject to certain
borrowing base calculations and certain other restrictive covenants. The facility is a 365-day facility and, as
collateral, the Company has given a first charge on accounts receivable. In addition this facility is
guaranteed by Aditya Birla Nuvo Limited. As at March 31, 2010, the Company is in compliance with
applicable bank covenants.
As at March 31, 2010, this facility was fully repaid. Subsequent to the year end, BNP Paribas (Canada) has released
the corporate guarantee on the debt and is proceeding with releasing their charge on the Company’s property, plant
and equipment in North America held as collateral against said facility.
Interest Rate
The weighted average interest rate on borrowings at March 31, 2010 was 1.05% (2009: 4.62%).
62
Aditya Birla Minacs Worldwide Inc.
Transactions with the Aditya Birla Nuvo Limited group of companies are as follows:
These transactions are measured at the exchange amounts of consideration established and agreed to by the
related parties.
In fiscal 2010, the Company entered into a forward contract agreement with AV Transworks Limited Canada
to provide foreign exchange protection to AV Transworks Limited Canada on their foreign exchange
liability in the amount of U.S. $24,500,000 (INR 108.19 Cr). For the year ended March 31, 2010, Minacs
has recorded a $5,699,000 (INR 25.17 Cr) (2009 – nil) gain in other comprehensive income. The derivative
asset of $7,474,000 (INR 33.01 Cr) recorded by the Company as at March 31, 2010 includes this gain.
12 SHARE CAPITAL
The Company is authorized to issue an unlimited number of common shares and an unlimited number of preferred
shares issuable in series.
The Company received $20,000,000 (INR 88.32 Cr) on February 24, 2010 and a further $10,000,000 (INR
44.16 Cr) on March 26, 2010 in cash from its parent company AV Transworks Limited Canada as
subscription for Redeemable Series B Preference Shares that were issued during the year.
The Series A Preference Shares are redeemable at face value at the option of the Company, at any time after
December 31, 2012. The Series B Preference Shares are redeemable at face value at the option of the
Company, at any time after December 31, 2014. However, there is no redemption obligation on the
Company. The preference shareholders are entitled to a cumulative dividend of 4.50% for Series A and 5%
for Series B on the outstanding preference shares. The payment of dividends is at the discretion of the
63
Aditya Birla Minacs Worldwide Inc.
Company and subject to availability of profits of the Company. The undeclared dividend as of March 31,
2010 is $1,029,312 (INR 4,55 Cr) (2009 - $2,505) (INR 0.01 Cr).
Capital Leases
Interest on obligations under capital leases accrues at various rates ranging from 6.5% to 9.2%. The
following is a schedule of future minimum annual lease payments for these capital leases:
Commitments
The Company has operating leases for its premises, furniture and fixtures and certain computer and
communications equipment, as well as minimum purchase commitments for telephone services. The
minimum annual payments for the next five years and thereafter are as follows:
Contingent Liabilities
On May 17, 2006, the former major shareholder and founder of the Company, Elaine Minacs, died. The
major shareholder of the Company then became the Estate of Elaine Minacs (the “Estate”) together with certain
entities controlled by it (the “EM Shareholders”) until August 18, 2006, when AV Transworks Limited Canada
acquired the shares of the Estate and the EM Shareholders.
The Company is the owner of a $350,000 (INR 1.55 Cr) whole life insurance policy and a $2,000,000 (INR 8.83 Cr)
term life insurance policy insuring the life of Elaine Minacs. The term life policy is a key-man policy, originally
required by the Company's previous lenders. The beneficiary of the policies when they were originally acquired was
the Company. During 2005, the beneficiary of the whole life insurance policy was changed at the direction of
Elaine Minacs. Also during 2005, the beneficiary of the term life insurance policy was changed to family members
related to Elaine Minacs at the direction of Elaine Minacs. In fiscal 2007, management changed the beneficiary back
to the Company. A legal proceeding has been commenced by the Estate against the Company claiming $5,000,000
(INR 22.08 Cr) in damages stating that the change in beneficiary was in breach of Elaine Minacs’ employment
agreement. Proceeds of $350,000 (INR 1.55 Cr) were paid into escrow pursuant to an escrow agreement with the
Estate. The proceeds of $2,000,000 (INR 8.83 Cr) were paid by the underwriter to the court to be held in trust. The
64
Aditya Birla Minacs Worldwide Inc.
Company has filed a defense and counterclaim to the initial Estate claim in August 2007 for the proceeds of the life
insurance policies and damages of $500,000 (INR 1.55 Cr). A second claim for damages of $500,000 (INR 1.55 Cr)
and for punitive damages of $100,000 (INR 0.44 Cr) was commenced by the Estate in December 2007 stating the
Company was in breach of contract related to an employment agreement. Management has not accrued a contingent
liability for the claims made by the Estate because they believe that the claims have no merit and the outcome of the
proceeding is not determinable.
During the ordinary course of business activities, in addition to the above, the Company may be a party to
claims and may be contingently liable for litigation. Management believes that adequate provisions have
been made in the accounts where required. Although it is not possible to estimate the extent of potential
costs and losses, if any, management believes that the ultimate resolution of such contingencies will not
have a material adverse effect on the consolidated financial position of the Company.
Guarantees
At March 31, 2010, the Company had $75,000 (INR 0.33 Cr) (2009: $75,000) (INR 0.33 Cr) of outstanding
letters of credit to secure customer performance guarantees.
In fiscal 2010, the Company terminated a number of employees. Total severance payments and other
charges of $1,343,000 (INR 5.85 Cr) (2009: $1,825,000) (INR 7.96 Cr) have been charged to restructur ing
costs.
In fiscal 2009, the Company closed its Saskatoon and Pickering sites and suspended operations at its
Chatham site.
In fiscal 2010, the Company approved a plan to close its Port Hawkesbury site and restart the operations at
the Chatham site.
The costs recorded in restructuring relating to lease exit costs and asset impairment in fiscal 2010 are
$2,485,000 and include a recovery of $687,000 (INR 2.99 Cr) of the prior year provision (2009: $6,452,000)
(INR 28.13 Cr).
The details of severance expenses, impaired assets, lease exist costs for the balance of the remaining lease
periods and the credits against lease exit liabilities are given below:
A reconciliation of beginning and ending accounts payable and accrued liabilities with respect to the
restructuring and other charges is as follows:
65
Aditya Birla Minacs Worldwide Inc.
Long-term accrued liabilities relating to operating leases relate to tenant inducements and free-rent
liabilities.
15 INCOME TAX
Expiry of Losses
As at March 31, 2010, the Company has non-capital losses of approximately $77,316,000 (INR 341.43 Cr)
available to reduce future years’ income for tax purposes. If not utilized, these losses will expire as follows:
Adjustments to reconcile net income (loss) to cash flows provided by operating activities include:
66
Aditya Birla Minacs Worldwide Inc.
The net change in non-cash working capital balances related to operations include:
The fair value of financial instruments, which include cash, accounts receivable and unbilled revenue, other
receivables, income taxes recoverable, accounts payable and accrued liabilities, long-term debt, income and
other taxes payable, and obligations under capital leases, approximates their carrying value due to their
short-term nature and/or variable interest rates.
Other financial instruments are long-term in nature, which include long-term receivables, accrued liabilities
relating to operating leases and deferred grant and government assistance, and due to their nature are
measured at amortized cost, which approximates their fair value.
Risk Management
67
Aditya Birla Minacs Worldwide Inc.
The Company's activities expose it to a variety of financial risks, including market risk (comprised of
foreign currency risk and interest rate risk), credit risk and liquidity risk. The Company's overall risk
management program focuses on the unpredictability of financial markets and seeks to minimize potential
adverse effects on the Company's financial performance. The Company does not purchase any derivative
financial instruments for speculative purposes.
Risk management is the responsibility of the corporate finance function. Material risks are monitored and
are regularly discussed with the Audit Committee of the Board of Directors.
The Company has significant operations in Canada and the United States. The Company’s activities result
in exposure to fluctuations in foreign currency exchange rates due to sale and purchase transactions in a
foreign currency. Increases or decreases in these rates could impact the Company’s net income.
As at March 31, 2010, the Company purchased financial instruments to hedge its foreign currency exposure
as follows:
Included in revenues are losses from foreign exchange hedging contracts amounting to $1,302,000 (INR
5.68 Cr) for the year ended March 31, 2010 (2009: $7,375,000) (INR 32.15 Cr. Included in selling, general
and administrative expenses are gains from foreign exchange hedging contracts amounting to $183,000 (INR
0.80 Cr) for the year ended March 31, 2010 (2009: loss of $718,000 (INR 3.13 Cr)). At March 31, 2010, all
contracts were designated as hedges for accounting purposes.
During the year ended March 31, 2010, a substantial portion of the Company's income was earned outside of Canada
in currencies other than the Canadian dollar. Increases in the value of the Canadian dollar can reduce net income
and declines can result in increased net income. Based on the income, a +/- 1% change in the United States dollar
would, everything else being equal, have had the following effect on the Company’s reported net income for the
year ended March 31, 2010:
68
Aditya Birla Minacs Worldwide Inc.
The table below presents the percentages of the Company's accounts receivable, accounts payable and accrued
liabilities that are denominated in US dollars:
During the years ended March 31, 2010 and 2009 the following percentage of revenues and expenses wer e
earned or incurred in US dollars:
The objective of the Company's interest rate management activities is to minimize the volatility of the Company's
income. The Company's interest rate risk primarily arises from its floating rate debt.
At March 31, 2010, the total long-term debt outstanding was $33,914,000 (INR 149.76 Cr) which is subject
to movements in floating interest rates. A +/-1% change in interest rates would, everything else being equal,
have an effect on the Company's net income for the year ended March 31, 2010 of approximately +/-
$412,000 (INR 3.10 Cr).
Credit Risk
Credit risk arises from cash held with banks and financial institutions, as well as credit exposure to clients, including
outstanding accounts receivable. The maximum exposure to credit risk is equal to the carrying value of the financial
assets. The objective of managing counterparty credit risk is to prevent losses in financial assets. The Company
assesses the credit quality of the counterparties, taking into account their financial position, past experience and
other factors.
The Company derived 50.2% or $148,000,000 (INR 645.18 Cr) of its revenues from multiple contracts with
two groups of clients in the automotive and technology sectors for the year ended March 31, 2010 (2009:
51.9% or $180,590,000) (INR 787.26 Cr).
As at March 31, 2010, multiple contracts with two clients represented 35.9% (2009: 55.8%) of the accounts
receivable balance.
The following table sets out details of the aging of accounts receivable that are outstanding and related
allowance for doubtful accounts:
69
Aditya Birla Minacs Worldwide Inc.
Included in accounts receivable and unbilled revenue are unbilled revenues of $14,652,000 (INR 64.7 Cr)
(2009: $3,340,000) (INR 14.75 Cr).
The carrying amount of accounts receivable is reduced through the use of an allowance account and the
amount of the loss is recognized in the consolidated statement of operations and deficit within operating
expenses. When a receivable balance is considered uncollectible, it is written off against the allowance for
accounts receivable. Subsequent recoveries of amounts previously written off are credited against operating
expenses in the consolidated statement of operations and deficit.
Liquidity Risk
Liquidity risk arises through the excess of financial obligations over available financial assets due at an y
point in time. The Company's objective in managing liquidity risk is to maintain sufficient readily available
reserves in order to meet its liquidity requirements at any point in time. The Company achieves this by
maintaining sufficient cash and through the availability of funding from committed credit facilities. As at
March 31, 2010, the Company was holding cash of $4,230,000 (INR 18.68 Cr).
18 MANAGEMENT OF CAPITAL
The Company defines capital that it manages as the aggregate of its shareholders' equity, cash on the balance sheet
and interest-bearing debt. The Company's objective when managing capital is to ensure that it can provide services
to its customers and returns to its shareholders.
As at March 31, 2010, managed capital comprised of shareholders' equity of $48,472,000 (INR 214.05 Cr)
(2009: $3,805,000) (INR 16.8 Cr), cash of $4,230,000 (INR 18.68 Cr) (2009: $3,087,000) (INR 13.63 Cr)
and interest-bearing debt of $35,557,000 (INR 157.02 Cr) (2009: $62,878,000) (INR 277.67 Cr).
70
Aditya Birla Minacs Worldwide Inc.
The Company manages its capital structure in a manner that ensures operating cash flow together with cash
on its balance sheet is greater than interest expense and current principal debt repayments required to be
paid.
The Company has defined contribution pension plans. The Company’s expenditures with respect to these
plans were $673,000 (INR 2.93 Cr) during the year ended March 31, 2010 (2009: $1,224,000) (INR 5.34
Cr).
20 COMPARATIVE FIGURES
Certain of the comparative figures have been reclassified to conform to the current year’s presentation.
71
Compass BPO FZE
We have audited the accompanying financial statements of Compass BPO FZE which comprise the statement of
financial position as at 31 March 2010 and the statements of comprehensive income, changes in equity and cash
flows for the year then ended, a summary of significant accounting policies and other explanatory related notes to
financial statements set out on pages 3 to 14.
Management is responsible for the preparation and fair presentation of these financial statements in accordance
with International Financial Reporting Standards (IFRS). This responsibility includes: designing, implementing
and maintaining internal control relevant to the preparation and fair presentation of financial statements that are
free from material misstatements, whether due to fraud or error, selecting and applying appropriate accounting
policies; and making accounting estimates that are reasonable in the circumstances.
Auditor's responsibility
Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our
audit in accordance with International Standards on Auditing. Those standards require that we comply with
relevant ethical requirements and plan and perform the audit to obtain reasonable assurance whether the financial
statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence
about the amounts and disclosures in the financial statements. The procedures selected depend on our judgment,
including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or
error. In making those risk assessments, we consider internal control relevant to the entity's preparation and fair
presentation of the financial statements in order to design audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal control.
An audit also includes evaluating the appropriateness of accounting principles used and the reasonableness of
accounting estimates made by management, as well as evaluating the overall presentation of the financial
statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit
opinion.
Opinion
In our opinion, the accompanying financial statements give a true and fair view of the financial position of
Compass BPO FZE as at 31 March 2010, and of its financial performance and it’s cash flows for the year then
ended in accordance with International Financial Reporting Standards (IFRS).
The accompanying financial statements comply with the U.A.E. Commercial Companies Law No. 8 of 1984 (as
amended by Law No. 13 of 1988).
72
Compass BPO FZE
CURRENT ASSET
Trade and Other Receivables 7 167,602 697,899
Prepayments 8 22,332 63,260
Cash and Cash Equivalents 9 56,092 36,707
EQUITY
Share Capital 100,000 100,000
Head Office Current Account 670,135 171,689
Retained Earnings (loss) (763,419) 294,983
LIABILITIES:
CURRENT LIABILITIES
Trade and Other Payables, including Derivatives 10 126,631 206,612
Provisions 11 119,996 123,877
Manager
73
Compass BPO FZE
31-03-10 31-03-09
Note Dirhams Dirhams
Manager
74
Compass BPO FZE
(Amount in Dirhams)
CURRENT YEAR
75
Compass BPO FZE
31-03-10 31-03-09
Dirhams Dirhams
Cash flows from Operating Activities
(Loss)/ Profit for the period (1,058,402) 824,622
Adjustment for :
Depreciation of property, plant and equipment 70,069 73,346
Interest expense 5,483 5,734
Loss on sale of Property, Plant & Equipments 13,447 Nil
Cash and cash equivalents at the beginning of the period 36,707 62,897
Cash and cash equivalents at the end of the period 56,092 36,707
76
Compass BPO FZE
1. Reporting entity
'Compass BPO FZE', here-in-after called 'the Establishment' is incorporated in the RAK Free Trade Zone,
Ras Al Khaimah, as a Free Zone Establishment in accordance with the laws and regulations of the Free Zone
Authority.
The shareholder of the establishment is M/s. Compass BPO Limited, United Kingdom, who is the registered
holder of One Share of AED 100,000/-.
During the year the name of the holding company was changed from "Compass Connections Limited" to
"Compass BPO Limited".
2. Reporting Period
These financial statements cover the year from 01 April 2009 to 31 March 2010. The previous year figures
are for the year 01 April 2008 to 31 March 2009.
3. Basis of Preparation
a) Statement of Compliance
The financial statements of the establishment have been prepared in accordance with International
Financial Reporting Standards (IFRS), which includes International Accounting Standards (IAS) and
its Interpretations.
b) Basis of Measurement
The financial statements have been prepared on the historical cost basis.
The accounting policies adopted are consistent with those of the previous financial year, except that the
establishment has adopted the following new and amended IFRS and IFRIC interpretations as on 01 January
2009:
a) Associated Companies
Associated Companies are defined as those companies in which the establishment holds a long term
equity interest, has representation on the board of directors and is in a position to exercise significant
influence in their management, but not control, over the financial & operating policies.
b) Financial Instruments
77
Compass BPO FZE
(iii) Depreciation
Depreciation is calculated to write-off the cost of property, plant & equipment on the
straight line basis over their estimated useful lives as follows:
Number of years
Motor Vehicle 3 years
Furniture & Fixtures 3 years
Office Equipments 3 years
d) Provisions
Provisions are recognized when the establishment has a present legal or constructive obligation as a
78
Compass BPO FZE
result of past events, and when it is probable that an outflow of resources will be required to settle
the obligation, and when a reliable estimate of the amount can be made. Provisions are reviewed at
each balance sheet date and adjusted to reflect the current best estimate.
e) Impairment of assets
Transactions in foreign currencies are translated to UAE Dirhams at the foreign exchange rate ruling
at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies at
the balance sheet date are translated to UAE Dirhams at the foreign exchange rate ruling at that date.
Non-monetary assets and liabilities denominated in foreign currencies that are stated at fair value are
translated to UAE Dirhams at the foreign exchange rates ruling at the dates the values were
determined. All differences are taken to profit or loss.
g) Revenue Recognition
Revenue is recognized when it is probable that the economic benefits will flow to the establishment
and when the revenue can be measured reliably, on the following basis :
Cash and cash equivalents for the purpose of cash flow statement consist of cash in hand and cash at
bank.
Furnitur
Motor e Office
& Equipme
Vehicle Fixture nt Total
Cost or Deemed
Cost :
As at 01 April
2009 154,740 36,874 31,564 223,178
Additions during the
year Nil Nil 12,849 12,849
As at 31 March
2010 Nil Nil 11,140 11,140
As at 31 March
2010 Nil Nil 3,823 3,823
Carrying Amounts :
As at 31 March
2010 Nil Nil 7,317 7,317
As at 31 March
2009 64,475 15,364 19,456 99,295
80
Compass BPO FZE
As at 31 March
2009 154,740 36,874 31,564 223,178
As at 31 March
2009 90,265 21,510 12,108 123,883
Carrying Amounts :
As at 31 March
2009 64,475 15,364 19,456 99,295
As at 31 March
2008 116,055 27,655 19,396 163,106
31-03-10 31-03-09
Dirhams Dirhams
7. Trade and Other Receivables
167,602 697,899
8. Prepayments
22,332 63,260
56,092 36,707
126,631 206,612
* Due to Associates
39,716 34,280
The parent company - Compass BPO Ltd U.K's account is reclassified from Due to Associates to
Head Office Current Account in the equity.
11. Provisions
119,996 123,877
31-03-10 31-03-09
Dirhams Dirhams
12. Other Income
82
Compass BPO FZE
696,713 750,247
a) Credit Risk
Financial assets, which potentially subject the establishment to credit risk, comprises mainly of
bank balances and receivables. Bank balances are with regulated financial institutions. The
receivables are fully recoverable as per management representation.
The establishment does not utilise any type of facilities from banks or financial institutions.
There were no significant exchange rate risks as most of the financial assets and liabilities are
denominated in UAE Dirhams & US Dollars except the due to associates' balances. The U.K.
associate Company's account is denominated in U.K. Pounds and the Indian associate Company's
account is denominated in Rupees.
83
Compass BPO FZE
d) Liquidity Risk
The table below summarized the maturity profile of the establishments' financial liabilities based on
contractual payment basis.
Financial instruments comprise financial assets and financial liabilities. Financial assets of the
establishment include bank balances and cash and trade receivables. Financial liabilities of the
establishment include loans from Directors, accounts payable and due to associates. The fair values of the
financial assets and liabilities are not materially different from their carrying values unless stated
otherwise.
The establishment enters into trade transactions with another firm or persons that fall within the definition
of related party as contained in International Financial Reporting Standards (IFRS).
Certain figures of the financial statements for the year-ended 31 March 2009 have been reclassified to be
consistent with the current year's classification.
84
Compass BPO Inc.
Profit & Loss Account for the period ended 31 March 2010
Salary Revenue
468,850 527,428 1,135,919 1,416,001
Consultant Charges
320,832 474,056
Travel
107,389 104,610
Office Costs
89,062 92,008
Marketing
35,990 28,511
Audit Fees
9,270 -
Legal & Professional Fees
2,020 7,205
Insurance
9,432 10,060
Bad Debts
- 34,664
Taxes & Fees
3,786 5,017
Depreciation
8,338 7,150
Bank Charges
710 1,609
Tax for the Year
24,200 43,536
85
Compass BPO Inc.
Computer
Capital Stock
100 100 Equipment
Less: Depreciation
4,659 6,624
Amount owed to holding
company 249,696 419,185
Accounts Payable Office Equipments
36,085 40,530
Other Liabilities Less: Depreciation
10,629 54,998 1,287 1,174
Provision for taxation
24,200 48,408
Furnitures &
Fixtures
Retained Earning Less: Depreciation
165,302 109,261 4,252 6,066
Bank
10,648 147,629
Debtors
448,010 465,088
Prepaid
17,156 45,901
86
Compass BPO Inc.
468,850
2 Office Cost :
400-150 Staff Welfare Exps 5,445
410-080 Computer Exps-Others 4,064
410-090 Courier Charges 4,882
410-200 Membership & Subscription 5,583
410-220 R & M - Office Equipment 1,358
410-230 R & M - Computers 5,193
410-240 R & M - Others 204
410-260 Rent 4,500
410-250 Rates & Taxes 2,592
410-290 Software Exp. 6,942
410-310 Tel Line Ongoing Cost 1,536
410-370 Tel Cost - Mobile 12,830
410-400 Tel. Cost Internet 8,287
410-410 Others 19,256
410-440 Meetings & Conferences 2,160
600-150 Staff Welfare Exps 266
610-200 Membership & Subscription 853
610-290 Software Exp - Direct 480
610-310 Tel Line Cost - Direct 2,630
89,062
3 Audit Fees :
410-020 Audit Fees 9,270
Legal &
4
Professional
Fees : 410-
Legal & Professional Fees 2,020
160
87
Compass BPO Inc.
5 Travel Etc. :
400-090 Flights Charges 25,735
400-110 Conveyance Local 13,056
400-130 Hotel Accomodation 15,721
400-190 Trl & Liv Travel 49,131
600-090 Flights Charges - Direct 654
600-110 Conveyance Local - Direct 181
600-130 Hotel Accom - Direct 1,459
600-190 Trl & Liv Travel 1,452
107,389
6 Marketing :
400-140 Marketing Cost 27,764
410-040 Business Prom/Ent 7,834
410-420 Entertain - B'ness Dev 347
610-040 Business Prom/Ent 45
35,990
7 Revenue
300-010 Staff Charges 1,745,770
320-020 Consulting-US
Consulting (DM) 52,035
Consulting (MEL) 79,624
Consulting (TERRI) 76,210
Consulting (VICKY) 119,910
Consulting (JOEL) 46,230
Consulting (CHERYL) 35,760 409,769
88
Compass BPO Inc.
478,127
448,010
2 Prepaid :
150-070 Prepaid Expenses 17,156
17,156
3 Other Liabilities :
150-040 Advance Account 7,320
150-105 Melinda Phillips Loan A/c (400)
240-060 Out.Liabilities for Exps 3,709
10,629
89
Compass Business Process Outsourcing Private Limited
Your Directors have pleasure in presenting the 12th Annual Report and the Audited Accounts for the year ended 31 st
March 2010.
FINANCIAL RESULTS:
(Rupees In Lacs)
31.03.2010 31.03.2009
Sales and Other Income 2409.23 2558.57
DIVIDEND
The Company has made profits during the year. However it has been decided to retain the profits and hence the
directors do not recommend any dividend for the year.
DIRECTORS’RESPONSIBILITY STATEMENT
Pursuant to the requirement under Section 217(2AA) of the Companies Act, 1956 with respect to Directors’
Responsibility Statement, it is hereby confirmed:
(i) That in the preparation of the annual accounts for the financial year ended 31.03.2010 the applicable
accounting standards have been followed along with proper explanation relating to material departures;
(ii) The Directors had selected such accounting policies and applied them consistently and made
judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state
of the affairs of the Company at the end of the financial year and of the profit or loss of the Company
for that period;
(iii) The Directors had taken proper and sufficient care for the maintenance of adequate accounting records
in accordance with the provisions of this Act for safeguarding the assets of the Company and for
preventing and detecting fraud and other irregularities.
(iv) That the Directors have prepared the accounts for the financial year ended 31.03.2010 on a ‘on going
concern’ basis.
90
Compass Business Process Outsourcing Private Limited
Since your Company is a 100% export oriented unit and only operates in data processing and development, the
information as required under Section 217(1)(e) of the Companies Act, 1956 read with The Companies (Disclosure
of Particular in the Report of the Board of Directors) Rules, 1988 are reported below to the extent applicable. The
company has not deployed and imported Technology to carry out its process. The consumption of energy is
minimal. The Company will take suitable steps, if required, in future for reduction of consumption of energy.
FOREIGN EXCHANGE
PARTICULARS OF EMPLOYEES
There were no employees covered by the provisions of Section 217 (2A) of the Companies Act, 1956 read with
companies (Particulars of Employees) Rules, 1975, whose particulars are required to be given.
AUDITORS
The Auditors of the Company M/s. KDS & Co., Chartered Accountants, Mumbai retire at the conclusion of ensuing
Annual General Meeting and S. V. Ghatalia & Associate be appointed as Auditor for FY 2010-11.
DEPOSITS
The Company has not accepted any deposit during the financial year.
ACKNOWLEDGEMENTS
Your Directors thank Compass BPO Ltd., UK for their continuous support and guidance given to the Company.
Your Directors are also thankful to the various Governments Agencies and Banks for their valuable support. The
Directors also express their appreciation to all Employees, Staff and Shareholders of the Company.
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Compass Business Process Outsourcing Private Limited
A ud it ors' R ep ort
To
Th e Memb ers o f
Co mp ass Bus in ess P ro cess O utso ur cing P r iv at e Lim i ted
2 . We h ave co ndu cted our aud it in accor d an ce w i th Au diting S t and ar ds G en er al l y Ac cep ted
in Ind ia . Tho se S t an d ar ds r eq uire th at w e p lan and p er fo rm th e aud it to ob tain re ason ab le
assu r an ce ab ou t wh e th er th e fi nan cial st atemen ts are fre e o f ma ter i al m i ss ta tem en t(s) . An
au di t in clude s ex a min ing , on a test ch eck b asi s, ev iden ce su p p o rtin g the a moun ts an d
disc lo su r es in th e F in an cial S t at em ent s. An au d it also in clud es as se ssing th e ac co un t in g
p r in cip l es u sed and sign i fic an t est im a te s m ad e b y m anag em en t , as we ll as ev alu at ing th e
ov er al l fin an ci al s ta tem en t p re sen t at io n . W e b el iev e tha t our aud i t p r ov id es a re ason ab le
b asis fo r ou r op inion .
3 . We r ep or t th at :
(b) In the case o f th e P ro fi t & Lo ss A c cou nt , o f th e P r o fit for th e year end ed on that
date .
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Compass Business Process Outsourcing Private Limited
ii. Th e comp an y is a s er v ice comp an y p r im ar ily r ender ing b ack o ffic e d ata
p r ocess ing ser vi ces. Accor d ingl y it do es no t h old an y p h ysi ca l in v en tor ies.
Th us clau se 4 ( i i) o f th e co mp ani es ( Aud itor s R ep or t) O r der, 2 003 ( ‘the O r der’ )
is not ap p licab le.
co ntr a ct ed r a te s ar e r ea son ab le hav ing r egar d to the term s o f con tr ac t and n atur e o f
the serv ic es p r ov id ed .
v i. Th e Comp an y ha s not a ccep t ed an y dep osits fr om the p ub lic and co nseq uent l y, th e
dire ct iv es i ssu ed b y the R eserv e B an k o f In d ia, t he p r ov is io n o f th e S ec tion s 5 8 A an d
58 AA o f th e Comp an ies A c t, 1 95 6 and the r u les fr am ed th er e un d er ar e n o t ap p licab le.
v ii . In o ur op in io n, Th e Co mp an y h as an In tern al Au di t s ys t em h owev er th e s am e ne ed s
to b e s tr en gth en ed an d cov erag e n e ed s to b e ex t end ed to m ake i t com m en sur at e w ith
the s ize & n atur e o f i ts b usin ess .
v ii i. A cco rd ing to in fo r mat ion an d exp lan at io n g iven to us, th e C en tr al Gov er n men t ha s
no t p rescr ib ed th e m ain t enan c e o f co st r ecor d s und er se ct io n 2 09 (1 ) (d ) o f th e
Co mp an ies Act , 1 9 56 .
ix. Acco rd in g to th e in for m at io n & ex p lan a tion s g iv en to u s , and on the b asi s o f ou r
exa m in at io n o f th e b oo ks of accou n ts and o th er docu men ts , The Comp an y i s
gen er all y regu l ar in d ep osi ting w ith ap p r op r iate au th or ities und isp ut ed st atu tor y
dues in c lud in g P r ov id en t Fu nd d u es, In co me Tax, S al es Tax , Cus to m s D u t y,
Inv es tor Ed uca tion an d P r ot ect ion F und , We al th Tax an d an y o th er m at er i al
st atuto r y d u es ap p licab le to it.
Acco rd in g to th e in for mat ion & exp lanat ion g iv en to us, n o u ndisp ut ed dues
p ayab l e in r esp ec t o f P r ov id ent F und , In com e t ax, S al es t ax , We al th T ax, S er v ic e
Tax, Custom s D u ty, Ex cise D ut y and C ess w er e in arr ear s, a s at 3 1 s t March 2 01 0
for a p er io d o f mor e th an six mo nth s fr o m th e d a te the y b ec am e p a yab le .
Acco rd in g to th e in for m ation & exp lan at io n s given to u s, th er e ar e n o d ues in
resp ect o f In co m e Tax , S al es T ax, W ea lth T ax , S er v ice T ax , Cus tom s D u t y an d
Excis e D ut y & C es s th at h ave n ot b een d ep osi te d wi th th e ap p r op riated au th or it ies
on ac cou nt o f an y d isp ute w i th the Co mp an y.
x. In our o p inio n, in th e cur ren t fin an ci al ye ar , th e ac cu mu la ted los se s ar e no t more than
fi ft y p er c en t o f its n et wo r th. T he co mp an y h as n ei th er incu r r ed an y cash losses in th e
cu rr en t fin an cial year nor in th e i mm ed iat el y p r o ce ed ing fin an cia l ye ar .
xi. In o ur op inion an d exp lan ation g iven to u s the Com p an y h a s not de fa ul ted in
r ep a ym en t o f d ues to a b ank.
xii . Th e Comp an y ha s no t an y g r anted lo an s & ad van ces on th e b as is o f se cur i t y b y w a y
o f p led g e o f sh ar es, d eb en tu r es & other se cur it i es. Acco rd in g l y, cl au se 4 ( xi i) o f th e
ord er is no t ap p licab le.
xii i . T he Co mp an y is no t a Ch i t Fun d , N id hi Mu tual B en e fi t F und or a S oc iet y.
Ac cor ding l y, c lau se 4 (x ii i) o f th e or d er is n o t ap p licab le .
xiv . A ccord in g to th e in form a tion & exp l an at ion s g iv en to us , th e Co mp an y i s not
dea ling or tr ad ing in sh ar es, secur ities, d eb en tur es & oth er inv es tm en ts. Ac cor d ing l y,
cl aus e 4 ( xiv ) o f th e o rd er is not ap p licab le.
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Compass Business Process Outsourcing Private Limited
xv. Ac co rd ing to th e in for m at ion & exp lan at io ns given to us , th e Com p an y h as n o t giv en
an y gu ar ant ee for lo an s t ak en b y o ther s fro m b an ks o r fin an cial in st itu tio n s.
Acco rd in g l y, clau se 4 ( x v ) o f th e o rd er is no t ap pli cab le .
xvi. Th er e i s no t er m lo an ou tst an d ing du r ing th e cu rr en t fi n an ci al year .
xviii . A ccord in g to th e in for m atio n & exp l an at io n s g iv en to u s and th e ov er all
exa m in at io n o f th e Bal an ce S heet o f th e Co mp an y, we r ep or t th at n o fun d s r aised o n
the shor t- t er m b asis h av e b een used for lon g - te rm inv es tm en ts. N o long -t er m fund s
hav e b een used to fin an ce sh or t- term assets ex ce p t th e p er man en t wor k ing c ap i ta l.
xviii . Th e C o mp an y ha s no t m ade an y p r e fer en tial a llot m en t o f th e sh ar es to p ar ti es &
co mp an ie s cov er ed in th e r eg ist er m ain tain ed u nd er se ct io n 301 of th e Co mp an ie s
Ac t 1 95 6 . Ac cor d ing l y, cl aus e 4 (x v iii) o f th e o r der is no t ap p licab le .
xix . Th e Comp an y ha s no t issu ed an y d eb entu r es . A ccor d in g l y, c lau se 4 (x ix) o f th e or der
is not ap p licab le.
xx. Th e Comp an y h as no t r ai sed an y mon e y b y p ub lic i ssu e dur in g th e fin an cia l ye ar.
Ac cor ding , cl aus e 4 ( xx) o f th e or d er i s no t ap p licab l e.
xxi. A ccor d ing to th e in for m ation & exp lanat ion s to us , no fr au d on or b y th e Co mp an y
has b een n o t iced or r ep ort ed d ur in g th e yea r.
xxii. Th e o th er clau ses o f th e C omp an ies ( Au ditor ’s R ep or t) O r der , 2 00 3 are not
ap p licab l e to th e C omp an y fo r th e fi n anci al year und er aud it .
Fo r a n d on b eha lf o f
K D S & C o.
Char t er ed Accoun tan ts
K eta n D . S a iy a
P ar tn er
Memb er ship N o . 4 9 176
Fir m R egn . N o. – 1 17 073 W
P lace : - Mu mb ai
D ated : - 2 2 n d Ap ril, 2 0 10
95
Compass Business Process Outsourcing Private Limited
Shareholders' Funds
Loan Funds
APPLICATION OF FUNDS
Fixed Assets 4
0
96
Compass Business Process Outsourcing Private Limited
-
Significant Accounting Policies 13 0.25
and Notes on Accounts
97
Compass Business Process Outsourcing Private Limited
PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED ON MARCH 31, 2010
2009-10 2008-2009
INCOME
EXPENDITURE
Schedules referred to herein form an integral part of the Profit and Loss Account
98
Compass Business Process Outsourcing Private Limited
99
Compass Business Process Outsourcing Private Limited
SHARE CAPITAL
31.03.2010 31.03.2009
Authorised (Rs.) (Rs.)
Notes:
1. Out of 6,93,100 paid-up equity shares 6,93,080 equity shares are held by the holding company
Compass BPO Limited, UK
2. Out of above 93,100 equity shares are allotted as fully paid-up pursuant to a contract for
consideration other than cash.
3. Preference Shares carry dividend of 10% and are redeemable at par in one installment at any
time before 10 years from 27th March 2000, the date of allotment.
4. The entire 1,05,000 fully paid-up preference shares are held by the holding company Compass
BPO Limited, UK.
SCHEDULE 2
Cash Credit from IDBI Bank Limited (Note 1 & 2) 637,140 75,324
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Compass Business Process Outsourcing Private Limited
Notes:
1. The Cash Credit facility is secured by hypothecation of Fixed Assets, Book Debts, Claims and
other receivables.
2. The Cash Credit is also guaranteed by Mr. Hitesh Dixit and the holding company Compass
BPO Limited, UK.
SCHEDULE 3
SCHEDULE 4
FIXED ASSETS
Gross Block Depreciation Net Block
Additions
As on / Adj. Disposals As on As on Disposals For the As on As on As on
Particulars during during during 31-Mar- 31-Mar- 31-Mar-
1-Apr-09 the the 31-Mar-10 1-Apr-09 the Year 10 10 09
Year Year Year
Rupees Rupees Rupees Rupees Rupees Rupees Rupees Rupees Rupees Rupees
Computers 47,403,947 553,898 15,477,416 32,480,429 39,505,268 15,046,734 4,666,133 29,124,667 3,355,762 7,898,679
Office Equipment 6,597,690 8,637,418 4,200,312 11,034,796 5,886,726 4,167,262 1,571,430 3,290,894 7,743,902 710,964
Vehicles 3,046,005 - 493,584 2,552,421 1,886,487 493,586 604,967 1,997,868 554,553 1,159,518
Furniture and Fixtures 6,685,114 6,847,922 5,893,052 7,639,984 5,786,997 5,546,669 1,803,353 2,043,681 5,596,303 898,117
TOTAL 63,732,756 18,663,228 26,064,364 56,331,620 53,065,478 25,254,252 8,864,548 36,675,776 19,655,844 10,667,278
Previous Year 59,417,895 4,636,958 322,097 63,732,756 45,928,858 322,097 7,458,717 53,065,478 10,667,278 -
SCHEDULE 5
31.03.2010 31.03.2009
SUNDRY
DEBTORS (Rs.) (Rs.)
Debts outstanding for less than six months TOTAL 1,334,632 3,908,736
(Unsecured Considered Good)
Note : The entire outstanding of Rs. 13,34,632 (Last year Rs.39,08,736/-) was due from holding
company Compass BPO Limited, UK
101
Compass Business Process Outsourcing Private Limited
SCHEDULE 6
CASH AND BANK BALANCES 31.03.2010 31.03.2009
(Rs.) (Rs.)
Cash on hand (including Foreign currency on hand) 154,152 132,186
3,508,934 3,208,695
Note 1 : Maximum balance in Current Account was Rs. 1,19,23,269 (Prevoius year Rs. 1,37,21,961)
Note 2 : The fixed deposit of Rs. 5,35,000/- is under lien to Bank for issuing bank guarantee in favour
of customs authorities.
SCHEDULE 7
LOANS AND ADVANCES 31.03.2010 31.03.2009
(Unsecured, considered good) (Rs.) (Rs.)
SCHEDULE 8
CURRENT LIABILITIES 31.03.2010 31.03.2009
(Rs.) (Rs.)
Creditors for Expenses 6,167,244 10,256,258
Creditors for Capital Goods* 9,418,710 9,408,537
Due To Holding Company, Compass
BPO Ltd, UK 1,687,594 5,219,749
Other Liabilities 11,667,693 12,037,125
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Compass Business Process Outsourcing Private Limited
SCHEDULE 9
PROVISIONS 31.03.2010 31.03.2009
(Rs.) (Rs.)
Provision for Taxation 2,590,800 1,479,800
Provision for Provident Fund Contribution 442,409 480,490
Provision for Gratuity 1,276,301 1,251,610
Interest accrued, but not due, on Fixed deposit with Bank 51,651 68,480
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Minacs Kft.
Sources of Funds
I Shareholders' funds
II Loan Funds - - - -
Application of Funds
I Fixed Assets
Property, plant and equipment, net 166,354 0.00 - -
Deferred development costs 134,936 0.00 - -
301,290 0.01 - -
II Current assets
Notes
FE Conversion Rate for HUF to INR as at the end of the year 0.2279 0.2226
105
Minacs Kft.
Unaudited Profit and Loss Account for the year ended 31st March, 2010
Expenditure
106
Minacs Kft.
Future - - - -
Net income (loss) for the period 14,651,165 0.36 10,537,161 0.28
Notes
Average FE Conversion Rate for HUF to INR
for the Financial Year 0.2466 0.2552
107
Minacs Kft.
I. General information
1. Business name:
The name of the Company
In Hungarian: MINACS Telefoninformációs Szolgáltatások Kft
In English: MINACS Call Center Services Limited
The MINACS Ltd. is going to consolidate by the Minacs Worldwide GmbH. The consolidated report can be seen at
the seat of the Company.
108
Minacs Kft.
The Company is only pursuing authorised activities owning the administrative license.
Other:
The financial year of the Company differs from the calendar year. The statement date is March 31, 2010. The date of
the preparation of the annual report is April 10, 2010.
Under the principle of completeness, the annual report includes those business activities which happened between
the year end and the date of report preparation, and could affect the financial figures in the balance sheet and the
profit & loss.
The Company prepares a simplified annual report, accordingly it keeps double entry. The Company prepares an ‘A’
type annual financial statement, with the so called balance-like arrangement. The company prepares its profit and
loss statement by the ‘A’ method, the cost summary method. It has formed its inner registrations, sub ledger and
chart of accounts, and their joining points in accordance with it.
The data of the annual report are expressed in thousand HUF, if not indicated otherwise.
The Company performs its activity in compliance with the regulations of the accounting law. The Company has
established its policy for cash treatment, inventory taking, and asset and liability valuation in accordance with the
accounting law.
The Company’s Accounting Policy has set out that under the principle of going concern the enforcement of (the
principle of integrity, authenticity, transparency, comparison, continuity, consistence, prudence, gross accounting,
individual valuation, accrual and deferral, priority of content over form, materiality and comparison of cost and
profit) should be ensured.
It is considered to be a significant error if in the year of revealing the error during different checks considering a
given business year (separately each year), the value of the revealed errors and margins of error (independent of
indication), increasing – decreasing profit and equity, the joint amount is above the 1% of the gross sum.
It is considered an error influencing true and fair picture to a great extent if the contracted value of the errors and
margins significantly alters the equity. It is considered to be such an error in all cases when following the settling out
there is more than 20% change in the equity reported in the balance sheet of the previous financial year.
In the case of the year-end assets and liabilities incurred in foreign currency or exchange are going to be revaluated
irrespective of the amount according to published exchange rates of the HNB.
109
Minacs Kft.
1/ Intangible assets
Intangible assets are disclosed at purchase or production value, reduced by accumulated depreciation, and at a value
not exceeding their known market value. The calculation of depreciation is to be performed on a straight-line basis,
by the application of the depreciation rates required for writing-off the intangible assets over a period equal to the
expected useful life of the assets. The expected useful life of the intangible assets by categories:
2/ Tangible assets
Tangible assets are disclosed in the balance sheet at purchase or production value, reduced by accumulated
deprecation. The calculation of deprecation is performed on a straight line basis, by the application of the
deprecation rates required for the writing off of the tangible assets over a period equal to the expected useful life of
the assets:
3/ Financial investments
Investments representing ownership share in economic associations are disclosed at purchased price in the case of
acquisition, while in the case of establishment at the value set out in the Articles of Association, until their market
value does not permanently decrease below book value. In this case they are valued at the market value known as
the date of preparation of the balance sheet.
Transactions in foreign currency are accounted at the exchange rate of MNB as the date of the transaction. The
exchange gain or loss arising from the difference between the exchange rate as at the date of the financial fulfilment
and the transaction are disclosed in the profit and loss statement.
5/ Sales revenue
Net sales revenues are accounted as at the date of fulfillment, and are exclusively of VAT.
6/ Corporate tax
The corporate tax liability of the Company is accounted in the profit and loss statement on the basis of the
regulations in the reported year.
The Company’s accounting policy did not change during the year.
110
Minacs Kft.
There has been no such event since the date of the balance sheet, which would have a material impact on the
Company’s financial statement as at 31 March, 2010. The liquidity of the Company was during the financial year
insured.
3 Liquid assets
18,377,616
Commerzbank Hungary 83,147,371 1.89 0.41
Petty cash 69,222
973,153 0.02 0.00
Total: 84,120,524 1.92 18,446,838 0.41
4 Receivables
Trade Receivables 101,752,475
97,421,621 2.22 2.27
Employee Advances Receivables - - 45,000
0.00
Total: 97,421,621 2.22 101,797,475 2.27
5 Other Receivable
Value added tax 16,003,513
12,267,783 0.28 0.36
Income & Other Taxes Payable 680,086
1,492,000 0.03 0.02
Total: 13,759,783 0.31 16,683,599 0.37
6 Liabilities
Current Liabilities
111
Minacs Kft.
V. Notes to Profit & Loss account year ending March 31st, 2010
2 Payroll Related
3 Other Costs
4 Professional Services
5 Office Cost
112
Minacs Kft.
113
Minacs Limited
Shareholders' funds
Called up share capital 4 1,000 0.01 1,000 0.01
Profit and loss account 267,698 2.04 183,796 1.45
Exchange fluctuation on Translation (0.23) (0.09)
268,698 1.82 # 184,796 1.37
Loan Funds - - - -
I
I Application of Funds
Fixed assets - - - -
Current assets
Debtors 6 707,809 4.80 942,614 6.99
Cash at bank and in hand 146,936 1.00 141,644 1.05
854,745 5.80 1,084,258 8.04
Less Current liabilities 7 (601,324) (4.08) (914,739) (6.78)
Net Current Assets 253,421 1.72 169,519 1.26
Notes:
See accompanying notes to the financial statements
FE Conversion Rate for GBP to INR as at year
end 67.87 74.16
Deepak
Place: Toronto Patel
Date: April 23, 2010 CEO
114
Minacs Limited
Profit and Loss Account for the year ended 31st March, 2010
Direct costs
Wages and salaries 1,574,508 12.00 1,584,086 12.54
Employer's NI contributions 152,017 1.16 162,570 1.29
Staff pension scheme costs 10,127 0.08 10,998 0.09
Placement & interview expenses 3,800 0.03 8,839 0.07
Staff training 1,168 0.01 5,622 0.04
Travel expenses 27,035 0.21 55,924 0.44
Health & safety costs 1,676 0.01 1,938 0.02
Total 1,770,332 13.49 1,829,976 14.48
Gross profit 621,862 4.74 525,283 4.16
Administration
Wages and salaries 244,300 1.86 270,268 2.14
Rent payable 29,100 0.22 10,150 0.08
Printing, postage and stationery 4,539 0.03 2,586 0.02
Telephone 3,602 0.03 7,193 0.06
Motor vehicle leasing - - 1,774 0.01
Entertaining 2,443 0.02 1,144 0.01
Legal and professional 5,430 0.04 9,475 0.07
Accountancy 38,210 0.29 44,390 0.35
Audit 6,000 0.05 6,000 0.05
Bank charges 9 0.00 262 0.00
Exchange rate (gain)/loss 639 0.00 (59,276) (0.47)
Payroll services 6,000 0.05 6,500 0.05
General expenses (240,918) (1.84) (238,219) (1.89)
Recruitment costs - - 603 0.00
Subscriptions 4,681 0.04 1,044 0.01
Management Charges 401,500 3.06 375,000 2.97
505,534 3.85 438,894 3.47
Financial
Other operating income (142) (0.00) (6,514) (0.05)
(142) (0.00) (6,514) (0.05)
Total expenses 505,392 3.85 432,380 3.42
115
Minacs Limited
Notes
Please see accompanying notes to the financials
FE Conversion Rate for GBP to INR for the
Financial Year 76.1983 79.1328
116
Minacs Limited
1. Accounting policies
117
Minacs Limited
Authorised
Equity Shares
118
Minacs Limited
6 Debtors
Trade Debtors 700,210 4.75 697,316 5.17
Amounts owed by group undertakings 5,104 0.03 148,182 1.10
Other debtors 1,126 0.01 82,355 0.61
Prepayments and accrued income 1,369 0.01 14,761 0.11
7 Current lilabilites
Amount falling due within one year
Trade Creditors 5,923 0.04 12,188 0.09
Amounts owed by group undertakings 359,437 2.44 705,009 5.23
Corporation Tax 32,651 0.22 26,080 0.19
Other taxes and social security costs 153,452 1.04 151,022 1.12
Accruals and deferred income 49,861 0.34 20,440 0.15
Receivables from
Minacs Kft, Hungary 5,104 0.03 76,659 0.57
Minacs GmbH, Germany (8,846) (0.06) 71,523 0.53
(3,742) (0.03) 148,182 1.10
Payable to
119
Minacs Limited
120
Minacs Worldwide S A De C V
Balance Sheet
As at March 31 2010 As at March 31 2009
Pesos INR/ Cr Pesos INR/Cr
I Sources of Funds
Shareholders' funds
Share capital
Shares issued 50,000 0.02 50,000 0.02
Cumulative translation adjustment - -
Deficit (50,000) (0.02) (50,000) (0.02)
- - - -
Debt - - - -
Total - - - -
II Application of Funds
Fixed Assets - - - -
Current assets
Cash and cash equivalents - - - -
Accounts receivable - - - -
Prepaid expenses - - - -
- - - -
Less Current liabilities - - - -
Bank Indebtedness - - - -
Other liabilities - - - -
Net current Assets - - - -
Total - - - -
Note
Conversion rate for Pesos to INR 3.62 3.62
121
Minacs Worldwide S A De C V
Revenues - - - -
Direct expenses - - - -
Note
Conversion rate for Pesos to INR at 31 March, 2010 3.619 3.620
122
Minacs Worldwide S A De C V
1 NATURE OF BUSINESS
Use of Estimates
The preparation of these financial statements in conformity with Canadian generally accepted accounting
principles requires management to make estimates and assumptions. These estimates and assumptions affect
the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses during the year. Actual results
could differ from those estimates.
Revenue Recognition
The Company derives revenues through the provision of direct resources to its customers and consulting
arrangements. Payment terms may vary by contract. The Company recognizes revenues at the time services
are performed and when the price is fixed or determinable and collection is reasonably assured.
The majority of revenues are recognized based on the billable hours or minutes rendered as defined in the
client contract. The rate per billable hour or minute charged is based on a predetermined contractual rate as
agreed in the underlying contract. This contractual rate fluctuates based on the Company’s performance
against certain predetermined criteria related to quality and performance. Some clients are entitled to
penalties when the Company is not in compliance with certain obligations as defined in the client contract.
Such penalties are recorded as a reduction of revenues as incurred based on a measurement of the
Company’s obligation under the terms of the client contract.
For some contracts the Company is paid by its customer based on achievement of certain level of revenues
or other client-determined criteria specified in the client contract such as full time equivalents, units
processed or completed contacts. The Company recognizes this performance-based revenue by measuring
its actual results against the performance criteria specified in the contracts.
The Company classifies reimbursements received from customers for out-of-pocket expenditures as
revenues. The Company incurs out-of-pocket expenditures such as expenses related to travel, postage and
telecommunications costs for which customers have agreed to reimburse Minacs. The corresponding cost
associated with this revenue is recorded within direct expenses. Some customers agree to reimburse the
Company for initial training and recruiting costs over a specified period of time. The revenue for these costs
are recorded over the period of time stipulated within the contract with a corresponding cost recorded within
direct expenses.
Income Taxes
The Company follows the liability method of accounting for income taxes. Under this method, future tax
assets and liabilities are determined based on differences between the financial reporting and tax bases of
assets and liabilities, and are measured using substantively enacted tax rates and laws that are expected to be
123
Minacs Worldwide S A De C V
in effect when the differences are expected to reverse. Valuation allowances are established when necessary
to reduce future income tax assets to the estimated amount that is more likely than not to be realized.
Assets and liabilities are translated using the exchange rate in effect at the balance sheet date and revenues
and expenses are translated at the average rate of the month the transaction is recorded.
Cash and cash equivalents consist of unrestricted cash and short-term deposits having an initial maturity of
three months or less.
3 SHARE CAPITAL
2010 2009
Pesos INR/Cr Pesos INR/Cr
Common shares 50,000 0.02 50,000 0.02
50,000 0.02 50,000 0.02
124
Minacs Worldwide GmbH
125
Minacs Worldwide GmbH
Unaudited Profit and Loss Account for the period from April 01 2009 to March 31, 2010
April 1 April 1 April 1 April 1 2008 to
2009 2009 2008 March 31 2009
March 31 March 31 March 31
2010 2010 2009
€ INR/Cr € INR/Cr
Income
1. Revenues 7,363,240 48.31 8,441,642 54.72
2. Interest income 59 0.00 1,701 0.01
7,363,299 48.31 8,443,343 54.73
Expenditure
3. Staff cost 5,213,485 34.20 6,169,127 39.99
4. Selling, general and
administrative expenses 444,458 2.92 513,931 3.33
5. Management fees 1,267,897 8.32 1,298,049 8.41
Total 6,925,840 45.44 7,981,107 51.74
6. Earnings before interest, income taxes
and 437,459 2.87 462,236 3.00
depreciation
7. Depreciation on fixed assets 7,377 0.05 6,576 0.04
9. Interest expenses - - - -
10. Earnings before income taxes 430,082 2.82 455,660 2.95
11. Income taxes 119,249 0.78 117,841 0.76
12. Net income 310,833 2.04 337,819 2.19
The accompanying notes to the Financial Statements are an integral part of this statement of income
The average conversion rates for Euro to INR for the financial year 65.60 64.83
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Minacs Worldwide GmbH
Unaudited Cash Flow for the year ended March 31, 2010
April 1 April 1 April 1 April 1
2009 2009 2008 to 2008 to
March 31 March 31 March March
2010 2010 31 2009 31 2009
€ INR/Cr € INR/Cr
Net earnings (Incl FE Rate difference) 310,833 2.04 337,819 2.26
Depreciation of fixed assets 7,377 0.05 6,576 0.04
Changes in operating assets and liabilities
- Accounts receivables and intercompany
receivables (111,326) (0.69) (436,879) (2.92)
- Prepaid expenses and other assets 1,170 0.01 61,274 0.41
- Accounts payables and intercompany payables (84,519) (0.52) (781,662) (5.22)
- Accrued expenses and other liabilities (47,689) (0.29) 13,122 0.09
Cash flow used in operating activities 75,847 0.59 (799,750) (5.34)
Purchase of fixed assets / deferred expenses (11,795) (0.07) (6,339) (0.04)
Correction profit carried forward - - - -
Decrease/increase in cash during the year 64,052 0.52 (806,089) (5.38)
Cash at the beginning of the year 102,409 0.69 908,498 6.07
Cash at the end of the year 166,461 1.03 102,409 0.69
127
Minacs Worldwide GmbH
I. General information
The company was set up on May 17, 2000 through notarized contract under the former firm Insartor Holding
SECHZEHNTE GmbH and was registered on July 04, 2000 with the commercial register at the district court in
Munich (HRB 131937).
The firm Insartor Holding SECHZEHNTE GmbH was changed in Minacs Worldwide GmbH with the shareholders
resolution dated August 04, 2000. AT the same time it was concluded to transfer the company’s residence from
Munich to Russelsheim. The change of the former firm Insartor Holding SECHZEHNTE GmbH in Minacs
Worldwide GmbH as well as the residence transfer were registered on March 07, 2001 under HRB 3872 with the
commercial register at the district court in Russelsheim.
Within the course of concentration of keeping the commercial-, cooperative association- and partnership register and
the step by step establishment of an electronic register Minacs Worldwide GmbH is registered from January 01,
2002 with the commercial register at the district court in Darmstadt under HRB 83872.
The subscribed capital of the company amounts to EUR 25.000,00 and is paid in totally.
The purpose of the company is to act as a provider of outsourced solutions incorporating customer contact center
management and other professional services. The company designs and delivers solutions that enable the customer
relationship management of its clients.
During the period 01.04.2009 to 31.03.2010 most of the company’s revenue has been generated by one major
customer.
The financial statements had been prepared in accordance with German Generally Accepted Accounting Principles
which are laid down in the Commercial Code.
Fixed assets were carried at historical acquisition costs less accumulated depreciation according to the straight-line
method
The accrued expenses consider all recognized risks and uncertain commitments, based on reasonable commercial
judgment.
The provision for income taxes was calculated on the basis of the German taxable income.
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Minacs Worldwide GmbH
2. Other information
a) Contingent liabilities
b) Subsequent events
There have been no events occurred since March 31, 2010 which require adjustments to the figures submitted in this
report.
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Minacs Worldwide GmbH
5. Other Assets
Accounts receivables against employees 2,500 0.02 400 0.00
2,500 0.02 400 0.00
7. Accrued Expenses
Audit and Legal Expenses 36,650 0.23 66,000 0.44
Disability 4,500 0.03 5,200 0.03
Personnel Expenses 6,000 0.04 144,000 0.96
Workmen's compensation 25,000 0.15 25,000 0.17
Outstanding holiday pay 190,000 1.17 145,000 0.97
Other Personnel Liabilities 46,060 0.28 51,280 0.34
Other Accruals 59,959 0.37 21,600 0.14
Total 368,169 2.27 458,080 3.06
8. Other Liability
Sales Tax Payable (2,652) (0.02) (4,545) (0.03)
Income and Other Taxes Payable 7,101 0.04 (33,228) (0.22)
4,449 0.03 (37,772) (0.25)
9. Staff Cost
Wages and salaries (4,245,153) (27.85) (4,994,769) (32.38)
Social security, pensions and other
personnel expenses (941,884) (6.18) (1,089,929) (7.07)
Subcontractors staff and minor services (26,448) (0.17) (84,429) (0.55)
(5,213,485) (34.20) (6,169,127) (39.99)
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Minacs Worldwide GmbH
131
The Minacs Group (USA) Inc.
Sources of Funds
I Shareholders' fund
1. Share capital $302,040 1.36 $302,040 1.58
2. Retained earnings $8,102,244 37.61 $6,711,455 31.19
3. Exchange Fluctuation on
Transaltion - (1.13) - 3.83
$8,404,284 37.84 $7,013,495 36.59
II Debt
1. Long-term debt from
holding company $20,768,591 93.52 $20,768,591 108.36
I Fixed Assets
1. Property, plant and
equipment, net $5,410,781 24.36 $6,245,114 32.58
2. Deferred Development costs $1,480,070 6.66 - -
3. Intangibles $101,961 0.46 $166,357 0.87
4. Goodwill $1,900,000 8.56 $1,900,000 9.91
$8,892,812 40.04 $8,311,471 43.36
II Investments - - - -
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The Minacs Group (USA) Inc.
Notes :
See accompanying notes to the financial
statements.
FE Conversion Rate for US$ to INR as at end of
year 45.03 52.17
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The Minacs Group (USA) Inc.
Expenditures
Direct expenses $72,406,782 334.45 $92,167,048 428.28
Selling, general and administrative expenses $12,268,172 56.67 $12,188,117 56.64
$84,674,953 391.12 $104,355,165 484.92
Earnings before interest, income taxes,
depreciation,
amortization and restructuring and other
charges $12,342,810 57.01 $14,479,290 67.28
Notes:
See accompanying notes to the financial
statements.
Average FE Conversion Rate for US$ to INR for the
Financial year 46.19 46.47
134
The Minacs Group (USA) Inc.
1 NATURE OF BUSINESS
Minacs Group (USA) Inc. (the “Company” or “Minacs USA”) is a provider of business process outsourcing
(“BPO”) solutions. These incorporate contact centre solutions, integrated marketing services and back office
administration. Minacs USA is a subsidiary of Minacs Worldwide Inc. (“Minacs”).
Use of Estimates
The preparation of these financial statements in conformity with Canadian generally accepted accounting
principles requires management to make estimates and assumptions. These estimates and assumptions affect
the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses during the year. Actual results
could differ from those estimates.
Revenue Recognition
The Company derives revenues through the provision of direct resources to its customers and consulting
arrangements. Payment terms may vary by contract. The Company recognizes revenues at the time services
are performed and when the price is fixed or determinable and collection is reasonably assured.
The majority of revenues are recognized based on the billable hours or minutes rendered as defined in the
client contract. The rate per billable hour or minute charged is based on a predetermined contractual rate as
agreed in the underlying contract. This contractual rate fluctuates based on the Company’s performance
against certain predetermined criteria related to quality and performance. Some clients are entitled to
penalties when the Company is not in compliance with certain obligations as defined in the client contract.
Such penalties are recorded as a reduction of revenues as incurred based on a measurement of the
Company’s obligation under the terms of the client contract.
For some contracts the Company is paid by its customer based on achievement of certain level of revenues
or other client-determined criteria specified in the client contract such as full time equivalents, units
processed or completed contacts. The Company recognizes this performance-based revenue by measuring
its actual results against the performance criteria specified in the contracts.
Amounts collected from customers prior to the performance of services are recorded as deferred revenue.
These advances are amortized to revenues in accordance with the Company’s policy on revenue recognition.
The Company classifies reimbursements received from customers for out-of-pocket expenditures as
revenues. The Company incurs out-of-pocket expenditures such as expenses related to travel, postage and
telecommunications costs for which customers have agreed to reimburse Minacs USA. The corresponding
cost associated with this revenue is recorded within direct expenses. Some customers agree to reimburse the
Company for initial training and recruiting costs over a specified period of time. The revenue for these costs
is recorded over the period of time stipulated within the contract with a corresponding cost recorded within
direct expenses.
Property, plant and equipment are stated at cost less accumulated depreciation. Depreciation is provided
from the first day of the month following the date the assets are placed into service, on a straight-line basis.
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The Minacs Group (USA) Inc.
Computer software is depreciated over four to five-year lives. Computer equipment is depreciated over a
four-year life. Communications equipment is depreciated over five to seven-year lives. Furniture and
fixtures are depreciated over seven to ten-year lives. Leasehold improvements are depreciated over the term
of the lease.
Goodwill
Goodwill is not amortized and is tested for impairment on an annual basis. Such evaluation determines an y
impairment in value, taking into account the ability to recover the carrying amount of goodwill from
discounted cash flows. The Company also considers projected future operating results, trends, and other
circumstances in making such evaluations.
In addition to the annual impairment test, the Company will perform an impairment test if an event occurs or
circumstances change that would more likely than not reduce the fair value of the reporting unit below its
carrying amount.
Intangibles
The Company allocates value to intangible assets acquired relating to customer and supplier contracts,
proprietary processes, and certain business relationships. Amortization of intangibles is provided on a
straight-line basis over 10 years.
The Company reviews its long-lived assets such as property, plant and equipment and intangibles for impairment
whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. When
indicators of impairment of the carrying value of the asset exist, and the carrying value is greater than the net
recoverable value (as determined on an undiscounted basis), an impairment loss is recognized to the extent that the
fair value (measured as the discounted cash flows over the remaining life of the asset when quoted market values are
not readily available) is below the carrying value.
Income Taxes
The Company follows the liability method of accounting for income taxes. Under this method, future tax
assets and liabilities are determined based on differences between the financial reporting and tax bases of
assets and liabilities, and are measured using substantively enacted tax rates and laws that are expected to be
in effect when the differences are expected to reverse. Valuation allowances are established when necessary
to reduce future income tax assets to the estimated amount that is more likely than not to be realized.
Assets and liabilities are translated using the exchange rate in effect at the balance sheet date and revenues
and expenses are translated at the average rate of the month the transaction is recorded.
Cash and cash equivalents consist of unrestricted cash and short-term deposits having an initial maturity of
three months or less.
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The Minacs Group (USA) Inc.
3 Share Capital
Common shares 100 0.00 $100 0.00
Contributed surplus 301,940 1.36 $301,940 1.58
302,040 1.36 $302,040 1.58
4 Long-Term Debt
Loan from Parent Company 20,768,591 93.52 20,768,591 108.36
The loan from parent company bears interest at specified margins over bank prime and is payable to
the Parent Company over a 25 year period.
INR
In US$ INR (Cr) In US$ (Cr)
Cost 5,034,046 22.67 5,216,260 27.22
Less: accumulated
depreciation (4,289,108) (19.31) (3,880,866) (20.25)
Net book value $744,938 3.35 $1,335,394 6.97
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The Minacs Group (USA) Inc.
The assets under capital leases are held as security for the capital lease obligations. Included within
depreciation and amortization is $513,877 relating to assets under capital leases.
6 INTANGIBLES
Cost 643,962 2.90 $643,962 3.36
Less: accumulated depreciation (542,001) (2.44) (477,605) (2.49)
Net book value 101,961 0.46 $166,357 0.87
7 GOODWILL
Balance, beginning of period 1,900,000 8.56 $1,900,000 9.91
Foreign currency translation adjustment - - - -
Balance, end of period 1,900,000 8.56 $1,900,000 9.91
Capital Leases
Interest on obligations under capital leases accrues at various rates ranging from 8.3% to 9.1%.
The following is a schedule of future minimum lease payments for these capital leases:
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The Minacs Group (USA) Inc.
The Company has operating leases for its premises, furniture and fixtures and certain computer and
communications equipment as well as minimum purchase commitments for telephone services. The
minimum annual payments for the next five years and thereafter are as follows:
Contingent Liabilities
During the ordinary course of business activities, the Company may be a party to claims and may be
contingently liable for litigation. Management believes that adequate provisions have been made in the
accounts where required. Although it is not possible to estimate the extent of potential costs and losses, if
any, management believes that the ultimate resolution of such contingencies will not have a material adverse
effect on the financial position of the Company.
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The Minacs Group (USA) Inc.
These transactions are measured at the exchange amounts of consideration established and agreed to by the related
parties.
The Company has defined contribution pension plans. The Company’s pension plan expenditures were
$4,160 (Previous Year $430,563) (INR .02 Cr) (Previous Year INR 1.94 Cr) during 2010.
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Transworks Inc (USA)
AUDITORS’ REPORT
1. In terms of your letter dated March 1, 2010 requesting us to audit the accounts of Transworks Inc. (“the
Company”), a wholly owned subsidiary of Aditya Birla Minacs Worldwide Limited (“the Parent”),
incorporated in the United States of America, based on records including photocopies of some records,
received from the said Company in Mumbai and in accordance with the accounting policies described in Note
1 of Schedule 14 to the attached financial statements (“the accounting policies”). We have not performed a
statutory audit, the objective of which would be the expression of an opinion on the financial statements in
conformity with generally accepted accounting practices and accordingly, we do not express such an opinion.
2. We have audited, in accordance with the accounting policies, the attached Balance Sheet of the Company as at
March 31, 2010 and also the Profit and Loss account and cash flow statement for the year ended on that date
annexed thereto, which are in agreement with the books of account verified by us. These financial statements
are the responsibility of the Company’s management and have been prepared in accordance with the accounting
policies, for the purpose of consolidation with the financial statements of the Parent. Our responsibility is to
express an opinion on these financial statements based on our audit.
3. We conducted our audit in accordance with generally accepted auditing standards in India. These Standards
require that we plan and perform the audit to obtain reasonable assurance whether the financial statements are
free of material misstatements. An audit includes, examining on a test basis, evidence supporting the amounts
and disclosures in the financial statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall financial statements. We believe
that our audit provides a reasonable basis for our opinion.
4. In our opinion, based on our audit, and to the best of our information and according to the explanations given to
us, the accompanying financial statements give a true and fair view in conformity with the accounting policies:
a. in the case of the Balance Sheet, of the state of affairs of Company as at 31st March, 2010;
b. in the case of the Profit and Loss Account, of the profit for the year ended on that date; and
c. in the case of the Cash Flow Statement, of the cash flows for the year ended on that date.
5. This report is furnished solely for the purpose of meeting the requirement if consolidation of the attached
financial statements with the financial statement of the Parent and hence should not to be used for any other
purpose.
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Transworks Inc (USA)
I. SOURCES OF FUNDS
1 Shareholders' Funds
Share Capital 1 - - 200,000 9,680,000
II. APPLICATION OF
FUNDS
Notes to Accounts 10
The Schedules referred to above and the notes to accounts form an integral part of the Balance Sheet.
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Transworks Inc (USA)
PROFIT & LOSS ACCOUNT FOR THE YEAR ENDED 31ST MARCH 2010
For the year For the year For the year For the year
ended Mar, 31 ended Mar, 31 ended Mar, 31 ended Mar, 31
2010 2010 2009 2009
Schedule (US$) (INR) (US$) (INR)
INCOME :
Mark up Fees - - (57) (2,629)
Reimbursement of Expenses
Business Development &
Marketing 5 - - (807) (37,563)
Utilization of Fixed Assets - - 131,268 6,107,449
Financing Charges 6 - - 1,856 86,374
- - 132,260 6,153,631
Bank Interest - - 11 520
Exchange Rate Fluctuations on
coversion - (1,235,015) - 6,552,522
EXPENDITURE :
Travelling & other Expenses 7 - - 2,087 97,109
Rent 8 - - 7,589 353,073
Other Expenses 9 - - 86,046 4,003,454
Depreciation / Amortization - - 34,738 1,630,724
Notes to Accounts 10
.
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Transworks Inc (USA)
The Schedules referred to above and the notes to accounts form an integral part of the Profit & Loss account
144
Transworks Inc (USA)
CASH FLOW STATEMENT FOR THE YEAR ENDED 31ST MARCH 2010
Net Increase in cash and Cash equivalants during the year (314,438) (16,251,994) 363,527 18,492,013
Cash and cash equivalants at the beginning of the year 368,200 18,678,805 4,673 186,792
Cash and cash equivalants at the end of the year 53,762 2,426,810 368,200 18,678,805
Notes:
Components of Cash and Cash Equivalents as at
i) Balance with Banks :
- in Current Account 53,762 2,426,810 368,200 18,678,805
Total 53,762 2,426,810 368,200 18,678,805
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Transworks Inc (USA)
146
Transworks Inc (USA)
SCHEDULE - 2
SUNDRY DEBTORS
1 Other Debts
Unsecured, Considered good - - 98,560 4,999,950
SCHEDULE - 3
CASH AND BANK BALANCES
1 Balance with bank
- On Current Account 53,762 2,426,810 368,200 18,678,805
SCHEDULE - 4
CURRENT LIABILITIES
1 Sundry Creditors 2,258 101,947 - -
2 Outstanding Liabilities 1,088 49,093 1,087 55,173
3 Provision for Tax 3,000 135,420 - -
SCHEDULE - 5
REIMBURSEMENT OF BUSINESS
DEVELOPMENT AND MARKETING EXPENSES
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Transworks Inc (USA)
Write-back of Sales
2 Commission - - (27,954) (1,300,619)
SCHEDULE - 6
FINANCING CHARGES
1 Interest recoverable on Fixed Assets & LDC - - 1,856 86,374
- - 1,856 86,374
SCHEDULE - 7
TRAVELLING & OTHER EXPENSES
1 Travelling Expenses - - 2,087 97,109
SCHEDULE – 8
RENT
SCHEDULE - 9
OTHER EXPENSES
1 Bank Charges - - 116 5,400
2 Miscellaneous expenses - - 46 2,139
3 Sales Commission (Net of write-back) - - (27,954) (1,300,619)
4 Legal & Professional Fees - - 3,961 184,317
5 Insurance Charges - - 2,740 127,483
6 Maintenance Charges (Net of write-back) - - (18,078) (841,113)
7 Loss on Sale of Fixed Assets - - 96,529 4,491,200
8 US Payroll Taxes (Net of write-back) - - (650) (30,249)
9 Repairs & Maint. - Others - - 326 15,157
Write-back of deposits for Long Distance
10 Charges - - 29,010 1,349,739
1. Accounting Policies
The Company is in the process of winding up its operations. Adjustments relating to the recoverability and
the classification of recorded asset amount or to amounts that may be necessary on winding up of the
Company have been made based on management’s assessment of the same. All assets and liabilities have
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Transworks Inc (USA)
been stated at net realizable value. Accordingly, the financial statements have not been prepared on the going
concern assumption.
a. Basis of preparation
The accounts have been prepared under the historical cost convention on accrual basis in accordance with the
generally accepted accounting principles applicable in India. The accounting policies applied by the company
are consistent with those used in the previous year. As stated above, the financial statements have not been
prepared on the going concern assumption.
b. Revenue recognition
Incomes from services rendered are accounted on accrual basis based on agreements / arrangements with the
concerned parties.
c. Fixed assets
Fixed assets are stated at cost less accumulated depreciation and impairment losses if any. Cost comprises the
purchase price and wherever applicable freight, duties and taxes and expenses incidental to acquisition and
installation.
d. Leased assets
Finance lease, which effectively transfers to the Company substantially all the risks and benefits incidental to
ownership of the leased item, are capitalized at lower of fair value and present value of the minimum lease
payments at the inception of the lease term and disclosed as leased assets. Lease payments are apportioned
between the finance charges and reduction of the lease liability based on implicit rate of return. Finance
charges are charged directly against income. Lease management fees, lease charges and other initial direct
costs are capitalized.
Leases where lessor effectively retains substantially all the risks and benefits of ownership of the lease term
are classified as operating leases. Operating lease payments are recognized as an expense in the profit & loss
account in accordance with the lease agreement.
e. Depreciation
Depreciation on assets is provided on straight-line basis, based on the useful lives as estimated by the
management. The management estimates seven years as the useful lives of these fixed assets.
f. Income Tax
The Company utilizes the asset and liability method of accounting for Income taxes. Under this method,
deferred income taxes are recorded to reflect the tax consequences of future years differences between the tax
basis of assets and liabilities and there financial reporting amounts at each year end are based on enacted tax
laws and statutory tax rates applicable to the periods in which the differences are expected to effect taxable
income. A valuation allowance is provided against the future benefit of deferred tax asset if it is determined
that it is more likely than not that the future tax benefits associated with the deferred tax assets will not be
realized.
For the purpose of consolidation of the financial statements with that of the Parent, the amounts in USD) are
converted into INR as follows:
Equity capital and retained earnings at historical cost, all other balance sheet items at closing rate of
exchange, profit and loss items at average rate and resultant translation gain/loss is adjusted in the profit and
loss account
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Transworks Inc (USA)
Provision for tax comprises current and deferred taxes. This includes provision for current tax US$ 3,000 (Rs.
1,35,420).
(INR)
Particular As at Movement As at
31/3/2009 During the 31/3/2010
year
Timing difference resulting in deferred Tax
Liability
Depreciation & deferment of income arising out of
(10,550,687)
cash basis of accounting for tax purposes 10,550,687 Nil
Timing difference resulting in deferred Tax Asset
Net temporary difference
(10,550,687)
10,550,687 Nil
Deferred Tax liability( net of deferred tax asset) (3,297,450) 3,297,450 Nil
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Transworks Inc (USA)
INR
Particulars Year ended Year ended
Mar 31, March 31, 2009
2010
Holding Company
Reimbursement of cost, financing charges & markup fee NIL 6,153,631
Repayment of Share Capital 9,680,000 23,616,485
Payment of dividend 7,116,250 NIL
Related Party Balances
Receivable from Holding Company NIL 4,999,950
Payable to Holding Company 101,947 NIL
The Company is exclusively in the marketing of Business Process Outsourcing (BPO) services provided
by its Holding Company Aditya Birla Minacs Worldwide Limited and hence its business activities
primarily fall within a single business segment. Therefore, there are no additional disclosures to be
provided in respect of primary segment under Accounting Standard 17 ‘Segment Reporting’, other than
those already provided in the financial statements.
a. Geographical turnover is segregated based on the location of the customer who is invoiced.
US$
Year ended 31st March 2010 India Outside India Total
a Revenue by geographical market - - -
b Carrying amount of segment assets - 53,762 53,762
US$
Year ended 31st March 2009 India Outside India Total
a Revenue by geographical market 132,260 - 132,260
b Carrying amount of segment assets 98,560 368,200 466,760
INR
Year ended 31st March 2010 India Outside India Total
a Revenue by geographical market - - -
b Carrying amount of segment assets - 2,426,810 2,426,810
INR
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Transworks Inc (USA)
6. Previous year figures have been regrouped wherever necessary to correspond with current period figures.
152